Document of The World Bank
FOR OFFICIAL USE ONLY
Public Disclosure Authorized Report No: 52907-BR
PROJECT APPRAISAL DOCUMENT
ON A Public Disclosure Authorized PROPOSED LOAN
IN THE AMOUNT OF US$90 MILLION
TO THE
STATE OF SANTA CATARINA
WITH THE GUARANTEE OF
Public Disclosure Authorized THE FEDERATIVE REPUBLIC OF BRAZIL
FOR THE
SANTA CATARINA RURAL COMPETITIVENESS PROJECT
August 3, 2010
Sustainable Development Department Brazil Country Management Unit Latin America and the Caribbean Region Public Disclosure Authorized
This document is being made publicly available prior to Board consideration. This does not imply a presumed outcome. This document may be updated following Board consideration and the updated document will be made publicly available in accordance with the Bank’s Policy on Access to Information. CURRENCY EQUIVALENTS
(Exchange Rate Effective July 30, 2010) Currency Unit = Brazilian Real R$1.7673 = US$1.0000 US$1 = US$0.5668
FISCAL YEAR January 1 – December 31
ABBREVIATIONS AND ACRONYMS
ADMs Microwatershed Associations CAR Project’s Steering Committee CAS Country Assistance Strategy CIDASC State Enterprise for Sanitary and Phytosanitary Services CMDR Municipal Rural Development Committee CPS Country Partnership Strategy CedeRural State Rural Development Council DLI Disbursement-Linked Indicator DRH WRM Department of SDS DEINFRA State Department of Infrastructure (affiliated to SIE) EA Environmental Assessment EEP Eligible Expenditure Program EMP Environmental Management Plan EPAGRI State Agricultural Research and Rural Extension Enterprise FAF Family Agriculture Farm FAO United Nations Food and Agriculture Organization FAPO Family Agriculture Producer Organization FATMA State Environmental Management Foundation FRL Fiscal Responsibility Law GDP Gross Domestic Product GHG Greenhouse Gas IADB Interamerican Development Bank IFR Interim Financial Report IP Indigenous Peoples IPPF Indigenous Peoples Planning Framework INPE National Institute for Space Research NCR Net Current Revenue NRM Natural Resource Management PAD Project Appraisal Document PAT Annual Work Program PEEA State Environmental Education Policy PMA State Environmental Military Police PPA Multi-year Development Plan PRONAF National Family Agriculture Program
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REDD Reducing Emissions from Deforestation and Forest Degradation RIF Rural Investment Fund RIS Regional Innovation Systems SAR State Secretariat of Agriculture and Rural Development SCDP Santa Catarina 2015 Development Plan SC Rural Santa Catarina Rural Competitiveness Project SDRs State’ Regional Development Secretariats SDS State Secretariat for Sustainable Economic Development SEE Project Executive Secretariat (at the state/central level) SER Program’s Regional Executive Secretariat SEF State Secretariat of Finance SFF Small Farmer Family SIE State Secretariat of Infrastructure SIEE Agro-Ecological and Economic Integration System SIGEF Integrated Fiscal Management and Planning System of Santa Catarina SIL Specific Investment Loan SIRHESC State Water Resources Information System SOE Statement of Expenditure SOL State Secretariat of Tourism, Culture and Sports SoSC State of Santa Catarina SPS Sanitary and phyto-sanitary SSP State Secretariat of Public Security and Citizen’s Protection SWAp Sector Wide Approach WRM Water Resource Management
Vice President: Pamela Cox Country Director: Makhtar Diop Sector Director: Laura Tuck Sector Manager: Ethel Sennhauser Sector Leader: Mark Lundell Task Team Leader: Alvaro Soler
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BRAZIL Santa Catarina Rural Competitiveness
CONTENTS
Page
I STRATEGIC CONTEXT AND RATIONALE ...... 1 A Background and Agricultural Sector Overview (see Annex 1) ...... 1 B Rationale for Bank involvement ...... 5 C Higher level objectives to which the project contributes ...... 6
II PROJECT DESCRIPTION ...... 6 A Lending instrument ...... 6 B Project development objective and key indicators ...... 8 C Project components (See Annex 2) ...... 9 D Lessons learned and reflected in the project design ...... 11 E Alternatives considered and reasons for rejection ...... 12
III IMPLEMENTATION ...... 13 A Partnership arrangements (if applicable) ...... 13 B Institutional and implementation arrangements (see Annex 6) ...... 14 C Monitoring and evaluation of outcomes/results ...... 15 D Sustainability...... 16 E Critical risks and possible controversial aspects ...... 16 F Loan conditions and covenants ...... 18
IV APPRAISAL SUMMARY ...... 19 A Economic and financial analyses (see Annex 9)...... 19 B Technical (see Annex 4) ...... 20 C Fiduciary (See Annex 7 and 8) ...... 21 D Social (see Annex 10) ...... 21 E Environment (see Annex 10) ...... 22 F Safeguard policies ...... 24 G Policy Exceptions and Readiness...... 24
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Annex 1: Country and Sector Background ...... 25
Annex 2: Major Related Projects Financed by the Bank and/or other Agencies ...... 32
Annex 3: Results Framework and Monitoring ...... 34
Annex 4: Detailed Project Description ...... 43
Annex 5: Project Costs ...... 62
Annex 6: Implementation Arrangements ...... 63
Annex 7: Financial Management and Disbursement Arrangements ...... 68
Annex 8: Procurement Arrangements ...... 82
Annex 9: Economic and Financial Analysis ...... 87
Annex 10: Safeguard Policy Issues ...... 93
Annex 11: Project Preparation and Supervision ...... 128
Annex 12: Documents in the Project File ...... 129
Annex 13: Statement of Loans and Credits ...... 131
Annex 14: Country at a Glance ...... 135
Annex 15: Maps IBRD 37570, IBRD 37571 and IBRD 37572 ...... 137
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BRAZIL
SANTA CATARINA RURAL COMPETITIVENESS
PROJECT APPRAISAL DOCUMENT
LATIN AMERICA AND CARIBBEAN
LCSAR
Date: August 3, 2010 Team Leader: Alvaro J. Soler Country Director: Makhtar Diop Sectors: General agriculture, fishing and Sector Manager: Ethel Sennhauser forestry sector (65%); Agricultural marketing and trade (10%); Agricultural extension and research (10%); General water, sanitation and flood protection sector (10%); Public administration- Agriculture, fishing and forestry (5%). Themes: Rural markets (35%); Other rural development (25%); Water resource management (20%); Other environment and natural resources management (10%); Rural policies and institutions (10%). Project ID: P118540 Environmental category: Lending Instrument: Specific Investment Loan B-Partial Assessment
Project Financing Data [X] Loan [ ] Credit [ ] Grant [ ] Guarantee [ ] Other:
For Loans: Total Bank financing (US$m.): 90.0
Proposed terms: US Dollar-denominated commitment-linked IBRD Flexible Loan with a variable spread, with level repayments of principal, payment dates on March 15 and September 15 of each year, with a 10-year grace period and a 25-year total loan term with all conversion options selected. Front end fee: 0.25% of loan amount to be paid with loan proceeds. Financing Plan (US$m.) Source Local Foreign Total Borrower 99.00* 0.00 99.00 International Bank for Reconstruction and 90.00 0.00 90.00 Development Total: 189.00 0.00 189.00 * This amount corresponds to the part of the EEP and TA estimated expenditures financed through State funding
Borrower: State of Santa Catarina, Brazil
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Responsible Agency: Secretaria de Estado de Agricultura e Desenvolvimento Rural Rodovia Admar Gonzaga, 1.486 Bairro Itacorubi Santa Catarina, Brazil 88034-001 Tel: (55 48) 3239-4170 [email protected] www.microbacias.sc.gov.br
Estimated disbursements (Bank FY/US$m) FY 2011 2012 2013 2014 20152016 Annual 15.3 13.9 13.8 14.8 16.315.9 Cumulative 15.3 29.2 43.0 57.8 74.190.0 Project implementation period: Start: September 30,2010 End: March 30, 2016 Expected effectiveness date: September 30, 2010 Expected closing date: September 30, 2016
Does the project depart from the CAS in content or other significant respects? [ ]Yes [X] No Ref. PAD I.C. Does the project require any exceptions from Bank policies? Ref. PAD IV.G. [ ]Yes [X] No Have these been approved by Bank management? [ ]Yes [ ] No Is approval for any policy exception sought from the Board? [ ]Yes [X] No Does the project include any critical risks rated “substantial” or “high”? [X]Yes [ ] No Ref. PAD III.E. Does the project meet the Regional criteria for readiness for implementation? [X]Yes [ ] No Ref. PAD IV.G.
Project development objective Ref. PAD II.C., Technical Annex 3
The objective of the Project is to increase the competitiveness of Family Agriculture Producer Organizations while providing support for an improved framework of structural competitiveness- inducing public services activities in the Borrower’s territory. Project description. Ref. PAD II.D., Technical Annex 4
Component 1: Family Agriculture Competitiveness and Increased Access to Markets: Support family agriculture competitiveness in the Borrower’s territory through the implementation of the pertinent Eligible Expenditure Programs (EEPs) and the provision of technical assistance, by working with stakeholders across local, municipal and regional levels in order to increase organizational and participation skills for Project implementation.
Component 2: Complementary Public Investments for Rural Competitiveness: Support the improvement of the structural rural competitiveness framework through the implementation of the pertinent EEPs and the provision of technical assistance, by financing public goods activities that are crucial for the sustained competitiveness of family agriculture producer organizations, and for the implementation of sectoral activities, such as water resource management; ecosystems and corridor management; environmental monitoring and education; rural
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infrastructure; regulatory framework compliance; rural technical assistance and extension, sanitary and phyto-sanitary services; and rural tourism.
Component 3: Support to the Rural Competitiveness Institutional Framework: Enhance public administration performance in support of rural competitiveness through the implementation of the pertinent EEPs and the provision of technical assistance by implementing: (a) more efficient financial management and procurement systems; (b) a results-based management approach for the Project and the main institutions of the Borrower which have administrative jurisdiction over the rural sector; and (c) Project coordination, monitoring and evaluation. Which safeguard policies are triggered, if any? Ref. PAD IV.F., Technical Annex 10 - Environmental Assessment (OP 4.01) - Natural Habitats (OP/BP 4.04) - Pest Management (OP 4.09) - Indigenous Peoples (OP/BP 4.10) - Physical Cultural Resources (OP 4.11) - Involuntary Resettlement (OP 4.12) - Forests (OP/BP 4.36) Significant, non-standard conditions, if any, for: Ref. PAD III.F.
Board presentation: None
Loan effectiveness conditions: 1. Project Implementation Unit Regulation has been adopted by the Borrower in form and substance satisfactory to the Bank.
2. The Partnership Agreements have been signed by the parties thereto.
3. The Project Operational Manual, in form and substance satisfactory to the Bank, has been adopted by the Borrower through the issuance of a resolution.
Covenants applicable to project implementation: 1. The Borrower through SAR, shall cause the Project to be carried out in accordance with the Project Operational Manual, including the Procurement Plan, the Annual Operating Plan, the Environmental Management Framework, the Involuntary Resettlement Framework and the Indigenous Peoples Framework.
2. The Borrower shall maintain, until the completion of the execution of the Project, a Project Implementation Unit within SAR and with competent staff in adequate numbers with qualifications and experience satisfactory to the Bank and in accordance, as applicable, with the provisions of Section III, Schedule 2 of the Loan Agreement, including the following key staff: a Project coordinator, an environment specialist, a social specialist, an administrative coordinator, a procurement specialist and a financial management specialist.
3. The Borrower shall maintain, until the completion of the execution of the Project, the Technical Council of Representatives, to convene at least once every semester, and shall submit the minutes of said meetings to the Bank.
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4. The Borrower shall, at least once a year during Project implementation on or about December 1, commencing on the first such date after the Effective Date, prepare and furnish to the Bank the Annual Operating Plan for the Project’s operation during the following twelve months.
5. The Borrower shall furnish to the Bank no later than 30 days after the Effective Date and thereafter every six months after the Effective Date, the EEP Spending Reports prepared in accordance with the provisions of the Project Operational Manual and the additional instructions referred to in Section IV.A.1, Schedule 2 of the Loan Agreement.
6. The Borrower shall furnish to the Bank on or about April 5 and October 5 each year starting on any such date after the Effective Date, the Procurement Plan Report confirming that all procurement activities under the Project have been carried out in accordance with the Procurement Plan.
7. The Borrower shall: (a) have all the Project’s procurement records and documentation (including those for the Subprojects) for each fiscal year of the Project audited, in accordance with appropriate procurement auditing principles by independent auditors acceptable to the Bank.
8. The Borrower, through SAR, shall ensure and/or cause to be ensured, that the EEPs comply with the eligibility criteria and procedures set forth in the Project Operational Manual.
9. Cooperative Agreements with each Participating Entity shall be executed no later than six months after the Effective Date, and for those Participating Entities entering Project implementation on a later date, the Cooperative Agreements shall be executed no later than 90 days after Bank approval of participation.
10. The Borrower, through SAR, shall: (i) no later than three months after the Effective Date, designate the independent auditors as referred to in Sections II. B.3 of the Loan Agreement; and (ii) no later than six months after the Effective Date, designate the procurement auditors as referred to in Section I. A.7 of the Loan Agreement; all under terms of reference and with qualifications and experience satisfactory to the Bank.
11. By June 30, 2013, or such other date as the Bank shall agree upon, the Borrower shall: (i) carry out jointly with the Bank, a mid-term review of the implementation of operations under the Project, which shall cover the progress achieved in the implementation of the Project; and (ii) following such mid-term review, act promptly and diligently to take any corrective action as shall be agreed by the Bank.
12. The Borrower, through SAR, shall: (i) no later than six months after the Effective Date, launch a public competitive examination (in form and substance satisfactory to the Bank) to hire rural extensionists; and (ii) no later than twelve months after the Effective Date adopt and publish a regulation in form and substance satisfactory to the Bank in order to create the Borrower’s Institute of Water Management (IGASC).
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I STRATEGIC CONTEXT AND RATIONALE A Background and Agricultural Sector Overview (see Annex 1) 1. Santa Catarina’s strong economic growth. The State of Santa Catarina (SoSC) has an estimated land area of 95,346 km² and a population of some 6.1 million, 80% of which live in urban areas. The State’s economy is based primarily on the services sector (58% of the state’s GDP), followed by the industrial sector (35%), and agriculture (7%). Nationally, the SoSC accounted for 4.0% of GDP (about US$37 billion) in 2006 and, by 2008, it had expanded to 5.9% outpacing the national average of 5.1% and ranking among the 7th largest states in Brazil in terms of GDP between 1999 and 2007.
2. The state’s fiscal performance has been robust over the past seven years and its fiscal indicators are well within the limit established by the Federal Fiscal Responsibility Law. Fiscal consolidation at the state level has made an important contribution to Brazil’s stronger macroeconomic situation. Improved sub-national fiscal capacity is one of the great achievements of the Fiscal Responsibility Law (FRL): in SoSC, from 2002 to 2007, the state’s net consolidated debts/net current revenue ratio fell from almost 2.0 (FRL’s ceiling) to 1.0. Fiscal indicators have shown strong improvement since 2004. Hence, the net consolidated debt as a ratio of net current revenue (NCR) has more than halved from 165% in 2004 to 61% in the first quarter of 2009. The personnel expenditure per NCR decreased from 54% in 2004 to 43% in 2009, well below the limit of 60%. The primary balance, which grew on average by 6% annually from 2004 to 2009, experienced a drop of 26% in 2007 as well as during the first quarter of 2009 (R$493 million) as a result of the global crisis.
3. Agriculture plays an important role in SoSC’s political economy: Though accounting for only 7% of State GDP, when considered along with agro industry, the sector generates nearly 60% of SoSC’s exports and employs 40% of the labor force. Agricultural export growth is consistently above 15% annually. One-half of the state’s agricultural output is livestock-based, with another 41% accounted for by perennial crops, with forestry accounting for the remaining 9%. Agricultural exports consist mainly of meat (e.g., poultry and swine) and wood (e.g., furniture and cellulose).
4. Agriculture remains vital to social well-being in the SoSC. About 20% of the SoSC’s population live in rural areas, of which some 90% are farmers. Of the State’s 187,000 holdings, 90% consist of small family-farms (Family Agriculture Farms or FAFs) of 50 hectares or less (34% are 10 ha or less) which contribute 70% of the state’s Agricultural GDP (AgGDP). SoSC has the highest proportion of very small farms among the southern states of Brazil. The main FAF contribution to the state’s AgGDP includes: maize (70%), beans (73%), rice (67%), 80% (swine and poultry), milk (83%) and onion (91%).
5. The SoSC is characterized by a rich natural resource base, including 42% of land covered with native forests and 9% by natural grasslands. The State’s water resources consist of two major river basins systems spanning 23 main watersheds. Livestock, agriculture and forestry represent 31%, 16% and 7% of the state’s total land use, respectively.
6. In spite of its strong macroeconomic performance, economic opportunities in the SoSC are not equally available to all. The State faces key development issues that constrain
1 continued poverty reduction and sustainable development. As in many other parts of the world, issues of environmental degradation, rural poverty and the status and trends in the State’s agricultural sector are interdependent. Some of the principal issues and associated critical constraints are summarized below.
Socioeconomic Challenges. The State has made impressive progress in reducing poverty over the last decade, but still has about 12.4% (or 700,000 people) of its population living in poverty (poverty line of US$ 1/day per family). Some 20% reside in rural areas, and are mainly small farmer families (SFFs), rural workers and indigenous people.
Agricultural Sector. Opportunities in the Brazilian agricultural sector are available mainly to large-scale grain and animal production, tropical fruits, sugar-cane, bio-fuels and forest producers. Hence competitiveness represents a particularly difficult challenge for smallholders. Competitiveness is defined here as the ability of a firm to offer products and services that meet the quality standards of the market – whether local, regional, national or international -- at prices that are competitive and provide adequate returns on the resources employed or consumed in producing them. The proposed project will support rural competitiveness in Santa Catarina on two fronts: (i) finance capital and related technical assistance to family agriculture producer organizations (FAPOs) to encourage technological innovation and diversification, raise productivity, and broaden market access; and (ii) bolster provision of needed complementary public goods and services (e.g., infrastructure, certification, sanitary, legal and environmental regulatory compliance).
FAFs in the SoSC face a number of pressing challenges, including: (i) lack of economies of scale, given the nature of prevailing agro-industrialization processes that in some cases are inadequate for FAFs; (ii) lack of capital and expertise needed to facilitate the modernization of production; (iii) poor-quality products, low productivity and value added, and insufficient diversification of production systems that are more suitable to markets and to the local agro- ecological conditions, leading to poor access to markets for a significant portion of FAFs; (iv) a fragile natural resource base and challenging requirements to comply with environmental legislation; (v) poor logistics systems and related infrastructure (roads) in many areas; and (vi) the limited scope of public policy in rural areas and a certain inability of public institutions to adapt to the evolving demands of the rural sector.
Environmental Footprint of Agriculture. Native forest lands are under pressure primarily as a result of past and on-going change in land use associated with conversion to agriculture, agro-forestry and livestock activities1. Agricultural sector growth has also contributed to an increase in water resource disputes, resulting in growing pressure to implement an integrated approach to Water Resource Management (WRM). This pressure is intensified by already observable impacts of Climate Change.
1 A recent study INPE/SOS Mata Atlantica states that, from 2005-2008, the SoSC had the second highest deforestation rate of Atlantic Forest (after Minas Gerais) among ten Brazilian States evaluated (the biome covers 13 States). Existing data on native Atlantic Forest remnants vary from 23 to 38 % (methodological issues): according to KfW/FATMA’s land use map (2005), the forest remnants are 38% (it includes primary vegetation and forests under moderate and advanced stages of regeneration); according to the aforementioned INPE /SOS SOS Mata Atlantica study based on satellite images from 2005-2008, the forest remnants are 23% (includes only primary vegetation and forests under advanced stages of regeneration). 2
Public Sector Management Constraints. As in other Brazilian states, there is a strong demand in the SoSC for more systemic institutional approaches that will improve the public sector performance. While progress has been made on fiscal management, support is still needed in specific areas to improve public sector management. Much of this need comes from an incipient planning and results-oriented culture, combined with a shortage of management information required for sound decision making. A second challenge is related to relatively weak coordination across sectors, a constraint that, if removed, would facilitate rural income growth and diversification.
7. State Government Strategy. To address these challenges, the SoSC is implementing a strong development agenda, which is reflected in its two main planning tools, the 2008-2011 Multi-Year Development Plan (PPA) and the Santa Catarina 2015 Development Plan (SCDP). Along the lines of both plans, the State Secretariat of Agriculture and Rural Development (SAR) and the State Secretariat of Sustainable Economic Development (SDS) have worked on a number of initiatives to promote sustainable rural development, including the recently-closed, Bank- financed, Natural Resources Management and Rural Poverty Reduction Project, locally known as Microbacias II (Ln. 4660-BR). The Microbacias II project assisted FAFs, rural workers and indigenous people in adopting more sustainable natural resources management practices, thereby improving their income and overall living conditions. Great progress was also made in addressing environmental and WRM challenges through: (i) education; (ii) infrastructure for state protected areas; (iii) the planning of three river basins and two ecological corridors integrated with local-level planning and actions; (iv) creation of Water Basin Committees and the development and implementation of key WRM tools, including the state WRM information and water use rights systems. For a summary of the main achievements of the Microbacias II project, see Annex 1, Appendix 1.
8. The proposed project would build on these achievements by adding the element of competitiveness to rural development efforts; it will do so by supporting both private and public sector investments. The project is designed with a defined exit strategy: it focuses on structuring a “pipeline” of increasingly entrepreneurial, market-driven, productive and creditworthy small-farm producers, supported by a set of better coordinated and more effective public-services-providing activities to serve as a framework for their increasing and lasting economic growth. With regard to support to private sector investments to promote competitiveness, the project would provide focused support to the FAF and Indigenous Peoples segment of producers guided by the following overall principles:
Productivity, value added and profitability: Permanent improvements in rural income and well-being will require that producers adopt new technologies and access greater market intelligence to more efficiently use available resources, thereby ensuring the profitability and competitiveness of their production.
Organizations: The small farmer, acting alone, is unlikely to effectively compete in a market dominated by intermediaries with asymmetric bargaining power and information. Conversely, participation in value-added arrangements such as productive alliances can provide more stable, reliable and remunerative market access. A business plan is the instrument upon which a productive alliance would be formed, evaluated and supported.
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Demand: There must be a specified market for the activities to be funded; they must respond to market demand.
Entrepreneurship: Traditional, low-productivity family agriculture requires a transformation toward more modern commercial agriculture, with increased factor efficiency and growth potential. A culture of formally-established businesses with contractual obligations would be fostered under the project, within which producers with potential would assume business responsibilities. In this context, the business plan is the crucial instrument.
Shared risk and benefits: Value-added arrangements provide a way for the different actors to share both the risks and associated revenues.
Enhanced share of final value: The project targets groups of organized small farmers with improved production potential, promoting increased value of production and market access through productive and commercial alliances so that they can more effectively access a better share of final value and profits.
9. Studies suggest the need to build on the results achieved under the previous project by: (i) increasing the emphasis on technical assistance and training for productive investments focused on income generation and increased rural competitiveness; and (ii) consolidating the underlying technical strategy as a public policy instrument. However, the consolidation of these initiatives and strategies will require a more specialized and effective agricultural policy. As such, the SoSC requested Bank support to expand and deepen the aforementioned strategies to increase rural competitiveness. Subsequent discussions led to a request for a new operation designed with a Sector-Wide-Approach (SWAp), combining traditional Specific Investment Lending and Eligible Expenditure Programs along with Disbursement-Linked Indicators disbursement modalities.
10. Specifically, the Bank’s proposed support to the SoSC’s rural strategy, as part of the SC 2015 Development Plan, would focus on consolidating government initiatives to increase rural competitiveness. The SoSC is currently implementing eight regular programs under the 2008- 2011 PPA — two each in agriculture and environment and one in WRM, rural tourism and rural roads— that, in the Bank’s judgment, will help address some of the most important constraints to improving the State’s rural competitiveness, particularly among the FAFs. The proposed operation will support the continued implementation of these eight regular PPA Eligible Expenditure Programs (EEPs) with financial resources, as well as through the use of disbursement-linked performance targets and technical assistance to enhance their impact. These eight EEPs were selected because they are operationally linked to the SoSC’s key development goals. The choice of EEPs ensures that the proposed operation would leverage a significant amount of resources in the targeted sectors. Addressing specific sectoral challenges requires improved horizontal coordination of public sector management. Hence, the public administration TA activities under the proposed operation would serve as an “umbrella” of support that sustains progress on sectoral programs. Activities would aim to enhance the SoSC’s ability to conduct performance-oriented planning and budgeting, procure goods and services, and monitor and evaluate service delivery. As such, the proposed operation would mobilize important reform and institutional strengthening efforts while guiding and supporting the SoSC’s rural competitiveness agenda.
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B Rationale for Bank involvement 11. The proposed project is an important part of both the Brazil portfolio and the Bank’s Agriculture Action Plan Implementing Agriculture for Development (FY10-12), which outlines the scaled-up Bank commitment to raise agricultural productivity, reduce risk and vulnerability, link farmers to markets, strengthen value chains, promote vital environmental services and facilitate rural non-farm income and diversification.
12. The underlying development hypothesis for the proposed operation stems from the recognized need to adopt two complementary approaches to increase FAF competitiveness, namely support for: (i) direct collective and individual investments for Family Agriculture Producer Organizations (FAPOs) and their FAFs members; and (ii) broader state development programs and policies in core competitiveness-inducing activities. Given the increasingly competitive and globalized economy, the proposed operation would raise the SoSC’s capacity to build a network of players at the forefront of innovation, the end result of which being the creation of new wealth, reduced poverty and rural employment generation.
13. The reasoning for Bank involvement is also related to project support to the implementation of one of the five areas of focus defined under the World Bank Group’s Country Partnership Strategy (CPS) 2008-2011 (Report # 42677) discussed by the Executive Directors on May 1, 2008 and the Progress Report (Report # 53356-BR) discussed by the Executive Directors on April 20, 2010, i.e., "addressing areas where performance was relatively weak in the last Country Assistance Strategy (CAS) period". Among the central CAS pillars, a more Competitive Brazil was the one where progress had been slow. Moreover, the CPS highlights the Bank’s increasing role at the State level and the importance of addressing complex development challenges in an integrated and multi-sector fashion. It defines the focus of the Bank Group engagement on the “paradigmatic challenges” identified by Brazilian leaders, and outlines how the World Bank Group’s key programs and interventions contribute to the three CPS pillars. While the proposed project would contribute to all three CPS pillars, its main focus will be on promoting a more Competitive Brazil.
14. Moreover, the Bank’s incremental and unique contributions are also related to its comparative advantage which can be expressed by the following factors:
The Bank’s in-country experience and past fruitful involvement with the SoSC’s rural sector, by supporting the development and implementation of a successful integrated approach to NRM and rural poverty reduction. The Bank has acquired knowledge of local and participatory development in Brazil, in particular, rural projects in Northeast Brazil, and Southern and Southeastern states, including Santa Catarina.
The Bank’s knowledge and accumulated international best practice can bring value-added in an array of subject matters central to the proposed project, including: improved rural competitiveness –and supporting rural competitiveness clusters– through increasing FAF productivity, value-added, innovation and market access; implementation of sector-wide approaches to promote sustained increased sector performance; and instruments for the long- term financing of sustainable production practices and natural resources conservation.
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15. The Bank’s involvement fits with the activities of other development partners operating in the SoSC, particularly those related to public sector management, environment and innovation associated with rural competitiveness clusters. The proposed project would complement and build on these ongoing activities, including: (i) IADB’s recently approved “State Administration Management Modernization Program, contributing to the strengthening of the state’s fiscal management modernization process; (ii) KfW’s Pro-Mata Atlantica Project, which supports institutional strengthening, planning and infrastructure in seven Protected Areas; and (iii) IADB’s Technical Cooperation grant, “Strengthening Regional Innovation Systems in Brazil Project”, that will undertake a diagnostic in the SoSC to identify private companies’ profiles, the most dynamic sectors of the state, and support the pilot implementation of state programs aimed at promoting innovation among the productive clusters. Creating a shared vision among the Bank, the borrower and other development partners is needed to advance a more sustainable rural development agenda. The proposed project would present a unique opportunity to complement the above-mentioned strategies with a multi-sector approach to promote producer-level and structural changes to enhance rural competitiveness.
C Higher level objectives to which the project contributes 16. Activities supported by the proposed project would contribute to the higher-order objective of sustained rural competitiveness in the SoSC. The project’s objective and strategy are fully in line with the 2008-2011 CPS. While the proposed project would contribute to all three of the pillars as outlined in the CPS, the main focus would be on promoting the third pillar, a Competitive Brazil. In the case of the agriculture and NRM sectors, the proposed project would support two key challenges outlined in the CPS, namely: (i) seizing opportunities for innovative and integrated approaches to sustainable growth, by focusing on rural competitiveness; and (ii) addressing paradigmatic issues facing Brazil in agriculture and NRM.
17. Beyond this main focus, the proposed project would also support the first and second pillars of the CPS by contributing to an Equitable Brazil and focusing on SFFs at “the bottom of the pyramid,” as well as by strengthening accountability. It will also contribute to a Sustainable Brazil by implementing sustainable production systems, including mechanisms for certifying sustainable agribusiness, and implementing sustained economic incentives schemes.
II PROJECT DESCRIPTION A Lending instrument 18. The Bank would support the Rural Competitiveness Program for the SoSC, a total of US$189 million in expenditures including Bank support, through a Specific Investment Loan (SIL) of US$90 million using a Sector Wide Approach (SWAp). This would be the first SWAp loan for the SoSC and would build on the successful implementation of the Microbacias II project, itself a multisectoral project requiring careful coordination and monitoring of the activities carried out by seven agencies belonging to three state secretariats. The choice of disbursement modality would reinforce what worked best in a previous Bank-supported operation, while adding new, results-based incentives to ensure achievement of project development objectives. The previous operation developed an efficient system for timely allocation of counterpart funding and tracking expenditures to component activities. This exercise strengthened budget management, promoted increased coordination between the
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Secretariat of Finance (SEF) and the Secretariat of Agriculture and Rural Development (SAR), and assured successful project implementation. Hence, reliance on regularly budgeted activities, through a SWAp, is a logical next step and would greatly contribute to the long-term sustainability of the proposed activities.
19. The proposed loan would disburse against: (i) aggregate EEP expenditures in a period, conditioned on satisfying associated non-tranched Disbursement-Linked Indicators (DLIs); and (ii) the traditional SIL Technical Assistance disbursement category. The EEP/DLI part of the loan would support expenses associated with eight priority EEPs that are central to achievement of the SoSC’s rural competitiveness program. Bank support would disburse at an approximate rate of 50% against EEPs expenditures and these disbursements would be capped. The 70% – minimum expenditure – rule would be imposed to be certain that the EEPs are expensed in support of loan objectives. At the same time, DLI-linked disbursements would contribute significantly to structural reforms – something the previous operation could not do –, improved monitoring and evaluation, and results based management. By monetizing results indicators, the operation would provide a strong, transparent incentive to the Government to move forward with the structural and institutional reforms needed for the beneficiaries to progress.
20. The EEPs (See Annex 4, Appendix 1 a list of the EEPs and annual budgets) to be considered, and the activities they will support are presented in the following table:
Eligible Expenditure Programs (EEPs) Sector and/or Code / Name Main Types of Activities Supported Theme Producer organization and capacity building for investments 0310 - Competitive Agriculture and in cooperation networks and productive alliances; improved Agribusiness Environment production systems, regulatory compliance, diversification, processing/ value- added innovation. 0300 - Quality of Life in Compliance with land tenure, sanitary/ phytosanitary Agriculture Rural and Urban Areas regulations. 0340 - Sustainable Env. Ecosystems and corridor mgt; environmental compliance and Environment Development enforcement activities; environmental education. Continued WRM improvement through planning at the state 0350 - Water Resources and basin levels, water monitoring, strengthening of river WRM Management basin committees, issuing of water user rights and upgrading of the state’s WRM information system. Improvement of tertiary roads to facilitate access to market of 0100 - Rural Roads Infrastructure agroprocessing ventures by project beneficiaries. Capacity building; awareness campaigns, fairs and 0640 - Rural Tourism Tourism workshops; studies/inventories; info dissemination and direct investments to promote rural tourism. Training in rural digital connectivity, especially youth, for 0250 - Digital Inclusion Agriculture improved access to information; innovation and implementation of networks. 0900 - Administration and Program execution as well as improved public-sector Public Sector Management within the performance through results-based management, and Management Executive Power improved administrative and fiduciary management.
21. In addition, the use of DLIs would be an added condition and performance incentive to ensure that results are achieved by paying for them (i.e., DLI values equal disbursement for the
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SWAp in the period, divided by the number of DLIs). Mechanisms described in the Disbursement Letter and project operations manual would address what would happen if the DLI or EEP 70% conditions are not met. The DLIs are summarized in the following table (see Annex 4).
Component/ Sub- Disbursement Linked Indicator (*) Sectors /Activities
1. Family Agriculture Competitiveness and Increased Access to Markets Investments (1) Number of new added-value arrangements established or strengthened, such as alliances, networks and cooperatives. (**) (2) Number of existing small agro-businesses made compliant with SPS Requirements, and new agro-processing and non-agricultural businesses created. (3) Number of ancillary climate-resilient production systems improvement and tourism plans executed through Subprojects with Project support. (**) (4) Number of rural tourism plans executed through Subprojects with Project support 2. Complementary Public Investments for Rural Competitiveness Environmental Management Water Resources (5) Number of River Basin Strategic Plans formulated on a participatory basis. Management (6) Number of River Basins with registration of users completed. Ecosystem Management (7) Number of hectares of forests under “Conservation Credits”. (8) Number of farms with SIEE implemented (SIEE of livestock - meat and milk -, grains, forestry, SAF and tourism). Rural Infrastructure Rehabilitation of Rural (9) Number of km of rural roads associated to business plans rehabilitated. Roads Digital Inclusion (10) Number of Pilot Digital Inclusion projects implemented with internet connection to support enterprises connected to networks. SPS and QC Systems Certification (11) Number of units of Family Agriculture production and processing units registered and certified to comply with phyto-sanitary requirements. (**) (12) Number of farms certified for absence of animal tuberculosis and brucellosis. Rural Technical Assistance and Extension Services Strategic Staffing (13) Number of new regular Technical Assistance and Rural Extension professional staff allocated by EPAGRI in priority project municipalities, by CIDASC to phytosanitary certification and by FATMA to SIEE implementation. (**)
B Project development objective and key indicators 22. The objective of the Project is to increase the competitiveness of Family Agriculture Producer Organizations while providing support for an improved framework of structural competitiveness-inducing public services activities in the Borrower’s territory.
23. Key results indicators include: (i) 500 business plans and 20,000 ancillary production- systems improvement plans executed with project support, benefiting 25,000 rural producers participating in FAPOs and indigenous peoples’ groups; (ii) increase by 30% in the total annual sales volume for participating FAPOs; and (iii) coordinated implementation of six public programs to improve the rural business environment for FAFs – aggregate indicator measured by the following contributing indices: (a) 65% of existing water resources adopting decentralized and participatory planning and management; (b) 10% of the SoSC’s territory (990,000 hectares) managed under an “ecological corridor” concept of sustainable production and preservation; (c)
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100% rehabilitation of rural roads associated with business plans, totaling 1,300 km; (d) 60% of all public financing for rural endeavors involving FAFs, channeled through a new Technical Assistance and Rural Extension strategy focused on SFFs; (e) re-structured Sanitary and Phytosanitary Services to include specific support for FAFs; and (f) 1,000 rural schools carrying out interdisciplinary actions under PEEA (PEEA: State Environmental Education Policy).
24. Targeting. Project activities would be implemented statewide, target existing FAPOs and others to be established during project execution. In line with national policies, FAPOs are defined as producer organizations in which 90% of membership consists of family farmers as defined under Brazil’s National Family Agriculture Program (PRONAF). Approximately 3.6 million hectares (37% of the State), where economic activity is lagging and the potential for improvement and the need for support are larger, would be covered by the project. Rural agricultural and non-agricultural small-scale producers would be targeted - including SFFs, rural workers and indigenous people families, organized in associations, cooperatives, formal (with legal status) and informal networks or alliances. The project would directly and indirectly reach some 90,000 SFFs overall, 2,000 rural workers/laborers and 1,920 indigenous people families. Of these beneficiaries, about 25,000 (considered direct priority beneficiaries) would be targeted to receive direct financial project support via grants delivered through the State’s Rural Investment Fund (RIF) to improve productive systems and added-value arrangements for rural competitiveness. A second important group of stakeholders would be the members of River Basin Committees, consisting of various private and public institutions and sectors.
C Project components (See Annex 2) 25. The Project, implemented over a six-year period, would have the following three components to achieve its objectives: (1) Family Agriculture Competitiveness and Increased Access to Markets; (2) Complementary Public Investments for Rural Competitiveness; and (3) Support to the Rural Competitiveness Institutional Framework.
26. Component 1: Family Agriculture Competitiveness and Increased Access to Markets would support family agriculture competitiveness in the Borrower’s territory through the implementation of the pertinent EEPs and the provision of technical assistance, by working with stakeholders across local, municipal and regional levels in order to increase organizational and participation skills for Project implementation through:
27. Pre-investment activities to: (i) support technical, extension and training services to create and consolidate added-value arrangements among family agriculture producer organizations and other commercial stakeholders; (ii) identify potential business opportunities and prepare business proposals; (iii) prepare related business plans; and (iv) build capacity among technical service providers to enhance the quality of their services provided in support of rural competitiveness; and
28. Demand-driven productive and added-value investments through the State Rural Development Fund (RIF) to support the implementation by family agriculture producer organizations of viable business plans, including, inter alia: (i) diversification and improvement of production/farming systems; (ii) agro-processing; (iii) support to meet legal environmental and sanitary requirements for market access; (iv) marketing and logistics; and (v) off-farm/non- agricultural investments.
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29. With total expected expenditures amounting to US$96 million, Component 1 would finance technical assistance and training services, workshops and exchanges, expert services, studies and demonstration/adaptation activities, goods (production inputs; farming, storage and processing equipment; computers and other logistics and communications equipment) and small civil works as part of its main activities.
30. Through these activities, the component would build capacity for investment and would act as a risk management tool to ease investment decision-making by lowering the barrier represented by up-front costs. This would also facilitate access to credit, as FAPOs will be expected to secure parallel financing in advance of the complementary grant from the project. The complementary grant, a one-time capital infusion, is designed to jump-start innovation and spur the adoption of new technologies and practices to enhance competitiveness and sustainable use of natural resources. Furthermore, in transforming FAPOs and the FAFs involved into both viable and competitive actors in the value chains, the project would create a greater pool of credit-worthy clients (to be picked up later by financial institutions) and expand the current thin market for rural financial services. Several technical design elements will contribute to the long- term sustainability of activities, including the organizational and capacity-building activities, the selection criteria of proposals to be supported (based on financial feasibility, concrete value- added arrangement such as a productive alliance and defined market), and the improved overall competitiveness framework.
31. Component 2: Complementary Public Investments for Rural Competitiveness would support the improvement of the structural rural competitiveness framework through the implementation of the pertinent EEPs and the provision of technical assistance, by financing public goods activities that are crucial for the sustained competitiveness of FAPOs, and for the implementation of sectoral activities, such as WRM; ecosystems and corridor management; environmental monitoring and education; rural infrastructure; regulatory framework compliance; rural technical assistance and extension, sanitary and phyto-sanitary services; and rural tourism.
32. With total expected expenditures of US$80 million, the component would finance training, workshops and exchanges, expert services, studies, goods (equipment, satellite images, publications and materials), and civil works in support of the implementation of the aforementioned sectoral activities set out in the State’s PPA.
33. Through these activities, the component would: (i) expand the State’s efforts to strengthen the capacity for participatory, integrated, basin-scale WRM at the state (central) level and in fourteen river basins (out of the state’s total 24 river basins), including formalization of non-agricultural and agricultural water rights, the latter incorporating specific support to FAF’s compliance with WRM legislation; (ii) implement two Ecological Corridors –Timbó and Chapecó– to support ecological corridor connectivity by supporting the creation of two areas of biodiversity conservation-friendly land use mosaics, and the development and implementation of two incentive mechanisms for payment of environmental services, environmental compliance and improved productive systems; (iii) strengthen capacity to assist small farmers and other rural entrepreneurs to comply with WRM and environmental legislation, and support implementation of the state and federal Environmental Education policies to promote awareness, appreciation, knowledge and stewardship of natural resources; (iv) support the State’s efforts to improve rural road rehabilitation and expand communication systems infrastructure essential for sustained rural
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competitiveness; (v) support FAFs in ensuring the quality and safety required for their products to access formal final markets, and regularizing their land tenure to enable creditworthiness; (vi) support State’s efforts to re-structure its Agricultural Extension Services to provide quality and sufficient technical assistance and rural extension to promote sustained competitiveness of family-agriculture; and (vii) support State’s efforts to provide alternative non-agricultural sources of income in rural areas.
34. Component 3: Support to the Rural Competitiveness Institutional Framework would enhance public administration performance in support of rural competitiveness through the implementation of the pertinent EEPs and the provision of technical assistance by implementing: (a) more efficient financial management and procurement systems; (b) a results- based management approach for the Project and the main institutions of the Borrower which have administrative jurisdiction over the rural sector; (c) Project coordination, monitoring and evaluation.
