Document of
The World Bank
FOR OFFICIAL USE ONLY
Report No: 66407-BR
PROJECT APPRAISAL DOCUMENT
ON A
PROPOSED LOAN
IN THE AMOUNT OF US$100 MILLION
TO THE
STATE OF CEARÁ
WITH A GUARANTEE OF THE FEDERATIVE REPUBLIC OF BRAZIL
FOR THE
CEARÁ RURAL SUSTAINABLE DEVELOPMENT AND COMPETITIVENESS PROJECT
(PROJETO DE DESENVOLVIMENTO RURAL SUSTENTÁVEL – PROJETO SÃO JOSÉ III)
March 7, 2012
Sustainable Development Department
Brazil Country Management Unit
Latin America and the Caribbean Region
This document is being made publicly available prior to Board consideration. This does not
imply a presumed outcome. This document may be updated following Board consideration and
the updated document will be made publicly available in accordance with the Bank’s policy on
Access to Information.
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II
CURRENCY EQUIVALENTS
(Exchange Rate Effective March 1, 2012)
Currency Unit = Brazilian Real (R$)
R$1.7146 = US$1.00
R$1.00 = US$0.54
FISCAL YEAR
January 1 – December 31
ABBREVIATIONS AND ACRONYMS
ATER Rural Technical Assistance
Assistência Técnica e Extensão Rural
BB Banco do Brasil
BNB Banco do Nordeste
CA Community Association
CAGECE State Water and Sanitation Company
Companhia de Água e Esgoto do Ceará
CDD Community-Driven Development
CEDR State Rural Development Council
Conselho Estadual de Desenvolvimento Rural
CENTEC Technological Learning Center Institute
Instituto Centro de Ensino Tecnológico
CMDS Municipal Sustainable Development Council
Conselho Municipal de Desenvolvimento Sustentável
COGERH State Water Resources Management Company
Companhia de Gestão dos Recursos Hídricos do Ceará
CONAB National Supply Company
Companhia Nacional de Abastecimento
CONPAM Environmental Policies and Management Council
Conselho de Políticas e Gestão do Meio Ambiente
CONTAG National Federation of Agricultural Workers
Confederação Nacional de Trabalhadores na Agricultura
CPS Country Partnership Strategy
CTDRS Territorial Council for Rural Sustainable Development
Colegiado Territorial de Desenvolvimento Rural Sustentável
EMATERCE Ceará State Rural Extension and Technical Assistance Company
Empresa de Assistência Técnica e Extensão Rural do Ceará
EMBRAPA Brazilian Agricultural and Livestock Research Company
Empresa Brasileira de Pesquisa Agropecuária
ESMF Environment and Social Management Framework
FECOP State Fund for Poverty Reduction
Fundo Estadual de Combate à Pobreza
FUNASA National Health Foundation
Fundação Nacional da Saúde
FUNCEME Ceará State Meteorology and Hydrological Resources Foundation
Fundação Cearense de Meteorologia e Recursos Hídricos
III
HDI Human Development Index
IICA Inter-American Institute for Cooperation on Agriculture
IPPF Indigenous Peoples Planning Framework
IRR Internal Rate of Return
PA Productive Alliance
MDA Ministry of Agrarian Development
Ministério do Desenvolvimento Agrário
MDS Ministry of Social Development
Ministério do Desenvolvimento Social e Combate à Fome
NGO Nongovernmental Organization
O&M Operation and Maintenance
PAM Municipal Water Plan
Plano de Águas Municipal
PDO Project Development Objective
PPP Public-Private Partnerships
PO Producers’ Organization
PREVINA State Program to Prevent, Monitor and Combat Forest Fires
Programa Estadual de Prevenção, Monitoramento, Controle de
Queimadas e Combate aos Incêndios Florestais
PRONAF National Program to Strengthen Family Agriculture
Programa Nacional de Fortalecimiento da Agricultura Familiar
PTDRS Territorial Rural Sustainable Development Plan
Plano Territorial de Desenvolvimento Rural Sustentável
SDA Ceará State Secretariat of Agrarian Development
Secretaria do Desenvolvimento Agrário
SEBRAE Brazilian Agency for Micro- and Small-Business Assistance
Serviço Brasileiro de Apoio às Micro e Pequenas Empresas
SEDUC Ceará State Secretariat of Education
Secretaria da Educação
SECITECE Ceará State Secretariat of Science and Technology
Secretaria da Ciência e Tecnologia do Ceará
SISAR Integrated Rural Water Supply and Sanitation System
Sistema Integrado de Saneamento Rural
SOE Statement of Expenditure
SOHIDRA State Superintendency for Water Works
Superintendência de Obras Hídricas
SRH Ceará State Secretariat of Water Resources
Secretaria dos Recursos Hídricos do Ceará
UGP Project Management Unit
Unidade de Gerenciamento do Projeto
UGT Project Territorial Management Unit
Unidade de Gestão Territorial
WSS Water and Sanitation Services
IV
Regional Vice President: Hasan A. Tuluy
Country Director: Makhtar Diop
Sector Director: Ede-Jorge Ijjasz-Vasquez
Sector Manager: Ethel Sennhauser
Task Team Leader: Maria de Fatima Amazonas
V
BRAZIL
Ceará Rural Sustainable Development and Competitiveness Project
TABLE OF CONTENTS
I. STRATEGIC CONTEXT .................................................................................................1
A. Country Context ............................................................................................................ 1
B. Sectoral and Institutional Context ................................................................................. 3
C. Higher-Level Objectives to which the Project Contributes .......................................... 4
II. PROJECT DEVELOPMENT OBJECTIVES ................................................................5
A. PDO............................................................................................................................... 5
Project Beneficiaries ........................................................................................................... 5
PDO Level Results Indicators ............................................................................................. 5
III. PROJECT DESCRIPTION ..............................................................................................6
A. Project Components ...................................................................................................... 6
B. Project Financing .......................................................................................................... 7
Lending Instrument ............................................................................................................. 7
Project Cost and Financing (US$) ...................................................................................... 7
C. Lessons Learned and Reflected in the Project Design .................................................. 7
IV. IMPLEMENTATION .......................................................................................................8
A. Institutional and Implementation Arrangements .......................................................... 8
B. Results Monitoring and Evaluation .............................................................................. 9
C. Sustainability................................................................................................................. 9
V. KEY RISKS AND MITIGATION MEASURES ..........................................................11
VI. APPRAISAL SUMMARY ..............................................................................................12
A. Economic and Financial Analyses .............................................................................. 12
B. Technical ..................................................................................................................... 12
C. Financial Management ................................................................................................ 13
D. Procurement ................................................................................................................ 13
E. Social........................................................................................................................... 14
F. Environment ................................................................................................................ 14
VI
Annex 1: Results Framework and Monitoring .........................................................................16
Annex 2: Detailed Project Description .......................................................................................21
Annex 3: Implementation Arrangements ..................................................................................33
Annex 4: Operational Risk Assessment Framework (ORAF) .................................................59
Annex 5: Implementation Support Plan ....................................................................................62
Annex 6: Economic and Financial Analysis ..............................................................................64
Annex 7: Irrigation in Ceará and Project Activities Related to Irrigation ............................69
VII
PAD DATA SHEET
Brazil
Ceará Rural Sustainable Development and Competitiveness
PROJECT APPRAISAL DOCUMENT .
Latin America and the Caribbean
Agriculture and Rural Development
.
Basic Information
Date: Mar-07-2012 Sectors: General agriculture, fishing and forestry sector
(40%), Water supply (25%), Irrigation and
drainage (15%), Crops (10%), Information
technology (10%)
Country Director: Makhtar Diop Themes: Rural markets (35%), Rural services and
infrastructure (25%), Trade facilitation and
market access (15%), Micro, small and
medium enterprise support (15%), Rural
policies and institutions (10%)
Sector
Manager/Director:
Ethel Sennhauser/Ede
Jorge Ijjasz-Vasquez
Project ID: P121167 EA
Category:
B - Partial Assessment
Lending
Instrument:
Specific Investment
Loan
Team Leader(s): Maria de Fatima de
Sousa Amazonas
Joint IFC: No .
Borrower: State Government of Ceará
Responsible Agency: State Secretariat of Agrarian Development - Project Management Unit
Contact: Josias Farias Neto Title: Project Manager
Telephone No.: 55-85-31018112 Email: [email protected] .
Project Implementation Period: Four years
Expected Effectiveness Date: July-31-2012
Expected Closing Date: October-31-2016 .
Project Financing Data(US$M)
[ X ] Loan [ ] Grant [ ] Other
[ ] Credit [ ] Guarantee
VIII
For Loans/Credits/Others
Total Project Cost (US$M): 150.00
Total Bank Financing (US$M): 100.00 .
Financing Source Amount(US$M)
Borrower 50.00
International Bank for Reconstruction and
Development
100.00
Total 150.00 .
Expected Disbursements (in US$ Million)
Fiscal Year 2012 2013 2014 2015 2016 2017
Annual 00.00 30.00 45.00 20.00 5.00 0.00
Cumulative 00.00 30.00 75.00 95.00 100.00 100.00 .
Project Development Objective(s)
Project Development Objective: The objectives of the project are to: (i) improve the sustainability of
rural production and rural income generation; and (ii) contribute to the Borrower’s efforts to universalize
access to water services. .
Components
Component Name Total Costs (US$ Millions)
1. Economic Inclusion: would promote investments in rural
economic inclusion in the Borrower’s territory, through: (a)
the provision of support for: (i) the preparation of business
plans; (ii) the construction of warehouse facilities (iii)
productive and environmental services subprojects; and (iv)
the development of a state-wide disaster risk management
policy, contingency plans and early warning systems for the
prevention of natural disasters.
70.00
2. Water Services: would support the State’s efforts to ensure
universal access to potable water and water services in rural
areas and for the scaling up of existing water distribution
management system models.
50.00
3. Institutional Strengthening and Project Management: would
support the technical and administrative management of the
Project, including information system, monitoring and impact
evaluation; training and technical assistance activities to
strengthen stakeholders and public functions that are critical
to ensure the project implementation and sustainability.
23.30
.
Compliance
Policy
Does the project depart from the CAS in content or in other significant Yes [] No [X ]
IX
respects?
Explanation:
.
Does the project require any exceptions from Bank policies? Yes [ ] No [ X ]
Have these been approved by Bank management? Yes [ ] No [ ]
Is approval for any policy exception sought from the Board? Yes [ ] No [ X ]
Does the project meet the Regional criteria for readiness for implementation? Yes [ X ] No [ ] .
Safeguard Policies Triggered by the Project Yes No
Environmental Assessment OP/BP 4.01 X
Natural Habitats OP/BP 4.04 X
Forests OP/BP 4.36 X
Pest Management OP 4.09 X
Physical Cultural Resources OP/BP 4.11 X
Indigenous Peoples OP/BP 4.10 X
Involuntary Resettlement OP/BP 4.12 X
Safety of Dams OP/BP 4.37 X
Projects on International Waterways OP/BP 7.50 X
Projects in Disputed Areas OP/BP 7.60 X .
Legal Covenants
Name Recurrent Due Date Frequency
Project Steering Committee 60 days after
Effectiveness
Description of Covenant
Loan Agreement – Schedule 2, Section I.1: No later than 60 days after the Effective Date, the Borrower
shall establish, and thereafter maintain during the implementation of the Project, a Steering Committee
chaired by SDA, and composed by representatives from key secretariats and organizations, as defined in
the Operational Manual, responsible for providing general oversight and guidance on the strategic and
multisectoral aspects of the Project.
Name Recurrent Due Date Frequency
Project Management Unit (1) and
Project Territorial Units (13) 30 days after
Effectiveness
Description of Covenant
Loan Agreement – Schedule 2, Section I.2 (a) : The Borrower shall create and maintain, until the
completion of the Project: (i) a unit within SDA (the UGP), responsible for the management,
coordination, supervision, monitoring and evaluation of the Project; and (ii) not later than 30 days after
the Effective Date, establish and thereafter operate and maintain until the completion of the Project,
thirteen regional management offices (UGTs) covering the Borrower’s territory, responsible for the
X
coordination and implementation of Project activities in remote municipalities, including the
responsibility to ensure integration and quality of activities under the Project.
Name Recurrent Due Date Frequency
Annual Operating Plans November, 30 of
each year Annual
Description of Covenant
Loan Agreement – Schedule 2, Section I.3: The Borrower shall: (a) prepare and furnish to the Bank
annual operating plans, satisfactory to the Bank, detailing the Project activities to be carried out during
the year following the date of presentation of each such plan, together with the respective sources of
funding, by November, 30 of each year during Project implementation; (b) furnish to the Bank the
approved annual operating plans (including the respective sources of funding) referred to in paragraph
(a) of this Section for each year in question, not later than 30 days after the approval of the Borrower's
annual budget by its Legislative Assembly (Assembléia Legislativa); and (c) thereafter, implement each
of said plans in a manner acceptable to the Bank. .
Team Composition
Bank Staff
Name Title Specialization Unit
Judith M. Lisansky Senior Anthropologist Senior Anthropologist LCSSO
Susana Amaral Financial Management
Specialist
Financial Management
Specialist
LCSFM
Gunars H. Platais Senior Environmental
Economist
Senior Environmental
Economist
LCSEN
Alberto Coelho Gomes
Costa
E T Consultant E T Consultant LCSSO
Edward William Bresnyan Senior Rural Development
Specialist
Senior Rural Development
Specialist
LCSAR
Paula Silva Pedreira de
Freitas
Operations Analyst Operations Analyst LCSEN
Luciano Wuerzius Procurement Specialist Procurement Specialist LCSPT
Mariana Margarita Montiel Senior Counsel Senior Counsel LEGLA
Maria de Fatima de Sousa
Amazonas
Senior Rural Development
Specialist
Team Leader LCSAR
Juliana Menezes Garrido
Pereira
Infrastructure Specialist Infrastructure Specialist LCSUW
Erick C. M. Fernandes Adviser Adviser LCSAR
Jose C. Joaquin Toro
Landivar
Senior Disaster Risk
Management Specialist
Senior Disaster Risk
Management Specialist
LCSUW
Miguel-Santiago da Silva
Oliveira
Senior Finance Officer Senior Finance Officer CTRLN
Erwin De Nys Senior Water Resources
Specialist
Senior Water Resources
Specialist
LCSEN
XI
Daniella Ziller Arruda
Karagiannis
Program Assistant Program Assistant LCC5C
Clarisse Torrens Borges
Dall Acqua
E T Consultant E T Consultant LCSEN
Abdoulaye Sy Young Professional Young Professional YPP
Barbara Cristina Noronha
Farinelli
E T Consultant E T Consultant LCSSD
Non Bank Staff
Name Title Office Phone City
Luis Loyola Irrigation Specialist/FAO 56-2-923-2241 Santiago
Mario Castejon Marketing Specialist/Ag.
Economist/FAO Panama
.
1
I. STRATEGIC CONTEXT
A. COUNTRY CONTEXT
1. Brazil is the largest country in area and population and the biggest economy in
Latin America and the Caribbean (LAC). The Brazilian economy’s solid performance during
the financial crisis and its strong and early recovery, including 2010 growth of 7.5 percent, has
contributed to the country’s transition from a regional to a global power. Despite the recent
economic results and social programs that lifted tens of millions of people out of poverty, its
immense natural resources, and strong development potential, important challenges remain for
Brazil to achieve its vision of joining the group of developed nations within a generation.
Economic and social exclusion, inequality and low access to land stubbornly persist at the root of
poverty. In addition, huge disparities remain across the country’s regions; the Northeast
continues to be the poorest and most unequal among them, with a wide gap between rich and
poor.
2. The Brazilian Government is implementing a strategy to eradicate extreme poverty
and focus on improving opportunities for vulnerable populations. The multisectoral Brasil
sem Miséria program targets the 16.2 million people living in extreme poverty, i.e., those earning
less than R$70 per capita per month (about US$1.50 per day). This implies a strong focus on the
Northeast, where 59 percent of the extreme poor reside.
3. Ceará has made solid progress in improving both economic and social indicators in
recent years and is the third largest economy in the Northeast Region. Between 2007 and
2010 the State’s GDP (currently ranked twelfth out of 27 Brazilian states) grew by an
accumulated 58 percent, well above Brazil as a whole (25 percent). Notwithstanding this recent
progress, the State faces significant challenges: poverty levels are still unacceptably high in
Ceará, with 13 percent of its population living below the regional extreme poverty line1 and
almost a third of the people (31 percent) below the regional poverty line. It is evident that to
sustain social inclusion gains made and substantially reduce current poverty levels, more rapid
and inclusive economic growth will be required.
4. Agriculture is a major sector of the Brazilian economy and is key for economic
growth and foreign exchange. Agriculture accounts for about 6 percent of GDP (25 percent
when including agribusiness) and 36 percent of Brazilian exports. Brazil enjoyed a positive
agricultural trade balance of US$87.6 billion from January to November 2011, 24 percent higher
than the same period in 2010.2 The share of family agriculture in Brazilian food production is 70
percent, which means that it has a strong potential not only for food security and nutrition but
also for economic growth and food price balance. While commercial farms dominate value-
added production, family agriculture nationwide produces 70 percent of manioc, 46 percent of
corn, 63 percent of horticulture, and is responsible for 56 percent of large animal production
(including dairy).3
1 ―Extreme poverty line‖ is defined as the required income to consume the minimum intake (2,000 calories/day),
according to the World Health Organization (WHO). 2 Source: Ministry of Agriculture, Livestock and Supply (MAPA, December 12, 2011).
3 IBGE 2009.
2
5. Technological change in agriculture is essential for poverty reduction. Fostering
development, stimulating economic growth and improving agricultural productivity will help the
rural poor by directly increasing their income and competitiveness. The State is eager to invest in
innovative practices and technologies and capitalize on the key linkages with agro-business and
small and medium enterprises.
6. Main challenges facing productive clusters and public services in rural areas. Low
rural productivity and low access to basic services in Ceará are tied to several constraints, among
the most important of which are: (a) low technological innovation in terms of product, process
and organization, as well as downside risks of production losses and threats to household food
security and weak market intelligence that hinder a coordinated and targeted supply response; (b)
poor access to capital to boost smallholder asset accumulation on several fronts: physical,
financial, human, managerial and social; and (c) a disconnect between technical assistance and
the needs of farmers, both for meeting market demands and reducing vulnerability through
climate change adaptation.
7. Weather severity and water scarcity/unequal distribution. The Brazilian Northeast
experiences chronic water scarcity, with periodic, long and severe droughts that create a number
of economic and social problems and hamper the region’s development. Ceará is one of Brazil’s
driest states, with average annual per capita water availability of 1,150 m3, equivalent to only 4
percent of the national average. The semi-arid Sertão subregion represents 87 percent of the
State’s territory,4 with per capita annual water availability ranging from 400 m
3 to 800 m
3.
Ironically, the Sertão has about 98 percent of the State’s total available water. Given the State’s
climate conditions and variability stemming from heavy droughts, desertification risk and floods
have caused major human disasters with a massive impact on agriculture and food production.
Agriculture will also have to adapt to increasingly variable and unpredictable growing
conditions. In recent years several Brazilian states in different regions have experienced the
heaviest rainfall in their history, which has caused severe floods.
8. Water supply and sanitation in rural Ceará. The State is composed of 184
municipalities with 8.4 million inhabitants,5 75 percent of whom live in urban areas and 25
percent (2.1 million inhabitants) in rural areas. In 2009, potable water supply access in the State
reached 91 percent of the urban population and only 17 percent of the rural population. In
contrast, basic sanitation services reach 37 percent of the population in the urban area and only
0.20 percent6 in rural areas. In this context, the State’s goal to ensure universal access to water
services by 2015 is considered to be overly ambitious because the amount of investment needed
is tremendously higher than what is currently allocated. By the end of the proposed project’s
interventions, that coverage in rural areas will reach 19 percent for potable water supply and 2
percent for basic sanitation services.
9. Despite the State’s strong and continuous investments in water infrastructure,
access to potable water supply and water for irrigation remains weak. Small-scale farmers,
4 Encompassing 150 municipalities out of a total of 184 statewide, IBGE 2010.
5 Source: IBGE Census 2010
6 IPECE, http://www.ceara.gov.br/ceara-em-numeros.
3
especially in the Sertão, often face an extremely low level of access to water resources; the
impact of this is a relatively stunted irrigated area (only 0.3 percent of the State’s total
agricultural area) and periodic lack of potable water supply for rural enterprises and households,
thus significantly limiting the growth of commercial food processing and domestic primary
processing. The lack of adequate basic sanitation systems is also a constraint to producers’
commercial activities, even at the level of the smaller cooperative associations.
B. SECTORAL AND INSTITUTIONAL CONTEXT
10. The State’s Multiyear Development Plan (Plano Plurianual 2012-2015, PPA) seeks
to increase regional and rural development and productivity and builds on the following
tenets:
(a) Regional/territorial approach and integration: Ceará’s thirteen territories (seven of
which coincide with the Federal Government’s Territórios da Cidadania boundary
delimitation) will aid in concentrating and coordinating various federal- and state-
level programs to boost economic and social inclusion.
(b) Climate-smart responses: The proposed project would stimulate innovations that
jointly increase agricultural productivity, increase the efficient use of scarce water,
and promote climate change resilience while reducing carbon emissions.
(c) Innovation: Rural producers must adopt new technologies and access greater
commercial intelligence in order to thrive in dynamic markets. This will require fresh
learning approaches to stimulate a ―rural innovation culture‖ conducive to
competitiveness and capable of connecting education to jobs.
