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Document o f The World Bank
FOR OFFICIAL USE ONLY
Report No: 45257-BR
INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT
PROJECT PAPER
ON A
PROPOSED ADDITIONAL FINANCING (LOAN)
IN THE AMOUNT OF US$103.00 MILLION
TO THE
STATE OF CEARA
WITH THE GUARANTEE OF THE FEDERATIVE REPUBLIC OF BRAZIL
FOR A
CEARA INTEGRATED WATER RESOURCES MANAGEMENT PROJECT
November 18,2008
Sustainable Development Department Brazil Country Management Unit Latin America and the Caribbean Region
This document has a restricted distribution and may be used by recipients only in the performance o f their official duties. I t s contents may not otherwise be disclosed without World Bank authorization.
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CAGECE
CAS COGERH
CQS
DO EIA EMF
FM FMR FSL FUNASA FUNCEME FY ICB
IERR IFRR IWRM
LCR LCS M&E NCB NGO O&M PAC PAD PCPR P IU PGRH
CURRENCY EQUIVALENTS
(Exchange Rate Effective September 24)
Currency Unit = Real (R$) R$ 1.00 = US$0.57 R$1.75 = US$l.OO
FISCAL YEAR January 1 - December31
ABBREVIATIONS AND ACRONYMS
Companhia de Agua e Esgoto do Ceara
Estrategia de Assistencia para o Pais Companhia de GestBo dos Recursos Hidricos SeleqBo Baseada na QualificaqBo do Consultor Objetivos de Desenvolvimento Estudo de Impact0 Ambiental Arcabouqo de Gestiio Ambiental
Gerenciamento Financeiro Relatorios de Gerenciamento Financeiro Emprestimo com AmortizaqBo Constante FundaqBo Nacional da Sahde FundaqBo Cearense de Meteorologia Ano Fiscal Concorrencia Internacional para ContrataqBo de Obras Taxa Interna Econamica de Retorno Taxa Interna Financeira de Retorno Gerenciamento Integrado de Recursos Hidricos RegiBo da America Latina e Caribe SeleqBo pel0 Menor Custo Monitoria e AvaliaqBo Concorencia Publica Nacional OrganizaqBo NBo Governamental OperaqBo e ManutenqBo Programa de AceleraqBo do Crescimento Documento de AvaliaqBo do Projeto Projeto de Combate a Pobreza Rural Unidade de ImplementaqBo do Projeto Projeto de Gerenciamento de Recursos Hidricos da Bahia
Ceara Water Supply and Sanitation Company Country Assistance Strategy Ceara Water Resources Management Company Selection Based on the Consultants’ Qualifications Development Objectives Environmental Impact Assessment Environmental Management Framework Financial Management Financial Management Reports Fixed-Spread Loan National Health Foundation Ceara Meteorological Foundation Fiscal Year International Competitive Bidding
Internal Economic Rate o f Return Internal Financial Rate o f Return Integrated Water Resources Management Latin America and Caribbean Region Least-cost Selection Monitoring and Evaluation National Competitive Bidding Nongovernmental Organization Operation and Maintenance Growth Acceleration Program Project Appraisal Document Rural Project Alleviation Projects Project Implementation Unit Bahia Integrated Water Resources Management Project
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PROAGUA Nacional PROAGUA Semi-arido
PRODHAM PROGERIRH
PROURB
QCBS REA RMF SAT SBD SEAIN
SIAFI
SIGERH
SIGMA SOE SOHIDRA
S R H TOR UGPE
WRM WUA
Programa Nacional de Desenvolvimento dos Recursos Hidricos Sub-programa de Desenvolvimento de Recursos Hidricos para o Semi-Arido Brasileiro Projeto-Piloto de Gestiio de Micro-bacias Projeto de Integraqiio e Gerenciamento dos Recursos Hidricos do Ceara Projeto de Desenvolvimento Urbano e Gestiio de Recursos Hidricos do Ceara Seleplo com Base em Qualidade e Custo AvaliapBo Ambiental Regional Regia0 Metropolitana de Fortaleza Equipe de Salvaguardas Documento Padriio de Licitapbes Secretaria Especial de Assuntos Internacionais Sistema Integrado de Administrapiio Financeira Sistema Integrado de Gestiio de Recursos Hidricos Sistema de Informapbes Gerenciais Declarapiio de Gastos
FOR OFFICIAL USE ONLY
Federal Water Resources Management Project - Additional Financing Federal Water Resources Management Project
Mic ro Watershed Management Pilot Ceara Integrated Water Resources Management Project Ceara Urban Development and Water Resources Management Project Quality- and Cost-Based Selection Regional Environmental Assessment Fortaleza Metropolitan Region Safeguards Advisory Team Standard Bidding Document Secretariat for International Affairs
Integrated Federal Financial Administration System Water Resources Management Integrated System Project Information System Statement o f Expenditures
Superintendencia de Obras Hidraulicas do Ceara Hydraulic Works Company Ceara Secretaria de Recursos Hidricos. Termo de Referzncia Unidade de Gerenciamento de Programas Special Programs Management Unit Especiais Gerenciamento de Recursos Hidricos AssociaqBo de Usuarios de Agua
Secretariat for Water Resources Terms o f Reference
Water Resources Management Water User Association
V i c e President: Pamela C o x Country D i rec tor : John Briscoe
Sector Director: Laura T u c k Sector Manager: Lau ra T la iye
Sector Leader: Jennifer Sara Task Team Leader: Manue l Cont i ioch
This document has a restricted distribution and may be used by recipients only in the performance o f their off icial duties. I t s contents may not be otherwise disclosed without Wor ld Bank authorization.
BRAZIL CEARA INTEGRATED WATER RESOURCES MANAGEMENT PROJECT
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This Project Paper was joint ly prepared by Musa Asad. Paula Freitas. Larry Simpson. Jennifer Sara. Manuel Contijoch. Alexandre Baltar. Paul Procee. Pilar Larreamendy. Luis Prada, Susana Amaral and Amanda Schneider
CONTENTS
Page
I . Introduction ........................................................................................................ I1 . mill ion .......................................................................................................................... I11 . Proposed Changes and Scope of Additional Financing .................................. I V . Consistency with CAS ........................................................................................ V . Appraisal o f Scaled-up Project activities .......................................................... V I . Expected Outcomes ............................................................................................ VI1 . Benefi ts and Risks ............................................................................................... VI11 . Financial Terms and Conditions for Additional Financing ..........................
Background and Rationale for additional financing o f US$103.00
Annex 1 : Procurement Arrangements .......................................................
Annex 2: Financial Management ............................................................. Annex 3 : Safeguard Aspects ..................................................................
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PROJECT PAPER DATA SHEET
Country: Brazil Project Name: Additional Financing - Ceara Integrated Water Resources Country Director: John Briscoe
Environmental Category: A
Borrower: State o f Ceara, Brazil Responsible agency: Secretariat o f Water Resources (SRH)
Bank policies?
Revised project development obj ectives/outcomes Project development objectives remain unchanged. The expected outcomes from this additional financing will be the provision o f bulk water supplies to Fortaleza Metropolitan Region, the storage and distribution o f potable water supplies for critical rural poverty areas and the strengthening o f the participative integrated water resources management system o f the State. Does the scaled-up or restructured project trigger any new safeguard policies? N o
[XI Loan [ ] Credit [ ] Grant For Loans/Credits/Grants:
- For Additional Financing
Total Bank financing (US$m.): 103 .OO Proposed terms: Fixed-spread loan, final maturity o f 2 1 years, and grace period o f
6 years Financing Plan (US$m.)
Borrower 104.26 0.00 104.26 IBRD/IDA 83.00 20.00 103.00 Others 0.00 0.00 0.00 Total 187.26 20.00 207.26
Source Local Foreign Total
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I. Introduction
1. This Project Paper seeks the approval o f the Executive Directors to provide an additional loan in an amount o f US$ 103.00 million to the State o f Ceara, Brazil, for the implementation o f the Ceara Integrated Water Resources Management Project (PROGERIRH), Ln. 453 1 -BR Ceara i s one o f the poorest States in the semi-arid NE Brazil famous for i t s climate variability and the strong strive o f the Cearense society to meet i t s water needs. This additional loan wi l l imply an extension o f three years to the original project.
2. The proposed additional loan would provide continuity to the financing o f PROGERIRH activities consistent with the project’s objectives and components. I t would contribute to the financing o f scaled-up activities to enhance the impact o f a well-performing project in the water sector. These include the: (a) completion o f major works for the conveyance o f bulk water supplies from the Castanhgo dam in the Jaguaribe River Basin to the Fortaleza Metropolitan Region (RMF) - known as the Integration Canal (Canal de IntegraqCo), which will secure water supply to more than 3 mill ion people; (b) implementation o f additional water storage and supply sub-projects to cover mainly small towns and rural areas; and (c) consolidation o f institutional and legal reforms o f the State’s water resource management system and the use o f instruments for allocating water among it multiple uses.
3. The original project design had the purpose o f providing the State with technical, institutional and operational tools for the management o f water resources as well as major infrastructure to respond to the demand for water for both human consumption and economic development. PROGERIRH has been performing well and, in addition to key institutional gains, physical results include the completion o f 6 new water storage reservoirs, the rehabilitation o f 23 dams, and the near completion o f the f i rs t three sections o f the Integration Canal. Project outcomes have allowed Ceara to be recognized as one o f the best performers among other Brazilian states, on the cutting edge in managing i t s water resources, especially in terms o f institutional responsibilities, user participation and charging for bulk water.
4. The State has pioneered water management improvements since the late 1980s, following modern principles o f participatory, decentralized management with full recognition o f the economic value o f water resources. Ceara was the f i rst Brazilian State to introduce a charge for bulk water supply which has been consistently revised to reflect real Administration, Operation and Maintenance (A, O&M) costs o f the State’s water resource infrastructure. The State Water Management Company (COGERH) fully covers i t s operational costs (including staff) out o f bulk water fees collected from water users.
5. The Additional Financing will be implemented under the purview o f the State Secretariat o f Water Resources (SRH), in close coordination with the State Secretariat o f Planning and Management (SEPLAG) and the Governor’s Office. Created and supported with financing from PROGERIRH, S R H now oversees and collaborates with other relevant agencies in all the State-wide water programs.
6. The Additional Financing wi l l also support and enhance the growing synergy with other Bank-financed projects being implemented in the State, including, for example, the Federal Water Resources Management Project (PROAGUA), the Water Sector Modernization Project (PMSS), and the Ceara Inclusive Growth Project (SWAP 11).
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11. Background and Rationale for Additional Financing
Background
7. The PROGERIRH Loan 4531-BR, in the original amount o f U S $ 136 million, was signed on February 10, 2000. It became effective on May 24, 2000 and i t s original Closing Date was June 30,2006. The Bank approved the Government’s request o f an extension o f the Closing Date until December 2008, to enable the completion o f ongoing works and activities and provide a bridge to the proposed additional financing.
Overview of the State s Hydraulic Infrastructure Development Plan
8. The State o f Ceara relies heavily on surface water infrastructure for providing water supply for multiple uses. Crystalline rock formations occur in about 90% o f the State 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 o f water infrastructure planning and management i s widely recognized in the State, which has consistently treated this theme with high priority.
9. In 1987, the State created i t s Secretariat o f Water Resources and in 1992, the State Water Resources Plan was completed. The Plan identified a network o f strategic reservoirs to increase the State’s capacity to cope with recurrent droughts. After the extreme drought o f 1994, which caused the RMF water supply system to almost collapse, the State built the Canal do Trabalhador, as an emergency measure, and started planning for other integration systems to increase reliability o f i t s water supplies. The implementation o f strategic reservoirs, the planning o f the integration systems, and the preparation o f PROGERIRH were supported by the PROURB and the Ceara Water Pilot Projects, both financed by the Bank.
