document of the world bank...document of the world bank report no: icr00001640 implementation...

Document of

The World Bank

Report No: ICR00001640

IMPLEMENTATION COMPLETION AND RESULTS REPORT (Loans: 4310-BR and 7420-BR)

ON A

LOAN

IN THE AMOUNT OF US$198.0 MILLION EQUIVALENT

AND AN

ADDITIONAL FINANCING LOAN

IN THE AMOUNT OF US$50.0 MILLION EQUIVALENT

TO THE

FEDERATIVE REPUBLIC OF BRAZIL

FOR THE

FEDERAL WATER RESOURCES MANAGEMENT PROJECT

December 22, 2010

Sustainable Development Department Brazil Country Management Unit Latin America and the Caribbean Region

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

CURRENCY EQUIVALENTS

(Exchange Rate Effective November 9, 2010)

Currency Unit = Real (R$) R$1.00 = US$0.5882 US$1.00 = R$1.70

FISCAL YEAR

[January 1 – December 31]

ABBREVIATIONS

A, O&M Administration, Operation and Maintenance Administração, Operação e Manutenção ANA National Water Agency Agência Nacional de Águas CAS Country Assistance Strategy Estratégia de Assistência ao País CPS Country Partnership Strategy Estratégia de Parceria com o País FY Fiscal Year Ano Fiscal

GoB Government of Brazil Governo do Brasil IBRD International Bank for Reconstruction and

Development Banco Internacional para Reconstrução e Desenvolvimento

ICR Implementation Completion and Results Report Relatório de Encerramento e Resultados KPI Key Performance Indicators Indicadores-Chave de Performance

M&E Monitoring and Evaluation Monitoria e Avaliação MI Ministry of National Integration Ministério da Integração Nacional

MMA Ministry of Environment Ministério do Meio Ambiente O&M Operation and Maintenance Operação e Manutenção PAD Project Appraisal Document Documento de Avaliação do Projeto PDO Project Development Objectives Objetivos de Desenvolvimento do Projeto

PGRH Bahia Water Resources Management Project Projeto de Gerenciamento de Recursos Hïdricos da Bahia

PMSS Water Sector Modernization Project Projeto de Modernização do Setor Saneamento PNRH National Water Resources Plan Plano Nacional de Recursos Hídricos

PROAGUA Nacional

Federal Water Resources Management Project – Additional Financing

Programa Nacional de Desenvolvimento dos Recursos Hídricos

PROAGUA Semi-árido

Federal Water Resources Management Project Sub-programa de Desenvolvimento de Recursos Hídricos para o Semi-Árido Brasileiro

PROGERIRH Ceará Integrated Water Resources Management Project

Projeto de Integração e Gerenciamento dos Recursos Hídricos do Ceará

PROURB Ceará Urban Development and Water Resources Management Project

Projeto de Desenvolvimento Urbano e Gerenciamento de Recursos Hídricos do Ceará

RPAPs Rural Poverty Alleviation Projects Projetos de Alívio de Pobreza Rural SIH Secretariat of Water Infrastructure Secretaria de Infra-Estrutura Hídrica

SINGREH National Water Resources Management System Sistema Nacional de Gerenciamento de Recursos Hídricos

SRH Secretariat of Water Resources Secretaria de Recursos Hídricos TCU National Accounts Court Tribunal de Contas da União

UEGPs State Project Management Units Unidades Estatuais de Gerenciamento do Projeto UGP-G Project Management Unit – Management Unidade de Gerenciamento do Projeto – Gestão UGP-O Project Management Unit – Works Unidade de Gerenciamento do Projeto – Obras UMA Monitoring and Evaluation Unit Unidade de Monitoria e Avaliação WRM Water Resources Management Gestão de Recursos Hídricos WUA Water User Association Associação de Usuários de Água

At Appraisal: Vice President: Shahid Javed Burki Country Director: Gobind T. Nankani Sector Director: Maritta Koch-Weser Project Team Leader: Luiz Gabriel T. Azevedo

At ICR: Vice President: Pamela Cox Country Director: Makhtar Diop Sector Manager: Karin Kemper Project Team Leader: Manuel Contijoch ICR Team Leader: Manuel Contijoch

BRAZIL

Federal Water Resources Management Project

CONTENTS

Data Sheet A. Basic Information .................................................................................................................. i

B. Key Dates .............................................................................................................................. i

C. Ratings Summary .................................................................................................................. i

D. Sector and Theme Codes ...................................................................................................... ii

E. Bank Staff ............................................................................................................................. ii

F. Results Framework Analysis ............................................................................................... iii

G. Ratings of Project Performance in ISRs ............................................................................... v

H. Restructuring (if any) .......................................................................................................... vi

I. Disbursement Profile .......................................................................................................... vii