(d) Technology Strategy: By tapping into global knowledge and technology for
dissemination in the local economy, the State will give priority to the establishment of
a network and mechanisms to facilitate the dissemination and adoption of new
technologies and practices among producers and other communities, including: the
direct support of innovative projects through the provision of technical, financial and
other needs; and (ii) the encouragement of change through demonstration projects.
(e) Producers’ Organizations:7 Collective action among small-scale producers can
reduce asymmetric bargaining power in markets dominated by intermediaries.
Previous Bank-financed operations in Ceará have fostered more than 3,500
community associations and cooperatives, mostly composed of small-scale producers
who would be targeted under the proposed operation.
(f) Value chains: Rural producer organizations that participate in value chains can: (i)
improve the uptake of technological innovation; (ii) expand access to timely
commercial intelligence; and (iii) reduce individual risks through risk spreading
across value chain actors.
7 Producers’ Organizations are clusters of small and medium enterprises located in a given territory with productive
specialization and cooperative arrangements.
4
(g) Equity: Equity among value chain actors would be promoted through alliances with
private companies that promote ―win-win‖ market solutions. The project’s inclusive
design will also promote the participation of women and youth.
11. In addressing the State’s agenda, its PPA (2012–2015) reflects the goals of equitable,
inclusive and efficient growth. The proposed project would support priority programs selected
from the PPA and from the State Strategic Plan. Investments will be linked to a very well-
designed strategy focused on: (a) promoting inclusive growth; (b) universalizing potable water
supply; and (c) modernizing and strengthening public institutions.
12. In this regard, the project will mark a shift in the approach to rural sustainable
development and competitiveness: from a traditional rural demand-driven (community-driven
development, CDD) approach to a more strategic and market-oriented approach.
C. HIGHER-LEVEL OBJECTIVES TO WHICH THE PROJECT CONTRIBUTES
13. The Bank has had a long-standing partnership with the Northeast Region and the
State of Ceará, with regular dialogue on the overall lending program, State sector strategies and
specific operations. The proposed project is an important part of both the Bank’s Brazil portfolio
and the focal areas of the Bank’s Agriculture Action Plan (FY10–12), linking with its five focal
areas: (a) raising agricultural productivity, including support to the increased adoption of new
technology, improved agricultural water management, and strengthened innovation systems; (b)
linking farmers to markets and strengthening value addition, including support for investments in
transport infrastructure, strengthened producer organizations, improved market information, and
access to finance; (c) reducing risk and vulnerability, including continued support for safety nets,
better managing food markets, risk management against catastrophic loss, and reduced risk of
major livestock disease outbreaks; (d) facilitating agricultural entry and exit and rural nonfarm
income, including improved rural investment climates, and upgraded skills; and (e) enhancing
environmental services and climate-smart agriculture, including better-managed livestock
intensification, improved rangeland, watershed and fishery management, and support to link
improved agricultural practices to environmental recovery and sustainability (e.g., through
payment for environmental services).
14. The Bank has consistently supported the State’s community-driven Rural Poverty
Reduction Program (known locally in Ceará as the Projeto São José) since its inception in 1993,
and the State has been notable for its willingness to test innovations, e.g., market-based land
reform, fair-trade initiatives, and integration. The Bank’s CDD8 investments in Northeast Brazil
are well documented in their respective ICRs as well as in evaluation studies noting the impact
and cost-effectiveness of the approach. Bank support at this time for a new Rural Development
Project in Ceará pairs its knowledge of a tested and robust new mechanism with the State’s own
policies, experiences and commitment, taking advantage of a social and participatory network
created by the previous projects.
8 Community-driven Development, a participatory approach adopted by the Rural Poverty Reduction Program in
Northeast Brazil
5
15. Ceará has been among the Bank’s primary subnational borrowers in the Northeast
Region. Investment loans to Ceará over the last decade have included education, health, rural
poverty, results-based Sector-Wide-Approach (SWAp) supporting six sectors and nine strategic
government programs, water resources management, water infrastructure and services expansion
and efficiency, and urban development and economic growth in development poles (Cidades do
Ceará Project). Currently, the State has five active projects comprising a total investment of over
US$535 million.
16. The proposed project’s objective and strategy are fully in line with The World Bank
Group's Country Partnership Strategy 2012-2015 (Report # 63731-BR) discussed by the
Executive Directors on November 1, 2011. In the agricultural and natural resource management
(NRM) sectors, the proposed project would support two key challenges outlined in the CPS: (a)
seizing opportunities for innovative and integrated approaches to climate-smart, inclusive
economic growth, focusing on rural productivity; and (b) addressing the competitiveness issues
that Brazil faces in agriculture and NRM. The proposed project would also support the other two
CPS pillars by contributing to an Equitable Brazil by targeting rural access to basic infrastructure
and services for human capital development, and to a Sustainable Brazil through the promotion
of sustainable production systems, including the piloting of incentives schemes for innovations
and technologies.
II. PROJECT DEVELOPMENT OBJECTIVES
A. PDO
17. The project development objectives (PDO) are to: (i) improve the sustainability of rural
production and rural income generation; and (ii) contribute to the State’s efforts to universalize
access to water services.9
18. This will be done by increasing rural productivity in a sustainable manner and also by
improving the competitiveness of organized small-scale rural producers by favoring their
participation in productive clusters chains and by expanding their access to supporting
infrastructure.
PROJECT BENEFICIARIES
19. The project will benefit over 18,000 poor rural producers and particularly small farmers,
as well as nonagricultural rural producers represented by their organizations, such as community
associations, producers’ associations, cooperatives, or other types of legally established
organizations that can provide proof of regular operation. The proposed project would also
provide about 40,000 people with access to water services.
PDO LEVEL RESULTS INDICATORS
9 Water services in this project mean potable water services and basic sanitation services (e.g., septic tanks and
sanitary kits).
6
20. Key results expected from the project are: (a) an increase in the real revenue (inflation
adjusted) of the beneficiary rural producers’ organizations; (b) the number of people in rural
areas provided with access to improved water sources under the project; (c) the number of people
in rural areas with access to improved sanitation under the project; and (d) the increased number
of beneficiary organizations participating in environmental recovery activities and conservation
of focused areas.
III. PROJECT DESCRIPTION
A. PROJECT COMPONENTS
21. Component 1: Economic Inclusion (US$70.0 million, of which US$46.69 million
IBRD financing) would promote investments in rural economic inclusion in the Borrower’s
territory, through:
(a) the provision of support to SDA for: (i) the preparation of Business Plans,
implementation and supervision; and (ii) the construction of approximately five
warehouse facilities in selected rural areas for collecting, processing and distributing farm
products.
(b) the provision of support to POs for the carrying out of: (i) Productive Subprojects; and
(ii) Environmental Services Subprojects, all included in eligible Business Plans.
(c) the provision of support to SDA for the development of a state-wide disaster risk
management policy, contingency plans and early warning systems for the prevention of
natural disasters.
22. Component 2: Water Services10
(US$50.0 million, of which US$33.35 million IBRD
financing) would support the Borrower’s efforts to universalize access to potable Water
Services, through:
(a) the provision of support to: (i) SDA for the preparation and implementation of
engineering designs for selected potable water and basic sanitation infrastructure
investment; and (ii) CAGECE and SOHIDRA for the analysis of engineering designs and
supervision of works for the implementation of selected potable water and basic
sanitation infrastructure investments, using existing water sources to complete the link
between the main water distribution system and the relevant household.
(b) the provision of support to CAGECE and SOHIDRA for the scaling up of existing water
distribution management system models, including SISAR, and the development of pilot
solutions for the sustainable operation and management of Water Services delivery and
management in selected rural areas.
(c) the provision of support to Community Associations for the carrying out of Greywater
Reuse Pilot Subprojects.
10
Water services in this project mean potable water services and basic sanitation services (e.g., septic tanks and
sanitary kits).
7
23. Component 3: Institutional Strengthening and Project Management (US$23.3
million, of which US$15.54 million IBRD financing) would provide support for, inter alia: (i)
the technical and administrative management of the Project; (ii) the necessary updates to SDA’s
management information system, including the design, development and implementation of a
monitoring and impact evaluation module to track progress on results indicators; (iii) the
development and implementation of a training program for technicians, Project Beneficiaries and
stakeholders; (iv) the development and implementation of a communication plan to disseminate
information on the Project; (v) institutional strengthening of TCE-CE for the carrying out of
audits under the Project.
B. PROJECT FINANCING
LENDING INSTRUMENT
24. The proposed operation is a Specific Investment Loan (SIL) in the amount of US$100.0
million. Retroactive financing11
is expected in the amount of up to US$20 million.
PROJECT COST AND FINANCING (US$)
Project Components Project Cost IBRD Financing % Financing
1. Economic Inclusion 2. Water Services
3. Institutional Strengthening and Project
Management
Total Baseline Costs
Physical contingencies
Price contingencies
70,000,000 50,000,000
23,300,000
143,300,000
3,225,000
3,225,000
46,690,000 33,350,000
15,541,100
95,581,100
2,084,450
2,084,450
66.70 66.70
66.70
66.70
64.63
64.63
Total Project Costs
Interest during Implementation
Front-end Fees
Total Financing Required
149,750,000
0
250,000 150,000,000
99,750,000
0
250,000 100,000,000
66.67
100.0 66.70
C. LESSONS LEARNED AND REFLECTED IN THE PROJECT DESIGN
25. Some lessons learned from the implementation of other Bank-supported projects in the
State, such as PCPR12
, and incorporated in project design, include the following:
(a) Partnership with social organizations can be significant for the quality of project-
supported proposals (local investments), particularly regarding the level of community
participation and project assessment for prioritization and implementation of investments.
(b) Market orientation: Verifiable market opportunities must underpin support for poor rural
producers. Effective mechanisms to achieve this include: (i) focusing on existing and new
11
Preparatory activities would be financed by project dissemination events, training, business plans, pilot projects
for productive and water services investments, among others. 12
Projeto de Combate à Pobreza Rural (Rural Poverty Reduction Project, P050875)
8
markets and value chains as part of the eligibility criteria for productive investment
projects; (ii) conducting private-sector consultations during project design; and (iii)
carefully analyzing areas where the public sector can play a catalytic role, based on
current and future market conditions.
(c) Competitiveness clusters: To ensure success, the following factors must be considered: (i)
creating extensive partnerships among players—under a common territorial development
strategy—for value-chain projects; (ii) focusing on technologies for markets with high
growth potential; (iii) reaching sufficient critical mass to acquire and develop state-level
(or national) visibility; and (iv) implementing a common territorial economic
development strategy consistent with the State’s overall development goals.
(d) Value-added arrangements are viable, based on a transparent scheme with proper
incentives. Successful value-added arrangements can be achieved when three key
elements are present: (i) a clear and shared objective and a sound balance of power and
governance among all stakeholders; (ii) a shared risk mechanism; and (iii) commitment to
market principles.
(e) Complementary funding from other sources can increase project results, as shown by the
agreement with MDS and FUNASA, which carried out previous or parallel
complementary actions. Integration with other rural development programs, including the
simultaneous promotion of private productive investments and public socioeconomic
investments, enhances efficiency, project impact and sustainability.
(f) Experiments carried out in previous operations showed that it is possible to increase
procurement efficiency without interfering in the autonomy of community organizations,
by applying the State’s modern bidding tools.
(g) Recent WSP and Bank studies/reports have shown the importance of the demand-driven
approach to guarantee ownership, while ensuring professional expertise to operate and
maintain the provision of water and sanitation systems (WSS) as a means to enable
sustainability.
IV. IMPLEMENTATION
A. INSTITUTIONAL AND IMPLEMENTATION ARRANGEMENTS
26. The State of Ceará, through SDA, would be the Borrower for the proposed loan, with the
Federative Republic of Brazil serving as Guarantor. SDA will be responsible for overall
management, planning, coordination, monitoring and evaluation of all project activities both at
central and regional levels, as well as for project financial management, procurement,
disbursements and accounting. SDA will also be responsible for implementing the social and
environmental safeguards instruments, as well as for disseminating project results through a
proactive communication strategy. In addition, SDA will ensure that counterpart resources are
foreseen in the State’s budget.
27. The Project Management Unit (Unidade de Gerenciamento do Projeto, UGP) will be
housed in SDA and will be composed of a Project Coordinator, a Technical Advisor for
Planning, a Legal Advisor, a Social Management Advisor, an Environmental Management
9
Advisor, an Information Technology Advisor, six managers (Procurement Specialist, Financial
Administration Specialist, Monitoring and Control Officer, Water Resources Use Manager,
Economic Inclusion Manager, and Institutional Strengthening Manager), technical staff and
administrative assistants.
28. To ensure local coordination and integration between institutions and stakeholders, 13
Project Territorial Management Units (Unidades de Gerenciamento Territorial, UGT) will be
established, covering all the State’s territories, each with three field technicians and one
administrative assistant. One of the three technicians will carry out overall coordination of the
UGT, reporting directly to the General Coordinator. In addition, a Steering Committee chaired
by SDA, and composed by representatives from key secretariats and organizations, as defined in
the Operational Manual, will be responsible for providing general oversight and guidance on the
strategic and multisectoral aspects of the Project.
29. SDA will partner with several institutions, such as EMATERCE, CAGECE, SOHIDRA,
CENTEC and IICA, for project implementation through cooperation agreements to formalize
responsibilities regarding project actions. Their roles, as well as the detailed implementation
arrangements, are described in Annex 3.
B. RESULTS MONITORING AND EVALUATION
30. The project will be monitored and evaluated through the existing Management
Information System (MIS) and databases developed by SDA in the context of previous Bank-
supported operations, in addition to the new Heritage System (Sistema de Controle Patrimonial),
which will feature modern technological tools. The monitoring system will serve as a realistic
and flexible instrument for improving the performance of project implementation through the
timely identification of problems that require immediate attention from managers and allow
corrective measures to be taken. The system will provide systematic and up-to-date information
to managers and partners during project implementation, and will assist in meeting established
criteria and eligibility rules.
31. The project will also conduct an impact evaluation to determine whether and to what
extent the interventions under Components 1 and 3 lead to improved outcomes for producers’
organizations and the families in those organizations. The impact evaluation will test different
extension and technical assistance strategies aimed at raising the quality of business proposals
prepared by the producers’ organizations, encouraging the adoption of new technologies,
improving community-driven processes and social capital in these organizations, and ensuring
the sustainability of investments. These monitoring and evaluation arrangements are further
detailed in Annex 3.
C. SUSTAINABILITY
32. The Borrower has demonstrated commitment to the PDO and has confirmed the
necessary fiscal space for project implementation. Consultations have been conducted across an
array of stakeholders (e.g., CAGECE, COGERH, SOHIDRA, EMATERCE, Banco do Nordeste,
among others) to both inform and verify key elements of project design.
10
33. Component 1 supports a business model with financing shared among POs, through the
National Program to Strengthen Family Agriculture (Programa Nacional de Fortalecimento da
Agricultura Familiar, PRONAF), private financial access and the project (through project
matching grants). It is expected that partnering financial institutions would take on an ever-
increasing role in financing the investments, with market-sourced finance comprising an ever-
larger share of the total investment. In addition, the participation of financial institutions in
assessing and possibly cofinancing viable and sustainable business plans to be implemented
under Component 1 would extend their client base and should work to deepen financial markets
in Ceará.
34. Component 2 builds on previous successful experience in Ceará with local-level
implementation of small-scale infrastructure investments, mainly in rural potable water supply
and basic sanitation services. Past experience reinforces the importance of up-front investments
in local management capacity to ensure that user fees are in place for such services (e.g.,
cleansing of septic tanks) to cover operation and maintenance expenditures. The Ceará
experience was included as a best practice and documented in the Water Partnership Program
grant; the project will follow the same successful model.
35. Furthermore, the project design aims at promoting sustainability at the economic, social,
environmental and institutional levels by establishing specific criteria (detailed in the Project
Operational Manual) for selecting investment proposals such as demonstrated market viability to
ensure that increased incomes promoted by the project are sustained over time, and that the WSS
systems will be sustainably operated and maintained.
36. On the WSS operation and management side, the project has incorporated improvements
to the WSS management model by using as a criterion for investment selection the prior
identification of how the systems will be operated and maintained post-implementation. The
association with the SISAR model, which is a well-established model with more than 15 years of
implementation and with clear guidelines and technical assistance to guarantee the sustainability
of project interventions at the local level, would be highly encouraged.
37. On the social side, the project emphasizes the strengthening of producers’ organizations
to effectively access project and government or private resources and enhance their managerial
capacity. The project also aims at ensuring that women, youth, indigenous peoples and other
vulnerable rural groups can benefit from increased agricultural and nonagricultural rural
competitiveness, as well as from water services investments.
38. On the environmental side, the investment selection criteria will ensure that business
initiatives incorporate environmentally sound practices, and will encourage the adoption of
practices that can maintain or recover environmental services, which can become an additional
source of income. Moreover, selection criteria include compliance with existing relevant federal,
state, territorial and municipal development plans. In particular, the Territorial Rural Sustainable
Development Plans (Planos Territoriais de Desenvolvimento Rural Sustentável, PTDRS) are the
tools that empower local stakeholders for social management through their representative
territorial councils and other representative bodies. These participatory instruments contribute to
11
the State’s objective of strengthening a regional development model, to which this project
contributes, by promoting social and economic sustainability with stakeholders’ commitment.
39. Overall: The Government would play an important role in promoting technology,
sometimes by directly supporting the development and use of technologies or creating a climate
favorable to innovation through various mechanisms and incentives. Sustainability of project
impact would be achieved through the project’s support to participatory processes at every level,
particularly regarding: (a) territorial forums and strategic planning; (b) Municipal Water Plans;
(c) public calls for submission of investment proposals for Components 1 and 2; (d) other state
public agencies as collaborators; and (e) POs in defining business plans, including
implementation and cost sharing, thus increasing the degree of ownership of financed
investments. Furthermore, the roster of technical service providers established by SDA would
ensure quality design and execution of business plans, complementary rural infrastructure and
the associated project. Finally, investment agreements signed among POs, Community
Associations and SDA would detail procedures for the continued operation and maintenance of
these investments, drawing on lessons learned from recent studies in Northeast Brazil on
management models for rural potable water and basic sanitation services. Moreover, these
activities would be an efficient policy tool for triggering change and enhancing the institutional
and financial sustainability of project impacts.
V. KEY RISKS AND MITIGATION MEASURES
A. Risk Ratings Summary Table
Risk Rating
Stakeholder Risk Low
Implementing Agency Risk Moderate
- Capacity Moderate
- Governance Moderate
Project Risk Moderate
- Design Moderate
- Social and Environmental Moderate
- Delivery of Monitoring and Sustainability Moderate
Overall Implementation Risk Moderate
B. Overall Risk Rating Explanation
40. Stakeholder risk is deemed Low, as the political will at the municipal and state level for
the Project is strong, as is also the grassroots support from existing producers and community
organizations, the private sector and financial institutions in Ceará, all of which have actively
participated in consultations during project preparation. The State’s innovative strategy on
inclusive economic growth carries inherent institutional capacity risks. With a relatively complex
12
operation following a multisectoral approach, technical capacity building and project
management are key elements to ensure that the project is implemented in a timely manner.
Previous operations have shown that without effective leadership, project implementation delays
could be high. However, in consideration of the Bank’s long-term partnership and familiarity
with the State, the overall implementation risk is considered Moderate because additional
measures to mitigate the project’s overall risk have been or will be put in place, such as the
Project Management Unit placed under the SDA’s leadership, suitable allocation of financing,
partnerships and collaboration of other State Secretariats, agencies, and stakeholders, business
plan preparation for productive investments, procurement packaging, design flexibility and up-
front preparation of the Operational Manual.
VI. APPRAISAL SUMMARY
A. ECONOMIC AND FINANCIAL ANALYSES
41. Because the proposed project will respond to the explicit demands of its target population
concerning the nature of the project proposals to be considered and eventually supported, a
detailed ex ante cost-benefit analysis of the project as a whole is not warranted. To obtain an ex
ante indication of the financial soundness of the types of investments likely to be supported by
Component 1, indicative production models from different value chains were constructed using
information collected during project preparation. The validity and accuracy of these models will
be verified, and any necessary revision will be incorporated during appraisal. More precise and
representative feasibility indicators could be estimated during implementation, using information
from a larger sample of actual investment proposals under consideration for project financing.
The analyzed projects generated Financial Internal Rates of Return (IRR) greater than 25 percent
in all cases and demonstrate significant incremental contributions to rural producer income
(R$262/month on average). The sensitivity analysis in Table 4 of Annex 7 shows that, in general,
these projects exhibit robust indicators.
42. The preliminary cost-benefit assessment of potable water supply investments to be
financed by Component 2 is based on cases drawn from the Implementation Completion and
Results (ICR) report for the Rural Poverty Reduction Project (RPRP) of Ceará (December 2009),
a precursor to this project. It is expected that the nature of the projects demanded for Component
2 financing will be similar in nature and scale to those implemented by the RPRP. Accounted
costs included the initial investment and annual operating costs, while the benefits were
calculated on the basis of: (i) savings in time used for water collection; (ii) savings derived from
the reduction of waterborne diseases; and (iii) willingness to pay, which is a proxy for the value
families attribute to the availability of potable water. As shown in Table 5 of Annex 7 potable
water supply investments were deemed economically feasible. The financial analysis of Potable
Water Supply projects shows positive results, with IRR above the discount rate of 10 percent.
B. TECHNICAL
43. The project is deemed technically sound and presents strategic complementary actions to
support the State’s efforts to promote inclusive growth. Productive inclusion of small producers
will be achieved by means of project actions to promote their economic development through
market inclusion, by adding value to and increasing the scale of rural productivity. Project
13
actions will also target nonagricultural activities carried out by small producers. The project
design envisages clear selection and ranking criteria for production investments, strongly linked
to the targeted production clusters.
