Document of The World Bank Report No: ICR0000929 IMPLEMENTATION COMPLETION AND RESULTS REPORT (Loan 4494-BR) ON A LOAN IN THE AMOUNT OF US$118.00 MILLION TO THE FEDERATIVE REPUBLIC OF BRAZIL FOR THE SALVADOR URBAN TRANSPORT PROJECT December 29, 2008 Sustainable Development Department Brazil Country Management Unit Latin America and the Caribbean Region Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized
Transcript
Document of The World Bank
Report No: ICR0000929
IMPLEMENTATION COMPLETION AND RESULTS REPORT (Loan 4494-BR)
ON A
LOAN
IN THE AMOUNT OF US$118.00 MILLION
TO THE
FEDERATIVE REPUBLIC OF BRAZIL
FOR THE
SALVADOR URBAN TRANSPORT PROJECT
December 29, 2008 Sustainable Development Department Brazil Country Management Unit Latin America and the Caribbean Region
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CURRENCY EQUIVALENTS (Exchange Rate Effective December 22, 2008)
Currency Unit = Brazilian Real (R$)
R$1 = US$0.40 US$1 = R$2.48
FISCAL YEAR
January 1 – December 31
ABBREVIATIONS AND ACRONYMS
AGERBA State Regulatory Agency of Public Services AGERT Municipal Transport Regulatory Agency of Salvador ANTP National Association for Public Transport BoP Balance of Payments CBTU Companhia Brasileira de Trens Urbanos COFIEX Commission for External Finance CONDER Companhia de Desenvolvimento Urbano do Estado da Bahia CTS Companhia de Transportes de Salvador EAR Environmental Assessment Report FGV Fundação Getúlio Vargas GDP Gross Domestic Product GoB Government of Brazil GSB Government of the State of Bahia Metrosal Salvador Metro O&M Operations and Maintenance PAC Accelerated Growth Program (Programa de Acelaração do Crescimento) PCU Project Coordination Unit PIPP Public Investment Pilot Program PIU Project Implementation Unit PPP Public Private Partnership RTCC Regional Transport Coordination Commission of Salvador Metropolitan
Region SB State of Bahia QSA Quality of Supervision Assessment SM Municipality of Salvador SMR Salvador Metropolitan Region STU/SAL Commuter line between Calçada and Paripe TCU Tribunal Federal de Contas da União TUE Trem Unidade Elétrico or Electric Train Unit
Vice President: Pamela Cox Country Director: John Briscoe Sector Manager: Emmanuel A. James
Project Team Leader: Jorge M. Rebelo ICR Team Leader: Jorge M. Rebelo ICR Main Author: Arturo Ardila-Gómez
Brazil
Salvador Urban Transport Project
CONTENTS
Data Sheet A. Basic Information B. Key Dates C. Ratings Summary D. Sector and Theme Codes E. Bank Staff F. Results Framework Analysis G. Ratings of Project Performance in ISRs H. Restructuring I. Disbursement Graph
1. Project Context, Development Objectives and Design................................................... 12. Key Factors Affecting Implementation and Outcomes .................................................. 73. Assessment of Outcomes .............................................................................................. 184. Assessment of Risk to Development Outcome............................................................. 235. Assessment of Bank and Borrower Performance ......................................................... 246. Lessons Learned............................................................................................................ 287. Comments on Issues Raised by Borrower/Implementing Agencies/Partners............... 30Annex 1. Project Costs and Financing.............................................................................. 32Annex 2. Outputs by Component...................................................................................... 34Annex 3. Economic and Financial Analysis ..................................................................... 37Annex 4. Bank Lending and Implementation Support/Supervision Processes................. 41Annex 5. Beneficiary Survey Results ............................................................................... 43Annex 6. Stakeholder Workshop Report and Results....................................................... 44Annex 7. Summary of Borrower's ICR and/or Comments on Draft ICR ......................... 45Annex 8. Comments of Cofinanciers and Other Partners/Stakeholders ........................... 53Annex 9. List of Supporting Documents .......................................................................... 54MAP IBRD nbr. 30090
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A. Basic Information Country: Brazil Project Name:
Original Actual Sector Code (as % of total Bank financing) General transportation sector 99 99 Sub-national government administration 1 1
Theme Code (Primary/Secondary) Decentralization Primary Primary Other urban development Primary Primary E. Bank Staff
Positions At ICR At Approval Vice President: Pamela Cox Shahid Javed Burki Country Director: John Briscoe Gobind T. Nankani Sector Manager: Emmanuel A. James Jeffrey S. Gutman Project Team Leader: Jorge M. Rebelo Jorge M. Rebelo ICR Team Leader: Jorge M. Rebelo ICR Primary Author: Arturo Ardila Gomez F. Results Framework Analysis Project Development Objectives (from Project Appraisal Document) (a) Improve the quality of public urban transport in the Salvador Metropolitan Region (SMR) by enhancing the development of a fully integrated urban transport system, under the coordination of a regional transport coordination commission. (b) Transfer from the Federal Government to the State of Bahia and Municipality of Salvador, the Salvador subdivision of the CBTU system.
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Revised Project Development Objectives (as approved by original approving authority) (a) PDO Indicator(s)
Indicator Baseline Value
Original Target Values (from
approval documents)
Formally Revised Target Values
Actual Value Achieved at
Completion or Target Years
Indicator 1 : Urban Transport Planning and Regulation in the SMR will be coordinated
Value quantitative or Qualitative)
No Transport Coordination Commission and No Regulatory agency
A Regional Transport Coordination Commission operating effectively and a Transport Regulatory Agency operating effectively
A Commission is operating regularly and a city transport regulatory agency is operating regularly
Date achieved 08/01/1998 06/18/1999 01/19/2000 Comments (incl. % achievement)
State of Bahia created the Regional Transport Coordination Commission (RTCC) in 1998. The City of Salvador created the Transport Regulatory Agency, AGERT, on January 2000. Both operate satisfactorily. 100% achievement.
Indicator 2 : Percentage of rail stations integrated with bus lines
Value quantitative or Qualitative)
0% of metro stations integrated with bus lines
50% of metro stations integrated with bus lines
25% of metro stations integrated with bus lines
40% of metro stations integrated with bus lines
Date achieved 05/14/1999 06/18/1999 11/23/2005 11/15/2008
Comments (incl. % achievement)
Metro line is a greenfield project. 40% of stations in Lapa - Acesso Norte section were built with an accompanying bus terminal (physical integration); and Agreements with bus operators allow city to re-concession all bus services (service integration).
Indicator 3 : Rail share of urban transport motorized trips (%) Value quantitative or Qualitative)
0.14% 7.8% 0.6% 0.6%
Date achieved 05/14/1999 06/18/1999 11/23/2005 05/15/2008 Comments (incl. % achievement)
Ridership increased because of improved level of service in the commuter line: (i) operational train fleet doubled; (ii) retrofitted stations; and (iii) affordable and competitive tariffs. 100% achievement.
Indicator 4 : Generalized cost of travel (travel time plus fare plus reliability) between Piraja and Lapa in minutes
Value quantitative or Qualitative)
96.4 53.0 94.0 94.0
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Date achieved 05/14/1999 06/18/1999 11/23/2005 12/16/2008 Comments (incl. % achievement)
Indicator will be achieved because: the trains on the metro line will run at higher speeds than buses; metro line has transfer terminals; and the concession contract orders the concessionaire to operate feeder buses to metro stations.
Indicator 5 : Decentralization (transfer) of commuter rail (STU/SAL) services from Federal to State and City government
Value quantitative or Qualitative)
STU/SAL owned and operated by Federal government
STU/SAL owned and operated by State and City (CTS) governments
STU/SAL owned and operated by City government
Date achieved 05/14/1999 06/18/1999 11/30/2005 Comments (incl. % achievement)
The GoB (Federal Government) transferred this CBTU line to the City government, per agreement reached between Federal, State, and City Government in 2005. The indicator was fully met.
(b) Intermediate Outcome Indicator(s)
Indicator Baseline Value
Original Target Values (from
approval documents)
Formally Revised
Target Values
Actual Value Achieved at
Completion or Target Years
Indicator 1 : Civil Works for Salvador Metro completed
Value (quantitative or Qualitative)
0%
12.1 Km of a metropolitan rail system (Metrosal) built and integrated with other modes
6.1 Km of a metropolitan rail system built and integrated with other modes
90.3% of permanent ways completed; 88.6% of other civil works completed; 22.5% of system works completed; 100% of trains manufactured and in Salvador.
Date achieved 05/14/1999 06/18/1999 11/23/2005 09/30/2008
Comments (incl. % achievement)
Change in target of indicator from 12.1 to 6.1 Km reflects decision to reduce the scope of the Bank-financed project. Works are expected to be completed in 2009 because project has political support at City, State and Federal level and is fully funded.
Indicator 2 : A concession for operation and maintenance of the Metrosal to the private sector Value (quantitative or Qualitative)
No concession A concession awarded and metro in operation
Not achieved yet.
Date achieved 05/14/1999 06/18/1999 12/16/2008
Comments (incl. % achievement)
A concesssion was awarded in in 2001 and afterwards cancelled because of macroeconomic conditions. New concession study completed in 2008. Bids to be issued in 2009.
Indicator 3 : Preparing an Integrated Transport Policy, Land Use and Air Quality Strategy
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Value (quantitative or Qualitative)
No Integrated urban transport, air quality and land use strategy
Integrated strategy discussed in a participatory manner
Strategy done and discussed in participatory manner.
Date achieved 05/14/1999 06/18/1999 06/15/2000 Comments (incl. % achievement)
Carried out through a series of small consultancies that sought to update the existing Master Transport Plan. The result was discussed in public hearings as part of the environmental permitting process.
Indicator 4 : Rehabilitation of the STU/SAL line ensuring intermodal transfer facilities Value (quantitative or Qualitative)
STU/SAL line not rehabilitated.
STU/SAL line rehabilitated and operational
STU/SAL line rehabilitated and operational
Date achieved 05/14/1999 06/18/1999 09/30/2008 Comments (incl. % achievement)
The rehabilitation of the STU/SAL line is completed. Trains were retrofitted and train fleet was doubled, allowing higher quality of service. Trains are already operating. Station retrofitting completed at the 95.0% level by 12/08.
Indicator 5 : Undertake a comprehensive traffic management review of the Salvador Metropolitan Region
Value (quantitative or Qualitative)
No review Review done Review done
Date achieved 05/14/1999 06/18/1999 06/15/2000 Comments (incl. % achievement)
Study was completed by mid 2000. As a result of the study, the municipality installed a new traffic light system, funded separately.
1. Project Context, Development Objectives and Design 1.1 Context at Appraisal 1.1.1 Brazil’s Economy: By 1999, when the PAD was finalized, Brazil’s economy had taken a positive turn thanks to several market-friendly reforms, macroeconomic reforms, and political stability. The results suggested Brazil would enter into a sustained growth path. The main outcomes were (see also Table 1): a. Inflation had been curbed and lowered to less than one digit. In 1986 inflation was 146% per year, while in 1997 it was 6.9%. b. Public spending was more disciplined with higher primary surplus. In 1986 the overall government surplus was -0.1% of GDP while in 1999 it was 3.2%. c. Economic growth was positive, but still low. After the “lost decade” of the 1980s, Brazil’s economy was growing at positive but low rates. d. Foreign Direct Investment flows were increasing the country was seen as one of the emerging economies with a brighter future, becoming part of the BRIC1 group.