10. In 2005, with support from PROGERIRH, 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. The revised Plan identifies three major types o f infrastructure to be developed to meet the multiple needs o f this semi-arid State: (a) a network o f small isolated reservoirs to supply drinking water to specific towns and villages; (b) larger reservoirs and integrated pipeline systems serving a number o f municipalities for domestic consumption and other uses such as irrigation, industrial supply and aquaculture; and (c) several major integration systems, including the Integration Canal, to connect key reservoirs with multi-year regulation capacity to improve water supply reliability to cope with the endemic problem o f droughts and climate change. During the preparation o f PROGERIRH, the State prioritized for Bank funding six reservoirs to meet specific demands in the interior o f the State and part o f the Castanhgo-RMF Integration Canal.
Project Development Objectives and Components
1 1. The three objectives o f PROGERIRH, as described below, will remain unchanged:
(a) Increase the sustainable supply o f water for multiple uses, improve the efficiency o f Ceara’s Integrated Water Resources Management system and decrease the vulnerability o f poor populations to cyclical drought;
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(b) Stimulate multiple use and efficient and shared management o f Ceara’s water resources; and
(c) Promote the improved management o f soil and vegetation in tributary watersheds to enhance conservation, minimize erosion and maximize natural water storage mechanisms, through the adequate management o f critical micro-basins and groundwater resources.
12. PROGERIRH i s divided into six components:
1. Management and Institutional: to strengthen the State’s institutional, legal and management frameworks and continue the implementation o f sustainable practices in the management o f water resources. Specific sub-components include: (a) Hydro-meteorological Information System; (b) Sustainable Operation and Maintenance o f Bulk Water System; (c) Dam Safety and Inspection Program; (d) Basin Committee Organization and Training; (e) Water Tariff Evaluation; ( f ) Market-Based Water Transfer Mechanisms; and (8) Public Information and Education Program.
2. Strategic Reservoir Network: to prepare engineering designs and construct new infrastructure for the provision o f reliable and good quality water supply to poor rural communities in the State.
3. Integration of Kev River Basins: with the purpose o f providing reliable and good quality water supply for industrial, municipal and domestic purposes within the Fortaleza Metropolitan Region for the short, medium and long term. Activities include the detailed analysis o f options for inter-basin water resource transfer to evaluate their environmental, social, technical and economic feasibility; preparation o f engineering designs; and construction o f priority infrastructure, including sections o f the Integration Canal to transfer water from Castanhgo to the Fortaleza Metropolitan Region.
4. Rehabilitation of Existing Bulk Water Infrastructure: related to critical water resource storage and delivery systems within the State.
5. PRODHAM - Micro Watershed Management Pilot Project: focusing on the rehabilitation o f micro-watersheds in four areas o f the State with the objective o f developing methodologies on how to build a functioning approach for local community involvement, implementing technically, socially, environmentally, and economically sustainable solutions that help promote the improved management o f soil and vegetation in the tributary watersheds by enhancing conservation, minimizing erosion and maximizing natural water storage mechanisms, constituting an important pilot to help protecting and further conserving the Caatinga biome.
6. Groundwater Management; to carry out sub-projects for the collection, production and analysis o f groundwater data; and development and implementation o f action plans to improve groundwater management in State’s key and fragile aquifers.
Project Performance and Achievements
13. PROGERIRH’s objectives are expected to be met by i ts closing date o f December 31, 2008. Despite implementation delays, overall implementation has been satisfactory and the
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projected results w i l l be achieved. In addition, all loan covenants have been met. The key reasons for delays had to do with: (a) the extended procurement processes related to such large works, (b) counterpart funding problems due, in part, to the macro economic difficulties that affected Brazil during 2000-2003 and an increase in construction costs (due to inflation and the appreciation o f the Real), and (c) changes in government administration.
14. However, during the past two years, disbursements rates have accelerated rapidly, as a consequence o f the priority given to the project by the newly-elected Governor and a restructuring o f the Bank funding ratio. Throughout project implementation, seven amendments to the Loan Agreement were made, the last one authorizing the modification o f disbursement percentages for the Works Category o f the project. A scale was established for the percentage o f expenditures to be financed by the Bank, starting at 95% with stepwise decreases to 4.5% as a function o f the aggregate amount o f withdrawals made. Disbursements have now reached US$126 mill ion (92% o f the total loan amount) and the State i s meeting i ts obligation to cover 95.5% o f the costs o f civil works. Recent project supervision missions have shown that project execution i s consistent with i t s objectives and outcomes and impacts are meeting expectations.
Project Results
15. The implementation o f the major Castanhiio-RMF Integration Canal has been a landmark effort o f the State, the Federal Government and the Bank. Upon completion o f Section 3 in 2009, the Integration Canal will make a major contribution towards achieving water resources stability in the State, thereby eliminating the vulnerability o f over 40 percent o f the population to the impact o f cyclical droughts. Furthermore, PROGERIRH has also allowed the State to expand i t s water storage volume through the construction o f six dams and associated reservoirs. This additional storage capacity, combined with the expected completion o f Section 3 o f the Canal, wi l l provide safe and reliable water supply to over 3 mill ion beneficiaries.
16. In addition, PROGERIRH, through i t s PRODHAM Pilot, has contributed to the initiation o f an environmental recovery and preservation process associated with economic growth and improvements in the quality o f l i f e o f the population living in four micro-basins in the State’s inner semi-arid region, with a total o f five municipalities and 2,200 beneficiary families.
17. On the institutional side, the project has significantly contributed to help consolidate the State o f Ceara’s leadership in putting in place a coherent policy and institutional framework for water resource management, in full compliance with the 1997 National Water Policy Law. The State i s now well advanced and considerably structured with regards to water resources management instruments, particularly in aspects related to legal issues, institutional roles and community participation. The legal framework i s sound and i s supported by a State Water Law and associated decrees, regulations and resolutions.
18. The responsibilities o f the key State agencies supported by PROGERIRH are:
0 Secretariat o f Water Resources (SRH), as the coordinating entity;
State Water Resources Management Company (COGERH), as executing entity;
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0 State Superintendence o f Hydraulic Works (SOHIDRA), responsible for the hydraulic infrastructure works;
State Water and Sanitation Utility (CAGECE), responsible for provision o f municipal water and sanitation services;
0 Ceara Foundation for Meteorology (FUNCEME), responsible for hydrometeorological information and development o f research and water resources applied projects; and
State Council o f Water Resources, the water basin committees and water user associations.
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19. In terms o f decision support and information instruments, the State, through PROGERIRH, has developed i t s own cadastre o f water infrastructure and a register o f bulk water users. The meteorological and hydrological networks are good, especially in terms o f quantitative information, as well as a water resources information system. Planning instruments include basins plans and a water resources atlas. On an operational-level, the State has been implementing a water use licensing system and enforcing bulk water charges. COGERGH operates and maintains multiple-purpose water infrastructure, including a considerable number o f reservoirs, bulk water supply systems and the f irst phase o f the Integration Canal.
20. Nearly 30 river basin committees and water user associations have been formed and are being strengthened. The progress made in the State’s groundwater management system i s also a direct result o f the project’s activities in key basins and stressed areas.
The Integration Canal
21. During project implementation, changes were made to the final technical design and engineering lay-out o f the Integration Canal and i ts associated water conveyance system. The revised design includes five main sections, with the f i rst three financed through PROGERIRH and the remainder by the State.
22. Based on detailed technical, social, environmental and economic analyses conducted during the first year o f PROGERIRH, the modifications to the initial design o f the Integration Canal were agreed upon to optimize the use o f existing hydraulic infrastructure in the State while also allowing to increase the overall design flow capacity o f the Castanha0 conveyance scheme from lOm3/sec to 18m3/sec. The flow capacity was increased by building a longer stretch o f Canal in l ieu o f using the Pirangi River and the Canal do Trabalhador (see Map 1 in Annex 4). This revised design also allows more efficient operation and maintenance, reducing energy costs as well as infiltration and evaporation losses. PROGERIRH supported the completion o f 54.7 km o f the Canal (Section 1) as originally designed, financed the upgraded design o f Sections 2 and 3, 46.2 and 66.3 km, respectively. The completion o f Section 3 would be financed as government counterpart contribution to the Additional Financing. In addition, Government has already issued bids for Section 4, to be funded with federal and state resources. Section 5 i s designed to extend the Canal from the RMF to the Port o f PecCm to bring large incremental benefits that were not contemplated in the initial project design.
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Table 1. Financing and Status for Current Design of the Integration Canal Section Section 1 Section 2
Financing Source Status PROGERIRH 100% completed PROGERIRH 99.9% comuleted
I Section 3 I PROGERIRH + PROGERIRH AF I 94.6% comdeted Section 4 Section 5
State/PAC* Bidding completed State/PAC** Planned
costs and benefits included in PROGERIRH’s original economic analysis. * * To be fmanced with State and PAC funds and not considered in PROGERIRH’s original analyses.
Integration Canal
Initial Design’ Revised Design4
23. Although these technical modifications did not require a project amendment since they did not affect the overall project objective, the contributed to the overall increase o f the cost o f Sections 1 , 2 and 3 from $2 14M to $404M . The increased overall cost o f the Integration Canal i s mainly due to three factors: (a) a more expensive lay-out, mainly o f Section 3; (b) incremental costs o f the works due to changes in the construction market, and especially steel prices2 and (c) normal inflationary impacts experienced by many long-lasting large-scale infrastructure projects o f this nature.
Y
Total Cost Bank Financing Bank Percentage (US$m.) (US$m.) (%) 214.00 92.33 43.1% 404.00 98.66 24.4%
24. These changes have an impact in the total costs as well as the cost-sharing arrangements for the part o f the Integration Canal supported by PROGERIRH, as shown in Table 2.
Rationale for the Additional Financing
25. The continuous effort to implement the State water resources policy and plan has placed the State o f Cearii in the front l ine to becoming a national and international reference in the area o f water resources management. To a great extent, World Bank support and international technical assistance has helped the State achieve this leadership position.
26. The State has fully embraced the spirit o f the water reform and has successfully implemented actions such as: (a) installation o f a political-legal-institutional structure to manage the system; (b) decentralization and public participation in the decision making process and conflict management system consisting o f users commissions, water basins
’ Nominal values throughout the period from 1998 to 2008. The initial cost estimate was determined as part o f the economic analysis of the project for the conveyance of water from the Castanhi40 to the Pacajus Reservoir.
Between December 1999 and December 2007, SINAPIABGE - Civil Construction Index in the State o f Ceara had an increase of 119.4%. Steel prices increased 186.57% between February 2000 and March 2006.
US dollars of 1998, from PROGERIRH economic analysis.
Nominal values in U S dollars as spent from 2001 to 2008. For the remaining balance of US$ 32 million still to be paid, the current percentage o f Bank financing o f about 4% was applied.
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committees and water resources State council; (c) financial sustainability and creation o f a mechanism for system financing with bulk water charging; (d) construction o f complex infrastructure to secure water demands with a v iew to ensuring long-term O&M; and (e) adoption o f planning instruments.
27. In this context, while the State has made significant progress in water sector reform, this i s a long te rm process at an incipient stage. The proposed Additional Financing includes a series o f institutional actions that are essential for consolidating the sector reform process, taking advantage o f the fact that water resource management continues to be a high priority for the current State Government.
28. In terms o f physical results, the completion o f Section 3 o f the Integration Canal and associated works will not only guarantee water supply to the Fortaleza Metropolitan Region, but also contribute to meeting the needs for economic development o f the State by increasing water availability for industrial and agricultural uses as well as to supply the Port o f PecCm once Sections 4 and 5 are completed by the State. Just as importantly, the hydraulic conveyance infrastructure will allow the State to capture the benefits o f the major federally- supported inter-basin water transfer project - the Transposiqdo o f the Sgo Francisco River’. Finally, the proposed AF will support the construction o f much needed additional water supply and storage systems for drought-stricken and poor rural communities.