44. Furthermore, the project will strongly contribute to the State’s efforts to ensure universal
access to potable water and basic sanitation in rural areas by financing the extension of potable
water supply infrastructure and basic sanitation services to rural communities. The State’s long-
term experience with the management of rural potable water supply services (such as SISAR)
will be adopted by the project. In addition, the project design includes a strong aspect related to
technical support to producers’ and community organizations, and social and environmental
requirements for project investments, as well as a project capacity-building plan targeting
participating stakeholders.
C. FINANCIAL MANAGEMENT
45. A financial management assessment for the proposed project was conducted during
project preparation, in accordance with OP/BP 10.02 and the Financial Management Practices in
World Bank Financed Investment, dated March 5, 2009, to determine whether SDA has
acceptable financial management and disbursement arrangements in place to adequately control,
manage, account for and report on project funds. Based on the assessment of the executing
agency, the financial management arrangements as set out for this project meet the Bank’s
minimum fiduciary requirements (see Annex 3 for a detailed assessment).
46. The overall conclusion on the assessment of SDA is that the financial management
arrangements, as set out for the proposed project, are adequate. Fiduciary risks have been
identified and mitigated as reflected in the ORAF matrix (see Annex 4). The financial
management supervision missions are expected to be undertaken on a semiyearly basis.
47. In addition, a financial management assessment for the proposed project was conducted
during project preparation at IICA’s headquarter and FM systems were found acceptable and
liable to proper account projects activities (see Annex 3). Details of the arrangements with IICA
are detailed in the Operational Manual.
D. PROCUREMENT
48. The capacity assessment of UGP/SDA reviewed the organizational structure for
implementing the project. It verified that despite the UGP staff’s lengthy experience with Bank-
financed operations, the introduction of private-sector procurement procedures (commercial
practices) for the productive projects, of larger infrastructure packages, and of an enhanced
technical assistance component will challenge the UGP staff’s procurement capacity. To
strengthen this capacity, UGP should hire procurement consultants for centralized procurement,
and technical experts to make sure the projects have sound business plans that propose specific
commercial practices and include criteria to verify economy, efficiency and transparency.
Annual audits of business plan implementation performance and annual procurement audits
could help identify adequacy and weaknesses. The initial implementation phases may require
closer and much more intense supervision by the Bank.
14
E. SOCIAL
49. The proposed project triggers OP/BP 4.10 (Indigenous Peoples) and 4.12 (Involuntary
Resettlement); for details see Annex 3 (Social section). The project will be implemented across
the State’s 13 rural territories and will target family agricultural producers, quilombolas,
indigenous groups, and artisanal fishermen, among other traditional groups at different stages of
social and economic sustainability. It is estimated that project activities will reach approximately
28,200 families, with around 100,000 direct beneficiaries.
50. Indigenous communities in the project area comprise 12 ethnic groups and 22,000 people
who are eligible for project activities according to their expressed interest in participating. These
people will mostly benefit from capacity-building activities planned under Component 3.
However, those with regularized land tenure status may access investment support under
Components 1 and 2. Eligible demands presented by indigenous communities will be initially
analyzed by the representative territorial and/or municipal councils. The project will favor the
representation of indigenous groups in such councils and will accompany their activities to avoid
partial decision making. The criteria for prioritization of indigenous communities were defined
through participatory procedures and in close consultation with indigenous peoples.
51. The Indigenous Peoples Planning Framework (IPPF), dated October 27, 2011,
incorporates these indigenous inputs and recommendations, documents the consultation process,
and takes into account the differing access of potential indigenous beneficiaries to public
policies. The Borrower publicly disseminated the IPPF on its website (www.sda.ce.gov.br); it
was also disseminated in the Bank’s external website (see Annex 3).
52. OP/BP 4.12 (Involuntary Resettlement) is triggered. The proposed project is not expected
to fund any subprojects that could potentially cause significant physical displacement and
economic losses. The project will seek to avoid involuntary resettlement. Nonetheless, some of
the potential subprojects, such as improvements and/or maintenance of rural roads or small-scale
irrigation works, could possibly involve the relocation of people or acquisition of land. It is
expected that, in these cases, the potential numbers of people who might be affected would be
quite small and any land acquisition would also be relatively minor. Because the subprojects to
be developed under the project are not yet known, a Resettlement Policy Framework (RPF),
dated October 27, 2011, was prepared; it was consulted with key stakeholders and publicly
disseminated, and will form part of the Project Operational Manual. The RPF will serve as the
guide to the site-specific formulation of Resettlement Action Plans (RAP), if needed. The RPF
has been consulted and was publicly disseminated on the Borrower’s website
(www.sda.ce.gov.br) and in the Bank’s external website (see Annex 3).
F. ENVIRONMENT
53. The proposed project falls under Category B and triggers Operational Policies 4.01
(Environmental Assessment), 4.04 (Natural Habitats), 4.36 (Forests), 4.09 (Pest Management),
4.11 (Physical Cultural Resources) and 4.37 (Safety of Dams). One of the project’s assumptions
is the adoption of environmental assessment as a cross-cutting theme for all project actions,
15
which should take into consideration the practice of proper environmental management and
explicit attention to biodiversity, climate change and environmental services.
54. The project does not entail any potential large-scale, significant and/or irreversible
negative impacts. The proposed project interventions will be small-scale, market-oriented/driven
investments. These investments would not cause significant adverse environmental impacts,
since they are related mainly to complementary infrastructure development (i.e., potable water
supply, basic sanitation), new agricultural practices (i.e., product diversification, conservation
agriculture, promotion of value-added products, and product certification) and nonagricultural
activities such as small-scale processing units. Potential adverse impacts from projects will be
limited, site-specific, largely reversible, and readily and reliably mitigated through known
methods. The selection of productive investments will be consistent with: (a) national, state and
local legislation concerning the Brazilian Forest Code, natural habitats and protected areas; and,
(b) World Bank safeguard policies. The environmental safeguard issues are detailed in the
project’s Integrated Safeguards Data Sheet (ISDS) and Operational Manual.
55. Although potential impacts from projects are expected to be small, temporary and of
short duration, the project’s Environmental and Social Management Framework (ESMF) dated
October 27, 2011 specifies guidelines and procedures to be followed by construction contractors,
covering aspects such as location of construction camps, clearance of vegetation, noise, traffic
control, safety signaling, and disposal of construction debris and waste material to be
incorporated in the bidding documents for civil works. Compliance with the practices outlined in
the Project Operational Manual would be a contractual obligation of the contractors. Regarding
small ruminants and irrigation activities under Component 1, potential impacts could arise from
the suite of investment activities related to the desertification process and vulnerability of semi-
arid areas to climate change, exploitation of native vegetation, use of rudimentary management
practices, and increasing demand for firewood for tanneries and meat processing. These impacts
could include soil erosion, the degradation of surface and groundwater, salinity, and improper
disposal of chemical packaging, all with corresponding demands for appropriate mitigation
measures.
56. The Borrower prepared an ESMF for the project, drawing on lessons from previous
operations implemented by SDA, including the RPRP and other projects implemented by the
State of Ceará, with best practices for soil conservation and recovery of degraded areas. The final
ESMF was submitted to the Bank for analysis and no-objection and has been disseminated in the
Bank’s external website and on the Borrower’s website (www.sda.ce.gov.br). See Annex 3 for a
more detailed description of project safeguards.
16
Annex 1: Results Framework and Monitoring
.
Brazil
Ceará Rural Sustainable Development and Competitiveness .
Results Framework .
Project Development Objectives .
PDO Statement
Project Development Objective: The objectives of the project are to: (i) improve the sustainability of rural production and rural income generation; and (ii) contribute to the Borrower’s efforts to
universalize access to water services. .
Project Development Objective Indicators
Cumulative Target Values Data Source/ Responsibility for
Indicator Name Core Unit of Measure Baseline YR1 YR2 YR3 YR4 End Target Frequency Methodology Data Collection
Real revenue increase (inflation adjusted) of
beneficiary rural
producers’ organizations
Percentage 0.00 0 10 15 20 20 Annual
Baseline Report,
Business Plans
and MIS
UGP
New piped household
water connections that result from project
intervention
Number 0.00 700 5.700 9.300 10.000 10.000 Annual
MIS, Annual
Performance
Report
UGP
Number of people in rural areas with access
to ―Improved Sanitation‖ under the
project
Number 0.00 2.800 22.400 36.400 39.200 39.200 Annual
Baseline Study, MIS, Annual
Performance
Report
UGP
Increased number of beneficiary
organizations
participating in environmental recovery
activities
Number 0.00 0 10 10 25 25 Biannual
MIS, Annual
Performance
Report
UGP
.
17
Intermediate Results Indicators
Cumulative Target Values Data Source/ Responsibility for
Indicator Name Core Unit of Measure Baseline YR1 YR2 YR3 YR4 End Target Frequency Methodology Data Collection
Productive investments
implemented and
operational Number 0.00 40 150 350 440 440 Biannual MIS UGP
25% of productive
investments led by
women Number 0.00 10 33 88 110 110 Annual
MIS, Annual
Performance
Report
UGP
Participating rural
producers’ organizations successfully accessing
formal markets (e.g.,
PAA and PNAE)
Percentage 0.00 0 10 30 40 40 Annual
MIS/Annual Accounting
Reports
UGP
Improved efficiency in
agricultural production
through access to environmentally
sustainable technologies
Number 0.00 4 15 35 44 44 Annual MIS UGP
Pilot PES mechanism
established and
operational for sustainable land-use
practices
Number 0.00 0 1 1 2 2 Annual MIS UGP
Basic sanitation investments
implemented and sustainably operated.
Number 0.00 0 10 80 140 140 Annual MIS UGP
Beneficiary
organizations trained in business management
Number 0.00 40 150 200 440 440 Biannual MIS UGP
Number of water reuse pilot projects
implemented with
project support
Number 0.00 1 8 12 13 13 Annual MIS UGP
Potable water supply
systems and basic
sanitation management training provided to
water services managers
Number 0.00 20 160 264 280 280 Biannual MIS UGP
18
Training being provided
to government staff and strategic partners in
accordance with the
Project Capacity Building Plan
Number 0.00 20 40 60 80 80 Biannual MIS UGP
Number of participants
X
Number 0.00 800 1.600 2.400 3.200 3.200 Biannual MIS, Annual
Report UGP
Training for project
beneficiaries to
encourage adoption of
environmentally sustainable practices
Number 0.00 2 4 6 8 8 Biannual MIS UGP
Number of participants in training courses
provided under by the
project
Number 0.00 100 375 825 1.350 1350 Annual
MIS, Annual
Performance Report
UGP
Project results and
lessons learned
disseminated Number 0.00 0 1 7 15 15 Biannual MIS, reports UGP
.
19
Annex 1: Results Framework and Monitoring .
Brazil
Ceará Rural Sustainable Development and Competitiveness .
Results Framework .
Project Development Objective Indicators
Indicator Name Description (indicator definition, etc.)
Real revenue increase (inflation adjusted) of beneficiary rural producers’
organizations
% increase in real revenue (inflation adjusted) resulting from activities supported by the project
New piped household water connections that result from project intervention Number of new piped household water connections resulting from the project intervention. A piped household water
connection is defined as a connection that provides piped water to the consumer through either a house or yard
connection. Thus, these do not include standpipes, protected wells, boreholes, protected springs, piped water provided
by tanker trucks or vendors, unprotected wells, unprotected springs, rivers, ponds and other surface water bodies, or
bottled water.
Number of people in rural areas with access to ―Improved Sanitation‖ under
the project
Cumulative number of people in rural areas who benefited from improved sanitation facilities that have been
constructed under the project
Increased number of beneficiary organizations participating in environmental
recovery activities
Number of beneficiary organizations involved in environmental recovering activities (e.g., riparian systems,
microcatchments and Caatinga biome). .
Intermediate Results Indicators
Indicator Name Description (indicator definition etc.)
Productive investments implemented and operational Number of project-supported activities implemented and operational; and % of investments led by women
25% of productive investments led by women Number of project-supported activities implemented and operational; and % of investments led by women
Participating rural producers’ organizations successfully accessing formal
markets (e.g., PAA and PNAE)
Number of rural producers selling products to institutional markets
Improved efficiency in agricultural production through access to
environmentally sustainable technologies (e.g., irrigation)
Number of producers who previously lacked access to irrigation or used unsustainable technologies gaining access to
environmentally sustainable technologies (e.g., irrigation).
Pilot PES mechanism established and operational for sustainable land-use
practices
Number of producers’ organizations adopting sustainable practices for recovery of environmental services and
receiving PES
Basic sanitation investments implemented and sustainably operated Number of project-supported activities implemented and operational
Business management training provided to beneficiary organizations Number of beneficiaries’ organizations trained in management of productive investments
20
Number of water reuse pilot projects implemented with project support Number of project-supported activities implemented and operational
Potable water supply systems and basic sanitation management trainings
provided to water services managers
Number of beneficiaries trained and managing water services systems
Training being provided to government staff and strategic partners in
accordance with the Project Capacity Building Plan
Number of technicians involved in the project implementation trained and delivering their tasks appropriately. (8
events; 3,200 participants)
Number of participants Number of technicians involved in project implementation trained and delivering their tasks appropriately
Training for project beneficiaries to encourage adoption of environmentally
sustainable practices
Number of beneficiaries trained and adopting environmentally sustainable practices
Number of participants in training courses provided under by the project Number of technicians involved in project implementation trained and delivering their tasks appropriately
Project results and lessons learned disseminated Number of dissemination activities (press releases, videos, publications, workshops, website, video conferences)
21
Annex 2: Detailed Project Description
BRAZIL: Ceará Rural Sustainable Development and Competitiveness Project
1. The Bank has articulated a strategic vision for continued engagement with Ceará and
other Northeast states, emphasizing:
(a) economic growth with inclusion and innovation;
(b) improved water productivity and management; and
(c) structural investments to enhance logistics in coordination with the State of Ceará’s
multiyear investment plan (PPA 2012–2015), converging with this three-pronged
approach.
2. The proposed Specific Investment Loan to the State of Ceara, with a sovereign guarantee
of the Federative Republic of Brazil, in the amount of US$100 million would support the
inclusive growth and sustainable development chiefly by facilitating and strengthening
competitive and innovative productive clusters and activities. Thus increasing income and access
to adequate technologies; and contributing to the State’s efforts to universalize access to basic
rural infrastructure, primarily potable water and basic sanitation services.
3. The identification of the most promising investments and policy interventions has
become a challenging task because the objectives have shifted from increasing outputs and basic
services under the previous Bank-financed Rural Poverty Reduction Projects, to transforming
agriculture into a more responsive, dynamic and competitive sector that includes small
producers. Therefore, the project is based on a multisectoral approach that requires well-
coordinated institutional management, well-designed workflow, and a monitoring system based
on performance and results indicators.
4. The selection of investment areas would be based on the following explicit inclusion
and exclusion factors:
(a) previous productive experience and market demand (private and public markets), allied
with potential improved competitiveness of selected beneficiaries and areas, based on
cluster assessment, a Territorial Development Plan, and a Rural Development Plan,
among other assessments and studies under preparation;
(b) water scarcity with regard to water resource availability, according to the Diagnóstico
das Rotas do Carro Pipa, Pacto das Águas Strategic Plan, Cinturão das Águas Program,
State Strategic Plan for Water Resources, Microcatchment Management Plan, and State
Sanitation Plan, as well as Municipal Water Plans under preparation, all contributing to
improve and universalize access to potable water and basic sanitation services;
(c) environmental and economic sustainability of proposed investments; and
(d) environmentally sensitive areas or areas under the process of desertification or
environmental degradation. Moreover, the aggregation of municipalities/producers and
spatial continuity will be considered as well as economic dynamics, and
complementarities with other policies, programs and projects (including other Bank-
supported projects) with transparent eligibility and prioritization criteria.
22
5. In line with Ceará’s strategic multiyear plan, the project will focus on several of the
State’s strategic regions, combining a different set of criteria for economic inclusion and access
to water resources for purposes of investment eligibility, such as:
(a) Spatial dynamics: through a selection mechanism consistent with the project’s objectives
and components, by regional classification in light of relevant dynamics, in particular
climate and demographics, with some areas facing population losses due to
desertification, for instance. The analysis provides a clear starting point for the selection
of municipalities based on access to basic opportunities and economic development.
Along with the geographic dimension, the full set of the State’s municipalities is reduced
to a much smaller subset that could hold pilot initiatives such as irrigation or production
projects linked to prioritized clusters. Municipalities with low access to potable water,
poor living conditions and low economic dynamics are presented in white (specified as
BBB in the legend) in the map below. Where those municipalities are located in adjacent
areas, forming clusters or regions lagging behind the remainder of the State, it might be
easier to scale up the pilot initiatives for nearby areas that are faced with the same
deficiencies.
(b) Demographic density: an area where small farmers make up a large share of the
population.
(c) Comparative advantage: most regional economies depend on a diverse portfolio of
unprocessed and processed primary-based products; comparative advantage will still lie
in primary activities and agro-processing because of the potential for natural resource
endowments.
(d) Availability of water resources.
(e) Business innovation, particularly the adaptation of existing technologies available in and
outside the State.
23
6. The project also includes disaster risk management requirements for project
investments under Components 1 and 2. The approach will be to have activities at
strategic/policy levels and operational level. At operational level, the proposed investments will
prepare and submit Contingency Plans, focusing particularly on the prevention of floods,
droughts and forest fires. Prevention actions will include environmental recovery actions
targeting riparian forests and vegetation to protect water sources; adequate soil management
techniques; and any action necessary to achieve compliance with the Brazilian Forest Code.
Environmental recovery actions in areas identified by the Forest Code as Permanent Preservation
Areas around water bodies may be considered as maintenance or recovery of environmental
services and, as such, be accounted as part of the community’s or producers’ in-kind contribution
to project investments. The project will seek coordination with the State Program to Prevent,
Monitor and Combat Forest Fires (Programa Estadual de Prevenção, Monitoramento, Controle
de Queimadas e Combate aos Incêndios Florestais, PREVINA) to provide technical assistance
24
on subjects such as alternative soil management, controlled burning, and other environmental
risk management activities to participating producers’ and community associations.
Project Development Objective:
7. The proposed project objectives are to: (i) improve the sustainability of rural production
and rural income generation, and (ii) contribute to the State’s efforts to universalize access to
water services.13
PDO Level Results Indicators
8. Key results expected from the project are:
(a) increase in the real revenue of the beneficiary rural producers’ organizations;
(b) number of people in rural areas provided with access to improved water sources
under the project;
(c) number of people in rural areas with access to improved sanitation under the project;
and
(d) increased number of beneficiary organizations participating in environmental
recovery activities and conservation of at-risk areas.
Project Beneficiaries
9. The project will benefit rural communities (Components 1 and 2) and particularly small
farmers and producers, as well as nonagricultural rural producers (Component 1) represented by
their organizations, such as community associations, producers’ associations, cooperatives, or
other types of legally established organizations that can provide proof of regular operation.
10. The aim of the training program under the project (Component 3) is to reverse the
historical weakness that hinders access to public policies and financial services by various social
groups such as land reform settlers and specific social groups such as quilombolas,14
indigenous
peoples, fishermen and other groups at different stages of achieving effective social and
economic development, thus reversing the current scenario of exclusion. In addition, the training
program will include the strengthening of targeted state agencies and other stakeholders involved
in project implementation.
Project Components:
11. Component 1: Economic Inclusion (US$70.0 million, with US$46.69 million IBRD
financing) is aimed at contributing toward enhancing the competitiveness and economic, social
and environmental sustainability of family producers through increased quality, added value and
increased productivity of family production, and through access to enhanced technologies,
including irrigation. Investments would involve both agricultural and nonagricultural rural
13
Water services in this project mean potable water services and basic sanitation services (e.g., septic tanks and
sanitary kits). 14
Quilombolas are communities formed by descendants of African slaves, living in rural areas.
25
production activities already successfully developed in communities or with economic potential
represented by successful past experiences, cultural characteristics, market opportunities or local
demand. Furthermore, this component will support environmental conservation or rehabilitation
investments for piloting the design of a model for payment for environmental services (PES) in
the rural landscape.
12. This component will finance consultants’ services, goods, works and nonconsulting
services to support the preparation and implementation of selected investments, and contingency
plans to manage disaster risks.
13. The target beneficiaries for this component are small farmers and producers carrying out
agricultural and nonagricultural activities in rural communities, represented by their
organizations, such as community associations, producers’ associations, cooperatives,
condominiums, or other types of legally recognized organizations. Settlers from the agrarian
reform and specific social groups (e.g., quilombolas, indigenous peoples, and fishermen, among
others) are also targeted as direct beneficiaries under this component.
14. Specifically, Component 1 will support the following investments through three
subcomponents:
(a) Subcomponent 1.1. Support to Productive Investments: this subcomponent would
finance (i) the preparation of business plans and monitorial supervision of
implementation; and (ii) the construction of approximately five warehouse facilities
in selected rural areas for collecting, processing and distributing farm products.