1 BRIC is the name given to the largest and most promising emerging economies, Brazil, Russia, India, and China.
2
Table 1. Key Economic Indicators for Brazil Sources: Word Development Indicators, The World Bank; Brazilian Central Bank; and Deutsche Bank, Emerging Markets Research “Brazilian Debt Dynamics: Improving, But Still Vulnerable,” February 17, 2008 http://200.32.4.58/~fsturzen/BrazSust0203.pdf 1.1.2 Urban Transport Demand and Supply in the Salvador Metropolitan Region (SMR) Demand: At the time of appraisal, the SMR had a population of 2.5 million inhabitants, of which 2.3 million lived in the Salvador Municipality (SM) and the rest in 9 remaining municipalities. Each day, 3.7 million trips took place of which 54.7% were by public transport, 14.4% by automobile, 28.9% were by foot, and the remaining 2.0% by other modes. Eighty one percent of all trips were work related. Of the 1.5 million trips by public transport, 98% were by bus (mostly privately operated and owned), 0.26% were by commuter rail (STU/SAL), 0.67% by ferryboat, and 1.07% by other modes. (Equivalently, 0.14% of all trips were by commuter rail, 0.37 by ferryboat and 0.59% by other modes). Supply: Public transport service by bus was provided, and still is, by companies that receive authorization (permissionaires) from the municipal government and that by city law have to belong to Fundetrans. Fundetrans is a clearing house established by city law, which receives all the revenues from passes such as Vale Transporte (an employer subsidy to formal employees) and special tickets for students. Fundetrans pays bus companies on a vehicle-
Item/Year
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
Inflation Consumer Prices (annual %)
15.76
6.93
3.20
4.86
7.04
6.84
8.45
14.71
6.60
6.87
4.18
3.64
GDP growth (annual %)
2.11
3.33
0
0.31
4.29
1.32
2.61
1.27
5.72
2.90
3.72
5.42
Foreign Direct Investment Net (BoP) Current US$ (millions)
11,667
18,608
29,192
26,886
30,497
24,714
14,108
9894
8694
12,549
9,420
27,518
Exchange rate R$ per dollar (by June of each year)
1.001
1.075
1.155
1.765
1.808
2.375
2.713
2.882
3.128
2.413
2.248
1.931
Primary Fiscal Balance (% of GDP)
-0.1
-1.00
-0.2
3.2
3.5
3.7
3.91
4.25
4.59
4.83
4.32
--
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kilometer basis within 3 days of actually receiving the revenues from passes and special tickets. Bus companies keep the fares collected in the buses. Bus companies are remunerated therefore on a mix of vehicle kilometers and passengers transported. The payment at Fundetrans allows the city to motivate bus companies to serve low-income areas located farther away from employment centers by paying them enough to cover costs. To cover these payments, Fundetrans takes revenue from highly profitable routes. By equalizing profitability across routes, bus companies tend not to under serve certain areas. The bus system does not require public subsidies. Further, in the 1970s and 80s the city of Salvador implemented bus way projects in the main corridors to increase passenger throughput and bus speed. Despite these positive characteristics, about half of the public transport trips required at least one transfer at the time the project was prepared. Buses were overcrowded. The average round trip to work took between 2.5 and 3 hours. The lack of integration between modes aggravated the overdependence on bus-based transport, which in turn aggravated congestion. Coupled to the city’s topography, it was estimated that the average Salvadorian wasted 5 days in traffic more per year than necessary if congestion was lower. Furthermore, the bus ways were reaching the saturation point, in particular the Bonocô Av. bus way. Bus ways without overtaking lanes work well up to 15,000 passengers per hour per direction (pphpd). After this point buses congest the lanes and experience delays, with 18,000 pphpd being the saturation point. At the time of appraisal, the Bonocô Av. bus way was reaching 18,000 pphpd. Demand projections estimated this bus way would have a peak demand of 20,000 pphpd in 2002, 26,000 in 2005, 29,826 in 2010 and 32,661 in 2015. Rail-based systems serve better these demands.2 In effect, a key component of the project was a “greenfield” metro line. 1.1.3 Institutional Issues At the time of appraisal, three levels of government dealt with planning, regulation, and supervision issues in the SMR. State and Municipal agencies regulated market entry and exit, set tariffs, and controlled quality. The state agencies controlled transport between municipalities, while the Municipal agency controlled transport within Salvador. A National agency, CBTU, owned and operated the commuter rail line (STU/SAL) between Calçada and Paripe. The multiple agencies involved lacked a formal coordinating arrangement. The results of this arrangement included lack of consistency in fares charged by similar modes, duplication of investments, poor criteria to prioritize investments, and minimal integration of the transit services. The lack of integration translated into high transfer rates and higher expenses by users.
2 Busways retrofitted to become Bus Rapid Transit can also serve these demands but they need two lanes per direction to allow bus overtaking and stations that resemble those found in rail systems. Cost increases significantly above the cost of simple busways.
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1.2 Original Project Development Objectives (PDO) and Key Indicators (as approved) The original PDO’s were: (a) To improve the quality of public urban transport in the Salvador Metropolitan Region (SMR) by enhancing the development of a fully integrated urban transport system, under the coordination of a Regional Transport Coordination Commission. (b) To transfer from the Federal Government to the State of Bahia and Municipality of Salvador, the Salvador subdivision of the CBTU system. The original PDO indicators were:
1. Percentage of stations of the rail-based system integrated with bus lines (target value revised during amendment);
2. Generalized cost of travel (travel time plus fare plus reliability) between Pirajá and
Lapa in minutes; 3. Rail share of urban transport motorized trips (%) (target value revised during an
amendment); 4. Urban Transport Planning and Regulation in the SMR will be coordinated; 5. Decentralization (transfer) of commuter rail (STU/SAL) services from Federal to State
and City government3 The project also had six output indicators. Key performance indicators are shown in detail in section F of the Data Sheet, and their appropriateness is discussed in section 2.3. 1.3 Revised PDO (as approved by original approving authority) and Key Indicators, and reasons/justification The PDOs were not revised because they remain valid after project reformulation. However, because of the reduced scope of the project, the target values for PDO indicators 1, 2, and 3 were revised as follows:
1. Percentage of stations of the rail-based system integrated with bus lines went from 50% to 25%;
3 Originally it was not an outcome indicator but an output indicator. Because of the relation of this indicator to the second PDO it is considered to be more an outcome indicator and hence it is added in this evaluation.
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2. Generalized cost of travel (travel time plus fare plus reliability) between Pirajá and Lapa in minutes went from 53 to 94 minutes (baseline was 96.4);
3. Rail share of urban transport motorized trips (%) was lowered from 8.0% to 0.60%.
POs target values were also revised. Please see sections 1.6 and 1.7 and section 2 for more details. 1.4 Main Beneficiaries The beneficiaries of the project are the residents of the SMR, because of the objective of creating an integrated transit system. However, low-income populations (up to three minimum wages) benefit the most because they are the main users of public transportation. The residents located in the area of influence of the metro line (Metrosal) and the commuter rail line (STU/SAL) benefit the most because of the increase in quality of service, without a significant price increase given the integrated fare. The primary beneficiaries are therefore the low-income transit users of the Miolo and Subúrbio areas who reduce their commuting time using a combination of bus and metro services. Car users also benefit given the reduced numbers of buses in the streets replaced by the Metro line. Real estate interests benefit because the properties around the stations increase in value. Finally, the system is planned so that, when meeting the forecast demand levels, it requires no operational subsidies. This outcome benefits the government of Brazil because it reduces budget outlays. 1.5 Original Components (as approved) The original components of the projects were (as taken from the loan agreement, dated December 1999): Part A: Infrastructure and Equipment Component: 1. Construction of the initial operating segment (Pirajá-Lapa) of the Metrosal, including the
transfer stations between road and rail based systems, consisting of a 11.9 km rail rapid transit line, of which 5.8 km are at grade, 4.7 km are elevated and 1.4 km are in tunnel. It will include civil works, installation of signaling, telecommunications and electrification facilities and equipment, acquisition of rolling stock (ten train sets), construction of houses required to resettle part of the population being affected by the metrorail works, and technical assistance for the management and supervision of the metrorail construction.
2. Rehabilitation of the Calçada-Paripe link of the STU-SAL System.
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Part B: Institutional and Policy Development Component: 1. Preparation of an integrated policy, land use and air quality management strategy for the
SMR to meet both transport and air quality targets and to introduce sound cost-recovery, tariff, regulatory and subsidy policies;
2. Provision of technical assistance for Project management and supervision. It is important to highlight that the project had two rail components, one a rehabilitation of a commuter line, and two, the construction of new metrorail line. The second element was a “greenfield” metro development, which typically involves more implementation problems than line rehabilitation and/or extensions. 1.6 Revised Components The loan agreement was amended in November 2005 and it modified Part A.1 as follows: Part A. Infrastructure and Equipment Investment Component: Construction of selected sections of the initial operating segment (Pirajá-Lapa) of the Metrosal, which consists of 12.1 Km, of which 4.1 Km are at grade, 6.3 Km are elevated and 1.7 are in tunnel, comprising: (a) all the civil works, installation of signaling, telecommunications and electrification facilities and equipment, acquisition of rolling stock (six train sets), construction of houses to resettle part of the population being affected by the metrorail works, and technical assistance for the management and supervision of the metrorail construction at Section I (Acesso Norte-Lapa), including transfer stations between road and rail based systems, consisting of a 6.1 Km rail rapid transit line, of which 0.2 Km are at grade, 4.4 Km are elevated and 1.5 Km are in tunnel; and (b) 49.3% of the civil works for the remaining segment of 6 Kms. of Section II (Pirajá-Acesso Norte). This amendment to Part A.1 reflects the request by the GoB to reduce the scope of the project to cope with tight fiscal conditions (see section 2) and its request in March 2004 to cancel US$ 32 million of the loan. Part (a) is the key element in the reformulated Bank-financed project because it will be a metro line of 6.1 Km between Lapa and Acesso Norte, now with a longer elevated section than in the original project. Part (b) reflects the fact that by the time the project scope was reformulated 49.3% of the Pirajá Acesso Norte had already been built. As part of this change, the State Government agreed to purchase with its own funds a fleet of six trains (four cars per unit) and provide them to the operations concessionaire. The concessionaire will also provide bus service between Acesso Norte and Pirajá. It was also agreed that once funding became available, the Federal and State government would finance the implementation of the remaining part of the line (Acesso Norte Pirajá), for a total of 12.1 Km, as originally planned. In fact, in 2006, the Federal Government made available the funding for the entire project (See section 2). The concession contract expects the
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concessionaire to furnish the additional 6 trains needed to operate the entire line between Lapa and Pirajá. 1.7 Other significant changes The loan agreement was amended several times mostly to facilitate project implementation given unfavorable macroeconomic and fiscal conditions, as explained in Section 2. A key change was to increase the percentage of Bank financing when macroeconomic conditions were very severe and the Borrower could not make available the originally required counterpart funds. The Closing date was extended two times. The first time was on December 18th 2003 when it was moved to December 30th 2005, and the second was on December 29th 2005 when it was extended to December 31st 2007. 2. Key Factors Affecting Implementation and Outcomes 2.1 Project Preparation, Design and Quality at Entry Project quality at entry was Satisfactory. The reasons behind this assessment are: 1. The background analysis that supported the project was solid because:
a. The project was strongly aligned to the CAS main drivers by (i) promoting efficiency for example by supporting private sector participation; (ii) increasing efficiency of the public sector by reducing subsidy needs; and (iii) contributing to poverty reduction by increasing job accessibility;
b. The project incorporated in its design lessons from seven Bank-financed projects in
urban transport in Brazil (Loans 1563-BR, 1839-BR, 1965-BR, 3547-BR, 3633-BR, 3915-BR, and 3916-BR) and from a broad variety of urban transit projects throughout the world. Lessons incorporated included the need to have institutional strengthening, the need to ensure adequate counterpart funds by all levels of government involved, the need to prevent slow implementation, and the need to involve the private sector through concessions to operate the rolling stock.
2. Project design was adequate because:
a. Several alternatives ranging from bus rapid transit to rail rapid transit were evaluated and the most cost-efficient was chosen. The metrorail line alignment was designed as to minimize total cost and also resettlement and environmental impacts;
b. Several procurement alternatives were evaluated settling for one that promoted
efficiency, reduced implementation time, and limited risks. The selected option envisaged procurement of the metrorail line through two main bids. The first was a turnkey contract for the infrastructure (links at grade, elevated, and in tunnel, and stations and accesses) and fixed installation systems (tracks, and power system and
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substations, including overhead power supply). The second was a concession for the provision and operation of the rolling stock, which included supplying the trains and other related systems;
c. The project was solidly conceived from a technical standpoint. For example, the
project design included mechanisms to facilitate bus-metro integration. A common problem with most metro projects is that integration—i.e. the transfer of passengers from a feeder bus to the metro—is not adequately planned.4 Once the metro becomes operational, ridership is lower than expected because of the difficulties of integrating the metro with feeder buses. The project design contemplated two elements to facilitate integration. One was building transfer terminals for passengers arriving by feeder bus in half of the stations. These stations were chosen on technical grounds to maximize passenger convenience and hence ridership. The second one was including the Metrosal in the Fundetrans clearinghouse, which facilitated fare integration;
d. A full concession study was completed before the project went to the Board and the
concession bidding documents were prepared;
3. The different government levels were committed to the project:
a. The Federal Government of Brazil had started its decentralization program and this project was part of that effort in urban transit. The GoB had shown its commitment to the project by signing a protocol for the transfer of the federally-owned and operated branch of CBTU and by agreeing to fund its share of the project, US$40M plus the $150M provided by the Bank loan, over the original five-year implementation period.;
b. The Government of the State of Bahia was fully committed to the project and had
allocated in future budgets the appropriations needed for the project totaling US$60M. It also delegated implementation of the project to the Municipality of Salvador. The State government had also created the Regional Transport Coordination Commission (RTCC) before appraisal.;
c. The Municipality of Salvador was committed as shown by the creation of Companhía
de Transportes de Salvador, CTS, the actual implementation agency, and eventually to be in charge of the STU/SAL and Metrosal operation. The Municipality had also created AGERT, the Municipal Transport Regulatory Agency of Salvador, as planned in the project.
4. A broad variety of risks were evaluated and mitigation measures were included. Key risks,
assessed at modest to substantial, were:
4 See Allport, R. and J. Thomson. 1989. “Study of Mass Rapid Transit in Developing Countries.” London, England.
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a. Project costs and time overruns due to works contractor: mitigated by contracting
experienced firms for the construction works under a turnkey, lump sum basis, except for the tunnel and foundations, where unidentified geological risk could exist and that would be paid on a unit price basis. There would be a “project integrator” to supervise works, under a Project Management Oversight Consultant that reinforced the capacity of the government. However, these mitigation measures could not handle external factors that affected the project and single it out from other Bank-financed projects in urban transport in Brazil (see 2.2);
b. Foreign exchange devaluation: mitigated by shifting burden of risk to the state
government, within certain range. The mitigation measure was planned to work within reasonable margins, as shown by previous experience, but not when devaluation was as significant as it happened (see 2.2);
c. No timely availability of counterpart funds: State and Federal Governments had
included in 1999 and 2000 budgets the allocation of funds for the project, and had included the project allocations in budget projections;
d. Bus feeder routes are not concessioned out as agreed: concession contract will commit
the municipality to concession out the feeder routes to metro stations.