1. Project Context, Development Objectives, and Design ........................................................ 1

2. Key Factors Affecting Implementation and Outcomes ......................................................... 7

3. Assessment of Outcomes .................................................................................................... 13

4. Assessment of Risk to Development Outcome ................................................................... 21

5. Assessment of Bank and Borrower Performance ................................................................ 22

6. Lessons Learned .................................................................................................................. 24

7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners ..................... 26

Annex 1. Project Costs and Financing .................................................................................... 29

Annex 2. Outputs by Component ............................................................................................ 32

Annex 3. Economic, Financial and Fiscal Impact Analysis .................................................... 55

Annex 4. Bank Lending and Implementation Support/Supervision Processes ....................... 62

Annex 5. Beneficiary Survey Results ..................................................................................... 64

Annex 6. Stakeholder Workshop Report and Results ............................................................. 68

Annex 7. Summary of Borrower's ICR and/or Comments on Draft ICR ............................... 69

Annex 8. Comments of Co-financiers and Other Partners/Stakeholders ................................ 86

Annex 9. List of Supporting Documents ................................................................................. 87

MAP: IBRD 33377R

i

A. Basic Information

Country: Brazil Project Name: Federal Water Resources Management Project

Project ID: P038895 L/C/TF Number(s): IBRD-43100,IBRD-74200

ICR Date: 12/22/2010 ICR Type: Core ICR

Lending Instrument: SIL Borrower: GOVERNMENT OF BRAZIL

Original Total Commitment:

USD 198.0M Disbursed Amount: USD 183.8M

Revised Amount: USD 183.8M

Environmental Category: A

Implementing Agencies: Agencia Nacional de Aguas Secretaria de Infra-estrutura Hidrica do Ministerio da Integracao Nacional

Cofinanciers and Other External Partners: B. Key Dates

Process Date Process Original Date Revised / Actual

Date(s)

Concept Review: 07/26/1996 Effectiveness: 07/30/1998 07/30/1998 (OP) 11/08/2007 (AF)

Appraisal: 11/10/1997 (OP) 09/18/2006 (AF)

Restructuring(s): 11/27/2003 (OP) 06/30/2009 (AF)

Approval: 04/02/1998 (OP) 12/19/2006 (AF)

Mid-term Review: 01/31/2000 (OP) 09/08/2008 (AF)

Closing: 12/31/2003 12/31/2006 (OP) 12/21/2009 (AF)

C. Ratings Summary

C.1 Performance Rating by ICR

Outcomes: Moderately Satisfactory

Risk to Development Outcome: Moderate

Bank Performance: Moderately Satisfactory

Borrower Performance: Moderately Satisfactory

C.2 Detailed Ratings of Bank and Borrower Performance (by ICR)

Bank Ratings Borrower Ratings

Quality at Entry: Moderately Satisfactory Government: Moderately Satisfactory

Quality of Supervision: Satisfactory Implementing Agency/Agencies:

Satisfactory

ii

Overall Bank Performance:

Moderately Satisfactory Overall Borrower Performance:

Moderately Satisfactory

C.3 Quality at Entry and Implementation Performance Indicators

Implementation Performance

Indicators QAG Assessments (if

any) Rating

Potential Problem Project at any time (Yes/No):

No Quality at Entry (QEA): Fully Satisfactory

Problem Project at any time (Yes/No):

Yes Quality of Supervision (QSA):

None

DO rating before Closing/Inactive status:

Moderately Satisfactory

D. Sector and Theme Codes

Original Actual

Sector Code (as % of total Bank financing)

Central government administration 18 18

Other social services 9 9

Sub-national government administration 20 20

Water supply 53 53

Theme Code (as % of total Bank financing)