(b) Subcomponent 1.2. Productive Investments: this subcomponent would finance the
provision of support to POs for the carrying out of: (i) Productive Subprojects; and
(ii) Environmental Services Subprojects, all included in eligible business plans. The
investment proposals would define the role of the producers’ organizations in the
context of the productive clusters and promote: (i) productivity-inducing, climate-
smart investments in fixed capital (e.g., plant and equipment, minor productive
infrastructure), training and technical assistance; agricultural innovation, including
quality, labeling, value-added through processing, and contracts with government
institutions, supermarkets, agro-industries, the improvement of agricultural
productivity through small irrigation systems, using existing water sources and
available infrastructure to enhance production/productivity through the adoption of
sustainable systems and technologies.; and (ii) the development of a pilot mechanism
for the payment for environmental services (PES), in collaboration with
environmental and water agencies. Project investments under this subcomponent will
include environmental protection or recovery actions aimed at the restoration or
maintenance of water resources and biodiversity, or the recovery of vegetation cover
for carbon sequestration, to receive such payments. Supported actions would seek the
valuation and enhanced quality of natural resources and environmental services,
improved community management and the establishment of links between PES
sellers and buyers. A conservation fund will be established by the State Government
with Treasury funds to pilot the specialized financial mechanism for providing
payments during the life of the project. The State would continue with the
development of this PES strategy beyond project implementation, based on lessons
26
learned and using its own resources and implementation of rural infrastructures
consistent with productive activities and to make them feasible and/or more
competitive. This subcomponent will also finance the construction of approximately
five warehouse facilities for collecting, processing and distributing products from the
productive clusters selected according to feasibility studies to be carried out by the
project, in selected rural areas.
(c) Subcomponent 1.3. State and sectoral disaster risk management, contingency plans
and early warning system. Under this subcomponent, the project will contribute to
the development and implementation of an integrated state early-warning system that
will allow the State to forecast and provide warnings in case of imminent adverse
natural events. The subcomponent will also finance capacity building and training for
these subjects. This subcomponent will support strategic engagement with state
institutions to promote and begin the development of a state disaster risk management
policy. This activity will catalyze a reform in how the disasters are managed at state
level. At the same time, the project will support the specific development of disaster
risk management aspects in the rural development sector. This activity will include
discussions on how the sector considers the hazards and risk in the sectoral
investments and explore financial protection mechanisms for the agricultural sector.
15. Selection of proposals: Proposals will be selected in each project area through public
calls for proposals aimed at the priorities identified through studies15
of target production clusters
(fruit production, goats and sheep, fish aquaculture, and honey, among other clusters to be
identified during project implementation) carried out during project preparation, as well as
studies on the participation of family agriculture in productive chains and in accordance with the
State’s Territorial Development Plans.
16. Economic inclusion will be the focus of eligibility criteria for selecting proposed
investments, which should: (a) support the conservation and sustainable use of water resources;
(b) introduce technological innovation in production; (c) focus on market access and income
generation; (d) have rural family-based producers as beneficiaries; (e) present demands already
identified in regional development plans; and (f) support the participation of women’s groups or
organizations, considering the target of achieving at least 25 percent of subcomponent
investments led by women. The UGP will form a committee to evaluate and rank proposed
investments, and may invite experts to assist in the evaluation and selection process when UGP
technicians are insufficient or not technically qualified to assess specific proposals.
17. The procedures for the evaluation and ranking of proposals will be further detailed in the
Project Operational Manual. Evaluation criteria include: (a) market viability; (b) priority of the
proposal within the territory; (c) importance of the proposed productive chain to enhance the
competitiveness of family producers in the region; (d) number of family producers addressed by
the proposal; (e) adoption of best practices for soil conservation and water resources
management; (f) environmental sustainability (reduced negative impact, greater recovery of
degraded areas, better environmental suitability); and (g) compatibility with project objectives
and integration with other initiatives.
15
Initial target productive chains were selected in accordance with diagnostics conducted by EMATERCE,
Agropolos, SDA, Banco do Nordeste (ETENE), SEBRAE, and ADECE.
27
18. Furthermore, proposals should include information on: (a) market demand for product
commercialization; (b) availability of and demand for inputs required for production; (c) viability
study; (d) organizational and administrative capacity of the proposing organization; (e) logistics
and strategy for commercializing the products; (f) technical design (description of necessary
works, technical specifications, budget and list of suppliers of the required equipment); (g)
operational framework and sustainability strategy; (h) environmental aspects and specific
measures to prevent or minimize environmental impacts; (i) management plan; (j) financial and
accounting management; and (k) water availability and source (for irrigation investments).
19. Business plan preparation, approval and eventual financing would be further governed by
procedures outlined in the Project Operational Manual.
20. Support will be classified in three investment categories:
(a) Business plan development: Project funds will finance up to 100 percent of the
preparation cost of business plans.
(b) Production investment: These are investments to support the increase in family
production and quality enhancement through access to adequate technologies.
Investments under these production typologies will have an average cost of
US$160,000 for the total investment cost financed by the project. These investments
would target the structure of the production clusters or the introduction of technology
(including irrigation), supporting production or product processing and insertion in
local and regional markets.
(c) Large-scale investments: These may also target the structure of the production
clusters or the introduction of technology (including irrigation), and would mainly be
aimed at the links between product processing and distribution in the selected
productive chains, with the adoption of higher levels of technology for higher added
value and quality, and larger scale of production. Five warehouse facilities in selected
rural areas for collecting, processing and distributing farm products will be executed
directly by SDA after a feasibility study is submitted to the Bank. Such investments
would target access to broader markets, including international markets, creating
central units for processing and/or commercializing family production. The average
cost for large-scale investments is US$700,000.
21. Investment values will be defined and selected based on cluster type. Technical
assistance to investment operations will be provided preferably through publicly funded Rural
Technical Assistance (Assistência Técnica e Extensão Rural, ATER) or through private-sector
providers for at least the first year of execution, based on eligible business plan costs. The
strengthening of participating producers’ organizations provided under Component 3 and
technical support provided by the project’s regional offices should ensure the good technical
quality and sustainability of supported investments. For production investments, the producers’
organizations would be responsible for 20 percent of investment cost sharing, either in cash or in
kind.
28
22. This component’s investments will be executed directly by the producers’ organizations
under the supervision and monitoring of the Project Implementation Unit (targeted-demand
approach linked to the clusters).
23. Larger infrastructure and equipment investments identified to support productive chains,
such as processing units, storage and distribution markets, will be implemented directly by the
State Secretariat of Agrarian Development through the Project Implementation Unit in
collaboration with related State institutions (EMATERCE and CENTEC) to make procurement
processes more efficient and management arrangements more sustainable.
24. Component 2: Water Services16
(US$50.0 million, with US$33.35 million IBRD
financing) would support the State’s efforts to universalize access to potable water and basic
sanitation services in rural areas, selecting investment areas in line with the Federal Program
Água para Todos and the State’s Pacto das Águas, as well as the State’s strategy to eradicate the
water truck (carro pipa) from the water distribution system. Actions under this component are in
line with federal initiatives such as the National Water Resources Policy (Law 9.433/1997),
which calls for decentralized management approaches that include both users and local
communities; and the Federal Integrated Water Supply and Sanitation Policy17
(Law
11.445/2007), which calls for decentralized management of access to water, sanitation, drainage
and solid waste disposal in small localities primarily occupied by low-income households.
25. The 2010 Census identified the existence of around 27,000 rural communities formed by
more than five families each, of which around 2,700 communities comprise 50 to 400
households, totaling 1.4 million inhabitants. The 2008 SNIS18
had identified 302 rural
communities served with potable water supply services; of these, 109 are operated by CAGECE
and 193 are served by municipal WSS operators. The Integrated Rural Water Supply and
Sanitation System (Sistema Integrado de Saneamento Rural, SISAR)19
currently operates potable
water supply services in 570 rural communities. Combined, these services reach only 872
communities. Other communities are still unidentified and/or have access to potable water
supply services that are being operated by stand-alone community associations.
26. Specifically, Component 2 will support the following objectives through three
subcomponents:
(a) Subcomponent 2.1. Extension of WSS services: extend the potable water supply and
basic sanitation infrastructure services in rural Ceará.
(b) Subcomponent 2.2. Scale-up of Operation and Maintenance (O&M) management
models: scale up existing water distribution management system models, including
16
Water services in this project mean potable water services and basic sanitation services (e.g., septic tanks and
sanitary kits). 17
The Federal Integrated Water Supply and Sanitation Policy (Law 11.445/2007) defines a broader concept of
integrated water supply and sanitation: water supply, sanitation, drainage, and solid waste management. 18
Source: National Information System for Water and Sanitation (Sistema Nacional de Informações sobre
Saneamento SNIS). 19
SISAR is a nonpublic civil entity for community purposes that works as a federation of associations for the
common management of WSS services in a number of communities (multi-communities), in a regional geographical
space that may be intermunicipal.
29
SISAR, and develop pilot solutions for the sustainable O&M of water services
delivery and management in selected rural areas.
(c) Subcomponent 2.3. Environmental sustainability: introduce pilot practices for
efficient water reuse (such as wastewater reuse for irrigating localized agricultural
production) and for environmental rehabilitation or conservation activities aimed at
protecting water bodies.
27. This component will finance goods, works, nonconsulting services and consultants’
services to support the design and implementation of water and basic sanitation services, as well
as the greywater reuse subprojects.
28. Subcomponent 2.1. Extension of potable water supply and basic sanitation services:
This subcomponent will be executed directly by SDA, in collaboration with other related State
Government institutions (CAGECE and SOHIDRA), under the supervision and monitoring of
the Project Implementation Unit (UGP) through a directed-demand approach linked to the water
services universalization strategy. The subcomponent will include the preparation of engineering
designs and works for the implementation of potable water and basic sanitation infrastructure
investments.
29. The potable water supply service would be a collective infrastructure in line with
Municipal Water Plans (already prepared or currently under preparation), using existing water
sources and adding to available infrastructure to complete networks between main water
distribution systems and households, and would include water networks, water treatment
facilities and advanced information system technology for water metering.
30. Basic sanitation services would consist of individual household solutions and include
sanitary kits20
with septic tanks in all communities where potable water supply would be
implemented. Water sources may include existing water pipelines, rivers and small dams
(açudes); the use of wells will require prior analysis of the risks of causing salinization problems.
Subcomponent investments will target communities or community clusters with a minimum of
25 and a maximum of 500 households, where regular potable water supply and basic sanitation
services are not available. Communities must respond to the project’s public call for interest to
participate in project selection. An up-front identification of the entity that will be responsible for
the sustainable operation and management of the water services infrastructure is an eligibility
criterion for the selection of projects to be financed. Localities or clusters with fewer households
will be addressed by other state or federal initiatives.
31. Subcomponent 2.2. Scaling up of O&M management models: This subcomponent will
also be executed directly by SDA, in collaboration with other related State Government
institutions (CAGECE and SOHIDRA), under the supervision and monitoring of the UGP, and
will support the scaling up of existing O&M structure (e.g., SISAR) or the development of pilot
solutions for the sustainable operation and management structure for water services delivery.
This would include technical assistance, acquisition of equipment, capacity building and creation
20
Sanitary kits (kits sanitários) are composed of a toilet, shower, hand-washing sink, washing tank and septic tank.
30
of incentives for new community associations to be included in the O&M management structure.
The SISAR O&M management model would be recommended for adoption.
32. The SISAR O&M management model is a nonpublic civil entity for community purposes
that works as a federation of associations for the common management of water services in a
number of communities (multi-communities) in a regional geographical space (intermunicipal).
This model started around 1995 in a region of the State of Bahia (Central in Seabra) and in a
region of Ceará (SISAR Sobral). In Ceará, this management model was expanded in 2001 to
seven other regions in the State, with one SISAR installed in each planning region. SISAR has as
its key element the organization of a General Assembly formed by all affiliated associations. It
also has a Management Council formed by managers from community associations and
representatives from the State and Municipal Governments; and a Fiscal Council formed
exclusively by managers from the associations.
33. The service provision operational model is characterized by shared management, which is
divided between activities under the responsibility of the local association and activities at the
SISAR level. The latter translate into technical staff for the systems’ maintenance support; for
billing and collecting tariffs; and also for providing training and sanitary education services. The
tariff will cover the local cost of operation (personnel and electricity) and the SISAR costs
(personnel, chemicals and materials, maintenance and administration), or any similar approach.
34. Subcomponent 2.3. Environmental sustainability: The pilot practices and environmental
conservation activities under this subcomponent will have the support of the State Government
but will be executed directly by community associations. (See detailed description of the
institutional arrangements in Annex 3.)
35. Introducing pilot practices: This part of the subcomponent will support pilot practices of
greywater21
reuse for irrigating localized agricultural production in rural communities. This
would include the development of engineering solutions and specific studies (e.g., feasibility
assessments), design and implementation. The selection process for the demand-driven
investments would encourage and create incentives for communities to submit proposals of this
nature.
36. Environmental rehabilitation or conservation services: These activities will be supported
by the beneficiaries (communities), who will be responsible for developing the design and
implementing compensatory environmental activities as counterpart contributions for water
investments, such as: (a) sustainable land-use and conservation practices; (b)
recovery/rehabilitation of riparian forests; (c) tree planting; and (d) protection of the margins of
water bodies, etc. with the aim of decreasing desertification and erosion and preventing natural
disasters. Communities could learn from the State’s past experiences in implementing similar
activities supported by PRODHAM (Bank-supported interventions) in microcatchments.
37. Selection of proposals: Investments under Component 2 will be selected through public
calls for proposals from community associations. Selection criteria will include: (a) a minimum
of 25 households reached by the proposed investment (for the set of smaller communities to be
21
Greywater means wastewater from bathtubs, shower drains and sinks.
31
aggregated, the project will consider the feasibility of an integrated potable water supply
arrangement that avoids long distances for pipelines and distribution networks. These concerns
should be translated, at the appropriate time, into the definition of the limit for the per capita cost
as criteria for prioritization of project investments); (b) the addressing of all local households by
the proposal; (c) where necessary, indication of complementary investments to reach local
universal potable water access; (d) eradication of the need for water truck services; and (e)
communities on the water truck route (Rota dos Carros Pipa), which are a priority due to the
critical potable water supply challenges. The spatial intersection of these communities with the
available water sources in these areas will establish the typologies of systems and their incidence
within the universe of priorities. Proposed investments located in municipalities with a
completed Municipal Water Plan (Plano de Águas Municipal, PAM), as well as proposed
investments including water reuse practices, will rank higher than those with no PAM. The call
for proposals will be further detailed in the Project Operational Manual.
38. Project actions under this component will be complemented by other state projects and
programs such as the Cisternas (rain harvesting) Program, which will address the most isolated
households where potable water supply pipeline extension would be very costly.
39. Component 3: Institutional Strengthening and Project Management (US$23.3 million,
with US$15.54 million IBRD financing) would support project management functions and a set
of activities to strengthen beneficiary organizational structures and public functions that are
critical to ensure the competitiveness and sustainability of project investments. Specifically,
Component 3 would finance: (a) the technical and administrative management of the proposed
project, including equipment and consultants, and safeguard management plans; (b) updates to
SDA’s Management Information System for use in project monitoring, including the design,
development and implementation of an impact evaluation module to track progress on results
indicators, as well as other project-related studies; (c) the development and implementation of a
training program for project beneficiaries (rural producers’ organizations, community
associations, Municipal and Territorial Councils, nongovernmental organizations (NGOs),
service providers, consultants and public servants involved in project management and
implementation, and other stakeholders involved in project implementation); (d) the
development and implementation of a communication plan to disseminate information on the
project; and (v) institutional strengthening of TCE-CE for the carrying out of audits under the Project.
40. Project management will finance the necessary equipment and consultants required to
manage project activities and ensure adequate fiduciary operation (procurement, accounting,
financial management), as well as technical planning, monitoring and impact evaluation of
project actions, including the implementation of the social and environmental safeguard
instruments. Thus, this component will finance goods, studies, nonconsulting services and
consultants’ services.
41. Institutional strengthening under Component 3 would finance training and capacity
building for project stakeholders, including the main beneficiaries (social organizations),
beneficiary consultations, project management, monitoring and evaluation, The training program
will be designed to include the organizations of the most vulnerable social groups, such as
indigenous peoples, quilombolas, youth and women, who have greater difficulty in accessing
public policies and programs. Institutional support would include, among other activities, limited
32
training for municipal-level authorities to participate in the project’s participatory mechanisms
(such as Municipal and Territorial Councils) and intersectoral coordination in complementary
activities.
42. Technical assistance to rural producers and community associations would include: (a)
environmental management and education in agricultural areas, including procedures for
requesting environmental licensing; (b) training in the provision of environmental services in
agricultural areas (e.g., water quality, carbon storage); (c) capacity building for improving
processing or production practices, management and market access for nonagricultural rural
economic activities; (d) training and technical assistance for rural communities to operate,
maintain and charge for rural water supply and sanitation solution services; (e) capacity building
and strengthening of rural community associations to create a culture of sustainable and rational
water use and of protection of water sources; (f) promotion of hygiene and environmental
education programs in rural communities; and (g) strengthening of community water
management structures to ensure long-term sustainable access to water and sanitation services.
33
Annex 3: Implementation Arrangements
BRAZIL: Ceará Rural Sustainable Development and Competitiveness Project
Project Institutional and Implementation Arrangements
1. The State of Ceará, through SDA, would be the Borrower for the proposed loan, with the
Federative Republic of Brazil serving as Guarantor. SDA would be responsible for day-to-day
project implementation, including procurement planning, financial monitoring and reporting,
disbursement and internal controls, maintenance of project accounts and preparation of project
management reports. SDA will also be responsible for ensuring that counterpart resources are
foreseen in the State’s budget. SDA will implement Components 2 and 3, and will supervise
implementation of Component 1 by producers’ organizations and parts of Component 2 by
community associations. A steering committee (Comitê de Articulação Estadual do Projeto), led
by SDA with representatives from all Secretariats involved in the project—Secretariat of Water
Resources (Secretaria dos Recursos Hídricos, SRH), Secretariat of Cities (Secretaria das
Cidades), Secretariat of Aquaculture and Fisheries (Secretaria da Pesca e Aquacultura, SPA),
Secretariat of Science and Technology (Secretaria da Ciência, Tecnologia e Educação Superior,
SECITECE), Secretariat of Planning and Management (Secretaria do Planejamento e Gestão,
SEPLAG), Environmental Policies and Management Council (CONPAM), State
Superintendence of the Environment (Superintendência do Meio Ambiente do Ceará, SEMACE),
State Water and Sanitation Company (Companhia de Água e Esgoto do Ceará, CAGECE), State
Superintendence of Water Works (Superintendência de Obras Hidráulicas, SOHIDRA), State
Rural Extension and Technical Assistance Company (Empresa de Assistência Técnica e
Extensão Rural do Ceará, EMATERCE), and Technological Learning Center Institute (Instituto
Centro de Ensino Tecnológico, CENTEC)—would guide the strategic and multisectoral aspects
of the project.
Project administration mechanisms
2. The Project Management Unit (Unidade de Gerenciamento do Projeto, UGP) will be
housed in SDA and will have the following composition: Project Coordinator; Technical Advisor
for Planning; Legal Advisor; Social Management Advisor; Environmental Management Advisor;
Information Technology Advisor; six managers (Procurement Specialist, Financial
Administration Specialist, Monitoring and Control Officer, Water Resources Use Manager,
Economic Inclusion Manager, and Institutional Strengthening Manager); and technical staff and
administrative assistants, totaling a team of approximately 34 people.
3. In addition to general project management activities, the UGP will also form ad hoc
technical committees to analyze the proposed investments to be financed under Components 1
and 2. Experts may be invited to complement the committee when UGP technicians are
considered insufficient or not technically qualified to evaluate and rank proposals.
4. CAGECE and SOHIDRA will play a direct role in the implementation of Component 2
(Water Services), under the coordination of the UGP. Their roles are detailed in the sections
below and in the Project Operational Manual. In addition SDA, will:
34
(a) for the purposes of assisting in the carrying out of Component 2 (a) and (b) of the
Project and to formalize their respective responsibilities under the Project, enter into a tri-partite
agreement (Convênio Tripartite) with both CAGECE and SOHIDRA under terms and conditions
satisfactory to the Bank (―CAGECE-SOHIDRA Agreement‖);
(b) for the purposes of assisting in the carrying out of Components 1 and 2 (c) of the
Project, and to formalize their respective responsibilities under the Project, enter into an tri-
partite agreement (Convênio Tripartite) with both EMATERCE and CENTEC, under terms and
conditions satisfactory to the Bank (―EMATERCE-CENTEC Agreement‖);
(c) for purposes of assisting in the carrying out of Components 1, 2 and 3 of the
Project, transfer a portion of the proceeds of the Loan to IICA under a subsidiary agreement (the
IICA Agreement) to be entered into between the Borrower and IICA, under terms and conditions
acceptable to the Bank, setting forth their respective roles and responsibilities regarding the
implementation of said Parts of the Project; and
5. To ensure local coordination and integration between institutions and stakeholders, 13
Project Territorial Management Units (Unidades de Gestão Territorial, UGTs) will be
established, covering all State territories, each with three field technicians and one administrative
assistant. Field technicians will work across all three project components (Economic Inclusion,
Water Services, and Project Management and Institutional Development) and support the core
areas of project planning, monitoring and control, and procurement and financial administration.
Each technician will be responsible for coordinating project actions in the territory. To ensure
integration and quality of actions, each of the field technicians will coordinate a thematic area
related to project components and one of the three will cumulatively carry out overall
coordination of the UGT, reporting directly to the General Coordinator.
35
Executing Entities
6. SDA will be the State’s executing agency for this project, through the Project
Implementation Unit (UGP). To streamline project implementation, SDA will partner with four
other State agencies (CAGECE, SOHIDRA, EMATERCE, CENTEC and IICA) as collaborators,
through legal agreements to formalize responsibilities regarding project actions. Their roles are
specified below and further detailed in the Project Operational Manual. SDA will be responsible
for the direct implementation of Component 1, Subcomponents 1.1 and 1.3; Components 2 and
3; as well as for supervising the implementation of Subcomponent 1.2 by producers’
organizations.