2.2 Implementation The implementation of the project can be described as moderately unsatisfactory, because the project faced extraordinary circumstances despite a sound start. Currently, however, the project has the political support and funding necessary to complete it by 2009. The project was approved by the Board on 06/17/99, signed on 12/3/99 and became effective on 02/18/00, a positive record for Brazilian projects, showing the support the project had. Project implementation initially proceeded as planned, even exceeding expectations, because of the following reasons: (i) Proper preparation, as shown in 2.1; and (ii) adequate procurement of complex contracts. The initial successful implementation is impressive because the project was a “greenfield” development (a new metro line) and because it involved private sector participation without operational subsidies. The main initial results were: 1. The Infrastructure and Fixed Installation Turnkey contract was awarded to the Camargo
Correa – Andrade Gutierrez – Siemens Consortium for R$358.0 million (approximately US$207.7 million) in the last quarter of 1999. This price was within expectations and reflected broad competition between the six firms pre-qualified. Construction works under the Turnkey contract started in early 2000.
2. The Concession for the Operation and Provision of Rolling Stock and Systems was
awarded to the CAF – Dimetronic – ICF Consortium for R$ 88.3 million (approximately US$47.6 million) in May 2001 for a 25 year period. Of the six pre-qualified firms, two
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submitted a bid. Again, the price was within the expectations and the winning bid implied the concessionaire investing R$64 million (US$ 34.5 million) in equity. The winning bid demanded a government contribution of R$ 74.5 million (US$ 40.1 million). It is important to highlight that the concession documents stated that there would be no operational subsidies, but assurances from the municipality and state government to establish bus feeder services and eliminate direct bus competition were given. This approach is in line with current best practices in public transportation that promote “competition for the market” and subsequent creation of barriers to entry to the market for other competitors.5 The signing of a concession contract is in of itself an important achievement, more so in the absence of operational subsidies and the project being a “greenfield” development. Both characteristics increase risk, but when a contract is signed, it shows the bidding documents were adequate and allowed the market mechanism to work and maximize efficiency.
3. The Project Management Oversight Consultant contract was awarded, after a competitive
bidding process, in late 1999. Equally, the contract for the supervision of civil works was awarded in early 2000.
4. The institutional component advanced rapidly because the State created the RTCC, the
Municipality created AGERT, both before effectiveness, and the joint operational management between CBTU and the state and municipality of the Calçada Paripe line begun informally in late 1999. Ridership soon increased by 50%.
5. Resettlement work started by mid 2000. Resettlement was gradual and successful. Many
affected communities lived in substandard housing were relocated to proper housing. Despite this successful beginning, diverse factors negatively affected implementation. Following ICR Guidelines these factors are grouped as follows: 2.2.1 Factors general subject to Government Control - Less than expected counterpart funds: Against the contractual commitments with the Bank, appropriations in the Federal budget for the project were either smaller than needed, not included in the budget at all, or arrived with delay. Notice that if the appropriation is not budgeted at all, then the Bank loan could not disburse. Furthermore, disbursement of budgeted funds was restricted. (This situation also affected other Bank-financed projects, such
5 In competition for the market, the government chooses through competitive bidder the operator of transit services. Once chosen, the government creates barriers to entry to the market so that other suppliers do not compete “in the market” or on the road for each additional passenger. Competition in the market in public transportation is proven to lead to excessive number of buses in the streets, low productivity, high fares that affect mostly the poor, and low coverage in poor areas. (See Gómez-Lobo, A. (forthcoming), ‘Why Competition Does Not Work in Urban Bus Markets: Some New Wheels for Some Old Ideas’, Journal of Transport Economics and Policy and Ardila, A. Forthcoming. “The Limitation of Competition in and For the Market in Public Transportation in Developing Countries: Lessons From Latin American Cities.” Transportation Research Record, Journal of the Transportation Research Board..
11
as Recife, P038882; and Belo Horizonte, P006564). In response, the State and Municipal Governments initially provided the difference in funds to maintain the pace of implementation and the Bank increased its share of financing in some categories. However, after a while the pace of project implementation diminished and construction even stopped twice. For example, a fraction ($4 million) of the appropriation for 2004 arrived by May 2005. - Changes in the scope of the project: A new Federal Administration took office in January 1st 2003. The new administration argued it lacked fiscal capacity to undertake the entire project and requested cancelling $32 million from the loan, reducing it to $118 million (requested March 2004 and made effective December 2004) but promising to use its own funds later to cover the money it cancelled. The Bank sent a letter to the Ministry of Finance demanding adequate funding or cancelling the project. This strategy prompted negotiations between the Federal, State and Municipal governments, that resulted in the Federal Government agreeing to make available R$ 283 million over 2005-07 for the project. The appropriation took place under the Federal Government’s Public Investment Pilot Program (PIPP). The PIPP was the result of an agreement between the GoB and the IMF to allow Brazil a little extra public spending. The GoB, however, stated that it could only finance a redefined project that went between Lapa and Acesso Norte (6.1 km, 5 stations). This implied abandoning temporarily, while funds became available, 49% of the civil works of the Acesso Norte – Pirajá section that the loan had already funded. The downsized scope of the project was approved by the Bank in December 2005.6 The targets for the output and outcome indicators were adjusted to reflect the changes in funding and scope (see 1.3 and 1.6). - Changes in the designs of the Project: The municipal administration that took office in January of 2005 decided to elevate the Bonocô Av. stretch of the Metro line, including the station, originally planned at grade. The turnkey contractor agreed, but demanded compensation for the extra cost. The Tribunal Federal de Contas da União (TCU, a Controller’s Tribunal) intervened and demanded to examine all unit prices before allowing the amendment to the turnkey contract to proceed. This contract was lump-sum based, with unit prices for the areas with geological risk, following World Bank Procurement Guidelines. The TCU did not recognize these procurement guidelines and demanded to see all unit prices behind the contractor’s price estimate. The TCU, moreover, argued that the winning bid should have the lower prices for all items and not just for the total cost. In contrast, World Bank Procurement Guidelines do not allow unit prices or costs by component, because what matters the most is the total cost and not the cost of particular items. The TCU ordered the retention of 12.5% of payment to the contractor. The contractor immediately reduced the labor force from 1,200 to 500 arguing the financial equilibrium of the contract was broken. The pace of implementation slowed down significantly.7 This last set of delays impeded the civil works of the project from being completed by the closing date of the loan, 12/31/2007.
6 Later on in 2007 the GoB found the funding to finish the remaining 6.0 Km; however, officially these are not part of the reformulated project.
7 Further, the TCU followed a similar approach with the contract to provide the signals for the metro line ordering to withhold 7.5% of the value of the contract.
12
However, the controversy between the TCU and the contractor appears to be on the way of being solved and all evidence indicates the project will be completed during 2009. - Slow pace of the Decentralization of the STU/SAL commuter rail line: As said, joint operational management between CBTU and the state and municipality of the Calçada Paripe line begun informally in late 1999. However, the formal transfer of responsibilities for this line did not happen until November 2005. This also delayed other aspects of this component. By mid 2006 the upgrading of the line, the retrofitting of the existing fleet, and the retrofitting of the used trains purchased from São Paulo’s commuter rail system started. By December 2008 this component was complete, except some elements in some stations. The line is operational. 2.2.2. Factors outside the control of government or implementing agency: - Changes in macroeconomic conditions: Years 2001 and 2002 exposed Brazil’s economy to stress. The September 11, 2001 attacks in the United States, Argentina’s debt default in late 2001 and subsequent recession, and market jitters ahead of Brazil’s presidential elections led to higher inflation, lower foreign direct investment, a significant depreciation of the Real, higher interest rates, and lower economic growth8. The consequence for the project was that the concessionaire of the trains could not achieve financial closure. For example, at the contract-award date, the exchange rate was 2.296 Reais per dollar. By October 2002 the exchange rate reached its maximum at 3.805, a 65.7% devaluation. For investments priced in dollars, as the concession was, but with income in local currency that cannot adapt rapidly to abrupt changes in the exchange rate, this change means a loss of 39.6% in gross income. Such a loss in gross revenue affected the profitability of the concession and hence the possibility of achieving financial closure. While the State Government was expected to cover this risk, the change was too drastic and the risk mitigation measure could not work. Negotiations between CTS and the consortium took place and the result was an agreement to amend the concession contract. However, the TCU objected to the amendment arguing that it would hurt the State’s finances. The implementing agency justified the changes, without success. By mid 2003 the City Government decided to cancel the concession contract on the grounds that there had been no financial closure. With support from the Bank, an alternative approach was put in motion: to acquire in separate bids the rolling stock, the signaling, and concession the operation of the system with lower investment obligations for the concessionaire. The Bank issued the no objection for the bidding of the trains by November 2003. The trains were manufactured and are currently in Salvador. In sum, the decentralization and rehabilitation of the Calçada Paripe commuter rail line is complete. However, the implementation of the Metrosal line faced extraordinary circumstances that go beyond what a well designed project typically faces. Despite these circumstances, implementation of the 6.1-Km, Bank-financed project was complete at the
8 See World Bank. 2004. Brazil: Equitable, Competitive, Sustainable. Contributions for Debate, Chapters 12 and 13.
13
90.3% level for permanent ways and at the 88.6% for other civil works. Remains to finish the Bonocô station, now elevated. Systems such as tracks and signaling are being installed. The six-train fleet needed for operating is already in Salvador. The 6.1 Km will therefore be finished and become operational also in 2009, through a concession that will be issued early in 2009. Companies interested in the concession have voiced informal interest in participating in the bidding process. Finally, a Quality of Supervision Assessment undertaken by QAG took place during 2006, producing a rating of Satisfactory for the overall quality of supervision (final report dated 11/14/2006). Please see section 5.1 for more details. 2.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization 2.3.1 M&E Design: The project was monitored through a series of output and outcome indicators that could be measured and that reflected the achievements of the PDOs (see Table 2). Indicators were adequate both for measuring outcomes and output. The outcome indicators are measurable either directly (% of stations of the rail-based system integrated with buses) or through standard transport models that incorporate observations of passenger behavior (Reduction in generalized cost of travel). Both of these examples, moreover, are linked to the first PDO by measuring an improved quality of public urban transport in the context of an integrated system. Output indicators also easily allow measuring project development (6.1 Km of metrorail system built and integrated with other modes or Rehabilitation of the STU/SAL line ensuring transfer facilities). Further, the Bank and the client agreed on a detailed version of the indicators that went year by year, contrary to many projects (one example is P035740, Lima Transport Project). And upon agreeing on reformulating the project the indicators were adjusted accordingly (Table 2). These tables were part of the Project Agreement. Moreover, since the outset, there were baseline values for all the indicators. Table 2, moreover, shows that the at the reformulation the indicators were adjusted to reflect what needed to be achieved by year 2007, when all loan funds would be disbursed, but maintained the original indicators for 2010, because the Borrower committed to complete the original project by that date. Table 2. Amended Schedule 2 of Project Agreement By End of the Calendar Year
1999 (base)
2000
2001
2002
2003
2004
2005
2006
2007
2008
2010
Project Development Objectives Percentage of rail stations integrated with bus lines (integration related- objective)
0
0
0
0
0
0
0
0
25
25
50
Rail share of urban transport motorized trips (%) (congestion-related objective)
0.14
0.14
0.35
.60
.60
.60
.60
.60
.60
1.1
7.8
Generalized cost of travel (travel time
96.4
97.1
97.8
98.4
98.4
98.4
98.4
100
94
84
53
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By End of the Calendar Year
1999 (base)
2000
2001
2002
2003
2004
2005
2006
2007
2008
2010
plus fare plus reliability) between Pirajá and Lapa in minutes (accessibility of low-income user related objective) Project Outputs Physical Implementation % of permanent way works completed (Part A.1 of the Project)
0
0
0
0
0
0
15.9
27.7
37.2
66.6
100.0
% of other civil works completed (Part A.1 of the Project)
0
5.85
32.5
47.5
56.0
60.5
64.4
73.2
78.2
84.9
100.0
% of the system works completed (Part A.1 of the Project)
0
0
0
0
0
0
5.0
40.0
55.0
75.0
100.0
% of rehabilitation of STUL-SAL System (Part A.2 of the Project)
0
0
0
0
7.00
18.0
24.0
80.0
100.0
100.0
100.0
Institutional Development Concession-related process
Modeling Comple-ted
Concession completed
-
-
-
Section 1
in operation
-
Section 2
in operation
Integrated urban transport, land use and air quality strategy
Draft report Comple-ted
Draft final report discussed in public.