29. The proposed AF i s part o f an integrated package or Bank assistance to the State in support o f the water sector. The long-standing Sgo JosC Community Development project (PCPR) has helped numerous rural communities improve their drinking water supplies and has supported the implementation o f an operational support network to help sustain the investments (SISAR). The appraised Cidades do Ceara Project supports the economic development o f the southern portion o f the State where adequate water resource management and pollution control are critical elements o f the strategy Most importantly, the proposed AF will be closely linked to the recently-negotiated Ceara SWAP I 1 Project for Inclusive Growth (P106765) which includes results-based disbursements linked to physical achievements and policy measures in a number o f sectors, including water. Among the key results expected in the water sector, are several linked to the continuous improvement o f the financial viability o f the sector through increasing levels o f user fees and improved corporate and commercial governance o f the key water agencies (CAGECE and COGERH).
30. The use o f a combination o f Bank lending instruments to support pol icy reform in difficult areas has proven to be an effective way o f maximizing the impact o f World Bank support and maintaining the visibility o f the water resources management reform agenda at the highest level o f the State Government.
31. The Carta Consulta for the Additional Financing loan was approved on September 28, 2007 for an incremental total project amount o f US$191.10 million, corresponding to an
The largest hydraulic infrastructure work financed by the federal government in the Northeast. The North Axis o f the Transposiqio, expected for completion in 20 13, wi l l allow the import o f about 9m3/sec firm flow from the SBo Francisco River to the Jaguaribe river into the CastanhBo reservoir, with a capacity to reach 50m3/sec when Sobradinho reservoir i s full.
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IBRD loan o f US$93.65 million for 3 years.6 The Governor has shown the State’s commitment to the project, and in fact, it was at the top o f his l i s t in his initial discussions with the Bank after he took office in January 2007.
111. Proposed Changes and Scope o f Additional Financing
32. The Additional Financing will scale up the activities financed under PROGERIRH aiming at further enhancing gains that have been made in the development o f a sound and sustainable integrated water management system with a strong participation o f the user community. The financing would be implemented from January 1, 2009 to December 31, 201 1.
33. Project objectives will remain unchanged. The expected outcomes from this additional financing will be the provision o f critical bulk water supplies to the Fortaleza Metropolitan Region by completing Section 3 o f the Integration Canal; the storage and distribution o f potable water supplies for rural areas; and strengthening o f the overall participative integrated water resources management system o f the State.
34. The strategic water infrastructure activities under PROGERIRH focused on Metropolitanas, Jaguaribe, Acarau, Coreau, Planalto de Ibiapaba and Poti rivers basins. The Additional Financing w i l l continue to provide infrastructure in the first four o f these basins and also add activities in Banabuiu, Salgado, Gameleira and Litoral river basins.
35. Most o f the activities supported under the ongoing PROGERIRH wi l l be continued, however, the project components will be consolidated into two major areas: (1) Water Resources Management, and (2) Hydraulic Infrastructure.
36. Component 1 - Water Resources Management: wi i l support and deepen the same water resources sector reform agenda with the objective of: (a) enhancing water resource management efficiency; (b) consolidating the management o f water supply, through the strengthening o f the capacity for O&M o f the hydraulic infrastructure, introducing new water quality management mechanisms for groundwater and improving public participatory mechanisms and management o f water uses conflicts; and (c) strengthening the capacity o f COGERH, SOHIDRA and SRH.
37. This Component wi l l comprise the following groups o f activities:
A. Institutional Strengthening 0 development and strengthening o f human resources for the State water resources
management entities and the public communication system to facilitate the social change for a new water culture.
B. Water Rights, Licensing and Control System, Bulk Water Tariff Program
“Carta Consulta” i s the approval from the Ministries o f Planning and Finance for international loans. With approval from the federal government, the loan amount may be increased by 10% during project negotiations.
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0
0
0
Water Basins Committees and Water Users Associations 0
0
0
Operation and Maintenance of Hydraulic Infrastructure 0
0
updating and expansion o f the technical and information basis for allocating and managing water rights enforcing water rights and bulk water charges re-evaluating the bulk water tariff and tariff collection system o f COGERH
supporting the creation o f additional water basin committees and water user associations dissemination o f lessons learned and best practices through PRODHAM development o f environmental education programs for bulk water conservation
preparation o f studies for rehabilitation and enhancement o f water infrastructure implementation o f automated O&M for priority infrastructure; including the
Integration Canal
Water Quality Management and Groundwater Management 0 implementation o f a water quality monitoring system 0 expansion and strengthening o f the groundwater management system.
C.
D.
E.
38. Component 2 - Hydraulic Infrastructure wi l l represent the bulk o f the funding and include the preparation and implementation o f additional water storage and supply facilities that were analyzed the preparation o f PROGERIRH but not included in the project scope due to funding limitations. The component contemplates three groups o f activities:
A. Strategic Reservoirs Network 0 The reservoirs were selected following a prioritization methodology, developed under
PROGERIRH, and will be primarily used to provide municipal/domestic water supplies to critical rural areas that presently suffer from a lack o f adequate and reliable treated water, particularly during the cyclical drought periods that occur in the region. The reservoirs are Umari, Gameleira, Trairi, Jenipapeiro, Jatoba and Mamoeiro. During the first year o f the project, Umari and Gameleira reservoirs wi l l be implemented7.
The completion o f Section 3 o f the Integration Canal which was initiated under the PROGERIRH. These works wi l l be included in the scope o f the Additional Financing Project but entirely financed as counterpart funds. The construction o f the water supply systems that wi l l be used to distribute the water from the six strategic reservoirs. These conveyance systems are: (1) UmarUMadalena; (2) Gameleirahtapipoca; (3) Trairi; (4) Jenipapeiro/Ipaumirim; (5) JatobdIpueiras; and (6) Mamoeiro/Antonina do Norte.
B. Water Transfer Axis 0
0
C. Studies and Engineering Designs 0 To support the State infrastructure investment planning.
The designs are ready, the bidding documents are well advanced to be submitted to the Bank and the resettlement plans have already been discussed and agreed with the affected population and reviewed and approved by the Bank.
14
The costs o f the main components in the Additional Financing and in the original Project are summarized in Table 3:
Original Project cost *
17.00
Table 3. Additional financing and original Project costs by main components (US$ m.) I 1
Original Additional Additional Loan Financing Loan
allocation Project cost allocation 12.50 11.71 10.68
Component Total
Project cost
28.71
607.55
l-Water Resources Management 2 - Hydraulic Infrastructure
Total Loan
allocation 23.18
215.82
Total
412.00 1 123.50 1 429.00 I 136.00 I 207.26 I 103.00 I 636.26 I 239.00
195*55 I 92.32 I
l-Water Resources Management A. Institutional Strengthening
11.71 91.2 10.68 4.58 91.4 4.18
D. Operation and Maintenance o f Hydraulic Infrastructure
Groundwater Management 2 - Hydraulic Infrastructure
E. Water Quality Management and
39. The detailed costs per components o f the Additional Financing and allocation o f Loan Proceeds are summarized in Table 4:
2.54 89.0 2.26
2.07 92.3 1.91
195.55 47.2 92.32
Table 4. Additional financine costs bv comDonents and activities
C. Studies and Engineering Designs Total
Component/Sub-component
3.50 92.5 3.24 207.26 49.7 103.00
B. Water Rights, Licensing and Control System, Bulk Water Tariff Program 92*5 I 1-49 I C. Water Basins Committees and Water Users Associations 92*5 I 0.84 I
I A. Strategic Reservoirs Network I 90.94 I 74.7 I 67.91 I I B. Water Transfer Axis I 101.11 I 20.9 I 21.17 I
40. The detailed costs for the infrastructure works for the Additional Financing are presented in Table 5 below:
15
?able 5. Additional financing costs by infrasti
Hydraulic Infrastructure 23.03 4.84 3.56 2.16 2.37 3.79 6.32
79.94 1 .oo 1.32 0.23 0.59 0.27 0.48
76.05
Strategic Reservoirs Umari Gameleira Jatoba Jenipapeiro Mamoeiro Trairi Water Transfer Axis Madalena Pipeline
90.94 13.75 14.23 13.28 7.71
20.19 21.78
101.11 6.42 8.62 1.50 3.87 1.64 3.02
76.05
Itapipoca Pipeline Ipueiras Pipeline haumirim PiDeline ____________ ~~
Antonina do Norte Pipeline Trairi Pipeline Castanhiio-RMF Integration Canal - Section 3 Total
icture worl Loan
Ammount 67.91
8.92 10.68 11.12 5.34
16.40 15.45 21.17
5.42 7.30 1.26 3.28 1.37 2.54 0.00
89.08 102.97 I 192.05 Exchange Rate U S $ l .OO = R$l.75
4 1. Map 2 in Annex 4 presents the key water resources infrastructure in the State, including the systems built by PROURB, PROAGUA and PROGERIRH, and those planned under PROGERIRH Additional Financing.
Implementation Arrangements
42. Existing project management arrangements w i l l be maintained, with the primary responsibility for project implementation remaining with S R H in coordination with COGERH and SOHIDRA for the execution o f specific components. The UGPE (Project Coordination Unit) wi l l continue to manage project finances and interaction with the Bank. A fiduciary update assessment has been undertaken as part o f the preparation o f the AF.
43. The procurement function in the State o f Ceara has recently been centralized into a number o f Procurement Committees, coordinated by the PGE (Procuradoria Geral do Estado). At present PGE has 84 people working in procurement. S R H has a procurement manager and 2 assistants. The two entities linked to S R H that have a role in the implementation o f the project, COGERH and SOHIDRA, also have capacity to manage procurement.
44. The procurement and consultants guidelines to be used for the Additional Financing wi l l be updated to reflect the Bank guidelines o f May 2004 revised in October 2006 and country thresholds determined in 2008. The PROGERIRH Operational Manual has been revised in order to reflect these changes and the procurement plan has been prepared by the cl ient and approved by the Bank.
16
45. No major difficulties are anticipated in fully utilizing the AF within the mandatory three years established by OP 13.20, given that the implementation agencies have sound knowledge o f Bank procedures and the design o f the new works i s well advanced. As shown in Table 6, the implementation schedule for the Additional Financing i s expected to be more significant during the first year due to the frontloading o f the counterpart contribution.
Borrower IBRD financing
2009 201 0 201 1 85.91 15.56 2.79 104.26 16.33 68.95 17.72 103.00
“ I
Total financing I 102.24 I 84.51 I 20.51 I 207.26 I
IV. Consistency with CAS or CPS
46. The proposed Additional Financing operation i s consistent with the Brazil Country Partnership Strategy 2008-201 1 (Report no 42677-BR, discussed on May 1, 2008), which supports three major pillars of: equity, competitiveness, and sustainability. The project also responds to the CPS strategy for a higher level o f support to the States, while also maintaining programmatic linkages with national initiatives.
47. The CPS recognizes water as “a key element o f Brazil strategy to promote sustainable growth and a more equitable and inclusive society”. I t also establishes that “the Bank will build on i t s long standing programs at the federal level and continue to improve institutional capacity and deepening reform at the State and municipal levels”. Improving water resources management i s one o f the key selected lines o f business to be supported in this CPS, with explicit reference to Ceara as one o f the States to be target for having demonstrated i t s commitment to improve W R M and an opportunity to advancing reforms. The State o f Ceara i s also an important co-executor o f the PROAGUA project, the main federal program to implement the National Water Resources Management System.
48. The objectives pursued by the Additional Financing are fully consistent with the CPS. The Additional Financing aims at ensuring the expansion o f good quality bulk water supply for multiple uses, promoting the sustainable use o f water resources, and recouping presently unused investments. The ultimate goal i s to reduce extreme poverty and achieve a better quality o f l i f e for Brazilians, especially in rural areas. Through i t s infrastructure improvement activities, which will increase the efficiency o f the water sector, the project will contribute to enhancing the State government’s competitiveness, improving resource allocation, and consolidating the legal frameworks and institutions. Additionally, by enhancing the role played by local water users associations and basin committees in water resources management, the project will improve local governance.
