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Document of The World Bank FOR OFFICIAL USE ONLY Public Disclosure Authorized ReportNo. 5438-BR STAFF APPRAISAL REPORT Public Disclosure Authorized BRAZIL TECHNICAL ASSISTANCE AND PILOT RURAL WATER SUPPLY AND SANITATION PROJECT Public Disclosure Authorized April 15, 1985 Public Disclosure Authorized Projects Department Latin America and the Caribbean Regional Office This documenthas a restricteddistribution and may be used by recipients onlyin theperformance of their officialdutis. Its contents may not otherwise be disclosed without World Bank authorization. CURRENCYEQUIVALENTS Calendar 1984 March 20, 1985 Currency Unit = Cruzeiro (Cr$) US$1 = CrS1,952 US$1 = 4,007 Cr$1 = US$0.00051 Cr$l = US$0.00025 FISCAL YEAR January 1 - December 31 ABBREVIATIONSAND ACRONYMS ABES - Asociacao Brasileira de Engenbaria Sanitaria e Ambiental (Brazilian Association of Sanitary Engineering) BNH - Banco Nacional da Habitacao (National Housing Bank) CORSAN - Companhia Riograndensede Saneamento (State Water Company of Rio Grande do Sul) FSESP - Fundacao Servicos de Saude Publica (Public Health Services Foundation FUNDURBANO- Fundo Urbano (Urban Investment Fund of Rio Grande do Sul) IPEA - Instituto de Planejamento Economico e Social (Institute of Economic and Social Planning) MINTER - Ministerio do Interior (Ministry of Interior) ORTN - Obrigacoes Reajustaveis do Tesoro Nacional (National Treasury Bond) PAHO - Pan American Health Organization PAPP - Programa de Apoio ao Pequeno Produtor (Small Farmer Program) PIASS - Programa de Interiorizacaodas Acoes de Saude e Saneamento (Program for Community Health and Sanitation) PLANASA - Plan Nacional de Saneamento (National Sanitation Plan) PROSAN - Programa de Saneamento (Community Sanitation Program of Rio Grande do Sul) FOR OMCUL USE ONLY SEPLAN - Secretaria de Planejamento da Presidencia da Republic.. (Presidential Planning Secretary) SES - Secretaria de Saude (State Health Secretary - Rio Grande do Sul) SUDENE - Superintendencia de Desenvolvimento do Nordeste (Northeast Regional Development Agency) SURBAM - Superintendencia de Desenvolvimento Urbano e Administracao Municipal (Secretary of Interior, Regional Development and Public Works, Department of Urban Development and Municipal Administration of State of Rio Grande do Sul) This document has a restriced distribution and may be used by recipientsonly in the performanceof their oflficialduties. Its contents may not otherwise be disclosedwithout World Bank authorization. BRAZIL TECHNICAL ASSISTANCE AND PILOT RURAL WATER SUPPLY AND SANITATION PROJECT STAFF APPRAISAL REPORT TABLE OF CONTENTS Page No. LOAN AND PROJECT SUMMARY..................... uiii-v I. THE SECTOR ....................... *.............** ...... 1 Sector Development and Organization ........................ I Level of Service ....................... .......................see... 2 Subsector Constraints................ 3 Government Strategy and the Bank's Role........sees........ 4 IIo THE PROJECT .... ..........ses.. * ...... 6 Background . .. ...................... ... 6 Project Objectives...b...je c ti..v.......e............ o.s.. 6 Project Executing Agencies. ........... ....o. ........ ..*. 7 Project Descriptions..,*. .*.se.. ....... * 7 Project Implementation.e............ .. ...................... 9 Selection and Design Criteria.................r............ 10 Project Cost, Financing and Recovery Plan ................. 11 Affordabilityo ........... , 13........................... Prccurement and Disbursement. ............ 13 Status of Project Preparation. ....... 15 Benefits and Risks.......... ... .... 15 III. AGREEMENTS REACHED AND RECO OMENDATIONS ... 16 LIST OF TABLES 2.1 Project Cost Estimates ............................... 11 2.2 Project Financing Plan - ...... o.. ............ 12 2.3 Project Cost by Procurement Method... ...................... 14 This report is based on the findings of an appraisal mission which visited Brazil from November 26 to December 8, 1984. The mission was comprised of Messrs. Emilio Rodriguez, Engineer; William Roach, Financial Analyst; and Emmanuel Mbi, Economist. The mission was assisted by the Loan Officer, Ms. Carolin Crabbe. -ii- Page No. LIST OF ANNEXES 1. Bank Loans to Brazil for Water Supply and Sewerage .......... 18 2. Project Description ....... o........................*.. 19-20 3. Terms of Reference for the Development of Rural Water Supply and Sanitation Sector ........... .......... ...... 21-28 4. Tentative List of Communities ............................... 29-34 5. Project Cost ............................................... 35-36 6. Project Implementation Schedule....*........................ 37 7. Organization Charts for the National and Pilot Components... 