-
-
-
-
-
-
-
-
Establishment of regulatory entity
Prepare proposal
Establi-shed
-
-
-
-
-
-
Note: Regarding some project output indicators it is necessary to see them in the context of the entire 12.1 km metro line being completed in 2010 and that base is equal to 100%. Related output indicators show a gradual progression, as a percentage, to completion in that year. For example, the output indicator “% of permanent way works completed” should be 66.6% by 2008, of the entire 12.1 km, and 100% in 2010. Finally, the indicator “% of rehabilitation of STUL-SAL System,” refers to this part of project alone. 2.3.2 M&E Implementation and utilization: because of the slow pace of implementation it was mostly output indicators that were used by the Bank to assess progress. The team used constantly the physical output indicators to ensure the progress of the works and the delivery of equipment. Most supervision missions’ aide memoires reported the progress in those outputs. To measure the institutional development progress indicators such as “A formal regional transport coordination commission in place,” “Decentralization of commuter rail services from federal to state government,” “Preparing an integrated transport policy, land use and air quality strategy” were used. Further, because the indicators were such an integral part
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of the project, they served to continuously assess progress. CBTU, for example, used these indicators to assess progress in its bi-yearly reports. Further, as part of the supervision effort, the Bank contracted a local engineering firm that followed the implementation of the project in detail. This consultant’s reports included information on progress of the works, the procurement of goods and services, and the general development of the project. These reports, filed even monthly or bimonthly, used the output indicators and went into even more detail. 2.4 Safeguard and Fiduciary Compliance 2.4.1 Procurement The procurement component was well designed and supervised. The implementing agency was knowledgeable in Bank Procurement procedures and had capacity, as correctly assessed during preparation. However, because of the complex and innovative nature of the turnkey and concession contracts, among others, the Bank intensified procurement supervision by carrying out one mission every 6 months, instead of one every 12 months as originally planned. Furthermore, the team had high-level procurement specialists and a local procurement specialist. This level of collaboration with the borrower facilitated communications and helped to address issues promptly. The QAG Assessment concluded that “The project team should be commended for going beyond the call of duty to ensure transparent and efficient procurement under this project.” It is also important to highlight that the concession bid, which blended equipment supply with operation needed to innovate since there are no Bank Standard Bidding Documents for this type of bid. The Bank and the client worked to produce bidding documents that respected Bank policies. These documents pioneered and later on served as models for other projects following similar approaches. 2.4.2 Financial Management Financial Management (FM) aspects were generally in compliance with Bank procedures. The Project Agreement required both CBTU (the recipient of the loan on behalf of the Government of Brazil) and the city of Salvador to keep proper accounting of expenditures in the project. Audited copies of the accounting records had to be submitted yearly until loan closure. The agreement also required CBTU to submit quarterly progress reports detailing expenses. Both CBTU and the municipality complied with these clauses. However, nine out of 13 auditor’s reports were submitted with a delay of one month or less. These reports were revised by the FM specialists at the Bank and given comments when needed. For instance, the audit for 2004 took exceptions with some issues and soon after receiving the report (July 2005), the Bank carried out a mission (August 2005) to address these issues. By October 2005 the client solved the issues and the rating was reinstated to Satisfactory. This rating continued for the remaining of the project.
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2.4.3 Environmental The project was rated as a Category A project by LATEN. Full Environmental Assessment Report and resettlement plan were prepared by independent consultants. The executive summaries were submitted to the Board, prior to appraisal. The Environmental License was issued by the States Environmental Authority (CEPRAM) on April 23 1999, for a period of five years. The assessment report established the creation of a multi-stakeholder commission to supervise compliance with the recommendations and mitigation measures proposed in the environmental report and in the resettlement plan. The Commission (CGTA, Comissão Técnica de Garantia Ambiental) was created in March 2003. CGTA included the municipal implementing agency (CTS) and the turnkey contractor, among others. The turnkey contractor also contracted the same consulting firms that produced the original studies to monitor their implementation. These firms produced reports that CGTA used to assess progress and compliance regarding environment and resettlement. In turn, CGTA produced a yearly report that summarized the project scope, the mitigation measures contained in the environmental assessment and in the resettlement plan, and showed the progress in the previous year for each measure. As a result of this governance structure for the supervision of compliance, the implementation of both the environmental mitigation and the resettlement plan was carried out as planned. This also facilitated the Bank’s supervision, which coupled to the team’s experience led to QAG concluding that the team was “going by the book and fully meeting all Bank requirements.” Due to the decision of the GoB to cut funds and only make them available for the link between Lapa and Acesso Norte, some of the works already built between Acesso Norte and Pirajá had to be protected. This suspension and postponement of the construction works, as explained in Section 2, implied that: (i) some works were halted half way through construction; (ii) CGTA could not count on the consultant reports hired by the turnkey contractor; and (iii) the project’s execution went beyond the original five-year period granted in the environmental license. The contractor and CTS took measures to ensure that halted work did not put in risk neighboring human populations, did not damage the environment, and were protected from vandalism. For example, the water table level was always measured and controlled in the tunnel stretch to prevent flooding and pollution of waters. CGTA lost effectiveness during this period, but was re-established once works restarted. Finally, CGTA planned measures to extend the environmental license, which was renewed by the environmental authority. 2.4.3 Social The implementation of the project ended up taking over 650 properties, distributed along parts of the alignment and where the yards were going to be built. Consequently, a resettlement plan was drawn, approved, and implemented. This plan implied building a residential complex for the poorest of the resettled people. A visit to this complex, as part of the fieldwork done to write this ICR, showed that this complex has high-quality housing, coupled to proper streets, sidewalks, and parks. Bearing in mind that some of the resettled people lived
17
in precarious houses by the road side, their welfare clearly improved. Compliance by the project on resettlement was highly satisfactory because: (i) all displaced people were resettled and or compensated; (ii) housing conditions improved, (iii) CTS appointed a team consisting of an engineer, a lawyer and a social worker to oversee the resettlement process and also made use of an outside consultant to draw up the resettlement plan; (iv) there was a constant social follow up of the affected people to address their questions and solve emerging problems. Further, CTS maintained a social specialist in the field to handle social issues of the affected population and the Bank provided frequent supervision through site visits throughout the process of resettlement from planning through execution and follow-up. The QAG report concluded that the team established a best practice on the supervision of social aspects. 2.4.5 Cultural Properties This policy was not triggered originally. However, the EAR established that works had to be carried out paying attention to finding archeological and other cultural elements. As a result of finding during construction artifacts from the colonial times, the Task Team triggered the policy. A team of archeologists was hired to accompany any new construction. CTS has currently a small “museum” in the main construction site, showcasing the findings, which are documented and studied by professionals. A local University is involved and will take over the “museum” once construction is finished. 2.5 Post-completion Operation/Next Phase As mentioned above, the upgrading of the Calçada – Paripe commuter rail line is complete; the Metrosal metro line is still under construction and therefore it is still not operational. The Lapa Acesso Norte section of the Metrosal should be completed in 2009 as recent developments indicate. For example, the turnkey contractor is working at a good pace and the Bonocô station conflict between the TCU and the contractor is on the way to be resolved, according to recent interviews with people in the field. Therefore, it is expected that the Metrosal line will be operational by 2009. For this initial section to operate successfully and then the remaining section of the line, the Municipality is planning the following:
1. CTS, the ground implementing agency, will migrate from a construction-centered organization (contract supervision wise) to one able to continue building more sections of the Metrosal, while also supervising the operation of the metro line;
2. A project finance study for concessioning the train operation was finished in mid 2008.
This study found that the Lapa Pirajá line could be concessioned in two stages to a single concessionaire. In the first stage, the concessionaire would operate between Lapa and Acesso Norte the six-train fleet acquired with State funds. The concessionaire will also run new articulated buses between Acesso Norte and Pirajá until the rail line is completed, approximately by the end of 2010 (see bullet 4 below). The concessionaire will then provide six additional trains and operate the entire line with a 12-train fleet. In addition, the concessionaire will also operate feeder buses since the beginning of the concession. As said, the metro was designed to facilitate fare and physical integration. The study showed that even with a demand less than
18
originally planned, the metro coupled to the feeder lines will not require operational subsidies;
3. There are plans in place to rearrange bus routes once the metro is operational to ensure
its demand. First, the Municipal government has promoted together with the bus operators the gradual introduction of an electronic fare collection card. This measure will facilitate integration with the metro. Second, the Municipality has not issued new concessions waiting for the metro line to start operating. Once the metro’s operation is looming, the city will re-concession all bus routes in a “competition for the market” arrangement. The new routes will be designed so as to avoid competing directly with the metro. Analogously, the metro will not compete with the bus routes. Rail and buses will complement each other in an integrated transit system. This arrangement is necessary to guarantee that “competition for the market” works as the economic theory underlying it states.9 Thirdly, the Metro will be part of the Fundetrans, clearinghouse mechanism, as originally planned;
4. With the decision in 2007 of the GoB to include in the PAC the funds to conclude the
original project approved by the Bank, CTS will also conclude the construction in the Acesso Norte-Pirajá link. Had it not been for the Bank project team effort to support the project during the fiscal crisis and the work done in 2007 by CBTU management to include the project in the PAC this result would not have been possible because the project would have probably been cancelled;
5. The retrofitting of the Calçada – Paripe commuter line is almost complete. The line is
operational and ridership continues to grow. The Federal Government will transfer an operational subsidy for the next two years or more as a compensation for the delays it created during the fiscal crisis. The Federal Government and the Municipal Government are aware that with new stations and the refurbished trains demand will continue to increase. The operational subsidy can go down as a result. The Federal Government wants to set targets that if met will translate into a diminishing subsidy.
3. Assessment of Outcomes 3.1 Relevance of Objectives, Design and Implementation The Project Development Objectives remained valid throughout the life of the project and did not require change to accommodate them to different government priorities. The objectives also stayed relevant in light of Bank’s priorities regarding Brazil. For example, the objective of improving quality of public urban transport by developing an integrated urban transport system is in line with the 2006 revised CAS (2004-2007) priority of “Investing in growth, including enhanced emphasis on improving competitiveness and investing in infrastructure.” A high-quality integrated transit system is an investment in infrastructure that promotes urban competitiveness and efficiency by requiring fewer resources to move passengers. Hence it
9 See World Bank, 2001. Cities on the Move, Chapter 7.
19
promotes growth. This PDO is also in line with the 2008-2011 CPS which identifies as Brazil’s country goals: (i) to improve competitiveness by investing in the transport system, and (ii) to reduce inequality by providing, among others, job opportunities for the poor. The integrated system will benefit mainly the poor residing in Miolo and other poor areas of Salvador. The second PDO has to do with the decentralization of CBTU’s Salvador line to the State and Municipal governments. The decentralization of urban transport is mandated by the Constitution of Brazil and therefore continues to be relevant. The PDOs, therefore, remained relevant throughout the life of the project. The Project Design also remained relevant. The project was well designed as the initial results showed for example in terms of adequate procurement strategy and the search for private participation. The Project Design remained relevant in light of the negative and significant macroeconomic and fiscal changes (e.g. a 65.7% devaluation of the Real over 1.5 years). The Project Design was flexible and allowed changes while keeping the PDOs intact. For example, splitting the first line into two sections (Lapa - Acesso Norte and Acesso Norte - Pirajá) allowed the project to survive and continue its implementation. The solid Project Design, coupled to the Task Team supervision strategy, prevented Salvador from having an abandoned and partially completed project. Instead, the city has a system that while not yet operational is on target to be completed in 2009 (Lapa - Acesso Norte). 3.2 Achievement of Project Development Objectives The analysis in this section is carried out in light of the likely operation of the Metrosal line (Lapa – Acesso Norte) by 2009 and the already increasingly successful operation of the Calçada – Paripe commuter rail line. The Project Development Objective of “improving the quality of public urban transport in the Salvador Metropolitan Region (SMR) by enhancing the development of a fully integrated urban transport system, under the coordination of a Regional Transport Coordination Commission” is considered Moderately Satisfactory, because of the following analysis of the indicators related to this PDO:
1. The key outcome indicator “Higher share of rail in total urban transport trips” was achieved”. This indicator encompasses both the commuter rail (Calçada – Paripe), which was upgraded, and the Metrosal metro line (first 6.1 Km), which is still under construction, as explained. The indicator established that 0.60% of total urban transport trips were to take place by rail. Ridership has increased in the commuter rail line from 0.14% of total demand to 0.60% of total demand, according to CBTU figures. The increase in ridership can be attributed totally to the project, because it increased the level of service by: (i) doubling operational train fleet through the acquisition of more trains and upgrading the old fleet; (ii) retrofitting and upgrading stations; and (iii) having affordable and competitive tariffs. This indicator is expected to rise to 7.8% once Metrosal Lapa Pirajá line is operational by 2010 (see Table 2 in section 2.3);
20
2. The key indicator of “25% of stations of the rail-based system integrated with buses,” which pertains only to the Metrosal metro line, was achieved because all of the stations of the Lapa-Acesso Norte link are already equipped with bus terminals. The reasons behind this claim are: (i) 40% of stations in Lapa Acesso Norte section (first section to start operation in 2009) are already equipped with bus terminals and 50% of all metro stations have been built with an accompanying bus terminal for physical integration; (ii) Concession contract instructs concessionaire to operate feeder buses thus guaranteeing service to stations and fare integration; (iii) Agreements between City of Salvador and bus operators allow city to re-concession out all bus services once metro becomes operational with the integration idea in mind;
3. The key indicator of “reduction in generalized cost of travel (travel time plus fare plus
reliability) between Pirajá and Lapa in minutes from 96.4 to 94.0 minutes,” which also pertains to the Metrosal metro line, is likely to be achieved in 2009, once the first section of the metro line becomes operational. The reasons behind this claim are: (i) the trains on the metro line will run at higher speeds than buses thus reducing the generalized cost of travel; (ii) the transfer terminal at Acesso Norte is built along with the rail station; and (iii) the concession contract orders the concessionaire to operate buses between Acesso Norte and Pirajá. Once the entire line is built, this indicator is expected to go down to 53 minutes (see Table 2 in Section 2.3). Again, the transfer terminals and the integrated fare will likely facilitate achieving this figure;
4. The key indicator of “Urban Transport Planning and Regulation in the SMR will be
coordinated” is related to the PDO’s idea of establishing a Regional Transport Coordination Commission (RTCC) and an urban transport regulatory agency. This commission was established by State Decree in 1999, before effectiveness. The commission has worked well, with occasional upheavals caused for political reasons. However, the need of the commission is so evident that stakeholders and government officers soon reconvene it to hold policy dialogues. An example is the agreement reached to re-concession all bus routes once the metro starts operating. The project also contemplated establishing a municipal transport regulatory agency. This agency was created through city law in January 2000. The regulatory agency (AGERT) has worked since, regulating tariffs;
5. Two additional studies to further institutional development were carried out as planned.
These were the Comprehensive Traffic Management Review of the Salvador Metropolitan Region and the Integrated Transport Policy, Land Use and Air Quality Strategy. The former study led to installing a new traffic light system in the system (not funded by the loan). The latter led to a framework that allowed studying the train concession and the re-concessioning of the bus routes.