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V. Appraisal o f Scaled-up Project Activities
Economic and Financial Analysis'
Section 1 Section 2 Section 3 Total
49. General. The State o f Ceara has demonstrated a rate o f economic increase in excess o f the rest o f the Northeast Region o f Brazil. While the Gross Domestic Product o f the Northeast Region rose 50.26% between 1985 and 2005, that o f Ceara rose 79.53 %. The GDP o f the State in 2005 was 25.8 billion Reais'. This was broken down by agriculture, 6.02 %, Industry, 23.07 YO and Services, 70.91%.
100% 230.04 87.17 317.21 99.9% 44.03 229.55 273.58 94.6% 49.60 348.42 398.02
- 323.68 665.14 988.81
50. The Project. S R H prepared a detailed financial and economic analysis o f the strategic reservoir network infrastructure proposed to be included in the Additional Financing. As part o f the preparation o f the Additional Financing the total costs o f the Bank-financed Sections 1 , 2 and 3 were reviewed to confirm they were in l ine with design changes and updated construction costs.
5 1. The initial design o f Sections 1, 2, and 3 implied investments o f about R$ 364 million, in 1998 figures, which would correspond to about R$ 799 mill ion in 2008 figures, based on civil construction cost variation indices published by IBGE for the State o f Ceara lo, The total costs o f the revised design, as currently planned and built, amounts to R$ 989 million, discounted to 2008 figures with the same indices. The discounted values, which take out inflation effects, show an increase in cost o f approximately 24% which could be attributed to the change in design. This cost increase seems reasonable vis-a-vis the additional 8m3/sec and the efficiency gains o f the revised design. Table 7 shows actual costs, discounted to 2008 figures, for the Integration Canal.
Table 7. Actual Costs for the Canal Sections 1,2 and 3, Reais o f 2008 (million)
52. The Bank team also verified that the key benefits, population and demand projections made as part o f the initial economic analysis conducted more than 10 years ago were being met. In fact, demand projections are expected to be exceeded due to the completion o f the Port o f PecCm, which was not contemplated in the original project as well as increased demand from the development o f tourism centers on the coast, to be served by Section 5 o f the Integration Canal. A thorough and final economic analysis o f the Integration Canal will be conducted for the project ICR.
* Based primarily on SIMOP, a widely used and well regarded analytical tool in the industry. Institutional strengthening activities, having been f i l ly analyzed during appraisal of PROGEFURH, have not been re-analyzed for purposes o f the AF. ' Source: www.ipeadata.gov.br , PIB Estadual a Preqos Constantes
lo Source: IBGE, Sistema Nacional de Pesquisa de Custos e indices da ConstruqJo Civil.
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53. The Economic analysis o f the six major sub-project systems to be financed by the Bank (Umariklagdalena, GameleirdItapipoca, Trairi, Jenipapeiro/Ipaumirim, JatobdIpueiras and Mamoeiro/Antonina do Norte systems) was done for population and demand projections using regression analysis, based upon projections o f both with project and without project scenarios. These were established using experiences in similar rural municipal settings within the State o f Ceara and the most recent census. The projections were developed for a period o f 30 years so as to evaluate the long te rm impacts o f the sub-projects. Population projections were directly converted to projected demand figures for the with-project scenarios based upon 112.5 liters per capita per day with an estimated 100% service coverage. The without-project scenarios were based on the supply capacity o f the existing systems and an estimated demand o f 40 l i ters per capita per day with 80% service coverage for the population without access to existing systems.
54. A detailed analysis was made o f the sustaining costs o f administration, operation and maintenance o f these proposed systems, also based upon similar experiences within Ceara as well as utilizing the criteria as established under PROAGUA. These costs included energy costs and water treatment costs. A discount rate o f 12% as established under PROAGUA was also used in the economic evaluation o f these sub-projects.
55. With regard to the revenues projected to be derived from these projects, a tari f f o f $R0.72 per cubic meter was used and applied to the projected demand figures for each sub-project. This compares with an alternate cost for the supply o f reliable potable water from sources such as water trucks (Carros-Pipa) and bottled water which was estimated to be $R4.38 per cubic meter, seven times higher.
56. Included in the benefit side o f the evaluation was an estimate o f increased revenues to the Government from anticipated increases in tax revenues from the estimated escalation o f economic activity in the affected regions. An estimate o f decreases in social welfare costs was also derived to be included in the benefits analysis.
57. Based upon the detailed analyses for these projects, the Internal Rate o f Return (IRR) for each sub-project was derived. These derived I R R s were favorable, attaining over 20 percent in most cases.
58. The price elasticity o f demand for the estimated project was -0.56. Sensitivity analyses were made with regard to the price elasticity in relation to the IRR, as well as sensitivity analyses with regard to the sensitivity o f demand to alternate costs for water. These analyses indicated acceptable levels o f sensitivity with regard to the estimates made and indicated that reasonable variations in the estimates would have no significant impact o n the resultant IRR or water demands projected in the study.
59. In summary, the economic viability o f the proposed investments i s acceptable and the proposed financing i s economically justified.
Technical Aspects
60. The selected works to be included under the Additional Financing are part o f the State Water Resources Plan and their prioritization took into consideration technical, financial, economic, environmental and social criteria. Different alternatives were analyzed and the
19
proposed schemes rendering higher benefits were selected. This approach indicates that the problems to be addressed by the proposed works constitute State priorities and that the solutions chosen result from a coherent and inclusive upstream planning process. In addition, a l l selected works had their engineering designs, social plans and environmental assessments prepared during the implementation o f PROGERIRH followed the Wor ld Bank’s technical and safeguards requirements.
Institutional Aspects
61. The three responsible agencies for project implementation, SRH, COGERH and SOHIDRA have institutional frameworks in place and staff experienced in dealing with Bank- financed projects. The UGPE (Project Coordination Unit) will continue to manage project finances and interaction with the Bank. New staff have been recently trained in Bank’s procedures.
Fiduciary Aspects
62. Financial management, financial reports, and auditing arrangements. A review o f the Financial Management capacity for the Additional Financing phase o f the project was made in December 2007. As detailed in annex 2, the project’s accounting and reporting system i s in place and audit and staffing arrangements, internal control and policies continue to comply with provisions o f Section 5.09 o f the General Conditions. Overall FM risk i s considered moderate. There i s no need to make changes in the implementation arrangements for the Additional Financing.
63. Although the project faced issues with the financial management arrangements in 2007 that resulted in unsatisfactory FM ratings, the project implemented the Bank’s action plan within the agreed-upon timeframe. The improvements made in the financial management arrangements during the last semester o f the implementation o f the original project are considered satisfactory.
64. The Borrower will keep transactional-based disbursements, using Records, Statement o f Expenditures (SOE) and Summary Sheets (SS), but has the capability to move to interim un- audited financial reports (IFR) disbursements. The project will continue to use the current f low o f funds, financial management system (State integrated administrative system) and disbursements practices.
65. The financial management system to be used under the proposed Additional Financing i s Ceara’s Integrated Accounting System which i s integrated with SIAP (Monitoring and Administrative Project Management System and SIOF (Budgetary and Financial Information System). These systems are the same that are being used under the ongoing PROGERIRH project. The financial management system complies with OP/BP 10.02 and the Financial Management Practices in World Bank-Financed Investment Operations as o f November 3, 2005 including: a) to ensure that funds are used only for their intended purposes in an efficient and economical way while implementing agreed activities; (ii) to enable the preparation o f financial reports that show costs budgeted and incurred for the current period and the total budget and cost o f the project to date; (iii) to enable the implementing agency
20
(SRH" - CE) to monitor efficiently implementation o f the project; and (iv) to safeguard the Project's resources and assets.
66. For monitoring purposes, S R H shall prepare and furnish to the Bank, not later than forty five days after each calendar quarter, interim un-audited financial reports for the project covering the quarter, in form and substance satisfactory to the Bank.
67. Procurement Assessment. Procurement activities will be carried out by SRH. This capacity assessment relies mainly on previous procurement post reviews and the performance o f S R H in the implementation o f PROGERIRH. The procurement function, including planning, monitoring, preparation o f bidding documents and bid evaluations will be centralized in SRH. The Secretary o f S R H confirmed that the additional financing o f PROGERIRH will continue to have a Project Implementing Unit (PIU), operating in S R H under his direct supervision. Detailed procurement assessment and arrangements are described in Annex 1.
Safeguards
68. The ongoing project i s classified as Category A. During the original project implementation, adequate planning o f the environmental strategy and close field-based supervision has ensured satisfactory compliance with safeguards. Consistent environmental, social and resettlement frameworks were developed and approved, as were manuals with environmental guidelines for the construction o f dams and water pipelines. Overall, the implementation o f PROGERIRH's Regional Environmental Management Plan (REMP) and i ts Involuntary Resettlement provided important lessons, detailed in Annex 3, and which are being taken into account for the implementation o f the Additional Financing. The following Safeguard Policies have been triggered by the sub-projects financed under the Additional Financing:
Safeguard Policies Triggered by the Project Yes N o Environmental Assessment (OP/BP/GP 4.0 1) [XI [ I Natural Habitats (OP/BP 4.04) Forests (OP/BP 4.36) Pest Management (OP 4.09) Physical Cultural Resources (OP/BP 4.1 1) Indigenous Peoples (OD 4.20, being revised as OP 4.10) Involuntary Resettlement (OP/BP 4.12) Safety o f Dams (OP/BP 4.37) Projects on International Waterways (OP/BP/GP 7.50) Projects in Disputed Areas (OP/BP/GP 7.60)*-
(See Annex 3 for more detailed information.)
I' Water Resources State Secretary. *
By supporting the proposed project, the Bank does not intend to prejudice the final determination o f the parties' claims on the disputed areas.
21
69. Two major lessons include the need to much closer attention to the importance o f OP 4.1 1- Physical Cultural Resources and understand the challenges o f implementing successful income generating activities for families that are resettled, as well as the need to help the State expedite land titling. Numerous process and human resource issues were also identified including the need for: adequate staff and their training, integration o f environmental management and social development activities into project planning and implementation, reference to environmental manuals and action plans in bidding documents, strengthened Bank supervision and use o f external independent auditors
70. The existence o f the present safeguard policies and plans within the State and the implementation capacity within the UGPE and COGERH and SOHIDRA and the lessons o f project implementation thus far should assure satisfactory compliance with al l safeguard policies.
71. Environmental. The proposed works will have positive impacts since they will provide proper water supply to communities and access to water resources throughout the year. Beyond normal specific and time bound environmental concerns arising during the construction phase, other environmental concerns from the proposed investments are related to the flooding o f areas and loss o f natural habitats, the creation and management o f conservation areas around the reservoirs, and the proper implementation o f resettlement activities. During the preparation o f the Additional Financing, detailed analyses were made to: (a) learn from the implementation o f environmental procedures during PROGERIRH; (b) environmental and social assessments o f the two works selected for the f i rs t year o f project implementation; and (c) preparing an environmental management framework for the implementation o f the Additional Financing taking into consideration the lessons learned from the original project.
72. The sub-projects selected for additional financing were the result o f a continuous planning process in the State. Alternatives were considered and the sub-projects were subject to rigorous screening and analysis criteria (including environmental, social, technical, economic and financial). The studies and alternatives selection took into account not only the individual effects o f each subproject but also their cumulative and regional impacts. The State's Water Resource Management Plan was updated in 2005 and resulted in the l i s t o f projects that will be financed by the PROGERIRH Additional Financing: (i) Gameleira, (ii) Umari, (iii) Jenipapeiro, (iv) Mamoeiro'2, (v) Trairi, and (vi) Jatoba.