35. With total expected expenditures of US$13 million, the component would finance expert services, training, workshops, studies and goods to support: (i) central administration strengthening; (ii) results-based management at the project, rural and environmental sector levels; and (iii) program coordination, monitoring and evaluation.
36. Through these interventions it is expected that by the end of the project: (i) the SoSC central administration would have in place more efficient financial management and procurement systems; (ii) a results-based management system for the main rural-focused public institutions would be in place to better and more effectively plan, budget and execute their activities, thus improving the efficiency and coordination of their rural development activities; and (iii) public availability of current results throughout program execution, and public consultation of program planning would result in better responsiveness to public demand and better overall results.
D Lessons learned and reflected in the project design 37. The collective experiences on natural resources management and rural poverty reduction projects supported by the Bank in Southern and Northeastern Brazil, as well as operations in support of rural competitiveness in Latin America and other regions, offer important lessons that have been incorporated into the design of the proposed project. The design will also build on the global lessons learned and compiled in the Bank’s 2008 World Development Report on “Agriculture for Development.” Some of the lessons learned are described in the following:
Market Orientation: Verifiable market opportunities must underpin support for poor rural producers. Effective mechanisms to achieve this include, inter alia: focusing on existing and new markets and value chains as part of the eligibility criteria for productive investment subprojects; conducting private sector consultations during project design; and carefully analyzing areas where the government can play a catalytic role based on current and future market conditions.
Participation by FAPOs in the selection, financing, execution, operation and maintenance of investments can generate cost savings and increase ownership, thereby improving the sustainability of these investments. Tangible contributions from the FAPOs themselves are 11
in line with the principle of subsidiarity of the proposed project interventions, thus avoiding or mitigating possible distortions induced by subproject grants.
Value-added arrangements are viable based on a transparent scheme with proper incentives. Successful value-added arrangements can be achieved when three key elements are present: (a) a clear and shared objective and sound balance of power and governance among all stakeholders; (b) a shared risk mechanism; and (c) commitment to market mechanisms.
Competitiveness clusters: To ensure success for a specific competitiveness cluster, the following factors must be considered: creating extensive partnerships among players - under a common development strategy - for specific value chain projects; focusing on technologies for markets with high growth potential; reaching sufficient critical mass to acquire and develop state level (or national) visibility; implementing a common local economic development strategy that is consistent with the state’s overall development strategy.
Multi-sectoral Interventions: integration of project activities with other rural development programs, including the simultaneous promotion of private productive investments and public socio-economic investments, enhances efficiency, project impact and sustainability.
Targeted Small Farmer Financial Support: Addressing temporary market failures through one-time matching grants, in addition to improving the policy environment and investment climate, help economic agents manage transaction costs and risk associated with technology adaptation and organizational innovation (as in the case of farmers investing in FAPOs and agribusinesses in developing value chains).
Decentralization and Project Ownership: Decentralization of project implementation and supervision responsibilities to the municipal level, along with the promotion of local stakeholder project ownership – through the active participation of beneficiaries and local governments during all phases of the project – act as a means for successful project implementation and enhanced sustainability of project activities. However, the impact of a decentralized strategy requires the effective strengthening of local capacity.
Lessons from other SWAp operations in Brazil: the proposed operation would build upon earlier Ceará and Minas Gerais SWAp design and implementation features, including those related to: i) disbursement mechanisms; ii) primary and secondary disbursement-linked indicators, and conditionality; iii) inclusion of a technical assistance component; and iv) fiduciary oversight and safeguards.
E Alternatives considered and reasons for rejection 38. Two options of loan instruments were considered. The first was to continue with the SIL-type loan and structure of the two previous operations in SoSC. The second was to use a SWAp focusing more on performance-based incentives. The second option was chosen for the following reasons:
After two loans, the SoSC had demonstrated an ability to carry out the actvities associated with the earlier SILs and could manage similar activites to be included in the new operation, thereby limiting the need for traditional SIL funding. 12
The need for upgrading and refining some specific project activities through traditional funding could be easily accommodated, while financing the bulk of performance-based management essential to sustain rural development objectives through the SWAp modality. Relative to most (but not all) Brazilian SWAps, the loan's SIL component is relatively large. This is to ensure that funding required to upgrade institutions and innovate FAPOs and related activities is readily available in the loan.
After two Bank loans, it was also felt that the biggest challenge to rural family well-being and sector development was meeting concrete, annual budget execution and performance- based expectations over the course of the loan and continuing to do so thereafter. A log frame has useful indicators but neither requires nor rewards annual performance and hence contributes far less to sustainable practices. As such, the proposed loan should incorporate and consolidate results-based management in a manner that would ensure ongoing sector development. A SWAp does this by establishing conditions for disbursement that require the SoSC to adequately budget and execute important rural programs annually, while achieving performance-based indicators. Hence, it is expected that a SWAp, much more than a SIL, would contribute to sustainable rural program budgeting and accountability for performance.
SILs are most often single sector operations. A SWAp can and often does focus on a number of important, related sectors; most Brazilian SWAps have been multi-sector including up to six sectors. A SWAp can do this without over-complicating with detailed investment programs for each sector to be included. The SWAp does this by disbursing against program expenditures and conditioning disbursement on results. Hence this SWAp can and does support numerous inter-related reforms across related sectors and organizations.
Finally, Brazilian SWAps have proven useful instruments for undertaking cross-sectoral institutional strengthening and especially procurement, financial management and results- based management. This can be done through the use of both disbursement-linked indicators and technical assistance. While a SIL could be designed to do something similar, this rarely happens. The use of a new instrument that customarily does this highly useful cross-sectoral work facilitates acceptance by both Bank and client staff.
III IMPLEMENTATION A Partnership arrangements (if applicable) 39. There are no formal partnership arrangements related to this operation. IADB is active in infrastructure and public sector management, and KfW in environmental management. The Bank team is coordinating complementarity of the proposed program activities and these operations with counterparts. In particular, the IADB is financing the national States and DF Administration Modernization I project and the Santa Catarina Highway Program – Stage V. KfW supports the Pro-Atlantic Forest Program, with which the Bank has already coordinated activities during the implementation of the now-closed Santa Catarina Natural Resources Management and Rural Poverty Reduction project, and the Tabuleiro State Park GEF project.
40. FAO would assist in project implementation through the long-standing WB-FAO Cooperative Program, whereby FAO provides technical assistance for the preparation and implementation of rural/agricultural investment projects. FAO is currently using project data to
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test the Ex-ante Carbon-balance Tool (EX-ACT)2, an instrument developed by FAO to provide ex-ante measurements of the impact of agriculture and forestry development projects on GHG emissions and Carbon sequestration, indicating its effects on the Carbon-balance (i.e., the sum of reduced GHG emissions and Carbon sequestered above and below ground).
B Institutional and implementation arrangements (see Annex 6) 41. The Borrower for the proposed six-year project is the State Government of Santa Catarina, represented by the State Secretariat for Agriculture and Rural Development (SAR). Project management and implementation would be mainstreamed into the structure of the public sector institutions involved in the Program, under the overall responsibility of the SAR. The SAR will be supported by a Program Executive Secretariat (SAR/SEE), and SAR’s affiliates, SAR/EPAGRI (Extension and Research) and SAR/CIDASC (Animal and Plant Health, and Animal Food Safety), which will play a central role in the implementation of project activities in the areas of management, capacity building, rural extension, market orientation, sanitary and phytosanitary services, investments planning, and monitoring and evaluation. The signing of Partnership agreements, satisfactory to the Bank, between SAR and EPAGRI, CIDASC and FATMA would be a condition of Loan Effectiveness.
42. Other Participating Entities for the implementation of the SWAp comprise the following:
Private sector organizations such as FAPOs, value-added arrangements and alliances. The project would work directly with FAPOs and provide them with investment support through grant agreements. In order for a FAPO to participate, at least 90% of its membership must be qualified under the National Family Agriculture Program – PRONAF (see Annex 4). Value- added arrangements/alliances are composed of one or multiple FAPOs and one or more commercial partners. The productive alliance would identify a mutually beneficial market opportunity, set forth in a business plan, which would also include a feasibility assessment.
Public sector institutions that would provide structural competitiveness-inducing public services to FAPOs under Component 2, as part of the State’s PPA, include: the State Secretariat for Sustainable Economic Development (SDS), through its Water Resources Directorate (SDS/DRH) and its affiliate, the State Environmental Management Foundation (SDS/FATMA); State Secretariat of Infrastructure (SIE); State Secretariat for Public Safety and Citizens’ Protection (SSP), through its affiliate, the State Environmental Police (SSP/PMA); State Secretariat for Tourism, Culture and Sports (SOL); State Secretariat of Finance (SEF); as well as Municipalities. SAR would sign cooperative agreements with these Secretariats no later than six months after Loan Effectiveness.
43. Program implementation structure is based on two pillars: deliberative and operational. On the deliberative side, program execution will be guided and monitored at the central level by the Technical Council of Representatives, composed by representatives from entities participating in/or implementing the project. At the regional level, the existing Regional Development Councils, linked to the State’s Regional Development Secretariats (SDRs), will be the Program's advisory bodies.
2 EX-ACT is a land-based accounting system, measuring C stocks and stock changes per unit of land, expressed in tCO2e/ha and year (see Annex 10, Appendix 2). 14
44. On the operational side, at the central level, the SAR will be in charge of implementing the Program with the assistance of the Program’s Executive Secretariat (SEE). As the liaison with the Bank, SEE would work to optimize the program’s performance in terms of results and expected impact. SEE would be responsible for managing, planning, coordinating, monitoring and evaluating all of the program activities, as well as for overall program financial management, procurement, disbursement and accounting. SEE would be supported technically at the central level by a representative Technical Committee (CTR) formed by professional staff from the different implementing partners. At the regional level, SEE would be supported administratively and technically by ten SAR Regional Executive Secretariats (SERs), each counting with the assistance of a Technical Committee (TC) composed with representatives of the implementing partners.
45. Subproject Cycle – Business Plans. The process for selecting and implementing subprojects under Component 1 is presented in Annex 4. The selection would involve the aforementioned structures comprising the SEE, beneficiaries’ and relevant State agencies representatives, sector professionals and business experts.
46. Project Operational Manual. The Manual would contain all rules and norms to guide overall project implementation, including: (i) physical performance indicators to be tracked through the Project Monitoring and Evaluation System; (ii) the criteria for targeting activities under Component 1; (iii) the responsibilities of FAPOs, EPAGRI and other stakeholders in business plan assessment, whether financial, environmental, institutional, social or technical; (iv) model forms for subproject agreements (convênios); (v) model forms for business proposals (perfís) and business plans; (vi) financial management arrangements, and regular and DLI disbursement arrangements; (vii) procurement and anti-corruption guidelines; (viii) the Environmental Management Plan; (ix) the Indigenous Peoples Planning Framework (IPPF); and (x) the Involuntary Resettlement Framework. A user-friendly synthesis of the Project Operational Manual would be made available, as part of the overall communication strategy, to FAPOs and other stakeholders. Adoption, in the form of a resolution, by the SoSC of a Project Operational Manual satisfactory to the Bank would be a condition of Loan Effectiveness.
C Monitoring and evaluation of outcomes/results 47. The SWAp includes eight regular EEPs and thirteen DLIs, as well as secondary indicators that the SoSC commits to monitor. The Bank would rely upon the state’s systems for monitoring and evaluation (including the one developed under the previous operation), while also contributing through the project to strengthen these systems. TA resources are identified to support loan implementation and strengthen fiduciary oversight.
48. The SoSC SWAp and similar operations in Brazil are "disbursement-linked indicator SWAps". The use of indicators to condition disbursement distinguishes them from other SWAps. The client must monitor and annually report DLIs with supporting evidence in order to receive loan disbursements; hence M&E is an innate part of the SWAp instrument. Furthermore, this and other DLI SWAps include DLIs, secondary indicators, and TA to support the development and implementation of the organizational capacity and systems to track and report results. The desired result is to create a sustainable, high-quality capability to carry out results-based management that includes development and vetting of a hierarchy of sector indicators,
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continuous and systemic monitoring and reporting, feedback into budget processes and accountability for results.
49. The SoSC will be responsible for tracking and reporting EEP execution and progress in selected performance indicators. SAR will coordinate with relevant line ministries to report progress against EEP execution, achievement of DLIs and progress against secondary monitoring indicators. Since disbursements require evidence of compliance with EEP execution and DLI targets, the responsibility is directly on the SoSC to provide to the Bank the needed information attesting to performance in a timely and comprehensive fashion. The line Secretariat for each of the eight EEPs would present a concise portrayal of its performance, both for accountability and for planning purposes. While these reports should not be constrained by multiple requirements, they should follow Bank guidelines.
50. Meanwhile, the design of the impact evaluation takes into consideration common elements between this project and other Bank-supported operations in Southern Brazil. Based on this, a shared approach to their evaluation has been built, with the expectation of not only evaluating each individual operation, but also assessing the results and impact of the regional portfolio as a whole. Through the Development Impact Evaluation Initiative (DIME), the Bank has been working with, and training, the project teams of these Southern Brazil operations to develop this compatible evaluation platform while still giving due consideration to the specific characteristics of each state and project design.
D Sustainability 51. At the end of the six-year implementation period, it is expected that participating FAPOs, through their business plan execution, would be on a path toward sustained income generation based on sound resource-base management and agro-processing practices that demonstrate measurable, sustainable results. Furthermore, it is expected that the improved framework to support rural competitiveness would be internalized as SoSC policy, such that FAPOs would have gained a permanent “space” in state and local planning with access to a range of Federal and State programs beyond the project.
E Critical risks and possible controversial aspects Risk to PDO Mitigation Measures Risk Level* SoSC exhibits weak -Project design thoroughly discussed with Secretariats M compliance with the SWAp involved, including SEF. EEP rules, including the 70% - History of previous project shows that as performance Rule. consolidated and actual implementation lined-up with shared SEF-SAR-SDS planning, full compliance with planned budgets was the norm. Inadequate implementation - History of previous project shows that implementation M capacity given the capacity of the implementing agents, which constitute the comprehensive approach being absolute majority of the implementation capacity required for used and the complexity of the the new operation, was satisfactory. implementation arrangements. - Implementation under an improved management system based on careful planning and focused on results. -Re-deployment and training of agencies’ staff, focused on
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project objectives. Failure to sustain commitment - FAF, WRM, and environmental management are state and M to the project after 2010 national priorities. elections. - The Bank has verified the high priority and interest of all stakeholders in project objectives. - The proposed project, like its predecessor, has strong local government support; municipal elections are slated for 2012. - Local task team already actively working with local governments to build on their support. Crowding out of the private - Careful targeting and eligibility criteria. M sector by creating subsidies - Funding provided only to business proposals clearly rooted where they are not needed and on verifiable market opportunities as an entry point and financing products where there economically and financially viable. might be no market and business may not be sustainable. Risk to Components Mitigation Measures Risk Level* Poor capacity of FAPOs to - Component 1 will finance technical assistance to FAPOs for M prepare and implement quality business plan preparation and implementation. business plans. - Project design incorporates good practice on subproject delivery, as well as best-practice in local procurement and implementation from other projects in the region. Inability to coordinate timely - Program implementation structure includes Technical M delivery of private and public Committees at the central and regional level, with investments. participation of representatives of all implementing agencies involved, to ensure coordination of integrated activities amongst them. Participating Secretariats not - Assess Secretariats’ structures; identify TA needs. M adequately staffed. - Enforce adequate staffing through Loan Agreement. - Implement adequate training and transition mechanisms to ensure program continuity. Increased Financial - PEFA exercise. L Management and Procurement - OECD benchmarking. capacity may be required. - Conduct Financial Management and Procurement. Assessment of each participating Secretariat. - Finance development and implementation of an action plan from the TA component. Possible procurement issues - Previous project worked with various agencies with S associated with multiple satisfactory fiduciary results. programs/sectors and agencies. - Previous good fiduciary performance enhanced through thorough training of all institutions involved. Possible financial management - Previous project worked with various agencies with M issues associated with SWAp satisfactory fiduciary results. reporting and multiple - SWAp reporting is more complex than normal SIL. Financial programs/sectors and agencies. Management team will work with the State to prepare reports. Lack of oversight by State - Client experienced with Bank’s safeguards; successful L agencies and non-compliance observance of safeguards during previous operation. by sector Secretariats of social - Safeguards requirements involving all of EEPs activities and environmental safeguards. thoroughly discussed with SAR and the rest of the Secretariats
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involved. - Full training for new staff on safeguards requirements, and annual update training to be provided. - Include relevant information in the Operational Manual. Overall Risk Rating M After mitigation measures taken. L=Low, M= Medium, MH= Medium High, S=Substantial
F Loan conditions and covenants 52. Board Presentation: None
53. Loan effectiveness:
Project Implementation Unit Regulation adopted by the Borrower in form and substance satisfactory to the Bank.
Partnership Agreements have been signed by the parties thereto.
Project Operational Manual, in form and substance satisfactory to the Bank, has been adopted by the Borrower through the issuance of a resolution.
54. Other convenants:
The Borrower through SAR, shall cause the Project to be carried out in accordance with the Project Operational Manual, including the Procurement Plan, the Annual Operating Plan, the Environmental Management Framework, the Involuntary Resettlement Framework and the Indigenous Peoples Framework.
The Borrower shall maintain, until the completion of the execution of the Project, a Project Implementation Unit within SAR and with competent staff in adequate numbers with qualifications and experience satisfactory to the Bank and in accordance, as applicable, with the provisions of Section III, Schedule 2 of the Loan Agreement, including the following key staff: a Project coordinator, an environment specialist, a social specialist, an administrative coordinator, a procurement specialist and a financial management specialist.
The Borrower shall maintain, until the completion of the execution of the Project, the Technical Council of Representatives, to convene at least once every semester, and shall submit the minutes of said meetings to the Bank.
The Borrower shall, at least once a year during Project implementation on or about December 1, commencing on the first such date after the Effective Date, prepare and furnish to the Bank the Annual Operating Plan for the Project’s operation during the following twelve months.
The Borrower shall furnish to the Bank no later than 30 days after the Effective Date and thereafter every six months after the Effective Date, the EEP Spending Reports prepared in accordance with the provisions of the Project Operational Manual and the additional instructions referred to in Section IV.A.1, Schedule 2 of the Loan Agreement.
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The Borrower shall furnish to the Bank on or about April 5 and October 5 each year starting on any such date after the Effective Date, the Procurement Plan Report confirming that all procurement activities under the Project have been carried out in accordance with the Procurement Plan.
The Borrower shall: (a) have all the Project’s procurement records and documentation (including those for Subprojects) for each fiscal year of the Project audited, in accordance with appropriate procurement auditing principles by independent auditors acceptable to the Bank.
The Borrower, through SAR, shall ensure and/or cause to be ensured, that the EEPs comply with the eligibility criteria and procedures set forth in the Project Operational Manual.
Cooperative Agreements with each Participating Entity shall be executed no later than six months after the Effective Date, and for those Participating Entities entering Project implementation on a later date, the Cooperative Agreements shall be executed no later than 90 days after Bank approval of participation.
The Borrower, through SAR, shall: (i) no later than three months after the Effective Date, designate the independent auditors as referred to in Sections II. B.3 of the Loan Agreement; and (ii) no later than six months after the Effective Date, designate the procurement auditors as referred to in Section I. A.7 of the Loan Agreement; all under terms of reference and with qualifications and experience satisfactory to the Bank.
By June 30, 2013, or such other date as the Bank shall agree upon, the Borrower shall: (i) carry out jointly with the Bank, a mid-term review of the implementation of operations under the Project, which shall cover the progress achieved in the implementation of the Project; and (ii) following such mid-term review, act promptly and diligently to take any corrective action as shall be agreed by the Bank.
The Borrower, through SAR, shall: (i) no later than six months after the Effective Date, launch a public competitive examination (in form and substance satisfactory to the Bank) to hire rural extensionists; and (ii) no later than twelve months after the Effective Date adopt and publish a regulation in form and substance satisfactory to the Bank in order to create the Borrower’s Institute of Water Management (IGASC).
IV APPRAISAL SUMMARY A Economic and financial analyses (see Annex 9) 55. Given the demand-driven process by which FAPOs will identify the value-added arrangements to be financed, a detailed ex-ante cost-benefit is not possible. Competitiveness studies have aided in the initial selection of priority values chains, combined with experience of FAPOs and other key informants, as well as field and analytical work of the preparation team. Ultimately, the interested FAPOs would determine the scope and mix of investments. To obtain a broad picture, eight indicative production models, combined with twelve FAF (i.e., farm) models within the selected chains were constructed based on real experiences of successful enterprises and market prospects, future or ongoing investment plans, and other business opportunities
19 identified during preparation. Subprojects would be supported as long as their estimated benefits cover estimated costs and they meet other established criteria (environmental, social, etc).
56. Component 1 would provide grants in support of subprojects within feasible business plans. Grants to FAPOs for subprojects would finance fixed capital (e.g., plant and equipment, minor infrastructure), working capital (e.g. key goods and services and labor) and technical/legal/commercial assistance, as outlined in the respective business plan.
57. For economic and financial analyses, twelve farm models were estimated. These models incorporated conservative estimates of production yields and producer prices. In summary, the weighted average Economic Internal Rate of Return (EIRR) for these models is 15.9%, and the aggregate Economic Net Present Value (NPV) is US$ 35.4 million. Project outcomes are robust vis-à-vis the sensitivity analysis. An increase of 12.7% in the expected incremental costs would reduce the EIRR to 12%. Similarly, a single reduction of 11.3% in the projected incremental income would reduce the EIRR to 12%. Finally, if the incremental benefits foreseen were delayed by one year, the EIRR would fall to 12%.
B Technical (see Annex 4) 58. The project is deemed technically sound and presents a balanced response to the State’s diverse rural competitiveness challenges. Consistent with the findings of the World Development Report 2009, the project promotes a mix of spatially blind (institutions), spatially connective (infrastructure) and spatially focused (incentives) policies, in response to the density, distance, and division challenges faced by the State. Component 1 focuses on capacity building (FAPOs) and incentives to demand-driven business initiatives, while Component 2 addresses key infrastructure and institutional issues, and Component 3 provides support to improve public management. The following aspects also contribute to the technical soundness of the project: (i) support through FAPOs, as aggregation (of production and costs) is critical for competitiveness; (ii) promotion of economic diversification and non-agricultural businesses; and (iii) forging linkagess with commercial partners and markets outside the region. In order to foster the above strategic lines, the project includes a subcomponent dedicated to pilots and learning (Subcomponent 2.1) in addition to capacity building and technical assistance (Component 1).
59. Moreover, the technical strategy will focus support on beneficiaries at two levels: (i) directly, for the implementation of collective and associated individual investments included in business plans in line with PDO; and (ii) indirectly, through the improvement of the framework for the delivery of complementary public services to shore-up the effectiveness and long-term sustainability of private investments.
60. Direct support will be carried out at two levels of FAPOs, those already existent and with better entrepreneurship skills, and those to be created under the Project. In addition, there will also be two levels of investments to be supported, that of comprehensive associative business plans destined to supply final markets, and that of individual business plans focused on the improvement of production systems that may supply inputs to the aforementioned endeavors. The strategy builds on the SAR policies implemented over the last few years, focused on technical training of producers to improve the quality of their products, adding value through further processing to the commodities they produce, and organizing themselves into cooperation/marketing networks. In the end, the strategy is expected to consolidate existing
20
organizations, to improve their market access and, under their leadership and “pull effect”, to progressively create similar conditions for those producers currently showing a lower degree of technical expertise, organization and entrepreneurship.
C Fiduciary (See Annex 7 and 8) 61. Financial Management Assessment. A financial management assessment for the Santa Catarina Rural Competitiveness SWAp was carried out at the SAR, SAR/EPAGRI, SAR/CIDASC, SDS/DRH, SDS/FATMA, SSP/PMA, SOL, SIE and the State Court of Accounts (TCE/SC), in accordance with OP/BP 10.02 and the Financial Management Practices in World Bank Financed Investment, dated March 5, 2009. The purpose of the assessment was to determine whether the executing agencies have acceptable financial management and disbursement arrangements in place to adequately control, manage, account and report on Project funds. Based on the assessment of the executing agencies, the financial management arrangements as set out for this Project satisfy the Bank's minimum fiduciary requirements.
62. Procurement Assessment. A capacity assessment of the executing agency and participating agencies was conducted at project appraisal. Procurement for the proposed project would be carried out in accordance with Bank Guidelines: (i) the World Bank’s “Guidelines: Procurement under IBRD Grants and IDA Credits” and “Guidelines: Selection and Employment of Consultants by World Bank Borrowers”, both published in May 2004 and revised in October 2006 and May 2010; (ii) the “Guidelines On Preventing and Combating Fraud and Corruption in Projects Financed by IBRD Loans and IDA Credits”, dated October 2006; and (iii) the provisions stipulated in the Loan Agreement and detailed in the Project Operational Manual.
63. For each contract to be financed by the loan, the different procurement methods or consultant selection methods, the need for pre-qualification, estimated costs, prior review requirements, and time frame were agreed between the SoSC and the Bank in the Procurement Plan.3 The SoSC has developed a procurement plan for the implementation of the traditional SIL activites that provides the basis for the procurement methods. The Procurement Plan, which was reviewed during project appraisal, would be updated in agreement with the project team at least annually or as required to reflect the actual project implementation needs and improvements in institutional capacity.
D Social (see Annex 10) 64. The activities supported by the proposed operation are expected to have a positive effect on the rural population of the SoSC. The priority programs selected for support under the operation are key aspects of the SoSC’s long-term development agenda to promote better socioeconomic opportunities to the most vulnerable rural groups, including indigenous peoples, through direct support and improved public services. In this respect, the SoSC’s institutional capacity for safeguard policies is considered adequate. The Bank Team discussed Bank safeguard policies and assessed the capacity of the SAR and the implementing partners, given that Bank environmental and social safeguards policies apply to all of the activities of the EEPs supported under the SWAp. The SoSC has carried out consultations with key stakeholder groups on the project approach and design, the environmental assessment and management framework,
3 Procurement Plans will be presented and processed through the Procurement Plans Execution System (SEPA). 21
and the indigenous peoples’ planning framework to address potential safeguard concerns and incorporate the feedback received.
65. Despite its strong macroeconomic performance, economic opportunities in Santa Catarina are not equally available to all. As mentioned, there are still about 12.4% (or 700,000 people) of the state population living in poverty (poverty line of US$1.00/day per family) and it is estimated that 20% of these reside in the state's rural areas, consisting mainly of small farmers, rural workers, and indigenous peoples. In addition to poverty, the state's rural areas face a number of other social challenges, including: (i) low employment opportunities resulting in the exodus of youths to cities; (ii) food insecurity in the poorest households; (iii) lack of productive and commercial skills development and training for small-scale farmers and their families to design and execute a family business plan; and (iv) weak capacity to expand upon and take advantage of existing social capital.
66. In relation to these challenges, the activities supported by the proposed operation are expected to have a positive effect on the rural population of the SoSC. The priority programs selected for support under the operation are key aspects of the SoSC’s long-term development agenda to promote better socioeconomic opportunities to the most vulnerable rural groups, including indigenous peoples, through direct support and improved public services. The SoSC has carried out consultations with key stakeholder groups on the project approach and design, the environmental assessment and management framework, and the indigenous peoples plan to address potential safeguard concerns and incorporate the feedback received.
67. Regarding the indigenous peoples (IP) social assessment and consultations4 conducted, SoSC has a documented population of about 8,751 indigenous people comprised of the Xokleng, Kaingang and both Mbyá and Ñandeva Guarani ethnicities. Approximately 92% of the IP live in 14 regularized indigenous lands in rural areas. Furthermore, there are now an additional 5 Guarani areas already delimited and another two Kaingang areas and one Guarani area already delimited.5 The IP of Santa Catarina were affected by the historical process of colonization of the state and social exclusion that contributed to the current poverty and degraded natural resources in indigenous areas. The results of the social assessment, consultations and the Indigenous Peoples Planning Framework, disclosed in-country on December 22, 2009 and to the Infoshop on February 2, 2010, are summarized in Annex 10, Appendix 1.
E Environment (see Annex 10) 68. The potential environmental impacts were reviewed by Bank experts during loan preparation based on documentation submitted by the SoSC authorities. The proposed safeguards and other national environmental requirements are satisfactory and will be complied with during project implementation. The Project, classified as Category B, is expected to produce positive environmental impacts. World Bank environmental safeguards policies apply to the SWAp EEP expenditures as a whole, though specific focus is directed to the project activities in agricultural production (including agro-processing), WRM, tertiary rural roads rehabilitation
4 Based on the SoSC’s Etnodesenvolimento para as Populações Indigenas (IPPF), November 2009. 5 In Brazil, the steps for regularizing or legalizing indigenous lands include identification, delimitation, portaria declaratoria, physical demarcation, local and federal registration, and Presidential Decree (homologação). An indigenous land is generally considered regularized once it obtains the portaria declaratoria, even though full legalization requires completion of all steps. 22
and restoration of agro-ecosystems and degraded forest ecosystems, as these appear to present the greatest safeguards risks.
69. According to the Environmental Assessment (EA), which includes an Environmental Management Framework (EMF) and a Pest Management Plan (PMP), the most significant positive impacts foreseen include: the restoration of degraded areas, riparian zones, and forest connectivity in ecological corridors; better soil fertility; improved water quality (both surface and ground); reduced pesticide use; improved NRM; better environmental governance; and enhanced overall environmental quality of livelihoods in targeted areas. These positive impacts will be achieved through: supporting environmental management in targeted areas; financing sustainable production systems; direct investments in the sustainable use and conservation of natural resources; carbon sequestration; reduced GHG emissions, mostly associated with minimum and no-till systems, reduced use of pesticides and activities aimed at Reducing Emissions from Deforestation and Forest Degradation (REDD); enhancing environmental awareness among stakeholders; promoting improved policy instruments (i.e., economic incentives to forest conservation and payment for environmental services (PES), the latter limited to the Ecological Corridors); scaling-up successful innovative production and conservation technologies piloted under the Microbacias II Project; supporting the development of long-term strategies to facilitate the transition to environmentally sustainable livelihoods; and improving multi-sectoral coordination and consultation mechanisms in rural and environmental matters.
70. No significant indirect, long-term, or cumulative impacts are foreseen. Low or moderate impacts on the environment could be expected at the local level as a result of subprojects (business plans) financed under Component 1 (i.e., crop, pasture management and livestock productive investments and agro-processing activities) and under Component 2 (i.e., the rehabilitation of tertiary roads, water monitoring equipment installation and rural tourism), requiring some mitigation measures and/or further environmental studies and environmental licenses prior to obtaining final project approval. The impacts of any misdirected support for productive and value-added investments could include soil erosion, water pollution (i.e., sediments and use of fertilizers or pesticides, even if not directly procured by the Project); air pollution (i.e., from agro-processing activities) and generation of GHG emissions mostly associated with increase in livestock activities and use of fertilizers. Localized and temporary impacts are foreseen in the areas where water monitoring equipment installation or small-scale physical works for rehabilitation of tertiary roads will be undertaken: (i) soil erosion; (ii) deforestation of very small spots of riparian vegetation, when existent (permitted by law for this purpose, upon approval of environmental authorization); and (iii) water pollution (sediments).
71. Subprojects under Component 1 and activities under Component 2 will be subject to a rigorous screening process to ensure maximum socioeconomic and environmental benefits. The screening process will also serve to prevent or minimize unintended negative environmental impacts, including those associated to secondary, indirect, and/or long-term effects.
72. An EA including an Environmental Management Framework (EMF) and a Pest Management Plan (PMP) for the Project was submitted by the Government and reviewed and approved by the Bank (for details, see Annex 10). These documents were made available publicly in-country on December 22, 2009 and in the Infoshop on February 2, 2010. The EA describes the organizational framework for safeguards, which builds on the capacity established
23
within the implementation agency for the recently-closed Microbacias II project. It also lists all activities with potential negative impacts and specifies time, extension, intensity, scope, risk of occurrence, and potential persistence of the impacts. The EMF addresses the potential positive and negative impacts identified in the EA and proposes a plan for avoiding, minimizing, and mitigating such impacts, which includes subproject environmental impact categories.
F Safeguard policies 73. The project is classified Category B, and the following Safeguards Policies are triggered.
Safeguard Policies Triggered by the Project Yes No Environmental Assessment (OP/BP 4.01) [X] [ ] Natural Habitats (OP/BP 4.04) [X] [ ] Pest Management (OP 4.09) [X] [ ] Indigenous Peoples (OP/BP 4.10) [X] [ ] Physical Cultural Resources (OP/BP 4.11) [X] [ ] Involuntary Resettlement (OP/BP 4.12) [X] [ ] Forests (OP/BP 4.36) [X] [ ] Safety of Dams (OP/BP 4.37) [ ] [X] Projects on International Waterways (OP/BP 7.50) [ ] [X] Projects in Disputed Areas (OP/BP 7.60)* [ ] [X]
G Policy Exceptions and Readiness 74. There are no policy exceptions and the project is ready for implementation. The main institutional and operational structures are already in place: (i) the State Rural Development Council and the Municipal Development Councils for the targeted area are already in place; (ii) the Project Executive Secretariat (SEE) and the Directorates responsible for project activities in each participating Secretariat are already staffed; (iii) the draft Cooperative Agreements between the SoSC and each of the executing partners and the draft Operational Manual have been reviewed and found acceptable by the Bank; and (iv) a large majority of technical field staff has already been trained.
* By supporting the proposed project, the Bank does not intend to prejudice the final determination of the parties' claims on the disputed areas 24
Annex 1
Annex 1: Country and Sector Background BRAZIL: Santa Catarina Rural Competitiveness
A Background
1. The SoSC Economy6. The State of Santa Catarina (SoSC) has an estimated land area of 95,346 km² and a population of some 6.1 million, 80% of which live in urban areas. The State’s economy is based primarily in the services sector (59% of GDP), followed by the industrial sector (34%), and agriculture (7%). Nationally, SoSC accounted for 4% of Brazil’s GDP (about US$37 billion) in 2006 and by 2008, expanded to 5.9%, outpacing the national average of 5.1%.
2. The Agricultural Sector. Agriculture plays an important role in the political economy of the State. Though accounting for only 7% of State GDP, when considered along with agroindustry, the sector generates nearly 60% of SoSC’s exports and employs 40% of the labor force. The most recent data for annual growth in the export of agricultural products is approximately 17%, about the same rate of the state’s total annual export rate (see Table 1 and Figure 1 below).
Table 1. Total Exports in the State of Santa Catarina and the Contribution of Agribusiness Year Item 2003 2004 2005 2006 2007 2008 Agribusiness export (US$ million) 2,126 2,790 3,289 3,261 4,275 4,864 Total state export(US$ million) 3,695 4,853 5,584 5,965 7,381 8,256 % Agribusiness 57,5% 57,5% 58,9% 54,7% 57,9% 58,9% Growth in agribusiness 14,1% 31,2% 17,9% -0,9% 31,1% 13,8% Total growth 17,1% 31,3% 15,1% 6,8% 23,7% 11,8% Source: SAR (Epagri-Cepa ), MDIC – Sistema Alice
Figure 1. Increase in exports (SoSC) – Agribusiness and Total
Milhoes US$ 9.000.000 8.000.000 Agronegocio Total SC 7.000.000 6.000.000
5.000.000 4.000.000
3.000.000
2.000.000 1.000.000
- 2000 2001 2002 2003 2004 2005 2006 2007 2008
3. Some 49% of the State’s agricultural GDP is based on animal production, followed by perennial crops, which contribute 41%, and forestry, with the remaining 10%. Agricultural exports consist mainly of meat (poultry and swine) and wood (for furniture and cellulose).
6 Source: IBGE: Brazilian Institute of Geography and Statistics.
25 Annex 1
4. Agriculture remains vital to social well-being in the SoSC. About 20% of the population lives in the State’s rural areas, of which some 90% are farmers. Currently, 90% of the State’s 187,000 holdings consists of FAFs of 50 hectares or less (34% are 10 ha or less), which contribute 70% of the state’s gross agricultural product value. The SoSC has the highest proportion of very small farms among the southern states and one of the country’s highest social capital in rural areas in terms of local leadership formation and expression of community aspirations. The main contribution of FAFs to the state agricultural GDP includes inter alia: maize (70%), beans (73%), rice (67%), swine and poultry (80%), milk (83%) and onion (91%).
5. Land and Water Resources. The SoSC is characterized by a rich natural resources base, including 42% of land covered in native forests and 9% by natural grasslands. The State’s water resources consist of two major river basin systems spanning 23 main watersheds. One of these two systems consists of 12 watersheds draining eastward to the Atlantic ocean (total area of 36,545 km2) and the other system is the trans-national Paraná-Uruguay river basin that consists of eleven river basins (58,690 km2). Agriculture, forestry and livestock represent 16%, 7% and 31% of the state’s total land use, respectively.
B Development issues and constraints
6. In SoSC, as in many other parts of the world, issues of environmental degradation, rural poverty and status and trends in the agricultural sector are interdependent. Some of the principal issues and critical constraints to overcome them are summarized below.
7. Socioeconomic Challenges. In spite of its strong macroeconomic performance, economic opportunities in the SoSC are not equally available to all. The State still has about 5% (or 275,000 people) of its population living in poverty (poverty line of US$ 1.00/day per family); 20% of them reside in the state’s rural areas, and consist mainly of FAFs, rural workers and indigenous people. In addition, other social challenges in rural areas include: i) lack of productive and commercial skills development and training for FAFs farmers and their families; ii) low employment opportunities resulting in exodus of youth to cities; iii) low education level of the middle-aged and aged adults; and iv) food security problems in poorest rural households.
8. Agricultural Sector. Currently, opportunities in the Brazilian agricultural sector are available mainly to large-scale grain and animal production, tropical fruits, sugar-cane, bio-fuels and forest producers. Hence competitiveness represents a particularly difficult challenge for smallholders, especially in the case of grain and meat production. Competitiveness is defined here as the ability of a firm to offer products and services that meet the quality standards of the market – whether local, regional, national or international -- at prices that are competitive and provide adequate returns on the resources employed or consumed in producing them. This is perhaps best illustrated in the case of soy and wheat production and to a lesser extent maize and beans. The same trends are being observed in milk and meat production. More specifically, in the case of maize, evidence of loss of small farming competitiveness has been quantified in terms of production area (from 1.0 million ha in 1990 to 0.7 million in 2007). In the case of swine production, despite a large increase in the total output, the number of commercial producers has dropped from 80,000 in the 1980s to around 10,000 in 2009.
26 Annex 1
9. In response to the difficulties faced in grain production, small farmers are diversifying in an attempt to find new economically viable production systems. For example, currently there is significant growth in investment in dairy production (more than 60,000 producers are undertaking milk production as a strategic activity to increase the sustainability of their farms). Nevertheless, they face challenges to increase production scale and efficiency. Overall, the smallholder faces technological, management and commercial challenges.
10. Access to markets is a major constraint for smallholders. Despite their importance, FAFs in the SoSC do not escape this reality and face a number of pressing challenges, including:
Lack of economies of scale given the nature of prevailing agro-industrialization processes that in some cases are inadequate to FAFs;
Lack of capital and expertise needed to facilitate the modernization of production;
Poor quality of products, low productivity and insufficient diversification of production systems that are more suitable to markets and to the local agro-ecological conditions, leading to poor access to markets for a significant portion of SSFs;
A fragile natural resources base and challenging requirements to comply with environmental legislation;
Poor logistics and related infrastructure (roads, communication) in may areas; and
The limited scope of public policy in rural areas and a certain inability of public institutions to adapt to the evolving demands of the rural sector.
11. Environmental footprint of agriculture. While data on deforestation are controversial7, there is agreement that native forest lands are under pressure primarily as a result of past and on- going change in land use associated with conversion to agriculture, forestry and livestock activities. The loss of the original vegetation cover in fragile areas (such as riparian and steep zones) and past unplanned and unmanaged occupation of land have resulted in land degradation, making the soil susceptible to erosion which, in turn, carries organic matter and sediments into the state’s aquatic ecosystems. Erosion has led to silting of reservoirs, headwater areas and springs, and to less productive soils, which disproportionately affects low income farmers who are rarely able to afford the additional costs of fertilizers and of longer-term investments in improved soil management systems.
12. Growth in the agricultural sector has also contributed to an increase in water quantity and quality conflicts. Agriculture, along with domestic sewage, is the main source of water pollution in rural areas. Pressure is growing in the State to implement an integrated approach to WRM, in particular strengthening capacity to implement key WRM instruments.
7 Deforestation data are controversial, quite probably due to methodological issues. A recent report from INPE/SOS Mata Atlantica states that, from 2005-2008, SC had the second highest deforestation rate of Atlantic Forest (after MG) among ten States evaluated (the biome covers 13 States). According to data from Epagri (Investario Florestal 2004), the forest remnants are 37.7%; according to the above INPE/SOS report (2009), 23.39%.
27 Annex 1
13. In addition, the importance of appropriate land and water resource management is underscored by the fact that the agricultural sector in the SoSC is afflicted from the impacts of climate change associated to increased risk of natural disasters. The main impact already observable is the increased frequency in natural disasters over the last decade, leading to high losses to the sector, and the need for improved resilience of ecosystems and production systems on such a changing environment.
14. The land situation in Santa Catarina is characterized by relatively significant equality in tenancy though with a portion of small farms with titling irregularities. This situation makes it difficult for small producers to comply with environmental legislation which requires land regularization to demarcate and establish a “legal reserve” to either preserve 20% of their farmland or maintain 20% under biodiversity conservation-friendly production systems.