The second Project Development Objective of “transferring from the Federal Government to the State of Bahia and Municipality of Salvador, the Salvador subdivision of the CBTU system” was fully achieved. The achievement of this objective is considered Satisfactory, because of the following analysis of the indicators related to this PDO:
21
1. The Federal Government transferred as planned, albeit with some delays, the STU/SAL commuter rail line to the Municipality of Salvador;
2. The Municipality with help from the Federal Government, as planned, is successfully
upgrading this line by introducing more and better trains and by upgrading the line and the stations;
3. Ridership has gone up significantly as a result of the improvements.
The overall achievement of PDOs is therefore considered Moderately Satisfactory because the first PDO is given more weight. This rating is in line with the most recent ISRs. 3.3 Efficiency A conventional cost-benefit analysis was carried out using the latest cost estimates to assess the effectiveness of the project at the time of this writing (see annex 3). The model used was the same one used during appraisal, to ensure comparability of results. The model maintains the original 12.1 Km Metrosal line, again to ensure comparability and because cost estimates provided by CBTU are for completing the entire line (see Annex 1). The following were the main changes with respect to the situation at appraisal:
1. The implementation (construction) period is of 10 and not 5 years; 2. The number of years where the project is operational is now 15 and not 20. This
change was because the evaluation period was kept constant at 25 years, again to make the two evaluations comparable. Benefits start to accrue on year 10 and not on year 5;
3. Project benefits started only after the 10th year because of the delays in construction
and they were only considered in full after the operation of the expected completion and entry in operation date of the Pirajá-Acesso Norte segment;
4. The project costs increase to reflect actual expenditures in the project, plus
expenditures estimated for completion. Updated project costs are shown in Annex 1 (totals are not discounted over time, whereas in evaluation they were discounted).
In the PAD the NPV (10% discount rate) was US$ 527 million and the EIRR was 25%. The model shows that for the evaluation with today’s data the NPV is US$ 178.9 (10% discount rate) million and the EIRR is 15.32%, above the discount rate. The results indicate that despite a significant cost increase and a significant reduction in benefits, the project is still expected to be beneficial for the economy because it generates more benefits than costs. Finally, it is worth estimating another indicator of efficiency, which is the overall cost per kilometer of the Metrosal line of 12.1 Km. The result is approximately 42.8 million per kilometer (dollars of 2008). The original estimate was 24.9 million per km (dollars of 2000,
22
roughly 31.6 in 2008 dollars).10 This increase is mainly explained because the State and Municipality decided to have the Bonocô section elevated rather than at grade as in the original design. This added costs to the project. The 42.8 million per Km figure compares well with similar projects, even with some that have a similar cost but whose infrastructure is of lower quality. For example, Lima’s Tren Electrico first stage of 10 Km cost in today’s dollars around 47 million per Km; however stations and alignment are of significant lower quality, no single link was underground, and no station has transfer terminals built. Metrosal has 1.5 km of tunnel, which is significantly more expensive than at grade or elevated. The Medellin Metro, also procured through a turnkey contract, ended up costing above US$96 million per km (in 2008 dollars), and has no link underground. Moreover, the 42.8 million per Km compares well with the international best practice for metros, which is found in Madrid, Spain, and in Santiago, Chile. These examples also have underground segments. Therefore, despite the cost increase Metrosal is still a reasonably priced metro line. 3.4 Justification of Overall Outcome Rating Rating: Moderately Satisfactory This rating results from: (i) the high relevance of the project objectives and design; (ii) a moderately satisfactory achievement of the first development objective; (iii) a highly satisfactory achievement of the second development objective; and (iv) a reasonable economic efficiency of the project-financed investments. 3.5 Overarching Themes, Other Outcomes and Impacts (a) Poverty Impacts, Gender Aspects, and Social Development None measurable with available data. (b) Institutional Change/Strengthening For the actual implementation of the project a city agency was created, Companhía de Transportes de Salvador, CTS. Throughout the implementation of the project, CTS has trained with on the ground experience several cohorts of professionals in areas such as engineering, procurement under World Bank rules, project management, and railway technology. As operations pick up pace, the people at CTS will further their experience in this area and to go faster along the learning curve, CTS signed technical cooperation agreements both with the Metro of São Paulo and with CBTU. The creation of the RTCC is also worth highlighting because of the need to gather different stakeholders to plan the evolution of the urban transport system and gather consensus. Equally, the project led to the creation of AGERT, the Municipal Transport Regulatory Agency of Salvador. As an independent agency, AGERT is able to regulate tariffs and other aspects of service provision free of undue political pressures, with an emphasis on technical aspects. Yet AGERT does not operate in a social vacuum. It
10 These values are distorted by the dramatic changes in the exchange rate. Changes is the cost per kilometer are smaller in Reais, the local currency. However, the values are in dollars for comparison purposes.
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has a consultative council where representatives of the mayor and the city council and of service providers and users gather to provide advice to the executive director. The executive director makes the final decisions. (c) Other Unintended Outcomes and Impacts (positive or negative) None measurable with available data. 3.6 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops Not Applicable. 4. Assessment of Risk to Development Outcome Rating: Substantial The risk to development outcome of this operation is substantial because of the following reasons:
1. Financial risk is assessed as moderate. Financial risk emerges from an eventual lack of integration between feeder buses and the Metrosal line. If this happens, then the concessionaire or the metro line as such will not be able to cover its costs because not enough passengers use the line. To mitigate this risk the Municipality has structured the concession so that the concessionaire of the metro also operates the feeder buses. Furthermore, the dialogue between the city government and the bus operators has led to agreeing that once the metro becomes operational the bus routes will be re-concessioned. The new concessions will have routes structured so that no direct competition with the metro takes place, but rather metro and buses are integrated. The integration, moreover, will be facilitated by the recent and gradual introduction of the electronic tickets in the buses;
2. Economic risk is assessed as moderate. Economic risk emerges from the impact of a
devaluation of the Real on the metro concession. Already once, with the original concession an extremely high and rapid devaluation led to cancelling the contract. Given the current world economic conditions this risk could materialize again. Mitigation measures are still under consideration, but it is clear that the state and city government need to provide better coverage particularly regarding a sound allocation of the mitigation of this risk between government and concessionaire;
3. Technical risk is low. The technical risk pertains to the possibility that the trains, the
power supply system, and the signaling system, among others, do not operate as planned. The main mitigation measures are: these systems were procured from experienced firms, and the concession creates positive incentives in both the government and the concessionaire for having these systems operate as planned. Also, these technologies are proven and are operating correctly in many systems in the world;
4. Institutional risk is assessed as substantial. The Tribunal Federal de Contas has played
a significant role in the project’s development and it could play a similar role in the
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near future leading to more delays. As said, the current conflict between the TCU and the turnkey contractor over the change from at grade to elevated of the Bonocô station is close to being solved. However, the TCU could continue to find reasons to intervene with the turnkey contract development, particularly the construction of the second section of the first line between Acesso Norte and Pirajá. If this scenario materializes, the end result will be delays, litigation, and against the original intent of the TCU more cost increases.
5. Assessment of Bank and Borrower Performance 5.1 Bank Performance (a) Bank Performance in Ensuring Quality at Entry Rating: Satisfactory At entry, the Task Team confronted a project that entailed features that were innovative for urban transport projects financed by the Bank: (i) the project included implementing a “greenfield” metro line and Bank experience involved only rehabilitating metro lines (e.g. Buenos Aires, P039584); (ii) the city of Salvador had no experience with metro technology; (iii) the government wanted to promote private sector participation for example in the provision and operation of the metro; (iv) more often than not metros ran a deficit, rarely covering O&M costs and even less frequently covering also rolling stock capital costs; and (v) the Brazilian concession law forbade subsidizing operating costs in concessions. Only recently was the Private Public Partnership law (PPP law) enacted which allows risk mitigation and operating subsidies. The new concession bidding documents will issued following the new PPP law. In this context, the Bank and the borrower prepared the project by (see also section 2.1): (i) carrying out a solid background analysis; (ii) evaluating several alternatives (including buses on exclusive lanes and a metro line); (iii) holding detailed missions with specialized teams of consultants that looked at the project in detail; (iv) designing a technically well conceived project; (v) studying several alternatives for procuring works coming up with the turnkey contract; (vi) having a recognized consultant (Fundação Getúlio Vargas) prepare the project finance study for the concession of the metro trains and structure it before appraisal; (vii) evaluating a range of risks and proposing proper mitigation measures; (viii) paying attention to institutional aspects such as the need to create the RTCC and AGERT, and (ix) gathering support from Federal, State and Municipal governments and asking them to show commitment (for example, by including the project in budget projections and creating RTCC and AGERT before appraisal). As a result, implementation started with great success (see 2.2). Finally, the project design achieved during preparation was flexible enough so that later on it was possible to split the first metro line into two segments to confront economic and political problems (see 2.2). This flexibility allowed project implementation to continue, albeit at a slow pace. In sum, the rating of Satisfactory reflects the absence of shortcomings in identification, preparation, or appraisal.
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(b) Quality of Supervision Rating: Satisfactory Bank supervision is rated as Satisfactory (please see also sections 2.2, 2.3, and 2.4) because of Bank’s actions such as: (i) frequent supervision missions (29 ISRs filed between June 1999 and January 2008, or more than 3 per year, not including Resettlement, FM and Procurement supervision missions which took place at least once every year); (ii) prompt and sound identification and assessment of implementation problems, for example when Federal funds did not arrive as scheduled; (iii) high-quality advice and proposed solutions to the borrower to address the implementation problems, for example by agreeing to increase Bank % financing in some categories to make up for delays in counterpart funds which allowed loan funds to advance implementation; (iv) ample use of the monitoring and evaluation tools to follow the implementation, detect problems, and generate reports; (v) the hiring of local consultants to help supervise overall project evolution, compliance with safeguards, and help advance complex procurement; (vi) strict supervision of the safeguards and the activation of an additional one during implementation; (vii) candid ISRs and Aide Memoires, (viii) appropriate and prompt Bank follow up actions, such as sending a letter to the Borrower demanding counterpart funds or cancelling the project; (ix) deep knowledge of how to adapt the project to ensure its survival in light of contrary fiscal and even political conditions; (x) dialogue with staff of the local branch of the TCU and with the judge responsible in Brasília to clarify questions from this comptroller’s office; and (xi) aiding CTS and CBTU convince the GoB of including the project in an expanded program of federally-funded projects, the PAC (Accelerated Growth Program). The inclusion of the project in the PIPP and later on in the PAC secured funding for the project and indicated that implementation would proceed at a good pace without disbursement restrictions. The supervision team showed strong dedication to the project and definitely contributed to its survival when the GoB decided to restrict the budget and cut funding. The team also informed management of the problems on a regular basis and when the budget situation started to affect the project implementation it suggested that either the Ministry of the Cities should increase funding or that it should cancel the loan. It was this letter that led to a major review of the funding of the project by the GoB and ultimately to the decision of including the first section (Lapa – Acesso Norte) it in the 2005 PIPP. Later on, the team helped CTS and the State in their efforts to include the full project in the 2007 PAC. Finally, a Quality of Supervision Assessment took place during 2006, producing a rating of Satisfactory for the overall quality of supervision (final report dated 11/14/2006). Regarding Identification and Assessment of Problems, the QSA commented that “The Task Team did an excellent job in identifying the implementation issues and outlining strategies for talking them.” Regarding procurement the QSA concluded that “The project team should be commended for going beyond the call of duty to ensure transparent and efficient procurement.” Regarding safeguard supervision the panel commented that the Task Team was going by the book on the environmental side, and that it “set a best practice example on the social aspects.” The QSA, however, noted that the CMU could have pressed earlier the GoB to ease the restrictions on funding.