73. Between 2002 and 2004 the PROGERIRH project financed the elaboration o f EINRIMAs for al l six reservoirs to be financed by the PROGERIRH Additional Financing. In addition, more detailed and independent environmental reviews were undertaken for the first year interventions o f the Umari and Gameleira Reservoirs and associated pipelines and water treatment plants. The environmental review included the assessment o f the EIAAUMAs, the Dam Safety provisions and procedures, the environmental licenses and their provisions,
l2 The original subproject o f Mamoeiro, analyzed during the preparation o f PROGERIRH, was rejected partly as a result o f the potential environmental impacts, as explained in the Regional Environmental Assessment (REA). A totally revised subproject was prepared for Mamoeiro, and compared to the original subproject, this new sub- project wil l only have 10% o f the total volume and 18% o f the area inundated. As a result, the subproject was considered again and prioritized under the strategic plan o f 2005.
22
visits to both sub-project sites and meetings with stakeholders. The compliance with applicable Brazilian legislation and Bank Safeguard policies was confirmed.
74. In addition to the public consultations held during the preparation o f the EINRIMAs and respective environmental licenses; the sub-projects, the EMP, and the RAPS were submitted to new consultation during the months o f July and August o f 2008. Detailed minutes and results o f these consultations are available in the project documentation.
75. In sum, the works included in the Additional Financing do not trigger any new Safeguard Policies and a Category A o f the Project i s s t i l l justified. Environmental Impact Assessments (EINRIMAs) were developed for each o f the investments and discussed in public meetings. Compensation measures were agreed on with SEMACE. PROGERIRH has well established Dam Safety procedures, conform to Bank Standards, and all dams are inspected by an independent panel. In the case o f the reservoirs, special attention has to be given to the preparation o f sites (removal o f flora and fauna), the creation o f buffer zones around the new reservoirs (to protect water quality and eutrophication) and water quality monitoring. The pipelines wi l l not cause major impacts as they are being projected along existing road infrastructure.
76. Social. The Additional Financing (AF) triggers the Bank policy OP 4.12 on Involuntary Resettlement. The Resettlement Plans o f Umari and Gameleira reservoirs, which wi l l be implemented during the f i rs t year o f the AF, were prepared between 2002 and 2004 by PROGERIRH and reviewed in February 2008. In order to fully comply with the local and WB’s policy, the revision included the following: (i) current characterization o f the population, areas affected, characterization o f form o f indemnity, options for the affected and types o f benefits; ii) expropriation plan determination o f the area, assets cadastre, table of values to be paid as compensations and indemnities; (iii) implementation stages o f the resettlements plans, the infrastructure projects, sustainable development programs and systems for claims, queries and grievances. The budget was updated based on the surveys and consultations undertaken. The Umari and Gameleira Resettlement Plans have been consulted and agreed upon with the affected population (more details are in Annex 3).
77. Regarding the remaining Mamoeiro, Jenipapeiro, Jatoba and Trairi Resettlement Frameworks, they are consistent with the provision o f the Bank’s OP 4.12 and will be part o f the Resettlement Manual, defining the organization arrangements and design criteria for i t s Resettlement Plans and i t s subsequent implementation.
78, Experience on Involuntary Resettlement during the implementation o f PROGERIRH was very positive, showing improvement on the quality o f l i f e and wellbeing o f the population resettled in the rural Agrovilas attained mostly through access to potable water, sanitation, health and education and providing lessons for improving on income generating activities and land titling processes. The lessons learned were incorporated to guide the AF implementation.
79. S R H will continue to use i t s resettlement special unit, NUREA (Nucleo de Reassentamento), which relies on a specialized technical team, to prepare and conduct the resettlement process. This team i s currently composed o f six people dealing with all aspects related to resettlement and wi l l continue to provide support for the implementation and monitoring o f the AF Resettlement plans. In addition, NUREA team will be strengthened with
23
permanent staff to be hired under the capacity building component supported by the AF. The existence o f the present safeguard plans and the implementation capacity within S R H should ensure satisfactory compliance with social safeguard policies. Moreover, the AF project will implement a system to deal with claims, queries and grievances o f the resettled population as a mechanism that will alert the project o f any fault in compliance with the safeguards during implementation.
Exceptions to Bank Policies
80. The scaled-up project will not involve any exceptions to Bank policies.
VI. Expected Outcomes
81. The scaled up aspects o f this project will be the completion o f Section 3 o f the Integration Canal and additional priority rural water supply sub-projects and should result in an expanded favorable outcome for the project. The indicators for these sub-projects will be the same as for other rural water supply projects constructed under PROGEFURH, including the use o f the environmental and resettlement matrices already in place and operating with success for these other projects. Indicators will be monitored through supervision mission as has been occurring for the previous rural water storage and distribution projects.
82. The expected outcomes from this additional financing will be the provision o f critical bulk water supplies to Fortaleza Metropolitan Region (3 mi l l ion people are expected to benefit with the completion o f the Integration Canal), the storage and distribution o f potable water supplies for critical rural poverty areas (120 thousand beneficiaries) that have been severely impacted by drought and the strengthening and sophistication o f the overall participative integrated water resources management framework as wel l as strengthening the institutional and operation and maintenance framework o f the State including an expanded knowledge base with regard to water quality information.
83. Other expected institutional results include:
0 Institutional strengthening o f the water resources planning and management agencies in the State (SRH, COGERH and SOHIDRA);
Support to State hiring processes for new technical staff to strengthen COGERH and SRH;
Capacity building programs for new and current staff;
Training programs to 100 representatives o f basin committees and water users associations;
Strengthening o f 30 water users organizations and support to the implementation o f the Parnaiba river basin committee;
Revision o f the State’s water rights system for surface and groundwater with i t s implementation in one river basin;
0
0
0
0
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0 Implementation o f the bulk water users cadastre in all State’s river basins and updating o f the existing cadastre;
Development and implementation o f a bulk water charging program in 5 priority river basins; and
Analysis and updating o f the existing water tariff system for surface and groundwater.
0
0
84. As final outcome, it i s expected that project activities w i l l contribute to decrease water- borne diseases, development o f local markets due to the opportunity to establish new economic activities and/or increase the value-added o f local production; and increase efficiency and effectiveness in public spending for the water sector.
VII. Benefits and Risks
Benefits
85. The Additional Financing wj improve access to safer and more r e iable water supply for at least 100,000 beneficiaries, in addition to the over 3 million existing inhabitants that will benefit from the activities financed initially under PROGERIRH. The water supply improvements wi l l also yield better health conditions through the decrease o f water-borne diseases, and increased economic activities. Additional benefits include increased transparency in decision making process regarding water management, cultural changes in the relation between society and the water sector, changes in vision on how to build, operate and maintain water infrastructure, and how to achieve financial, economic and social sustainability o f water systems.
86. Specific benefits from the activities under the Water Resources Management Component include the improvement and strengthening o f water resources management instruments, such as water rights, licensing, tar i f fs and enforcement o f rights and payments o f tariffs. In addition, the Additional Financing would provide for the consolidation o f water supply management, introduction o f mechanisms for water quality management, and implementation o f a policy for groundwater management and protection, contributing for sustainable demand- supply management.
Risks
87. While the change o f government had a considerable impact on the project in 2003, the new government administration in the State has demonstrated i t s priority to water resources management and PROGERIRH implementation. However, a possible risk includes a shortfall or delayed provision o f the counterpart funding from the State. This risk i s minimized by front-loading counterpart funding obligations during early years o f implementation and targeting them to the highly visible Integration Canal.
88. Risks associated with resettlement, land acquisition, and environmental impacts could jeopardize the outcome o f the individual rural water storage and distribution projects. Such risks will be minimized or mitigated through the utilization o f the environmental, resettlement and land appropriation procedures and frameworks presently in place in Ceara which have
25
worked successfully on project components to date. Such risks cannot be totally eliminated but can be minimized through strengthening o f the capacity o f the State agencies in this area as well as with close advisory supervision o f the project by the Bank supervision team.
VIII. Financial Terms And Conditions For The Additional Financing
89. The Borrower selected a U S Dollar denominated IBRD Flexible Loan with a fixed- spread, with level payments o f principal, payment dates on April 15 and October 15 o f each year, six year grace period, and 21 years o f total loan term with al l conversion options. The Front-end Fee in an amount equal to 0.25 percent will be paid f rom proceeds o f the Loan.
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Annex 1 - Procurement Arrangements
A. General
1. 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 May 2004 and revised in October 2006; and “Guidelines: Selection and Employment o f Consultants by World Bank Borrowers” dated May 2004 and revised in October 2006, and the provisions stipulated in the Legal Agreement. The general description o f various items under different expenditure categories are described below. For each contract to be financed by the Loadcredit, 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 project team in the Procurement Plan. The Procurement
. Plan will be updated at least annually or as required to reflect the actual project implementation needs and improvements in institutional capacity.
2. Procurement of Works: Works procured under this project would include the completion o f major works for the transposition o f bulk water supplies from the Castanhiio dam in the Jaguaribe River Basin to the Fortaleza Metropolitan Region, improvement o f the physical infrastructure o f COGERH and S R H and rehabilitation and improvement o f water infrastructure in general. The procurement will be done using the Bank’s Standard Bidding Documents (SBD) for all ICB and National SBD agreed with (or satisfactory to) the Bank for National Competitive Bidding and Shopping.
3. Procurement o f Goods: Goods procured under this project would include: hardware and software, PCs, laptops, vehicles, GPS, Water measuring and monitoring devices, etc. The procurement wi l l be done using Bank’s SBD for all ICB and National SBD agreed with (or satisfactory to) the Bank for National Competitive Bidding and Shopping. N o special requirements specific to the Project were identified.
4. Procurement o f non-consulting services: Non-consulting services to be procured under the project include: Training logistics (hotel services, catering, travel services, printing services), workshops, seminars, events, etc. The bidding documents to be used for procurement are the Bank’s documents for non-consulting services. These are included as an Annex in the Operations Manual.
5. Selection o f Consultants: Consulting services from f i r m s and individuals required for the project include: project management firm, registry o f water users, works supervision, Viability studies and engineering projects, ETC. Short l is ts o f consultants for services estimated to cost less than $ 500,000 equivalent per contract may be composed entirely o f national consultants in accordance with the provisions o f paragraph 2.7 o f the Consultant Guidelines. Engagement o f Universities, Government Research institutions, Training Institutions, NGOs nor any other special organizations was identified during project preparation.
6. Operational Costs: Operational costs which would be financed by the project would be procured using the implementing agency’s administrative procedures which were reviewed and found acceptable to the Bank.
27
7. Others: N o special arrangements for scholarships, Grants etc. were identified.
B. Assessment o f the agency’s capacity to implement mocurement
8. Procurement activities will be carried out by the Secretariat o f water Resources (SRH). This capacity assessment relies mainly on previous procurement post reviews and the performance o f SRH in the implementation o f PROGERIRH I. Although there will be other agencies involved in the implementation o f the project, namely “Companhia de Gestao de Recursos Hidricos” COGERH and “SuperintendCncia de Obras Hidraulicas” SOHIDRA, the procurement function especially in planning, monitoring, preparation o f bidding documents and bid evaluations will be centralized in SRH. The Secretary o f S R H confirmed that the additional financing o f PROGERIRH will continue to have a Project Implementing Unit (PIU), operating in SRH under his direct supervision.
9. The procurement function in the State o f Ceara i s centralized in a number o f Procurement Committees, under the States’ Comptrollers Office (PGE). The assessment identified that PGE have experienced and qualified teams but not so in SRH. At present SRH counts with the ex-president o f the permanent bidding committee as procurement officer. This person does not have experience with World Bank procurement. The Secretary o f S R H approves assigning a senior and very knowledgeable consultant who i s a lawyer to support the P I U in procurement related issues. It i s recommended that S R H identifies and selects a procurement officer with knowledge in World Bank procurement to strengthen the PIU. The Project Operations Manual will include, in addition to the procurement procedures, the SBDs to be used for each procurement method, as well as model contracts for works and goods procured.