Decentralization 13 13

Other urban development 25 25

Rural policies and institutions 13 13

Rural services and infrastructure 24 24

Water resource management 25 25 E. Bank Staff

Positions At ICR At Approval

Vice President: Pamela Cox Shahid Javed Burki

Country Director: Makhtar Diop Gobind T. Nankani

Sector Manager: Karin Erika Kemper Maritta R. V. B. Koch-Weser

Project Team Leader: Manuel Contijoch Luiz Gabriel Azevedo

ICR Team Leader: Manuel Contijoch Escontria

ICR Primary Author: Paula Silva Pedreira de Freitas

iii

F. Results Framework Analysis

Project Development Objectives (from Project Appraisal Document) Promote rational and sustainable use and participatory management of water resources in Brazil in general, and in the Northeast in particular. The project, which complements other Bank-supported initiatives in the water sector including those in Northeastern states of Bahia and Ceará, would help establish Federal and State regulatory and institutional frameworks. Once in place these changes would help formulate and implement efficient and sustainable water resources management policies and plans by: (i) strengthening relevant federal and state institutions; (ii) decentralizing water resources management to river basin committees and local water user associations (WUAs); (iii) developing mechanisms and institutional arrangements to promote efficient use of resource, allocation and enforcement of water use rights; and (iv) setting up a well-coordinated monitoring and evaluation system to track project performance and assessment of its impact on beneficiaries. Provide reliable and sustainable access to water for domestic, municipal, and other uses in priority river basins in the Northeast, by: (i) supporting the construction and/or installation of storage/conveyance structures and distribution networks to optimize the storage, delivery, and use of water supplies within selected areas with high concentration of poor rural households; and (ii) establishing sustainable administration, operation and maintenance (A, O&M) systems for water supply infrastructure, including sound and efficient cost-recovery mechanisms. Project-financed infrastructure investments in bulk water supply, by ensuring an increased year-round water supply for human consumption and productive purposes, would provide sustainable and reliable supplies of water to rural and semi-urban populations of the Northeast, and reduce the vulnerability of this region's economy, to cyclical and prolonged droughts. This would lead to significant improvements in the standards of living, health and sanitation of beneficiary populations, and would enhance local employment opportunities. With the creation of the National Water Agency (ANA) in December 2000, the project has also supported the consolidation of ANA and its institutional strengthening as one of its main objectives. Revised Project Development Objectives (as approved by original approving authority) (a) PDO Indicator(s)

Indicator Baseline Value

Original Target Values (from

approval documents)

Formally Revised Target

Values

Actual Value Achieved at

Completion or Target Years

Indicator 1 : Establishment of regulatory and institutional frameworks to formulate and implement efficient and sustainable water resources management policies and plans at the federal level and in all 10 participating states.

Value quantitative or Qualitative)

Zero Federal + 10 States Federal + States

Date achieved 07/30/1998 12/31/2006 12/21/2009 Comments The AF expanded the indicator, by including a target of 11 states "outside the Brazilian Semi-

iv

(incl. % achievement)

Arid Region that have been supported by the Project". Through the Federal entities, the project supported 16 more Brazilian states.

Indicator 2 : Number of Brazilian states that have specific water management agencies and that are reasonably well-staffed or have promoted public selection processes for hiring personnel.


4 states 7 states 6 states 6 states

Date achieved 01/01/2007 12/21/2009 06/30/2009 12/21/2009 Comments (incl. % achievement)

Achievement is 86% of original target and 100% of revised target.

Indicator 3 : Increase in the number of water user associations (WUAs). Value quantitative or Qualitative)

Zero 85 351

Date achieved 07/30/1998 12/31/2006 12/21/2009 Comments (incl. % achievement)

An evaluation of the project undertaken in 2006 indicated that achievement was about 400% of target. Achievement for "Number of river basin committees supported by the Project" with a target of 6 (by 12/21/09) was: 16 (267% of target).

Indicator 4 : Increase in the number of households in project areas with year-round access to water for human consumption.


Zero 115,000 115,050 407,565


Achievement was about 350% of target.

Indicator 5 : Use of eligibility criteria for the approval of PROAGUA works being applied to the selection of works financed by the MI.


Very few initiatives in addition to PROAGUA.

Most works at federal level and some at state level.

Some water resources works at federal level.

Most works at federal level.


Standard criteria for implementation of new hydraulic infrastructure (based on technical, economic, environmental, social and legal feasibility) were established. Criteria were adopted for works financed in the states with federal resources.

(b) Intermediate Outcome Indicator(s)

Indicator Baseline Value

Original Target Values (from

approval documents)

Formally Revised Target

Values

Actual Value Achieved at

Completion or Target Years

Indicator 1 : Establishment of bulk water charges, based upon rational operational and management costs and beneficiaries' socio-economic conditions; and Rate of bulk water tariffs collection and no. of delinquencies.

Value Zero Not established Establishment of bulk

v

(quantitative or Qualitative)

water charges which falls below the full-cost of providing the services and recovery of those charges through bulk water tariffs.


Designated as output indicator but actually reflecting an outcome, the project did establish a system but did not maintain any data. It also did not maintain data on increase in the level of cost recovery in the implementation of water resources systems.

Indicator 2 : Number of Administration, Operation and Maintenance (A, O&M) Plans for water supply systems prepared and implemented.

Value (quantitative or Qualitative)

Zero 41 48 29

Date achieved 07/30/1998 12/31/2006 06/30/2006 12/21/2009

Comments (incl. % achievement)

Design included prep. of A,O&M Plans of bulk water syst. for operators use (Wtr Sup companies) but it didn't foresee companies participation in prep. As result, most systems are being operated following companies' own procedures, that vary among states.