7. Producers’ Organizations will be responsible for implementing the selected investment
proposals under Component 1, under the supervision of the UGP.
Project Coordinator
I.T. Advisor
Legal Advisor
Monitoring and Control
Officer
Financial Administration
Specialist
Procurement
Specialist
Institutional Strengthening
Manager
Economic Inclusion
Manager
Water Resources Use
Manager
UGP
UGT Coordinator
Institutional Strengthening
Coordinator
Administrative
Assistant
Economic Inclusion
Coordinator
Water Resources Use Coordinator
UGT
Social Mgmt Advisor
Environmental Mgmt
Advisor
Planning Advisor
36
8. CAGECE: The Ceará Water and Sanitation Company (Companhia de Água e Esgoto do
Ceará) is a public company created in 1971. It is connected to the State Secretariat of Cities.
CAGECE will be responsible for the technical, economic, social and environmental viability
analysis of proposed water investments in communities with more than 70 households, for
assisting the UGP in the bidding process for contracting and approving the designs and works, as
well as supervising the implementation of works.
9. SOHIDRA: The State Superintendency for Water Works (Superintendência de Obras
Hidráulicas) was created in 1989. It is connected to the Secretariat of Water Resources and is
responsible for implementing public works in Ceará’s water sector. It will be responsible for the
technical, economic, social and environmental viability analysis of proposed water investments
in communities with at least 25 but fewer than 70 households; and for assisting the UGP in the
bidding process for contracting and approving the designs and works as well as supervising the
implementation of works.
10. EMATERCE: The Ceará Rural Extension and Technical Assistance Company (Empresa
de Assistência Técnia e Extensão Rural do Ceará) was created in 1954 and is connected to SDA.
EMATERCE will be responsible for the technical, economic, social and environmental viability
analyses of proposed rural production investments and for monitoring their implementation.
EMATERCE will also provide rural technical assistance services to producers’ organizations and
assess and verify goods and services supplied to participating organizations by other providers.
11. CENTEC: The Technological Learning Center Institute (Instituto Centro de Ensino
Tecnológico) is a Social Organization (Organização Social, OS). Under the project it will
participate in the technical, economic, social and environmental viability analyses of proposed
nonagricultural investments and in monitoring their implementation. CENTEC will also
collaborate in the preparation of calls for and selection of proposals, provide technical assistance
to the selected investments, and assess and verify goods and services supplied to participating
organizations by other providers.
12. IICA: The Inter-American Institute for Cooperation on Agriculture is a specialized
agency of the Inter-American System for the promotion of agriculture and rural well-being,
focused on making agriculture competitive and sustainable in the Americas. Under the project
IICA will provide technical cooperation in the areas of technology and innovation for
agriculture, health and food safety, agribusiness, agricultural trade, rural development and
training.
37
13. The State of Ceará has adopted a results-based management model to implement
integrated actions in the field (Territorial Development). This territorial approach has proved
effective in channeling the coordinated planning and implementation of disparate federal and
state programs, with perceived efficiency and effectiveness gains obtained through their joint
interaction. Moreover, through a monitoring and evaluation system to accompany the
implementation of strategic projects, a high-level committee coordinated by the State Governor
meets monthly to evaluate the status, taking actions once any problem has been identified.
14. As part of this strategy the proposed project would integrate actions in the field across
three dimensions:
(a) Public Policies and Projects
i. At the State Government level, between the State Secretariat of Agrarian
Development (SDA, EMATERCE, ITECE) and the State Secretariats of
Planning and Management (SEPLAG), Water Resources and Services (SRH,
COGERH, CAGECE, SOHIDRA), Environment (SEMACE), Science and
Technology (SECITECE), COPAM, FUNCEME and the State Council for
Rural Sustainable Development (CDRS); and three Bank-financed operations:
Ceará Inclusive Growth (SWAP II), Water Resources Management
(PROGERIRH), Regional Development (Cidades do Ceará) and two trust
funds: GEF–Caatinga Conservation and Sustainable Management, and the
JSDF–Leveling the Playing Field for Quilombola Communities in
Northeastern Brazil.
38
ii. At the State and Federal Government levels by using the proposed project to
break down the barriers between the rural and urban-focused projects listed
above and to promote the convergence of various state and federal public
policies and respective agencies, e.g., Ministry of Agrarian Development
(MDA), Ministry of Social Development (MDS), National Foundation for
Water and Sanitation (FUNASA), BNB, and Banco do Brasil (financial
services).
(b) Knowledge, research, innovations and technological institutions: Federal and State
Universities, Federal Technical Institute;, and EMBRAPA.
(c) Civil Society and Private Sector
i. OSCIPs: social organizations that deliver public services: SISAR, Agropolos,
CENTEC;
ii. Participatory Councils at state, territorial and municipal levels; and
iii. Private companies: organizations such as FIECE, ABRAS and SEBRAE.
15. Under the proposed project, the abovementioned organizations will be linked for the
generation, transformation, storage, retrieval, integration, dissemination and utilization of
knowledge and information, for the purpose of working in synergy to support decision making,
technical assistance, problem solving, and innovation.
Other institutions involved in project implementation
16. In addition to the collaborating agencies, other institutions will participate at the
following levels: (i) Partner Institutions: will coordinate their existing programs and actions to
leverage project results; (ii) Participating Organizations: composed of social councils, this
category will play a consulting role and contribute to disseminate bids and calls for proposals for
project investment, provide technical opinions on proposals, and provide social control of project
actions; and (iii) Technical Cooperation: will provide technical support to the Community
Associations and Organizations.
17. The following institutions were identified under these three categories of participation: (i)
Partner Institutions: BNB, BB, SEBRAE, EMBRAPA, SECITECE, CONPAM, FUNCEME,
MDA, MDS, Municipal Governments, Secretariat of Cities, Secretariat of Aquaculture and
Fisheries, CONAB, and IFC; (ii) Participating Organizations: CEDR, CTDRS, and CMDS; and
(iii) Technical Cooperation: SISAR.22
22
SISAR: The operation and maintenance of the water services will be carried out, in the majority of the
communities, by the regional SISAR working in the respective watershed where the works are taking place; or any
other operation and management solution proposed by the community and accepted by the State. The process of
community membership in SISAR takes into account a need for the development of an educational program to be
implemented during the course of the works. A set of required legal instruments will be prepared to formalize
SISAR’s responsibility for service provision: (i) An agreement between the State and Municipal Governments
where the former, as the owner of the assets, leases the goods to the latter, as the pensioner concession provider of
services; (ii) Authorizing Law of the Municipal Chamber, allowing the City Government to sign the contract with
the Association and SISAR to provide these services; and (iii) A contract for the provision of services signed by the
Municipality, the Association and SISAR.
39
18. During preparation, the project identified the following complementary actions
implemented by state and federal agencies, which will also reach project beneficiaries under their
public programs with parallel funding, as shown below. The project will seek cooperation
agreements to coordinate such actions with project implementation, under the participating
category of Partner Institution.
Ongoing and foreseen public programs and projects that are complementary to Component 1
(Economic Inclusion):
Institutions Priority Programs Type of Investment and
Estimated Investment Amount
(US$ million)*
Banco do Brasil and Banco do
Nordeste
National Program to Strengthen
Family Agriculture (PRONAF)
Low-cost and long-term rural
credit. US$22.03 million
National Secretariat of Family
Agriculture under the Ministry of
Agrarian Development
(SAF/MDA)
National Technical Assistance
Program for Family Agriculture
(PRONATER)
Rural technical assistance
through public bids aimed at
specific productive chains.
US$8.44 million
Ministry of Social Development
(MDS) and State Secretariat of
Agrarian Development (SDA)
Food Acquisition Program
(PAA)
Public acquisition of products
from family agriculture for the
purpose of donation to social
groups or establishment of public
strategic stocks.
US$8.44 million
Ministry of Education and
Culture (MEC); Municipal
Governments; and State
Secretariat of Education (SEC)
National School Meals Program
(PNAE)
Public acquisitions of products
from family agriculture for
student meals (mandatory use of
a minimum 30 percent of federal
resources provided for school
meals). US$8.44 million
National Secretariat of
Territorial Development under
the Ministry of Agrarian
Development (SDT/MDA)
National Infrastructure and
Services Program for Rural
Territories (PROINF)
Works and equipment related to
commercialization centers and
agro-industry at the territorial
level. US$2.50 million
Ministry of Social Development
(MDS) and State Secretariat of
Agrarian Development (SDA)
Ceará’s Goat and Sheep Raising
Development Program
Donation of breeding pairs and
improved breeders, and
distribution of cooler tanks.
US$1.38 million
State Secretariat of Agrarian
Development (SDA)
Tempo de Plantar Distribution of seeds and
seedlings. US$0.12 million
Banco do Brasil Foundation Caatinga Biome Project Various investments in the
honey, goat and sheep
production chains.
US$0.53 million
IBRD and FECAP Mata Branca Project Production activities and
environmental conservation
actions in the Caatinga biome.
US$0.16 million
40
Ministry of National Integration
(MIN)
Program to Support the Araripe
Region (PROMESO)
Various investments in priority
productive chains.
US$0.12 million
National Department of Works
Against Droughts (DNOCS)
Fish Repopulation Program Fry distribution.
US$0.03 million
State Secretariat of Agrarian
Development (SDA)
Program for the Productive Use
of Water
Financing of small irrigated
areas; wind power for irrigation;
protected cultivated fields for
fruit and vegetables; household
vegetable gardens; sustainable
irrigation in floodplains; climate
monitoring equipment.
US$0.08 million * Exchange rate used to estimate amounts: US$1.00 = R$1.60.
Ongoing and foreseen public programs and projects that are complementary to Component 2
(Water Services):
Institutions Priority Programs Type of Investment and
Estimated Investment Amount
(US$ million)*
Ministry of Social Development
(MDS)
Program One Million Cisterns
for the Semi-Arid Region
Construction of individual and
community cisterns.
US$75.00 million
Ministry of National Integration–
National Department of Works
Against Droughts (DNOCS)
Water Resources Program Construction of small dams
(açudes) and larger dams.
US$0.38 million * Exchange rate used to estimate amounts: US$1.00 = R$1.60.
Ongoing and foreseen public programs and projects that are complementary to Component 3
(Institutional Strengthening):
Institutions Priority Programs Type of Investment and
Estimated Investment Amount
(US$ million)*
SEBRAE Governance of Productive
Chains; and SEBRAETEC
Capacity building; promotional
events; technical missions, etc.,
with emphasis on goat, sheep
and honey production.
Qualification of packaging,
labels and brands.
US$0.15 million
National Secretariat of
Territorial Development under
the Ministry of Agrarian
Development (SDT/MDA)
National Program for Territorial
Development (PRONAT)
Training of Territorial
Development Agents; support
for the management of
agribusiness and
commercialization of products
from family agriculture in the
State’s territories.
US$0.05 million
Banco do Brasil, BB Foundation,
and Banco do Nordeste
Financial Agents Program for
Strengthening Enterprise
Management
Capacity building; business
plans; market assessments.
US$0.19 million
41
Ministry of Science and
Technology; Ceará State
Secretariat of Innovation,
Science and Technology
(SECITECE).
Program for the Implementation
of Technological Vocational
Centers (CVT)
Generation and dissemination of
technology; informal
professional qualification.
US$0.04 million
Secretariat of Cities Local Production Arrangements
Program (APLS)
Support for the governance of
productive chains and
complementary strategic
investments. US$0.25 million * Exchange rate used to estimate amounts: US$1.00 = R$1.60.
Financial Management, Disbursements and Procurement
Financial Management
19. The State of Ceará follows: (i) the Brazilian Accounting Rules (NBCASP), Law 4320/64,
which establish certain high-level accounting principles; and (ii) the Accounting Manual
Applicable to the Public Sector (MCASP), issued under Law 10180 of February 6, 2001 and
Decree 3589 of September 6, 2001. The project would require adherence to the first set of
national accounting standards applicable to the public sector (NBCASP) and the revised
Accounting Manual Applicable to the Public Sector (MCASP) issued under STN Portaria 467 of
August 6, 2009 beginning in fiscal year 2011. The Bank and National Treasury have agreed to
jointly carry out a Gap Analysis (expected in 2013) to confirm that the accounting for the
Brazilian public sector conforms to international accounting standards applicable to the public
sector (IPSAS) or to identify any important differences from the IPSAS. The last Country
Financial Accountability Assessment (CFAA) for Brazil indicated that Law 4320/64 was in line
with international accounting standards.
20. The budget cycle includes planning and implementation of all government activities,
which are to be reflected in the PPA, LDO and LOA.23
All transaction processing uses SDA
institutions, processes and systems that provide for segregation of duties, supervision, quality
control reviews, reconciliations and independent external audits, and meet the needs of the
project. Process flows are clear and well understood by SDA personnel. All project budgeting
and accounting transactions would run through the State’s public accounting system (S2GPR).
All payments will follow the official commitment (empenho), payables (liquidação) and
payment (pagamento) routine. These functions are carried out by the SDA. This system is used
by SDA for recording project transactions, financial reporting and budget execution. The system
is an integrated online system used by SDA.
21. The POA (annual operating plan), after being approved by the Bank, is updated in the
SIOF (integrated budget and finance system) after being approved through the LOA (annual
budget law). Execution is made through State accounting systems (e.g., S2GPR, SIOF) jointly
with MIS2 (used for PCPR2). The asset management system that will monitor the project has the
capacity to record assets, liabilities and financial transactions of the project. The accounting
23
PPA–Plano Pluri-Anual, LDO–Lei de Diretrizes Orçamentárias, LOA–Lei Orçamentária Anual which includes
the Government’s goals and programs that are approved by Sate Congress every five years, 18 months, and 12
months, respectively.
42
system is designed to be able to capture all financial information and allocate among project
activities and categories, and to generate financial reports for project management (including
data to prepare the Interim Unaudited Financial Reports, IFRs). The Electronic Archiving
System is not yet in place. A copy of all supporting documentation is kept in the UGP.
Administrative procedures have been established to ensure that financial transactions are made
with consideration to safeguarding project assets and ensuring proper entry in the
accounting/monitoring systems.
22. For the funds transferred to project executors, MIS2 will run reports to follow up the use
of respective funds and supporting documentation. The asset management module will be
available for the project to allow monitoring of funds received, and the UGP will be able to
monitor at micro level the respective use of the system.
Internal Controls
23. SDA (like other State direct agencies/institutions) lacks an internal control unit or internal
audit department. Internal control is made a posteriori by the Secretariat of the Comptroller
(Controladoria e Ouvidoria do Estado, CGE). SDA’s annual financial statements are available
directly through the system (S2GPR) for internal (CGE) and external (TCE) State auditing.
Reports are available after 18 months of auditing, are available on the Internet and are published
in the State newspaper, in accordance with the World Bank’s disclosure policy.
24. SDA holds the primary fiduciary responsibilities for the project, which will be carried out
by the UGP’s financial office. At the UGP level, staffing is appropriate to assure segregation of
functions and reconciliations of accounts. Policies and procedures are stated in the Project
Operational Manual.
25. Proper internal-level approval required to use the funds (POA) includes three levels of
expenditure approval. The first is made by the project coordinator, the second is approved by the
monitoring and planning coordinator for all expenditures in SDA, and the third is by the State
Secretariat. The system allows budgetary and financial execution follow-up.
26. Staffing: The staff directly involved with FM-related activities include: one financial
manager and one assistant, two accountants, two treasurers, one staff member responsible for
account reconciliation, and one responsible for disbursement requests. Few staff turnovers have
been observed in the FM department, and the respective team structure (together with 13
expected regional offices, when properly trained) was shown to be the minimum staffing
structure to assure proper decentralized execution. Most of the team members were contracted
through a competitive process and have the adequate background to implement the project while
observing the agreed fiduciary arrangements.
27. Detailed staff duties and tasks are detailed in the Project Operational Manual. The main
fiduciary responsibilities of UGP’s financial management staff include: (i) updating the financial
management system, as needed and on a timely basis; (ii) reviewing project expenditure
documentation; observing eligibility criteria, category percentages and counterpart allocation;
(iii) keeping documentation properly archived; (iv) preparing and submitting to the World Bank
quarterly unaudited financial reports (IFRs); (v) reconciling and monitoring data, identifying
43
discrepancies and taking timely corrective action; and (vi) preparing and providing all financial
documentation and reports requested by external auditors and Bank staff.
28. The Project Operational Manual documents these project processes and serve as an
important source for processing steps to be followed during project implementation. It contains
detailed procedures and guidelines for disbursements, payments, approvals, commitments and
reporting, and would be submitted to the Bank for review prior to negotiations.
29. Mitigation measures: risk during implementation. During prior project execution,
weaknesses were related to project delay in documenting the use of funds and providing
respective supporting documentation. Measures include: regional staff properly staffed to
provide timely support to the project, including use of the asset management system, and to
assure that the control process is extended to the local level; systematically assuring that the
control of all funds is also present for the project.
Financial Reporting: IFRs
30. The State’s integrated management system is able to adequately control, account for,
report on, and manage the proposed loan’s financing. A specific cost center will be created in the
system to record all loan transactions, and will be aligned with the structure of the loan to record
transactions by category and component/subcomponent. The system can provide financial
management data in order to prepare respective reports (in both US dollars and local currency),
which are prepared (for Bank purposes) on a cash basis, although State accounting follows
accrual accounting. The IFRs (1-A Sources and Uses of Funds by disbursement category; and 1-
B Uses of Funds by Project Component and Subcomponent) will state the expenditure figures by
quarter, accumulated for the project and accumulated for the year (project-to-date, year-to-date,
and for the period) versus budgeted expenditures, including a variance analysis, and will be
submitted 45 days after the end of each quarter. Any counterpart contribution (in-kind or cash
contributions) supporting the loan’s activities will be reflected (and valued) in the IFRs.
Auditing
31. Annual financial statements would be audited by TCE-CE, satisfactory to the Bank, in
accordance with acceptable auditing standards. The audit would be conducted according to
Terms of Reference acceptable to the Bank. The auditor’s report would be submitted to the Bank
no later than six months after the closing of the Borrower’s fiscal year.
Supervision Plan
32. The scope of project supervision would review the implementation of FM arrangements
and FM performance, identify corrective actions if necessary, and monitor fiduciary risk. It
would take place every six months and include: (i) a review of quarterly IFRs; (ii) a review of the
auditors’ reports and follow-up of any issues raised by auditors in the management letter, as
appropriate; (iii) participation in project supervision; and (iv) updating of the financial
management rating in the Implementation Status Report (ISR).
44
Disbursement
33. The proposed funds flow and disbursement arrangements were considered satisfactory
and will be streamlined within the project to facilitate execution, avoid unnecessary incremental
operational arrangements, and rely as much as possible on Public Financial Management (PFM)
country systems. All payments would be physically made by the Treasury of the State of Ceará
through S2GPR upon instructions from SDA (UGP) once payment obligations have been
incurred and properly documented. Payments will be made directly from the Treasury, through
the issuance of an ordem bancária, to the subprojects, which would pay service providers and
contractors. To make payments, the State system requires that funds be committed by source,
enabling the tracking of loan disbursements to project expenditures. A subsidiary financial
agreement (Convênio de Financiamento) would be signed between the subproject executor and
SDA to receive funds in an account opened for the subproject.
34. The Secretariat of Finance (Secretaria da Fazenda, SEFAZ) will open a segregated
designated account (DA) in US dollars in the Caixa Econômica Federal (CEF) – Sao Paulo (with
Citibank NY acting as the intermediary bank) to receive loan funds, process disbursements in US
dollars and transfer funds into local currency (Brazilian Reais, or BRLs) to a BRL operational
account in CEF in Fortaleza in order to process local currency payments.
35. SDA will be responsible for instructing the State Treasury to make all payments for
works, goods and services (through S2GPR), except in the case of funds transferred to each
subproject where payments will be made by each subproject. Payments will be made directly
from the operational account (through S2GPR) for loan purposes. Such arrangements are
considered appropriate. This arrangement has the necessary segregation and level of approvals
and can speed up implementation. A fixed ceiling of US$10 million will be established. A
schedule of estimated IBRD disbursements and a loan allocation table are provided below.
Estimated Disbursements (Bank FY/US$ m)
FY 2012 2013 2014 2015 2016
Annual 0 30.0 45.0 20.0 5.0
Cumulative 0 30.0 75.0 95.0 100.0
36. The following disbursement methods will be used: Advance and Reimbursement. The
Minimum Application Size with respect to Reimbursements (not Advances) will be in US$1
equivalent. Applications documenting expenditures paid from the Designated Account should be
submitted by the Borrower ideally once a month but not later than once every four months, and
must include reconciled bank statements as well as other appropriate supporting documents.
37. All payments will be made through electronic deposits to each beneficiary’s/consultant’s
bank account. Summary Sheets with Records and Statements of Expenditure (SOEs) will be used
to document eligible expenditures. Disbursements will be made on the basis of SOEs except for
payments under contracts for works above US$5 million equivalent, payments under contracts
45
for goods and nonconsulting services above US$500,000 equivalent, payments under contracts
for contracts with consulting firms above US$100,000 equivalent, and payments under contracts
for contracts with individuals above US$50,000 equivalent. In these cases, all Records must be
attached to a Summary Sheet (SS). Original supporting documentation will be available at
SDA’s headquarters or Regional Offices. The Project will have a Disbursement Deadline Date
(final date on which the Bank will accept applications for withdrawal from the borrower or
documentation on the use of loan proceeds already advanced by the Bank) four months after the
Closing Date. This "Grace Period" is granted in order to permit the orderly project completion
and closure of the Loan Account via the submission of applications and supporting
documentation for expenditures incurred on or before the Closing Date. Expenditures incurred
between the Closing Date and the Disbursement Deadline Date are not eligible for disbursement,
except as otherwise agreed with the Bank.