10. An assessment o f the capacity o f the Implementing Agency to implement procurement actions for the project has been carried out on March 2008. I t included organizational aspects, staff skills, quality and adequacy o f supporting and control systems and suitability o f the laws, rules and regulations.
11. The issues and r isks concerning the procurement function for implementation o f the project have been identified and the corrective measures which have been agreed are as follows :
1. Identify and select a procurement SRH official with experience in world bank procurement.
1 month after effectiveness
2. Develop a procurement Manual including Standard bidding documents for goods, services and works.
3. Institute the figure o f the “procurement manager” andthe “contract manager” in S R H
S R H 1 months after effectiveness
S R H 1 months after effectiveness
28
4. Implement a procurement planning and monitoring system
5. Prepare; general procurement plan for I SRH
S R H
the-life o f the project and a detailed procurement plan for the f i rst 18 months o f project implementation.
6. Include a section on procurement in the operations manual including a detailed description o f al l procurement methods and procedures
management and supplier performance tracking
7. Develop a system for contract
1 months after effectiveness
S R H
S R H
Before negotiations.
Before negotiations.
1 months after effectiveness
12. The overall project risk for procurement i s AVERAGE
C. Procurement Plan
13. The Borrower, at appraisal, developed a Procurement Plan for project implementation which provides the basis for the procurement methods. This plan has been agreed between the Borrower and the Project Team on 20 M a y 2008 and i s available at the Secretariat o f Water Resources, Fortaleza, Ceara. It will also be available in the Project’s database and in the Bank’s external website. The Procurement Plan will be updated in agreement with the Project Team annually or as required to reflect the actual project implementation needs and improvements in institutional capacity.
D. Frequency of Procurement Supervision
14. In addition to the prior review supervision to be carried out from Bank offices, the capacity assessment o f the Implementing Agency has recommended yearly supervision missions to visit the field to carry out post review o f procurement actions.
29
1
Ref. No.
NIA
(b) All ICB contracts, NCB contracts estimated to cost above U S $10,000,000 per contract, and all direct contracting will be subject to prior review by the Bank.
2. Consulting Services.
(a) L i s t o f Consulting Assignments with short-list o f international f i rms.
2 3 4 5 6 7 8 9
Contract Estima Procure P-Q Domestic Review Expected Com (Descrip ted ment Preference by Bank Bid- ment
tion) Cost Method (yedno) (Prior/ Opening s Post) Date
1 2 3 4 5 6 7
Ref. No.
Description of Estimated Selection Review Expected Com Assignment Cost US$ Method by Bank Proposals ments
(Prior / Submission
project
(b) Consultancy services estimated to cost above US$200,000 per contract and Single Source selection o f consultants ( f i rms and individuals) will be subject to prior review by the Bank.
Post) Date 1.2 QCBS YES
(c) Short lists composed entirely of national consultants: Short l is ts o f consultants for services estimated to cost less than US$500,000 equivalent per contract, may be composed entirely o f national consultants in accordance with the provisions o f paragraph 2.7 o f the Consultant Guidelines.
management firm registry o f water users
30
million 570,000 QCBS YES
Works supervision Viability studies and engineering projects
3.1 QCBS YES million 3.5 QCBS YES million
Annex 2 - Financial Management
1. Project activities are carried out by S R H using the existing SHR structure, considered appropriate to supervise, monitor and evaluate the implementation. Close supervision missions have been undertaken during last two years o f original project.
2. Conclusion o f the Financial Management Review: SRH’s structure i s satisfactory to meet the Bank’s minimum requirements. The financial management systems are in place and integrate: SIC l3 (Ceara’s Integrated Accounting System), SIAP (the Monitoring and Administrative Project Management System14) and SIOF (the Budgetary and Financial Information System). These systems provide accurate and timely information on the status o f the project. Staff capability and FM arrangements have improved and are adequate. Overall risk associated to the project i s rated Moderate.
Implementing Entity/Financial Management Unit / Staffing:
3. S R H will maintain the actual implementation administrative structures for the PROGERIRH additional Financing. Although recent turnover occurred, the current staff has the minimum skill requirements and was trained to undertake project implementation. Bank close support and supervision will be needed during the f i rs t year o f implementation to assure that adequate control i s maintained.
4. Project design includes other implementing agencies COGERH (water management) and SOHIDRA (works). These entities will provide counterpart activities and services but will not receive loan proceeds.
Flow of Funds:
5. The f low o f funds has not changed from the original project. The Bank will advance loan proceeds into a segregated U S D dollar account (designated account) maintained by the Treasury o f the State o f Ceara in New York with Banco do Brasil. Loan proceeds would be withdrawn and transferred into the Treasury single treasury account in Reais at Banco do Brasil, Fortaleza, upon project request. Deposits into the single treasury account are recorded in a sub account that identifies the project.
6. The project is set up as a cost center in SIAP. All expenditures are first committed in SIC the counterpart funds are disbursed directly from the single treasury account and are monitored through SIC and SIAP. All projects are integrated and have proper internal control tools. The systems are used to process al l payments through electronically transfers directly to the beneficiary account, assuring budgetary and financial availability, and review and approval o f supporting documentation that i s properly archived. The above procedures are considered satisfactory. Detailed funds f low charts are f i led in project operational manual. The SHR financial department i s responsible for reviewing
l3 Under the Finance Secretariat.
l4 Under the Planning Secretariat.
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the adequacy o f the funds flow. All payments are subjected to SECON (Secretaria de Controle) review and approval.
7. Reporting Uses o f Funds to the Bank: The project would keep the current disbursement transaction-based arrangements through Records, Statement o f Expenditures (SOE) and Summary Sheets (SS), although it i s ready to disburse through Interim Un-Audited Financial Reports (IFRs). All payment supporting documentation would be retained at SRH, the filing system was considered satisfactory. The Bank’s Loan Department will prepare a Disbursement Letter describing the Bank’s disbursement methods, use o f the designated account and supporting documentation requirements. The project should keep all reports format (including SOE and SS), available under the respective FM system.
8. Audit arrangement: External Audit: An independent audit firm was hired to audit the project’s accounts and financial Statements. The audit report shall be delivered to the Bank up to six months after end o f each calendar year. For the current Additional Financing, a new Terms o f Reference and short l i s t o f audit f i r m s should be submitted to Bank for approval. The reports required are:
a) Opinion on Project Financial Statements, use o f SOE, and designated Account
b) Management Letter on internal control.
as well as a note on observance o f contractual arrangements.
9. Accounting Policies, Procedures and Internal Controls: S R H i s part o f the Ceara direct governmental administration, and follows accounting procedures Stated under Law (4604/67), prevailing for the Brazilian public sector, which are consistent with international accounting standard for the public sector.
10. SIC, SIAP and SIOF will be used to control budget and financial execution and for monitoring purposes. These systems are integrated and used by all State administration to implement the State budget They were reviewed by prior Bank’s missions, including for the SWAP project (43210) and considered satisfactory. It has the proper internal control tools. They can produce the reports required by the Bank under section 5.02 o f the General Conditions Guidelines.
1 1. Interim un-audited Financial Reports: The State systems can produce and provide information on project annual budgetary allocation, financial approvals and transfers, compare that information to quarterly and annually project execution, by sources o f funds, loan categories and project components, as described in the loan agreement.
12. Quarterly IFR will continue to be produced and submitted to the Bank, forty five days after end o f each calendar quarter. Each report will contain the figures for the quarter, accumulated for the year, accumulated for the project and variance will be compared to annual budgetary approved figures. All IFR supporting documentation will be filed at S R H for auditor’s inspections and Bank’s supervision mission review. The reports to be produced are:
32
1 -A: Sources and uses o f Funds by categories
1 -B: Expenditures by components
13. Supervision Plan: Semi-annually financial management supervision mission i s proposed, with a field visit, if needed.
14. Operational Manual: Manual i s ready, updated and reviewed by the Bank as per last supervision mission request. It contains the relevant detailed information needed to implement the project, including staff daily routines.
Risk Inherent Risks Countrv specific Sub-national (State)
Entity specific Project specific Overall Inherent Risk Implementing Agency
Flow o f Funds Staffing
Accounting procedures InternaYExternal Audit
Auditing
Information Systems
Reporting &
Overall Control Risk
Risk
L M
M M
M
L M
L S
M
L
M
M
Mitigation Measures
Current governement administration
S R H to strendhen internal communication Long term (and high cost) contracts shall keep close monitoring
Administrative changes negatively impacted the project. Institutional capacity continues to be strengthened.
Governmental Administrative reform disrupted project implementation, with lack o f institutional memory and proper team work. Close interaction with Bank staff, other State project experienced staff. Bank to support current staffing arrangements, (including State training on fiduciary arrangements. Follows State accounting rules acceptable to the Bank. SECON provides systemic internal control over the financial transfers. Operational Manual kept updated with internal control mechanism to assure segregation o f functions, dissemination o f information and measures to improve team work. The administrative reform created a centralized unit to process al l procurement and bidding governmental related processes. The impact on the project was a delay in contracting the auditor. The mitigation measure included hiring a firm for 2 years, which was done. SIC, SIAP and SIOF are integrated through electronic transfers o f information. IFR being done but discrepancy was noticed by auditors. Review o f IFRs formulas and l i n k s to avoid incorrect data entry and better understanding o f reports outputs.
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Annex 3 - Safeguard Aspects
1. Introduction
1. This annex presents a summary o f the environmental and social assessments conducted as part o f the preparation o f the Additional Financing o f PROGERIRH. An independent consultant was hired to conduct a critical review and evaluation o f the experience with the implementation o f environmental and social policies during implementation o f PROGERIRH and activities to strengthen the framework to better address the environmental and social aspects o f the Additional Financing.
2. PROGERIRH - First Phase
2. To mitigate the potential adverse environmental impacts and further improve environmental conditions, PROGERIRH includes a comprehensive Regional Environmental Management Program (REMP). The following activities were included as part o f the REMP:
Protected Areas Strengthening. Support specific investments by IBAMA (Brazil's Federal environmental agency) to strengthen the on-the-ground protection and management o f the 39,000 ha Araripe National Forest. PROGERIRH also supported the efforts o f Ceara's State Environmental Agency (SEMACE) to improve the protection and management o f three existing State Environmental Protection Areas (APAs): Serra de Baturite (32,690 ha), Serra de Aratanha (6,448 ha), and Serra de Maranguape (6,000 ha). During implementation, the Bank and the State agreed to replace the support to Serra de Maranguape with support to the APA do Rio Coc6.
Estuary and Floodplain Monitoring. Support environmental (physical, ecological, and socioeconomic) monitoring o f the estuaries o f four rivers likely to be affected by PROGERIRH dams. SEMACE started the Estuary and Floodplain Monitoring in July 2008, which also includes Coreau and Mundau Rivers (besides Malcozinhado, Catu, Timonha and Jaguaribe). The additional financing will continue providing support to SEMACE through data collection, quality control and dissemination. This will be part o f the EMP.
Reservoir Operation and Protection and Water Quality Monitoring Programs. Help to ensure that water quality information i s used in various kinds o f decision-making. It supported the improvement o f water quality monitoring and data dissemination; contributed to coordinate actions aimed at reducing pollution and improving land use practices; reevaluated operation o f reservoirs in light o f environmental needs.
Schistosomiasis Control. The National Health Foundation (FNS) in the Federal Ministry o f Health has a substantial program o f schistosomiasis prevention and control in Ceara. To offset any possibility that some PROGERIRH works could facilitate the water-borne spread o f schistosomiasis, the REMP included a component to strengthen FNS's existing program, executed through the State Health and Environment Secretariats.