Indicator 3 : Number of states with improved implementation of basic, intermediate and advanced water resources management instruments.

Value (quantitative or Qualitative)

Zero

3 states with improvement of basic instruments; 3 states with improvement of intermediate instruments; and 3 states with improvement of advanced instruments.

5 states with improvement of basic instruments; 9 states with improvement of intermediate instruments; and 5 states with improvement of advanced instruments.


Achievement was 167% of target for basic and advanced instruments; and 300% of target for intermediate instruments. (Source: Relatorio de Marco Zero e Meio Termo PROÁGUA Nacional, ANA, September 2008).

Indicator 4 : Number of municipalities covered in the water supply Atlas developed by ANA. Value (quantitative or Qualitative)

1,356 3,000 4,025


A Water Supply Atlas that covered all the municipalities was prepared by ANA with the purpose of improving water supply planning. Achievement was 134% of target.

G. Ratings of Project Performance in ISRs

vi

No. Date ISR Archived

DO IP Actual Disbursements

(USD millions)

1 07/03/1998 Satisfactory Satisfactory 0.00 2 06/04/1999 Satisfactory Satisfactory 26.42 3 12/17/1999 Satisfactory Satisfactory 36.25 4 06/07/2000 Satisfactory Satisfactory 43.34 5 08/15/2000 Satisfactory Satisfactory 54.77 6 03/01/2001 Satisfactory Satisfactory 68.24 7 11/06/2001 Satisfactory Satisfactory 71.19 8 05/13/2002 Satisfactory Satisfactory 80.88 9 11/26/2002 Satisfactory Satisfactory 87.65

10 05/22/2003 Satisfactory Satisfactory 89.75 11 11/13/2003 Satisfactory Satisfactory 96.70 12 06/18/2004 Satisfactory Unsatisfactory* 103.33 13 11/30/2004 Satisfactory Unsatisfactory* 103.33 14 04/20/2005 Satisfactory Satisfactory 102.97 15 11/18/2005 Satisfactory Satisfactory 124.61 16 06/19/2006 Satisfactory Highly Satisfactory 148.41 17 12/30/2006 Satisfactory Highly Satisfactory 158.00 18 06/13/2007 Satisfactory Satisfactory 158.00 19 12/16/2007 Satisfactory Satisfactory 158.00 20 06/06/2008 Moderately Satisfactory Moderately Satisfactory 159.84 21 12/18/2008 Moderately Satisfactory Moderately Satisfactory 161.72 22 04/30/2009 Moderately Satisfactory Moderately Satisfactory 162.03 23 11/24/2009 Satisfactory Satisfactory 179.75 24 12/22/2009 Moderately Satisfactory Moderately Satisfactory** 181.37

Notes: * Unsatisfactory Implementation Performance (IP) ratings reflect the challenges faced by the Project with the change in Administration in 2003, at Federal and most States levels; the cancellation of US$40 million from the Loan Amount; and difficulties in raising counterpart funds by Federal and States Governments due mostly to fiscal and budgetary constraints.

** As a result of the restructuring, the AF picked up pace in 2009, however, considering that ISR 24 was the last ISR of the project and needed to reflect the complete progress of the AF , IP was rated at Moderately Satisfactory.

H. Restructuring (if any)

Restructuring Date(s)

Board Approved PDO Change

ISR Ratings at Restructuring

Amount Disbursed at

Restructuring in USD millions

Reason for Restructuring & Key Changes Made

DO IP

11/27/2003 S S 96.70

Original Project cancellation of US$40 million due to the economic crisis; devaluation of the Real; and transition in Federal and States Administrations.

06/30/2009 N MS MS 162.13 Delays in start up and implementation of AF loan financed

vii

Restructuring Date(s)

Board Approved PDO Change

ISR Ratings at Restructuring

Amount Disbursed at

Restructuring in USD millions

Reason for Restructuring & Key Changes Made

DO IP

activities; and ensuring that results indicators are in line with the restructured Project, measurable within the timeframe for Project completion and in line with the activities being supported by the Project.