15. Public Sector Management Constraints. As in other Brazilian states, there is a strong demand in Santa Catarina for more systemic institutional approaches that will improve the performance of the public sector. While progress has been made on fiscal management thorugh broad-based institutional strengthening process (under PNAFE8 framework), and the initial implementation of the Integrated Fiscal Management and Planning System of Santa Catarina (SIGEF), support is still needed in specific areas to improve public-sector management. Much of this need comes from a lack of a planning and of a results-oriented culture and a shortage of management information needed for decision making. Particularly in the rural sector, there is a need to improve the organization and management of SAR and SDS, hence modernizing the management style by introducing, for example, a model based on planning and competencies and results-based management methodologies, supported by an information technology system. Another challenge faced by the public sector is the relatively weak coordination across sectors, a constraint that if removed would facilitate rural income and diversification, such as new opportunities in non-agricultural income like rural tourism and a more dynamic generational replacement.
C Government strategy
16. To address these challenges, the SoSC is implementing a strong development agenda, which is reflected in its two main planning tools, the 2008-2011 PPA and the Santa Catarina 2015 Development Plan (SCDP). Along the lines of both plans, the State Secretariat of Agriculture and Rural Development (SAR) and the State Secretariat of Sustainable Economic Development (SDS) have worked on a number of initiatives to promote sustainable rural development, the main one of which was the recently-closed, Bank-financed, Natural Resources Management and Rural Poverty Reduction Project, locally known as Microbacias II (IBRD Report No. 23299-BR dated March 27, 2002).
17. Recent Bank Support to the Sector. The Microbacias II project helped small farmers, rural workers and indigenous people families to adopt more sustainable natural resources management practices and to improve their income and overall living conditions.
8 PNAFE - National Program to Support the Modernization of Tax Administration in the Brazilian States.
28 Annex 1
18. Great progress was also made to address environmental and WRM challenges through: education; infrastructure for a state protected area; the planning of three river basins and two ecological corridors integrated with local-level planning and actions; creation of Water Basin Committees and the development and initial implementation of key model WRM tools, including the state WRM information and water use rights systems. Appendix 1 summarizes the main achievements of the Microbacias II project.
19. Existing studies suggest the need to build on these results by increasing the emphasis on technical assistance and training for productive investments focused on income generation and increased competitiveness, and to consolidate the underlying technical strategy as a public policy instrument. However, the consolidation of these initiatives and strategies will require a more specialized and effective agricultural policy.
20. In view of this, the SoSC requested the Bank’s support to expand and deepen the above mentioned strategies to increase rural competitiveness. Subsequent discussions have led to a request for a new operation designed with as a SWAp, combining traditional Specific Investment Lending and EEPs along with DLI disbursement modalities. The operation, involving total expenditures of about US$ 189 million (including a US$ 90 million loan) will be the Bank’s first “rural” SWAp with a multi sector approach spanning not only agriculture but also the environment and water resources management, infrastructure and tourism sectors.
D Bank’s Lending Comparative Advantage
21. Bank’s lending comparative advantage. There are a variety of factors that underpin the rationale for Bank involvement in the proposed project.
The Bank has had a fruitful involvement with Santa Catarina’s rural sector, supporting the development and implementation of a successful combined approach to NRM and rural poverty reduction.
The Bank’s knowledge and accumulated international best practice can bring value-added in an array of subject matters central to the proposed project, including: improved competitiveness through increasing small-scale farming productivity, value-added, and market access; implementation of sector-wide approaches to promote sustained increased sector performance; and instruments for the long-term financing of sustainable production practices and natural resources conservation.
The Bank’s in-country knowledge and experience. The Bank has acquired knowledge of local and participatory development in Brazil, in particular, projects in Brazilian Northeast, South and Southeast states.
Supporting this proposed loan fits squarely within the CPS, as described above, which defines the focus of the Bank engagement on the “paradigmatic challenges” identified by Brazilian leaders and where the Bank expertise is sought.
29 Annex 1
Annex 1, Appendix 1 Summary of Past Performance: Microbacias II Project
22. Implementation progress under the previous (Microbacias II) project was consistently rated satisfactory over the last 30 months, including the last supervision mission in July 2009. The Mid-term Review (MTR) in November 2006 and draft ex-post evaluation studies demonstrated strong implementation performance with many project output targets already met or exceeded by MTR, and the continuing relevance of project objectives and principles to rural realities in Santa Catarina. The Implementation Completion Report (ICR) suggests the need to further integrate the project’s technical strategy as a public policy instrument, and in a follow-up operation to greatly increase the emphasis on income generation and on technical assistance and training for productive investments and increased competitiveness. The importance of leveraging the catalytic effects of the project by coordinating and concentrating the “supply” of other programs – federal, state and municipal – for project micro-catchment beneficiaries was also a key finding. These findings are reflected in proposed objective and activities under the proposed loan.
23. In physical terms, some 936 micro-catchments – 50% of all micro-catchments state-wide and covering approximately 4.5 million ha of land – and 144,000 rural people have been impacted by the project via physical works, preparation of investment plans and maps, and training; 54,300 families are using improved farming technologies; and, 33,300 families have invested in natural resource management works and changes on-farm. Interventions have been concentrated in the most impoverished and environmentally-degraded areas of the state. There has been substantial compliance with loan covenants.
24. Evaluation studies demonstrated strong implementation performance with many project output targets already met or exceeded by the MTR, and the continuing relevance of project objectives and principles to rural realities in Santa Catarina. Preliminary impact evaluation data from a full-scale, ongoing evaluation exercise indicate positive outcomes. First, a survey of 417 beneficiaries adopting project-financed technologies in 2005 and 2006 showed that 86% had been able to improve their incomes. Second, a related study which monitored the evolution of incomes and productivity on 70 properties over two agricultural years (2005/06 and 2007/08) found that net income rose 105% over the period. Higher productivity and better prices were key determinants. However, progress in competitiveness was modest and income increase was mainly limited to those farmers and products (such as milk) benefited by better prices and/or higher productivity.
25. The development objectives were also consistently rated satisfactory. Preliminary impact evaluation data from a full-scale, ongoing evaluation exercise conducted by the state’s center of excellence in agricultural studies and planning (CEPA) indicate positive outcomes. First, a survey of 417 beneficiaries adopting project-financed technologies in 2005 and 2006 showed that 86% had been able to improve their incomes. Second, a related study which monitored the evolution of incomes and productivity on 70 properties in seven micro-catchments over two agricultural years (2005/06 and 2007/08) found that net income rose from R$6,344 to R$6,961 in the first period and to R$12,992 in the second period, an overall increase of 105% in the period. Higher productivity and better prices were key determinants. Great progress was also made to
30 Annex 1 address environmental and WRM challenges through education, infrastructure for a state protected area, the planning river basins and ecological corridors, the creation of Water Basin Committees and the development and initial implementation of key model WRM tools including the state WRM information and water use rights systems. The new loan will pursue the consolidation and completion of related activities.
26. Moreover, preliminary field evidence still being analyzed as part of the ex-post evaluation suggests that the project’s participatory structure has fostered substantial social capital, especially in micro-catchment leadership formation and the expression of community demands. Women in particular, have come to the fore as prominent actors. The new Bank operation proposes to expand and leverage accumulated social capital through more systematic, official participation of micro-catchment representatives in municipal, state and federal programs predicated on social participation, and through renewed focus on the socio-economic organization of communities, aspects of which, according to preliminary evaluation results, require further consolidation.
27. In light of recent achievements and lessons learned, the SoSC has been searching for alternative and/or new strategies to increase small-farming competitiveness, by promoting, for example, the introduction of new economic activities that are more adequate to the small-scale production of small fruits, flowers, ornamental and medicinal plants, forestry products and “artisan” food production. The main strategy foreseen by the Government is to support value added associated with family agro-industries and marketing networks, given the small-scale of these activities and the need to specialize their production throughout the value chains. In other words, the strategy will concentrate in quality, especially in the adding of value toterritorial/regional products, such as mountain cheese and other typical products of the state. It will also promote organic agriculture.
31 Annex 2
Annex 2: Major Related Projects Financed by the Bank and/or other Agencies BRAZIL: Santa Catarina Rural Competitiveness
Amount Latest Latest Project Main Sector Issues Project Name (US$ Status IP DO ID Addressed million) Rating Rating Santa Catarina Natural Resources Management and Rural Poverty Ag., fishing and P043869 62.8 Closed S S Reduction forestry; soc. services
Ag., fishing and Rio de Janeiro Sustainable Rural forestry; Ag. marketing P101508 39.5 Approved S S Development Project and trade; Agro- industry Ag., fishing and forestry; Ag. marketing São Paulo Sustainable Rural P108443 78.00 and trade; Agro- Approved NA NA Development and Access to Markets industry
RJ Sustainable Integrated Ecosystem Ag., fishing, and Mgt in Productive Landscapes of the P075379 6.8 Active MS MS forestry NNW Fluminense (GEF) Parana Biodiversity Conserv. (GEF) P070552 8.0 Biodiversity Conserv. Closed S S Ag. extension and São Paulo: Land Management III P006474 55.0 Closed MS S research; public adm. Ag., fishing, forestry; Ecosystem Restoration of Riparian P088009 7.75 ag. Extension, Active S S Forests in São Paulo (GEF) research; sub-nat. adm. The Critical Ecosystem Partnership P100198 20.0 Biodiversity Conserv. Active HS S Fund II (GEF) Ceará Rural Pov. Reduction P050875 37.5 Rural Pov. Reduction Closed S S Pernambuco Rural Pov. Reduction P050880 30.1 Rural Pov. Reduction Closed S S Minas Gerais Rural Pov. Reduction P052256 35.0 Rural Pov. Reduction Closed S S Ecological Corridors Project - Rain P006572 8.4 Biodiversity Protection Closed MU MU Forest Pilot Program Parana: Social Inclusion and Ag., fishing, forestry; Sustainable Development Project in P097305 31.5 Proposed NA NA Social services Rural Areas National Environmental Project P099469 22.1 Sub-national gov. adm. Active MS MS Colombia Productive Partnerships P041642 Ag. competitiveness Closed S S Colombia Second Rural Productive P104567 19.09 Ag. competitiveness Active MU MU Partnerships Honduras Rural Competitiveness P101209 28.52 Ag. competitiveness Active MU MU Project Guatelmala Support Rural Econ. Dev. P094321 30.0 Ag. competitiveness Active MU MS Program Bolivia Rural Alliances P083051 29.5 Ag. competitiveness Active S S
32 Annex 2
Table 2: Other Major Rural Development Projects in the Project Area
Amount (US$ Project Name Financier Start Close million) States and DF Administration Modernization I IADB 11.0 2006 2011 (BR0405)
Pro-Atlantic Forest Program KfW 20.4 2006 2010 Santa Catarina Highway Program – Stage V IADB 50.0 2009 2012 PROFISCO Santa Catarina - State Administration Management Modernization IADB 15.0 2009 2013 Program (BR-L1206; BR-X1005)
33 Annex 3
Annex 3: Results Framework and Monitoring BRAZIL: Santa Catarina Rural Competitiveness PDO Project Outcome Indicators Use of Project Outcome Information Increase the By End of Project: Access follow-up competitiveness of Family Increase in total value of annual sales for interventions in rural Agriculture Producer participating FAPOs.† competitiveness, as Organizations while Coordinated implementation of six public needed. providing support for an programs to improve the rural business Disseminate outcomes improved framework of environment. to financial sector structural institutions to promote competitiveness-inducing increased credit access public services activities by FAPOs in the Borrower’s Document best-practice territory. for possible scale-up Intermediate Intermediate Outcome Indicators Use of Intermediate Outcomes Outcome Monitoring Increased and sustained New added-value arrangements established and Generate knowledge on factor productivity for existing ones strengthened. use of technologies that participating Family Business plans developed and under sustainably increase Agriculture Producer implementation by FAPOs with project support. rural productivity Organizations Increase land and labor productivity. Track forecasted and Climate-resilient production systems implemented actual outcomes of as part of business plans. business plans New agro-industries implemented, taking into consideration CC adaptation and mitigation. Participatory Strategic Plans completed for target Dissemination of Greater capacity of River Basins. outcomes to FAPOs for complementary public Registration of water users for 14 River Basins business planning goods and services to completed. Aid in integrated promote rural Studies completed to implement target Ecological planning of future rural competitiveness Corridors in support of biodiversity-friendly land sector investment needs. use mosaics. Kilometers of rural road rehabilitated. Internet Connectivity for added-value arrangements. New regionally-focused, market-oriented rural extension strategy implemented. Improved Sanitary and Phytosanitary (SPS) and Quality Assurance (QA) systems to support Family Agriculture implemented. Effective public sector Strategic Planning developed and Results-Based Adapt and revise management of rural Management implemented at the project and sector Annual Operating Plans competitiveness (Rural, WRM, Environment) levels. per achievement of initiatives. Annual Operations Plans successfully executed. Outcomes Satisfactory technical, financial and procurement Update Project audits. Operational Manual Compliance with Project Operational Manual, including Safeguard and Anti-Corruption policies. Note: measurement of indicators will be done against activity baseline values † Value of sales is adjusted for domestic and international price changes ° Productivity is measured in terms of real value of production related to labor and land
34 Annex 3
Arrangements for results monitoring
Target Values Data Collection and Reporting Project Outcome Baseline Total YR1 YR2 YR3 YR4 YR5 YR6 Frequency Data Responsibility Indicators and Collection for Data Reports Instruments Collection Increase in total value of 0 30% 0 10 15 20 25 30 Annual Surveys Epagri/Cepa annual sales for participating FAPOs
Coordinated implementation of six public programs to improve the rural business environment as measured by:
- share of state’s water 0 65% 7% 14% 28% 35% 49% 65% Monthly Progress Report SDS resources under from Project MIS decentralized and (SIMEP) participatory planning and management.
- share of state’s territory 0 10% 1% 3% 5% 7% 9% 10% Monthly Progress Report SEE/Fatma managed under an from Project MIS “ecological corridor” (SIMEP) concept ( coexistence of sustainable production and preservation).
- 100% rehabilitation of 0 100% 4% 19% 38% 61% 88% 100% Monthly Progress Report SIE rural roads associated from Project MIS with business plans. (SIMEP)
- share of public 0 60% 9% 16% 25% 36% 47% 60% Monthly Progress Report SEE/Epagri financing to family from Project MIS agriculture enterprises (SIMEP) channeled through the new extension/TA strategy.
- re-structured SPS Services, generating the
35 Annex 3
following results in support of FAFs: (i) Number of registered 4,000 2,500 100 400 800 1,300 2,000 2,500 Monthly Progress Report Cidasc and certified crop and from Project MIS forest production units (SIMEP) []
(ii) Number of registered 2,000 240 0 20 50 100 170 240 Monthly Progress Report Cidasc and certified fruit from Project MIS processing units [] (SIMEP)
(iii) Number of 440 420 20 100 250 420 420 420 Monthly Progress Report Cidasc enterprises legalized, from Project MIS complying with sanitary (SIMEP) standards
(iv) Number of farms 0 700 0 0 100 250 450 700 Monthly Progress Report Cidasc certified for absence of from Project MIS animal tuberculosis and (SIMEP) brucellosis [] -rural schools carrying 0 600 100 200 300 400 500 600 Monthly Progress Report Epagri out interdisciplinary from Project MIS actions under PEEA (State Environ. Education Policy) Component 1 – Family Agriculture Competitiveness and Increased Access to Markets New added-value 55 138 37 79 102 129 138 138 Monthly Progress Report Epagri arrangements established from Project MIS (63) or strengthened (75) (SIMEP) [i.e. alliances / networks and cooperatives] [] 500 business plans 0 500 15 60 140 270 400 500 Monthly Progress Report SEE, Epagri, developed, approved and from Project MIS Cidasc financed, and under implementation by FAPOs with project support. Increase land and labor 0 20% 10% 20% By end of PY3 MTR, Final Epagri/Cepa productivity and PY6 evaluation Climate-resilient 0 20,000 530 1,576 4,616 7,658 14,600 20,000 Monthly Progress Report SEE/Epagri production systems from Project MIS improvement plans implemented as part of business plans with
36 Annex 3 project support Small agro-businesses 0 500 15 60 140 270 400 500 Monthly Progress Report SEE/Epagri (200 existing farms, 190 from Project MIS new agroprocessors and 110 new non-agricultural businesses) compliant with SPS requirements and taking into consideration CC adaptation and mitigation. Rural tourism plans 10 30 5 12 18 24 30 30 Annual Progress Report SOL implemented with project from Project MIS support Component 2 – Complementary Public Investments for Rural Competitiveness River Basin Participatory 5 14 1 3 5 8 11 14 Monthly Progress Report SDS Strategic Plans completed from Project MIS (out of the 23 River basins in the state) [] River Basins with 3 14 1 3 5 8 11 14 Monthly WRM Info SDS registration of users System completed [] (SIRHESC) Studies completed to 0 2 2 Monthly Progress Report SDS/Fatma implement target from Project MIS Ecological Corridors in support of biodiversity- friendly land use mosaics Hectares of forests under 0 950 0 50 450 950 950 950 Annual Progress Report SDS/Fatma “Conservation Credits” from Project MIS [] Farms with SIEE 0 200 0 0 30 80 140 200 Annual Progress Report SDS/Fatma implemented (SIEE of from Project MIS livestock - meat and milk -, grains, forestry, SAF and tourism) ] km of rural roads 0 1,300 50 250 500 800 1150 1300 Monthly Progress Report SEE rehabilitated [] from Project MIS Internet Connectivity for 0 500 15 60 140 270 400 500 Monthly Progress report SEE/Epagri 500 business plans from project MIS involving 138 FAPOs (networks/added-value arrangements) 0 10 2 5 10 10 10 10 Annual Progress Report SAR Pilot Digital Inclusion from Project MIS projects implemented w/
37 Annex 3 internet connection to support enterprises connected to networks New regionally-focused, 0 1 1 From PY3 to Report from Epagri market-oriented rural PY6 Epagri MIS extension strategy (SEATER) implemented Re-structured SPS 0 1 1 From PY2 to MTR and ex-post SEE/Cidasc System to include PY6 evaluation specific support for FAFs Number of new regular 510 176 56 156 156 176 176 176 Annual Reports from Epagri Technical Assistance and Epagri MIS Rural Extension (SEATER), Fatma professional staff and Cidasc allocated by EPAGRI in priority project municipalities, by CIDASC to phytosanitary certification and by FATMA to SIEE implementation [] Component 3 – Support to the Rural Competitiveness Institutional Framework Program Project Strategic Plan 0 1 1 PY1 Project reports SEE prepared and implemented Strategic planning 0 1 1 From PY2 to MTR and ex-post SEE/SDS developed and Results- PY6 evaluation Based Management implemented at the sector level (Rural, WRM, Environment) levels Annual Operations Plans 0 6 1 2 3 4 5 6 Annual Project reports SEE successfully executed Satisfactory technical, 0 6 1 2 3 4 5 6 Annual Project reports SEE financial and procurement audits Compliance with Project 0 1 2 3 4 5 6 Annual Project reports SEE Operational Manual, including Safeguard and Anti-Corruption policies [] Disbursement-Linked Indicators - DLIs (for details on DLIs, see Appendix 2 to Annex 4)
38 Annex 3
A. Monitoring and Evaluation Strategy
1. The project’s Monitoring and Eva;iatopm (M&E) system will monitor progress towards the indicators and targets identified above, including Disbursement-Linked Indicators (DLIs) –for details on DLIs, see Annex 4, Appendix 2. To do so, the M&E system will build on the existing information systems and databases developed by SAR and SDS during the implementation of the previous Bank operation (Microbacias II). Meanwhile, the design of the impact evaluation takes into consideration common elements between this project and other Bank-supported operations in southern Brazil. Based on this, a shared approach to their evaluation has been built, with the expectation of not only evaluating each individual operation, but also assessing the results and impact of the regional portfolio as a whole. Through the DIME initiative, the Bank has been working with, and training, the project teams of these southern Brazil operations to develop this compatible evaluation platform while still giving due consideration to the specific characteristics of each state and project design.
Arrangements for results monitoring
2. Project implementation will be guided by the Results Framework. The SAR – through the SEE - will have overall responsibility for the Monitoring and Evaluation (M&E) of project activities and manage data inputs from the participating actors, i.e., FAPOs, added-value arrangements, technical assistance providers. In line with project administration, SAR will maintain a simple financial system to compile project financial statements, using a computerized financial management system certified by the World Bank financial management specialist. The system will have the ability to classify financial information by project component, disbursement categories, and sources of financing; and produce useful financial reports (such as interim financial reports-IFRs and Statements of Expenditures – SOEs).
3. A Management Information System (MIS) – building on the Microbacias II MIS - will be used for recording all information and data related to all project implementation activities including physical and financial progress, information on participating FAPOs and added-value arrangements. Specifically the MIS will include: (i) basic information on FAPOs; (ii) development and implementation of business plans and added-value arrangements; (iii) subproject information, such as physical and financial progress; (iv) financial management data from which Statement of Expenditure (SOEs) will be generated and submitted to the Bank; and (v) project management information, from which all project reports (e.g., semi-annual progress report) will be generated.
4. The M&E process will function as both a mechanism for day-to-day project management and assessing project impacts periodically. The M&E system will also support the project supervision process by ensuring that baseline and follow-up data for the key performance indicators are collected and made available on an ongoing basis and at strategic times including project start-up (underway before project effectiveness), mid-term review and project closing.
5. Once Project implementation begins, all stakeholders will be involved in reviewing the information generated and provide feedback through the project steering committee and local competitiveness networks. The added-value arrangements will also provide feedback on the effectiveness of technical service providers through surveys integral to the M&E.
39 Annex 3
6. The following is a description of the some key concepts being considered:
Competitiveness is understood as the producer’ ability to operate efficiently in a market- based environment and to make profits that can be sustained over time. Increasing competitiveness requires a combination of technical, associative, and financial capacities and tools at the producers’ level (Component 1) and the existence of an overall conducive institutional and policy framework and physical infrastructures, provided through improved structural competitiveness-inducing public-services i.e. public goods activities that are crucial for the sustained competitiveness of FAPOs endeavors (Component 2). It will be measured by: (i) the increase (from the baseline) in annual sales value achieved by participating FAPOs; ii) performance in execution of Business Plans; and iii) coordinated implementation of six public core programs to improve the rural business environment, as measured by six indicators included in Table 3.2.
Annual sales value (Unit Price x Quantity Sold) will be used as an indicator of competitiveness, considering that an increase in sales value reflects progress in productivity (per unit of land, labor and inputs), quality, and/or marketing techniques. However, sales value can only be considered as a proxy for net income, as it does not capture a variation of production costs.
Net income is, in principle, a relevant indicator of success for this project and experience with similar project shows that measuring net income at farm level is a challenging task to carry out. However, the SoSC has a highly experienced evaluation team (within SAR) who has successfully measured farm-level income during the two previous operations and is proposing to continue this type of measurement. Similarly, “reduced production costs” is also a relevant indicator which though difficult to measure, would also be assessed by the SAR evaluation team.
The number of participating FAPOs with effective management and accounting will be used to measure the project’s contribution to building long-term capacity with direct beneficiaries. The sharing of fixed costs and the aggregation of small individual production is critical for FAFs to increase profits; hence the focus of the project on strengthening the organizational capacities of FAPOs.
Improved environmental management practices, as far as FAFs are concerned, include: no- till agriculture, the use of green manure, terracing, fencing to isolate and protect water springs and stream margins, stabilization and restoration of gullies, and rotational pasture. The number of FAFs where such practices are being implemented will be used as a proxy indicator for measuring progress towards ensuring environmental sustainability of rural businesses.
Monitoring of Fiduciary Arrangements
7. During preparation, Bank specialists assessed the Financial Management capacity (SAR, SAR/CIDASC, SAR/EPAGRI, SDS/DRH, SDS/FATMA, SSP/PMA, SOL, SIE, TCE/SC) and Procurement capacity (SAR, SAR/CIDASC, SAR/EPAGRI, SDS/DRH, SDS/FATMA, SSP/PMA, SOL, SIE, SEF) and found them to be adequate. Action Plans for FM and
40 Annex 3
Procurement were prepared and were agreed with SAR (see Annexes 7 and 8). SAR will submit quarterly FM reports to the Bank. Monitoring and processing of procurement services, goods, works and subprojects will be carried out by the SAR. The annual planning processes will be monitored with specific indicators defined in the Results Framework. Information from the monitoring system will be analyzed by project management and disseminated according to the project’s communication strategy to stakeholders. The Project will provide semi-annual progress reports and an update on legal covenants compliance every six months to the Bank.
B. Project Impact Evaluation
8. Based on the aforementioned DIME-supported work on evaluation design, the project will carry out an Impact Evaluation to determine whether it has a significant impact on increasing the competitiveness of family agriculture in the State by seeking to answer the following questions:
Has the intervention impacted on the market access of the members of the participating FAPOs (measured by sales value)?
Has the intervention impacted on levels of production and productivity for FAFs (measured by total production and production per hectare)?
Has the intervention impacted on quality of life and satisfaction of FAFs (measured by access to durable goods and land value)?
Has the project significantly contributed to technology adoption by FAPOs as well as by FAFs (measured by land management techniques)?
9. Evaluation of project outcomes will seek to measure quantitative and qualitative changes in both income and employment, and land use among participating FAFs and FAPOs (for discussions for indicators, see Section A above). Evaluation of land use changes will indicate the extent to which existing agricultural land is being used more productively and sustainably by participating FAFs, and whether significant deforestation or other undesirable land use changes may be occurring. Evaluation design will attempt to capture both before-after and with-without project outcomes through the application of a randomized approach. Specifically, the competitive grants cycle will facilitate the formation of three groupings: (i) intervention (i.e., those FAPOs with approved business plans); (ii) near control (i.e., FAPOs which submitted business plans but were not approved for financing); and (iii) distant control (i.e., FAPOs that did not participate in the project). The formation of two control groups will mitigate the selection bias that can be expected, given that the demand-driven methodology of the project requires that FAPOs “opt-in” through self-selection (see Fig. 1).
41 Annex 3
Gross Benefits Intervention
Beneficios Correction foré Selection Bias Near Control
Distant Control
Time Fig. 1
10. The Bank team is working with the SoSC to further develop the details of this impact evaluation (to be included in Project Operational Manual), along with a detailed Control Group identification strategy and a detailed methodology of analysis.
11. Semiannual and Annual Evaluation: Annual beneficiary evaluations, along with quarterly project reporting, will allow semiannual supervision missions to assess the status of obtaining key project outcomes. This evaluation process will also examine environmental variables, including the extent to which approved business plans contain appropriate environmental mitigation measures, and whether these measures are adequately implemented. During Bank supervision, learning workshops for both SoSC and Bank project staff will identify and discuss lessons learned during project implementation with project stakeholders and beneficiaries.
12. Mid-term Evaluation. The Bank’s supervision team, together with a team of external reviewers, will conduct an MTR of project execution. The MTR will be conducted no later than three years after the first disbursement. The external review will focus on: (i) assessing the degree of advancement in achieving project outcomes; (ii) assessing of the institutional arrangements for project implementation; (iii) reviewing and updating the Project Operational Manual; (iv) primary results of implementing business plans and subprojects; (v) producer income increase and production cost reduction and (vi) reviewing the Annual Operating Plan and Procurement Plan.
13. Final Evaluation. A final evaluation will be conducted in the last semester of project execution. The key objectives of the final evaluation will be to assess the achievement of the project development objective and the expected project results. Additionally, the outputs from the final evaluation would serve as inputs toward the design for follow-up interventions, as needed, in support of rural competitiveness
42 Annex 4
Annex 4: Detailed Project Description BRAZIL: Santa Catarina Rural Competitiveness
A Project Overview
1. Lending Instrument. The Bank will support the Rural Competitiveness Program for the SoSC, which will involve a total of US$189 million in expenditures including Bank support, through a Specific Investment Loan (SIL) of US$90 million, using a Sector Wide Approach (SWAp). The proposed loan will disburse against both SWAp-related Eligible Expenditure Programs (EEPs) with associated Disbursement-Linked Indicators (DLIs) and the traditional SIL Technical Assistance disbursement category. The EEP/DLI portion of the loan will aim to finance expenses associated with priority expenditure programs that are central to achievement of the Government’s rural competitiveness program.
2. The Project Development objective is to increase the competitiveness of Family Agriculture Producer Organizations while providing support for an improved framework of structural competitiveness-inducing public services activities in the Borrower’s territory. Hence, while the project will directly promote private sector competitiveness, achievement of this objective will be reinforced by providing support for an improved framework of structural competitiveness-inducing public-services activities as part of the State’s PPA.
3. Key results indicators include: (i) 500 business plans and 20,000 ancillary production system improvement plans executed with project support, benefiting a total of 25,000 rural producers grouped in FAPOs and indigenous peoples groups; (ii) increase by 30% percent the total annual sales volume for participating FAPOs; and (iii) coordinated implementation of six public programs to improve the rural business environment for FAFs – aggregate indicator measured by the following contributing indices: (a) 65% of existing water resources adopting decentralized and participatory planning and management; (b) 10% of the SoCS territory (990,000 hectares) managed under an “ecological corridor” concept of sustainable production and preservation; (c) 100% rehabilitation of rural roads associated with business plans, totaling 1,300 km; (d) 60% of all public financing for rural endeavors involving FAFs, channeled through a new Technical Assistance and Rural Extension strategy focused on SFFs; (e) re-structured Sanitary and Phytosanitary Services to include specific support for FAFs; and (f) 1,000 rural schools carrying out interdisciplinary actions under the PEEA.
4. Target Area. Project activities will be implemented statewide and will target existing FAPOs and others to be established during project execution. In line with national policies, FAPOs are defined as producer organizations in which 90% of membership consists of family farmers as defined under PRONAF. The main existing FAPOs to be targeted are those active in about half (936) of the 1,683 microwatersheds statewide. As those FAPOs are established in clusters of municipalities concentrated where the combination of socio-economic and environmental factors is more adverse, activities will effectively focus on areas of the West and Central regions of the state. Approximately 3.6 million hectares (equivalent to 37% of the state), where economic activity is lagging and the potential for improvement and the need for support are larger, will be covered by the project.
43 Annex 4
5. The targeting of project priority municipalities will be based on the application of criteria that combine socio-economic, degree of organization of beneficiaries, and environmental considerations (specific criteria are available on project files and will be further detailed in the Project Operational Manual). The application of these criteria results in the ranking of municipalities within three priority levels. Within municipalities, a large amount of project beneficiaries would be members of the aforementioned associations created with the support of the previous Bank operation (M), Indigenous Associations in 14 regularized indigenous lands, as well as other existing associative organizations who have implemented adequate investment projects under the operation‘s Development Plans.
6. Target Population. The project will primarily support rural agricultural and non- agricultural small-scale producers, including FAFs, rural workers and indigenous people families, organized in associations, cooperatives, formal (with legal status) and informal networks or alliances. The project will directly and indirectly reach some 90,000 FAFs overall, 2,000 rural workers/laborers and 1,920 indigenous peoples families. Out of these beneficiaries, about 25,000 (considered priority beneficiaries) will be targeted to receive direct financial project support via grants delivered through the State’s Rural Investment Fund (RIF), to improve added-value arrangements as well as productive systems for rural competitiveness. A second important group of stakeholders will be the members of River Basin Committees, consisting of various private and public institutions and sectors (varying from basin to basin) and including representatives from cooperatives and Microwatershed Associations and, when applicable, Indigenous Associations. Eligibility criteria for receiving project support are available in project files and are further detailed in the Project Operational Manual.
7. Project approach and Technical strategy. The proposed Project will address new challenges that surfaced during the implementation of the previous operation, related to access to markets by FAFs and the soundness of the overall framework for sustained rural competitiveness. According to studies undertaken for the ICR, the previous operation achieved its project development objectives and established a firm platform and enabling environment for ushering the state into an even more productive era of increasing FAF productivity based upon targeted technical assistance for innovation and improved production efficiency, product quality, and resource-base management.
8. The technical strategy will focus support to beneficiaries at two levels: (i) directly, for the implementation of collective and associated individual investments included in business plans in line with the PDO; and (ii) indirectly, through the improvement of the framework for the delivery of complementary public services to shore-up the effectiveness and long-term sustainability of private investments.
9. Direct support will be carried out at two levels of FAPOs, those already existing and with better entrepreneurship skills, and those to be created under the Project. In addition, there will also be two levels of investments to be supported, that of comprehensive associative business plans destined to supply final markets, and that of individual business plans focused on the improvement of production systems that may supply inputs to the aforementioned endeavors. The strategy builds on the SAR policies implemented over the last few years, focused on technical training of producers to improve the quality of their products, add value –through further processing– to the commodities they produce, and organize themselves into
44 Annex 4 cooperation/marketing networks. In the end, the strategy is expected to consolidate existing organizations, to improve their market access and, under their leadership and “pull effect”, to progressively create similar conditions for those producers currently showing a lower degree of technical expertise, organization and entrepreneurship.
10. The operational strategy will focus on the following elements:
Improved Rural Competitiveness. Through Component 1, the project will support rural competitiveness clusters –through increasing FAF productivity, value-added, innovation and market access for small farmers. Through Component 2, the project will promote complementary strategies to support the implementation of sector-wide approaches to promote sustained increased sector performance, including strengthening institutional capacity and networking to more effectively and efficiently respond to the arising, better articulated, and integrated demands at the local and regional levels.
Landscape-level Approach. The project operational strategy will include a landscape planning approach to improve municipal and regional dialogue and management to unleash the agricultural production potential and competitiveness in priority areas/regions of the State while promoting sustainable practices and improving the socioeconomic conditions of family agriculture communities. This approach is based on comprehensive diagnostic and planning and negotiation exercises across different levels (i.e., local/microwatershed, municipal, and regional) with a wider scope beyond project activities. Project activities to be directly supported by the project will stem from priorities established under this approach and will focus on demand-driven investments to support small farmers’ business initiatives. Project planning and implementation at the regional level will take into consideration the existing or future river basin plans and ecological corridors.
Because decentralization of planning and decision-making responsibilities is fundamental to the success of this approach, the Project will build on (and expand to the regional level) the strategy developed and implemented by the previous loan. This strategy, which promoted full involvement and empowerment of community-based and other local organizations was characterized by a participatory municipal and local/microwatershed- level planning model, and will now be scaled-up to the regional level and integrated into broader river basin and ecological corridors planning processes.
B. Project Components
11. The Project will be implemented over a period of six years and will have the following three components to achieve its objectives: (i) Family Agriculture Competitiveness and Increased Access to Markets; (ii) Complementary Public Investments for Rural Competitiveness, and (iii) Support to the Rural Competitiveness Institutional Framework.
12. Component 1: Family Agriculture Competitiveness and Increased Access to Markets, with total expected expenditures amounting to US$96 million, will support family agriculture competitiveness in the Borrower’s territory through the implementation of the pertinent EEPs and the provision of technical assistance, by working with stakeholders across
45 Annex 4 local, municipal and regional levels in order to increase organizational and participation skills for Project implementation, by financing:
pre-investment activities to: (i) support technical, extension and training services to create and consolidate added-value arrangements among FAPOs and other commercial stakeholders; (ii) identify potential business opportunities and prepare business proposals; (iii) prepare related business plans; and (iv) build capacity among technical service providers to enhance the quality of their services provided in support of rural competitiveness; and
demand-driven productive and added-value investments through RIF to support the implementation by FAPOs of viable business plans including, inter alia: (i) diversification and improvement of production/farming systems; (ii) agro-processing; (iii) support to meet legal environmental and sanitary requirements for market access; (iv) marketing and logistics; and (v) off-farm/non-agricultural investments.
13. Main Outcomes: (i) 500 associative business plans and 20,000 ancillary individual production-system improvement plans executed with project support, benefiting 25,000 rural producers; and (ii) increase of 30% in the total annual sales volume for participating FAPOs.
14. Financing: The component will finance TA and training services, workshops and exchanges, expert services, studies and demonstration/adaptation activities, goods (production inputs; farming, storage and processing equipment; computers and other logistics and communications equipment) and small civil works.
15. The proposed business plans implemented by FAPOs will be guided by the following principles (see Appendix 3):
Productivity, value added and profitability: Permanent improvements in rural income and well-being will require that producers adopt new technologies and access greater market intelligence to more efficiently use available resources, thereby ensuring the profitability and competitiveness of their production.
Organizations: The small farmer, acting alone, is unlikely to effectively compete in a market dominated by intermediaries with asymmetric bargaining power and information. Conversely, participation in value-added arrangements such as productive alliances can provide more stable, reliable and remunerative market access. A business plan is the instrument upon which a productive alliance would be formed, evaluated and supported.
Demand: There must be a specified market for the activities to be funded; they must respond to market demand.
Entrepreneurship: Traditional, low-productivity family agriculture requires a transformation toward more modern commercial agriculture, with increased factor efficiency and growth potential. A culture of formally-established businesses with contractual obligations would be fostered under the project, within which producers with potential would assume business responsibilities. In this context, the business plan is the crucial instrument.
46 Annex 4
Shared risk and benefits: Value-added arrangements provide a way for the different actors to share both the risks and associated revenues.
Enhanced share of final value: The project targets groups of organized small farmers with improved production potential, promoting increased value of production and market access through productive and commercial alliances so that they can more effectively access a better share of final value and profits.
16. Through all of the above activities, the component will build capacity for investment and act as a risk management tool to ease investment decision-making by lowering the barrier represented by up-front costs. It is also expected that this will facilitate access to credit, as FAPOs will be expected to secure parallel financing in advance of the complementary subproject grant. The complementary grant, a one-time capital infusion, is designed to jump-start innovation and spur the adoption of new technologies and practices to enhance competitiveness and sustainable use of natural resources. Furthermore, in transforming FAPOs and the FAFs involved into both viable and competitive actors in the value chains, the project should create a greater pool of creditworthy clients to be picked up by financial institutions later and expand the current thin market for rural financial services. Several technical design elements will contribute to the long term sustainability of activities, including the organizational and capacity-building activities, the selection criteria of proposals to be supported (based on financial feasibility, concrete value-added arrangement such as a productive alliance and defined market), and the improved overall competitiveness framework.
17. Component 2: Complementary Public Investments for Rural Competitiveness, with total expected expenditures amounting to US$80 million, would support the improvement of the structural rural competitiveness framework through the implementation of the pertinent EEPs and the provision of technical assistance, by financing public goods activities that are crucial for the sustained competitiveness of family agriculture producer organizations, and for the implementation of sectoral activities, such as WRM; ecosystems and corridor management; environmental monitoring and education; rural infrastructure; regulatory framework compliance; rural technical assistance and extension, SPS services; and rural tourism. . 18. Main Outcomes: Coordinated implementation of six public programs to improve the overall rural business environment as indicated by: (i) percentage of the state’s water resources under a decentralized and participatory planning and management; (ii) percentage of the state’s territory managed under an ecological corridor concept of sustainable production and preservation; (iii) percentage of rehabilitation of rural roads associated with business plans; (iv) percentage of public financing to family-agriculture rural endeavors channeled through a regional focused rural technical assistance and extension strategy; (v) SPS services restructured to assist family agriculture competitiveness; and (vi) number of rural schools carrying out interdisciplinary actions under the state’s environmental education program.
19. Financing: The component would finance training, workshops and exchanges, expert services, studies, goods (equipment, satellite images, publications and materials), and civil works in support of sectoral activities set out in the State’s Multi-year Plan and described below. The sectoral activities supported by the project and set out in the State’s PPA are described below:
47 Annex 4
20. Strengthening Environmental Management (expected expenditures amounting to US$38 million). This activity will expand the State’s efforts to integrate environmental and river basin management policies and, specifically, strengthen the enabling policy and institutional environment to facilitate the transition to a more competitive state, particularly in rural areas. It will include:
Water Resources Management: This activity will expand the State’s efforts to strengthen the capacity for participatory, integrated, basin-scale WRM at the state (central) level and in fourteen river basins (out of the state’s total 24 river basins). Specifically, it will: (a) build capacity of the existing WRM Department (or the future State WRM Institute – IGASC foreseen for creation in early 2010); (b) improve the existing state water resources information system; (c) expand/implement the state water cadastre and water user rights system; (d) execute surface water monitoring and groundwater surveys and mapping; (e) strengthen the state alert system; (f) support the formulation of fourteen river basin plans following the participatory methodology piloted under the previous Bank operation in 3 basins; (g) strengthen the fourteen existing river basin committees by training in WRM tools, organizational and management skills; support to the participation of key organizations and water users not yet involved in the committees to ensure stakeholders’ participation and to line-up political support; and strengthening and supporting early operation of river basin committee’s offices.