34
. Cultural Property Salvage. Support the identification, classification, and salvage o f items o f high archaeological or paleontological interest that could be discovered in reservoir inundation areas, quarries, borrow pits, or other PROGERIRH subproject sites.
3. The REMP includes, also, Environmental Manuals (criteria and procedures for water resources projects), Environmental Training (for SRH, SEMACE, and other key water- related organizations), and Environmental Rules for Contractors (applicable to both new construction and rehabilitation works).
4. In general, the activities listed under the REMP were adequately implemented and complied with the Bank Safeguard Policies: OP 4.01 - Environmental Assessment; OP 4.04 - Natural Habitats; OP 4.10 - Indigenous People; OP 4.12 - Involuntary Resettlement; and, OP 4.37 - Dam Safety.
5. Despite the satisfactory performance o f S R H in implementing the REMP, activities related to OP 4. I I - Physical Cultural Resources were not adequately implemented. The main reason being that the original E I N R I M A s prepared between 1998 and 2001 did not include specific procedures regarding physical and cultural resources and neither the SEMACE’s environmental licenses nor the Project’s Operational Manual included specific procedures on this issue. In addition, it was recognized that this issue, differently from others in the REMP, escaped more detailed monitoring by the Bank Supervision.
6. The current situation i s very different. All E I N R I M A s o f PROGERIRH - AF project already include assessment o f cultural resources and include specific programs that have to be implemented during implementation o f each subproject. Furthermore, the licenses by SEMACE n o w also include chance finding identification and recovery procedures.
7. In terms o f Involuntary Resettlement, the main result o f the f i rs t phase was the improvement o n the quality o f l i f e and wellbeing o f the population resettled in the rural Agrovilas attained mostly through access to potable water, sanitation, health and education. The percentage o f literate adult population increased 50% when benefiting from alphabetization programs held at local schools. Access to potable water and sanitation improved the children’s health, and local health centers also helped to improve vaccination rates among children. O n the other hand, income generating activities from the Agrovilas were not fully attained by al l the affected population due mainly to the lack o f access to credit and improved technology.
2.1. Lessons Learned
8. following lessons were learned.
During the implementation o f PROGERIRH a number o f issues were raised and the
a) Compliance with the safeguard policies i s only possible if project teams have a good understanding o f the policies and are able to identify and adequately prevent or mitigate potential environmental and social impacts that trigger these policies. The additional financing need to continue to disseminate o f knowledge and information
35
regarding the Bank’s Safeguards and relevant national and State legislation to al l staff and technical people involved in project implementation.
The environmental management and social development activities need to be better integrated into the planning and implementation process, to ensure that these activities become an integral part o f the project cycle.
The bidding documents and contracts need to make for explicit reference to environmental manuals and action plans with costs and clear definition o f roles and responsibilities, so that the contractor i s obliged to execute the activities and environmental supervision o f works i s more effective.
Need to develop comprehensive Environmental Management System and develop more continual cycle o f planning, implementing, reviewing and improving the processes to address environmental issues o f sub projects. The system should at least contemplate the creation o f a Sector Coordination for Socio-Environmental Management and Supervision o f Works Unit.
The State environmental team responsible for implementing the environmental activities o f the project needs to include wel l trained and an adequate number o f technical staff to ensure al l activities are properly implemented and instruments are availably to ensure compliance with the REMP.
The World Bank’s supervision should more frequently review the compliance with the REMP and Bank’s environmental and social safeguards. An annual independent environmental and social audit should also be considered.
Monitoring and evaluation o f resettlement activities could include independent external evaluations.
Better coordination among State’s public institutions could avoid delays on land titling. The Institute for Agro-development in Ceara (IDACE) and the S R H need to work collaboratively to ensure budget availability and complement actions for land titling.
Prompt reestablishment o f productive activities would render timely income improvement for resettled population.
SRH’s involuntary resettlement performance could benefit from improving staff training on cadastre related procedures.
3. PROGERIRH - Additional Financing
9. The infrastructure investments o f the Additional Financing will continue to finance the implementation o f the Integration Canal (“Canal de Integraq6o ”) and the construction o f six reservoirs (Gameleira, Umari, Jatoba, Jenipapeiro, Mamoeiro e Trairi) and related water pipelines and infrastructure.
10. The construction o f new reservoirs is considered essential to provide adequate water supplies to rural communities and populations in some o f the areas o f deepest poverty in
36
the State. Some o f the water stored by these reservoirs that i s not needed for urban uses would be utilized for irrigation, mostly by small farmers living downstream o f the reservoirs.
Height (m)
Reservoir Volume Inundated Regulated Benefitted (hm3) area (m2) flow ( lh ) population(*)
Umari
Gameleira
Jatobii
21.82 35.4 738.28 390 15,241
19.50 52.64 1,147.80 640 34,369
20.69 6.20 120.59 28 25,801
(*) 25-year project horizon
Jenipapeiro
Mamoeiro
Trairi
1 1. The selection o f projects was the result o f a continuous planning process in the State. The latest revisions o f the State's Water Resource Management Plan was revised in 2005 and resulted in the l i s t o f projects that will be financed by the PROGERIRH Additional Financing: (i) Gameleira, (ii) Umari, (iii) Jenipapeiro, (iv) M a m ~ e i r o ' ~ , (v) Trairi, and (vi) Jatoba. Alternatives were considered and the sub-projects were subject to rigorous screening and analysis criteria (including environmental, social, technical, economic and financial). The studies and alternatives selection took into account not only the individual effects o f each subproject but also de cumulative and regional impacts.
15.40 43.40 836.00 143 15,724
29.30 20.30 369.00 140 9,439
19.10 58.8 1,016.00 638 24,527
3.1. World Bank's Safeguard Policies
OP 4.01 - Environmental Assessment
12. The preparation o f the Additional Financing included an overall environmental assessment o f PROGERIRH implementation, a new Environmental Management Framework (EMF) for the implementation o f the Additional Financing Project, and an overall Environmental Management Plan (EMP) as well as EMPs for each first year sub- project.
13. About 4-5 years ago,, the PROGERIRH project financed the elaboration o f EINRIMAs for all six reservoirs to be financed by the PROGERIRH Additional Financing. As part o f preparation o f the additional financing, a detailed and independent environmental review was undertaken for the f i rs t year interventions o f the Umari and
The original subproject o f Mamoeiro, analyzed during the preparation o f PROGERIRH, was rejected partly as a result of the potential environmental impacts, as explained in the PAD and in the Regional Environmental Assessment (REA). A totally revised subproject was prepared for Mamoeiro, and compared to the original subproject, this new sub-project will only have 10% o f the total volume and 18% o f the area inundated. As a result, the subproject was considered again and prioritized under the strategic plan o f 2005.
15
37
Gameleira Reservoirs and associated pipelines and water treatment plants. The environmental review also included the review o f Dam Safety provisions and procedures, the environmental licenses and i t s provisions, and visit to both sub-project sites. The compliance with applicable Brazilian legislation and Bank Safeguard policies were also evaluated.
14. The main environmental issues related to the implementation o f the reservoirs and related pipelines and infrastructure are presented below:
Reservoirs
15. The Reservoirs o f Gameleira and Umari were projected to address multiple uses, most importantly public water supply for the town o f Barrento in Itapipoca Municipality, and towns o f Macaoca and Lagoa do Mato in Madalena Municipality.
16. Both reservoirs are vulnerable to eutrophication, due to nutrient pollution as a result o f the release o f sewage effluent and run-off from fertilizers into natural waters. The risk o f salinization i s low. The water quality monitoring program, together with the reservoir protection and operation program should guarantee the quality o f the water for the different uses.
17. In addition, a number o f mitigation measures, described in the EMP o f each reservoir (e.g. Social Mobilization and Environmental Education Programs, Recovery o f Quarry and Borrow Pit Areas and Construction Sites, and Rational Deforestation o f the Inundated Area), will be implemented as part o f infrastructure works.
Pipelines
18. The main pipeline systems include the implementation o f raw water pipelines, the construction o f a water treatment plan, as wel l as main pipelines for the water supply network. The pipelines are being installed along secondary roads and highways, not affecting natural environments, habitats or population. The WTPs include waste water and sludge treatment facilities
Agrovilas and Agricultural Lots
19. In the resettlement plans for the population affected by the construction o f the reservoir (inundated area and Permanent Protection Areas - APPs), one o f the options i s the relocation to the agrovilas and/or agricultural lots to be demarcated specifically for the population in the reservoir’s area o f influence.
20. In the definition o f such areas, the analyses o f alternative locations took into consideration environmental criteria as wel l as soil characteristics for agriculture and the preferences o f the population. The selected areas have already been altered by anthropogenic activities.
2 1. An Environmental Management Plan was prepared for PROGERIRH and the f i rst year investments o f the Additional Financing, summarized in section 4 o f this Annex.
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Public Consultations
Reservoir
Umari
22. In addition to the public consultations held during the preparation o f the EINRIMAs and respective environmental licenses; the sub-projects, the EMF, and the EMPs were submitted to new consultations during the months o f July and August o f 2008. In general, the works are perceived to have positive impacts since they wi l l provide proper water supply to communities and access to water resources throughout the year. The main expressed concerns are related to the proper implementation o f the resettlement activities. Detailed minutes and results o f these consultations are available in the project documentation.
Inundated area Area of Agrovilas and Area of APPs (ha) farming plots (ha) (ha)
73 8 202 865
OP 4.04 - Natural Habitats
Jatobh
Jenipapeiro
23. The selected subprojects will not affect Environmental Conservation Areas or Critical or significant natural habitats. The l i s t o f priority areas for Environmental Conservation and Biodiversity were reviewed and the areas affected by the reservoirs, including the Agrovilas, are already largely occupied and altered by anthropogenic activities.
121 146 52
836 254 557
24. The project's main adverse impact upon terrestrial natural habitats would be the inundation o f natural vegetation by the new reservoirs. The six reservoirs would inundate roughly 4,228 ha and the Agrovilas wi l l occupy an additional 1,101 ha (see Table 3.2 below). The additional financing includes the creation o f Permanent Protection Areas (APPs) o f at least lOOm around the reservoirs with specific re-vegetation program. The next table presents a summary o f the cumulative impacts and APPs to be created under the Additional Financing at each reservoir as well as the ones created under PROGERIRH.
Trairi
Sub-total AF:
1,016 168 1,019
4,228 1,101 3,665
I Gameleira I 1,148 I 215 I 657 I
C arm ina * Malcozinhado*
319 20 168
795 357
1 Mamoeiro I 369 I 116 I 515 I
I Catu-Cinzenta* I 883 I I 282 I
I Aracoiaba* I 2,393 I 358 I 1,095 I
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FaB*
Pesqueiro*
193 222
318 249 142
25. In addition, an agreement was reached with SEMACE to support Mata Branca Project (part o f the World Bank GEF Caatinga Project) and develop a strategy to implement Conservation Units within the Conservation and Biodiversity Priority Area close to the Umari Reservoir (known as Ca 154), as well as support f ire prevention programs within conservation units in the Caatinga.
Total:
OP 4.09 - Pest Management
9,129 I, 728 5,93 I
26. This policy i s triggered due to activities aimed at (i) controlling ant infestation in newly reforested areas, and (ii) controlling and eliminating the presence o f ant hills or animal burrows in or in the immediate vicinity o f dam walls. The EMF/EMP include procedures to ensure that any pesticides used in such activities comply with the requirements o f the safeguard policy, including a definition o f the types o f pesticides that can be used, the procedures for their application, the safety o f those applying it, and potential contamination o f the surrounding environment.