38. Reports will be reconciled between the FM systems prior to submission and requesting
disbursement to assure adherence.
39. Retroactive financing up to 20 percent is permitted for payments made prior to the
Signing Date but on or after November 29, 2011, for Eligible Expenditures under Categories (1)
to (4) as set out in the Loan Agreement.
40. Subprojects: SDA allocates funds to subproject executors based on subproject budget
estimates and POAs. The POA is updated in S2GPR to be executed. SDA reviews, monitors and
approves the requests for payments to the subproject executors (upon assurance of full
documentation of previous advances/payments). Advances for the subprojects are made to any of
the banks used by the State to execute the subproject .The UGP will reconcile the accounts and
will submit the documentation regarding all actual transactions24
to the World Bank in a timely
manner under each withdrawal application (SOE).
41. Beneficiary counterpart funds: In order to receive funds from SDA, each beneficiary will
need to prove that the equivalent of at least 20 percent of the total amount being advanced has
been allocated as counterpart to the respective projects, observing that in-kind payments cannot
be more than 10 percent. The remaining 10 percent would need to be either the beneficiary’s
own proceeds or other sources at his/her disposal (e.g., grants, commercial bank financing,
cofinancing, etc.). Such amounts will not be considered by SDA when disbursements are
requested under loan proceeds.
42. Payments and operation of bank accounts: The bank account reconciliation will be
prepared on a monthly basis and will be available within 15 days after the end of the month. The
UGP will establish a 30-day cycle for disbursements and cash-flow programming. Supporting
documentation will be retained for at least one year after the receipt of the audit report or two
years after the Closing Date, whichever is later. All expenditure records will be available for
examination by the Bank if considered necessary. In case of activities to be executed by IICA or
any other organization, details will be outlined in the Operational Manual.
24
Payments for Actual Costs Incurred. Disbursements are made on the basis of eligible expenditures incurred or to
be incurred by the executor; therefore the implementation of such subprojects involves a significant amount of
paperwork, expenditure reporting, and fiduciary controls by the UGP.
46
43. In case of IICA, a FMA was undertake at its’ headquarter and FM systems were found
acceptable and is able to proper account for projects activities. Transfers will be made from the
Designated Account to IICA’s operational account based on a maximum of 4 months forecasted
project expenditure but not exceeding US$2 million equivalent, to pay for expenditures under the
project. IICA’s will keep copy of the respective supporting documentation and the originals and
summary information, documenting the use of the transfers, will be sent by IICA to SDA in
order to reconcile the expenditure being documented, with the amounts previously transferred by
SDA to IICA. SDA will then include the expenditure documented by IICA, in the SOE’s and
Summary Sheets to be submitted to the Bank by SDA. Details of the arrangements with IICA
will be detailed at the Operational Manual.
47
Project Flow of Funds
Allocation of Loan Proceeds
Category Amount of the Loan
Allocated
(expressed in US$)
Percentage of Expenditures to
be financed
(1) Goods, works, nonconsulting
services, and consultants’
services required for Subprojects
43,421,700
Up to 100% of the amount
disbursed under a Matching
Grant
(2) Goods, works, consultants’
services, and nonconsulting
services
40,620,300 66.70%
(3) Training 1,334,000 66.70%
(4) Operating costs 10,205,100 66.70%
(5) Front-end fee 250,000 Amount payable pursuant to
Section 2.03 of the Loan
Agreement in accordance with
Section 2.07 (b) of the General
Conditions
(6) Interest rate cap or interest
rate collar premium
Amount due pursuant to Section
2.07(c) of the Loan Agreement
(7) Unallocated 4,168,900
TOTAL AMOUNT 100,000,000
And Treasury Unique Account
(counterpart funds)
Designated Account (US$)
Caixa Econômica Federal
Loan Account
Operational Account (Reais)
Caixa Econômica Federal (CEF),
in Fortaleza.
Subprojects–Beneficiary Account. Process payments of 100% of invoices
as stated under subsidiary agreement and submit supporting documentation
for SDA.
Beneficiary Counterpart (OP).
Provide SDA with supporting
documentation that an additional 20%
of amounts received has been allocated
as CP. Such invoices will not add up for
disbursement purposes.
Direct payments to service
providers
48
44. For the purposes of the table above, the following terms have the following definitions:
(a) ―Nonconsulting services‖ means the costs of services that are of nonintellectual
nature and that can be procured on the basis of performance of measurable physical
outputs, including unskilled-labor communications campaigns, production of videos,
and installation of equipment.
(b) ―Training‖ means expenditures (other than those for consultants’ services) incurred
by the Borrower in connection with the carrying out of training, seminars, and
workshops, including the reasonable travel costs (e.g., accommodations,
transportation costs and per diems) of trainees and trainers (if applicable), catering,
rental of training facilities and equipment, logistics and printing services, as well as
training materials and equipment under the project.
(c) ―Operating costs‖ means the reasonable incremental operational costs (which would
not have been incurred in the absence of the project) related to project technical and
administrative management monitoring and supervision required under the project,
including updates to SDA’s Management Information System, administrative and
operational support staff, office equipment, supplies, travel costs (including
accommodations, transportation costs and per diems), printing services,
communication costs, utilities, maintenance of office equipment and facilities,
vehicle operation and maintenance costs, and logistical services.
Procurement
45. Procurement Risk Assessment. The procurement risk assessment highlighted SDA
staff’s lengthy experience in working with Bank-financed procurement, although this was largely
limited to Community Participation in Procurement procedures. The introduction of private-
sector procurement procedures, known as commercial practices, for the productive project, of the
larger infrastructure packages for Component 2, and an enhanced technical assistance component
would challenge SDA staff’s procurement capacity. For this reason, the overall risk is rated as
High. To reduce the risks, SDA should ensure the participation of the technical sector agencies in
the procurement process, describing and defining roles and responsibilities in each step of the
procurement process and for the respective decision making. The SDA team should be
strengthened by highly experienced consultants who are familiar with Bank Guidelines for works
and consultancies, and by technical experts to ensure the project has sound business plans that
propose specific commercial practices and include criteria to verify the economy, efficiency and
transparency of such practices before the Loan Agreement becomes effective. Annual business
plan implementation performance audits could help identify the adequacy and weaknesses of the
commercial practices used, and annual procurement audits conducted by the State’s Court of
Accounts (Tribunal de Contas do Estado do Ceará, TCE) would help identify compliance and
weaknesses of the procurement arrangements and interactions between SDA and the technical
sector agencies. Because it might be difficult to identify the recommended highly experienced
consultants, the initial implementation phases may require closer and much more intense
supervision by the Bank.
49
46. IICA Technical Assistance. Under a technical cooperation agreement with IICA, the
Borrower will be allowed to transfer funds to IICA under the conditions that: (i) IICA will follow
the Bank’s procurement guidelines for those contracts procured using Loan funds, and IICA
procurement procedures may be used for those contracts procured exclusively using counterpart
funds; (ii) any remuneration paid to IICA (i.e., fees) for its work as implementing agency under
the project shall not be paid out of the proceeds of the Loan, since IICA did not go through a
competitive process for its selection; (iii) the recommendations made by the Bank to the
Borrower regarding financial management and procurement shall be complied with by IICA, and
the Borrower understands that it will be responsible for ensuring its compliance, as stated in
Section 5(d) of Schedule 2 to the Loan Agreement; and (iv) the final draft of the IICA
Agreement shall be submitted to the Bank for no-objection prior to signing.
47. Applicable Guidelines. Procurement for the proposed project would be carried out in
accordance with the World Bank’s ―Guidelines: Procurement under IBRD Loans and IDA
Credits‖ dated January 2011, and ―Guidelines: Selection and Employment of Consultants by
World Bank Borrowers‖ dated January 2011, and the provisions stipulated in the Legal
Agreement. The general description of various items under different expenditure categories is
described below. For each contract to be financed by the loan, the different procurement methods
or consultant selection methods, the need for prequalification, estimated costs, prior review
requirements, and time frame are agreed between the Borrower and the Bank in the Procurement
Plan. The Procurement Plan will be updated at least annually or as required to reflect the actual
project implementation needs and improvements in institutional capacity.
48. Summarized Procurement Plan. The Procurement Plan provides the basis for the
procurement methods used during the project implementation. The Bank received the initial
Procurement Plan on December 15, 2011. This Plan was agreed with the Bank, and the Client
prepared and published the General Procurement Notice in UNDB online prior to negotiations.
The final Procurement Plan was approved by the bank in February 17, 2012 and published on the
Bank’s website prior to negotiation on February 28, 2012.
49. Prior Review Thresholds. Procurement decisions subject to prior review by the Bank as
stated in Appendix 1 to the Guidelines for Procurement follow the thresholds below.
Procurement/Selection Method Prior Review Threshold Limits
ICB Goods, Services > US$0.5 million > 5,000,000
Works > US$5 million > 25,000,000
NCB Goods, Services > US$0.5 million < 5,000,000
Works > US$5 million < 5,000,000
QCBS, LCS, FBS, CQS > US$0.1 million
Individual Consultants (includes sole-source selection) > US$0.05 million
Direct Contracting All contracts are subject to prior review.
Single-Source Selection All contracts are subject to prior review.
Shopping No contracts are subject to prior review.
Commercial Practices No contracts are subject to prior review.
50. Short lists composed entirely of national consultants. Short lists of consultants for
services estimated to cost less than US$0.5 million equivalent per contract may comprise only
50
national consultants, in accordance with the provisions of paragraph 2.7 of the Consultant
Guidelines.
51. Procurement under business plans. Under Component 1, the project would finance
goods, works, services and consultancies, following Commercial Practices (see paragraphs 49–
51 below) or Community Participation in Procurement Procedures, and nonprocurable items
as part of business plans to be proposed, developed and implemented by participating rural
producers’ organizations (POs). Procurement under business plans would include plants and
equipment, minor productive infrastructure, small irrigation systems, rural infrastructure, and
training and technical assistance. Because the main objective of the investments under
Component 1 is to link product processing and distribution in the selected productive chains,
targeting the access to broader markets, including international markets, POs’ procurement
procedures must afford them flexibility and speed to adequately respond to those markets. This
can be best achieved through commercial practices.
52. The provisions described under Section I of the Guidelines apply to all procurement
methods used under the project, that is, all principles, rules and procedures outlined in the
Guidelines apply to all contracts financed in whole or in part from Bank loans. To comply with
such requirements, four main considerations should guide the use of Commercial Practices by
the RPOs.
(a) the need for economy and efficiency;
(b) the need for quality services;
(c) giving all eligible bidders the same information and equal opportunity to compete in
providing goods, works, and services; and
(d) the importance of transparency.
53. POs, as private-sector enterprises, would often meet these concerns by following
established commercial practices other than formal open bidding for their procurement. This is
true because when POs seek a supplier, the really important considerations include quality,
performance, price, delivery, capacity, and assurance of supply. Market forces would ensure a
fair and reasonable price while competitive markets would be the driving force leading to POs
having efficient internal operations. In addition, POs would buy-to-sell a product or service to
raise revenues. POs are for-profit and have the threat of bankruptcy, which forces efficiencies
into their procurement process.
54. In addition, POs would be responsible for 20 percent of business plan financing, which
means business plans include a built-in mechanism to encourage wise procurement and prevent
them from paying too much for goods and services. Because actual commercial practices may
vary significantly from industry to industry, one size would not fit all. Therefore, being able to
accommodate terms and conditions for good procurement would be an important aspect of the
business plans, requiring sound technical understanding of products, services and industries.
Business plans must contain specific criteria to measure performance of the commercial practices
used.
55. Training. ―Training‖ means expenditures (other than those for consultants’ services)
incurred by the Borrower in connection with the carrying out of training, seminars and
51
workshops, including the reasonable travel costs (e.g., accommodations, transportation costs and
per diems) of trainees and trainers (if applicable), catering, rental of training facilities and
equipment, logistics and printing services, as well as training materials and equipment under the
project. These expenditures would be incurred following the agency’s administrative procedures,
which were reviewed and found acceptable to the Bank and will be described/detailed in the
Operational Manual.
56. Operating Costs. ―Operating Costs‖ means the reasonable incremental operational costs
(which would not have been incurred in the absence of the project), related to technical and
administrative management monitoring and supervision required under the project, including
updates to SDA’s Management Information System, administrative and operational support staff,
office equipment, supplies, travel costs (including accommodations, transportation costs and per
diems), printing services, communication costs, utilities, maintenance of office equipment and
facilities, vehicle operation and maintenance costs, and logistics services. These expenditures
would be incurred following the agency’s administrative procedures, which were reviewed and
found acceptable to the Bank and will be described/detailed in the Operational Manual.
57. Procurement Packages planned during the first 18 months after project effectiveness
(including those that are subject to retroactive financing and advanced procurement):
1 2 3 4 5 6
Ref. No. Description Estimated Cost (US$) Procurement Method Domestic
Preference
Review
by Bank
1 Vehicles 700,000 NCB NA Post
2 Office IT
equipment
500,000 NCB NA Post
3 Office
furniture
40,000 Shopping NA Post
3 Warehouse
construction
700,000 NCB NA Prior
4 Water supply
service
expansion
works
10,000,000 NCB NA Prior
58. Consultancy Assignments with Selection Methods and Time Schedule:
1 2 3 4 5 6
Ref. No
Description of Assignment
Estimated
Cost US$
Selection Method Review by
Bank
Time
Schedule
1 Rural economic inclusion studies 390,000 QCBS Prior 08/2012–
12/2013
2 Economic feasibility studies, and
supervision
1,560,000 QCBS Prior 08/2012–
12/2013
52
3 Business plan preparation and
monitoring of economic
inclusion investments
1,560,000 QCBS Prior 08/2012–
12/2013
3 Water supply services feasibility
and design preparation
501,428 QCBS Prior 08/2012–
12/2013
4 Engineering design–water
services projects
501,428 QCBS Prior 08/2012–
12/2013
5 Specialized Individual
Consultancy–Economic
Inclusion–calls for proposals
preparation and proposals
analysis
273,000 QBS Post 08/2012–
12/2013
6 Specialized Individual
Consultancy–Water Services–
calls for proposal preparation
and proposal analysis
117,000 QBS Post 08/2012–
12/2013
7 Specialized Individual
Consultancy–monitoring of
water services works
668,571 QCBS Prior 08/2012–
12/2013
8 Information Technology
Consultancy
1,228,000 QCBS Prior 08/2012–
04/2013
59. Procurement record keeping. The UGP will maintain detailed procurement records,
reflecting the project’s supply of goods and consultant services, including records of time taken
to complete key steps in the process and procurement activities related to supervision, review
and audits. These records will be maintained for at least two years after the project’s Closing
Date. The records for goods will include public notices, bidding documents and addenda, bid
opening information, bid evaluation reports, formal appeals by bidders and outcomes, signed
contracts with related addenda and amendments, records on claims and dispute resolution, no-
objections and any other useful information. The records for consultant services will include
public notices for expression of interest, requests for proposals and addenda, technical and
financial reports, formal appeals by consultants and outcomes, signed contracts, addenda and
amendments, records on claims and dispute resolution, no-objections, and any other useful
information.
Environmental and Social
60. The Environmental and Social Safeguard issues are detailed in the project’s ISDS and
summarized below.
61. Environment (OP/BP 4.01): The project is rated Category ―B‖ because the impact is
limited in scope, localized, temporary and reversible. The Borrower has carried out an
Environmental and Social Management Framework (ESMF), dated October 27, 2011. The
project implementation procedures will adopt strict environmental ―screens‖ to ensure that
approved investments demonstrate low potential for negative impact. The ESMF assessed the
most common types of intervention expected, and proposed mitigation measures a priori. The
draft ESMF was formally submitted to the Bank in June 2011. The final version was submitted
53
to the Bank and disseminated on the Client’s website and in the Bank’s external website prior to
project appraisal.
62. Natural Habitats (OP/BP 4.04): Although activities are not planned for Areas of
Permanent Preservation (Áreas de Preservação Permanente, APP) and Legal Reserves (Reservas
Legais, RL), activities under the project components should nonetheless lead to positive impacts
on natural habitats through the direct protection and rehabilitation of these areas, following the
provisions of the Brazilian Forest Code. Despite the expected positive impacts, the ESMF, dated
October 27, 2011, includes clear guidance regarding direct and indirect impacts on natural
habitats, in accordance with World Bank policies. The project has provisions to regenerate and
reforest water-producing systems (mainly riparian vegetation), also benefiting local biodiversity
preservation and restoration. Special attention should be given to areas where a desertification
process was already identified by the State (IPECE 2010). These amount to 30,000 km2,
representing 23 percent of the Caatinga biome of Ceará. Investments resulting in any significant
conversion or degradation of critical natural habitats will not be eligible.
63. Forests (OP/BP 4.36): Project implementation is not expected to have negative impacts
on forest resources. Investments that have the potential for conversion or degradation of natural
forest or other natural habitats and that are likely to have significant adverse environmental
impacts which are sensitive, diverse or unprecedented, are ineligible. The project also excludes
activities that require commercial forest harvesting, wood extraction or firewood use in the
productive chain. Activities resulting in reforestation and loss of native vegetation cover will not
be allowed. The project would contribute toward conserving and restoring natural vegetation,
thus generating positive impacts through the maintenance and/or recovery of natural vegetation
on rural private landholdings on steep slopes, along water courses (up to a certain distance from
the riparian margin) or in the vicinity of springs. The project would also contribute toward
conserving and/or restoring a set-aside area called a Legal Reserve (Reserva Legal, RL) in these
private holdings.
64. Pest Management (OP 4.09): The project would not finance any pesticides or other
chemical additives that would trigger OP 4.09. Nevertheless, minor amounts of pesticides would
probably continue to be used in the short term by a small portion of targeted small-scale farms.
The project would encourage and support technical assistance for the adoption of organic
agriculture and of proven, economically and environmentally sustainable Integrated Pest
Management (IPM) practices. The need to use pesticides or herbicides should be indicated in
each proposed investment, as well as the IPM measures to be adopted. When the use of
pesticides or herbicides is justified, an analysis of potential negative impacts resulting from the
use of these chemicals and the risks associated with the inappropriate handling or storage of their
containers should be conducted. The proposals should also include measures to reduce those
risks, in compliance with Law 7802/89. A Pest Management Plan (PMP), which includes the
IPM was prepared and incorporated in the Project Operational Manual, dated December 29,
2011.
65. Physical Cultural Resources (OP/BP 4.11): Project implementation would not cause any
negative impact on known physical cultural resources (PCR). Proposed investments with
expected direct and negative impact on known archeological, paleontological, historical or other
culturally significant sites will not be eligible. Brazil has a well-developed legislative and
54
regulatory framework, which is under federal oversight by the National Institute for Protection of
Historical and Archeological Sites (Instituto do Patrimônio Histórico e Artístico Nacional,
IPHAN). Ceará also has an IPHAN Regional State Agency (4a Superintendência Estadual do
IPHAN) and a Secretariat of Culture (Secretaria da Cultura), which are tasked with the
identification, restoration and protection of PCR in the State. The ―chance findings‖ procedures
would be included in the Project Operational Manual for guidance during project
implementation, particularly in regions with PCR sites already mapped by the IPHAN Regional
Agency. SDA may engage the Secretariat of Culture or other entities with proven experience to
implement ―chance findings‖ procedures.
66. Safety of Dams (OP/BP 4.37): It is not expected that the investments in water supply and
irrigation works will depend on the storage capacity and operation of existing dams. Considering
(i) the high provision of water resources infrastructure installed in the State over the past years,
including the results of World Bank-financed operations, and (ii) the current standard of
excellence in water resources management, with good practices already incorporated in the SRH
and COGERH routine procedures, OP 4.37–Safety of Dams was triggered as a precautionary
measure, not to limit any possibility of using existing water sources. However, no new dam
construction will be financed by this operation. The Borrower is preparing a conceptual
framework of procedures to be adopted during the implementation phase of the project. The
Borrower should arrange for one or more independent dam specialists to: (a) inspect and evaluate
the safety status of the existing dam, its appurtenances, and its performance history; (b) review
and evaluate the owner’s operation and maintenance procedures; and (c) provide a written report
of findings and recommendations for any remedial work or safety-related measures necessary to
upgrade the existing dam to an acceptable standard of safety. Previous assessments of dam safety
or recommendations of improvements needed in existing dams may also be accepted by the
Bank, if the Borrower provides evidence that (a) an effective dam safety program is already in
operation, and (b) full-level inspections and dam safety assessments of the existing dams, which
are satisfactory to the Bank, have already been conducted and documented.
Social
67. Indigenous Peoples (OP/BP 4.10): Indigenous peoples are present in the project area and
will be among the potential beneficiaries. Adverse effects are not expected for them under this
project. There are about 22,000 indigenous peoples in the State of Ceará comprising 12
ethnicities. They are present in 18 municipalities in three distinct areas: the Metropolitan Region
of the capital city, the North coast, and the hinterlands of the Sertão dos Inhamuns. The vast
majority (80 percent) lives in five municipalities: Caucaia, Crateús, Itarema, Maracanaú and
Monsenhor Tabosa. Six ethnic groups (Anacé, Pitaguary, Potiguara, Tabajara, Tapeba and
Tremembé) comprise 94 percent of this population and there are smaller numbers of the Gavião,
Jenipapo-Kanindé, Kalabaça, Kanindé, Kariri and Tapuyo peoples.