Ecosystem Management: This activity will implement two Ecological Corridors – Timbó and Chapecó– supporting ecological corridor connectivity in project watersheds, by creating two areas of biodiversity conservation-friendly land use mosaics established on private lands covering 34 municipalities and 10% of the state land area. It will also support the development and implementation of two major incentive mechanisms, both involving private/productive lands that require rehabilitation (if degraded), preservation (to comply with environmental legislation and/or receive PES) or improvement to obtain certification or to add ecological value to their production. For example, transitioning zero tillage with pesticides to without pesticide use; transition from pasture management to agro-sylvo-pasture management; or a soy farm with a new market for greening/improving its production system or complying with the forest or other relevant environmental law. The two proposed mechanisms will be:
i. A system to promote the commercialization of “Conservation Credits” associated with according value to environmental assets (preserved forests), mainly focused on farmers who need to comply with the forest law requiring the preservation of 20% of their farmland area either on-farm or off-farm, by establishing a Legal Reserve; for small farmers (only), the legislation allows either 20% preserved or 20% under agro-forestry systems. This activity will facilitate the commercialization process for FAFs not currently not in compliance with legal minimum land preservation requirements (to buy “conservation credits”) and also for those farmers who have more than 20% of their land preserved and are willing to sell their extra forest as a “conservation credit” (hence, receiving a PES) instead of increasing their productive area (the legislation allows this “purchase” of credit
48 Annex 4
– called servidão florestal - if the two farms are within the same river basin and the same biome, in this case Atlantic Forest; and
ii. An Agro-Ecological and Economic Integration System (SIEE - Sistema de Integração Ecológico-Econômica)” by strengthening existing and new local productive arrangements through a focus on their productive and marketing features as related to improved natural resources management. It will support activities in about eight existing value chains (in most cases overlapping with project-supported competitiveness clusters/networks), including organic products, milk, meat, grains, agro-forestry, forestry, and rural tourism. The implementation of SIEEs will be done through TA, capacity building, financial incentives (including but not exclusively those incentives obtained through the Rural Fund/Component 1) for adoption of improved production systems and markets or for the establishment of private protected areas (as private PAs provide federal tax incentives to the farmers). The Rural Fund/Component 1 will also provide incentives/grants to beneficiaries in support of biodiversity-related activities in farms located in the Corridor area, including activities to rehabilitate degraded riparian forests, hilltops to connect fragments, and to protect water springs.
Environmental Compliance Support and Enforcement System: would strengthen the State Environmental Military Police (PMA) capacity to assist farmers (particularly youth) and other rural entrepreneurs to comply with environmental legislation – through educational activities involving rural citizens and 2,300 youth – and to execute environmental enforcement on behalf of FATMA, by processing their administrative enforcement procedures (mainly related to environmental licensing). It would also intensify their random preventive police patrol and, as required, directed police patrol. In coordination with the WRM Department, it would also strengthen PMA capacity to start (on a pilot basis) field activities to enforce the state water user rights system.
Environmental Education (EE): will be implemented at the rural school and community/microwatershed levels and in close coordination with above mentioned activities and with Rural Extension activity and the Pre-Investment subcomponent. The work with rural schools will target around 1,000 schools in the project area - including rural and indigenous people schools. It will facilitate and promote awareness, appreciation, knowledge and stewardship of natural resources through interdisciplinary activities, hence implementing both the state and federal EE policies. It will also support partnerships with the departments of education at the municipal and state levels and will provide technical assistance to build skills that enhance the awareness and abilities of both teachers and students to achieve the objectives and principles of the sub- components. Specifically, EE activities will include: (i) development and dissemination of classroom-ready teaching aids and materials; (ii) presentation of “environmental awards” to schools that improve their environmental education efforts; (iii) organization of workshops with school staff and seminars with school parents and field trips and outdoor workshops for primary and high school students; (iv) technical assistance to support the preparation of EE projects in the target schools; and (v) support to EE school group formation to enhance the abilities of teachers and students in problem solving, leadership, decision-making and cooperation.
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At the microwatershed level, the project will implement a series of EE capacity building and technical assistance activities with communities through a programmatic approach focused on “socio-environmental entrepreneurship” among organized family-agriculture producers and indigenous people families. They will include: (i) courses and workshops that will be tailored to the needs of different stakeholder groups, reaching farming families, local leaders, indigenous people families and municipal technicians; (ii) establishment of partnerships with governmental and non-governmental/private institutions to undertake joint EE activities; (iii) working with microwatershed and watershed communities in the preparation of local EE materials; and (iv) training rural youth to develop leadership and “socio-environmental entrepreneurship” skills.
21. Rural Infrastructure (expected expenditures amounting to US$17 million). This activity will support the State’s efforts to improve and expand infrastructure essential for sustained rural competitiveness. It will include:
Rehabilitation of Rural Roads (1,300 km): to support the access of FAFs’ products to formal markets, hence addressing a logistical bottleneck while implementing erosion control measures along rural roads and reducing road maintenance costs;
Communication Systems: to promote digital inclusion to enhance rural entrepreneurship skills of project beneficiaries, by partnering with the ongoing “Beija Flor” Digital Inclusion Program to sharing the IT resources of the program’s 142 rural tele-centers. It will do so by offering training modules to develop an entrepreneurial culture; to uncover, develop and implement new business opportunities; and to create virtual networks to support ample participation and sharing of experiences in the development and implementation of those new opportunities.
22. Regulatory Framework Compliance: (expected expenditures amounting to US$11 million). This activity will support:
SPS and QC Systems support: to facilitate the access of family-agriculture products to formal final markets, by providing technical services to ensure the quality of the un- processed products and the safety of the food products marketed by family-agriculture producers. The activities to be undertaken include: (i) phytosanitary certification of the quality and safety of products, subproducts and residues of vegetal origin, involving 2,500 production units/farming systems; (ii) inspection of products of animal origin, improvement of the sanitary status of the animal stock of FAFs, covering about 55,000 production units; (iii) the re-structuring, improvement and computerization of the animal health monitoring and surveillance system; (iv) the implementation of pilot activities to eradicate brucellosis in two areas of the state; and (v) a study of the necessary changes to standardize the sanitary inspection of animal and vegetal products in order to enable the sale of family-agriculture products beyond local markets.
Land tenure regularization support to 3,000 FAFs in obtaining land titling, to facilitate creditworthiness and comply with environmental legislation which requires land regularization to demarcate and establish –through notarization– a “legal reserve” in
50 Annex 4
20% of their farmland (“legal reserve” is a pre-requisite to credit). It will include: (i) qualification, quantification and georeferencing of target small farms; (ii) promotion of legal assistance to obtain land titling; and (ii) assistance to demarcate and notarize legal reserves.
23. Extension Services (expected expenditures amounting to US$13 million). This activity will support State’s efforts to re-structure its Agricultural Extension Services to provide quality and sufficient technical assistance and rural extension to support the sustained competitiveness of family-agriculture. It will: (i) develop and implement a new decentralized, regionally focused TA and Rural Extension strategy concentrated on FAPO assistance, aimed at achieving increased – 60%– and coordinated public financing for rural competitiveness; (ii) recruit –with no loan resources– 370 technicians to assist FAPOs in the improvement of productive systems for rural competitiveness; (iii) hiring 150 new and seconding 376 existing rural extension staff to work in the project priority area.
24. Rural Tourism (expected expenditures amounting to US$2 million). This activity will support State’s efforts to provide alternative non-agricultural sources of income in rural areas. It will include: (i) inventory of tourism attractions in rural municipalities; (ii) tourism awareness campaigns, fairs and workshops in rural municipalities and promote the valorization of cultural and historical values in these municipalities; (iii) structure and develop agro-tourism and eco- tourism in areas with higher potential for such activities, respectively; (iv) develop actions to promote, disseminate and commercialize the SC rural tourism sector in the national and international markets; and (v) improve the qualification of tourism support services involving capacity building of all professionals and FAPOs.
25. Component 3: Support to the Rural Competitiveness Infrastructure Framework, with total expected expenditures amounting to US$13 million, will enhance public administration performance in support of rural competitiveness through the implementation of the pertinent EEPs and TA provision by implementing: (a) more efficient financial management and procurement systems; (b) a results-based management approach for the Project and the main institutions of the Borrower which have administrative jurisdiction over the rural sector; (c) Project coordination, monitoring and evaluation. It will finance expert services, training, workshops, studies and goods. Through these interventions it is expected that by the conclusion of the project the Government will have in place a results based management system that includes a hierarchy of indicators being continuously revised, accountabilities for results, budget allocation informed by the system, systems and processes in place that support systematic monitoring and evaluation by dedicated staff, and reporting and public dissemination protocols. The system envisioned will be cross sectoral, hence it will involve agriculture and rural development specific activities as well as activities that involve the central administration units and especially the Departments of Planning and Finance.
26. Central Administration Strengthening (expected expenditures amounting to US$1 million) will involve three diagnostics and be based upon the results, partial or full funding of resultant implementation plans aiming at improved efficiency of crucial systems related to central financial management and procurement. The first diagnostic is of fiscal and financial management making use of the PEFA instrument used elsewhere in Brazil and worldwide by the Bank. The second will be a "Quick Gains" (generic name) diagnostic of how the largest
51 Annex 4 categories of goods and services are procured by the State. The result will be a menu of recommendations that have produced significant savings and efficiency improvements when used elsewhere in Brazil and around the world. The third diagnostic will be a self assessment making use of the OECD-DAC tool which will be facilitated by Bank specialists. This will look more deeply at underlying procurement legislation, manuals, systems, organization, procedures and staffing. All three diagnostics will generate menus of prioritized interventions and time-bound, fully-costed action plans. It is possible that parts of the action plan implementation will be funded through the loan's TA component.
27. Results-based Management (expected expenditures amounting to US$10 million) will equip the main institutions working in the rural sector with a prototype, comprehensive and sustainable Results-Based Management (RBM) system by project conclusion, aimed at better coordinated, effective and efficient implementation capacity. Through this activity, the project will support:
Improved public sector management focused on the strategic planning of the program itself to align the institutions involved, define the results to be obtained, the responsibilities of each institution and the action plans for each region covered in a participatory and public fashion. This planning will be annually reviewed and publicly consulted, and the targets set and progressed recorded will be publicly disseminated through the program website and other resources.
Promotion and subsequent expansion of this exercise to all of the activities of the agricultural and environmental institutions and their affiliates involved in project execution, i.e., SAR (and affiliated agencies EPAGRI and CIDASC) and concerned parts of SDS (Environment/FATMA and WRM/DRH). The institutions and their affiliates will undergo functional reviews comprising: their missions, visions, strategic plans and working processes, aiming at the efficiency and effectiveness performance; the definition of the new competences needed according to their redefined missions and working processes; and their workforce plans for the medium-term future, expressing the necessary number and skills mix, training plans and career incentives to perform their missions.
28. These efforts will entail the development of action plans based on the strategic plans, and the monitoring and evaluation of results (see below) that will inform sector administration and budget preparation and execution. A hierarchy of indicators will be established –baseline and targets– to support the aforementioned efforts, including indicators for the State, the concerned sector and individual programs. Indicators will be monitored, evaluated and continuously revised; accountabilities will be established through Results Agreements, and M&E unit(s) established – or strengthened if existent– to support the implementation of the sectoral plans. It is envisioned that these units will have dedicated, trained individuals, adequate systems, and reporting protocols to ensure high quality sector program management and budget formulation.
29. Coordination, Monitoring and Evaluation (expected expenditures amounting to US$1 million) would support the incremental costs associated with the operation of the Project Executive Secretariat that will coordinate project implementation. The Secretariat will be in charge of concentrating the reporting related to administrative and fiduciary functions (procurement, accounting, and financial management). The Secretariat will support the executive,
52 Annex 4 deliberative, and consultative functions involved in project implementation at the central/state and regional levels and ensure smooth coordination across stakeholder organizations and at different levels.
30. The Secretariat will also be in charge of project monitoring. This will include the setting up and implementation of a participatory monitoring and evaluation system and the technical planning and monitoring and impact evaluation of the project. It will also cover the monitoring of the social and environmental safeguards instruments. It will disseminate project results and implement a pro-active communication strategy. The Impact Evaluation strategy as well as the Communication Strategy will be included in the Project Operational Manual. The project management structure and associated institutional responsibilities are indicated in Annex 6.
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Annex 4, Appendix 1 Eligible Expenditure Programs (annual budgeted amounts in US$ ‘000)
Year Year Year Year Year Year Component / EEP (Non-TA activities) 1 2 3 4 5 6 Family Agriculture Competitiveness and 15,981 11,509 15,066 17,753 17,039 19,135 Increased Access to Markets 0310 - Competitive Agribusiness 13,386 7,596 12,087 13,555 13,038 14,835 0340 - Sustainable Environmental Development 304 1,245 629 897 545 820 0300 - Quality of Life in Rural and Urban Areas 1,800 1,910 1,668 2,328 3,207 3,208 0640 - Rural Tourism 491 758 682 973 249 272 Complementary Public Investments for Rural 13,928 15,763 8,512 9,497 9,671 7,485 Competitiveness 0340 - Sustainable Environmental Development 1,172 338 212 222 134 121 0310 - Competitive Agribusiness 5,384 8,028 2,287 2,285 2,144 2,090 0350 - Water Resources Management 6,079 5,056 3,224 3,988 3,797 3,578 0100 - Rural Roads 874 2,044 2,545 2,843 3,438 1,507 0640 - Rural Tourism 7777 66 0250 - Digital Inclusion 412 290 237 152 152 183 Support to the Rural Competitiveness 1,034 Infrastructure Framework 819 721 635 637 630 0900 - Administration and Management in the 1,034 819 721 635 637 630 Executive Total - Eligible Expenditure Programs 30,943 28,091 24,299 27,885 27,347 27,250
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Annex 4, Appendix 2 Disbursement-Linked Indicators
31. The loan will use both traditional SIL and EEP/ DLI disbursement modalities. Through the EEP/DLI portion of the loan, the project aims to finance expenses associated with priority expenditure programs that are central to achievement of the Government’s program. It is believed that the choice of disbursement modality will reinforce what worked best in a previous Bank- supported operation, while adding new, results-based incentives to ensure achievement of project development objectives. The previous operation developed a very efficient system for allocating and tracking expenditures to component activities. This proved particularly important in light of the constrained budget and the need for loan activities to receive dedicated funding in a timely manner. Furthermore, the earlier loan disbursed for activities that were not always well funded in the Government's budget. The mechanism of reimbursing via Withdrawal Applications required the Government to put loan and counterpart funding at the disposal of the loan's executors in a timely manner. This exercise strengthened budget management and promoted increased coordination between the SEF and SAR, assuring project implementation. Hence, it was felt that reliance on regularly budgeted activities through a SWAp is a logical next step and will greatly contribute to the long term sustainability of the proposed activities.
32. At the same time, DLI-linked disbursements will contribute significantly to structural reforms –something the previous operation could not do–, improved monitoring and evaluation, and results based management. By monetizing some of the results-frame indicators, the operation will provide a strong and very public incentive to the Government to move forward with the structural and institutional reforms that are necessary for the beneficiaries to progress. The adoption of this approach will be an important step toward launching and sustaining results based management in the sector – supported under Component 3. Hence, by combining traditional and EEP-based and DLI-linked disbursements, the Bank and the SoSC are incorporating disbursement vehicles and incentives that best address the State's needs and strengths.
33. This Appendix presents a simplified version of the DLIs. Table 1 presents a list of the proposed thirteen DLIs, four of which have been included in the Project’s Results Framework (RF) – see Annex 3. The Project Operational Manual will include the protocols for measuring each of these indicators. In addition to DLIs and other outcome indicators included in the RF, the Project Operational Manual will include a list (and protocol) for secondary indicators that have been developed during project preparation. The monitoring of these indicators will be done in the context of the project’s pilot RBM exercise, to be undertaken at the Project, Rural and Environmental sector levels, respectively. In other words, the project will build RBM from the indicators presented in the Results Framework, DLIs and secondary indicators. For such, the local team will report all indicators (i.e. RF, DLIs and secondary) so as to turn this into a RBM exercise where they do a strategy with indicators (primary DLIs and secondary) and base their budgeting and work program around this.
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Table 1: Disbursement-Linked Indicators (DLIs) (*)
Component/ Sub-Sectors Disbursement Linked Indicator (*) YR1 YR2 YR3 YR4 YR5 YR6 Total /Activities 1. Family Agriculture Competitiveness and Increased Access to Markets Investments (1) Number of new added-value arrangements n/a 79 102 120 129 138 138 established or strengthened, such as alliances, networks and cooperatives. (**) (2) Number of existing small agro-businesses n/a 60 140 270 400 500 500 made compliant with SPS Requirements, and new agro-processing and non-agricultural businesses created. (3) Number of ancillary climate-resilient n/a 1,576 4,616 7,658 14,600 20,000 20,000 production systems improvement and tourism plans executed through Subprojects with Project support. (**) (4) Number of rural tourism plans executed n/a 12 18 24 30 30 30 through Subprojects with Project support 2. Complementary Public Investments for Rural Competitiveness Environmental Management Water Resources (5) Number of River Basin Strategic Plans n/a 3 5 8 11 14 14 Management formulated on a participatory basis. (6) Number of River Basins with registration of n/a 3 5 8 11 14 14 users completed. Ecosystem (7) Number of hectares of forests under n/a 50 450 950 950 950 950 Management “Conservation Credits”. (8) Number of farms with SIEE implemented n/a 0 30 80 140 200 200 (SIEE of livestock - meat and milk -, grains, forestry, SAF and tourism). Rural Infrastructure Rehabilitation of (9) Number of km of rural roads associated to n/a 250 500 800 1,150 1,300 1,300 Rural Roads business plans rehabilitated. Digital Inclusion (10) Number of Pilot Digital Inclusion projects n/a 5 10 10 10 10 10 implemented with internet connection to support enterprises connected to networks. SPS and QC Systems Certification (11) Number of units of Family Agriculture 100 420 850 1,400 2,170 2,740 2,740 production and processing units registered and certified to comply with phyto-sanitary requirements. (**) (12) Number of farms certified for absence of 0 0 100 250 450 700 700 animal tuberculosis and brucellosis. Rural Technical Assistance and Extension Services Strategic Staffing (13) Number of new regular Technical 56 156 156 176 176 176 176 Assistance and Rural Extension professional staff allocated by EPAGRI in priority project municipalities, by CIDASC to phytosanitary certification and by FATMA to SIEE implementation. (**) (*) All of the above thirteen DLIs have been included in the Project’s Results Framework (see Annex 3); (**) Aggregate indicator: it is measured by either i) the sum of values of all constituent indicators,; or ii) the measurement of compliance of all constituent indicators.
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Annex 4, Appendix 3 Productive and Value-Added Investments
34. Productive and Added Value Investments would provide grants to finance the implementation of demand-driven Business Plans and ancillary production systems improvement plans, under the SoSC RIF. Demand-driven investments are identified and developed in the context viable Business Plans, implemented by FAPOs.
35. Added-value arrangements or networks are composed of one or multiple FAPOs and one or more commercial partners. The networks will jointly identify a mutually beneficial market opportunity, detailed in the form of a business plan, which will also include a feasibility assessment.
36. The project will work directly with FAPOs. In order for an FAPO to participate, at least 90% of its membership must be qualified under the National Program for Family Agriculture – PRONAF.
37. The project is expected to support approximately 500 rural business plans which will include some complementary 20,000 ancillary production systems improvement plans. The average grant to a FAPO to finance Business Plans will be about US$100,000, with a limit of US$160,000. Business initiatives will generally involve one FAPO with an average membership of around 40 families. These matching grants would require counterpart funding from 20 to 80 percent of the total cost, with larger grants having higher co-funding requirements. Investments would include infrastructure, equipment, other goods (seedlings, etc.) and technical assistance.
38. To be eligible, a business plan must be financially feasible and entail a concrete productive alliance. Subprojects will be that portion of the productive alliance’s business plan that will: (i) be financed with proceeds from the proposed loan; (ii) be implemented by FAPOs; (iii) be governed by subproject agreements signed between the FAPOs and EPAGRI; and (iv) include fixed capital (e.g., plant and equipment, minor infrastructure), working capital and technical assistance expenditures. FAPOs will be responsible for a minimum of 20 percent of subproject financing, through their own contributions (either in cash or in-kind). Subproject finance will be further governed by procedures outlined in the Project Operational Manual.
39. EPAGRI, housed in the State Secretariat for Agriculture and Rural Development (SAR), will be responsible for providing technical assistance to FAPOs in business plans formulation and monitoring the implementation of these plans, supported by the municipal rural development council (CMDR)
40. Main steps of Subproject Cycle- Business Plans (for detailed steps, see Figure 4-1):
Following a project dissemination campaign, FAPOs identify commercial opportunities and develop business proposals (perfil de negócio) which are submitted to for funding under the RIF;
57 Annex 4
Business proposals are assessed for eligibility, according to FAF and FAPO targeting criteria set forth in the Project Operational Manual; if approved, FAPOs are authorized to develop business proposals into business plans, with technical service provision as needed;
Business plans are evaluated by the Technical Committee for compliance with environmental, financial, institutional, social and technical guidelines (per the Project Operational Manual);
Subproject agreements (convênios) for approved business plans are signed between EPAGRI and the FAPOs, specifying the use of subproject resources, and the rights and responsibilities of each FAPO;
Subproject resources are transferred to FAPOs for subproject execution, according to the approved business plan;
FAPOs contract goods, works and services, in accordance with the norms established in the Project Operational Manual.
41. Family Agricultural Producer Cooperative Networks (redes de cooperação): While family agricultural producers in Santa Catarina have a history of autonomy, market forces are generating incentives for their increased cooperation. To this end, the proposed project will facilitate the formation of strategic alliances that will include FAPOs and individual family agricultural producers, as well as other stakeholder in the respective value chain. These alliances will primarily form to take advantage of value-added processing, ensure compliance with sanitary standards and certification, and permit a scale response to market demand.
42. Technical Service Providers (TSP): EPAGRI will orient and certify qualified service providers who will assist FAPOs in forming cooperative networks (redes de cooperação), preparing business proposals (perfís) and developing and implementing business plans (including subprojects). FAPOs will choose TSPs from the “Positive List” provided by EPAGRI. Results contracts will be signed between TSPs and EPAGRI, with inputs from FAPOs. The “Positive List” will also form part of the ongoing communication and outreach strategy and be included in the Operational Manual. The project will finance training of trainers activities targeted to TSPs to enhance their technical skills and build awareness regarding Safeguard Policies and Anti- Corruption Guidelines.
43. Technical Evaluation Committee: Business plans will be approved by a Technical Evaluation Committee composed of: (i) a value/chains/agribusiness specialist; (ii) environmental and social specialists; and (iii) three to four outside experts, selected on an ad hoc basis, depending on value chains represented. The terms of reference for the Evaluation Committee will be included in the Project Operational Manual, as will the criteria for the evaluation of proposed business plans. Deliberations of the Technical Evaluation Committee will be open to the public and its final decisions will be publicly disclosed (e.g., newspapers, EPAGRI homepage), thereby building transparency into the evaluation and approval process of the use of public funds.
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44. Project Operational Manual: will include all rules and norms to guide overall project implementation. A draft Manual was submitted to the Bank for review and considered satisfactory.. The Manual will include: (i) physical performance indicators to be tracked through the Project Monitoring and Evaluation System; (ii) the criteria for targeting activities under Component 1; (iii) the responsibilities of FAPOs, EPAGRI and other stakeholders in business plan assessment, whether financial, environmental, institutional, social or technical; (iv) model forms for subproject agreements (convênios); (v) model forms for business proposals (perfís) and business plans; (vi) procurement and anti-corruption guidelines; (vii) the Environmental Management Plan; and (viii) the Indigenous Peoples’ Planning Framework. A user-friendly synthesis of the Manual will be made available, as part of the overall communication strategy, to FAPOs and other stakeholders. Adoption by the SoSC of a Project Operational Manual, satisfactory to the Bank, will be a condition of Loan Effectiveness.
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Phase 1 - Promotion of the SC Rural and organization of interest groups
S Organization of T Interest Groups E Promotion of SC P (watersheds, S Rural municipalities) R E S P O N SEE/SER S CMDR SEM I FAPOs B FAPOs L SEM E
Phase 2- Preparation of Expressions of Interest and Subprojects
S Analysis and Preparation Formation of Local T Preparation of Aggregation of prioritization of of E and Regional Expression of regional demands to P Productive Alliances the Expressions Subprojects S Interest local priorities. of Interest
R E S P SEM SEM O Associations Technical Service SER Project Technical N Technical Service Providers SER Regional Technical Staff S Regional Technical Technical Service I Providers FAPOs Committee B Agribusinesses Committee Providers
L Market Players E Cooperatives
Figure4.1
60 Annex 4
Phase 3 – Subproject Approval
S Consistency Analysis T Analysis and Revision of Subproject E and Selection of the P prioritization of subprojects Approval subprojects S the subprojects
Autorization for Execution R E S P FAPOs O Technical Service N SER; Providers S Regional Technical SER I SEM SEE B Committee Project Technical Technical L Staff E Committee
Phase 4 – Execution and Supervision
S Elaboration of Monitoring of T proposals for support Authorization for subproject E Supervision of P (budgets) Payment implementation subprojects S
R E S P SEM SEM O SEM CMDR CMDR N FAPOs SEE S Technical Service FAPOs FAPOs I Regional Technical Staff B Providers SER L SIE - Municipalities SEE E
Figure4.1 (con’t)
61 Annex 5
Annex 5: Project Costs BRAZIL: Santa Catarina Rural Competitiveness
Local Foreign Total Project Component US$ million US$ million US$ million
1. Family Agriculture Competitiveness 95.95 0.00 95.95 And Increased Access to Markets 1.1 Pre-Investments 29.03 0.00 29.03 1.2 Productive and Added Value 66.92 0.00 66.92 Investments
2. Complementary Public Investments 80.28 0.00 80.28 for Rural Competitiveness 2.1 Strengthening Environmental 38.29 0.00 38.29 Management 2.2 Rural Infrastructure Activity 16.78 0.00 16.78 2.3 Regulatory Framework Compliance 11.25 0.00 11.25 2.4 Extension Services Activity 12.35 0.00 12.35 2.5 Rural Tourism Activity 1.61 0.00 1.61
3. Support for Rural Competitiveness 12.54 0.00 12.54 Infrastucture Framework 3.1 Central Administration 1.04 0.00 1.04 Strengthening 3.2 Results-Based Management 10.40 0.00 10.40 3.3 Coordination, Monitoring and 1.10 0.00 1.10 Evaluation
Total Project Costs1 188.77 0.00 188.77 Front-end Fee - 0.23 0.23 Total Financing Required 188.77 0.23 189.00
1Identifiable taxes and duties are US$ 18.9 m, and the total project cost, net of taxes, is US$170.5. Therefore, the share of project cost net of taxes is 90%.
62 Annex 6
Annex 6: Implementation Arrangements BRAZIL: Santa Catarina Rural Competitiveness
A Overview
1. Implementation of the Santa Catarina Rural Competitiveness Program will be under the overall responsibility of the State Secretariat of Agriculture and Rural Development (SAR), supported by a Program Executive Secretariat (SAR/SEE) and SAR’s affiliates, SAR/EPAGRI (Extension and Research) and SAR/CIDASC (Animal and Plant Health, and Animal Food Safety).
2. Given the sector-wide approach sought, the program will also engage the:
State Secretariat for Sustainable Economic Development (SDS), through the participation of its Water Resources Directorate (SDS/DRH) and its affiliate, the State Environmental Management Foundation (SDS/FATMA); State Secretariat of Infrastructure (SIE), through the participation of a Project Management Unit; State Secretariat of Public Safety and Citizens’ Protection (SSP), through the participation of its affiliate, the State Environmental Military Police (SSP/PMA); State Secretariat of Tourism, Culture and Sports (SOL). State Secretariat of Finance (SEF)
3. The Program will also forge partnerships with FAPOs by themselves or organized in added-value arrangements/alliances for the implementation of private investments under Component 1, and Municipalities for the rehabilitation of rural roads under Component 2.
4. Taking into account the lessons learned from the previous Bank-supported project, the executive and operational structure will adopt the following premises: a) effective participation of beneficiaries, promoting the participation of beneficiaries and their representative bodies in decision-making, especially at the local level; b) institutional integration to address sector bottlenecks in rural areas through a comprehensive, coordinated and integrated approach by all implementers; and c) sustainability of family agriculture production and increased entrepreneurship.
B Program Deliberative Structure
5. At the central level, program execution will be guided and monitored by the Technical Council of Representatives linked to the SEP. The Council is composed of representatives from entities participating in and/or implementing the project.
6. Its activities will be deliberative in nature and it will hold regular meetings every two months to analyze reports on implementation progress, especially relating to EEP expenditures and achievement of indicators, identification of problems and discussion of corrective measures. Its aim will be to keep program implementation on track, ensure exchange of information
63 Annex 6 between the different implementing partners and compliance with loan implementation, disbursement, and fiduciary requirements.
7. At the regional level, the existing Regional Development Councils, linked to the State’s Regional Development Secretariats (SDRs), will be the Program's advisory bodies.
8. At the municipal/local level, the existing Municipal Rural Development Committee will participate in planning and monitoring the Program’s work plans. They will: provide opinions and deliberate about proposed supports; support conflict resolution; identify problems and possible solutions, demands and potentialities, using participatory methodologies.
C Program Operational Structure
9. At the central level, the SAR will be in charge of implementing the Program with the assistance of the Program’s Executive Secretariat (SEE), supported by an implementation structure spanning the central, regional, and local levels (Figure 1).
10. The SEE will be the liaison with the Bank, hosting and facilitating Bank supervision missions and working with the Bank to optimize the program’s performance in terms of results and expected impact. It will be responsible for managing, planning, coordinating, monitoring and evaluating all of the program activities, as well as for overall program financial management, procurement, disbursement and accounting.
11. The SEE will be in charge of:
dissemination of the program’s objectives and activities;
general coordination with the implementing partners to ensure the inclusion of funding for the program in the PPAs as well as in the respective annual budgets ensure during the period of implementation;
preparation of annual implementation plans;
managing component 3, including preparation of Terms of Reference and other documents for hiring consultants and evaluation of proposals;
technical training of implementers and beneficiaries;
ensuring timely implementation of all loan activities and compliance with loan conditionality (EEPs, TA and DLIs);
monitoring, evaluating and reporting loan activities in a timely manner, including the presentation of financial and performance reports as required by the Bank;
fiduciary control, ensuring that: (i) a procurement plan is prepared for technical assistance activities: (ii) procurement is carried out following the rules agreed with the Bank (see Annex 8); and (iii) financial reports are prepared in accordance with Bank fiduciary oversight requirements and in a timely manner, including the presentation of the reports
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required for disbursement against projected and actual EEP expenditures, and audit reports.
promoting a broad articulation within and amongst Secretariats and other implementing partners, to increase program's visibility, enhance program's activities, and assure synergy with other state and federal programs.
12. The SEE will be supported technically at the central level by a representative Technical Council (CTR) formed by professional staff from the different implementing partners.
13. The CTR will be in charge of:
supporting coordination and monitoring of multi-institutional activities;
proposing to the SEE modifications/adjustments to the work programs of the implementing partners when deemed necessary;
supporting the preparation and timely delivery of satisfactory statements of expenses by implementing partners;
recommending technical adjustments in matters concerning their specialties;
ensuring compliance by implementing partners of the SEE's provisions and regulations; and,
entering into operational agreements with SEE, on behalf of the implementing partners, defining their responsibilities and required resources.
14. At the regional level, the SEE will be supported administratively and technically by ten SAR Regional Executive Secretariats (SERs), each counting with the assistance of a Technical Committee (TC) composed with representatives of the implementing partners.
15. The SER will be in charge of:
facilitating the flow of demands and requests between the implementing partners and the SEE; assisting the implementing agencies in interpreting the program rules and procedures; coordinating the integrated actions amongst implementing partners, especially timely planning and delivery of complementary outputs; delivering to the SEE the BPs seeking financing, along with the corresponding opinion from the Technical Committee; preparing monthly work plans and systematically evaluating the implementation of physical and financial targets; and, monitoring the program's release of funds and expenditures performance at the regional level.
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16. The regional TC will be responsible for the:
analysis of safeguards compliance by proposals submitted for support; identificacation of opportunities and preparation of relevant documentation for public calls for business-plans proposals; monitoring and follow-up of the results achieved by the activities supported; and, coordination and leveraging of resources among implementing partners and other outside sources.
17. At the municipal level, actions will be coordinated by EPAGRI with support from the implementing partners. Teams of professionals from the partner organizations will be mobilized and trained to integrate efforts in implementing the Project.
18. At the local level, the Program will use the existing Micro-watersheds Development Associations (ADMs), individually or organized at the municipal level to survey potential demands.
Figure 6-1. Project Management Structure
State Secretariat for Rural Development CEDERURAL and Agriculture - SAR
SDS SIE SOL SSP SEF
Technical Program’s Executive Secretariat Council of Representatives
Regional Executive Secretariats (SERs) Technical Committees (CTRs)
Municipal level [actions coordinated by EPAGRI with support from the implementing partners]
D Responsibilities of the Participating Secretariats
19. Each of participating secretariat will assume both general and specific responsibilities for its participation in the program and as primary implementer of the activities entrusted to it, as follows:
take the lead in all of the activities where it has primary implementer responsibilities, as required to implement the loan and achieve its objectives;
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indicate representatives to the CTR and the TC; participate in the activities of the CTR and collaborate with the SEE to report interim and final results, and to identify and resolve any problems that may arise and affect program implementation; timely plan and deliver the request for the budget resources necessary to implement program activities under its responsibility; verify the timely release of EEPs budgeted resources and the implementation of EEP programs, especially those linked to DLIs; and, implement EEPs in a timely and efficient manner so as to ensure compliance with EEP disbursement requirements and achievement of DLIs and secondary indicators.
20. In addition, the SEF will ensure the timely release of EEPs budgeted resources.
21. As part of project preparation, the responsibilities of the participating secretariats under the approach promoted were discussed and well understood, and they are described in detail in the Project Operational Manual. Table 6.1 summarizes general, primary and partner responsibilities by activity and organization.
Table 6-1 Summary Implementation Arrangements
Activities of the Program Organization
♦ = General Responsibility for the Activity = Primary Implementer ○ = Partner Implementer
SAR/SEE SAR/EPAGRI SAR/CIDASC SDS/DRH SDS/FATMA SIE SEF SOL SSP/PMA Beneficiaries Component 1: Family Agriculture Competitiveness and Increased Access to Markets 1.1 Pre-Investments ♦ ○ 1.2 Productive and Added Value Investments ♦ ○ ○ Component 2: Complementary Public Investments for Rural Competitiveness 2.1 Environmental Management - Water Resources Management ♦ - Ecosystems and Corridor Management ♦ ○ ○ - Environmental Monitoring and ♦ ○ Environmental Education ○ ○ 2.2 Rural Infrastructure - Rural Roads ♦ ○ ○ - Communication Systems (Digital Inclusion) ♦ 2.3 Regulatory Framework Compliance ♦ 2.4 Technical Assistance and Rural Extension Services ♦ 2.5 Rural Tourism Component 3: Support to the Rural Competitiveness Infrastructure Framework 3.1 Central Administration Strengthening ♦ 3.2 Results-based Management ♦ 3.3 Program Coordination, Monitoring and Evaluation ♦ ○ ○ ○ ○ ○ ○ ○ ○ ○
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Annex 7: Financial Management and Disbursement Arrangements BRAZIL: Santa Catarina Rural Competitiveness
1. A financial management assessment for the Santa Catarina Rural Competitiveness SWAp was carried out at the State Secretariat of Agriculture and Rural Development (SAR); Water Resources Directorate of the State Secretariat for Sustainable Economic Development (SDS/DRH); State Environmental Management Foundation (SDS/FATMA); State Environmental Military Police (SSP/PMA); State Enterprise for Sanitary and Phytosanitary Services (SAR/CIDASC); State Agricultural Research and Rural Extension Enterprise (SAR/EPAGRI); State Secretariat of Tourism, Culture and Sports (SOL); State Secretariat of Infrastrutcture (SIE) and the State Court of Accounts (TCE/SC), in accordance with OP/BP 10.02 and the Financial Management Practices in World Bank Financed Investment, dated March 5, 2009. The purpose of the assessment was to determine whether the executing agencies have in place acceptable financial management and disbursement arrangements to adequately control, manage, account and report on Project funds.
2. Based on the assessment of the executing agencies, the Project financial management arrangements are considered acceptable.
3. The overall project FM risk was assessed as Moderate as show in the table below:
Risk Assessment Matrix
Risk H S M L Identified Risks & Mitigation Measures Inherent Risks: Country specific x Sub-national (state) level X Implementation entity level x Strong past experience implementing Bank project. Project design level x SWAps are complex to prepare and implement. Overall Inherent Risk X Control Risks: Budgeting and Accounting X Financial Reporting x SWAp reporting is more complex than traditional SIL. FM team will work with the State to prepare reports. Funds Flow X Internal Control X External Audit x First-time audit of State SWAp by State auditor but auditor appears to have adequate technical capabilities. FM team will work closely with the auditor. Overall Control Risk X H-High S-Substantial M-Moderate L-Low
Project Background and Information
4. The proposed Project would be financed by a SIL of US$90 million, using a Sector Wide Approach (SWAp). The Government’s counterpart contribution would be US$99 million. The loan would finance priority expenditure programs that are central to achievement of the
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Government’s program. Bank disbursements for EEPs would also be subject to the achievement of Project DLIs and the 70% rule (both Interim and Final).
5. Financial Management: Based on the successful previous experience of Microbacias II, the final Financial Management supervision (FMS) in April 2009 (seven were conducted) maintained the FM rating as Satisfactory and the FM risk as Low. The two financial management information systems (SIGEF and SAFF) were rated Highly Satisfactory in attending to the project’s accounting and financial needs, including production of Bank-required reports. Arrangements/systems for project accounting, financial management and information systems were found to provide the information necessary for project management. Institutional arrangements were considered satisfactory with the segregation of functions strengthening internal controls.
Institutional arrangements
6. Based on the successful previous experience of Microbacias II, a small SAR Project Executive Secretariat (SEE) would implement the loan. The SAR/SEE successfully oversaw and handled procurement, financial management, and reporting, though the latter would be strengthened given the disbursement modality being implemented. The Project would otherwise significantly use country systems in terms of the State central and line institutions for planning, budgeting, accounting, cash and debt management, internal control and audit and external audit.
7. The Project will be managed by the SAR in close coordination with the SEF. Project financial management will be the responsibility of the SAR. The day-to-day financial management, including budget execution and transaction processing, will be carried out by budget and administrative divisions in the participating Entities, as shown below (Fig. 1).
Fig. 1
SEF SAR - SEE
SDS/ SDS/ SIE SAR SAR/ SAR/ SOL SSP/ DRH FATMA CIDASC EPAGRI PMA
Direct reporting line Functional reporting line
8. SAR FM staffing is adequate and turnover has been low. The other Secretaries and implementing agencies also have adequate FM staff and previous experience in the use of the Public State Financial Management System – SIGEF and procedures.
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Internal Control
9. The SAR Finance Department has an adequate segregation of functions and is supported by financial information systems with adequate built-in controls. SAR’s regional offices provide advice on subproject preparation, coordinate subproject activities with FAPOs and supervise subproject implementation. They also check the eligibility of expenditures, review payment supporting documentation and have controlled access to the system and expenditures authorization. The Project internal control structure is considered satisfactory.
10. The Project Operational Manual will include a detailed description of policies and procedures and guidelines for disbursements, payments, approvals, commitments and payments and be shared with all the implementing entities.
Budget preparation, execution and accounting
11. The Project budget was prepared using standard State budget policies, processes and procedures and is included in the SoSC’s Annual Budget Law. The SoSC’s accounting system (SIGEF) will be used to record the receipt and use of loan proceeds. Loan proceeds transferred to the Project would immediately be recorded and accounted under the budgetary code for receipt of external or foreign funding/financing sources. All project budgeting and accounting transactions will utilize the SIGEF. All payments will follow the official allocation (alocação), commitment (empenho), payables (liquidação) and payment (pagamento) routine. These functions are carried out by SAR and each implementing agency division.
12. Individual project transactions will be recorded in a project cost center established in a State Chart of Accounts. All project expenditures will be recorded using the State Chart of Accounts, structured as follows for the Project: (1) PPA Sub-programs PPA (Action, Sub-Action codes, preferably already existing, otherwise to be created in the PPA 2010 and; 2) Categories of expenditure (equipment, training, consulting, etc). As is customary in federal and state projects, an exclusive project cost center will be established in SIGEF. Loan proceeds and government funds will be recorded in the project cost center and therefore linked electronically to Project expenditures. Each payment will be registered in SIGEF and SAFF identifying the program, budget lines and activities agreed during project preparation and reflected in the legal agreement.
13. The SoSC follows the Brazilian Accounting Rules (NBC), Law 4320/64 that establishes certain high-level accounting principles, and the Accounting Manual Applicable to the Public Sector (MCASP) issued under Law 10180 of February 6, 2001 and Decree 3589 of September 6, 2001. It will be required to follow the first set of national accounting standards applicable to the public sector (NBCASP) and the revised Accounting Manual Applicable to the Public Sector (MCASP) issued under Portaria STN 467 of August 6, 2009, beginning with Fiscal Year 2011. The Bank and National Treasury have agreed to jointly carry out a Gap Analysis (expected 2010) to confirm that the accounting for the Brazilian public sector conforms to international accounting standards applicable to the public sector (IPSAS) or identify any important differences from the IPSAS. The last Country Financial Accountability Assessment (CFAA) for Brazil indicated that law 4320/64 was in line with international accounting standards.
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Financial Management Information Systems
14. The Project will use two primary Financial Management Information Systems: SIGEF (Sistema Integrado de Planejamento e Gestão Fiscal do Estado de Santa Catarina): the State’s integrated financial management information system (IFMIS) used by the Executive, Legislative, Judiciary and the State Court of Accounts (the State external auditor), and SAFF (Solução para Administração Física, Financeira e Contábil de Programas cofinanciados por Organismos Internacionais http://www.saff.com.br/saff/index.html): a planning, monitoring and management control tool. Project implementing entities will have access to this system and input their own transactions.