OP 4.11 - Physical Cultural Resources
27. The additional financing investments are located in areas o f archaeological and paleontological interest, especially around the Reservoirs o f Gameleira and Umari. Therefore, a chance finding identification and recovery program was prepared as part o f EMP, including the following measures:
A prior research o f the project area, investigation and recovery procedures o f historic, archeological and paleontological remains. Any activity related to this program has to be approved by IPHAN - Instituto do PatrimGnio Histbrico e Artistic0 Nacional (historic and archeological remains) and by DNPM - Departamento Nacional de Produqio Mineral (paleontology).
Public awareness programs.
Destination o f remains encountered to research centers.
Chance finding identification and recovery program.
. . OP 4.12 - Involuntary Resettlement
28. The preparation o f the resettlement action plans were concluded together with the basic and detailed designs o f the reservoirs. Since some time has passed since the conclusion o f these plans and designs (between 2002 and 2004), the following measures were taken as part o f the Additional Financing preparation:
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. Review and update o f the resettlement action plans for the first year investments: Gameleira e Umari reservoirs;
Update o f the Resettlement Framework to be applied to the remaining reservoirs.
N e w consultations with the affected population.
Number of affected families
29. These studies are included in separate documents. The updating o f the Umari and Gameleira Resettlement Plans was carried out by S R H and i t s Resettlement Unit based on the experiences o f PROGERIRH. For the Additional Financing, SRH will continue to implement and update the remaining Plans. The Resettlements Plans for Umari and Gameleira reservoirs complied with the Bank policies.
Number of Number of Area of Agrovila families in families resettled and farming Agrovilas on their own plots (ha)
30. S R H will continue to use the Resettlement Unit, which relies o n a specialized technical team, to prepare and conduct the resettlement process. This team i s currently composed o f six people dealing with al l aspects related to resettlement and will continue to provide support for the implementation and monitoring o f the AF Resettlement plans and will be trained, as needed, to address the lessons learned with the implementation o f PROGERIRH. In addition, NUREA team will be strengthened with permanent staff to be hired during the implementation o f the AF. Moreover, the AF project will implement a system to deal with claims, queries and grievances o f the resettled population as a mechanism that will alert the project o f any fault in compliance with the safeguards during implementation.
Gameleira
Jatoba
3 1. The Table 3.3 below provides a summary o f the affected people and those benefiting from the resettlement program.
163 32 22 215
76 20 30 146
Table 3.3. Families affected bv PROGERIRH AF reservoirs
Reservoir
I Umari I 33 1 I 32 I 25 I 202 I
I I 13 I 254 I Jenipapeiro I 162 30 I I Mamoeiro I 81 I 20 I 7 I 116 I I Trairi I 113 I 28 I 29 I 168 I
32. The objective o f the State Resettlement Policies as reflected in the Umari and Gameleira Resettlement Plans and Jatoba, Jenipapeiro, Mamoeiro and Trairi Resettlement Frameworks is to improve the quality o f l i fe o f the resettled population, ensuring the reestablishment o f their livelihoods and social networks, while providing sound governmental support to promote sustainable development o f the affected population.
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33. The applied Resettlement Policy included the fol lowing process framework: to minimize the number o f resettlements; to observe cultural appropriateness and social diversity; to ensure the population affected, based on the eligibility criteria, are offered free options for resettlement as well as compensation and indemnities; to assure al l the community members participation along the project cycle; to the appropriate legal instruments to carry out expropriation measures; to improve housing for al l the affected population; to assign the rural housing (Agrovilas) and the agricultural land in accordance to sound environmental norms; to ensure al l affected families whether with legal or illegal tenure are properly resettled; to ensure gender inclusion and participation o f family members in the endorsement for cash compensation and indemnities; to ensure the appropriate consideration for payment o f al l infrastructure, property improvements and possessions affected; to provide resettlement solutions before starting reservoir construction works; to provide transitional accommodation only in exceptional cases; to elaborate a timetable for the resettlement activities and have an information and communication strategy. In addition, learning from the lessons o f the implementation o f PROGERIRH, arrangements for participatory monitoring and an external ex-post evaluation are programmed.
34. The updated Resettlements Plans included the following: characterization o f the population, affected areas, description o f indemnity types, options for the affected population and types o f benefits; expropriation plan, selection o f the resettlement area, cadastre o f assets, reference values to be paid as compensations and indemnities; implementation stages o f the resettlement plans infrastructure projects, sustainable development programs, and systems for claims, queries and grievances. During the updating o f the plans, the affected families were consulted and informed. The resettlement costs have been updated in the cases o f Umari and Gameleira. For the updating o f Jatoba, Jenipapeiro, Mamoeiro and Trairi Plans, the resettlement costs will be revised in accordance with Bank policies.
35. The Resettlement Plans also included measures to ensure better timing on the reestablishment o f productive activities to the resettled populations. SRH will coordinate with other institutions to accelerate the establishment o f activities that are better suitable to the conditions o f the land and the resettled vocation and go beyond irrigated agriculture options.
36. During a recent consultation process with the affected population concerns were raised about a new S R H generalized norm requiring “judicial” process for the expropriations. Previously, the expropriation for the regular titled holders involved strictly administrative procedures, whereas cases o f informal ownership or unsolved legal inheritance were resolved through judicial processes. The main concern raised by the affected owners and holders o f legal tit les i s related to the hidden costs o f the new norm. According to some testimonies the legal representation for the judiciary process will increase the transaction cost which will be absorbed by the affected owners.
37. Following these consultations and discussions with the Bank, the State has agreed to go back to the previous expropriation process and the State Assembly has approved a law that allows S R H to fo l low mainly administrative procedures.
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OP 4.36 - Forests
38. The policy i s triggered due to activities involving reforestation o f APP areas using native tree species. For this project, the requirements o f OP 4.36 overlap with those o f OP 4.04 (Natural Habitats) and, therefore, the requirements have been addressed under OP 4.04.
OP 4.37 - Dam Safety
39. The basic and detailed project designs o f the Gameleira, Umari, Jatoba, Jenipapeiro, Mamoeiro e Trairi Reservoirs were prepared under the supervision o f an Independent Dam Safety Inspection Panel that was created for the State o f Ceara according to World Bank’s requirements. The Panel provides assistance to S R H and monitors all major and complex reservoirs in the State.
40. The Umari and Gameleira Projects were approved by the Panel during the 40th meeting in August o f 2002 and the 4fith meeting in July o f 2003, respectively.
,3.2. Compliance with National Legislation
41. The main legal issues the implementation o f the project, are related to the: (i) environmental licensing; (ii) water usage authorization; (iii) environmental compensation; (iv) conservation units; and, (v) cultural and natural heritage.
a) Environmental licensing
42. For components o f the PROGERIRH Additional Financing, the environmental licensing process i s following environmental requirements. All sub-projects have already received initial licenses (LPs) and some have also received implementation licenses (LIS), which i s the case o f Umari Reservoir.
b) Granting o f Water Rights
43. The procedures for obtaining the corresponding Licenses for the civil water works are underway. The request for granting water rights wi l l only be made after conclusion of the civil works and should also be issued by S R H in view o f the planned water uses.
c) Environmental Compensation
44. According to the SNUC Law number 9.985/2000, 0.5% o f the cost o f reservoirs and pipeline systems should be used to strengthen Conservation Units (UCs) selected by SEMACE. In a meeting between S R H and SEMACE in February 2008, it was established that 0.5% o f the physical interventions - reservoirs and pipeline systems, corresponding to US$467,450 will be used by the State Conservation Units, including areas within the Caatinga biome.
d) Historical, Cultural and Archaeological Heritage
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45. The EMP includes a specific program for the identification, evaluation and salvage o f the historical, archaeological or paleontological heritage.
3.3. Overall Environmental Impacts
46. The potential environmental impacts o f the interventions to be supported by the Additional Financing were assessed (both positive and negative).
47. In general, the positive impacts are highly significant. When the reservoirs and the water supply systems are operational, the interventions are expected to have highly positive, permanent results, which will ensure the population’s access to good quality water supply on a permanent basis, both for human consumption and for other uses.. This wi l l promote a significant improvement in the quality o f l i fe o f the beneficiary population.
48.
(9
(ii)
49.
There are two types o f negative impacts:
Localized, reversible and temporary impacts mainly resulting from activities inherent to the civil works execution, which can be minimized by preventative measures, including the adequate planning o f interventions and the use o f suitable procedures during i t s execution, and mitigating measures specifically related to degraded areas recovery, etc. These measures are foreseen in the Environmental Management Plan - EMP and include an Environmental Manual for Civil Works, including detailed procedures to minimize the negative impacts during the construction works.
Impacts related to resettlement and cultural heritage. These impacts wi l l be minimized by the use o f resettlement plans and programs for identification and salvage o f cultural heritage.
In order to reinforce and ensure the beneficial effects o f the interventions, the Project foresees the development o f environmental education actions and community participation.
50. Additionally, further improvement in SRH’s environmental management capacity i s expected as a result o f the institutional strengthening and other activities included in the Water Resources Management Component. Noteworthy i s the water quality program, which wi l l provide S R H and COGERH with information for an adequate operation o f the State reservoirs.
4. Environmental Management Plan
5 1. The Environmental Management Plan - EMP o f PROGERIRH’s Additional Financing foresees a set o f actions and interventions to prevent, minimize or compensate the environmental and social impacts resulting fiom the civil works andor Project activities.
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52. The EMP i s organized into policies and programs o f environmental and social nature. Table 3.3 below presents a summary o f the EMP together with a final version o f the estimated costs and institutional responsibility for the execution.
53. Specific Environmental Management Plans should be established for each sub- project - reservoir, pipeline and water treatment plant, including details o f environmental actions, responsibilities, costs and c iv i l works timeframe.
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T - #
ble 3.4: Summary of the Envi nmental Management Plan - EN P
UGPE and Consulting firm
U G P E N C A M Consulting fm
- 1
- 2
(Costs included in Project management) Social and environmental management
SRH's Environmental Management Strengthening
(Costs included in the Institutional Strengthening activity o f Component 1)
3 Environmental Education and Participatory Management
US$ 175,000 (Costs included in the Water Basin Committees and Water Users Associations activity o f Component 1)
UGPE Consulting f i r m s
4 Program for Identification and Salvage o f the Cultural Heritage
US$300,000 (Costs included in Component 2 - Water infra-structure, Strategic Reservoirs Network and Water Transfer Axis activities)
UGPE Consulting f i rms
5 Mitigation Measures Program
Compensatory Measures Program
(Costs included in the Civil works)
US$467,450
UGPE / SOHIDRA
UGPE / SEMACE 6
7 -
Support to the Mata Branca Project (GEF Caatinga)
US$ 106,000 000 (included in the amount allocated to the Compensatory Measures Program)
UGPE / CONPAM
8
9 -
Support to the Estuary Monitoring US$50,000 UGPE / SEMACE ~~~
Environmental Manual for Civil Works
UGPE / SOHIDRA / Construction f i r m s
(Costs included in the Civil works)
10 Water Quality Monitoring US$ 1,400,000 (Costs included in Component 1, Water Quality Management and Groundwater Management activity)
UGPE / COGERH
11 Families Resettlement US$ 14,400,000 (Costs included in Strategic Reservoirs Network activity o f Component 2)
UGPE / Consulting f i r m s / SOHIDRA
12 Environmental Manuals: (i) Design and Construction o f Integration Canals; and (ii) Procedures Manual for the conception o f water interventions and environmental assessments
US$83,000 (Costs included in the Studies and Projects activity o f Component 2)
UGPE / Consulting f m s
13 River Basins Pollution Sources Inventory Study
US$570,000 (Costs included in the Studies and Projects activity o f Component 2)
UGPE / COGERH / Consulting f i r m s
14
- 15
(Costs included in the project management)
UGPE Consulting f m s
Criteria and Procedures for Environmental Assessment for the 2"d and 31d-year sub-projects
Pest Management Manual Costs included in the civil works costs and in works specific EMPs
UGPE / SOHIDRA / Construction f i r m s
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1