68. The Borrower conducted a social assessment that underscored the pressures and threats
faced by these indigenous peoples in terms of their livelihoods and their degree of social and
economic vulnerability. The main constraints they face are related to: land constraints due to
sluggish processes of land regularization; encroachment and land conflicts; inadequate use and
degradation of land; water shortage; inadequate housing and sanitation conditions; poverty and
food shortage; social discrimination and outside resistance to acknowledge their cultural
55
identities; lack of technical assistance and barriers to their access to markets and financing; lack
of income alternatives and heavy dependence upon retirement pensions and government cash
transfer programs.
69. Indigenous groups are eligible for project actions according to their expressed interest in
participating. Project actions involving indigenous groups are expected to contribute toward (a)
reducing their social and economic vulnerability; (b) promoting development alternatives that are
ethnically, culturally and environmentally adequate and sustainable in the short, medium and
long terms; and (c) reversing the processes of impoverishment, economic exploitation,
discrimination, social exclusion, and cultural devaluation.
70. Indigenous peoples living within regularized indigenous lands or having land tenure
rights over plots properly donated to indigenous community associations may propose
participation in project activities under any component. Other groups may only participate under
Component 3 (capacity building and institutional strengthening). Proposals must originate from
indigenous demands validated by their respective communities and organizations through
participatory processes. A broadly consulted Indigenous Peoples Project Framework was
prepared to define the ways and means of project involvement with indigenous groups and
ensure adequate procedures for the participation of this population in the project, which will
focus on three complementary pillars: (a) culturally appropriate dissemination and mobilization
activities, participatory planning, capacity building and institutional strengthening strategies; (b)
promotion of effective participation of indigenous peoples in social networks and in the project’s
territorial and deliberative councils; and (c) investments in productive facilities (under
Component 1) and safer water supply systems (under Component 2).
71. Involuntary Resettlement (OP/BP 4.12): The project is not expected to fund any project
that could potentially cause significant physical displacement and economic losses. In principle,
the project will seek to avoid involuntary resettlement wherever possible. Nonetheless, some of
the potential projects that could be financed under the project—such as investments in rural
infrastructure, the structure of the production clusters, infrastructure for the distribution of
potable water, and activities related to natural disasters and environmental risk management—
could possibly involve the relocation of people or the acquisition of land. It is expected that, in
these cases, the potential numbers of people who might be affected would be quite small and any
land acquisition would be relatively minor. Because the projects to be developed under the
project are not yet known, a Resettlement Policy Framework (RPF), dated October 27, 2011, was
chosen as the suitable instrument and is under the scope of the project’s Social and
Environmental Management Framework, also dated October 27, 2011. The RPF will serve as the
guide to the site-specific formulation of Resettlement Action Plans (RAP), if needed, which in
many cases would be Abbreviated Plans due to the relatively small numbers of people affected
and relatively minor impacts. Abbreviated RAPs would only be used for cases in which 200 or
fewer persons are affected, where they are not physically relocated or would lose 10 percent or
less of their productive assets. The RPF was consulted and publicly disseminated on the
Borrower’s website and in the Bank’s external website prior to appraisal.
56
Monitoring and Evaluation
72. The project will be monitored and evaluated through the existing Management
Information System (MIS) and databases developed by SDA in the context of previous Bank-
supported operations, in addition to the new Heritage System, which will feature modern
technological tools, such as the standard free software tools adopted by the Federal Government
and the State Government of Ceará. Internet access will enable the recording and provision of
information to all interested parties in accordance with the security requirements and defined
access levels. A major advantage of this system is the integration with other systems currently
used by State agencies (SDA’s MAPP/SIAP-S2GPR/SACC/PGE/EDOWEB Systems), which
avoids duplication of information records and maintains data integrity. The system will also offer
the advantage of access to documents in digital format where available, thus avoiding the
accumulation of unnecessary paper and facilitating the process of locating documents.
73. The monitoring system will serve as a realistic and flexible instrument for improving the
performance of project implementation through the timely identification of problems that require
immediate attention from managers, thus allowing corrective measures to be taken. The system
will also monitor project performance against baseline data, check progress according to
outcome indicators, justify the necessary adjustments during implementation, promote the
verification of resource use in relation to project objectives, provide and receive feedback from
stakeholders, and generate inputs for the dissemination of project results. SDA has further
developed an Institutional Arrangement and Results Framework, which will guide: (i) the design
of a workflow, monitoring and evaluation implementation system, and (ii) the implementation of
an evaluation strategy for the proposed operation.
74. An impact evaluation will be developed for Components 1 and 3 of the project with
support from the Bank’s program of impact evaluation in the Agriculture and Rural
Development (ARD) sector (known as Agricultural Adaptations, or AADAPT). Several
background research tasks were carried out during project preparation as well as at appraisal to
understand further: (i) the constraints that farmers and producers’ associations face; and (ii) how
project interventions can best relax these constraints. Based on this analysis, the team developed
testable hypotheses about program impacts and the channels through which the project can affect
outcomes. The following additional background research activities will be carried out to refine
these hypotheses:
(a) An analysis of the main value chains in project areas (e.g., milk and meat processing
and commercialization, fruit or vegetable farming, etc.). The objective of these
value-chain analyses is to understand the challenges that farmers face at the different
stages of their economic activities such as production, processing, and marketing.
(b) Background research on potential recipients of the program will be carried out and
merged with existing agricultural and socioeconomic databases. This database is an
essential building block for the MIS. Information from the database is then analyzed
to guide project design and implementation strategy.
75. The impact evaluation will provide operational guidance to the project throughout its
implementation. In addition to measuring the impact of some of the key project interventions
57
under Components 1 and 3, it will look at complementarities and substitutability across various
interventions that can deliver improved outcomes for producers’ organizations and the families
in those organizations. In particular, the impact evaluation will test the relative effectiveness of
various technical assistance modalities aimed at raising the quality of business proposals
prepared by producers’ organizations and improving the management of the productive resources
to enhance the sustainability of investments. In addition, the project will measure the impact of
providing management training to groups that were eligible for financing but could not be
supported due to limited supply of funds. These impact evaluations will develop a framework to
assert the causality between project interventions (financial support through the matching grant,
extension) by controlling for other factors that may affect receiving the interventions and the
outcomes for producers’ organizations, communities and families. Furthermore, they will help
the project develop a strategy to ensure the sustainability of its policy actions.
76. The outcomes examined in this evaluation will include the following indicators: adoption
of new technologies, improvements in production and productivity, improvement in management
practices, access to markets and governance issues of producers’ organizations (e.g., inclusion of
women and smallholder farmers, management of common investments), and household income
from productive activities. The impact evaluation will provide inputs to project management
during implementation for purposes of potential adjustments to project design and
implementation.
77. Understanding which model of extension and technical assistance services is more
effective, is key to the successful implementation of this project. Extension agents provide
guidance and support to producers’ organizations to identify viable businesses and to develop
and implement their business proposals. These extension agents will be from EMATERCE, the
State rural extension agency, or from the Movimentos Sociais (e.g., Movimento dos Sem Terra,
FETRAECE, etc.).25
Although EMATERCE’s extension agents may have better knowledge of
agronomic technologies and market trends, the Movimentos Sociais have developed, sometimes
over several decades, strong relationships of trust with communities; these relationships facilitate
community mobilization, interest in the project and the transfer of knowledge. Although it will
not be possible to manipulate the coverage of these organizations, and therefore establish
causality between the type of extension provided and the outcomes of interest, the impact
evaluation will provide descriptive insights on the relative effectiveness of these two extension
models by using indicators such as: quality of business proposals prepared by producers’
organizations and their implementation, adoption of new technologies, improved community-
driven processes and social capital (e.g., inclusion of all socioeconomic classes, and resolution of
collective action problems to ensure sustainability of investments).
78. The Bank is also considering the possibility of designing an impact evaluation to measure
the relative impact and cost-effectiveness of different cost-sharing rules in matching grants to
support rural business initiatives. This exercise can help the project to understand how the
matching grant scheme can promote the participation of low-income and disadvantaged groups,
the adoption of new technologies, and access to markets.
25
With 390 extension agents and 610 trainees, EMATERCE lacks dissemination capacity to reach the majority of
the 300,000 agricultural properties in the State of Ceará. As such, the Movimentos Sociais (social movements) are
important organizations for expanding access to extension services in the State.
58
79. The Bank is also considering the possibility of including an impact evaluation for
Component 2, in order to measure the welfare effects of the expansion of access to potable water
supply and basic sanitation in rural areas, with special attention to the following outcomes:
incidence of waterborne diseases, reduction of the time dedicated to water collection
(disaggregated by gender and age group), qualitative assessment of well-being, etc.
80. The data collected and used in this impact evaluation will be fully integrated in the MIS.
These data will come from annual and semiannual surveys of households, communities and
producers’ organizations. The sample sizes will be determined in collaboration with SDA to
ensure representativeness and that indicators can be disaggregated by gender. In addition, the
survey instruments will be developed in coordination with other states with similar projects to
ensure that the data collected are comparable across states in terms of content and quality.
59
Annex 4: Operational Risk Assessment Framework (ORAF)
Brazil: Ceará Rural Sustainable Development and Competitiveness (P121167)
Project Stakeholder Risks
Stakeholder Risk Rating Low
Description:
Reduced commitment to the Project Development Objective. Existing POs could express opposition to the proposed project PDO and
methodology.
Management and coordination of a multisectoral approach, with significant community-level participation/commitment in Component 1.
Risk Management:
Project design is aligned with consensual state development strategy as reflected in the State Multiyear Investment Plan (PPA
2012–2015).
Resp: Bank Stage: Implementation Due Date: Ongoing Status: Not Yet Due
Risk Management:
Continuous dialogue with State counterparts during implementation and well-designed institutional arrangement and a monitoring
system for implementation.
Resp: Bank Stage: Implementation Due Date: Ongoing Status: Not Yet Due
Risk Management:
Continuous consultation with POs in the project area during preparation as well as during implementation, to build consensus on
PDO and methodology. Commercial partnership with key actors in producer chains who jointly with POs participate in business
plan formulation and share market intelligence.
Resp: Client Stage: Implementation Due Date: Ongoing Status: Not Yet Due
Implementing Agency (IA) Risks (including Fiduciary Risks)
Capacity Rating Moderate
Description:
Public-sector employees have constrained capacity to facilitate private-sector
development, particularly in delivering technical assistance for business development and entrepreneurship.
Risk Management:
Project Operational Manual widely disseminated under the project communication strategy; steering committee oversight.
Resp: Client Stage: Implementation Due Date: Jul-31-2012 Status: Not Yet Due
Risk Management:
Strong social oversight already in place and functioning through CEDR
Resp: Client Stage: Implementation Due Date: Ongoing Status: Not Yet Due
Risk Management:
Provide training and consulting services to producers’ organizations and to SDA technical staff and other State agencies involved
in the project implementation, and active in market access initiatives.
60
Resp: Client Stage: Implementation Due Date: Jul-31-2012 Status: Not Yet Due
Governance Rating Moderate
Description: Risk Management:
The objective evaluation of proposed business plans could be co-opted by competing
agendas to distribute political patronage in the targeted area.
Transparency of business plan selection through public bids; Project Operational Manual widely disseminated under the project
communication strategy; steering committee oversight. Strong social oversight already in place and functioning through CEDR
Resp: Client Stage: Implementation Due Date: June-30-2013 Status: Not Yet Due
Project Risks
Design Rating Moderate
Description: Risk Management:
Matching grants to finance business plan implementation could distort financial markets, notwithstanding the thin formal supply of rural finance.
Project is already building dialogue with financial institutions (e.g., Banco do Brasil, Banco do Nordeste) with the aim of their inclusion in the financing of business plans.
Explore alternatives to guarantee financial risk of rural producers’ organizations to improve their creditworthiness.
Resp: Client Stage: Implementation Due Date: June-30-2013 Status: Not Yet Due
Social and Environmental Rating Moderate
Description:
Safeguard capacity: The implementation of productive arrangements relies heavily on
the capacity of rural producers’ organizations, which varies widely. Demographic distortions in potential access to project benefits.
Traditional patterns of the social division of labor may hamper women's participation in the productive economy and restrict their access to market-related job
opportunities.
Risk Management:
An Environmental and Social Management Framework and the Indigenous Peoples Planning Framework address safeguard
compliance and propose actions, where needed, to ensure adequate technical capacity.
Resp: Client Stage: Implementation Due Date: June-30-2013 Status: Not Yet Due
Risk Management:
A social assessment and an Indigenous Peoples Planning Framework address the main risks and restrictions that may hinder the
participation of these most vulnerable social groups and propose mitigation measures.
Resp: Client Stage: Implementation Due Date: June-30-2013 Status: Not Yet Due
Risk Management:
Producers’ organizations’ capacity building, training and technical assistance will be assessed and funded, as needed, under proposed business plans.
Resp: Client Stage: Implementation Due Date: Dec-31-2013 Status: Not Yet Due
Risk Management:
Focus of rural community infrastructure on access to potable water should reduce the domestic workload and free women's time for other productive economic activities. The project will also provide capacity building to women on participation in project
production investments.
Resp: Client Stage: Implementation Due Date: Dec-31-2013 Status: Not Yet Due
Program and Donor Rating
Description: Not applicable Risk Management:
61
Resp: Stage: Due Date: Status:
Delivery Monitoring and Sustainability Rating Moderate
Description:
Delays in fund transfers to producers’ organizations could hinder the implementation
of business plans.
Procurement and financial training to be provided to the organizations as a condition
of disbursement may also lead to delays.
Technical capacity of SDA to adequately design and implement M&E systems could
inhibit the assessment of results and associated impact.
Risk Management:
State has demonstrated previous best practices in managing fund transfers to local organizations, and has ongoing Bank projects being implemented in the State. Capacity building will be provided by the Bank
Bank team (including financial management and procurement specialists) share best practices from other projects in the region.
Resp: Client Stage: Implementation Due Date: Dec-31-2012 Status: Not Yet Due
Risk Management:
Bank team support for impact evaluation design; M&E specialists on Bank team; SDA to contract M&E specialist under Terms of
Reference reviewed by the Bank.
Resp: Client Stage: Implementation Due Date: Dec-31-2013 Status: In Progress
Overall Risk
Implementation Risk Rating: Moderate
Description: The State’s innovative strategy on inclusive economic growth carries inherent institutional capacity risks. With a relatively complex operation following a multisectoral approach, technical capacity building
and project management are key elements to ensure that the project is implemented in a timely manner. The overall implementation risk is considered Moderate because the Bank has a long-term partnership and familiarity with the State, and additional measures to mitigate the project’s overall risk have been or will be put in place, such as the Project Management Unit placed under the SDA’s leadership, suitable allocation of
financing, partnerships and collaboration of other State Secretariats, agencies, and stakeholders, business plan preparation for productive investments, procurement packaging, design flexibility and up-front preparation
of the Project Operational Manual.
62
Annex 5: Implementation Support Plan
BRAZIL: Ceará Rural Sustainable Development and Competitiveness Project
Strategy and Approach for Implementation Support
Implementation Support Plan
I. Support for Implementation
1. The strategy for implementation support (IS) draws on the risk profile of the project (i.e.,
ORAF, Annex 4) and aims to enhance the Client’s quality delivery of the proposed project
interventions. As such, the IS focuses on: (i) risk mitigation measures defined in the ORAF; and
(ii) standard Bank supervision, including technical, institutional, safeguards (environment,
social) and fiduciary aspects (financial management and procurement).
2. Semi-annual Bank supervision (including field visits to investments financed under
Components 1 and 2) would concentrate in the following areas:
Strategic: To the extent possible, supervision missions would meet with the Project Steering
Committee (Comitê Articulador) to: (i) review project activities; (ii) reconfirm strategic
alignment of the project’s multisectoral aspects; and (iii) ensure the necessary coordination
across the respective stakeholders.
Technical: Supervision would concentrate on the implementation of the investment cycle
with regard to Components 1 and 2, as well as on ensuring SDA’s ability to provide quality
assurance for the project’s interventions, both centrally in Fortaleza and throughout its
thirteen territorial offices. Randomized field visits would serve to verify compliance with the
Project Operational Manual and encourage adjustments to project design, as needed, given
results on the ground. Market-chain/private-sector specialists (Component 1) and water and
sanitation specialists (Component 2) would complement the permanent Bank supervision
team through short-term cross-support of Bank staff and, as warranted, targeted engagement
of external technical experts. Ongoing support by Bank specialists for M&E and contracted
evaluation expertise, as needed, would continue to strengthen SDA’s ability to both monitor
project progress and assess the impact of interventions.
Safeguards. The Bank worked with and advised SDA staff on the preparation and
consultation of the ESMF for the proposed project. This support would continue throughout
project implementation with regard to the investments financed under Components 1 and 2.
The Bank also worked closely with the Client’s team in the preparation and consultation of
the IPPF, as well as the RPF, and would continue to do so during project implementation.
Fiduciary: The Bank would provide timely, targeted training to POs and SDA prior to
project effectiveness and through periodic supervision during project implementation. These
training courses and supervisions would: (i) prepare SDA staff to work with POs in
conducting procurement under their respective investments, in compliance with the
63
Procurement and Anti-Corruption Guidelines and the Project Operational Manual; (ii) ensure
the capacity of POs to manage the flow of funds and simple accounting procedures, in line
with FM guidance; and (iii) work with SDA and co-executor agencies in building their
overall financial management and procurement capacity to improve and facilitate project
management. Supervision of the project’s financial management arrangements would be
conducted semiannually and as needed in response to client needs. Procurement supervision
would also be carried out semiannually during regularly scheduled Bank supervision.
Client Relations: The Task Team Leader (TTL) would: (i) coordinate Bank supervision to
ensure consistent project implementation, as specified in the legal documents (i.e., Loan
Agreement, Project Operational Manual); and (ii) meet regularly with the Client’s senior
representatives (i.e., SDA and SEPLAG) to gauge project progress in achieving the PDO and
address implementation roadblocks, as they may arise.
II. Skills Mix Required
Skills Needed # Staff Weeks per FY #Trips per FY Comments
Task Team Leader (Supervision) 6 3 Country-based
Procurement Specialist 3 2 Country-based
Financial Management Specialist 3 2 Country-based
Environment Specialist 3 2 Country-based
Social Specialist 3 2 Country-based
Legal Counsel 3 1 HQ-based
Market-Chain/Private-Sector Specialist 5 3 Country-based
Monitoring/Evaluation Specialist 3 2 Country-based
Natural Disaster Management Specialist 2 1 Country-based
Water and Sanitation Specialist(s) 5 2 Country-based
III. Partners
Name Institution/Country Role
Private-Sector Partners Various/TBD by
participating POs
Commercial partners with POs in the preparation
and implementation of viable business plans.
Financial Institutions IFC, Banco do Brasil;
Banco do Nordeste
Linkage with market; complementary financing of
proposed business plans (Component 1).
Water and Sanitation
Partners
CAGECE, SOHIDRA,
COGERH, SISAR, SRH,
ASA, FUNASA
Collaborate on design and management of water
services-related investments (Component 2).
Knowledge and
Learning; Technical
Assistance
EMATERCE,
CENRTEC, EMBRAPA,
CONPAM, FUNCEME,
ITF, SEBRAE, UECE,
UFCE
Collaboration with knowledge sharing, training
courses, specialized technical assistance, research,
studies. (Components 1, 2 and 3)
64
Annex 6: Economic and Financial Analysis
BRAZIL: Ceará Rural Sustainable Development and Competitiveness Project
Introduction
1. Because the nature, scope and scale of the proposed investments will result from the
explicit demands of the project’s target population, a detailed ex ante cost-benefit analysis of the
project as a whole is not warranted.
2. In the case of the project’s supporting business plan implementation (Component 1,
Economic Inclusion), although strategic productive chains have been preidentified26
by SDA and
would be given priority during the initial phase of the project, the interested producer groups
responding to market opportunities would ultimately determine the product scope and mix of the
supported project. Total investment in productive projects is expected to be around US$61.6
million for an estimated 440 projects or approximately US$140,000 per project.
3. As is the case for the productive project under Component 1, infrastructure investments
for potable water supply under Component 2 (Water Services), the nature, scope and mix of
investments would ultimately be determined through a demand-driven process, but in this case
also evaluated against the diagnostics of municipal water plans, watershed plans, water-truck
(carro-pipa) routes and the survey of existing water sources and needs of rural communities.
Component 2 would finance some US$50 million in infrastructure for around 40,000 inhabitants,
with an estimated US$1,275 per beneficiary or US$5,102 per household (see summary in Table
1). Investments under this component are expected to include the construction of water networks,
water treatment facilities, and advanced information system technology for water metering, as
well as sanitary kits. Water sources may include existing water pipelines, rivers and small dams
(açudes), while the use of wells will require prior analysis of the risks of causing salinization
problems.
Table 1. Summary of number and investment per project
Total
Investment
(US$)
Number of
Projects
Average per
Project
(US$)
Number of
Producers
(C.1) and
Households
(C.2)
Average per
Rural Producer
or Beneficiary
(US$)
Productive
projects
70,000,000 445 157,303 18,200 3,846
Water services
projects 50,000,000 140 357,142 40,000 1,275
TOTAL 120,000,000 585 58,200
Ex Ante Evaluation of Productive Projects (Component 1)
26
These include sheep and small-ruminant production, apiculture, aquaculture, and fruit and vegetable crops.
65
4. In order to obtain an ex ante indication of the financial soundness of the types of
investments likely to be supported by Component 1, indicative production models were
constructed using primary and secondary information collected during project preparation. The
modeling exercise was based on information from real cases of small producer groups when
possible, and technical information provided by local experts on the specific productive chains.