15. SIGEF and SAFF are integrated, communicate electronically, and provide the necessary information to manage and monitor Project implementation.
16. The sources of funds codes that will be used include:
1100 - Contrapartida – Banco Internacional para Reconstrução e Desenvolvimento; 0100 and 110 - Recursos Ordinários – Recursos do Tesouro – Exercício Corrente; 0261 - Receitas diversas – Fundo Social - Receitas de Outras Fontes - Exercício Corrente; 0121 – Conta-parte da Contribuição Intervenção no Domínio Econômico – CIDE – Estadual – Receita Tesouro – Exercício Corrente; 0122 – Conta-parte da Compensação Financeira dos Recursos Hídricos-Recursos do Tesouro - Exercício Corrente; and 0661 – Receitas Diversas – Fundo Social – Receitas Outras Fontes – Exercícios Anteriores.
Flow of Funds and Disbursement Arrangements
17. The Loan proceeds will be disbursed against the following expenditure categories:
Amount of the Loan Percentage of Expenditures to be Category Allocated financed or reimbursed (expressed in USD) (inclusive of Taxes) (1) Eligible Expenditure Programs 73,200,000 Up to 50% of amounts spent (paid) and under the Project reported under the EEP Spending Reports. (2) Consultants’ services for 16,575,000 technical assistance under the 73% Project (3) Front-end Fee 225,000 Amount payable pursuant to Section 2.03 of the Loan Agreement in accordance with Section 2.07 (b) of the General Conditions. (4) Premia for Interest Rate Caps 0 Amount due under Section 2.07(c) of the and Interest Rate Collars Loan Agreement. TOTAL AMOUNT 90,000,000
18. Disbursement arrangements for the SWAp will be structured as follows:
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EEP expenditures: SEF will make payments from its own resources to contractors, suppliers and others for eligible expenditures in the pertinent EEPs and submit Withdrawal Applications for reimbursement to the Bank, supported by Customized SOEs. The Minimum Application Size for reimbursements of EEP expenditures is US$ 1,000,000 equivalent.
TA expenditures: The World Bank will disburse loan proceeds using the advance method to the State’s Single Treasury Account (the Designated Account - DA) denominated in US Dollars at Banco do Brasil, in Florianópolis, in the name of SEF. SEF will make payments from the Project DA to contractors, suppliers and others for eligible expenditures. The reimbursement method will also be available for TA expenditures. The Minimum Application Size for reimbursement of TA expenditures is US$ 500,000 equivalent.
19. Withdrawal Applications will be prepared by the SAR/SEE Team, which has access to the financial information in SIGEF entered by the secretariats and other State implementing agencies executing the EEPs and TA activities.
20. Bank disbursements under the loan for EEP expenditures would consist of one reimbursement of retroactive EEP expenditures, incurred for a period not exceeding 12 months prior to Loan signing, and 12 semi-annual reimbursements against EEP expenditures, subject to a semi-annual ceiling of US$ 5.308 million. Supporting documents under EEP expenditures will be customized SOEs. Bank disbursements for TA would consist of one reimbursement of retroactive TA expenditures, incurred for a period not exceeding 12 months prior to Loan signing, and periodic advances with documentation of funds previously advanced. TA supporting documents will be traditional SOEs, Summary Sheets and Records, e.g., invoices, etc. (Fig. 2). Projected disbursements under the EEPs (SWAp) and TA activities are presented in Table 1.
21. Retroactive Loan Disbursement. The loan will retroactively disburse 11.1% or US$10 million (US$9.5 million for EEP expenditures and US$0.5 million for TA expenditures). Disbursements will be against expenditures paid in the previous 12 months prior to loan signing, but not prior to October 1, 2009. The retroactive financing of expenditures will need to satisfy Bank investment lending eligibility, procurement and safeguards rules, as well as technical justification. Any amount not disbursed as part of retroactive disbursement for the EEP component will be evenly distributed over the remaining twelve planned disbursements for the EEP component.
22. Subsequent Disbursements. Disbursements will occur every six months (April and October), each of which must meet actual EEP expenditure conditions, for a total of 12 such disbursements (excluding the retroactive disbursement). EEP expenditures must satisfy Bank investment lending and safeguards rules. The amount of each disbursement will be capped at US$5.308 million per disbursement (as detailed in Table 1), which may be exceeded to the extent that undisbursed amounts from previous periods are disbursed during a later period (see Appendix 1 for various rollover scenarios).
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Table 1: Disbursement Matrix
Assumptions and conditionality $90.0 million loan, $16.8 million of which is for Technical Assistance activities and the Front End Fee. $10.0 million is for a retroactive disbursement ($9.5 million for EEP expenditures and $0.5 million for TA expenditures). ($90.0 million -16.8 million -9.5 million)=$63.7 million available to pay out as DLI disbursements. Six-year implementation period, two disbursements/year (every 6 months); disbursement is against actual EEP expenditures =12 $63.7 million/12 disbursements = $5.308 million/disbursement. Compliance with all DLIs (with non-zero targets for the period) required for full $5.308 million April disbursements beginning in 2012; DLIs are based upon performance during the previous 12-month Fiscal Year (January 1 – December 31), measured on December 31. There are thirteen DLIs. Of those, 12 have non-zero targets for Year 2, and all 13 DLIs have non-zero values thereafter. Hence, the assigned “value” of each indicator for reimbursement purposes is:
Year 2(for Disbursement # 4 in April 2012) → $5.308M / 11 DLI = $482,576 / DLI; indicators are not tranched so that missing a single indicator results in withholding of $469,231 subject to waiver conditions. Years 3 – 6 (for Disbursements #6, 8, 10, and 12) → $5.27M / 13 DLI = $408,333 / DLI; indicators are not tranched so that missing a single indicator results in withholding of $405,128 subject to waiver conditions.
For Disbursement #4, #6, #8, #10, #12, a 70% Rule (Final) requires that expenditures for each of the eight EEP’s in the previous fiscal year be equal to or greater than 70% of their individual budgeted amounts for the fiscal year with respect to the expected annual budgeted amounts specified in Schedule 4 to the Loan Agreement. For Disbursement #2, # 3, #5, #7, #9, #11, #13 a 70% Rule (Interim) requires the EEPs supported actually disburse at least 70% of the overall budget amount for the group of eight EEPs as a whole during the previous semester with respect to the monthly budget forecast issued by the SEF at the beginning of each fiscal year. Date / Period Disbursement Amount Conditions against US$ M
Sep-2010 Retroactive – previous 12 month 9.5 Against eligible expenditures acceptable to the (1) aggregate EEP expenditures Bank incurred during the 12-month period prior Withdrawal ($9.5M) . to loan signing. EEP expenditures must satisfy Application (WA) Bank procurement rules for retroactive and all period: 12 months subsequent disbursements. prior to loan signing Apr-2011 Previous 6-month EEP 5.308 (*) Verification of previous 6-month actual (2) expenditures expenditures, and achievement of the 70% rule WA period: 01-oct- for the group of budgeted EEP for the previous 2010 to 31-mar-2011 six months. Oct-2011 Previous 6-month EEP 5.308 (*) Verification of previous 6-month actual (3) expenditures expenditures, and achievement of the 70% rule WA period: 01-apr- for the group of budgeted EEP for the previous 2011 to 30-sep-2011 six months. Apr-2012 Previous 6-month EEP 5.308 (*) Verification of previous Fiscal Year (January 1 – (4) expenditures December 31) expenditures, achievement of the WA period: 01-oct- 70% rule for each budgeted EEP for the previous 2011 to 31-mar-2012 FY, and achievement of the 11 DLIs, each one valued at $482,576 (assuming no reduction due to non-compliance with the 70% rule-Final. Oct-2012 (5) Previous 6-month EEP 5.308 (*) Verification of previous 6-month actual expenditures expenditures, and achievement of the 70% rule WA period: 01-apr- for the group of budgeted EEP for the previous 2012 to 30-sep-2012 six months.
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Apr-2013 Previous 6-month EEP 5.308 (*) Verification of previous Fiscal Year (January 1 – (6) expenditures December 31) actual expenditures, achievement WA period: 01-oct- of the 70% rule for each budgeted EEP for the 2012 to 31-mar-2013 previous FY, and achievement of the 13 DLIs, each one valued at $405,128 (assuming no reduction due to non-compliance with the 70% rule-Final. Oct-2013 Previous 6-month EEP 5.308 (*) Verification of previous 6-month actual (7) expenditures expenditures, and achievement of the 70% rule WA period: 01-apr- for the group of budgeted EEP for the previous 2013 to 30-sep-2013 six months. Apr-2014 Previous 6-month EEP 5.308 (*) Verification of previous Fiscal Year (January 1 (8) expenditures – December 31) actual expenditures, WA period: 01-oct- achievement of the 70% rule for each budgeted 2013 to 31-mar-2014 EEP for the previous fiscal year, and achievement of the 13 DLIs, each one valued at $405,128 (assuming no reduction due to non- compliance with the 70% rule-Final. Oct-2014 Previous 6-month EEP 5.308 (*) Verification of previous 6-month actual (9) expenditures expenditures, and achievement of the 70% rule WA period: 01-apr- for the group of budgeted EEP for the previous 2014 to 30-sep-2014 six months. Apr-2015 Previous 6-month EEP 5.308 (*) Verification of previous Fiscal Year (January 1 (10) expenditures – December 31) actual expenditures, WA period: 01-oct- achievement of the 70% rule for each budgeted 2014 to 31-mar-2015 EEP for the previous fiscal year, and achievement of the 13DLIs, each one valued at $405,128 (assuming no reduction due to non- compliance with the 70% rule-Final. Oct-2015 Previous 6-month EEP 5.308 (*) Verification of previous 6-month actual (11) expenditures expenditures, and achievement of the 70% rule WA period: 01-apr- for the group of budgeted EEP for the previous 2015 to 30-sep-2015 six months. Apr-2016 Previous 6-month EEP 5.308 (*) Verification of previous Fiscal Year (January 1 (12) expenditures – December 31) actual expenditures, WA period: 01-oct- achievement of the 70%rule for each budgeted 2015 to 31-mar-2016 EEP for the previous FY, and achievement of the 13 DLIs, each one valued at $405,128 (assuming no reduction due to non-compliance with the 70% rule-Final. Oct-2016 Previous 6-month EEP 5.308 (*) Verification of previous 6-month actual (13) expenditures expenditures, and achievement of the 70% rule WA period: 01-apr- for the group of budgeted EEP for the previous 2016 to 30-sep-2016 six months. Technical assistance 16.575 Retroactive disbursement – previous 12 month expenditures - Traditional expenditures ($0.5M) prior to Signing and SOEs, Summary Sheets, Advance disbursements as needed up to the Records Designated Account ceiling; unused funds can be reallocated to final SWAp disbursements. (*) Estimated ceiling
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23. Verification of Retroactive and SWAp Disbursement Amounts. The Bank will verify that EEP budgets and budgeted expenditures are fully and credibly presented in the SoSC budget documents and captured in the FMIS system according to agreed budget codes. Consequently, the SoSC will present to the Bank within a period of 30 calendar days after the closing of each semester the required financial information. The Bank and SoSC have agreed upon a financial reporting format to present budgeted amounts for, and actual expenditures against, each EEP line item for the relevant period covered by each disbursement. Hence, at the end of reporting period the SoSC will present this financial report to the Bank together with whatever other information may be required to demonstrate compliance with conditionality in that period (i.e. DLI information for April Disbursement). The Bank, upon receipt of the financial report, will verify that EEP expenditure conditions have been met and then determine whether other disbursement requirements have been met. If all the requirements as set out in the Operational Manual and Disbursement Letter have been met, the disbursement will be approved.
24. Year-End Disbursement Conditions. Disbursement #4, #6, #8, #10, #12 require for each EEP that expenditures in the previous fiscal year be equal to or greater than 70% of their budgeted amounts during the fiscal year for each EEP line item with respect to the expected annual budgeted amounts specified in Schedule 4 to the Loan Agreement (70% Rule-Final). Thus, the 70% rule applies to each EEP line item. There are eight EEPs targeted for Bank support. For each EEP not meeting the 70%, an amount equal to US$5.308 million/8=US$663,542 will be withheld per failed EEP. Should this occur, the value of each non-zero DLI eligible to be paid out will be recalculated (see DLI below). In the event that all DLIs with non-zero target for the period are met, then US$5.308 million would normally be paid out assuming that the 70% Rule has been met. However, for each EEP that does not meet the 70% rule the amount of disbursement permitted will be reduced by $5.308M/8 = $663,542 and the value of each DLI met will be reduced by $663,542/(# of DLIs with non-zero target for the period).
25. Interim Disbursement Conditions. Disbursement conditions established for April 2011 and all October disbursements (disbursements #2, #3, #5, #7, # 9 and #11) are called Interim Disbursement Conditions to distinguish them from Year-End Disbursement Conditions. These are conditions that focus only on overall compliance of the 70% Rule and that must be met for the aforementioned disbursements to take place. For these Interim Disbursements, the only condition required is that the group of eight EEPs being supported actually disburse at least 70% of the overall budgeted amount for the group as a whole during the previous semester, vis a vis to the monthly budget forecast issued by the SEF at the beginning of each fiscal year (70% Rule- Interim).
26. The amount carried forward to subsequent withdrawals due to noncompliance with the 70% rule (either Interim or Final) may be paid only if the 70 percent rule (either Interim or Final) has been fully complied with in the subsequent withdrawal or if compliance with this condition is waived. In the event of the Bank withholding funds for non-compliance with the disbursement requirements, the Bank will decide unilaterally whether these funds will be cancelled or whether they will be paid out in part or in their entirety at some later point during the life of the project, when evidence has been provided that EEP disbursements are back on track or if the Bank determines that the funds can be added to subsequent April or October disbursement amounts to enhance performance incentives. The funds may also be allocated to the TA activities.
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27. Disbursement Linked Indicators (DLI). The thirteen DLIs are conditions that must be met for partial loan amounts to be disbursed during a disbursement period concluding in March (see Annex 3). The loan disbursement amount is capped at US$5.308 million at the end of each six-month period. Hence, the value of each DLI with non-zero target for the period ranges from US$482,576 in Year 2, to US$408,333 thereafter, assuming no reduction due to non-compliance with the 70% Rule-Final. The payment of this value in full is made possible first by the SoSC having met the EEP aggregate expenditure condition requiring total EEP expenditures in a period to be at least $10.616 million, given the Bank’s eligible financing percentage as established in the disbursement table is set as up to 50%. The second condition for this amount to be paid out in full is that the 70% Rule-Final is met. The GoSC must then show that the period specific DLIs conditions have been met. Responsibility for providing evidence of compliance rests entirely with the GoSC. This evidence should be submitted together with evidence of aggregate EEP expenditures and the 70% Rule-Final having been met. The Bank will unilaterally decide if the DLIs conditions have been met based upon submitted evidence. At any time the Bank may choose to audit DLI compliance however, this will not be done routinely.
28. Individual DLI compliance and payment are linked. If a DLI is not met in a period then the corresponding amount will be withheld by the Bank without prejudice to the payment of amounts corresponding to DLIs that have been met. If a DLI is missed a waiver may be allowed as described below. As explained above, if the amount to be disbursed in a given period is reduced owing to non-compliance with the 70% Rule-Final then the value of each DLI is equal to the available amount for disbursement (after the 12.5% reduction in the maximum amount per failed EEP budget line) divided by the number of DLIs with non-zero target for the period.
29. Waiver Conditions. The purpose of waivers is to preserve the GoSC incentive to comply with a DLI that has been missed. Waivers also will apply to funds withheld owing to non- compliance with the 70% rule. Non-compliance can occur for various reasons and depending upon the cause and the GoSC program to eventually comply with the indicator, the Bank may want to consider providing a waiver. The Bank will retain total discretion regarding the dispensation of funds that have been withheld for non-compliance with loan conditions.
30. When a case of DLI non-compliance occurs the Borrower will provide an explanation of what caused the DLI to be missed and a time bound work program to fix problems and eventually comply with the DLI. The Bank may, therefore decide to: withhold the funds or part of the funds, and cancelling the amount in question; or withhold the funds and pay when the DLIs are met or as part of a subsequent disbursement providing the indicator has been met; or pay in accordance with some other criteria deemed appropriate.
31. Technical Assistance Activities. The loan supports technical assistance (TA) activities totaling $16.58 million. Expenditures for these activites will be disbursed using the advance method similar to a traditional TAL or SIL operation based upon the submission of Withdrawal Applications supported by SOEs / Summary Sheets / Records. Funds will be withdrawn as needed and will conform to normal Bank fiduciary procedures and rules. A designated account will be established and deposits will be made to this account periodically by the Bank in
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accordance with rules established by the Bank. The reimbursement method will also be available for these expenditures. The Bank will deposit reimbursements to the State bank account stated on the Withdrawal Application (other than the Designated Account).
32. In the event that not all the funds initially allocated to Disbursement Category 2 will be used, the amounts not used may be added to the Disbursement Category 1 (EEP Expenditures) in the final disbursement(s). If this is done in a period the value of a DLI will be recalculated as: ($5.308M + reallocated Category 1 amount) / number of DLIs with non-zero target for the period. For such a reallocation to take place the GoSC must petition the Bank with a justification for why the funds will not be used under Category 2, and the Bank will have total discretion over whether to allow this reallocation of funds.
Flow of funds
33. The Project funds flow is shown below and included in the Project Operational Manual.
SoSC SWAp
EEP expenditures
World Bank US Dollar Currency Single Treasury Reimbursements for SEF – BB Account (R$)
Component 1
Withdrawal Payments for Investments, Goods and Applications supported Services by Customized SOE
Providers of SAR Investments, Goods Project Coordination and Services
Planning, Budgeting and Investments, Goods and Services Procurement Plans
Implementing Agencies
SIE SDS/FATMA SDS/DRH SAR SAR/CIDASC SAR/EPAGRI SOL SSP/PMA
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TA expenditures
Advances for TA acitivites
US Dollar Currency Single Treasury Designated Account World Bank Account (R$) SEFAZ – BB
Withdrawal Applications
supported by Standard Payments for Services SOE/ Summary Sheets/Records documenting use of Advances
Providers of SAR Services Project Coordination
Procurement Plan & Request of Goods and Services Services (Technical Assistance)
Implementing Agencies
SIE SDS/FATMA SDS/DRH SAR SAR/CIDASC SAR/EPAGRI SOL SSP/PMA
Financial Reporting
34. Interim unaudited financial reports (IFR) will be prepared by the SoSC to monitor the financial execution of the Project. The IFR will follow the format of existing government reporting to the extent possible. The ability of SAR to generate IFRs has been verified. The preliminary format of the reports was agreed during Negotiations and is included in the Operational Manual. The IFR should cover the entire project (all three components, including both loan and State resources). The second semester’s IFR, ending December 31 of each calendar year, will also be the project’s annual financial statements, including the Notes to the Financial Statements and the 70% budget execution threshold.
35. External Audit: Annual financial statements, covering the entire project, are required to be audited by either an acceptable auditing firm or by the SoSC Court of Accounts (Tribunal de Contas do Estado de Santa Catarina-TCE/SC). The first audit is expected to be performed by the TCE/SC, provided the TCE/SC agrees to the requirements of the Bank audit policy. The decision on the auditor for subsequent years will be made taking into consideration the timely delivery and acceptability of the first audit report. The auditors will be required to issue a single opinion on the project’s financial statements, including the fulfillment of covenants in the Loan Agreement, within six months after the end of the fiscal year. The auditor will be responsible for
78 Annex 7 preparing a management letter identifying internal control weaknesses and following up in subsequent audits on SoSC’s implementation of corrective actions.
Financial Management Supervision
36. During the first year of implementation, Bank FM supervision will be carried out at least semi-annually. Supervisions will review SoSC actions agreed to in signed aide memoires, the FM Action Plan and other controls and transactions, as appropriate. This will be complemented by desk reviews of the semi-annual IFRs and annual audit report. The frequency of Bank FM supervision will be reviewed annually. The period prior to Project closing will be monitored closely to ensure that expenditures are not incurred after the closing date. Interim visits may also be needed to follow up on desk reviews.
37. Year-one supervision will focus on SoSC preparation of IFRs; Customized SOE, including the calculation of the 70% budget execution threshold, implementation of the FM Action Plan and the technical assistance program, as well as performance of the external audit. Based on the FM assessment, the FM Action Plan below was agreed with the SoSC to strengthen institutional capacity.
Financial Management Action Plan Activity Responsibility Target Date Status Flow of Funds Finalization of the flow of funds SoSC and WB By Negotiations Completed design Operations Manual A satisfactory Operations Manual SoSC and WB By Negotiations Completed
Financial Reporting and Monitoring Preliminary customized SOE and SoSC and WB By Negotiations Completed IFR formats and procedures for data collection and report generation External Audit Satisfactory Audit TORs SoSC By Negotiations Completed
Appointment of external auditor SoSC Within three (3) Not yet due months after effectiveness
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Annex 7, Appendix 1 Project Disbursement Rollover - Examples EEPs DLIs Action SCENARIO 1 1 April Disbursement: Achieves all DLIs Disburse: 100% of planned amount=US$5,308,333 Executes >70% for all 8 EEPs SCENARIO 2 2a April Disbursement: Achieves all Reduce disbursement by 12.5% for each failed EEP, so 25% in total. Executes >70% in 6 of DLI’s New maximum amount =75% x 5,308,333=3,981,250 the 8 EEP’s Disburse= US$3,981,250 2b October Disbursement Not assessed Disburse: 100% of planned amount=5,308,333 Executes >70% for all 8 + 2a - Value of 70% missed previously and now achieved =1,327,083 EEPs Total disburse=US$6,635,416 SCENARIO 3 3a April Disbursement: Achieves all Reduce disbursement by 12.5% for each failed EEP, so 25% in total. Executes >70% in 6 of DLI’s New maximum amount =75% x 5,308,333=3,981,250 the 8 EEP’s Disburse= US$3,981,250 3b October Disbursement: Not assessed No disbursements Executes <70% for 8 EEPs 3c April Disbursement: Achieves all Reduce disbursement by 12.5% for each failed EEP, so 12.5% in Executes >70% in 7 of DLI’s total. the 8 EEP’s New maximum amount =87.5% x 5,308,333=4,644,791 Disburse= US$4,644,791 (3a and 3b-The value of the 70% missed previously is not added since 70% rule was not fully complied with). SCENARIO 4 4 October Disbursement: Not assessed Disburse: 100% of planned amount=5,308,333 Executes >70% for all 8 EEPs SCENARIO 5 5a October Disbursement: Not assessed No disbursement Executes <70% for 8 EEPs 5b April Disbursement: Achieves all Disburse: 100% of planned amount=5,308,333 Executes >70% for all 8 DLI’s + 5a - Value of 70% missed previously but now achieved =5,308,333 EEP’s Total Disburse=US$10,616,666 SCENARIO 6 6a October Disbursement: No assessed No disbursement Executes <70% for all 8 EEPs 6b April Disbursement: Achieves all Reduce disbursement by 12.5% for each failed EEP, so 25% in total. Executes >70% in 6 of DLI’s New maximum amount =75% x 5,308,333=3,981,250 the 8 EEP’s Disburse: 3,981,250 (6a-The value of the 70% missed previously is not added as to 70% rule was not fully complied with). 6c October Disbursement: Not assessed Disburse: 100% of planned amount=5,308,333 Executes >70% for all 8 + 6a-Value of 70% missed previously but now achieved =5,308,333 EEPs + 6b- Value of 70% missed previously but now achieved =1,327,083 Total Disburse=US$11,943,749 SCENARIO 7 7a April Disbursement: Achieves 8 of the Reduce disbursement by 12.5% for each failed EEP, so 25% in total. Executes >70% in 6 of 11 DLI’s New maximum amount =75% x 5,308,333=3,981,250
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the 8 EEP’s Disburse: 8/11 x 3,981,250=2,895,454 (Value of individual DLI missed = 3,981,250/11 = 361,931) 7b October Disbursement: Not assessed Disburses 100% of planned amount =5,308,333 Executes >70% for all 8 + EEPs Value of 70% missed previously but now achieved = 1,327,083 Total Disburse= US$6,635,416 SCENARIO 8 8a April Disbursement: Achieves 8 of the Reduce disbursement by 12.5% for each failed EEP, so 25% in total. Executes >70% in 6 of 11 DLI’s New maximum amount =75% x 5,308,333=3,981,250 the 8 EEP’s Disburse: 8/11 x 3,981,250=2,895,454 (Value of each DLI missed = 3,981,250/11 = 361,931) 8b October Disbursement Achieves 2 of the Disburses 100% of planned amount = 5,308,333 Executes >70% for all DLI’s missed in + EEP’s combined the previous Value of 70% missed previously now achieved =1,327,083 disbursement + Value of individual DLI missed previously but now achieved =361,931x2=723,862 Total Disburse= US$7,359,278
81 Annex 8
Annex 8: Procurement Arrangements BRAZIL: Santa Catarina Rural Competitiveness
A. General
1. Procurement for the proposed project will be carried out in accordance with the World Bank Guidelines: Procurement under IBRD Loans and IDA Credits" dated May 2004 and revised on October 2006 and May 2010; and "Guidelines: Selection and Employment of Consultants by World Bank Borrowers" dated May 2004 and revised on October 2006 and May 2010, and the provisions stipulated in the Legal Agreement. The various items under different expenditure categories are described below. For each contract to be financed under the project, the different procurement methods or consultant selection methods, the need for pre- qualification, estimated costs, prior review requirements, and time frame are agreed between the SoSC and the Bank in the Procurement Plan. The Procurement Plan will be updated at least annually or as required to reflect the actual project implementation needs and improvements in institutional capacity.
2. Procurement will take place at ten different participating entities or levels: SAR, SAR/SEE, SAR/EPAGRI, SAR/CIDASC, SDS/DRH, SDS/FATMA, SIE, SEF, SOL and SSP/PMA, each one processing its own procurement. Also, FAPOs and Municipalities will process their own procurement, respectively for the implementation of private investments under Component 1, and for the rehabilitation of rural roads under Component 2.
3. For the Technical Assistance – TA interventions, procurement will make use of procurement or selection of consultants, as defined in the Bank’s guidelines. For the SWAp interventions and at the Municipalities level, procurement would follow procurement methods and the respective thresholds, as provided for under the National Procurement Law: “convite”; “tomada de preços” and “concorrência”. This will not include consultants’ services and is only applicable below the NCB threshold for goods, technical services and works. For goods, works and services (other than consultants’ services) under Subproject implemented by FAPOs, procurement would be in accordance with the procedures set forth in the Project Operational Manual, including community participation. Under any of these arrangements, as applicable, bidding documents, acceptable to the Bank, would include the Bank’s fraud and anti- corruption clauses.
4. Procurement at the rural beneficiaries’ level: Under component 1, the FAPOs will procure technical assistance and training services, workshops and exchanges, expert services, studies and demonstration/adaptation activities, goods (production inputs; farming, storage and processing equipment; computers and other logistics and communications equipment) and small civil works. Investments will be divided into: (i) pre-investment activities, which will support technical, extension and training services; and (ii) productive and value-added investments, namely grants under the SoSC Rural Investments Fund, to support implementation by FAPOs of viable Business Plans. EPAGRI will be responsible for procuring pre-investment activities following the Bank’s guidelines. Each FAPO beneficiary will be responsible for procurement for productive and value-added investments, applying funds transferred as per Resolução 009/2008/SAR/Cederural. Upon the signature of the contract with the FAPO, the project
82 Annex 8
Executive Secretary will, based on the FAPO’s actual procurement needs, deliver training on the Bank’s relevant procurement procedures, including handling standard request for quotations forms, evaluation reports and sample contracts for services/works; as well as selection and contracting of individual consultants and handling of standard CV evaluation forms.
5. Procurement of Works. Procurement of small works and rural roads rehabilitation will take place under the SWAp interventions and can follow the National Procurement Law up to the NCB threshold of US$ 5 million. Works can be procured in accordance with the following procurement methods and the respective thresholds, as provided for under the National Procurement Law: “convite”; “tomada de preços” and “concorrência”. All contracts estimated to cost more than US$2 million equivalent per contract will be subject to prior review by the Bank.
6. Procurement of Goods. Goods procured under the project will include: vehicles, office furniture, production inputs, farming, storage and processing equipment, computers and other logistics and communications equipment. Under the SWAp approach, goods up to the NCB threshold of US $1 million can be procured in accordance with the following procurement methods and the respective thresholds, as provided for under the National Procurement Law: “convite”; “tomada de preços” and “concorrência”. Procurement of common off-the-shelf goods up to the NCB threshold may also be carried out in accordance with the method known as “pregão eletrônico”, as provided in the Brazil’s Law, under “COMPRASNET”, the procurement portal of the Federal Government, or any other e-procurement system approved by the Bank. Under the TA interventions, the Bank’s standard procurement methods as defined in the guidelines and use Bank Standard Bidding Document (SBD) are required and common goods up to the NCB threshold may be procured in accordance with “pregão eletrônico”. All contracts estimated to cost more than US$500,000 equivalent per contract would be subject to prior review by the Bank.
7. Procurement of non-consulting services. Non-consulting services to be procured under the project include: training logistics (hotel services, catering, travel services), workshops, seminars, events, printing services and satellite images. Under the SWAp approach, goods up to the NCB threshold of US $1 million can be procured in accordance with the following procurement methods and the respective thresholds, as provided for under the National Procurement Law: “convite”; “tomada de preços” and “concorrência”. Procurement of common readily available non-consulting services up to the NCB threshold may also be carried out in accordance with the method known as “pregão eletrônico”, as provided in the Brazil’s Law, under “COMPRASNET”, the procurement portal of the Federal Government, or any other e- procurement system approved by the Bank. Under the TA interventions, the Bank’s standard procurement methods, as defined in the guidelines, and use of the Bank Standard Bidding Document (SBD) are required. All contracts estimated to cost more than US$500,000 equivalent per contract would be subject to prior review by the Bank.
8. Selection of Consultants. Selection of consultants is only anticipated under the TA intervention and will include studies, researches, etc. Throughout the project, these services will be hired through Quality and Cost Based Selection (QCBS), Selection Based on Consultants Qualification (CQS), Least Cost Selection (LCS), Selection under a Fixed Budget (FBS), Single Source Selection (SSS – subject to the Bank’s no-objection on a case by case basis) and Individual Consultants (IC). Short lists of consultants for services estimated to cost less than
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$500,000 equivalent per contract may be composed entirely of national consultants in accordance with the provisions of paragraph 2.7 of the Consultant Guidelines. All contracts estimated to cost more than US$200,000 equivalent per contract will be subject to prior review by the Bank.
9. The need for special arrangements regarding engaging universities, Government research institutions, public training institutions, Civil Society Organizations (CSO) or other types of organizations was not identified during project preparation.
10. Operating Costs. During project preparation, it was agreed that operating costs will include individual consultants’ expenses, supplies, and miscellaneous expenses. The operating costs to be financed by the project will be procured using the implementing agency’s administrative procedures which were reviewed and found acceptable to the Bank. Contracting of individual consultants to compose the project executive secretary team will be processed by SAR and follow Individual Consultants’ selection processes as per chapter V of the Consultant’s guidelines.
11. Considering the number of agencies involved and the level of decentralization of the procurement function, the procurement risk has been rated as SUBSTANTIAL, and the prior review and procurement method thresholds were defined as follows:
Procurement Methods Threshold Expenditure Contract Procurement Processes subject to prior review category value method threshold (US$ thousands) Works ≥ 5,000 ICB All processes < 5,000 ≥ 500 NCB First process and all processes above US$2,000,000 < 500 Shopping First process. Goods ≥ 1,000 ICB All processes < 1,000 ≥ 100 NCB First process and all processes above US$500,000 < 100 Shopping First process. Non-consulting ≥ 1,000 ICB All processes services < 1,000 ≥ 100 NCB First process and all processes above US$500,000 (incl. training, < 100 Shopping First process communication) ≥ 200 QCBS/QBS/ All processes Consulting LCS/FBS (firms) < 200 ≥ 100 < 100 LCS/CQS First process under each selection method.
Individual Section V in consultants the Guidelines Direct All cases regardless of the amounts involved contracting
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B. Assessment of the agency’s capacity to implement procurement
12. The overall project risk for procurement is SUBSTANTIAL, due to the high level of decentralization and involvement of nine agencies and procurement at the municipality and beneficiaries’ level. All agencies were accessed and procurement would follow the legal framework for procurement in Brazil, i.e., the National Procurement Law 8.666/93. Some of the agencies are already procuring through pregão eletrônico as per law 10.520/02 with excellent results and the ones not using the system either lack trained personnel or adequate IT resources, but all of them are expected to start using pregão eletrônico soon. The agencies are adequately staffed but there is little experience on following Bank’s Guidelines.
13. The action plan includes the use of pregão eletrônico under all agencies and training them on the Bank’s procurement procedures. Great responsibility lies with the Executive Secretariat of the project. The procurement specialist and an assistant (to be hired) need to: a. keep the procurement plan updated for the entire project; b. assist all agencies under the TA component when contracting consultants by: (a) reviewing their TOR, cost estimates, short-list reports, request for proposals; (b) working with them as part of the evaluation committee in the analyses of technical and financial proposals and in preparing technical, financial and final reports; (c) assisting them in the negotiations meeting and in preparing the minutes of negotiations; and (d) preparing and submitting to the Bank all documents requiring no-objections, and providing that same assistance for the agencies selection and contracting of Individual Consultants, following Chapter V of the Bank’s Consultants Guidelines; c. assist the municipalities processing procurement under the project; d. develop standard forms to be used by the FAPOs, provide them with training, and assist them in following procedures as outlined in the Project Operational Manual; and, e. maintain a list of all contracts signed under the project, at all procurement levels.
C. Procurement Plan
14. The SoSC presented to the Bank the procurement plan for the first 18 months of project implementation, which will provide the basis for the procurement methods, covering for the TA and SWAp interventions. The Procurement Plan will be updated in agreement with the Bank annually or as required to reflect the actual project implementation needs and improvements in institutional capacity.
D. Frequency of Procurement Supervision
15. In addition to the prior review supervision to be carried out by the Bank, the capacity assessment of the Implementing Agency suggests the need for annual supervision missions to visit the field to carry out post review of procurement actions. An annual external procurement
85 Annex 8 audit satisfactory to the Bank will be a covenant in the Loan Agreement, and will be required to assess and verify a sample of processes procured at the SWAp level. As a result of the post reviews and external procurement audits, the Bank will be in a position to identify cases of noncompliance and apply the remedies provided for in the Loan Agreement. The Bank will declare misprocurement in any misprocured contract funded by the whole pool of funds, and will have the option of canceling from its loan (or requesting reimbursement of) an amount equivalent to the contract amount multiplied by the Bank’s percentage participation in the pool of funds.
16. The responsibility of producing a list of all signed contracts under the project lies with the Executive Secretariat of the project. The Bank will rely on that list for defining the sample for procurement post reviews.
E. Details of the Procurement Arrangements Involving International Competition
1. Goods, Works, and Non Consulting Services
(a) List of contract packages to be procured following ICB and direct contracting: 1 2 3 4 5 6 Contract Estimated Procurement Domestic Review Expected (Description) Cost Method Preference by Bank Bid- (US$) (yes/no) (Prior / Post) Opening Date
(b) ICB contracts for Goods and non-consulting services estimated to cost above US $500,000 per contract and all direct contracting will be subject to prior review by the Bank. (c) ICB contracts for Works estimated to cost above US $5 million per contract, NCBs contracts for Works estimated to cost above US $ 2 million, and all direct contracting will be subject to prior review by the Bank.
2. Consulting Services
(a) List of consulting assignments with short-list of international firms.
1 2 3 4 5 Description of Assignment Estimated Selection Review Expected Cost Method by Bank Proposals 1,000 (Prior / Submission Post) Date
(b) Consultancy services (firms) above US$500,000 and all single source selection of consultants will be subject to prior review by the Bank. (c) Short lists composed entirely of national consultants: Short lists of consultants for services estimated to cost less than US$500,000 equivalent per contract may be composed entirely of national consultants in accordance with the provisions of paragraph 2.7 of the Consultant Guidelines.
86 Annex 9
Annex 9: Economic and Financial Analysis BRAZIL: Santa Catarina Rural Competitiveness
A. Introduction
1. The economic and financial feasibility analysis of the project focuses on a comparison of the returns from private sector investments supported (Component 1) with total project costs. The feasibility has been assessed based on the "cost-benefit analysis of the discounted funds flow” method, using the FARMOD program. The discount rate used is 12 %, taking in consideration that this rate reflects the opportunity cost of capital in Brazil, over a 20-year period.
B. Summary of Project Benefits
2. It is estimated that the project would directly benefit approximately 25,000 FAFs from the total of 150,000 FAFs in the state, where family agriculture predominates. On average, each benefited FAF would cover some eleven hectares, destined mainly to non-irrigated farming, and using family labor almost exclusively. It’s important to emphasize that these 25,000 FAFs may be among the 40,000 FAFs which benefited under the previous project (Microbacias II).
3. Different levels of benefits will accrue to these FAFs. Under the Family Agriculture Competitiveness Component of the project, some 4,000 FAFs grouped in approximately 390 associations –characterized by the use of medium to high technology and by active participation in cooperatives or other small producer associations to which they belong – would benefit from associative agro-industrial investments. These group investments would cost, on average, US$ 100,000. Another 21,000 FAFs – characterized by the use of a low-level technology and little participation in the cooperatives and other small producer associations to which they belong – would similarly benefit, at an average cost of US$910 per producer.
4. The benefits estimated under the FARMOD program simulation are extremely conservative. These would be generated by: a) increased unit producer prices, in response to changes in quality or appropriation of a higher added value derived from the group investments made by the project in the cooperatives and associations; and b) technological change supported by the project and incorporated in the production models, in comparison with the non project situation. Table 1 summarizes the estimated benefits of the project.
Table 9-1. Beneficiaries9 and parameters considered in the project economic analysis Type of Beneficiary # % average % producer price beneficiaries increase increase in income FAFs – FAPO Collective Investments 4,000 21.8 % 20 % FAFs – FAPO Members Individual Investments 21,000 21.8 % 0 %
9 Priority beneficiaries are those who will receive direct financial project support through the State’s Rural Investment Fund (RIF), to support improved productive alliances as well as improved productive systems for rural competitiveness.
87 Annex 9
Production Models
5. Seven agriculture cultivation models were taken as representative of the project- supported and non project-supported situations (see Table 9-2). It is important to repeat that these production models are the same that were prepared to perform the ex-post economic and financial evaluation of Microbacias II Project. The changes in the income and other technical coefficients per hectare and/or animal presented in Table 9-2 are the result of a sample of 250 observations taken in seven micro-watersheds served by the Microbacias II Project (details are available on project files).
Table 9-2. Production Models Crop Unit Without Project With Project (Years 4-20) % change Time Frame Banana t/ha/year 24 26 8.3 4 Onion t/ha/year 11 15 36.4 4 Beans t/ha/year 1.3 1.5 15.4 4 Tapioca t/ha/year 16 18 12.5 4 Corn t/ha/year 3.6 4.8 33.3 4 Hearts of Palm t/ha/year 2.8 2.8 0 4 Milk t/ha/year 2.6 3.5 34.6 4
Farm Models
6. Twelve family farm (i.e., FAF) models were defined as representative of the 25,000 FAFs that would directly benefit under the project. These farm models were combined with the ten production models in order to simulate the diverse crop assignments observed among FAFs in the project area. These farm models are the same as those used in November 2009 to perform the ex-post economical-financial evaluation of Microbacias II Project. Table 9-3 presents a summary of the distribution of the main relevant productive activities for each of the twelve farm models.
Table 9-3. Farm Models 1st 2nd 3rd 4th Total Model ha Ha ha ha Activity Activity Activity Activity ha 1. West 1 Corn 4.5 Beans 1.0 Others 1.5 - 7.0 2. West 2 Milk 6.5 Corn 4.5 Beans 1.0 - 12.0 3. West 3 Milk 6.5 Corn 4.5 Others 1.7 - 12.7 4. Plateau 1 Corn 4.5 Beans 1.0 Others 1.5 - 7.0 5. Plateau 2 Milk 6.5 Corn 4.5 Beans 1.0 Others 1.5 13.5 6. Plateau 3 Milk 6.5 Corn 4.5 Beans 1.0 - 12.0 7. Plateau 4 Milk 6.5 Corn 4.5 Others 3.7 - 14.7 8. Coast 1 Milk 6.5 Corn 4.5 Others 1.5 - 12.5 9. Coast 2 Corn 4.5 Onion 1.5 - 6.0 10. Coast 3 Milk 6.5 Corn 4.5 Tapioca 2.0 Others 1.5 14.5 11. Coast 4 Banana 2.0 Heart of Palm 1.0 - 3.0 12. Coast 5 Milk 6.5 Corn 4.5 Others 1.7 - 12.7
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7. Input and Producer Prices. The financial and economical prices of operational inputs, services and labor are those disclosed in December 2009 by the State project preparation team, and reflect the market conditions in the project area. All market prices are expressed in constant real 2009 prices. The economic price of labor, according to 2009 estimates, is 80% of its financial price. The economic price of the products, inputs, services and investments has been adjusted by a 0.90 index, to reflect the influence of the taxes included in the financial prices.
8. The project will promote an increase in competitiveness of FAFs and support group investments intended to help these FAFs achieve better conditions in the market. Such better conditions will enable them to capture greater added value within the productive chains.