38-39 8. BINH's Finances ....... --- 9......... , ^ 40-49 9. Cost Recovery in the Pilot Component...................... 50-51 10. Loan Disbursement Schedule ........ 52 11. Monitoring Indicators.d l ......ct o r 53 12. Selected Reference Documents and Data Available in Project File ......... 54-55 MAP IBRD Map No. 16948 - Brazil - Water Supply and Sewerage Percent Service Levels by State 1983/1987 (iii) BRAZIL TECHNICAL ASSISTANCE AND PILOT RURAL WATER SUPPLY AND SANITATION PROJECT Loan and Project Summary Borrower: Federative Republic of Brazil. Project Institute of Economic and Social Planning (IPEA) and the Executing Secretary of Interior, Regional Development, and Public Agencies: Works, Department of Urban Development and Municipal Administrationof the State of Rio Grande do Sul (SURBAM). Amount: US$16.3 million equivalent. Terms: Repayment in 15 years, including 3 years of grace, with interest at the Bank's standard variable rate. Beneficiaries: The pilot component will benefit 200 low income communities consisting of about 146,000 people in the State of Rio Grande do Sul. The results of the studies undertaken through the national technical assistance component will benefit eventually the rural poor throughout Brazil and particularly in the less developed Northeast Region. Relending For the national technical assistance component, the Terms: Borrower will make available the proceeds of the loan to IFEA on a grant basis. For the pilot component, the Borrower will make available the proceeds of the loan to the National Housing Bank (BNH) on the same terms as those of the loan. BNH will onlend them to the State of Rio Grande do Sul through SURBAM for 18 years including 3 years of grace at 7.5%. STJRBAM will enter into agreements with participating communities which will make an initial contribution to investments and repay a minimum of 30% of cost at 7.5% interest plus monetary correction for a term of 18 years. Project The objective of the project is to assist the Government of Description: Brazil in establishing a policy for providing water supply and sanitation in rural areas, defining sector goals at the Federal and State levels, and institu:ional responsi- bilities. The national technlcal assistance component will finance (a) studies of the organization of the sector and the reordering of institutions, financial policies, includ- ing, a system of finance, tariffs and cost recovery; community promotion; and training requirements; (b) an inventory of technologies and technical standards; (c) the preparation of state investment plans; (d) special assist- ance to ten Northeast states for project preparation - iv - including implementing community participation programs; and (e) equipment. The component will also finance special assistance to the emergency water works included in the Northeast's Small Farmer Program (PAPP) to be financed by proposed rural development projects. The pilot component will support the above objectives by testing and evaluating the delivery of services. It will finance water supply and sanitation in the State of Rio Grande do Sul including engineering and construction of about 200 community water systems, 10,000 individual sanitation units, 5,000 latrines, technical assistance, training and equipment. The experien- ces gained will serve as an input to preparing national oolicy. Risks: The proposed project depends on the cooperation of three ministries in administering a large studies and technical assistance component. To some extent the risk associated with the large size will be minimized by retaining the Pan American Health Organization (PAHO) to undertake administra- tion and contracting. Nonetheless, continuationof coopera- tion by the ministries of the new administration which took office in March 1985 will be essential. Estimated Project Costs: Local Foreign Total …----US$ thousand----- National Technical Assistance Component Coordinating Unit 358.3 287.0 645.3 Studies 2,420.7 524.5 2,945.2 State Investment Plans 646.5 129.0 775.5 Project Preparation (Northeast States) 2,336.5 1,001.0 3,337.5 Equipment 350.0 150.0 500.0 PAPP Assistance 1X202.4 570.0 1,772.4 Subtotal 7,314.4 2,661.5 9,975.9 Pilot Component Coordinating Committee 352.5 100.0 452.5 Studies-Engineering/Training 721.4 409.0 1,130.4 Construction of Water Systems 6,836.3 2,930.0 9,766.3 Operation of Water Systems 350.0 150.0 500.0 Sanitary Units 2,394.3 1,026.0 3,420.3 Technical Assistance - 424.0 424.0 Equipment 171.6 73.5 245.1 Subtotal 10,826.1 5,112.5 15,938.6 -v- Local Foreign Total …----US$ thousand------ Base Costs (12/84 Prices): 18,140.5 7,774.0 25,914.5 Physical Contingencies (5%) 907.0 388.7 1,295.7 Price Contingencies (7/85-6/88) 3,695.8 1,584.3 5,280.1 Total Project Cost 22,743.3 9,747.0 32,490.3 ==w===== ======a = Local Costs include about US$0.5 million