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(c) Justification of Rating for Overall Bank Performance Rating: Satisfactory. The Bank helped the borrower in the adequate preparation of the project. The Bank also actively addressed implementation problems thanks to a careful and proactive supervision that helped adapt the project to ensure its survival and likely achievement of its PDOs. The supervision of safeguards and fiduciary issues was exemplary. 5.2 Borrower Performance (a) Government Performance Rating: Level of Government Federal State Municipal Overall Rating Unsatisfactory Moderately
Satisfactory Moderately Satisfactory
Three levels of government were involved in this project. This evaluation considers all of them, both during preparation and during implementation. During preparation all three levels of government achieved a satisfactory rating because they supplied information, carried out the necessary studies, estimated investment needs, and recognized institutional weaknesses. Furthermore, the federal agency, CBTU, had acquired experience in at least two similar projects and was able to manage safeguard and procurement issues easily. The state and municipal governments, for their part, created the Regional Transport Coordination Commission and the actual implementation agency, CTS. During implementation, however, as explained in detail in section 2.2, the GoB either did not budget adequate resources for the disbursement of the loan or counterpart funds, despite being merely US$ 8 million per year, on average over the five-year implementation period. Overall macroeconomic conditions during the crisis were probably a factor for this decision. However, it is unthinkable to stop a project in the middle of a busy city when the money of the loan was available to be disbursed and could not be done because it was not included in the budget. Even if counterpart funds were not provided, the loan funds if adequately included in the budget would have been enough to keep the project going. The Ministry of Transport and after 2003 the Ministry of the Cities, particularly the latter, should have evaluated more carefully the huge impact of their decisions in the implementation of this project. This decision is relevant in light of the legal agreements signed by the GoB with the Bank in which the GoB agreed to provide the funds for the timely completion of the project. This budgetary decision of GoB is a key cause for the delays in completing the project; a decision that almost derailed it completely. For these reasons, the performance of the GoB during implementation is rated as unsatisfactory. The State Government’s performance during implementation is rated as moderately satisfactory because it provided initially the counterpart funds that GoB did not supply. Also, the State agreed to finance the initial set of six trains, once the concession was cancelled, for operating in the Lapa Acesso Norte section. However, from 2007 onwards, the State could have participated more in the project particularly because the municipal government changed twice the director of CTS. The State, although delegating always the implementation of the
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project to the Municipality, could have been more proactive for instance through an agency with power and capacity such as CONDER. Equally, the Municipal Government’s performance is rated as moderately satisfactory because it supported the implementation effort all along although there were clearly two different periods. In the beginning, from 1999 to 2002 the Municipal government maintained a very stable CTS management and the continuity of the main managers served well the project despite the federal budgetary restrictions. However, as of 2003 the Municipality changed twice the team at CTS and this had a negative impact on the project. These changes were because of shifts in political alliances, which in turn affected the Municipal Secretary of Infrastructure to which CTS reports. The high rotation caused difficulties to the project, generated delays, loss of institutional memory and experience, and unnecessary need to revisit the learning curve. (b) Implementing Agency or Agencies Performance Rating:
Implementation Agency
CBTU (Federal)
CTS (Municipal)
Overall Rating Moderately Satisfactory
Moderately Satisfactory
There are two implementation agencies, CBTU, at the Federal Level, and CTS, at the Municipal Level. This evaluation considers both. First, CBTU had ample experience with Bank loans, procedures, safeguards, monitoring and evaluation, and reporting. As such, the agency complied with all Bank requirements. Furthermore, the Project Implementation Unit at CBTU was adequately staffed and its management was stable. In the beginning, and as requested and agreed with the State, CBTU acted as a representative of the GoB and allowed ample space for CTS to act. However, all bids and disbursements had to go through CBTU. This relative independence for the local implementation agency was one of the lessons learned from previous projects. Specifically, local authorities had complained that all the power was at CBTU and that they needed to have more say in implementation because they were going to operate the systems. As of 2003, with the changes in the federal administration, CBTU’s management started to interfere more in the project and was often accused by CTS of being slow at managing certain processes, and often conflict with CTS emerged for this reason, souring the relationship at times. Moreover, CBTU proved to be a weak actor when it came to fight for budget for the project from the Ministry of the Cities. Reasons were that CBTU’s initial administration under the government that took office in 2003 did not believe in private sector participation and was not too keen on the decentralization model. For these reasons, CBTU’s performance is rated as moderately satisfactory. Second, CTS was created to handle all rail-based transit in Salvador, i.e. the Metrosal and the STU/SAL commuter rail. As a nascent agency it had to learn tasks ranging from Bank procedures, to procuring large and complex contracts, to supervising these contracts. There were occasional problems. Sometimes CTS was slower-than-desired at handling processes,
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particularly given that CBTU was also involved in many of them. CTS, however, is handicapped by the institutional design adopted for the project’s implementation. CTS is the formal owner of the project and is its direct implementing agency, but it is also the weakest agency. Salvador’s financial contribution to the project is minimal compared to the state and federal contributions. CTS’s power is consequently small. To lobby for funds it has to do it through the state or through CBTU—an agency not always sympathetic to the idea of decentralization, (particularly after 2003) and private sector participation embedded in the project. Given the handicap and the actual performance, the rating for CTS is moderately satisfactory. (c) Justification of Rating for Overall Borrower Performance Rating: moderately satisfactory The overall Borrower Performance for the Government of Brazil is moderately satisfactory. One rating is unsatisfactory and the other is moderately satisfactory. When this discrepancy happens, ICR rating guidelines indicate to look at the rating for the project, which is moderately satisfactory, to assign the final rating. The rating for the State of Bahia and the Municipality of Salvador is moderately satisfactory. 6. Lessons Learned The following lessons emerge from the analysis of the project done in this ICR. Turnkey contract: turnkey contracts work quite well when there are no changes to the original designs. However, when the government introduces a change or variation the situation can turn problematic. The main cause is how to valuate the cost of the variation.11 This was the case in the Bonocô station and adjacent stretch when the government changed them from at grade to elevated after the reformulation of the project. The resulting uncertainty in the cost gave the opportunity to the TCU to oversee the entire project, and as a result fine the contractor and generate delays. In the standard formats used for turnkey contracts there are several alternatives for dealing with variations.12 However, none seem to address the situation in the project where a powerful Controller’s Office (TCU) intervenes and has the right to stop the project or impose sanctions that affect the financial equilibrium of the turnkey contractor. In this context, a possible solution is that when the government requests a change, it should have highly detailed designs (ideally 100% detail or construction level) for that change so that it can know with high certainty the cost. The standard turnkey contract has clauses dealing with variations that usually ask the contractor to provide its own design and budget. The
11 See Huse, Joseph, 1997, “Understanding and Negotiating Turnkey Contracts,” especially chapter 17 “Variations.”
12 See Huse, Joseph, 1997, “Understanding and Negotiating Turnkey Contracts;” International Chamber of Commerce, ICC, 2007, “ICC Model Turnkey Contract for Major Projects;” and Fédération Internationale des Ingénieurs-Conseils, FIDIC, 1999, “Conditions of Contract for EPC Turnkey Projects,” among others.
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contract also establishes how to proceed in case of price discrepancies. The proposed alternative for dealing with variations in turnkey contracts will, first, diminish the excessive power the turnkey contractor develops—emerging from its monopoly position—when a variation is requested. The contractor will know the government has an independent and detailed budget. Second, the TCU can oversee the entire process of changing the original designs, and because it will have access to precise information it will have better incentives. Notice that this recommendation is not an argument for having turnkey contracts where the entire facility is fully designed prior to bidding. The advantage of turnkey contracts is that they can speed up the process because they are based on sufficiently detailed project designs that then require the contractor to finalize them under supervision from the owner. However, variations usually lead to conflicts and problems in turnkey contracts, and hence the recommendation here for dealing with changes to the final designs. Exchange Rate Risk: for concessions where investments are priced in Dollars or Euros but the revenue is received in local currency, a large devaluation can affect dramatically the profitability of the concession. The Salvador Urban Transport Project had provisions to cover this risk, but given the dramatic devaluation of the Real, these mitigation measures were not sufficient. A better sharing of the devaluation risk has to be devised. For example, in case of a dramatic devaluation of the local currency, a one time transfer from the government could take place. The government could buy insurance to cover this transfer. However, if there is a dramatic appreciation of the local currency (as it was the case between 2006 and 2008) then the concessionaire ought to either lower tariffs or agree to transfer part of the windfall to the government. These options were considered in the original design of the concession but at that time there was only a Concession Law which did not allow the State to assume risks in this way. Currently, the Private Public Participation (PPP) law enacted in 2005 allows better mitigation measures in this regard and they were used in the design of the new concession. Flexibility: The Salvador Urban Transport project illustrates the importance of introducing flexibility into the planning and implementation of a large project like this one.13 This flexibility allowed the project to survive through incredibly difficult times, represented by economic crisis, large devaluations, and lack of counterpart funds. The flexibility in this case stemmed from a sound technical conception that allowed the possibility of splitting the first line into two sections and finish one first, start service, and then finish the second one. This flexibility, in part made possible by a devoted Task Team, allowed the project to survive and prevented the city from ending up with an abandoned and partially built facility. Contrasting this case to Lima and Medellin illustrates the importance of flexibility. In Lima the metro’s construction stopped 16 years ago and the line is not operational. The 10 Km. built do not communicate the heavily populated area where it starts with the downtown area. Construction
13 See Goetz A. and J. Szyliowicz. 1997. “Revisiting Transportation Planning and Decision Making Theory: the Case of Denver International Airport” (Transportation Research, Vol. 31, No. 4) for an analysis of resilience in mega project planning and implementation.
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has not yet restarted. In the Medellin case, the lack of flexibility translated into sky-high cost increases in the cost of the project in order to finish it from US$ 41.50 million to US$96 million per km (in 2008 dollars). Dealing with Comptroller’s Offices (i.e. Tribunal Federal de Contas da União): the Project’s mishaps with the TCU are not unique to the Brazilian case. Other countries in Latin America are reporting similar situations in which Comptroller’s Offices intervene with the procurement and disbursement of a project. The result can be delays that could increase the cost of the project. In the project object of this report, the TCU did not recognize Bank procurement procedures and did not accept the underlying principles of a turnkey contract. The Task Team met with representatives of the TCU but to no avail. The TCU still demanded the retention of a certain percentage of the payment to the contractor in all invoices. This retention affected negatively the turnkey consortium, which was already suffering from the budgetary restrictions imposed by the GoB. Given the importance of and need to have Comptroller’s Offices oversee any public expenditure, the lesson is to involve representatives of the Comptroller throughout the planning and preparation of the project. In this way, the procurement strategy and the costs of the project will be known to this agency. At the same, however, a proactive effort has to be made to invite TCU representatives to courses on Bank procurement guidelines and to discuss advanced procurement methods, such as turnkey bidding processes. This training is important because in the project at hand, the TCU argued that it needed to know all unit prices for the bids for the turnkey contract. However, disclosing unit pricing will discourage true competition if bidders have to disclose their advantages and weaknesses. What matters the most is the overall price of the bid. Finally, the World Bank could undertake research to illustrate Comptroller’s Offices best practices and diffuse it among the agencies in the Latin America Region. Decentralization and service provision: Similar to the Belo Horizonte and Recife railway decentralization projects sponsored by the World Bank, the Salvador project illustrates the convenience of such process. Ridership in the Calçada Paripe STU/SAL line is increasing thanks to the upgrading of the stations and fleet, and the doubling of the fleet but also because local appointed management is under more pressure to show results and is directly accountable to the Mayor. Thanks to decentralization and transfer of ownership to the state and municipal levels, service provision is closer to the passenger and tends to improve in order to attract passengers. The Bank should continue to support similar decentralization efforts in urban transport service provision although it must be careful in evaluating the source for the operating subsidies required in view of the buying power of the users which in general are of very low-income. Decentralization and the remaining role of the Federal Implementation agency: In any decentralization process the Federal level of government cedes functions, attributions, and even revenue, to sub-national levels of government. There is a natural tendency in the Federal agency that cedes responsibilities to fear the decentralization process. This fear stems from first, not being able to continue to carry out the tasks it used to perform. Secondly, it stems from fearing that lacking functions, the agency will be eliminated from the government apparatus. The fear translates into political opposition to the decentralization process. CBTUs weak support of the need for funds for the project illustrates this point. However, in a
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decentralization process the role of the federal agency does not disappear but instead changes from actual service provider to, for example: (i) setting standards of service, (ii) providing oversight and technical support to the sub-national levels that now provide the service, and (iii) allocating Federal funds among the sub-national governments. For the latter, the agency will fund projects that meet technical standards defined by the agency. Examples are the Federal Transit Administration in the U.S.A. and the Ministry of Transport in Colombia in light of this country’s National Urban Transport Program. Therefore, future projects that support decentralization efforts should also include answers to the question of what happens to the Federal agency as the decentralization process advances. In the end, organizational survival is a key objective of any organization, and the decentralization should not eliminate the Federal agency but change its role in line with the decentralization process. 7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners (a) Borrower/implementing agencies The Borrower’s report is translated in Annex 7. The borrower, through CBTU, describes the project and explains the factors that led to delays and cost increases in the completion of the project. These factors are similar to the ones explained in this report. It is worth highlighting the borrower’s mention of the macroeconomic crisis and the role of the TCU. The macroeconomic crisis led to the demise of the concession contract and also to delays in disbursements by the Federal Government. The borrower mentions that the TCU: (i) did not accept solutions found to the situation confronted by the concessionaire, and (ii) did not agree with World Bank Procurement Guidelines, ordering a retention of payments to the turnkey contractor. The first action by the TCU led ultimately to cancelling the concession contract. The second action slowed down the pace of work of the turnkey contractor. According to the borrower, the macroeconomic problems and the role of the TCU led to implementation delays and to cost increases. The borrower’s report also assesses the Bank’s role and rates it as “highly satisfactory.” Finally, the borrower evaluates its own role by highlighting again some of the problems faced during implementation and the actions taken. The borrower states the project achieved its PDO regarding the decentralization of the commuter rail line from the federal to the municipal government, and it is on target to fulfill the other PDO. (b) Cofinanciers (c) Other partners and stakeholders (e.g. NGOs/private sector/civil society)
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Annex 1. Project Costs and Financing
(a) Project Cost by Component (in USD Million equivalent) Components Appraisal
Estimate (USD
millions)
Actual/Latest Estimate
(USD millions)
Percentage of
Appraisal
1. INFRASTRUCTURE AND EQUIPMENT
263.8 511.7 194%
- Turnkey contract (Infrastructure and fixed installations Metrosal)
Physical Contingencies 18.7 Price Contingencies 13.1 4. FRONT END FEE 1.5 1.5 100% TOTAL PROJECT COST
307.8 557.7 181%
Note: Estimated for the entire original project of 12.1 Km and not just for the 6.1 Km, reformulated project, to ensure comparability of figures. Some items, in addition, include scope beyond the one originally planned.