9. In order to estimate the percentage producer price increase resulting from these investments, twelve farm models were constructed as representative of the possible group investments in family agriculture. The models were used to determine the average benefit that these group investments can transfer to the producers, in the form of return or increased producer prices. For 10 of these selected models, producer prices increased from 25% to 263%; the most prevalent models for family agriculture in Santa Catarina –grains and milk– showed increases in producer prices of 31% and 44%, respectively. On average, across all models, the weighted average increase in producer price was estimated at 20%, this accruing over a three-year period.
10. Regarding project investment costs, the financial analysis for the farm models considers the costs of only individual building investments (US$910 per family) which will be performed through the Component 1. It is foreseen that 80% of such building investments will be financed by the project. In turn, the economic evaluation of the project has included the economic costs resulting from the COSTAB program sheets, for the three project components. Economic total costs amount to US$168.0 M (R$335.9 M - details are available in the project files).
Farm Model Results
11. Financial profitability of farm models. The financial estimations of the farm models consider the employed family labor as a component of the production cost. Additionally, the costs of building investments estimated to be performed with fund transfers from producers (on average US$160 per model) were also included. Each farm model was simulated in two forms; (i) introducing technological change with static producer prices; and (ii) this same technological change, with increased producer prices.
12. Table 9-4 compares the results for the 24 FAFs simulations, with-project and without project. By such comparison, the impacts are estimated on the net incomes of the analyzed FAFs, as a result of the productive changes derived from the actions and investments under the project.
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Table 9-4. Farm Model Results Farm Net annual Net income, with Increased income Income Model income w/o project (R$.2009) increase NPV FIRR project (*) (R$.2009) % (R$. 2009) % (R$.2009) West 1 4,786 6,164 1,378 28.8 7,322 87.9 West 1A (**) 4,786 7,804 3,018 63.1 17,532 196.2 West 2 2,837 5,321 2,484 87.6 12,281 72.5 West 2A 2,837 9,418 6,581 232.0 37,325 212.2 West 3 11,169 14,108 2,939 26.3 14,373 70.6 West 3A 11,169 18,986 7,817 70.0 44,114 210.6 Plateau 1 4,786 6,164 1,378 28.8 7,322 87.9 Plateau 1A 4,786 7,804 3,018 63.1 17,532 196.2 Plateau 2 3,412 6,515 3,103 90.9 15,135 69.8 Plateau 2A 3,412 11,704 8,292 243.0 46,772 209.5 Plateau 3 2,415 5,429 3,014 124.8 14,685 69.6 Plateau 3A 2,415 10,618 8,203 339.7 46,322 213.8 Plateau 4 15,034 17,972 2,938 19.5 14,373 70.6 Plateau 4A 15,034 22,85 7,816 52.0 44,114 210.6 Coast 1 2,721 5,749 3,028 111.3 14,823 70.7 Coast 1A 2,721 10,627 7,906 290.6 44,564 206.2 Coast 2 3,717 5,324 1,607 43.2 7,752 56.3 Coast 2A 3,717 8,544 4,827 129.9 27,552 168.6 Coast 3 3,129 6,257 3,128 100.0 15,136 68.4 Coast 3A 3,129 11,963 8,834 282.3 49,910 222.8 Coast 4 8,425 9,067 642 7.6 3,095 65.6 Coast 4A 8,425 13,292 4,867 57.8 29,076 473.2 Coast 5 7,839 10,778 2,939 37.5 14,373 70.6 Coast 5A 7,839 15,656 7,817 99.7 44,114 210.6 (*) Annual net income, less family labor. (**) Farm models whose number is followed by the letter “A” correspond to those that will incur a producer price increase. 13. As given in Table 9-4, the project will generate increased incomes for the 25,000 FAFs directly benefited. Increased annual income would grow annually between R$642 and R$8,834. The net present value (NPV) across the models simulated ranges from R$3,095 to R$49,910. In all cases, the Financial Internal Rate of Return (FIRR) of these farm models exceeds 50%.
14. Aggregate benefits. Aggregate data provided by the FARMOD program for the total 40,000 producers assisted under the previous project and who are located in the area of the new project indicate the increases, in term of quantities, that would be originated by the project, in its full development, for each main group of products composing the FAFs production (Table 9-5).
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Table 9-5: Production differential Product Groups Annual production w/o Annual production % project (ton) w/project (ton) Increment Grains (corn and beans) 657,299 784,742 19.4 Animal Products (Milk) 439,868 533,380 21.3 Other Crops (banana, onion, 902,624 971,353 7.6 tapioca and heart of palm) Total 1,999,791 2,289.475 14.3
15. The percentage increase in production for the different groups ranges from 7.6% to 21.3%. Products having higher production increases would be milk and grains, since these will be the ones with higher potential and response after adoption of the new productive and organizational technologies promoted by the project.
16. Monetary aggregates of the project. Table 9-6 compares the financial results obtained by the project as a whole, at full development, against those that would be obtained in a ‘without project’ situation. By this comparison we can foresee the total impact that will be generated over the gross amount and the costs of production (including the family labor) and over the net incomes of the project, in consequence of the productive changes derived from the works and actions performed by the project.
Table 9-6: Income differential Total Project Without Project With Project Increase % (R$. 2009) (R$. 2009) (R$.2009) Increment Gross Annual Revenue 844,369,938 992,420,817 148,050,879 17.5 Annual Production Cost 653,096,772 725,837,946 72,741,174 11.1 Annual Financial Net 191,273,166 266,582,871 75,309,705 39.4 Income
17. The 78% of the annual financial net income increase to be produced by the project (R$ 75.3 million), will be derived from the increment of earnings per hectare and animal, and the remaining 22% from the increase in implicit prices that the producers will receive when collecting part of the value added from the subsequent phases of the productive chain.
Economic Analysis of the Project
18. Net Present Value and EIRR. The net present value (NPV) of the flow of annual incremental income of the project is estimated at R$62.1 million (US$35.4 million) and the respective economic internal rate of return (EIRR) is 15.9% (Table 9-7).
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Table 9-7: NPV and EIRR Concept (in million R$ 2009) 1 2 3 4 5 6 7 8 9-20 NPV EIRR
Incremental Incomes 0.0 3.2 15.3 35.8 60.9 87.9 112.7 128.5 133.2 551.40 Investments paid per Beneficiary (1) 0.4 1.1 1.3 1.4 1.5 1.3 4.60 Incremental Costs of Production 0.0 1.2 5.9 14.7 26.3 39.1 51.9 60.2 63.0 254.64 Project Investment Costs (2) 59.6 53.0 54.9 54.7 54.6 57.1 1.9 230.03 Flow of Funds -60.0 -52.1 -46.8 -35.0 -21.5 -9.6 58.9 68.3 70.2 62.13 15.9%
(1): Beneficiaries counterpart to individual investments. (2): Total costs of the project. Sensitivity analysis. The sensitivity analysis performed consisted of simulating the impact on EIRR of incremental cost increases, reduced incremental incomes and time delays in obtaining the benefits that the project would be able to support, while still being profitable (Table 9-8).
Table 9-8: Sensitivity Analysis Simulated Situation EIRR 12.7% increase in incremental economic costs 12.0% 11.3% reduction in incremental economic income 12.0% one year delay in obtaining incremental economic income 11.5%
19. Project outcomes are robust vis-à-vis the sensitivity analysis. An increase of 12.7% in the expected incremental costs would reduce the EIRR to 12%. Similarly, a single reduction of 11.3% in the projected incremental income would reduce the EIRR to 12%. Finally, if the incremental benefits foreseen were delayed by one year, the EIRR would fall to 11.5%. The project is not very sensitive to the reduced producer prices; in fact, if producer prices increase by only 10%, instead of the projected 20%, the project EIRR would only decrease to 13.7%. Conversely, the project is sensitive to a reduction in earnings per hectare and/or per animal: if average earnings increased only by one half of that projected (i.e., 10.9%), the project EIRR would be –3.1%.
Conclusion
20. For the reasons above, the proposed project would be economically and financially feasible. Additionally, the sensitivity analysis indicates that the project is prepared to cope with higher challenges without significant reduction of its economic and financial impact. The 25,000 FAFs directly benefited by the project will have incentives to enter the project. The project not only would produce an important increase in total annual net income, but also would support investments destined to improve existing technologies for the associative agro-industries, including sanitary adaptations of their premises, integration of associative networks, natural resources conservation, improved productive technologies and development of income generation opportunities in their farming activities.
92 Annex 10
Annex 10: Safeguard Policy Issues BRAZIL: Santa Catarina Rural Competitiveness
1. This annex reviews the projects compliance with Bank’s safeguard policies. The potential social and environmental impacts were reviewed by Bank experts during loan preparation based on documentation submitted by the SoSC authorities. The proposed safeguards and other national environmental and social requirements are satisfactory and will be complied with during implementation of the project.
2. The project is a follow-up of the Microbacias II project, expanding beyond rural poverty and NRM to address issues of rural competitiveness. The lending instrument to be used for this project is a SIL using a Sector Wide Approach (SWAp). The loan will disburse using both traditional SIL disbursement categories and SWAp-related EEPs with associated DLIs. The EEP/DLI portion of the loan will aim to finance expenses associated with priority expenditure programs that are central to achievement of the state’s development policy priorities associated to increased competitiveness and sustainable rural development. One of the innovative design aspects of the project is the introduction of Results-based management to provide an important model for inter-sectoral and inter-institutional management of key programs.
3. The Project is rated as Category B in accordance with the Bank’s Safeguard Policies. World Bank environmental and social safeguards policies apply to the SWAp EEP expenditures as a whole, though specific focus is directed to the project activities in agricultural production (including agro-processing), water resources management, tertiary rural roads rehabilitation and restoration of agro-ecosystems and degraded forest ecosystems, as these appear to present the greatest safeguards risks.
4. No major World Bank safeguards problems are foreseen for the project and related EEPs. Some social and environmental issues may indirectly arise as a result of implementation, and have been considered in the context of the project’s Environmental Management Framework (EMF), Indigenous Peoples Planning Framework (IPPF) and Resettlement Policy Framework (RPF), respectively, along with a more complete discussion of the steps needed to ensure compliance with the seven safeguard policies triggered by this operation, namely OP 4.01 – Environmental Assessment; OP 4.04 – Natural Habitats; OP 4.36 – Forests; OP 4.09 – Pest Management; OP 4.11 – Physical Cultural Resources; OP/BP 4.12 – Involuntary Resettlement; and OP 4.10 – Indigenous Peoples. The draft Operation Manual contains all procedures and costs indicated by the EMF, IPPF and RPF and needed to be implemented by the state.
A. Environmental Issues in the Project Area
5. Santa Catarina is represented by one of Brazil’s six biomes, the Mata Atlantica. Although these forests originally covered 100% of the state - an area estimated to be as large as 95.443 km2 - only 23.39 % of the original area is thought to remain10. Despite the relatively low levels of
10 Fundacao SOS Mata Atlantica-Instituto Nacional de Pesquisas Espaciais (INPE), 2009. Atlas dos Remanescentes Florestais da Mata Atlantica Peiodo 2005-2008. Relatorio Parcial. Florestal 2004). Data on native Altantic Forest remnants vary from 23.39 to 37.7 % (methodological issues): according to data from the State Agricultural Research and Extension Agency EPAGRI (Inventario Florestal 2004), the forest remnants are 37.7% (includes primary
93 Annex 10 deforestation during the last few years, native forest and natural grasslands are under pressure primarily as a result of past and on-going change in land use associated with conversion to agriculture, forestry, livestock and urbanization11. The degradation of these native forests has seriously affected the structure and function of the State’s ecosystems, including biodiversity losses, increases in carbon dioxide emissions and other negative ecological and socio-economic consequences. Moreover, the loss of the original vegetation cover in fragile areas (such as riparian and steep zones) and past unplanned and unmanaged occupation of land have resulted in land degradation, making the soil susceptible to erosion which, in turn, carries organic matter and sediments into the state’s aquatic ecosystems. Erosion has led to sedimentation of reservoirs, headwater areas and springs, and to less productive soils, which disproportionately affects low income farmers who are rarely able to afford the additional costs of fertilizers.
6. Growth in the agricultural sector has also contributed to an increase in water quantity and quality conflicts. Agriculture (in addition to domestic sewage) is the main source of water pollution in the rural space. In the case of agriculture, poultry and pig waste are the main causes of contamination, followed by pollution from pesticide use in croplands (mainly from horticulture) and discharge of liquid effluents from forestry activities and from irrigated rice production.
7. The protection, restoration and preservation of Santa Catarina’s environment within a sustainable context have been a constant priority of the federal and state Governments over recent years. For example, out of the 55,000 km² of Mata Atlantica that are under legal protection at the national level, 9% (or 4,950 km²) are found in the State of Santa Catarina, including federal, state, municipal and private protected areas. Specifically, the State Government has supported the creation of seven Parks, three Biological Reserves, two Environmental Protection Areas (APAs) and one Ecological Station, though covering only about 125,000 hectares. The State is currently supporting the creation of two Ecological Corridors (designed under Microbacias II) covering an area of 990,000 hectares (or 10% of the state area) and 34 municipalities. In addition to arresting the loss of forest cover and promoting improved soil and water conservation in the State, other environmental priorities that are currently being addressed include recuperation and legal protection of the riparian areas and adopting a micro- watershed approach to promoting sustainable development.
B. Social Issues in the Project Area
8. Despite its strong macroeconomic performance, economic opportunities in Santa Catarina are not equally available to all and there are still about 12.4% (or 700,000 people) of the state population living in poverty (poverty line of US$1.00/day per family). It is estimated that 20% of these 700,000 poor people reside in the state's rural areas, consisting mainly of small farmers, rural workers, and indigenous peoples. In addition to poverty, the state's rural areas face a number of other social challenges, including: (i) low employment opportunities resulting in the exodus of youths to cities; (ii) food security problems in the poorest households; (iii) lack of productive and commercial skills development and training for small-scale farmers and their
vegetation and forests under moderate and advanced stages of regeneration); according to the above INPE/SOS report (2009), 23.39% (includes primary vegetation and forests under advanced stages of regeneration). 11 The above mentioned report from INPE/SOS Mata Atlantica states that, from 2005-2008, SC had the second highest deforestation rate of Atlantic Forest among ten States evaluated (the biome covers 13 States).
94 Annex 10 families to design and execute a family business plan; and (iv) weak capacity to expand upon and take advantage of existing social capital. The indigenous population of Santa Catarina, comprised of the Xokleng, Kaingang and both Mbyá and Ñandeva Guarani ethnicities, is estimated at 8,751 people, with 92 percent living in 14 regularized indigenous lands in rural areas. The indigenous peoples of Santa Catarina were affected by the historical process of colonization of the state and social exclusion that contributed to the current day situation of poverty and degraded natural resources in indigenous areas.
9. Target Population and stakeholders groups. The project will primarily support rural agricultural and non-agricultural small-scale producers (including small farmer’s families (SFFAs), rural workers and indigenous people families), organized in associations, cooperatives, formal (with legal status) and informal networks or alliances. The project will reach some 90,000 SFFAs overall, 2,000 rural workers/laborers and 1,920 indigenous people families. Out of these beneficiaries, about 25,000 (considered priority beneficiaries) will be targeted to receive direct financial project support through the State’s Rural Investment Fund (RIF), to support improved added-value arrangements as well as improved productive systems for rural competitiveness. Project beneficiaries will be organized in Family Agricultural Producer Organizations (FAPOs), both those currently existing (cooperatives, Microwatershed Associations and Indigenous Associations) and others to be established during project execution. FAPOs are defined as producer organizations in which 90% of membership consists of family farmers as defined under Brazil’s Program to Assist Family Agriculture (PRONAF). The main existing FAPOs to be targeted are those active in about half (936) of the 1,683 microwatersheds into which the State is divided. A second important group of stakeholders will be the members of River Basin Committees, consisting of various private and public institutions and sectors (varying from basin to basin) and including representatives from cooperatives and Microwatershed Associations and, when applicable, Indigenous Associations. Eligibility criteria for receiving project support are described under Component 1 and will be further detailed in the Project Operations Manual.
C. Environmental Aspects of the Project
10. Overview. Environmental considerations are incorporated in key aspects of the Project, which include: the targeted area and beneficiaries, beneficiary eligibility criteria, investment typologies to be financed, and implementation tools. In general, the Project is expected to produce positive and neutral environmental impacts. However, activities carried out in subprojects supported under Component 1 (i.e., the implementation of business plans for productive and added value investments) and under Component 2 (i.e., the rehabilitation of tertiary roads and water monitoring equipment installation) could generate low or moderate impact on the environment that require some mitigation measures. The Project design includes mechanisms to prevent negative impacts during implementation, implementation, and monitoring of subprojects.
11. Positive Environmental Impacts. According to the EA, a significant portion of impacts foreseen are positive, including, inter alia: the restoration of degraded areas, riparian zones, and forest connectivity in ecological corridors; better soil fertility; improved water quality (both surface and ground water); reduced pesticide use; improved management of land and natural resources; carbon sequestration (i.e., rehabilitation of degraded lands, including reforestation and natural regeneration of riparian and steep areas as well as change from degraded pastures to
95 Annex 10 agroforestry and agro-sylvopastoral systems) – for details, see carbon balance in Appendix 2 to this Annex; reduced GHG emissions (mostly associated with reduced/non-till systems and reduced use of pesticides and REDD) – see Appendix 2; better environmental governance; and enhanced overall environmental quality of livelihoods in targeted areas. These positive impacts will be achieved through: supporting environmental management in targeted areas; financing sustainable production systems; direct investments in the sustainable use and conservation of natural resources (i.e., connection of forest fragments and certifying sustainable agribusiness and forestry activities); enhancing environmental awareness among stakeholders; promoting improved policy instruments (i.e., economic incentives to forest conservation and PES, the latter limited to the Ecological Corridors); scaling-up successful innovative production and conservation technologies piloted under the Microbacias II Project; supporting the development of long-term strategies to facilitate the transition to environmentally sustainable livelihoods; and improving multi-sectoral coordination and consultation mechanisms in rural, environmental matters.
12. Potential Adverse Environmental Impacts by Project Component and Sector. Low or moderate impacts on the environment could be expected at the local level as a result of the implementation of the activities financed under Components 1 and 2, requiring mitigation measures and/or further environmental studies and environmental licenses prior to obtaining final project approval. The Bank team reviewed all potential issues in each component, including activities to be financed under EEPs. The following is an analysis of the potential impacts by project component, focusing on the activities and sectors which appear to present the greatest safeguards risks.
13. Component 1 (Agricultural and Environmental Sectors): Low or moderate impacts on the environment could be expected at the local level as a result of SSF subprojects (business plans) financed under Component 1, including crop, pasture management and livestock productive investments, small-scale agro-processing and small works (mostly on-farm) to promote rural tourism. The impacts of any misdirected support for productive and added value investments and tourism activities could include soil erosion, water pollution (i.e., sediments and use of fertilizers or pesticides, even if not directly procured by the Project) and pollution (i.e., from agro-processing activities). In addition, despite the fact that the project will support improved livestock and crop systems, it would generate GHG emissions associated with livestock – for details, see carbon balance in Appendix 2 to this Annex. As subprojects and small works (and their locations) that will be financed cannot be identified a priori because of the demand-driven nature of interventions, specific impacts cannot be anticipated.
14. Component 2 (Sectors: Agriculture, WRM, Environment, Rural Infrastructure and Tourism). Table 10-1 includes the main activities associated with the relevant EEPs supported under this component. Following this table is a description of specific activities and impacts on the environment that could be expected at the local level, resulting from the implementation of those activities in two sectors (infrastructure and WRM) which appear to present the greatest potential risks.
96 Annex 10
Table 10-1: EEPs, Sector and Activities of Component 2 Eligible Expenditure Programs Sector and/or Main Types of Activities (EEPs) Theme TA, training, workshops, campaigns, studies and 0340 - Sustainable information systems to support ecosystems and corridor Environment Environmental Development management; environmental compliance and enforcement activities Institutional strengthening to improve the following Agriculture services: to environmental, sanitary and phyto-sanitary 0310 - Competitive Agribusiness and (SPS) compliance, inspection and certification; AT and Environment rural extension; environmental education Undertaking WRM planning at the state and basin levels, 0350 - Water Resources water monitoring, strengthening river basin committees, WRM Management issuing of water user rights and upgrading WRM information system 0100 - Rural Roads Infrastructure Civil works: tertiary rural road rehabilitation Capacity building; awareness campaigns, fairs and 0640 - Rural Tourism Tourism workshops; studies/inventories; info dissemination to promote rural tourism Digital connectivity and access to information in rural tele- 0250 - Digital Inclusion Agriculture centers.
15. Rural Infrastructure, consisting of small-scale physical works for rehabilitation of tertiary roads - basically erosion control works along the roads to prevent runoff from roads initiating erosion on farmers’ fields. The following localized and temporary impacts are foreseen: (i) soil erosion; (ii) deforestation of very small spots of riparian vegetation, when existent (permitted by law for this purpose, upon approval of environmental authorization); and (iii) water pollution (sediments).
16. Water Resources Management, including the following activities which may generate environmental impacts: (i) small works to install water monitoring stations/equipments; (ii) participatory formulation of Strategic River Basin Plans; and potentially (iii) the construction of one new building for the state Water Resources Management Institute. Localized and temporary impacts are foreseen are: (i) soil erosion and deforestation of very small spots of riparian vegetation, when existent (permitted by law for this purpose, upon approval of environmental authorization), to allow the installation of water monitoring equipment; (iii) water pollution (sediments); and (iv) air and noise pollution during the construction of the WRM Institute building. The Project will support the aforementioned formulation of participatory Strategic River Basin Plans for 14 pilot basins. While implementation of these plans will not be financed by the Project, some of the activities identified in the plans could have potential adverse environmental or social impacts once implemented. To ensure conformity with Bank and Government environmental policies beyond the life of project, environmental and social considerations will be mainstreamed into these Plans (for details, see section below on Environmental Management Framework).
17. No significant indirect, long-term, or cumulative impacts are foreseen. Subprojects under Components 1 and activities carried out under Component 2 will be subjected to a rigorous screening process to ensure maximum socioeconomic and environmental benefits. The screening process will also serve to prevent or minimize unintended negative environmental impacts,
97 Annex 10 including those eventually associated to secondary, indirect, and/or long-term effects. The EA/EMF recommends that a case study be carried out during the mid-term review in order to consider indirect and/or long-term and cumulative positive or adverse affects.
18. Environmental Assessment and Procedures. An EA including an Environmental Management Framework (EMF) and a Pest Management Plan (PMP) for the Project was submitted by the Government and revised and approved by the Bank. It was publicly disclosed and discussed in country on December 22, 2009 and a final draft was reviewed and approved by the Bank and submitted to the Infoshop on February 2, 2010. The EA lists the main activities with potential negative impacts, specifying time, extension, intensity, scope, risk of occurrence, and potential persistence of the impacts. It also proposes prevention and mitigation mechanisms to ensure that small works (tertiary rural roads and small agro-industries) are subjected to adequate EA processes (so that they do not create any serious adverse impacts), and that appropriate mitigation measures are included in the design and implementation of all activities supported.
19. The EMF addresses the potential positive and negative impacts identified in the EA and proposes a plan for avoiding, minimizing, and mitigating such impacts, as well as identifies the costs and responsible parties for implementing the specific measures. The EA also details the strategy adopted for the implementation of the proposed measures, which include the following:
Strict screening of subprojects, with evaluation, approval, and monitoring procedures mainstreamed in the subproject cycle; Review of the legal and institutional framework at the country and state-level relevant to the Project; Environmental licensing procedures to be required for some of the investments financed under Components 1 and 2 in order to comply with national and state legislation; Description of the process for setting up fully accountable management practices for preventing and mitigating impacts, including eventual cumulative impacts; Incorporation in the M&E system of specific processes to detect and measure any negative environmental impact, which builds on the experience gained from the existing M&E system of the Rio GEF Project; An attached guidance document - Pest Management Plan - for the adoption of integrated pest management practices in project-supported activities; Environmental management guidelines for roads rehabilitation, including monitoring mechanisms (attached as a mandatory requirement to agreements with road maintenance contractors); Guidelines for site selection, design construction, and monitoring arrangement for infrastructure works; A detailed plan for strengthening the capacity of stakeholders in environment matters.
20. Mainstreaming EA Procedures. Subproject investments and their locations will be defined during implementation. The EMF includes screening criteria and procedures (including operational rules) that will be used to identify and avoid or minimize any adverse environmental impacts. As a result, subprojects financed under Component 1 and proposals for road
98 Annex 10 rehabilitation activities (financed under Component 2) will go through a screening process. Depending on the nature and magnitude of their potential impacts, proposals will be classified into a specific impact category. Preliminary subproject screening, evaluation, approval, and monitoring procedures are incorporated in the project’s design within the subproject cycle so that the proposed mitigation measures are cost-effective and not overly burdensome. These procedures, detailed in the EMF, have been included in the project cycle and are foreseen for inclusion in the Operational Manual.
21. Environmental and Social Considerations mainstreamed into the basin- scale, participatory strategic WRM Plans. To ensure conformity with Bank and Government environmental policies beyond the life of project, it was agreed during project preparation that, during the first three months of project implementation, the Government will submit to the Bank (for no-objection) the Terms of Reference (ToRs) for the formulation of the first two WRM Plans, with environmental and social considerations, and their related training, mainstreamed into the plan formulation process. Upon Bank approval of this methodology under which environmental and social considerations are incorporated into the Plan formulation process (as opposed to having separate environmental and social assessments for the Plan), it will be applied to the subsequent Plans.
22. Proposed Subproject Environmental Impact Categories. The draft EA/EMF organizes the main types of subproject proposals into four categories according to the relevance of their potential environmental impacts: Category I covers subprojects with expected positive environmental impacts, which will require measures to maximize positive impacts; Category II covers subprojects that have very low impacts, which will be subject to prevention measures within the EMF; Category 3 covers subprojects with potentially negative impacts that are the object of specific legislation, which will be submitted to the specified simplified environmental authorization procedures in addition to the adoption of project EA procedures and associated measures; and Category 4 covers subprojects with potentially negative impacts, which may require specific studies (i.e., to design waste water treatment for an agro-processing plant) and that are the object of specific legislation, which will be submitted to the specified environmental licensing procedures in addition to the adoption of project EA procedures and associated measures. Corresponding neutralization or mitigation measures will be incorporated into the subproject design before being submitted for approval and will furthermore be subjected to the provisions of Brazilian legislation related to environmental assessment, water resources, and forests (e.g., rehabilitation of tertiary rural roads and drainage works).
23. Pest Management Plan. A Pest Management Plan (PMP) has been developed (presented as a separate document though linked to the EA/EMF), building upon the experience of the Microbacicas II project. The PMP’s objective is to ensure the implementation of integrated pest management techniques (IPM) in all subprojects related to the introduction of improved on-farm technologies, with a particular accent on the protection of worker’s health through the sound management and use of pesticides and the adequate disposal of used pesticide containers. The PMP establishes a framework process with the aim of optimizing resources available for technical training, with a dynamic approach that focuses on those subprojects that are likely to suffer a higher pest incidence or more problems related to pesticide use. Within the proposed activities, those that may be incorporated into planned and budgeted project activities have been prioritized, with the objective of streamlining pest management into regular project operations
99 Annex 10 and minimizing the implementation costs of the PMP. The Project (as in Microbacias II) will not finance the procurement of pesticides. However, these agro-chemicals might continue to be used by farmers submitting subprojects in crops which do not involve organic farming. According to the EMF and the PMP, subprojects under Component 1 will not be eligible if the concerned crop involves the use of WHO Category I or II; rather, an alternative to the use of these chemical pesticides will have to be presented to allow eligibility for subprojects, and will require the adoption of an IPM strategy.
24. Responsibility for EA and Institutional Arrangements. The Project will build on the existing EA capacity established within the organizational framework of the implementation agency for the previous Microbacias I and II Projects, which will be strengthened with additional staff at all levels to support the implementation of the PMP and EMF, including EA screening procedures and EA training associated with the review and approval of investment proposals (i.e., in the subproject cycle). Detailed institutional arrangements have been agreed and included in the EA/EMF and PMP, respectively. At central and regional levels, a core group of professionals working for SAR (within the Executive Secretariat –SEE), EPAGRI (Extension Agency), CIDASC (SPS and QC Agency), SIE and FATMA (Environmental Agency) and EPAGRI local offices (at municipal level) will share EA-related responsibilities.
25. Strengthening EA Capacity. In addition to the inclusion of specific responsibilities for EA and to the institutional arrangements mentioned above, the EMF and the PMP include provisions for the strengthening of capacity to carry out EA activities, respectively, as well as for establishing mechanisms to monitor implementation and measuring impacts. Specifically, the EMF and the PMP include a capacity building proposal, which is mainstreamed into project training activities supported under Component 2 to train relevant technicians (and managers) and disseminate the project’s environmental requirements and procedures among beneficiaries, stakeholders, municipal authorities, and other relevant institutions and organizations at municipal and territorial levels.
D. Social Aspects of the Project
26. OP 4.12 Involuntary Resettlement. The road rehabilitation and construction work activities to be supported – either directly or indirectly – in rural areas under Component 2 appear to have a very small potential for physical involuntary resettlement, issues pertaining to right-of-ways (ROWs) or land acquisition.
27. OP 4.10 Indigenous Peoples. The indigenous population of Santa Catarina, comprised of the Xokleng, Kaingang and both Mbyá and Ñandeva Guarani ethnicities, is estimated at 8,751 people, with 92 percent living in 14 regularized indigenous lands in rural areas. The indigenous peoples of Santa Catarina were affected by the historical process of colonization of the state and social exclusion that contributed to the current day situation of poverty and degraded natural resources in indigenous areas. For details on social issues, see Indigenous Peoples Planning Framework (IPPF) in Appendix 1 to this Annex.
28. An IPPF and an Involuntary Resettlement Framewrok for the Project were submitted by the Government and revised and approved by the Bank. They were publicly disclosed and
100 Annex 10 discussed in country on December 22, 2009 and a final draft was reviewed and approved by the Bank and submitted to the Infoshop on February 2, 2010.
E. Institutional Capacity for Safeguard Policies
29. The SoSC’s institutional capacity for safeguard policies, based on the evaluation of the implementation performance under the previous Bank-supported operation, is considered adequate. During the implementation of the Bank-supported Microbacias II Project, the implementation agency (State Secretariat of Agriculture and Rural Development - SAR) successfully developed and implemented an Environmental Management Framework (EMF) as part of the Environmental Assessment (EA). The procedures for environmental screening were incorporated in projetc’s Operational Manual, which also included procedures for the evaluation, approval, and monitoring of subprojects seeking to be financed under the investment component. Training of key staff of the implementing agency was provided under the project, and technical training (to farmers and extension staff) will be reinforced under the proposed project in areas such as integrated pest management (IPM) practices and organic agriculture. The tertiary road rehabilitation program funded by the State will be implemented by the State Secretariat of Infrastructure with support from former staff of the Roads Infrastructure Department (DEINFRA), which has broad, acknowledged experience in the environmental management of rural roads projects, dating back to 1993, with the creation of its Environment Division - DEINFRA’s environmental safeguard procedures were reviewed by the Bank team and are considered best-practice.
30. The SoSC's institutional capacity for social safeguard policies is also considered adequate. Evaluations of the implementation of the Indigenous Peoples Planning Framework (IPPF) under the previous Bank supported Microbacias II Project were rated satisfactory, and technical staff have gained training and experience with working with indigenous communities. Additional training will be provided under the proposed project, including training on involuntary resettlement policies.
F. Compliance with Safeguard Policies
31. The Project is designed to comply fully with Bank safeguard policies as indicated below.
OP 4.01 Environmental Assessment
32. The Project is classified as Category B, which is the appropriate classification for a project whose potential adverse environmental impacts on human populations or environmentally important areas are site-specific, reversible, and can be readily mitigated (OP 4.01, paragraph 8). Moreover, it is not expected that any subprojects to be supported by the Project will be classified as Category A due to their size, location, or expected impacts. In accordance with this classification, an EA, which includes an EMF and a PMP (described above in Section C), has been prepared, and, based on its results, the Project remains designated as Category B. The draft EA/EMF/PMP specifies the criteria and procedures (including operating rules) that will be used during implementation to avoid or minimize adverse environmental impacts. Some of the key aspects regarding Bank’s safeguards taken into consideration in the EA/EMF/PMP are described in the policies below.
101 Annex 10
OP 4.04 Natural Habitats
33. The project will not support or lead to the conversion of natural habitats. In fact, it will help rehabilitate, restore, and protect degraded riparian forests – and other sensitive areas such as high slopes and hill tops - which are important to preserve local biodiversity and the quality of water resources. On-farm investments are expected to take place in areas that have been traditionally dedicated to crop and livestock farming and will not therefore involve conversion of natural habitats. Instead, the proposed project will support natural habitat conservation since: (i) it will avoid deforestation and forest degradation (while supporting REDD) by developing a system that will promote the commercialization of “Conservation Credits” associated with the valorization of environmental assets (preserved forests) in two large Ecological Corridors (for details, see Annex 4, Component 2); (ii) increased agricultural productivity will be a result of sound environmentally practices; (iii) it will help restore and protect degraded riparian forests and which are important to preserve biodiversity and the quality of water resources; and (iii) the project will support more sustainable use of agricultural lands and the rehabilitation of degraded natural habitats. The EMF explicitly forbids any project activities in areas supporting critical natural habitats or inducing significant conversion or degradation of critical natural habitats. It also ensures that any activity in the buffer zone of a protected area will be designed to help reduce pressure on the protected area itself. The EMF also provides guidance regarding unintended impacts on natural habitats.
OP 4.36 Forests
34. The requirements of OP 4.36 for this project overlap with those of OP 4.04. The project will support activities that generate positive environmental impacts by promoting the rehabilitation and conservation of degraded native forests (including riparian zones), as well as by contributing to the restoration and maintenance of ecological functions in those areas. Through Component 1, the project will also test models of sustainable, non-timber use of such areas in small rural properties. This will be carried out in accordance with addendum 2166-67 to Federal Law 4771/65 (and related regulations issued in 2009)12, which allows for sustainable
12 Brazil has a wide body of older legislation formulated to reverse the effects associated with past, widespread deforestation and loss of vegetative cover and the provision of ecological “goods and services” including biodiversity conservation. This includes federal legislation that recognize the creation of Areas de Preservação Permanente (APP) and Reserva Legal (RL); above-mentioned Law 4771/65, CONAMA Resolution 369/06 and Decree 6514/08). This legislation has been recently strengthen by a number of national Normative Instructions (Instrução Normativa) and one Decree (Decreto) passed in late 2009 that are relevant to the project as they establish a number of requirements affecting land use on private holdings in the rural space. These include requirements governing: (i) the use of vegetation in lands outside of areas designated as APP and/or Reservas Legais (RL; Normative Instruction [NL] # 3); (ii) the sustainable utilization of existing vegetation in RLs (NL # 4); (iii) the restoration and recuperation of APP and RL (NL # 5) and (iv) facilitating compliance with these (and other) legal requirements (Decree # 7029/09). Of particular relevance to the project are the provisions that require that agricultural properties in Brazil maintain forest cover in sensitive areas (riversides, high slopes) as well as on 20% of the respective property’s total area. For historical reasons, most agricultural properties in the SoSC, as in most regions across the country, are currently not in full compliance with these requirements. The project will help address this situation in a pragmatic manner, promoting a gradual process towards achieving a higher level of compliance through the implementation of economically feasible measures. Specifically this will occur through: (i) requiring sub-project beneficiaries to fully protect existing forests and implement environmentally-sound practices that facilitate forest regeneration in degraded areas (e.g. rehabilitation riparian areas under Component 1) and (ii) by
102 Annex 10 agro-forestry activities in small rural properties as long as they do not change the overall character of the forest cover and do not alter ecosystem functions in the area. Through Components 1 (seed capital) and 2 (information management and dissemination system, and TA), the project will also avoid deforestation and forest degradation (while supporting REDD) by developing a system that will promote the commercialization of “Conservation Credits” associated with the valorization of environmental assets (preserved forests) in two large Ecological Corridors (for details, see Annex 4, Component 2). Despite the positive impacts foreseen through the implementation of these activities, the EMF includes guidance regarding direct and indirect impacts on native forests. The EMF contains procedures to ensure that project activities comply with OP 4.36 and with national legislation which establish measures to protect existing forests.
OP 4.09 Pest Management
35. The Project will not finance the procurement of any pesticides or other chemical amendments. Nevertheless, this policy is triggered because small amounts of pesticides will probably continue to be used by a small portion of farmers for which disposal containers may be requested by communities to reduce health and environmental risks associated with pesticide use. Therefore, a Pest Management Plan (PMP) has been prepared (described above in Section C) to provide guidance on how to minimize potential negative environmental impacts, as well as on training in safe pesticide use, handling, storage, and disposal. The Project will also support TA for the adoption of organic agriculture and of proven, economically, and environmentally- sustainable Integrated Pest Management (IPM). This approach is designed to reduce input costs and human health risks, and to minimize adverse environmental impacts through the virtual elimination of pesticide use without significantly affecting yields. The IPM approach will further improve the sustainability of agro-ecosystems by focusing on improving the knowledge and skills of farmers for sound resource management. The EMF and the PMP includes screening procedures against the World Health Organization’s list of approved products. In addition, Component 1 of the Project will promote training in good practices and IPM information dissemination. The need to use pesticides will be assessed on an individual subproject basis, and any approved use must comply with Brazilian Law 7.802/89 and related state laws.
OP 4.11 Physical Cultural Resources
36. This policy is triggered. The Project will finance small-scale works in already established agricultural zones where the likelihood of disturbing archaeological, paleontological, or other culturally significant sites is small. The Project is not expected to have negative impacts on cultural property, including movable or immovable objects, sites, structures, groups of structures, or natural features or landscapes with archeological, paleontological, historical, architectural, religious, aesthetic, or other cultural significance. The EMF includes a framework for screening project activities in relation to potential negative impacts of cultural property. In any case, such impacts will be avoided through the application of subproject eligibility criteria and the safeguards screening system based on Brazil’s well-developed legislative and normative
supporting activities such as environmental awareness-raising and conservation and sustainable use of NR in two Ecological Corridors (including PES to preserve forest remnants) under Component 2.
103 Annex 10 framework, which is under the oversight of the National Institute for Protection of Historical and Archeological Sites (IPHAN). Moreover, the EMF defines that “chance find” procedures will be included in the contracts for any subproject involving works, as well as in the OM, in order to comply with this safeguard and with national legislation on cultural property.
OP 4.12 Involuntary Resettlement.
37. This policy is triggered. Notwithstanding the small probability of resettlement issues, the SoSC prepared and consulted a satisfactory Resettlement Policy Framework (RPF) that will become part of the Project Operational Manual and apply to all construction and road work to be financed under the SWAp, as well as for non-supported activities such as the implementation of the basin-scale strategic WRM plans. As mentioned, training on involuntary resettlement policies for all stakeholders involved in these activities will be provided under the proposed project, to ensure conformity with Bank and Government environmental policies during and beyond the life of project.
OP 4.10 Indigenous Peoples
38. This policy is triggered, however, it is not anticipated that the project will generate any negative effects on IP that will need to be mitigated. The SoSC prepared and consulted a satisfactory Indigenous Peoples Planning Framework (IPPF) that will become part of the Project Operational Manual. It drew on experiences and lessons learned in the previous operation. The current IPPF includes suggestions and recommendations from both an evaluation of the previous operation, and free, prior informed consultations carried out with indigenous peoples for the current operation. The IPPF, including the social assessment, consultations, and guidelines for the new operation, is summarized in Appendix 1.
OP 4.37 Safety of Dams. This policy is not triggered.
OP 7.50 Projects on International Waterways. This policy is not triggered.
OP 7.60 Projects in Disputed Areas. This policy is not triggered.
G. Public Consultation and Disclosure
39. All safeguard documents (EA/EMF/PMP, RPF and IPPF) were consulted, and subsequently disclosed in-country on December 22, 2009, and sent to the Bank for comments, which were subsequently incorporated. The final version was approved by the Bank on 27 January, 2010 before appraisal, and submitted to Infoshop on February 2, 2010 and the Public Information Center for Bank disclosure on the same day.
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Brazil Santa Catarina Rural Competitiveness Project
Appendix 1, Annex 10
Summary of the Indigenous Peoples Ethnodevelopment Strategy13 (Indigenous Peoples Planning Framework/IPPF)
Introduction
40. From 2002 to 2009, for the first time in Santa Catarina, state agricultural policy included indigenous people as a priority public under the previous operation, Microbacias 2.14 Much was learned during these seven years, both by public institutions and IP, which is summarized below.15
41. This Indigenous Peoples Ethnodevelopment Strategy (IPPF) for the project builds on this initial seven-year experience and aims to continue support to IP for the reduction of poverty from the perspective of improving the sustainable use and conservation of natural resources in indigenous lands and income generation. It is not anticipated that the project will generate any negative effects on IP that will need to be mitigated.
42. The IPPF for the current project incorporates the suggestions and recommendations from both participatory evaluations of the previous operation, and free, prior informed consultations carried out for the preparation of the project, the results of which are outlined in more detail below.