I. Disbursement Profile

1

1. Project Context, Development Objectives, and Design 1.1 Context at Appraisal

1. This Implementation Completion and Results (ICR) report evaluates the performance of the Brazil Federal Water Resources Management Project (PROAGUA), implemented as the original project, approved March 13, 1998, and an Additional Financing with the same project development objectives, approved November 27, 2006, and both closing on December 31, 2009. In the late 1990s when the project was contemplated, less than 10 percent of the rural population in the Northeast1 had access to safe water, and only 4 percent had proper residential sanitation facilities. In periods of drought, many rural inhabitants had to walk several hours to the nearest water source, often of low quality, while others had to wait for the arrival of publicly financed (at great cost) water trucks. Even when there was no drought, it was the rural poor who suffered most from inadequately operated and maintained infrastructure. Unreliable and poor-quality water supplies contributed to dismal health and sanitation conditions and aggravated rural poverty. Without appropriate institutions to direct and coordinate, and without a comprehensive set of instruments developed to evaluate infrastructure subprojects comprehensively, the volume of investments to address the above issues had fallen far short of what was needed. Institutions and Instruments 2. At the institutional level, the Bank had been involved in the sector with projects such as the Ceará Urban Development and Water Resources Management project (approved in 1994) that had been strengthening local governments and water resources management in some states. The focus of these projects was on the municipalities instead of a river basin. One of the reasons for this lack of focus on river basins was that at the Federal level the institutions were either nonexistent or weak, and coordination beyond a state for a river basin could not be delivered. In addition, the laws at the national level had not been enacted yet. For example, though the State of Ceará had a Water Law since 1992, it was only in January 1997 that the National Water Law (No. 9433) was enacted. This law established for the whole nation that water resources management (Gestão de Recursos Hídricos, Water Resources Management/WRM) in Brazil must address the need for multiple uses of waters (instead of hydropower having a priority, as was the case in the past), and that the river basin is the unit for WRM. 3. At the beginning of the project, many of the questions on instruments and processes for the operation of river basin committees had not been addressed. These included: Who should be members of the committee: federal, state, and municipal representatives; representatives of water users, civil society, and indigenous communities? What should be the priority areas for such a committee? Collect water charges for all uses, both inside and outside the basin? Develop a roadmap to establish a water agency for the basin? What should the decennial water resources plan include? Should it define a strategy for the rehabilitation, recovery, and environmental conservation of the basin? Some answers to the above questions had been developing based on Bank projects, but comprehensive guidance for the national level was yet to be established.

1 The Project area includes the nine states of the Northeast Region of Brazil plus the Semi-arid part of the State of Minas Gerais.

2

Investments 4. In Northeast Brazil, operation and maintenance (O&M) of existing hydraulic infrastructure had been grossly inadequate. Over the past century, many reservoirs had been built in the Northeast, costing the Federal Government over US$2 billion, in current terms, during the period. In general, these reservoirs stored water just for local consumption, with no pipelines to convey water to towns or rural communities located in the same river basins. Local landowners managed the operation of these systems according to their own needs, ignoring the collective interest and/or potential participation of both upstream and downstream water users. In addition, maintenance had suffered from the lack of satisfactory cost-recovery mechanisms. As a result, water availability and reliability were much lower than what could be achieved through proper water resources management and operation. 5. In the provision of hydraulic infrastructure, the World Bank’s involvement had been even longer. In response to overwhelming demand by small rural communities, the Northeastern States and the Bank had financed, under the reformulated Northeast Rural Development Program and the follow-on Rural Poverty Alleviation Projects (RPAPs), small-scale rural water supply systems in the semi-arid region. The Northeast Rural Development Program committed about US$58 million for the construction of some 2,700 simple rural water supply systems, small dams, and wells, and demand by rural communities for this type of investment was expected to continue to be strong under the RPAPs. There was, however, not a general strategy that could improve water availability and reliability to the majority of these disconnected systems. 1.2 Original Project Development Objectives (PDOs) and Key Indicators 6. The development objectives of PROAGUA were to:

• Promote rational and sustainable use and participatory management of water resources in Brazil in general, and in the Northeast in particular; and

• Provide reliable and sustainable access to water for domestic, municipal, and other uses in priority river basins in the Northeast.

Key Performance Indicators

Key Performance Indicators (KPIs) for Project Development Objectives (PDOs) included in the Project Appraisal Document (PAD) 7. On management of water resources: Stressing the rational and sustainable use of water the PAD included the KPI: Establishment of regulatory and institutional frameworks to formulate and implement efficient and sustainable water resources management policies and plans at the federal level and in all 10 participating states. Stressing participatory management, the PAD included the KPI: In the areas benefitting directly from the project’s infrastructure component, increase in the number of water user associations (Associação de Usuários de Água, WUAs) established within the first three years of the project. Other outcome indicators that would lead to rational and sustainable use were also included (see below). The original WUA indicator was later amplified (for additional financing) to also indicate percentage of communities and

3

localities that benefitted from program works that have active and regular representation and participation in the water management systems (user associations, river basin committees). 8. On access: Stressing the volume of water, the project included the KPI: Increase in the number of households in project areas with year-round access to water for human consumption by 15 percent by the second year of project implementation. In the additional financing, after the project was delivering on volume increases, two impact-oriented indicators stressing health issues were introduced: (a) reduction in prevalence rates of waterborne diseases in the areas served by PROAGUA works; and (b) degree of improvements in housing or in the hydro-sanitary system of households in areas benefitting from PROAGUA works. 9. From the various project outputs indicated in the PADs, (a long list was provided in Annex 6 of the PAD), Table 1 presents a set of project outcomes with KPIs.2 Table 1. Project Outcomes and Key Performance Indicators

Outcomes Key Performance Indicators Satisfactory application/enforcement of Federal Water Law, of existing state water laws in seven states, and creation of state water laws in the remaining three states in the Northeast.