More accurate and representative feasibility indicators could and should be estimated during
implementation using information from a larger sample of actual investment proposals under
consideration for project financing. Standard procedures should be applied for ex ante and ex
post project evaluations.
5. Indicative financial impact estimates were obtained from the abovementioned investment
models. Feasibility indicators included the Net Present Value (NPV) of incremental net benefit
flows (at a discount rate of 12 percent) and the corresponding Internal Rate of Return (IRR) for
the same benefit streams. Switching values27
with respect to output prices and costs were also
calculated to test the robustness of the financial indicators against volatility in revenues and
costs. The results of this analysis are shown in Tables 2 to 4.
6. Indicative models of productive projects include:
(a) Production and marketing of irrigated (fruit and vegetable) crops: The investment
would support the transition of 12 families from subsistence farming to market-
oriented fruit and vegetable production. Main investments include the construction
of six screenhouses (6 x 1 ha), a packinghouse for fruit and vegetable processing,
tanks for the production of bio-fertilizer, water harvesting and irrigation systems, a
van for transporting produce, as well as technical assistance. Production will be sold
to institutional markets (i.e., PAA and PNAE) and in local markets.
(b) Honey production and marketing: The project aims to increase the quantity and
quality of honey produced by a group of 50 beekeepers. The main investments
would be the acquisition of 1,000 beehives, new processing equipment, the
construction of a honey-processing unit, as well as technical assistance. Produced
honey would undergo sanitary certification by the relevant authorities so producers
would be able to continue supplying formal markets that will soon start requiring it.
(c) Milk processing and marketing: The projects would allow a community of 280 goat
producers to purchase cooling and processing equipment, and to build a facility to
package milk and produce and package yogurt. 500 liters of milk and 500 liters of
yogurt would be sold daily, mostly to institutional markets (PAA and PNAE). Other
investments include of a van for product transport, and technical assistance.
(d) Fish farming, processing and marketing: The projects would benefit 20 families of
artisanal fishermen transitioning into fish farming. The production would take place
in 120 floating cages, with fish at three different growth stages. Main investments
would be the floating cages and associated infrastructure, as well as a building to
process the fish.
27
This is the percentage change that reduces the NPV of the stream of incremental net benefits to zero.
66
Table 2. Financial indicators for the examples of subprojects
Total
Investment
(R$)
Annual
Net
Revenue
(R$)1
NPV
(R$)
IRR Job
Creation
Person/
Year
No. Rural
Producers
Benefited
Fruits and
vegetables 207,334 258,369 1,002,334 75% n.a. 12
Honey 304,576 511,571 703,307 48% 6 50
Milk 609,213 516,534 1,750,020 47% 5 280
Fish farming 329,828 298,723 710,861 48% 7 20 1All costs including family labor and depreciation deducted from gross revenue.
Table 3. Financial indicators for the examples of subprojects (per households)
Total Investment (R$) Annual Financial Net
Revenue (R$)*
NPV (R$)
Fruits and
vegetables 17,278 21,531 83,527
Honey 6,092 10,231 14,006
Milk 2,176 1,845 3,505
Fish farming 16,491 14,936 35,543 *All costs including family labor and depreciation deducted from gross revenue.
Table 4. Sensitivity analysis of the models of the project examples
Switching Value
Output Prices* (%)
Switching Value
Output Prices (R$)
Switching Value of
Running costs** (%)
Fruits and
vegetables -46% - 141%
Honey -22% Honey = R$5/kg 99%
Milk -30%
Milk = R$1.19/lt
Yogurt = R$1.74/lt 27%
Fish farming -18% Fish = R$3.44/kg 28% ** Maximum changes in estimated values of costs and benefits to keep IRR equal or above 12%.
7. The analyzed investments provide significant incremental contributions to rural
producers’ income (R$262/month on average).
8. The sensitivity analysis shows that, in general, the projects are robust with respect to the
variability of running costs and output prices. Fish farming and honey production are the most
sensitive models with respect to changes in output prices. Nonetheless, this degree of sensitivity
in the models is considered quite reasonable.
9. Fruit and Vegetable Crops: These are usually a somewhat risky activity because it is
quite vulnerable to extreme weather events and to pests and disease. These crops show a high
IRR and little sensitivity to changes in output prices (or quantities produced) and operating costs.
10. The most sensitive model with respect to running costs is for milk. Nevertheless, most
costs are related to payments to producers for their raw milk. An increase in the price paid to
producers for unprocessed milk is expected to come from an increase in the price of processed
67
milk, which would translate into higher revenues that would offset the increase in higher prices
paid to producers for their raw milk.
11. Although most milk and honey are currently sold to institutional markets and thus their
long-term sustainability could be questioned, they provide short-term market and price security
during a transitional period in which producers could, with adequate technical assistance,
improve their productivity and marketing skills.
Ex Ante Evaluation of Water Services Project (Component 2)
12. The implementation of Component 2–Water Services is aimed at a better use of the
State’s existing water sources and at supporting the implementation of the State’s strategy for
―universal access to water supply and basic sanitation for rural communities‖.28
13. As previously mentioned, the nature of the project’s implementation strategy as a locally
demanded project does not allow for a meaningful, detailed ex ante evaluation of the project as a
whole. Thus, the preliminary cost-benefit assessment of potable water supply investments to be
financed under Component 2 is based on cases drawn from the Implementation Completion and
Results (ICR) report for the Rural Poverty Reduction Project (RPRP) of Ceará (December 2009),
a precursor to this project. It is expected that the nature of the project demanded for Component
2 financing will be similar in nature and scale to those implemented by the RPRP.
Methodology
14. The benefit/cost ratio and the economic rate of return were estimated. The period of
analysis used was 10 years, which was considered consistent with the expected useful life of the
investments. The discount rate used for the analysis was 10 percent.29
Costs included the initial
investment and annual operating costs, while the benefits were calculated on the basis of: (i)
savings in time used for water collection; (ii) savings derived from the reduction of waterborne
diseases; and (iii) willingness to pay, which is a proxy for the value families attribute to the
availability of potable water. As such, it incorporates the effect of missing or unmeasured
benefits such as comfort, well-being, etc. It was measured using the average payment made by
families for the potable water they receive from the project.
15. The economic indicators of the eight potable water supply projects selected for the
analysis are shown in Table 5.
28
Studies such as Songco (2002) have shown that the investment in public infrastructure, i.e., infrastructure for
water supply, yields substantial improvement in the lives of the poorest, namely when these investments aim at the
improvement of their existing livelihoods (Songco 2002). Baquero et al. (2006) state that access to assets (by rural
populations) enables better risk management and more active participation in social and political life, as well as
better capacity to seize opportunities and more easily confront challenges. 29
This discount rate is lower than that for productive subprojects because investments in infrastructure usually result
in additional unvalued benefits that are expected to exceed unvalued costs.
68
Results
Table 5. Financial analysis of two types of Basic Water Services projects
Average
Present Value
of Investments
(R$)
Average
Present Value
of Benefits
(R$)
Benefit/Cost
Ratio
Internal Rate
of Return (%)
Payback
Period
(years)
Potable water
supply 65,135 96,104 1.48 18 6.2
16. The economic analysis of potable water supply projects showed positive results, yielding
an economic IRR of 18 percent and a benefit/cost ratio of 1.48, meaning that for every R$100.00
invested the project would return R$148.00. A sensitivity analysis30
showed that even when
assuming a cost increase of 10 percent from the base scenario and a simultaneous 10 percent
decrease in revenues, the economic IRR remains above the discount rate, at 11 percent.31
17. In addition to these results, available literature shows the benefits of potable water supply
projects. For example, according to UNICEF (2009) the two main causes of mortality among
children under age five—acute respiratory infections and diarrheal diseases—are closely linked
to poor water quality, hygiene and sanitation. In addition, the UNICEF ―Sanitation for All‖
report states that rural investment in water supply and sanitation results in lower rates of death
and illness, savings in health costs, higher worker productivity, better learning capacities of
schoolchildren, increased school attendance especially by girls, strengthened tourism, and
heightened personal dignity and national pride. The ICR for Ceará’s RPRP reports evidence from
interviews with beneficiaries, indicating a reduction in the incidence of waterborne illnesses,
mainly in children.
References
Baquero, F. Rocha J. Ortega, J. (eds.) (2006). Políticas Públicas y Desarrollo Rural en América
Latina y Caribe: el papel del gasto público. FAO. Santiago. Chile.
Songco, J. A. (2002). Do Rural Infrastructure Investments Benefit the Poor? School of
International and Public Affairs, Columbia University and the World Bank. Vietnam.
UNICEF (2009). Community Approaches to Total Sanitation. Field Notes: UNICEF Policy and
Programming in Practice. New York. USA.
UNICEF. (2001). Sanitation for All – Promoting Dignity and Human Rights. New York. USA.
30
For investments in communities with available electricity before water supply subprojects. These results may vary
for communities without electrical power at the time of water supply investments. 31
The ICR for Ceará’s RPRP does not disaggregate the sensitivity analysis for water supply and rural electrification
investments. Rural electrification projects showed a lower IRR (13 percent) than water supply. Thus, it would be
expected that the increase in investment costs of water supply systems by 10 percent and the reduction of their
benefits by the same 10 percent, would yield an internal rate of return higher than the 11 percent obtained for both
water supply and rural electrification combined.
69
Annex 7: Irrigation in Ceará and Project Activities Related to Irrigation
BRAZIL: Ceará Rural Sustainable Development and Competitiveness Project
Context
1. Ceará accounts for about 108,000 ha of irrigated land, which corresponds to only 0.3
percent of the State’s total agricultural area and about one sixth of the potentially irrigable area,
estimated at approximately 620,000 ha.32
This area is managed by a diversity of irrigation users
ranging from large projects (irrigation areas of several thousands of hectares), medium projects
(up to a few hundred hectares), to small-scale irrigation by family agriculture at the level of a
rural community. Most of the irrigated area (over 70 percent) is concentrated in the three
hydrographic regions of Banabuiu, Acaraú and Médio Jaguaribe, with the other eight
hydrographic regions accounting for the remaining 30 percent. Table 1 presents the irrigated area
of existing medium and large public irrigation schemes.
2. The policy of large public irrigation schemes was strongly promoted at the end of the
1960s, with the objective of expanding irrigation in the State. This was consolidated in the mid-
1980s with the creation of the Programa de Irrigação do Nordeste (PROINE). During the early
1990s, the focus changed to deploying medium-scale irrigation schemes with the development
by the State of a program of Regional Irrigation Growth Poles.
3. In 1987 the State created its Secretariat of Water Resources, and in 1992 the State Water
Resources Plan was completed. The Plan identified a network of strategic reservoirs to increase
the State’s capacity to cope with recurrent droughts. After the extreme drought of 1994, which
caused the Metropolitan Region of Fortaleza’s (RMF) water supply system to nearly collapse,
the State built the Canal do Trabalhador as an emergency measure and started planning for other
integration systems to increase the reliability of its water supplies. In 2005 the State Water
Resources Plan was fully revised to update water balances in all river basins and identify
appropriate measures to address remaining supply-demand deficits.
4. The revised 2005 Plan identifies three major types of infrastructure to be developed to
meet the multiple needs of this semi-arid state: (a) a network of small isolated reservoirs to
supply potable water to specific towns and villages; (b) larger reservoirs and integrated pipeline
systems serving a number of municipalities for domestic consumption and other uses such as
irrigation, industrial supply and aquaculture; and (c) several major integration systems, including
the Canal da Integração, to connect key reservoirs with multiyear regulation capacity in order to
improve water supply reliability and cope with the endemic problem of droughts and climate
variability and change.
5. In this regard, the State’s water resources policy has been based on the increase of
infrastructure for the supply of water. The State has a storage capacity of around 18 billion m3,
nearly 90 percent of which is in large reservoirs. In addition, more recent efforts have been made
to construct interbasin transfer infrastructure to guarantee water availability to large metropolitan
areas and gradually integrate more scattered communities throughout the State.
32
1995 Agricultural Census.
70
6. The Bank has a long history of engagement in the State’s water resources management
sector, with strong support to institutional strengthening, planning of new infrastructure,
implementation of 25 multipurpose strategic reservoirs, water supply systems for drought-
stricken and poor rural communities, and construction of the State’s main conveyance system
that supplies bulk water from the Castanhão Dam in the Jaguaribe River Basin to the RMF,
known as the Eixão das Águas, which will secure water supply to more than three million people
and will further supply water to the industrial area of the Port of Pecém.
7. Today, the area irrigated by public irrigation projects is estimated at 50,766 ha,33
of
which over 90 percent is concentrated in nine large projects (e.g., Morada Nova, Icó-Lima
Campos, Baixo Acaraú, Chapada-Apodi), the rest being covered by twenty-three medium-scale
projects (e.g., Xique-Xique, Realejo, Graça, Altinho and Tucunduba).34
Those public irrigation
schemes have been implemented either by the federal agency DNOCS (Departamento Nacional
de Obras Contra as Secas) or by the State of Ceará, that is, through the Secretariat of Water
Resources (SRH). The current strategy on large irrigation projects outlined by the Federal
Government is now to attract private investment in order to implement a public-private
partnership (PPP) structure for rehabilitating those large-scale projects through concession
agreements, and for constructing several new ones.
8. With the infrastructure of the Canal do Trabalhador and the Eixão das Águas, it is
expected that new irrigated areas will be put into operation. The project will support the
formulation and implementation of irrigation models that are inclusive of the small producers
living along this water infrastructure. Those areas are likely to take the form of the medium
irrigation schemes described above, i.e., projects of a few hundred hectares each.
9. The area irrigated by small family producers is very poorly known because of a lack of
data on this type of irrigation. The water source for irrigation is diversified, and includes
different types of infrastructure: small and medium multiple-use dams (açudes), surface alluvial
wells (cacimbas), and traditional wells (poço amazonas or cacimbão) which are underground
dams for water harvesting and conservation for productive uses. Some public investments have
targeted this type of small-scale irrigated agriculture, such as the Poços do Sertão Program; the
São José Project; PRODHAM (Projeto de Desenvolvimento Hidroambiental), under the Bank-
financed PROGERIRH (Programa de Gerenciamento e Integração dos Recursos Hídricos); and
the Sustainable Development Project for Agrarian Reform Settlements in the Semi-Arid
Northeast (Dom Hélder Câmara Project).
10. The specific nature of this type of small-scale irrigated agriculture is that it often enters
into direct competition with other water uses that have greater priority: for population and cattle.
Therefore, considerable investment needs to be made in water resources planning and
management at the decentralized local community level in order to provide stakeholders and
local authorities with the elements of discussion on the possible options for managing water
availability (in terms of quantity and quality) for different users and different uses within the
watersheds.
33
Source: Pacto das Águas 2009. On the other hand, the private irrigated area in Ceará is estimated at about 18,537
ha. 34
Plano Estadual de Recursos Hídricos 2004. Data from 2000.
71
11. With regard to the irrigation methods most commonly used, less than 40 percent of
irrigated land in Ceará is equipped with improved on-farm irrigation systems, such as drip
irrigation or sprinklers. The irrigation method is predominantly surface irrigation (63 percent)
and sprinklers (32.8 percent), with drip irrigation and central pivots accounting for only 3.3
percent.35
12. The Secretariat of Agrarian Development (SDA) has a particular interest in strengthening
the value chain of fruits and vegetables, which has seen a rapid growth in large- and medium-
scale irrigation projects but faces a great number of challenges related to highly demanding
markets, both domestic and international.
Statement of problem and needs
13. The Brazilian Northeast experiences critical problems related to water scarcity, with
periodic, long and severe droughts, which create a number of economic and social problems and
hamper the development of the region. The State of Ceará, due to its specific characteristics, is
particularly susceptible to these climate adversities. It relies heavily on surface water
infrastructure to supply water for multiple uses. Crystalline rock formations occur in about 90
percent of the State’s territory, implying a rather limited potential for groundwater use and
storage due to very small yields and high salt contents. Highly variable rainfall, on the other
hand, requires large surface water storage capacities to ensure reliable water supplies. The
importance of water infrastructure planning and management is widely recognized in the State,
which has consistently treated this subject with high priority.
14. The assessment of problems, needs and potential presented below is based on several key
documents, most importantly the ―Pacto das Águas,‖ which is a visioning exercise that was
conducted in a participatory manner during 2008–2009 at the level of the State, the eleven
hydrographic regions, and municipalities. The Pacto das Águas collects the main aspirations of
the people on water resources use and management, and includes suggestions for programs and
subprograms covering the relevant aspects for a rational state water resources management
policy, among them universal access to potable water and the availability of water for irrigated
agriculture.
15. Many of the large irrigation projects face the following problems: (i) poorly maintained
collective irrigation infrastructure and need for rehabilitation; (ii) low water-use efficiency at
farm level, requiring modern water-saving techniques and practices; (iii) rapid growth of the
population inside irrigation schemes (agrovilas), calling for basic sanitation and the treatment of
water for human consumption; (iv) better monitoring and control of the use of agrochemicals,
which have become a public health problem (deteriorating water quality); and (v) poor technical
and financial management by the water users’ organizations (WUO) and lack of land titles for
irrigation producers.
16. The medium-scale irrigation projects express demands that are, to a certain extent, similar
to those of the larger projects. In addition, they stress the importance of: (i) technical assistance
(TA) in water-saving irrigation techniques and practices; (ii) more diversified TA in production
35
COMAGRI 1996.
72
and post harvest; (iii) preservation of water bodies (aquifers, water sources [mananciais], etc.)
and gallery forest (mata ciliar); and (iv) more rational and integrated water use for multiple
purposes (e.g., human consumption, cattle, fish production, and irrigation) in a coordinated
manner with key stakeholders such as the municipality.
17. Small-scale irrigation by family agriculture faces diversified demands, including: (i)
helping to organize producers; (ii) technical assistance in irrigation techniques, and production
more broadly; (iii) lack of capital for the purchase of machinery and equipment; (iv) preservation
of water bodies (aquifers, mananciais, etc.) and the mata ciliar; and (v) support for participatory
water resources planning and management at the watershed level by irrigation farmers and other
competing water uses.
18. The objective of the productive subprojects using irrigation systems is to support the
improvement of smallholder irrigated agriculture production and productivity in targeted
irrigated areas of Ceará.
Project approach
19. The project uses an integrated approach to irrigation improvement, which supports the
improvement of irrigation infrastructure (collective and on-farm), using existing water sources
and available infrastructure to enhance production and productivity through the adoption of
sustainable systems and technologies. Such systems and technologies should enable greater
efficiency in water use, avoiding water wastage in a region where this resource is scarce during
most of the year, and should minimize the risk of soil salinization or erosion. The project will
provide access to producers currently applying inadequate or less-efficient irrigation
technologies, as well as to producers in the project area who currently lack access to irrigation.
20. Component 3 of the project would provide capacity building for water users’
organizations and farmers’ groups, including the formation of groups, strengthening of existing
groups, and extension and adaptive research to strengthen the value chains of irrigated crops. It
will also support water resources planning and management at the decentralized, local
community level in order to provide stakeholders and local authorities with the elements of
discussion on the possible options for managing the water availability (in terms of quantity and
quality) for different users and different uses within the watersheds in the medium and long
terms.
21. Component 3 will also build the capacity of SDA, SDA territorial units, and producers’
organizations to develop projects and monitor their implementation.
Beneficiaries and project intervention area
22. The project’s irrigation investments will benefit poor rural communities and particularly
small and medium agricultural producers, represented by their organizations, such as community
associations, producers’ associations, cooperatives or other types of legally established
organizations that can provide proof of regular operation.
23. The project intervention area will be defined for each of the types of subprojects defined
by the different specific windows proposed by the selected business plans.
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Types of subprojects
24. The project would support different types of investments:
25. Water Investments for Productive Use at Community Level
(a) This typology would finance preinvestment studies and design, execution and
supervision of projects to support stakeholder groups at the level of small watersheds
(producers’ organizations, watershed committees, etc.).
(b) The main beneficiaries would be small irrigation producers involved in key value
chains (e.g., fruits and vegetables, milk and meat production, etc.). Types of investments
would include: water intake improvement, superficial alluvial wells (cacimbas),
traditional wells (poço amazonas or cacimbão), underground dams for water harvesting,
conservation for productive uses, etc.
(c) The eligibility criteria for this window will be set out in the Project Operational
Manual.
(d) The capacity building provided by Component 3 will encourage consultation with
the different water users groups at the watershed level on the design of the project’s
technical and management model, and will ensure close coordination with the
investments for rural water supply and sanitation proposed under Project Component 2.
26. Design and Construction of Smallholder Irrigation Schemes:
(a) This typology would finance preinvestment studies and the design, execution and
supervision of projects to support eligible farmers’ groups in designing and
implementing irrigation schemes along existing water supply infrastructure, such as
along the Canal do Trabalhador. Investments would include: (i) water intake
construction; and (ii) distribution, regulation and drainage systems.
(b) The PO will be responsible for 100 percent of the operation and maintenance.
27. On-farm Irrigation Technology Improvement:
(a) This typology will finance preinvestment studies and the design, execution and
supervision of SPs to support eligible farmers’ groups and to increase irrigation
performance at the farm level through the installation of improved on-farm irrigation
systems, including: (a) the carrying out of works and provision of equipment at the
farm intake (e.g., installation of pipes, pumping units, filters, meters, pressure
regulators and individual hydrants, and rehabilitation or construction of small
regulation reservoirs); and (b) carrying out of works and provision of equipment on
the irrigation plots (e.g., installation of sprinklers and drip systems, land leveling and
gated pipes).