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(b) Financing Source of Funds Type of
CofinancingAppraisal Estimate
(USD millions)
Actual/Latest Estimate
(USD millions)
Percentage of
Appraisal
International Bank for Reconstruction and Development
150.0 118.0 79 %
Foreign Private Commercial Sources (unidentified)
50.0 0.0 0%
Borrower Counterpart funds
40.0 367.9 920%
State of Bahia/Municipality of Salvador
68.0 71.9 106%
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Annex 2. Outputs by Component Part A. Infrastructure and Equipment Investment Component: Part A1. Construction of selected sections of the initial operating segment (Pirajá-Lapa) of the Metrosal, which consists of 12.1 Km, of which 4.1 Km are at grade, 6.3 Km are elevated and 1.7 are in tunnel, comprising: (a) all the civil works, installation of signaling, telecommunications and electrification facilities and equipment, acquisition of rolling stock (six train sets), construction of houses to resettle part of the population being affected by the metrorail works, and technical assistance for the management and supervision of the metrorail construction at Section I (Acesso Norte-Lapa), including transfer stations between road and rail based systems, consisting of a 6.1 Km rail rapid transit line, of which 0.2 Km are at grade, 4.4 Km are elevated and 1.5 Km are in tunnel; and (b) 49.3% of the civil works for the remaining segment of 6.1 Kms of Section II (Pirajá-Acesso Norte). Part A2. Rehabilitation of the Calçada – Paripe (STU/SAL) commuter rail line.
Sub-Component Output Indicator Percent of target
achieved (September
2008)
Comments
% of permanent way works completed (Part A.1 of the Project)
90.3% Tunnel and elevated sections almost complete. Construction of now-elevated Bonocô Station is delayed.
% of other civil works completed (Part A.1 of the Project)
88.6%
% of the system works completed (Part A.1 of the Project)
22.5%
Acesso Norte – Lapa 6.1 Km section
% of required trains for Metrosal (six for first section)
100% Trains are manufactured and in Salvador.
Pirajá – Acesso Norte 6.0 Km section (49.3% of civil works only)
% of permanent way works completed (Part A.1 of the Project)
100% Target refers to 49.3% of civil works already built in this segment. This construction took place before the project was reformulated.
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Sub-Component Output Indicator Percent of target
achieved (September
2008)
Comments
% of required trains
for Metrosal (six for second section)
See comments Concessionaire expected to supply this additional trains once needed.
A concession for operation and maintenance of the Metrosal to the private sector
A concession awarded and financially viable
See comments A concession was awarded in 2002 but had to be cancelled because of changes in macroeconomic conditions. Municipal Government will issue bidding documents for a new concession early in 2009, under the new PPP law.
% of rehabilitation of STUL-SAL System (Part A.2 of the Project)
100.0%
Three existing trains retrofitted and in service
100%
Three old trains from another system retrofitted and in service
100%
Calçada – Paripe (STU/SAL) commuter rail
% of stations retrofitted
95.0%
Sources: information gathered from CBTU’s reports and from fieldwork in Salvador.
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Part B. Institutional and Policy Development Component to help in financing: (i) the preparation of an integrated Transport Policy, Land Use and Air Quality Management Strategy for the SMR to meet both transport and air quality targets and to introduce sound cost-recovery, tariff, regulatory and subsidy policies; and (ii) undertake a comprehensive traffic management review of the SMR.
Sub-Component Output Indicator Percent of target
achieved (September
2008)
Comments
Urban Transport Coordination and planning in the SMR will be in place
A Commission operating effectively
100%
Decentralization (transfer) of commuter rail (STU/SAL) services from Federal to State and City government
STU/SAL owned and operated by State and
City governments
100%
Preparing an Integrated Transport Policy, Land Use and Air Quality Strategy
Strategy done 100%
Undertake a comprehensive traffic management review of the Salvador Metropolitan Region
Review done 100%
Sources: information gathered from CBTU’s reports and from fieldwork in Salvador.
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Annex 3. Economic and Financial Analysis A conventional cost benefit analysis was carried out using the latest cost estimates to assess the effectiveness of the project at the time of this writing. The situation with the project was compared against the situation without the project. The model used was the same one used during appraisal, to ensure comparability of results. The model maintains the original 12.1 Km Metrosal line, again to ensure comparability and because cost estimates provided by CBTU are for completing the entire line (see annex 1), and not just the reformulated component A (Lapa Acesso - Norte). A conservative approach was therefore taken. The following were the main changes in the evaluation model with respect to the situation at appraisal:
1. The implementation (construction) period is of 10 and not 5 years. This is the estimate for the entire line. The Lapa Acesso Norte link will be finished first, but this is ignored to be conservative;
2. The number of years where the project is operational is now 15 and not 20. This
change was because the evaluation period was kept constant at 25 years, again to make the two evaluations comparable and to be conservative. Benefits start to accrue on year 10 and not on year 5. Neither do benefits begin to accrue for evaluation purposes when the Lapa Acesso Norte link becomes operational;
3. The project costs increase to reflect actual expenditures in the project, plus
expenditures estimated for completion. Updated project costs are shown in Annex 1 (totals are not discounted over time, whereas in evaluation they were discounted, following standard practice, and shown by year).
Benefits The evaluation considered the same benefits as for the evaluation at appraisal. These are:
1. Travel time savings: These are estimated by determining the passenger-hours saved, by type of trip (home to work, business or other) and multiplied by the value of time for each type of trip. The demand model estimates passenger hours with and without the project mode. Value of time was kept at the appraisal level to be conservative and because of lack of updated values.
2. Operating cost savings: These are savings resulting from the lower costs of operating
all modes with and without the project. The demand model estimates the passenger-kms with and without the project and these are multiplied by the respective estimated unit operating costs. The project decreases the number of bus-kms traveled on the urban bus network through the re-routing of the buses to the main stations. The bus-kms saved per year are estimated by the demand model. The costs of operating the metro are included. The result is the net savings.
3. Reduction in road maintenance costs due to the reduction of bus-kms with the project
(minor).
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4. Reduction of accidents: These are estimated by multiplying the average cost per accident per 1000 passenger-kms with and without the project. This reduction of accidents is normally a function of the number of bus-kms saved (minor).
5. Reduction of air pollution costs due to reduction in bus-kms with project (minor).
No financial analysis was done because the concession of the Metrosal system is not yet granted. The results of the concession study are confidential for procurement reasons.
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Table A3.1 shows the estimated flow of resources. DIRECT BENEFITS EXTERNALITIES
Road TOTAL Investments TOTAL BENEFITS PROJECT CALENDAR Travel Operating Maintenance Air BENEFITS Costs COSTS minus
YEAR YEAR Time Cost Cost Accident Pollution (B) (C) COSTS Savings Savings Savings Savings Savings (B-C)
B/C @ 10% 1.62 Ben PV @ 10% 467,360.77 Cos PV @ 10% 288,504.88 178,855.89
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Annex 4. Bank Lending and Implementation Support/Supervision Processes (a) Task Team members
Names Title Unit Responsibility/ Specialty
Lending Jorge M. Rebelo Lead Transport Specialist and TTL LCSTR TTL David Hughart Principal Transport Economist LCRVP Economist Jose Carvalho Senior Counsel LEGLA Legal Armando Ribeiro Araujo Regional Procurement Adviser LAC Procurement
Tulio Henrique Lima Correa Financial Management Specialist LCSFM Financial Management
Oliver S. de Lima Consultant Metro Systems Specialist Metro Systems
Kenneth Knight Consultant Metro Infrastructure Specialist Metro Civil Works
Infrastructure
Pedro Benvenuto Consultant Institutional Specialist Institutional
Framework
Benjamin Darche Consultant Project Finance Specialist Project Finance
Avante Consultants Resettlement Specialists Resettlement Systra Consultants Project Reviewers Overall Design Daniel R. Gross Consultant ENV Social SafeguardsFundação Getúlio Vargas Consultant Project Finance Kenneth Gwilliam Urban Transport Adviser TWUTD Peer Reviewer John Flora Lead Transport Specialist TWUTD Peer Reviewer Antonio Estache Lead Infrastructure Economist LCSTR Peer Reviewer
Isaac Popoutchi Consultant External Peer Reviewer
Pedro Benvenuto Consultant Institutional Specialist Institutional Framework
SUPERVISION Jorge M. Rebelo Lead Transport Specialist/TTL LCSTR TTL Armando Ribeiro Araujo Consultant Procurement Alberto Figueiredo-Nunes Consultant LCSTR Procurement Daniel R. Gross Consultant ENV Social SafeguardsElisabeth Goller Transport Specialist LCSTR Institutional Jorge Yamashita Consultant Infrastructure Sabina Augusta Kauark Leite Consultant Institutional
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Projob Consultants Metro System Design Specialist Infrastructure and Systems
Annex 5. Beneficiary Survey Results (if any) Not Applicable.
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Annex 6. Stakeholder Workshop Report and Results (if any) Not Applicable.
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Annex 7. Summary of Borrower's ICR and/or Comments on Draft ICR
Brazilian Urban Trains Company (CBTU)
Borrower’s Evaluation Report
Loan Agreement No. 4494-BR
Preface This is the final report relating to the Salvador Metropolitan Rail Decentralization Project undertaken with the participation of the Brazilian Urban Trains Company (CBTU), the Salvador Transport Company (CTS), the Salvador Municipal Government, the Bahia State Government and Brazil's Federal Government. The project was supported with US$118 million of IBRD financing under the terms of a Loan Agreement signed on 3rd December 1999. The Agreement was concluded on 31st December 2007, 48 months over and above the originally agreed completion date of 31st December 2003. The final disbursement was made on 20th September 2007 and all the funds provided by the IBRD (US $118 million) were utilized.
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Evaluation Summary
Salvador Metropolitan Rail Decentralization Project
Brazilian Urban Trains Company (CBTU)
Loan Agreement No. 4494-BR
Brazil
Introduction Brazil’s Federal Government, responsible through the CBTU for operating and administering the existing urban rail systems, developed the Metropolitan Trains Decentralization Program aimed at transferring the systems from federal to local control in response to a series of constitutional directives determining the transfer of the management and operation of urban transportation systems to their respective local authorities. The urban trains system in Salvador was transferred to a municipal company specifically constituted for this purpose (CTS) on 30th November 2005. The World Bank has provided partial financing for mass transit decentralization projects in São Paulo, Rio de Janeiro, Belo Horizonte, Recife, as well as in Salvador, and is also funding the Linha Oeste project in Fortaleza. The Salvador decentralization project was submitted to the IBRD, with the definitive project design approved by the World Bank Board of Executive Directors on 14th May 1999.
Project Objectives The following documents were signed on 3rd December 1999: Loan Agreement LN-4494-BR between the Federative Republic of Brazil and the IBRD; a Project Agreement between the CBTU, the Salvador Municipality and the IBRD; and, finally, the ‘State Agreement’ between the Government of the State of Bahia and the IBRD. The Loan Agreement signed with the IBRD was in the sum of US$150 million. The US$40 million representing the Federal Government’s counterpart contribution and US$117.8 million in counterpart funds to be provided by the State of Bahia and the Salvador Municipality represented a total project value of US$307.8 million. The purpose of the project was (i) to implement the city of Salvador’s first metro line and (ii) to rehabilitate the capital’s urban rail system. Contracts were split into four major categories: works, systems, works and consulting services. On 4th March 2004 a reduction of US$32 million of the projected financing under the IBRD Loan Agreement was officially approved (down to US$118 million), while the Federal Government increased its counterpart contribution to US$72 million. Of the above-mentioned sum it was decided that US$11.8 million would be spent on recovering the commuter rail system along the stretch between Calçada and Paripe and that the remainder would go towards building the subway between Lapa and Pirajá.