43. The basic premise of the IPPF of the proposed project is the concept of ethnodevelopment which emphasizes the autonomous capacity of culturally differentiated societies to control and determine their own processes of change, as contrasted with external change agents determining what is best for indigenous societies. The basic conditions for ethnodevelopment are that indigenous peoples: (a) strengthen their cultures; (b) assert their ethnic identities as peoples; (c) obtain recognition of their lands and territories for local autonomy, governance and self-determination; and (d) self-manage their own processes of economic and social development. This approach includes emphasis on collective well-being, local definition of problems and resolutions, valuing traditional knowledge in seeking solutions to problems, maintaining balance with the environment, and participatory approaches to sustainability and independence. It emphasizes respect for self-determination of IP.16
13 Based on the project document, Etnodesenvolvimento para as Populações Indígenas, Microbacias-3, Florianpólis, Santa Catarina, outubro de 2009. 14 See Annex 13, Indigenous Peoples Strategy, of World Bank Project Appraisal Document, Brazil: Natural Resource Management and Rural Poverty Reduction, March 27, 2002, Report Number 23299-BR. 15 See also Selected References. 16 Further outlined in Santa Catarina's Etnodesenvolvimento para as Populações Indígenas (IPPF)/Microbacias-3, Florianópolis, novembro 2009; and in Rocha, Cinthia Creatini, Estudo de avaliação da metologia utilizada pelo PRAPEM/Microbacias-2 junto as populações indigenas de Santa Catarina, Florianópolis: Microbacias-2, 2008.
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Overview of IP of Santa Catarina
44. According to the Brazilian National Indian Foundation (FUNAI), the indigenous population of Brazil is approximately 563,000, and indigenous lands comprise 110,397,000 hectares (about 13% of the natinal territory). About 43,000 IP live in Southern Brazil.
45. Today about 8,751 IP live in Santa Catarina. These include the Kaingang, Xokleng and the Guarani indigenous peoples. The Guarani are subdivided into two sub-groups, the Mbyá and the Ñandeva (or Chiripa). One characteristic shared by these three ethnicities is that they all define themselves traditionally as people of the forests, with their cultures, social organization and livelihoods strongly linked to the natural resources of the sub-tropical Atlantic Forests. Originally these peoples were primarily hunters and gatherers with some small-scale horticulture.
46. The IPs of Santa Catarina were victims of the historical process of colonization of the state and social exclusion that contributed to a current day situation of poverty and degraded natural resources in indigenous areas. In the 1970s, the well known ethnologist Silvio Coelho dos Santos characterized the IPs of Santa Catarina as victims of a long process of white domination that profoundly modified their original cultures and contributed to the disappearance of the sub-tropical Atlantic Forest (plains and Brazilian pine forests) that was their traditional habitat. He also concluded that while prolonged contact with whites had provided some resistance to new diseases and eventual demographic stability, it had also left the remaining indigenous population in a precarious situation in terms of livelihoods, health and education. He observed that the relationship between the national society and IP was generally characterized by violence and by white cultural, political, linguistic and economic dominance and by a large social gulf between the groups. In 2004, Coelho17 observed during a training event for technical agents of Microbacias 2 that today it is crucially necessary to create better mechanisms for co- existence in multiethnic societies.
47. Land tenure. Most of the IP of Santa Catarina live in indigenous lands that are concentrated in three distinct locations in the state: (i) the west (predominantly Kaingang), (ii) the Alto Vale do Itajai (predominantly Xokleng), and (iii) the coast (predominantly Guarani). Since 2002, the number of regularized indigenous lands in Santa Catarina has increased from 10 to 14 of which the four new areas are Guarani. Furthermore, there are now an additional 5 Guarani areas already delimited, and another two Kaingang areas and one Guarani area already identified.18 Table A summarizes the current indigenous land tenure situation in the state.
48. Today IP livelihoods are comprised primarily of: extractivism, subsistence agriculture with some items commercialized, sale of handicrafts, and income from agricultural day labor, and public sectors jobs such as teachers or health agents.19 Despite increasing contacts between
17 See Silvio Coelho dos Santos, Autonomia e Etnodesenvolvimento. Palestra ministrada em capacitação para os técnicos do Microbacias-2, Florianópolis, 2004. 18 In Brazil, the steps for regularizing or legalizing an indigenous land include identification, delimitation, portaria declaratoria (declaratory decree), physical demarcation, local and federal registrations, and Presidential Decree (homologação). An indigenous land is generally considered regularized once it has received its portaria declaratoria, even though full legalization requires completion of all steps. 19 Microbacias-2 contributed to improving IP well-being with subprojects such as protecting water resources, reforestation with native species, forest enrichment with handcrafts species, commercialization of honey and handicrafts, among others.
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IP and national society, in particular greater integration of IP in the larger rural economy, the indigenous groups of Santa Catarina insist on and are preserving their ethnic identities both as specific ethnic groups and as IP. All want the right to be IP and be respected. They are trying to maintain their languages, intimately linked to maintaining their culture and worldview, and their life ways that are so intimately linked to their territories, traditional knowledge (such as of the biological diversity of the Atlantic Forest) and the sustainable use of natural resources.
Kaingang IP
49. The Kaingang belong to the linguistic family Macro-Jê and are traditional inhabitants of the Brazilian pine forests (araucária) in the states of São Paulo, Paraná, Santa Catarina and Rio Grande do Sul, where their presence is documented as of the 1600s. Today they live primarily in the west of Santa Catarina, the north and northeast of Rio Grande do Sul and the southwest of Paraná. People of the forests and warriors, the Kaingang resisted and tried to escape the colonization that took place during the 19th century. Nevertheless, the colonists managed to push the Kaingang from much of their traditional habitat, thus altering the Kaingang culture and economy.
50. Contacts with the national society and other tribal groups disrupted Kaingang livelihood and reduced their territorial unity. In their view, their territorial space is defined by their material and social subsistence activities, such as fishing, harvesting pine nuts, honey and wax and the horticultural cultivation of corn, pumpkin, beans and sweet potatoes. Their subsistence economy is largely defined by what they can extract from nature. Today, they largely cultivate subsistence plots of the aforementioned crops, with minor commercialization of surplus production, as well as working as temporary agricultural wage laborers. Over the past decades, with uncertain returns from fishing, hunting and agriculture, they have been increasingly unable to feed themselves and have begun to depend on the sale of crafts for cash to supplement their livelihoods.
51. There are approximately 6,037 Kaingang in Santa Catarina. During the 1980s, more of their lands were regularized. In the western region of Santa Catarina, seven Kaingang indigenous lands are now recognized: T.I. Xapecó; T.I. Toldo Chimbangue 1 and 2 (which are contiguous); T.I. Toldo Pinhal; T.I. Palmas (also in Paraná) T.I. Toldo Imbu; and T.I. Aldeia Condá, which are found in the municipalities of Chapecó, Seara, Abelardo Luz, Ipuaçu and Entre Rios. Each of these Kaingang areas differs, particularly with respect to their degree of insertion in the social- political-economic local context and retention of traditional Kaingang culture and language. Overall, the Kaingang are attempting to maintain their traditional culture while incorporating new elements, leading to what some observers have called a contemporary Kaingang culture.
Xokleng IP
52. Before systematic contact with national society in the 1910s, the Xokleng were nomadic, with livelihoods from hunting and gathering of pine nuts and other forest products. They did not practice horticulture. The small groups, which varied between 50 and 300 people, spent their winters on the plateau. In the summers, they will gather into larger groups in summer villages in valleys where they will carry out ceremonial life, dispersing again at the end of summer.
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53. Today the majority of the approximately 1,581 Xokleng of Santa Catarina live in two regularized lands. Most live in T.I. Ibirama, also called LãKlanõ ( 14,156 ha), officially demarcated in 1965 at 14,156 ha but expanded recently by FUNAI to encompass 37,108 ha which is located in Alto Vale do Itajaí (especially in the municipalities of Vitor Meireles and José Boiteux). A small group live in the T.I. Rio dos Pardos, and some Xokleng families live on the outskirts of the cities of Blumenau, Joinville and Itajaí.
54. The social, economic and political organization of the Xokleng in the T.I. Ibirama underwent a major transformation during the 1970s with the construction of the North Barragem, a dam that embanked the Hercilio River at their southeast border, in order to avoid flooding of industrial cities in the low Itajaí valley such as Blumenau. The retention lake flooded almost 900 ha of their lower lands more suitable for agriculture, and the Xokleng had to move to higher more densely forested areas. This led to the formation of five smaller villages each of which has its own political leadership although they select one leader to represent them to the outside world. Living in the hills has led to intensification of timber extraction, a decrease in horticulture and less productive hunting.
55. Over the past decades, the Xokleng practiced swidden subsistence cultivation of corn and manioc often on sharply sloping hillsides, as well as minor cultivation of tobacco for sale. With support from the previous project, the Xokleng intensified craft production, began reforestation with native species, and initiated honey production for commercialization, among other activities. They have still not yet fully received compensation for their lands lost to the flooding from dam construction.
56. Since the 1990s, observers have noted that the ethnic identity of the Xokleng has been undergoing revitalization. This appears to be derived in part from the degradation of the natural resource base, their struggle for compensation and their request for a revision and expansion of the T.I. Ibirama, currently underway. Since 1992, the learning of the Xokleng language has been incorporated in the T.I. Ibirama schools, and there is strong support for the developing culturally appropriate teaching materials. There is a continuing resurgence of the Xokleng language.
Guarani IP
57. The Guaranis belong to the linguistic family Tupi-Guarani. In South America, there are four Guarani groups, of which three are present in Brazil: the Kayova, the Ñandeva (or Chiripá) and the Mbya, with a total population in Brazil of about 35,000 individuals. While the Kayova are concentrated in the state of Mato Grosso do Sul, the Ñandeva and the Mbya are located in the Midwest, southeast and southern regions. There are approximately 1,193 Guarani in Santa Catarina.
58. In the past they lived traditionally along the southern coastline of Brazil, between the state of São Paulo and of Rio Grande do Sul, the Plate Basin, to the shores of the Paraná River, part of the territory of Paraguay, Argentina, Uruguay and Bolivia. The Guarani practiced swidden horticulture as well and hunting and gathering, and traditionally inhabited some of the best lands of the Southern Cone. Their livelihoods are forest based and they define themselves as “Forest Indians.” The Guarani consider their territories as tekoa which must have appropriate natural resources for village life, horticulture and sufficient forests. The land is fundamental for
108 Annex 10 the Guarani. According to one researcher20 (Melià, 1989), “The Guarani ecology is not limited to nature, nor is defined exclusively by productive values. The tekoa means to create simultaneously the economic, social relations and political-religious organization essential for the Guarani lifestyle.” The tekoa is the place where conditions are met to create the teko, i.e., the Guarani culture, way of life, system, law, behavior and habit.
59. The Guarani language shapes their worldview which emphasizes orality, language and words as well as music. After more than 500 years of contact and acculturation, the majority of Guarani still retain their language, preserving and developing their religious rituals and traditions.
60. Their livelihood strategies have been characterized as Guarani ecosystems, combining hunting, fishing, and swidden horticulture in the forest where they plant corn, manioc and smaller amounts of beans, peanuts, pumpkin, sweet potato, “cará” and tobacco for religious purposes. Traditional corn varieties also play an important role in the Guarani life and cosmology. Water is also an important element in the Guarani cosmology, as are air and fire. They utilize a local calendar, based on moon cycles. Many researchers emphasize that the migration and mobility of Guarani are intrinsic to their culture and adaptation to ecological conditions.
61. Studies over the past decades of the Guarani in Santa Catarina emphasize the lack of adequate land and forest natural resources due to the destruction of the Atlantic Forests as well as slow processes of land regularization by FUNAI. Significant progress was accomplished over the past seven years including four additional Garani lands regularized, with another five delimited and one identified. But regardless, the Guarani can no longer follow traditional migration patterns and have been altering their livelihood patterns. The groups without land are sometimes found migrating in small groups on the roads and highways in search of land and selling their handicrafts, and often are subject to malnutrition, illnesses, poverty, dependency, alcoholism, depression, psychological and social stress, serious identity crises among the younger generation, homicides and car accidents.
62. The Guarani in the indigenous lands consider that the land and forest resources available to them now are generally insufficient for their livelihoods. Hence, the majority of Guarani in Santa Catarina today find themselves in situations of dire poverty. Illnesses, malnourishment and alcoholism have drastically reduced their population. The commercialization of crafts and a more sedentary horticulture have become their main livelihoods. Despite this situation, today after 500 years of intense and devastating contact with the non-Indian society, the Guarani continue to speak their native language within their villages (all the Mbya-Guarani, approximately 7,000 in Brazil, are speakers of their native language), thus continuing to preserve their traditional culture and religious practices. In Guarani areas which received assistance under Microbacias 2, progress was made on food sufficiency, improved commercialization of handicrafts, replanting riparian areas with native species, forest enrichment with useful species, and protection of water resources, among others.
20 Melia as cited by Aldo Laitaiff and Augusto Karai, Sem Tekoa náo há Teko, Sem Terra náo há Cultura, Study of the Self- Sustaining Development of Mbya-Guarani Communities along the Santa Catarina Coast, Florianópolis, Federal University of Santa Catarina, 2000.
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Legal Issues
63. The Brazilian Constitution of 1988 marked a departure point from previous integrationist policies and provides a firm basis for the recognition by the nation-state of the perpetual usufruct rights of IP in Brazil to their territories, excluding sub-soil rights. The regularization of indigenous lands in Brazil is comprised of a multi-staged process led by FUNAI to identify and delimit, demarcate, register and homologate indigenous lands. The process of land regularization is further regulated by Decree 1775, adopted in 1996 which replaced Decree 22. It is important to observe that in the past 15 years significantly more progress on regularizing indigenous lands in the Amazon region has been accomplished than in southern Brazil, in part related to the greater challenges faced in southern Brazil, including, among others, greater non-Indian population densities, competing land claims and conflicts and compensation issues. Nonetheless, some progress has been made in Santa Catarina over the past seven years, notably with additional of 4 regularized Guarani lands (and others in process), and the revision of the Xokleng T.I. Ibirama (see Table A for current land tenure status).
64. Decree 1141, adopted in 1994, authorizes FUNAI, in conjunction with the Ministry of Environment, to carry out environmental activities including, among others, environmental diagnostics, recuperation of degraded areas, environmental enforcement, environmental education and identification and dissemination of environmentally appropriate technologies, although FUNAI’s current capabilities to fulfill these functions is highly constrained. FUNAI is currently being restructured so its competencies in these areas may improve in the coming years.
65. The antiquated1973 Indian Statute defines IP as being in tutelage, essentially minors under the law. It also provides a series of guidelines about natural resource use in indigenous lands, including, for example, regulations pertaining to third-party natural resource use concessions. Such guidelines are not always adhered to. A new draft of the Indian Statute is currently under consideration by Congress, and if passed will likely include an end to the status of tutelage and improved natural resource guidelines.
Institutional Arrangements
66. The Secretariat for Rural Development (SAR) via the Executive State Secretariat (SEE), is the main government entity responsible for the implementation of the proposed project. Under SAR, EPAGRI has the main responsibilities for project execution with respect to rural extension and technical assistance, training, rural environmental education, research, income generation and reduction of poverty via the competitiveness of family agriculture. Other governmental agencies participating in the project include CIDASC, (Integrated Company for Agricultural Development in Santa Catarina) also linked to SAR which is responsible for sanitary oversight of agricultural products; FATMA, linked to the Secretariat of Urban Development and Environment (SDR), which is responsible for implementation of environmental corridors, environmental oversight and environmental education; the Secretariat of Tourism with responsibility for rural tourism actions; and the Secretariat of Transportion and Works responsible for rural roads.
67. EPAGRI gained significant experience working with indigenous peoples, as well as partnering with other governmental and non-governmental agencies, during the previous operation, Microbacias 2, and intends to build on these experiences and lessons learned in the
110 Annex 10 new operation (see section on lessons learned below). Field activities with indigenous communities will be overseen and coordinated by EPAGRI extension agents specifically trained to work with IP targeting the municipalities with indigenous populations, and IP field facilitators to be selected by the project in conjunction with the IP communities will carry out the field activities. The facilitators will be specifically trained to work with indigenous communities and to use participatory methodologies for all phases of project implementation. In addition, specialized technical assistance can be contracted by indigenous associations for the implementation of specific subprojects.
68. EPAGRI estimates that approximately eleven extension agents will be assigned to work with IP, six to be allocated in year one and five to be allocated in year two of the project. Within SEE, there will be one specialized professional assigned to coordinate, supervise and monitor the project activities with indigenous communities in conjunction with EPAGRI and other partner institutions. Furthermore, EPAGRI will work on further developing partnerships with municipal governments, universities, NGOs, among others, which are important for the broaded range of activities often included in Indigenous Land Development Plans.
69. Federal level. On the federal level, FUNAI provides some oversight and services for IP in the state, albeit highly limited with one regional administrative office in Chapeco, and one support station in Palhoca which is linked to the FUNAI regional administrative office in Curitiba, Paraná. FUNAI already has good working relationships with the decentralized services for health and education which are carried out by FUNASA (National Health Foundation) and the Nucleus for Indigenous Education of the State Secretariat for Health and Sports (SED) respectively. FUNASA has responsibility for indigenous health, and a network of local health agents in the State. The project will include Cooperative Agreements with FUNAI and FUNASA to coordinate actions being carried out in indigenus lands.
70. State level. The State Secretariat for Education and Sports (SED) via the Nucleo de Educação Indigena maintains 32 indigenous schools and carries out specialized teacher training (in collaboration with FUNAI). Microbacias 2 supported the production of specialized didactic materials for indigenous education, with plans to continue these activities under Microbacias-3. The State Indigenous Peoples Council (CEPIN/SC) was established by Law 11,266 in 1999. It is comprised of 24 members: six from government (State Secretariats of Justice, Rural Development and Agriculture (SDA), Education and Sports (SED), Social Development and the Family, Urban Development and Environment and Health),; six from NGOs; and 12 indigenous representatives (four from each of the three ethnicities). The function of CEPIN/SC is to articulate activities relating to IP in the state.
71. Nongovernmental organizations. Some of the main NGOs that carry out research and technical assistance with IP in Santa Catarina are: CIMI (Indigenist Missionary Council/affiliated with the Catholic Church); COMIN (Indigenous Mission Council/affiliated with the Lutheran Church); and CAPI (Commission for Support to Indigenous Populations/organized by university professors affiliated with the University Museum at the Federal University of Santa Catarina/UFSC).
72. All these institutions and organizations are potential partners for activities with IP under the proposed project, which intends to continue and expand the collaborations that were begun
111 Annex 10 under the previous operation, Microbacias 2, an area identified as needing further strengthening during the consultations with IP. Some of the potential areas for collaboration include specialized technical training, applied research or specialized studies, as well as potential resources for activities proposed by Indigenous Development Plans but not included in the categories eligible for financing under the project.
73. In addition, the majority of indigenous communities have one or more type of community associations for implementation of project activities, many of which were strengthened under the previous operation. These IP associations will have the main responsibilities for the Indigenous Lands Development Plans (existing and/or updated plans as well as new ones), as well as for most subproject activities.
Indigenous Participation in the Project
74. Participation during preparation. In addition to the continuous dialogue with IP during the previous operation from 2002-2009 (see section below on Lessons Learned), there were also free, prior informed consultations carried out with indigenous representatives in May 2008 on the new operation. Participants included 39 representatives of all three ethnic groups (31 men and 8 women), and 23 EPAGRI and FUNAI personnel. The findings of the consultations indicated overall IP satisfaction with the previous operation, and a strong interest for IP to continue to be one of the beneficiary populations of the new operation, with specific recommendations outlined in the following section. The IP recommendations were incorporated into the new operation, specifically into the planning for training, environmental education, research and innovation as well as into the Sustainable Investment Fund.
75. Indigenous Concerns and Needs. The consultations reiterated the importance of the following basic issues identified prior to and during Microbacias 2: land tenure for indigenous lands not yet regularized; importance of improving subsistence activities, income generation and technical assistance in agricultural production; administration and management; recuperation and preservation of natural resources in indigenous lands; need for improving housing and sanitation; and ensuring appropriate mechanisms for indigenous representation in public spheres both in general and for the project. Despite some progress on indigenous land regularization in the state (see Table A), this process is not completed in Santa Catarina, however, indigenous land regularization is a federal responsibility and is outside the control of the state and the project. In addition, the consultations of May 2008 made the following specific recommendations for improving the indigenous strategy for the proposed project:
1. Improving partnerships. Although there were numerous positive partnerships and collaborations under the previous operation, the consultation stressed the need to further improve coordination and collaboration among institutions, agencies and NGOs that work with IP. 2. More attention to food security. Considering that traditional subsistence patterns (e.g. hunting and gathering) are no longer viable, relative inexperience with agriculture and a situation of food scarcity and malnutrition, the need to foster food security was uniformly stressed by all IP as their most urgent concern, regardless of the size or legal status of their land. IP also view it as a precondition for income generation and environmental conservation.
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3. Further strengthening of technical assistance. IP recognized the value of technical assistance and extension provided in the previous operation, pointing to some gains achieved. However, IP emphasized the critical need to continue technical assistance and extension to IP communities, the importance of adequate specialized training of extension agents to work effectively with diverse indigenous populations, and the need for the use of an ethnodevelopment approach that fosters IP self-sufficiency. 4. Further attention to self-manage and co-management (auto-gestão e co-gestão). IP recommended that external agencies seek to better understand and respect the existing internal organization of indigenous communities to work more effectively with a model of co-management by technical staff with benenficiary communities. 5. Continued support for indigenous teaching materials. IP urged continued support for culturally appropriate teaching materials directed for use in indigenous communities and schools, for non-indigenous communities, and for environmental education.
76. Lessons Learned: Implications of the Experiences during Microbacias 2 for Indigenous Participation in the proposed project. During the participatory evaluations of the previous operation and consultations carried out for the preparation of the new project, the IP emphasized the following lessons learned during the seven years of implementation of Microbacias 2 that they considered relevant to the new project:
1. Indigenous subprojects and rural investment funds. Subprojects financed under Microbacias 2 were rated as highly satisfactory. Nonetheless, IP concluded that a correct balance between food security and income generation activities must be considered in line with the Indigenous Development Plans developed. Also emphasized was the need for more simplified procedures and less bureacracy to facilitate indigenous access to project resources. 2. Training. Training received under Microbacias 2 was positively evaluated. IP emphasized the need for continued training especially on a variety of topics including nutrition, hygiene, forest management, and procedures required for dealing with national society and outside agencies, among others. They also emphasized the importance of learning from others in a variety of ways, site visits, workshops, both for IP and for the technical personnel that work with them. 3. Environmental Education. Previous work on environmental conservation linked to food security was evaluated positively by IP. They emphasized the need for continued work on environmental education with attention to reconstituting riparian forests, recuperation of degraded areas, and more sustainable use of natural resources, among other topics. They further emphasized the importance of linking respect for cultural knowledge and practices to environmental issues, and encouraging dissemination via publications and events. 4. Research. IP emphasized the need for further research on appropriate agricultural practices to contribute to food security, anthropological studies to contribute to preparing technical agents to work more effectively with them, and on environmental topics, in particular soil erosion, water resources and water quality, reconstituting riparian forests, among other topics.
77. Indigenous Participation in the Proposed Project. This indigenous strategy is designed to effectively promote the participation of IP in the proposed project, based on indigenous
113 Annex 10 concerns outlined above. The goal is to continue to build on actions begun under the previous operation, based on a process of interactive participation in planning, management, implementation, monitoring and evaluation in all decision-making forums. The project activities will be carried out based on a relationship of mutual cultural respect, recognizing that each indigenous community has its own valid internal socio-cultural organization, political structures and decision-making processes. This approach is also based on a respect for cultural diversity that recognizes the differences between the ethnic groups. Indigenous communities to be benefited under the project will be regularized indigenous lands.21 It has been further agreed that similar to Microbacias 2, the technical personnel of the proposed project will not work in areas of direct conflicts, especially violent conflicts, to ensure the safety and security of all involved.
78. The first step for indigenous involvement in the project is the carrying out of a participatory diagnostic and formulation of an Indigenous Development Plan (IDP) for the indigenous land that will identify the community's social, environmental and economic concerns and potential priority activities. The methodology to be used is based on the methodology developed under Microbacias 2,22 and emphasizes flexibility to make adjustments as needed for each particular IP situation. For indigenous lands with IDPs from the previous operation, an assessment will be made if these need to be updated; new IDPs will be done for lands which do not yet have them.
79. The IDPs will subsequently be approved by the IP association which will have the co- responsibility for the implementation, monitoring and evaluation of activities as well as the management of subproject resources and responsibility for contracting any needed technical assistance. The project will carry out a broad and continuous set of trainings to ensure indigenous associations' management capacities, including financial management and procurement.
80. More specifically, activities for IP are incorporated in primarily in Component 1 of the project, and include the following considerations:
1. Provision of Technical Assistance and Extension. Qualified facilitators, selected with the participation of IP, will provide direct technical assistance and extension services to indigenous communities. Facilitators will also receive additional training for work with IP. Facilitators will be responsible for the diagnostics and formulation of IDPs, as well as for assisting with the implementation, monitoring and evaluation of IP subprojects. 2. Rural Investment Fund. IP will be eligible to apply for the financing of subprojects from the fund which includes thematic areas in environmental management and income generation which for IP could include, for example, production of raw materials for handicrafts, processing and commercialization of honey, and others. Each indigenous land will will develop community subprojects based on the Indigenous Land Development Plan (IDP) which define priority areas. The rules for accessing the fund will be evaluated and adjusted for IP, for example, format of proposals, evaluation procedures, etc.
21 In Brazil, an indigenous land is generally considered regularized once it has received its portaria declaratoria even though full legalization requires additional subsequent steps. See Table A for tenure status of indigenous lands in Santa Catarina. 22 See Cinthia Creatini Rocha, Estudo de avaliação da metologia utilizada pelo PRAPEM/Microbacias-2 junto as populações indigenas de Santa Catarina, Florianópolis: Microbacias-2, 2008
114 Annex 10
3. Environmental Education, Training and Support for Teaching Materials, Research and Innovation. Indigenous communities are considered a beneficiary population of this subcomponent. Activities to be developed with IP have been incorporated in each set of activities in this subcomponent, to be further operationalized annually by the extension agents assigned to work directly with IP in conjunction with IP. or example, activities to be supported could include developing specific teaching materials for indigenous communities and schools, facilitating indigenous participation in fairs and markets, as well as in workshops and trainings such as on productive horticulture, honey production, small animal production, fruit production, handicrafts, and others. Examples of research and innovation could include observation units for food production and carfts and participatory socio-anthropological studies, among others.
Monitoring and Evaluation
81. The Indigenous Development Plans and related sub-projects will be monitored and evaluated by a participatory process--by the beneficiaries and project technical staff. Simultaneously, there will be physical and financial monitoring as well as monitoring of results. Persons and organizations implementing activities will be trained in basic monitoring and evaluation techniques.
82. Based on local-level monitoring, facilitators will produce quarterly implementation reports for the overall project implementation unit which will also be reviewed by the aforementioned indigenous specialist, who is in the SEE. It has also been agreed that an independent evaluation of activities in indigenous areas will be carried out prior to the project’s mid-term evaluation scheduled for the third year.
83. Project monitoring and evaluation will include the following:
(i) Implementation: Evaluation of established structures and processes, to ensure they are adequate for the targets and timetables planned by indigenous communities, including suggestions for modifications or adaptations to improve activities. Evaluations will be based on community-level monitoring and facilitators’ reports, as well as field visits as needed.
(ii) Financial: There will be monitoring of financial resource flow and financial management of project resources, ensuring adherence to project norms. Special training to assist in the administration and management of financial resources will be provided.
(iii) Participation: There will be continuous monitoring of indigenous participation in the different levels of project decision-making forums, and the possibility to propose modifications as needed.
(iv) Technical Personnel: There will be careful monitoring of technical staff (facilitators, extension agents and others) working with IP.
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Table A - Status of Indigenous Lands of Santa Catarina (updated as of May 2009) INDIGENOUS GROUP SITUATION23 LOCATION AREA POPULATION LAND (municipalities) (hectares) Aldeia Amâncio Guarani Pending Biguaçu Undefined 22 M’bya Aldeia Guarani Pending Palhoça Undefined 8 Cambirela Nãndeva Aldeia Itanhãe / Guarani Regularized Biguaçu 216 100 Morro da Palha M’bya Aldeia Kury’i Guarani Regularized Biguaçu 500 60 M’bya Aldeia Guarani Pending Palhoça 04 37 Maciambu M’bya Aldeia Reta Guarani Pending São Francisco Undefined 37 M’bya do Sul Aldeia Guarani Regularized Canelinha 195 14 Tava’i/Rio da M’bya Dona Aldeia Feliz Guarani Regularized Major Gercino 140 60 M’bya Aldeia Yia-Kan Guarani Pending Garuva Undefined 63 - Porã-Garuva M’bya Cachoeira dos Guarani Registered Imaruí 80 117 Inácios - Tekoá M’bya Marangatu M’Biguaçu/Yyn Guarani Registered Biguaçu 59 134 Moroti Whera M’bya e Nãndeva Morro Alto Guarani Delimited São Francisco 893 93 M’bya do Sul Morro dos Guarani Portaria Palhoça 1.988 113 Cavalos M’bya Declaratória M.J. Pindoty/Gleba Guarani Delimited Barra do Sul 1.016 36 Conquista M’bya Pindoty/Gleba Guarani Delimited Araquari 2.278 99 Pindoty M’bya Piraí Guarani Delimited Araquari 3.017 64 M’bya
23 The steps for full legalization or regularization of an indigenous land in Brazil includes: identification, delimitation, portaria declaratoria (declaration decree/Ministry of Justice), physical demarcation, federal and local registrations, and Presidential Decree (referred to as homologation). Once the indigenous land receives its portaria declaratoria, it can be considered legally constituted even prior to the final steps.
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Tarumã Guarani Delimited Araquari 2.172 16 M’bya Rio dos Pardos Xokleng Regularized Porto União 758 24 La Xokleng Original part Dr. Pedrinho, 37.108 1.557 Klanõ/Ibirama regularized; Itaópolis, José expanded part Boiteux e Vitor in Meireles demarcation. Toldo Pinhal Kaingang Homologated Seara 880,07 139 Aldeia Condá Kaingang Identified Chapecó 2.300,23 420 Chimbangue I * Kaingang Homologated Chapecó 988,66 78 Chimbangue II Kaingang Homologated Chapecó 975,00 377 * T.I. Xapecó Kaingang Homologated Entre Rios e 15.633,95 4.828 Ipuaçu Araçai ** Guarani Identified Cunha Porã e 2.728,63 120 Saudades Toldo Imbu Kaingang Identified Abelardo Luz 1.965 135 Palmas *** Kaingang Demarcated Abelardo Luz 1.900 60 Total 77.655,54 8.751 Source: Funai * The Indigenous Lands Chimbangue I e Chimbangue II are contiguous. ** The families of the community of Araçai live in Indigenous Land Chimbangue. *** The Indigenous Land Palmas in total is 3,770 ha., of which 1,900 ha are in Santa Catarina and the rest in the State of Paraná.
Selected Bibliography
COMISSÃO DE APOIO AOS POVOS INDÍGENAS. Sugestões para a definição de prioridades nas políticas públicas para os povos indígenas de Santa Catarina, a serem consideradas pelo Conselho Estadual dos Povos Indígenas. Florianópolis, 2000.
DARELLA, Maria Dorothea Post. Sementes verdadeiras: a agricultura na cosmovisão guarani. Palestra ministrada em capacitação para os técnicos do Microbacias 2, 2004.
DE CERTEAU, Michel. A invenção do cotidiano. 2ª ed. Petrópolis: Vozes, 1996. FERNANDES, Ricardo Cid; ALMEIDA, Ledson Kurts de. Diagnóstico antropológico: componente indígena no contexto da UHE Foz de Chapecó. Florianópolis, 2001. 36p.
FERNANDEZ, Ricardo Cid. Territorialidade e Sociabilidade Kaingang. Palestra ministrada em capacitação para os técnicos do Microbacias 2, 2004.
GERBER, Rose Mary e BUOGO, Geraldo. Anexo 15: Estratégia para Populações Indígenas, Microbacias 2, 2002.
117 Annex 10
LITAIFF, Aldo; KARAI, Augusto. ¨Sem Tekoa não há Teko¨, ¨sem terra não há cultura¨: estudo e desenvolvimento auto-sustentável de comunidades indígenas mbya-guarani do litoral do Estado de Santa Catarina. Florianópolis : UFSC, 2000. 15p.
MARINI, Antônio I.; BRIGHENTI, Clóvis A.; SILVA, Irani Cunha da; et al. Plano de acesso das comunidades indígenas de Santa Catarina ao projeto Microbacias 2. (Proposta preliminar). FNI, CIM, UFSC, FURB.
ROCHA, Cinthia Creatini da. Estudo de avaliação da metodologia utilizada pelo Prapem/Microbacias 2 junto às populações indígenas de Santa Catarina. Florianópolis: Microbacias 2, 2008.
SANTA CATARINA. Lei nº 11.266, de 16 de dezembro de 1999. Dispõe sobre o Conselho Estadual dos Povos Indígenas e estabelecer outras providências. Diário Oficial de Santa Catarina, Governo do Estado, Florianópolis, 16 dez. 1999. v. 66, n.16.313, p.2-3, 1999.
SANTOS, Silvio Coelho dos. Autonomia e Etnodesenvolvimento. Palestra ministrada em capacitação para os técnicos do Microbacias 2, 2004.
SECRETARIA DE ESTADO DE JUSTIÇA E CIDADANIA. Conselho Estadual dos Povos Indígenas - CEPIN/SC. (Proposta da secretaria para o regimento interno)
WIIK, Flavio Braune. Texto sobre esta etnia e disponível em: www.socioambiental.org/epi/xokleng.
______. Organização Social e Cultura Xokleng. Palestra ministrada em capacitação para os técnicos do Microbacias 2, 2004.
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Brazil Santa Catarina Rural Competitiveness Project
Appendix 2, Annex 10 Summary of the Project’s Carbon Balance
The EX-Ante C-balance Tool (EX-ACT)
84. Agriculture is a major source of greenhouse gasses (GHG), contributing 14% of global emissions or about 6.8 Gt of CO2 equivalents per year. Climate change mitigation potential for the sector is high. Many of the technical options are readily available and could be deployed immediately: reducing emissions of carbon dioxide through reduction in the rate of deforestation and forest degradation, adoption of improved cropland management practices;
reducing emissions of methane and nitrous oxide through improved animal production, improved management of livestock waste, more efficient management of irrigation water on rice paddies, improved nutrient management; and
sequestering carbon through conservation farming practices, improved forest management practices, afforestation and reforestation, agro-forestry, improved grasslands management, restoration of degraded land.
85. As 74% of agriculture’s mitigation potential is in developing countries, mitigation options can also contribute to increase food security and reduce rural poverty. Thus, many forestry and agriculture development projects/programmes can play an important role in climate change mitigation, either by reducing emissions or by sequestering carbon.
86. Nevertheless, there is a lack of methodologies that would help project designers to integrate significant mitigation effects in agriculture and forestry development projects. Therefore FAO has developed a scoping tool called EX-ACT (EX-Ante Carbon-balance Tool) aimed at providing ex-ante measurements of the impact of agriculture and forestry development projects on GHG emissions and Carbon sequestration, indicating its effects on the Carbon- balance24. The C-balance can be selected as an indicator of the mitigation potential of the project, as discussed in the next section.
87. This ex-ante C-balance appraisal is a land-based accounting system, measuring Carbon stocks and stock changes per unit of land, expressed in tCO2e/ha and year. EX-ACT will help project designers selecting the project activities that have higher benefits both in economic and CC mitigation terms (added value of the project) and its output could be used to guide the project design process and decision making on funding aspects, complementing the usual ex-ante economic analysis of investment projects (Bernoux et al. 2010a).
88. EXACT will compute the Carbon balance by comparing two scenarios: “with project” and “without project” (i.e. the “Business As Usual” or “Baseline”). Therefore the final balance is
24 C balance = reduced GHG emissions + C sequestered above and below ground.
119 Annex 10 the comparison between the GHG associated with project activities and the baseline (without project scenario). The model will also consider both the implementation phase of the project (i.e. the active phase of the project commonly corresponding to the investment phase), and the so called “capitalization phase” (i.e. a period where project benefits are still occurring as a consequence of the activities performed during the implementation phase). The logic behind EXACT is shown in Figure A.
C balance (reduced GHG emissions and C sequestered)
x2 With project
x1 Without project
x0 Implementation phase Capitalization phase
Time (years)
t0 t1 t2
Figure A Source: Bernoux et al. 2010b
89. EX-ACT has been developed using mostly the Guidelines for National Greenhouse Gas Inventories (IPCC 2006) complemented with other methodologies and review of default coefficients for mitigation option as a base, so as to be acceptable to the scientific community. Default values for mitigation options in the agriculture sector are mostly from IPCC (2007). Other coefficients such as embodied GHG emissions for farm operations, inputs, transportation, and irrigation systems implementation are from Lal (2004).
90. EX-ACT can be used in the context of ex-ante project formulation. The tool is already operational although testing process is ongoing (experimental implementation). Projects used as case-studies for the testing process have been selected with the aim of representing a wide range of different ecosystems (e.g. tropical, temperate, and semi-arid), agriculture activities (e.g. annual/perennial crops, forestry, and livestock) and geographic coverage. Results of the tests will also be used to improve the methodology and to increase the consistency of EX-ACT results.
91. The Santa Catarina Rural Competitiveness Project has been selected, among others, to become a case-study for this testing process. The results of this test have also been used to provide project designers with information about the potential impact on Carbon balance of different and alternative project scenarios. EXACT has therefore been used here as a guidance tool during the project design process, assisting project developers to refine project components so to increase the environmental benefits of the project. It also provided a basis to enter a carbon financing logic by highlighting the most carbon intensive practices in the project which could be extended either during the project implementation phase or in future loans.
120 Annex 10
92. It is worth to notice that this project represents the first case of application of the EX- ACT methodology in the phase of appraisal and that the results shown in what follows should be considered only as preliminary and therefore subject to change as a result of the future changes in the methodology adopted in the development of the tool. Therefore, consolidated and improved results of the application of EX-ACT analysis to the Santa Catarina Rural Competitiveness Project together with more accurate data will be available between project appraisal and project effectiveness
Measuring the Mitigation Potential of the Project: an application of EX-ACT 93. The Santa Catarina Rural Competitiveness Project is aimed at increasing the competitiveness of family agriculture producer organizations. Achievement of this objective will be reinforced by providing support for an improved framework of structural competitiveness- inducing public-services activities as part of the State Multi-year Development Plan. It would assist the SoSC to place sustainable land and water management (SLWM) in to the mainstream of the State’s development policy and practices at the state, regional and local levels. It would also up-scale Sustainable Land and Water Management investments that generate mutual benefits for the local livelihoods and the national as well as the global environment.
94. By promoting and scaling-up the adoption of SLWM practices the project will also contribute to climate change mitigation. This section describes the effects of selected project components on GHG emissions and Carbon sequestration, indicating the overall impact on the Carbon balance, computed using EX-ACT (EX-ante Appraisal Carbon-balance). The computation of the C-balance is an indication of the overall potential mitigation impact of the selected project components which were considered as relevant in this type of environmental analysis.
95. The analysis took into account the activities to be undertaken under the Components 1 (Family Agriculture Competitiveness and Increased Access to Markets) and 2 (Complementary Public Investments for Rural Competitiveness).
96. In terms of relevance for the project’s Carbon balance, the increased agricultural productivity consequent to the adoption of new technologies promoted by the Component 1 (extension of perennial crops in existing agricultural lands, promotion of improved grassland and cropland management and agroforestry) will have an impact on the above and below ground Carbon sequestration, with expected positive effects in terms of mitigation. This may be true for the rehabilitation of the Areas of Permanent Preservation (APP - Areas de Preservaçao Permanente) and Legal Reserve (RL - Reserva Legal), as they require project beneficiaries to protect existing forests and implement environmentally-sound practices that facilitate forest regeneration or rehabilitation (e.g. fencing of riparian areas, agro-forestry, planting of native species in APPs and RLs for full protection, and promoting sustainable forest management in degraded RLs).
97. Also activities of Ecosystem Management under Component 2 – such as the implementation of ecological corridors and other key strategies as economic incentives schemes
121 Annex 10 to improve small-farmer’s and indigenous people livelihoods – are expected to have a positive influence on the resulting Carbon balance of the project.
98. The results of the EX-ACT analysis are reported in Table A.
Table A: C balance of the SC Rural Competitiveness project Total CO2e 15 Mt (avoided deforestation + afforestation + sequestered cropland management + agro forestry + grassland) Total CO2e emitted 2 Mt (other land use change + livestock + inputs + investments) C-balance = emitted – seq. 2 - 15 = - 13 Mt. Project is a C sink CO2e seq./ha per year 1 t/ha per year Source: own calculations using EX-ACT (2010) 99. The overall C balance of the project is computed as the difference between C sinks and sources and it has been estimated at about -13 MtCO2e over 20 years (6 years of implementation phase and 14 years of capitalization phase). The project is in fact able to sequester 15 MtCO2e while emitting “only” 2 MtCO2e so that the net effect of project activities is to create a sink of 13 MtCO2e. Since total project area amounts to 661 thousands ha, the average mitigation potential of the project is equal to 1.0 tCO2e per ha per year.
100. Next figure shows the impact of the project on the C balance by land use and land use change categories. Most mitigation potential of project activities is related to the expansion of agro-forestry systems (60%) and to the adoption of improved grassland management (25%).