• Legal and regulatory frameworks for the assignment, registry, administration, and enforcement of water rights in place for all the 10 states included in the project.

Establishment of State Water Resources Management Entities (SRHs) capable of: (a) supporting competing water users in conflict resolution; (b) ensuring rational use and equitable distribution of water resources; and (c) administrating water rights system.

• Demonstration of State Governments’ commitment to grant SRHs financial and administrative autonomy by or after project completion. This was further refined (in the additional financing phase) to: Number of Brazilian states that have specific water management agencies and that are reasonably well staffed or have promoted public selection processes for hiring personnel.

Establishment of sustainable O&M systems, and cost-recovery mechanisms, based on benefits derived and costs incurred, supported by “willingness-to-pay” and “ability-to-pay” analysis.

• Establishment of bulk water charges, based on rational operational and management costs and beneficiaries’ socioeconomic conditions.

• Rate of water tariff collection and number of delinquencies.

Establishment of integrated infrastructure management systems for existing and proposed new facilities for water storage and distribution in priority river basins.

• Number of water supply systems with Administration, Operation & Maintenance (A, O&M) at start of construction in the first and second project years.

• Infrastructure Operation and Maintenance Manual for water infrastructure. A more generic indicator “replaced” the above in the additional financing: Use of eligibility criteria for the approval of PROAGUA works being applied to the selection of works financed by MI and/or by the States.

Note: The PAD and the Project Paper for the AF included more indicators, which are presented in Annex 2. 1.3 Revised PDO (as approved by original approving authority) and Key Indicators, and Reasons/Justification

2 Outcome indicators were included in the original PAD but were not called such.

4

10. The PDO remained unchanged throughout the life of the project. 1.4 Main Beneficiaries 11. The target population constituted some of the poorest segments of the Brazilian population, with annual per capita incomes of about US$230 and socioeconomic indicators that were significantly lower than for Brazilians living in other regions. From infrastructure works in the first project years alone, the number of beneficiaries was estimated at some 1.3 million, or about 260,000 families. Of these, about half lived in isolated rural communities and small semi-rural centers (of less than 15,000 inhabitants each), while the rest belonged to relatively larger agglomerations of 20,000 to 50,000 people. Only Mossoró, the second-most-populated town in the State of Rio Grande do Norte, could be called an important town. Statistics of the Brazilian Institute of Geography and Statistics (Instituto Brasileiro de Geografia e Estatística) showed that, even in these semi-urban centers in the project area, close to 50 percent of the households lived on a monthly income that was less than the minimum wage. 12. The public institutions in the water sector at both the federal and state levels were also to benefit from the project. The project was expected to bring important, lasting institutional benefits to the Brazilian water sector (a) by supporting the establishment of sound legal and institutional frameworks at the Federal level and in all 10 participating states; (b) by financing bulk water supply infrastructure that was viable not only in technical and economic terms but also from institutional, social, and environmental standpoints; and (c) by developing financially sustainable systems for their A, O&M. In addition, the project was to provide lessons and models that could be replicated in other river basins both in the Northeast and elsewhere in Brazil. 1.5 Original Components 13. The project, broadly encompassing the water resources sector in the Northeast, covered all water users—those who own, or should be granted, a water right. Its main focus was policy support and institutional strengthening, to be achieved through its “soft” (WRM and studies and project design) components both at the Federal and State/local levels. Project funds for these activities and for the construction of priority infrastructure works were to be available to participating States on a competitive basis, depending on their institutional, legal, and regulatory performance that would be monitored based on an institutional “matrix” that was defined specifically for each State. Works to be financed were expected to meet strict eligibility criteria, laid out in the Project Operational Manual. It was expected that the studies and planning exercises conducted under the project would feed through into additional investment programs or a follow-up phase of PROAGUA. Other project components were expected to finance the development of a specific WRM plan, together with pilot investments, for the São Francisco river basin; and project management, monitoring, and evaluation.3 Even though the project also included some water supply infrastructure, its main purpose was to finance investments in bulk water linked to sound feasibility criteria, that were used as leverage for the structuring and/or strengthening of water resources management in the states. 3 Both stages of the project had the same type of components, presented differently in each stage. The Original Project components are summarized below, with details in Annex 2.