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The Lapa-Pirajá subway project involves the construction of 4.1 km of electrified double track, with 6.3 km above-ground and 1.7 km underground, 8 stations and 3 transport integration terminals, in addition to an operations control centre and a maintenance facility (Centro de Manutenção). The subway project also involves the acquisition of 12 electric locomotives (TUEs) and the installation of a fixed system for the aerial network as well as introducing signaling, telecoms and electronic ticketing systems. The project also envisaged a number of improvements on the Calçada/Paripe stretch, involving the rehabilitation of 10 stations and 13.5 km of permanent track, construction of two integration terminals at the Calçada and Paripe stations, the repair of six TUEs, the replacement of the metal structure of the bridge over the São João river, the modernization of the Lobato and Periperi substations and upgrading of the electrification system. The key objectives of the project were: to improve the quality of public transport in the Salvador Metropolitan Region by developing a totally integrated urban transport system coordinated by a regional transportation coordination commission; to undertake decentralization of the system operated by CBTU in Salvador, transferring ownership and management from the Federal level to the Salvador municipal authorities; and, finally, to improve the quality of life and provide better access by the poorer population of the city to employment opportunities, health centers and education facilities. The CBTU-IBRD-SAL project was regarded as a project of major importance which enabled the CBTU to fulfill its role of upgrading urban transport in the area by utilizing railway systems integrated with other modes of transport, thereby substantially boosting the quality of transport for the population living in the urban area of Salvador (in common with similar projects undertaken in other large Brazilian cities). The model adopted for implementation of the foregoing objectives in this specific project envisaged the handing-over of the subway system to the private sector which, in turn, would take over operating and maintenance responsibility for the system, including contracting and training staff and acquiring and installing the automatic ticketing system and the equipment required for maintaining and running the operating systems, the permanent subway line and associated rolling stock. The Salvador project differed in some respects from the urban trains systems of São Paulo and Rio de Janeiro (also partially financed by the World Bank). In these cities the bidding and contracting procedures, as well as the works and services management, remained the responsibility of the CBTU even after the systems had been decentralized. In the case of Salvador these functions were devolved in their entirety to the Municipality of Salvador and the Salvador Transport Company (CTS), with the central government, through the CBTU, responsible solely for transferring financial counterpart funds and the Loan Agreement resources and for tracking their correct application.
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Experience acquired in the implementation of the project and results achieved The Salvador project was designed on the basis of three key components:
• A physical component envisaging the construction of 12.1 km of double track electrified subway line with appropriate signaling, of which 6.3 km were to be over-ground and 1.7 km underground, the building of 8 subway stations of which two would be underground and one elevated. The physical component also involved the acquisition of 12 TUEs. Of the latter, six were acquired by the State of Bahia as a counterpart contribution and a further six were to be purchased by the Federal Government. The project also included plans for rehabilitating 13.5 km of permanent track and the restoration and repair of 10 commuter rail stations and six TUEs to benefit the commuter rail system stretch. Furthermore, it was expected that the operational conditions of the system would improve substantially as a result of establishing terminals to integrate rail and bus services and of constructing new stations and upgrading and restoring existing stations, thereby ensuring improved rider comfort and convenience. The project also covered plans for installing an integrated telecommunications system with fiber-optic cables for radio communication, chronometry and public address systems in the various stations;
• An environmental and traffic safety component, as part of a broader program involving
the management of road traffic (including safety aspects) in the Salvador Metropolitan Region, taking account of the increased numbers of passengers transported on the railway system and the resulting reduction of passengers needing to use road-based vehicles, thereby ensuring lower emissions and noise pollution;
• A component focused on an integrated policy for transport and land use with a view to
giving a substantial boost to the economic/financial situation of each transport system, the adoption of an integrated fares system and extra operating revenues arising from new private sector partnership arrangements.
As for institutional aspects, the existing Transport Master Plan was brought up to date by a select number of small consultants and the result submitted for public scrutiny as required by the environmental licensing process. The contracts for preparing the new Urban Transport Master Plan for the Salvador Metropolitan Region have been issued and work associated with these is currently underway. Integration of the metro into the local transportation system has been assisted by a metropolitan-wide transport management mechanism in the shape of the Regional Transportation Coordination Commission. This was created in 1998 as a state enterprise charged with managing Salvador's municipal and inter-municipal lines, while simultaneously serving as a transport regulatory agency. It is important to emphasize that whereas the original concession model did not include operational subsidies, assurances were nevertheless given by both the Municipal and State
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governments that feeder bus corridors would be established and direct competition between different bus companies would be eliminated. The World Bank Loan Agreement was signed on 3rd December 1999 and became effective on 17th February 2000. Implementation of the project was planned for a period of four years (1999 to 2003), with an estimated completion date of 31st December 2003. the completion date was extended for a further 48 months to 31st December 2007. The main reasons which caused the implementation of the project to be delayed for 48 months were the following:
• Problems related to the global economic situation had a major effect on the supply of foreign credit. As a result the Brazilian Government was obliged to cut back the release of budget funds originally earmarked for implementing the project. These budget restrictions made it necessary to revise the overall project implementation plan in order to ensure that the contracted-for disbursements remained compatible with the actual resources released by central government. This obviously resulted in delays to the project works.
• Due to the prevailing macroeconomic circumstances the concessionary company
responsible for supplying the trains proved unable to maintain the necessary financial equilibrium for satisfactory execution of the contract. At the time of contract signature the exchange rate stood at R$ 2.296 to the US dollar, whereas in October 2002 the rate had reached its maximum of R$3.805 to the dollar - an effective local currency devaluation of 65.7%. This meant that to invest in US dollars (as was the case with the supplying company) but with income in Brazilian “reais” unable to adapt speedily to abrupt changes in the exchange rate, a loss of 39.6% in gross income would happen. This potential loss of revenue impacted directly the concession contract, lowering the possibility that the financial closure would be reached. Negotiations between the CTS and the consortium in due course resulted in an agreement to produce a revised version of the contract. However, the Federal Accounts Court (Tribunal de Contas da União) raised objections to this adjustment which, in the court’s view, was likely to impact negatively on State finances. In mid-2003 the Government decided to cancel the concession contract altogether.
• Reduction of the scope of the project, with an assurance of receiving resources from the
Investments Pilot Plan (PPI) for the implementation of half of the originally planned stretch, i.e. implementation only of the Lapa to Acesso Norte segment (6 km). This reduction was only reversed with the introduction of the Acceleration Growth Program (PAC) by the Federal Government in January 2007;
• Objections raised by the TCU with regard to the employment of the bidding and
contracting criteria established by the World Bank Procurement Guidelines. Subsequently the TCT issued judicial decisions (acórdãos) ordering the precautionary retention of payments due to the consortium responsible for constructing the metro line. This measure caused serious delays in the work of the contractor.
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The Loan Agreement stipulates as project performance evaluation criteria a number of physical execution targets to be met in the course of project execution. These targets were not met as the result of the above-mentioned circumstances.
World Bank Participation This project represents the continuation of a partnership between the World Bank and the CBTU. The first Bank missions involved in the identification of the Salvador Metropolitan Trains Decentralization Project and the publication of the Staff Appraisal Report manifested the World Bank's interest in developing this project in a true spirit of co-operation. Following the signature of the Loan Agreement and at every stage of the project from beginning to end, the World Bank's interest was clear as manifested by the following:
• Training sessions, seminars, lectures and support material were provided for the CBTU teams and government bodies;
• Supervisory visits to track the development of the project on a regular basis and to
identify and recommend solutions in problem areas; undertaking necessary interventions or collaborating in a search for correct solutions while highlighting project achievements which were subsequently adopted as recommended procedures;
• The prompt supply of funding whenever requested (and confirmed as necessary) was
essential for the CTS to be in a position to honor its financial commitments with suppliers and consultants. This approach greatly assisted those responsible for managing the project.
Given the above support provided to both the CBTU and the CTS and amply demonstrated by effective practical action, we assess that the performance of the World Bank throughout can be considered as highly satisfactory.
Borrower Participation In the World Bank assessment contained in the Staff Appraisal Report the highest risks involved in the Program were considered to be the following: cost projections; execution timescale; the threat of currency devaluation; concessions of feeder bus lines differing from what had been agreed; and, finally, the possibility of the non-availability of counterpart funding. These risks arose with different degrees of intensity in the course of the project’s development (explained below). The mitigation action proposed by the World Bank with respect to the projected costs and the project execution timeline involved a call for bids for implementing the civil works and fixed systems (with the exception of the foundations and the tunnel stretch) on a turnkey basis at a fixed price.
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The success of this contracting method depended on the funds being released for the works to be undertaken within the timeline established in the contract. Although the CBTU requested, on an annual basis, the funds needed for carrying out the works planned for each fiscal year, the corresponding budgeted amounts were not released at the due time because of the problems mentioned above. In these circumstances, construction of the metro line within the planned schedule impossible. Furthermore, the CTS proceeded to make a number of adjustments to the originally contracted project either to resolve questions of a technical order or in an effort to improve qualitatively the project. These adjustments led to strong questioning by the TCU, principally because of the turnkey nature of the contract. All these factors had a major impact on the estimated costs as well as on the project’s implementation schedule. The measure to mitigate the exchange risk proposed by the World Bank, by transferring it to the Government of the State of Bahia, failed to work because it had to support in the existing concession-related legislation and, as mentioned above, the concessionaire company (supplier of the trains) was in any case unable to attain the financial equilibrium necessary for complying with the terms of the contract. The result was the cancellation of the concession contract. With the cancellation of the contract it became necessary to undertake new technical and economic studies on the feasibility of involving the private sector. These studies updated and proposed feeder bus lines that could jointly with the metro line concession be eligible for bidding. The CTS is now in the process of finalizing these studies, but the CBTU has not yet been informed of the outcomes. Because Federal Government counterpart funding - as well as the provision of funds from its own financing resources - was reduced, the metro line could not be built in accordance with the originally established schedule. The Bahia State Government also encountered difficulties in releasing funds from its counterpart contribution. This made it necessary on a number of occasions for the State Government to reduce (for a predetermined period) the portion for which it was responsible by altering the pari passu arrangement set forth in Schedule 1 of the Loan Agreement. As for the decentralization of the System (one of the objectives of the project), it was carried out in accordance with Article 3 of Law 8693/93, with the CTS assuming control of the commuter rail system between Calçada and Paripe on 30th November 2005. At the time the system was transferred it was agreed that the Federal Government would subsidize operations on that particular stretch for a period of 18 months. This timescale was renewed for an additional period of 18 months, ending in December 2008. The Municipality of Salvador has subsequently demonstrated that it will not be possible for it to meet the cost of operating and maintaining the transferred system, and that authority has already requested a new subsidy from the Federal Government. Concluding this Evaluation Report on the participation by the borrower in implementing the Salvador Metropolitan Trains Decentralization Project, it is incumbent on us to say that:
• The project has been incorporated into the Growth Acceleration Program (PAC), which will ensure a non-abated resource flow;
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• The project is expected to be concluded by December 2010; and
• The project has fulfilled the objective established under the Loan Agreement, i.e. to decentralize operation of the commuter rail system in the city of Salvador by transferring the system to a municipal company created specifically for this purpose.
Flávio Mota Monteiro Coordinator of the CBTU/IBRD project Approved by:
Elionaldo Maurício Magalhães Moraes Director/President of CBTU
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Annex 8. Comments of Cofinanciers and Other Partners/Stakeholders Not Applicable.
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Annex 9. List of Supporting Documents Allport, R. and J. Thomson. 1989. “Study of Mass Rapid Transit in Developing Countries.” London, England
Gómez-Lobo, A. (forthcoming), ‘Why Competition Does Not Work in Urban Bus Markets: Some New Wheels for Some Old Ideas’, Journal of Transport Economics and Policy and Ardila, A. Forthcoming. “The Limitation of Competition in and For the Market in Public Transportation in Developing Countries: Lessons From Latin American Cities.” Transportation Research Record, Journal of the Transportation Research Board
World Bank. 2004. Brazil: Equitable, Competitive, Sustainable. Contributions for Debate, Chapters 12 and 13
World Bank, 2001. Cities on the Move, Chapter 7
Huse, Joseph, 1997, “Understanding and Negotiating Turnkey Contracts,” especially chapter 17 “Variations.”
Huse, Joseph, 1997, “Understanding and Negotiating Turnkey Contracts;” International Chamber of Commerce, ICC, 2007, “ICC Model Turnkey Contract for Major Projects;” and Fédération Internationale des Ingénieurs-Conseils, FIDIC, 1999, “Conditions of Contract for EPC Turnkey Projects,” among others
Goetz A. and J. Szyliowicz. 1997. “Revisiting Transportation Planning and Decision Making Theory: the Case of Denver International Airport” (Transportation Research, Vol. 31, No. 4) for an analysis of resilience in mega project planning and implementation
CAJAZEIRAS
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This map was produced by the Map Design Unit of The World Bank. The boundaries, colors, denominations and any other informationshown on this map do not imply, on the part of The World BankGroup, any judgment on the legal status of any territory, or anyendorsement or acceptance of such boundaries.
BRAZIL
SALVADOR URBAN TRANSPORT PROJECTLAPA-PIRAJÁ METRORAIL LINE
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