C balance of the SC Rural Competitiveness Project (by land use and land use change categories)
2
0
-2 Inputs Livestock Grassland e Change 2 Annual crops Annual Deforestation -4 Crops Reforestation Other Land Use Land Other Afforestation and Mt CO Project Investment Project
-6 Agroforestry/Perennial
-8
-10 Land use categories
Figure B Source: own calculations using EX-ACT (2010)
122 Annex 10
101. The relevant mitigation impact of the expansion of agro-forestry systems is essentially related to the big size of the land interested by the change, as the area under perennial crops increases by 142%, going from 41,629 ha to 100,837 ha. This is also shown in the land use matrix developed for the two scenarios “without” and “with” projects (see next figure). Mitigation impact of project activities related to the adoption of improved grassland management depends essentially on the specific management practices implemented on the grasslands area more than on the size of the area. In fact, in the “with project” scenario, land classified as grasslands is equal to 139,085 ha, with a decrease of 29% with respect to the initial status (before project begins). It is also interesting to notice that most of the grasslands is changing land destination towards improved use such as agro-forestry and forest land.
102. Also, as expected, activities aimed at reducing the deforestation rate and improving the natural resource base of the project area (fencing of riparian areas, establishing ecological corridors, rehabilitating land and expanding perennials on degraded land) will have a significant mitigation impact. Conversely, the expansion of training activities, the support to agro-industry and sanitary installation development, the expansion of cropland and the support to livestock production are causing an increase in GHG emissions.
103. Figure C shows the land use matrix reporting the land use in both “with” and “without project” scenarios which has been used as a basis for the analysis with EX-ACT.
Land use matrix of the SC Rural Competitiveness Project FINAL Without Project Forest/Cropland Grassland Other Land Plantation Annual Perennial Rice Degraded Other Total Initial INITIAL Forest/Plantation 76316 0 0 0 1810 0 0 78126 Annual 0 285529 00 0 00285529 Cropland Perennial 0041629 00210 0 41839 Rice 00051422 0 0051422 Grassland 0000193955 0 0 193955 Other Land Degraded 0000010130 0 10130 Other 0 0 0 0 0 0 0 0
Total Final 76316 285529 41629 51422 195765 10340 0 661001
FINAL With Project Forest/Cropland Grassland Other Land Plantation Annual Perennial Rice Degraded Other Total Initial INITIAL Forest/Plantation 77193 0 0 0 933 0 0 78126 Annual 1250 281246 3033 0 0 00285529 Cropland Perennial 0 8718 33121 00 0041839 Rice 00051422 0 0051422 Grassland 625 0 55178 0 138152 00193955 Other Land Degraded 625 0 9505 0 0 0 0 10130 Other 0 0 0 0 0 0 0 0
Total Final 79693 289964 100837 51422 139085 0 0 661001 Figure C Source: own calculations using EX-ACT (2010)
Conclusions 104. Project activities could contribute to climate change mitigation as shown by the total change in Carbon balance the project generates and estimated with EX-ACT. The analysis of the ex-ante carbon-balance results shows in fact that the project in its current design has a mitigation
123 Annex 10
potential of about 13.0 MtCO2e over 20 years. These results in terms of mitigation can be considered as co-benefits of the project (together with main project benefits).
105. The ecosystem services (C sequestration) supplied by the project and estimated through the C-balance, could then be priced, valued and incorporated in the project economic analysis, examining how the discounted measures of project worth (e.g. NPV, IRR) will change when taking into account Carbon sequestration benefits. Also, a set of indicators can complement the economic analysis providing useful information about the efficiency of the project in providing ecosystem services or the potential contribution of such services to farm incomes.
106. The project could therefore potentially obtain funds from Carbon finance related to these mitigation co- benefits quantified using EX-ACT. Whether it would be a public, private or public-private support, will have to be defined amongst the project stakeholders, depending on the state Government of Santa Catarina, the Federal Government and the private sector willingness, environmental policy orientation and in particular their engagement in the current international climate change framework (the United Nations Framework Convention for Climate Change), and financial resources.
107. The type of support will also depend on the transaction costs, i.e. costs for measuring, reporting and verification (MRV), capacity and institutional building, developing a Carbon baseline assessment and other costs for participating in Carbon markets (e.g. developing and validating a methodology, legal fees, insurance and marketing costs). These costs for adopting, monitoring, reporting and verifying Carbon mitigation activities influence the nature of financing together with the Carbon sequestration potential of the project. Carbon crediting mechanisms are suitable when the mitigation benefits (value of Carbon sequestered) are greater than the costs of adoption and of meeting Carbon crediting MRV requirements. On the other hand, when the benefits of pursuing low-Carbon agricultural strategies are greater than the costs associated with adoption of basic MRV, public funding may be most appropriate.
References Bernoux M., Branca G., Carro A., Lipper L., Smith G., Bockel L., Ex-ante greenhouse gas balance of agriculture and forestry development programs, Scientia Agricola, Piracicaba Brazil, vol. 67, n.1, p.31-40, January/February, 2010a. Bernoux M., Bockel L., Branca G., Tinlot M., Ex-ante Carbon-balance Tool (EX-ACT) Technical Guidelines, Easypol, FAO, Rome: 2010b. EX-ACT, Ex-ante Carbon-balance Tool, version beta 2.0, FAO, Rome, 2010. IPCC, 2006 IPCC Guidelines for National Greenhouse Gas Inventories, H. Eggleston, Buendia L, Miwa K, Ngara T, Tanabe K, Editor. 2006, The National Greenhouse Gas Inventories Programme, Intergovernmental Panel on Climate Change. IPCC, Agriculture, in Climate Change 2007: Mitigation. 2007, Contribution of Working Group III to the Fourth Assessment Report of the Intergovernmental Panel on Climate Change. Lal, R., Carbon emissions from farm operations Environment International 2004a. 30: p. 981- 990.
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Annex 10, Appendix 3 Summary of Resettlement Policy Framework25
Santa Catarina: Rural Competitiveness Project
A. Overview
108. OP 4.12 is triggered because the project will fund small scale civil works and rehabilitate rural roads. These activities may involve small amounts of land acquisition, especially with respect to right-of-ways. However, it is not anticipated that the project will cause physical displacement of people. Because the location, timing and technical features of the potential infrastructure investments to be financed under the project remain unknown at this time, the Client has prepared a RPF, which was publicly disseminated and will form part of the OM. The RPF will serve as the guide to the site-specific formulation of Resettlement Action Plans (RAP), which in many cases will be Abbreviated Plans26 due to the relatively small numbers of people affected and relatively minor impacts.
109. The RPF is guided by a set of policy principals to:
minimize and mitigate potential negative social and economic impacts caused by the project; ensure that all affected peoples, regardless of their tenure condition, receive proper compensation and/or assistance to replace assets lost and the restoration of livelihoods at an equal or superior level; make certain that affected people are informed about their options and rights, as well as consulted on the available choices; prepare a RAP consistent with the provisions of the Bank’s policy on resettlement for each subproject that will involve resettlement.
B. Eligibility
110. Eligibility will be determined on a case by case basis once the necessary cadastres have been done. This would include all types of rural inhabitants and/or formal or informal group, regardless of whether their lands and/or dwellings are legalized or not.
C. Legal Framework
111. The project’s RPF is consistent with the existing legal framework in Brazil. There are, however, three main differences between the Bank’s Operational Policy on resettlement and the Brazilian legal framework. First, the Bank’s policy recognizes the right to assistance of those who have no recognizable legal right or claim to the land they are occupying at the time the
25 This summary is based on the framework prepared by the Santa Catarina State Secretariat of Infrastructure in December 2009: Programa Santa Catarina Rural - Marco de Reassentamento Involuntário. 26 Where the affected people are not physically displaced and less than 200 persons have less than 10% of their productive assets affected.
125 Annex 10 census begins but have a claim to such assets. Second, the Bank’s policy considers support to affected peoples after displacement to restore their livelihood and standards of living (loss of income sources or means of livelihood). Third, the Bank’s policy considers effective compensation at full replacement cost for losses of assets attributable directly to the Project.
112. It should be noted that both the Bank’s and SoSC’s set of norms indicate that: (i) involuntary resettlement (including land acquisition and displacement) shall be avoided or minimized when feasible; (ii) all viable alternative project designs should be explored; and (iii) where displacement is unavoidable, people losing assets, livelihoods, or other resources shall be assisted in improving, or at a minimum regaining, their former status of living at no cost to themselves. Based on the analysis of these differences and common points, the SoSC has agreed to implement the policy principles of the RPF as stated above for the activities to be financed by the Project.
D. Institutional Assessment
113. The project has been designed to support a decentralized approach to planning and decision-making. Project activities will promote the participation of community-based and other local organizations through the preparation of demand-driven investment plans. The project would primarily support rural agricultural and non-agricultural small-scale producers - including small farmer’s families (SFFAs), rural workers and indigenous people families -, organized in associations, cooperatives, formal (with legal status) and informal networks or alliances. These project beneficiaries are members of the 936 Microwatershed Associations created under the previous Bank operation Microbacias 2 (Resources Management and Rural Poverty Reduction Project), Indigenous Associations in 14 regularized indigenous lands, as well as other existing associative organizations who have implemented adequate projects under the Microbacias 2’s Development Plans.
114. The State Secretariat of Agriculture and Rural Development (SAR) would be responsible for overall project coordination. The project Coordinator will also be assisted by a team of technical specialists including social and resettlement specialists. This Technical Evaluation Committee would prepare the Project Operational Manual that will include the Resettlement Policy Framework (RPF). The OM will provide all the rules and criteria for the evaluation of proposed investment plans. The State’s Rural Extension Enterprise (EPAGRI) would also train and certify qualified Technical Service Providers (TSP) who would assist farmers to design business proposals consistent with the social, environmental, technical and financial guidelines specified in the Operational Manual.
115. The rehabilitation of tertiary roads will be carried out in accordance with existing state and national resettlement procedures developed by the State Secretariat of Infrastructure, with support from staff from the Department of Infrastructure (DEINFRA) that has adequate experience in the management of land acquisition and resettlement needs for rural roads projects. In the event that any proposed road works would require land acquisition or involuntary resettlement, SIE will work closely with the civil works contractors and Supervision Consultants to prepare and implement sub-project specific Resettlement Plans (RPs) according to the guidelines established in the Resettlement Policy Framework. This includes: (i) data collection,
126 Annex 10 including a cadastre of affected families and a land cadastre; (ii) elaboration of an RP, including a socioeconomic profile of affected families, evaluations of affected assets, qualitative and quantitative aspects of degrees of impacts, and refined definitions of options and eligibility criteria; and (iii) an action plan that includes institutional responsibilities, timetable, and budget. Once the draft RP has been reviewed by SIE or the responsible municipal authority to ensure consistency with the Operational Manual and national legislation, it will be sent to the Bank for review and “no objection.”
F. Grievance Procedures
116. During the process of formulating and implementing site-specific RPs, EPAGRI and SIE will maintain an open channel of communication with potentially affected families. This will be carried out through the appointment of a specialized interagency ombudsman responsible for channeling the concerns and complaints of local stakeholders to the appropriate agencies capable of providing solutions.
G. Monitoring and Evaluation
117. The Project Coordinator in the State Secretariat of Agriculture and Rural Development (SAR) will have the primary responsibility for monitoring the implementation of the principles agreed under the RPF. Bank supervision will closely follow progress during the design phase of subprojects through the inclusion of social and safeguard concerns. Monitoring will be done through regular reporting and field visits to ensure the enforcement of relevant safeguard frameworks, clauses, and satisfactory implementation of civil works contracts. The following indicators will be tracked to monitor progress: number of landholdings affected by land acquisition and number of RPs effectively implemented. In addition an ex-post evaluation would be conducted in cases where more than 200 persons are affected; however, such cases are not anticipated in this project.
127 Annex 11
Annex 11: Project Preparation and Supervision BRAZIL: Santa Catarina Rural Competitiveness
Planned Actual PCN review 11/04/2009 11/04/2009 Initial PID to PIC 11/09/2009 11/24/2009 Initial ISDS to PIC 11/09/2004 11/24/2009 Appraisal 02/05/2010 03/05/2010 Negotiations 07/21/2010 07/26/2010 Board/RVP approval 09/02/2010 Planned date of effectiveness 09/30/2010 Planned date of mid-term review 09/30/2013 Planned closing date 09/30/2016 Key institutions responsible for preparation of the project: International Bank for Reconstruction and Development (IBRD); State Agricultural Research and Rural Extension Enterprise (EPAGRI)
Bank staff and consultants who worked on the project included: Name Title Unit Alvaro J. Soler Sr. Rural Development Specialist LCSAR Anna Roumani ST Consultant LCSAR Carolina Hammond Program Assistant LCSAR Chris Parel Sr. Operations Specialist, Consultant LCSAR Edward Bresnyan Sr. Rural Development Specialist LCSAR Evelyn Levy ET Consultant LCSPS Frederico Rabello Costa Procurement Specialist LCSPT Gregoire Francois Gauthier Transportation Engineer LCSTR Isabella Micali Drossos Sr. Counsel LEGLA João Vicente Campos Financial Management Specialist LCSFM Judith M. Lisansky Sr. Anthropologist LCSSO Katia Medeiros FAO Sr. Environmental Specialist FAO/CP Mariana Montiel Sr. Counsel LEGLA Nestor Bragagnolo Sr. Agronomist, Consultant LCSAR Regis Cunningham Sr. Financial Management Specialist LCSFM
Bank funds expended to date on project preparation: 1. Bank resources: US$ 209, 494.86 FAO: US$72,540.00 2. Trust funds: 0 3. Total: US$282,034.86
Estimated Approval and Supervision costs: 1 Remaining costs to approval: US$18,000 2 Estimated annual supervision cost: US$94,000.00
128 Annex 12
Annex 12: Documents in the Project File BRAZIL: Santa Catarina Rural Competitiveness
A. Preparation Documents (produced by SAR)
- Santa Catarina Rural: Carta Consulta (Concept Note available in Portuguese: submitted to the Federal Government – COFIEX – in July 29, 2009) - Project’s Operational Manual (available in Portuguese: Manual Operativo – Volume I, Sections II and II) - Preliminary Project Documents (versions of October and December 2009) - Environmental Assessment – includes an EMF (available in Portuguese: Avaliação Ambiental) - Pest Management Plan (available in Portuguese: Plano de Manejo de Pragas : Melhoria Ambiental em Ssistemas de Produçao) - Involuntary Resettlement Framework (available in Portuguese: Marco de Reassentamento Involuntário) - Indigenous Peoples Ethnodevelopment Strategy – IP Planning Framework/IPPF (available in Portuguese: Etnodesenvolvimento para as Populações Indígenas) - Results Matrix - Tables of EEPs, primary and secondary DLIs - Project Financial and Economic Analysis of the Project (available in Spanish, w/ some tables Portuguese: Analise Economica e Financeira - FARMOD) - Inputs Tables to the FAO’s Ex-Ante Appraisal Carbon Balance Tool (ExAct) - Project’s Technical Implementation Strategy (available in Portuguese) - Costs and Timetable (COSTAB) - Chapecó Ecological Corridor Management Plan (available in Portuguese: Plano de Gestão do Corredor Ecológico Chapecó, Volume I) – Produced for FATMA/SDS by a Consulting Co (Socio Ambiental Consultores Associados) - Comparative Analysis of FAFs Agro-Processing Enterprises associated in Networks with those Isolated, SC Wester Region (article available in Portuguese: Análise Comparativa do Desempenho da Competitividade das Agroindustrias familiares em rede e isaoladas no Oeste de SC) - Trejetórias das Agroindustrias Familiares no Estado de SC (available in Portuguese and prepared by SAR staff: for the IV Congreso Internacional de la Red SIAL: prepared by SAR staff - ALTMANN, R.; MIOR. L.C.; ZOLDAN, P. Perspectivas para o Sistema Agroalimentar e o Espaço Rural de Santa Catarina em 2015: Percepção de representantes de agroindústrias, cooperativas e organizações sociais. Florianópolis: Epagri, 2008. 133p. (Epagri. Documentos, 231) - ANDRIGHETO, J. R.; KOSOSKI, A.R. Desenvolvimento e Conquistas da Produção Integrada de Frutas no Brasil. Disponível em:
129 Annex 12
Ministério da Agricultura, Pecuária e Abastecimento. Secretaria de Desenvolvimento Agropecuário e Cooperativismo. Brasília: Mapa/ACS, 2009. - FANCELLI, Marilene. Sistema de Produção, 6. EMBRAPA Mandioca e Fruticultura. Versão eletrônica. EMBRAPA: Jan/2003. - IBGE. Censo Agropecuário 2006: Resultados Preliminares. IBGE: 2006. Disponível em:
B. Documents from Microbacias II Project (produced by SAR)
- Project Appraisal Document - Operational Manual - Ex-post evaluation reports - Ex-post evaluation studies - Mid-Term Review Report - Mid-Term and Studies - Social Assessment - Environmental Assessment (includes Environmental Management Plan)
130 Annex 13
Annex 13: Statement of Loans and Credits BRAZIL: Santa Catarina Rural Competitiveness
Difference between expected and actual Original Amount in US$ Millions disbursements Project ID FY Purpose IBRD IDA SF GEF Cancel. Undisb. Orig. Frm. Rev’d P106663 2011 BR – AF SP Feeder Roads Project 326.78 0.00 0.00 0.00 0.00 326.78 0.00 0.00 P111665 2011 BR- RJ Munic Fiscal Consolid DPL 1,045.00 0.00 0.00 0.00 0.00 1,045.00 0.00 0.00 P101508 2010 BR-RJ Sustainable Rural Development 39.50 0.00 0.00 0.00 0.00 36.59 2.83 0.00 P108654 2010 BR Pernambuco Sustainable Water 190.00 0.00 0.00 0.00 0.00 189.53 0.51 0.00 P108443 2010 BR SP Sust Rural Dev & Access to 78.00 0.00 0.00 0.00 0.00 78.00 0.50 0.00 Markets P104995 2010 BR Municipal APL5: Santos 44.00 0.00 0.00 0.00 0.00 43.89 2.67 0.00 P106703 2010 BR SP Water Reagua 64.50 0.00 0.00 0.00 0.00 64.50 0.21 0.00 P106663 2010 BR Sao Paulo Feeder Roads Project 166.65 0.00 0.00 0.00 0.00 12.48 -153.75 0.00 P106390 2010 BR SP METRO LINE 4 (PHASE 2) 130.00 0.00 0.00 0.00 0.00 130.00 0.00 0.00 P099469 2010 BR (APL2) 2nd National Environmental 24.30 0.00 0.00 0.00 0.00 24.24 0.00 0.00 P111996 2010 BR RJ Mass Transit II 211.70 0.00 0.00 0.00 0.00 193.89 -17.28 0.00 P113540 2010 BR AIDS-SUS 67.00 0.00 0.00 0.00 0.00 67.00 0.00 0.00 P006553 2010 BR SP APL Integrated Wtr Mgmt 104.00 0.00 0.00 0.00 0.00 103.75 20.28 0.00 P118410 2010 BR Mato Grosso do Sul Road 300.00 0.00 0.00 0.00 0.00 300.00 0.00 0.00 P114204 2010 ELETROBRAS Distribution 495.00 0.00 0.00 0.00 0.00 495.00 0.00 0.00 Rehabilitation P116170 2010 BR Sao Paulo Metro Line 5 650.40 0.00 0.00 0.00 0.00 650.40 0.00 0.00 P104752 2009 BR Paraiba 2nd Rural Pov Reduction 20.90 0.00 0.00 0.00 0.00 20.85 0.00 0.00 P094315 2009 BR Municipal APL4: Sao Luis 35.64 0.00 0.00 0.00 0.00 33.49 -1.71 0.00 P095205 2009 BR 1st Prog. DPL for Sust. Env Mgmt 1,300.00 0.00 0.00 0.00 0.00 500.00 -795.45 0.00 P099369 2009 BR Ceara Regional Development 46.00 0.00 0.00 0.00 0.00 45.13 -0.46 0.00 P106208 2009 BR Pernambuco Educ Results& Account. 154.00 0.00 0.00 0.00 0.00 97.84 15.62 0.00 P110614 2009 BR: Sergipe State Int. Proj.: Rural Pov 20.80 0.00 0.00 0.00 0.00 16.04 4.13 0.00 P107843 2009 BR Fed District Multisector Manag. Proj. 130.00 0.00 0.00 0.00 0.00 129.68 46.74 0.00 P107146 2009 BR Acre Social Economic Inclusion Sust 120.00 0.00 0.00 0.00 0.00 97.92 -0.11 0.00 D P106767 2009 BR RGS Fiscal Sustainability DPL 1,100.00 0.00 0.00 0.00 0.00 450.00 450.00 0.00 P106765 2009 BR Ceara Inclusive Growth (SWAp II) 240.00 0.00 0.00 0.00 0.00 119.66 37.35 0.00 P088716 2009 BR Health Network Formation & Quality 235.00 0.00 0.00 0.00 0.00 234.41 10.27 0.00 Im P101324 2008 BR-Second Minas Gerais Dev't 1,437.00 0.00 0.00 0.00 0.00 589.04 11.77 0.00 PArtnership P106038 2008 BR Sao Paulo Trains and Signalling 550.00 0.00 0.00 0.00 0.00 283.25 165.20 0.00 P095626 2008 BR (APL2)Family Health Extension 2nd 83.45 0.00 0.00 0.00 0.00 70.24 27.40 0.00 APL P083997 2008 BR Alto Solimoes Basic Services and 24.25 0.00 0.00 0.00 0.00 18.93 5.36 0.00 Sust P088966 2008 BR Municipal APL3: Teresina 31.13 0.00 0.00 0.00 0.00 28.48 7.60 0.00 P094199 2008 BR-(APL) RS (Pelotas) Integr. Mun. Dev. 54.38 0.00 0.00 0.00 0.00 39.31 11.06 0.00 P089013 2008 BR Municipal APL: Recife 32.76 0.00 0.00 0.00 0.00 32.68 18.12 0.00 P089929 2008 BR RGN State Integrated Water Res 35.90 0.00 0.00 0.00 0.00 30.11 22.96 0.00 Mgmt P082651 2007 BR APL 1 Para Integrated Rural Dev 60.00 0.00 0.00 0.00 0.00 51.20 48.87 0.00
131 Annex 13
P089011 2007 BR Municipal APL1: Uberaba 17.27 0.00 0.00 0.00 0.00 10.02 8.12 0.00 P089793 2007 BR State Pension Reform TAL II 5.00 0.00 0.00 0.00 0.00 4.99 3.75 0.00 P095460 2007 BR-Bahia Integr.Hway Mngmt. 100.00 0.00 0.00 0.00 0.00 68.35 18.22 0.00 P081436 2006 BR-Bahia Poor Urban Areas Integrated 49.30 0.00 0.00 0.00 0.00 38.96 38.96 0.00 Dev P050761 2006 BR-Housing Sector TAL 4.00 0.00 0.00 0.00 2.70 0.65 3.35 -0.47 P093787 2006 BR Bahia State Integ Proj Rur Pov 84.35 0.00 0.00 0.00 0.00 30.00 0.00 0.00 P089440 2006 BR-Brasilia Environmentally Sustainable 57.64 0.00 0.00 0.00 0.00 21.22 21.22 0.00 P092990 2006 BR - Road Transport Project 501.25 0.00 0.00 0.00 0.00 164.04 164.04 0.00 P090041 2006 BR ENVIRONMENTAL SUST. 8.00 0.00 0.00 0.00 0.00 4.78 4.75 2.61 AGENDA TAL P076924 2005 BR- Amapa Sustainable Communities 4.80 0.00 0.00 0.00 0.23 1.78 2.01 1.78 P083533 2005 BR TA-Sustain. & Equit Growth 12.12 0.00 0.00 0.00 0.00 7.45 7.45 0.00 P087711 2005 BR Espirito Santo Wtr & Coastal Pollu 107.50 0.00 0.00 0.00 0.00 16.57 -54.75 -22.75 P060573 2004 BR Tocantins Sustainable Regional Dev 60.00 0.00 0.00 0.00 0.00 13.99 13.99 0.00 P076977 2003 BR-Energy Sector TA Project 12.12 0.00 0.00 0.00 0.00 4.74 4.74 0.00 P049265 2003 BR-RECIFE URBAN UPGRADING 46.00 0.00 0.00 0.00 0.00 6.91 6.91 0.00 PROJECT P066170 2002 BR-RGN Rural Poverty Reduction 45.00 0.00 0.00 0.00 0.00 6.66 -15.78 6.72 P060221 2002 BR FORTALEZA METROPOLITAN 85.00 0.00 0.00 0.00 62.60 4.93 58.01 6.30 TRANSPORT PROJ P051696 2002 BR SÃO PAULO METRO LINE 4 304.00 0.00 0.00 0.00 0.00 5.51 -89.25 5.75 PROJECT P006449 2000 BR CEARA WTR MGT PROGERIRH 239.00 0.00 0.00 0.00 0.00 87.05 -15.69 4.64 SIM Total: 11,390.39 0.00 0.00 0.00 65.53 7,147.91 120.74 4.58
BRAZIL STATEMENT OF IFC’s Held and Disbursed Portfolio In Millions of US Dollars
Committed Disbursed IFC IFC FY Approval Company Loan Equity Quasi Partic. Loan Equity Quasi Partic. ABN AMRO REAL 98.00 0.00 0.00 0.00 15.77 0.00 0.00 0.00 2005 2005 ABN AMRO REAL 98.00 0.00 0.00 0.00 15.77 0.00 0.00 0.00 2001 AG Concession 0.00 30.00 0.00 0.00 0.00 30.00 0.00 0.00 2002 Amaggi 17.14 0.00 0.00 0.00 17.14 0.00 0.00 0.00 2005 Amaggi 30.00 0.00 0.00 0.00 30.00 0.00 0.00 0.00 2002 Andrade G. SA 22.00 0.00 10.00 12.12 22.00 0.00 10.00 12.12 2001 Apolo 6.04 0.00 0.00 0.00 3.54 0.00 0.00 0.00 1998 Arteb 20.00 0.00 0.00 18.33 20.00 0.00 0.00 18.33 2006 BBM 49.40 0.00 0.00 0.00 49.40 0.00 0.00 0.00 2001 Brazil CGFund 0.00 19.75 0.00 0.00 0.00 18.15 0.00 0.00 2004 CGTF 54.01 0.00 7.00 65.12 54.01 0.00 7.00 65.12 1994 CHAPECO 10.00 0.00 0.00 0.00 10.00 0.00 0.00 0.00 1996 CHAPECO 1.50 0.00 0.00 5.26 1.50 0.00 0.00 5.26
132 Annex 13
2003 CPFL Energia 0.00 40.00 0.00 0.00 0.00 40.00 0.00 0.00 1996 CTBC Telecom 3.00 8.00 0.00 0.00 3.00 8.00 0.00 0.00 1997 CTBC Telecom 0.00 6.54 0.00 0.00 0.00 6.54 0.00 0.00 1999 Cibrasec 0.00 3.27 0.00 0.00 0.00 3.27 0.00 0.00 2004 Comgas 11.90 0.00 0.00 11.54 11.90 0.00 0.00 11.54 2005 Cosan S.A. 50.00 5.00 15.00 0.00 50.00 5.00 15.00 0.00 Coteminas 0.00 1.84 0.00 0.00 0.00 1.84 0.00 0.00 1997 Coteminas 1.85 1.25 0.00 0.00 1.85 1.25 0.00 0.00 2000 Coteminas 0.00 0.18 0.00 0.00 0.00 0.18 0.00 0.00 1980 DENPASA 0.00 0.52 0.00 0.00 0.00 0.48 0.00 0.00 1992 DENPASA 0.00 0.06 0.00 0.00 0.00 0.06 0.00 0.00 Dixie Toga 0.00 0.34 0.00 0.00 0.00 0.34 0.00 0.00 1998 Dixie Toga 0.00 10.03 0.00 0.00 0.00 10.03 0.00 0.00 1997 Duratex 1.36 0.00 3.00 0.57 1.36 0.00 3.00 0.57 2005 EMBRAER 35.00 0.00 0.00 145.00 35.00 0.00 0.00 145.00 1999 Eliane 14.93 0.00 13.00 0.00 14.93 0.00 13.00 0.00 1998 Empesca 1.33 0.00 2.67 0.00 1.33 0.00 2.67 0.00 2006 Endesa Brasil 0.00 50.00 0.00 0.00 0.00 50.00 0.00 0.00 2006 Enerbrasil Ltda 0.00 5.50 0.00 0.00 0.00 0.00 0.00 0.00 2006 FEBR 12.00 0.00 0.00 0.00 12.00 0.00 0.00 0.00 2000 Fleury 0.00 0.00 6.00 0.00 0.00 0.00 6.00 0.00 1998 Fras-le 4.00 0.00 9.34 0.00 4.00 0.00 6.04 0.00 2006 GOL 50.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 2005 GP Capital III 0.00 14.00 0.00 0.00 0.00 0.14 0.00 0.00 GP Cptl Rstrctd 0.00 2.22 0.00 0.00 0.00 2.16 0.00 0.00 2001 GPC 0.00 0.00 9.00 0.00 0.00 0.00 9.00 0.00 GTFP BIC Banco 44.91 0.00 0.00 0.00 44.91 0.00 0.00 0.00 GTFP BM Brazil 4.22 0.00 0.00 0.00 4.22 0.00 0.00 0.00 GTFP Indusval 5.00 0.00 0.00 0.00 5.00 0.00 0.00 0.00 1997 Guilman-Amorim 18.08 0.00 0.00 14.37 18.08 0.00 0.00 14.37 1998 Icatu Equity 0.00 5.46 0.00 0.00 0.00 4.16 0.00 0.00 1999 Innova SA 0.00 5.00 0.00 0.00 0.00 5.00 0.00 0.00 1980 Ipiranga 0.00 2.87 0.00 0.00 0.00 2.87 0.00 0.00 1987 Ipiranga 0.00 0.54 0.00 0.00 0.00 0.54 0.00 0.00 2006 Ipiranga 50.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 2006 Itambe 15.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 2000 Itau-BBA 12.86 0.00 0.00 0.00 12.86 0.00 0.00 0.00 2002 Itau-BBA 70.61 0.00 0.00 0.00 38.47 0.00 0.00 0.00 1999 JOSAPAR 7.57 0.00 7.00 0.00 2.57 0.00 7.00 0.00 2005 Lojas Americana 35.00 0.00 0.00 0.00 35.00 0.00 0.00 0.00 1992 MBR 0.00 0.00 10.00 0.00 0.00 0.00 10.00 0.00 2006 MRS 50.00 0.00 0.00 50.00 0.00 0.00 0.00 0.00 2002 Microinvest 0.00 1.25 0.00 0.00 0.00 0.82 0.00 0.00 Net Servicos 0.00 10.93 0.00 0.00 0.00 10.93 0.00 0.00 2002 Net Servicos 0.00 1.60 0.00 0.00 0.00 1.60 0.00 0.00 2005 Net Servicos 0.00 5.08 0.00 0.00 0.00 5.08 0.00 0.00 1994 Para Pigmentos 2.15 0.00 9.00 0.00 2.15 0.00 9.00 0.00 1994 Portobello 0.00 0.59 0.00 0.00 0.00 0.59 0.00 0.00 2000 Portobello 4.28 0.00 7.00 0.00 4.28 0.00 7.00 0.00
133 Annex 13
2002 Portobello 0.00 0.90 0.00 0.00 0.00 0.90 0.00 0.00 2000 Puras 0.00 0.00 1.00 0.00 0.00 0.00 1.00 0.00 2003 Queiroz Galvao 26.67 0.00 10.00 0.00 26.67 0.00 10.00 0.00 2004 Queiroz Galvao 0.60 0.00 0.00 0.00 0.08 0.00 0.00 0.00 2006 RBSec 22.83 1.51 0.00 0.00 0.00 1.51 0.00 0.00 Randon Impl Part 2.33 0.00 3.00 0.00 2.33 0.00 3.00 0.00 1997 Sadia 2.55 0.00 2.33 3.28 2.55 0.00 2.33 3.28 1997 Samarco 3.60 0.00 0.00 0.00 3.60 0.00 0.00 0.00 1998 Saraiva 0.00 1.24 0.00 0.00 0.00 1.24 0.00 0.00 2000 Sepetiba 26.24 0.00 5.00 0.00 11.24 0.00 5.00 0.00 2002 Suape ICT 6.00 0.00 0.00 0.00 6.00 0.00 0.00 0.00 1999 Sudamerica 0.00 7.35 0.00 0.00 0.00 7.35 0.00 0.00 2006 Suzano petroq 50.00 0.00 10.00 140.00 39.50 0.00 10.00 110.50 2001 Synteko 11.57 0.00 0.00 0.00 11.57 0.00 0.00 0.00 2006 TAM 50.00 0.00 0.00 0.00 17.00 0.00 0.00 0.00 1998 Tecon Rio Grande 3.55 0.00 5.50 3.71 3.55 0.00 5.50 3.71 2004 Tecon Rio Grande 7.87 0.00 0.00 7.76 7.59 0.00 0.00 7.48 2001 Tecon Salvador 2.95 1.00 0.00 3.10 2.95 0.77 0.00 3.10 2003 Tecon Salvador 0.00 0.55 0.00 0.00 0.00 0.55 0.00 0.00 2004 TriBanco 10.00 0.00 0.00 0.00 10.00 0.00 0.00 0.00 2006 TriBanco 0.35 0.00 0.00 0.00 0.35 0.00 0.00 0.00 2002 UP Offshore 9.01 9.51 0.00 23.29 0.00 2.51 0.00 0.00 2002 Unibanco 16.89 0.00 0.00 0.00 16.89 0.00 0.00 0.00 Total portfolio: 1,164.15 253.88 144.84 503.45 703.91 223.86 141.54 400.38
Approvals Pending Commitment FY Approval Company Loan Equity Quasi Partic. 2000 BBA 0.01 0.00 0.00 0.00 1999 Cibrasec 0.00 0.00 0.00 0.00 2006 Ipiranga II 0.00 0.00 0.00 0.10 2002 Banco Itau-BBA 0.00 0.00 0.00 0.10 Total pending commitment: 0.01 0.00 0.00 0.20
134 Annex 14
Annex 14: Country at a Glance BRAZIL: Santa Catarina Rural Competitiveness
Brazil at a glance 12/9/09
Latin Upper- POVERTY and SOCIAL America middle- Development diamond* Brazil & Carib. income 2008 Population, mid-year (millions) 192.0 565 949 Life expectancy GNI per capita (Atlas method, US$) 7,300 6,781 7,878 GNI (Atlas method, US$ billions) 1,401.3 3,833 7,472
Average annual growth, 2002-08 Population (%) 1. 2 1. 2 0 . 8 Labor force (%) 2.1 2.2 1.7 GNI Gross per primary M ost recent estimate (latest year available, 2002-08) capita enrollment Poverty (% of population below national poverty line) 22 .. .. Urban population (% of total population) 84 79 75 Life expectancy at birth (years) 72 73 71 Infant mo rtality (per 1,000 live births) 18 22 21 Child malnutrition (% of children under 5) 25.. Access to improved water source Access to an improved water source (% of population) 91 91 94 Literacy (% of population age 15+) 90 91 94 Gross primary enrollment (% of school-age population) 13 0 117 110 Brazil M a l e 13 4 119 112 Upper-middle-income group F e m a l e 12 5 115 10 8
KEY ECONOM IC RATIOS and LONG-TERM TRENDS 1988 1998 2007 2008 Economic ratios* GDP (US$ billions) 330.4 843.8 1,333.3 1,575.2 Gross capital formation/GDP 22.7 17.0 17.7 18.9 Exports of goods and services/GDP 10.9 6.9 13.7 14.3 Trade Gross domestic savings/GDP 27.9 15.0 19.3 19.1 Gross national savings/GDP 23.9 13.0 17.6 17.1
Current account balance/GDP 1.3 -4.0 0.1 -1.8 Interest payments/GDP 1.9 1.7 1.1 1.0 Domestic Capital savings formation Total debt/GDP 30.7 26.6 17.3 16.2 Total debt service/exports 25.9 80.7 24.2 25.1 Present value of debt/GDP .. .. 19.6 15.6 Present value of debt/exports .. .. 117.2 111.2 Indebtedness 1988-98 1998-08 2007 2008 2008-12 (average annual growth) GDP 2.3 3.3 5.7 5.1 2.8 Brazil GDP per capita 0.7 2.0 4.6 4.1 0.8 Upper-middle-income group Exports of goods and services 5.4 9.1 6.7 -0.6 14.8
STRUCTURE of the ECONOM Y 1988 1998 2007 2008 Growth of capital and GDP (%) (% of GDP) 15 Agriculture 10.1 5.5 6.0 6.7 10 Industry 43.6 25.7 28.1 28.0 5 M anufacturing 31.0 15.7 17.4 16.0 0 Services 46.2 68.8 66.0 65.3 -5 03 04 05 06 07 08 Household final consumption expenditure 59.5 64.3 60.8 60.7 -10 General gov't final consumption expenditure 12.6 20.6 19.9 20.2 GCF GDP Imports of goods and services 5.7 8.9 12.1 14.2
1988-98 1998-08 2007 2008 Growth of exports and imports (%) (average annual growth) Agriculture 2.5 4.4 5.9 5.8 30 Industry 1.5 2.8 4.8 4.3 20 M anufacturing 2.6 3.0 4.7 3.2 10 Services 3.3 4.0 6.0 5.3 0 Household final consumption expenditure 3.9 3.0 8.8 6.9 03 04 05 06 07 08 General gov't final consumption expenditure 0.7 2.9 4.7 5.6 -10 Gross capital formation 2.6 2.8 13.5 13.8 Exports Imports Imports of goods and services 14.6 5.5 20.8 18.5
Note: 2008 data are preliminary estimates. This table was produced from the Development Economics LDB database. * The diamonds show four key indicators in the country (in bold) compared with its income-group average. If data are missing, the diamond will be inco mplete.
135 Annex 14
Brazil
PRICES and GOVERNMENT FINANCE 1988 1998 2007 2008 Inflation (%) Domestic prices (% change) 15
Consumer prices 980.2 1.7 4.5 7.1 10 Implicit GDP deflator 651.1 4.2 3.7 5.9 5 Government finance (% of GDP, includes current grants) 0 Current revenue 10.8 18.8 23.9 24.8 03 04 05 06 07 08 Current budget balance -2.0 0.4 2.3 3.0 GDP deflator CPI Overall surplus/deficit ###### -0.8 -2.3 -1.6
TRADE 1988 1998 2007 2008 Export and import levels (US$ mill.) (US$ millions)
Total exports (fob) 32,809 50,736 160,649 184,216 200,000 Coffee 2,091 3,253 11,629 20,183 Soybeans 3,175 2,178 8,030 13,462 150,000 M anufactures 18,389 29,387 87,254 88,483 Total imports (cif) 14,605 57,714 120,622 155,475 100,000 Food 376 2,514 0 2,582 50,000 Fuel and energy 4,104 4,109 16,345 24,978 Capital goods 4,195 16,093 25,124 32,190 0 Export price index (2000=100) 8 8 9 9 114 12 8 02 03 04 05 06 07 08 Import price index (2000=100) 44 104 94 100 Exports Imports Terms of trade (2000=100) 19 9 9 5 12 1 12 7
BALANCE of PAYMENTS 1988 1998 2007 2008 Current account balance to GDP (%) (US$ millions) Exports of goods and services 35,650 59,037 184,603 228,393 2 Imports of goods and services 17,500 75,722 157,795 220,247 Resource balance 18,150 -16,685 26,808 8,146 1 Net income -13,776 -18,188 -29,291 -40,562 0 Net current transfers -20 1,458 4,029 4,224 02 03 04 05 06 07 08 Current account balance 4,180 -33,416 1,551 -28,192 -1
Financing items (net) -2,931 25,446 85,933 31,161 -2 Changes in net reserves -1,249 7,970 -87,484 -2,969
Memo: Reserves including gold (US$ millions) 9,140 44,556 180,334 216,881 Conversion rate (DEC, local/US$) 9.53E-8 1.2 1.9 1.8
EXTERNAL DEBT and RESOURCE FLOWS 1988 1998 2007 2008 Composition of 2008 debt (US$ mill.) (US$ millions) Total debt outstanding and disbursed 101,295 224,632 231,032 255,614 IBRD 1,824 171 6,704 8,150 G: A: 8,150 D: IDA 0 0 0 0 36,652 10,424
Total debt service 9,448 48,465 53,941 55,420 E: 4,571 IBRD 429 77 480 481 IDA 0 0 0 0
Composition of net resource flows Official grants 46 103 178 211 Official creditors -340 3,632 -754 2,076 Private creditors 3,194 15,728 19,105 27,188 Foreign direct investment (net inflows) 2,804 31,913 34,585 45,058 Portfolio equity (net inflows) 189 -1,768 26,217 -7,565 F: 195,817 World Bank program Commitments 0 0 1,335 2,962 Disbursements 0 0 374 1,606 A - IBRD E - Bilateral Principal repayments 268 61 115 146 B - IDA D - Other multilateral F - Private C - IMF G - Short-term Net flows -268 -61 258 1,459 Interest payments 161 15 364 335 Net transfers -429 -77 -106 1,125
Note: This table was produced from the Development Economics LDB database. 12/9/09
136 Annex 15
Annex 15: Maps IBRD 37570, IBRD 37571 and IBRD 37572 BRAZIL: Santa Catarina Rural Competitiveness
Map 1. State of Santa Catarina’s Municipalities and Priority Levels
137 Annex 15
Map 2. State of Santa Catarina’s River Basins and Hydrographic Regions
138 Annex 15
Map 3. Ecological Corridors to be supported under the project: Timbó and Chapecó
139