5

14. Component 1: Water Resources Management (WRM) (US$53.1 million – including contingencies, 16 percent of total estimated cost).The component helped establish the National Water Resources Management System (SINGREH), pursuant to the 1997 National Water Law. The component was to provide the necessary technical and financial resources to strengthen the Federal Government, 10 state governments, river basin committees, and user associations to effectively manage water resources in the Northeast. The Federal Government was responsible for the implementation of SINGREH in rivers that cross state boundaries, the so-called “federal rivers,” and the State Governments in the “state rivers”, in both cases with strong stakeholder participation in the decision-making process. The WRM component had two major elements: (a) institutional development, and (b) creation of the technical basis for the SINGREH. 15. Component 2: Infrastructure (US$212.0 million – including contingencies, 64 percent of total estimated cost). This component was to finance the construction of water storage and conveyance infrastructure to provide reliable water supplies (in terms of both quality and quantity) for towns and communities with enduring problems of water supply for domestic consumption4. The Federal Project Preparation Unit, responsible to the federal Secretariat of Water Resources (SRH), selected the first-year works based on rigorous multi-criteria screening, including: (a) the nature of the problem; (b) socioeconomic conditions prevailing in the area; (c) level of local institutions’ commitment; (d) consistency with water resources management plans; and (e) level of technical preparation of the proposals submitted by the participating States. The component also was to elaborate the eligibility criteria to be used for selecting proposed subprojects and incorporate them into the Operational Manual. 16. Component 3: Planning, Studies, and Project Design (US$41.6 million – including contingencies, 13 percent of total estimated cost). The component was to: (a) produce water resources plans, which are the basic tools for implementing a sustainable water resources management system in the region; (b) develop specific studies aimed to increase rationality in the use of water (action on demand) and water availability and supply; and (c) develop a portfolio of subprojects of needed infrastructure expansion, sufficiently detailed to be procured, for construction under the infrastructure component of the project. The component was to have two major elements: (a) planning, at both the State and river basin levels; and (b) specific studies and pre-investment studies, necessary for the identification of solutions to the imbalance between water demand and availability, during dry spells, in river basins of the semi-arid region. 17. Component 4: São Francisco Watershed (US$8.6 million – including contingencies, 3 percent of total estimated cost). The component was to: (a) support the creation and effective start-up of the São Francisco River Basin Committee, as defined by the National Water Law; (b) provide financial support toward the development of WUAs in the basin; and (c) develop a simulation model for water allocation under the principle that water is an economic good, with emphasis on aspects such as: (a) the system of water allocation; (b) the costs for the different groups of users; (c) revenues of the Water Agency, also to be created as per the Water Law; and

4 Project component focused on multi-purpose bulk water supply infrastructure that was mainly used for domestic consumption.

6

(d) the priority investments, at the river basin level, that would be financed by the future São Francisco Water Agency. 18. Component 5: Management, Monitoring, and Evaluation (US$14.7 million – including contingencies, 4 percent of total estimated cost). This component was subdivided into three major interrelated but autonomous elements: (a) project oversight at the highest level; (b) project management at federal level, in support of State Project Management Units (UEGPs) (see WRM component); and (c) project monitoring and evaluation (M&E), and auditing. 1.6 Revised Components 19. During project implementation, two new components were added to the loan agreement to meet new demands derived from the change in the Government of Brazil’s (GOB’s) structure: (d) watershed management models and pilot initiatives that enabled ANA to prepare studies and pilot experiences related to water resources management (WRM) issues for federal waters; and (e) complementary studies to support the implementation of water resources infrastructure in the Northeast region that enabled MI to carry out Federal studies and plans to implement infrastructure in priority watersheds in the Northeast region. Nevertheless, the above two components and the São Francisco River Basin Component were never effectively implemented with project funds, as other sources of funding were used. However, the activities implemented by the Government were consistent with project objectives.

1.7 Other Significant Changes 20. Reallocation and Cancellation of Funds: Under the original project, the amounts allocated to the different categories were adjusted to allow for the proper reconciliation of expenses made under the Loan and the appropriate disbursement of funds. The original loan had a cancellation of US$40 million of proceeds mainly due to the devaluation of the Real and consequent over dimension of loan funds compared to appraisal estimates. Under the additional financing, US$23 million were cancelled from the Loan amount because they would not be completed in time as a result of delays in start up and implementation of activities. 21. Extensions of Closing Date: The original project had two extensions of Closing Date, from December 31, 2003 to December 31, 2005 and then to December 31, 2006 to allow for an appropriate timetable for the Government to conclude project implementation, ensuring the successful achievement of an expanded set of PDO indicators. With the approval of the Additional Financing, the whole project closing date was extended to December 21, 2009. Despite strong requests from the Government, the additional financing closed at the end of its allotted three years, in line with the Bank’s policy of a maximum length of 3 years for AF projects. 22. Amendments to the Loan Agreement: The original project had a first amendment in May 2000, which, among other things, inserted two new components. The second amendment (January 2002) increased allocation for national public tenders. The third amendment (November 2003) reduced the loan amount by US$40 million. In addition, some important changes were requested by the GOB and were reflected in the amendments. In 1999, the GOB reorganized its ministries and created the Ministry of National Integration (MI) responsible for, among other

7

tasks, constructing water infrastructure. In the following year, the GOB created the National Water Agency (ANA), which became responsible for implementing the water resources management activities at the Federal level and for assisting the states in this task. As a result, the GOB requested to replace SRH with ANA and MI. ANA was made responsible for developing the activities related to water resources management. MI, through its Secretariat of Hydraulic Infrastructure (SIH), was responsible for assisting the States in implementing the water resources infrastructure. 23. Additional Financing: The Federal Water Resources Management Additional Loan was designed to help finance the costs associated with scaled-up activities to enhance the impact of a well-performing project in the water sector and to continue to support the implementation of actions and activities that promote and reinforce the achievement of the original objectives. The development objectives remained unchanged and the components were rearranged and consolidated into fewer ones. The Loan in the amount of US$50 million was approved by the Board on December 19, 2006, became effective on November 8, 2007, and the Closing Date was December 21, 2009. 2. Key Factors Affecting Implementation and Outcomes 2.1 Project Preparation, Design, and Quality at Entry 24. The project was designed to support and strengthen the Government recent strategy in the water resources sector. It also appropriately reflected the analysis and thinking that went into the preparation of the National Law on Water Resources (No. 9.433), approved in January 1997, which represented a fundamental step towards sustainable management of water resources in Brazil, with emphasis on the concept of participatory and decentralized water resources management and the creation of ANA and MI. Project scope complemented other Bank-financed projects that addressed:

• The water supply and sanitation (WSS) sector in selected States in North, Northeast and Central West Brazil (PMSS II – Second Water Sector Modernization Project, Projeto de Modernização do Setor Saneamento II – P043420, approved in 1998);

• Development of basic urban infrastructure, including for water supply, in about 40 cities in the State of Ceará (PROURB – Ceará Urban Development and Water Resources Management Project, Projeto de Desenvolvimento Urbano e Gerenciamento de Recursos Hídricos do Ceará, approved in 1994);

• Measures to improve water resources management in Ceará (PROGERIRH - Ceará Integrated Water Resources Management Project, Projeto de Integração e Gerenciamento dos Recursos Hídricos do Estado do Ceará, approved in 2000);

• Policy and institutional measures and priority infrastructure works in three river basins in Bahia (PGRH - Bahia Water Resources Management Project, Projeto de Gestão de Recursos Hídricos do Estado da Bahia, approved in 1997); and,

• Small-scale rural infrastructure such as simple water supply systems (Northeast RPAPs). 25. Based on the extensive experience in the region and in the sector, the project design had the right objectives and institutional framework, which could well incorporate an integrated water

8

resources management approach at the basin and local level to reconcile cross-sectoral water demands. In terms of realism, the project design was not overly ambitious in its coverage and used the window of opportunity created by the enactment of the federal law, thus making the project a path-breaking contribution to Brazil’s water resources sector. In one aspect, it was overly optimistic. Although cost recovery, water tariffs, and tradable water rights were well understood conceptually, project design did not fully take into account the risks of controversy and lack of collection experience, which precluded introduction of water use charges prior to delivering demonstrable benefits to users. In that sense, Project design seems to not have entirely appreciated the complex political economy of introduction of bulk water rights and water charges, especially in a rather short time period of only five years. However, even in this complex area, the project made a substantive contribution, as evidenced by progress in several states and should be commended for taking on such a complicated and sensitive issue. Quality at Entry 26. As observed by the Latin America and the Caribbean Region (LCOSU5) Quality-at-Entry assessment, the project was rated “Fully Satisfactory.” LCOSU found that the project had successfully incorporated the main provisions of the Bank’s Water Resources Management Policy Paper and generated commitment from the Federal Government and 10 State Governments. However, it also flagged as risks: (a) possible delays in implementation of the WRM component, and (b) sustainability of investments. There was no Quality at Entry rating by the QAG. Assessment of Quality at Entry 27. Given the overly optimistic expectations of adoption of cost recovery policies and their implementation through water charges, the risks of delays in implementation of the WRM component did indeed come about. For these reasons, the ICR rates Quality at Entry of the project Moderately Satisfactory. 2.2 Implementation

Factors Affecting Project Implementation 28. The enactment of a National Water Law, No. 9433, in 1997, just before the project was approved in April 1998, was crucial because the law put to rest, after considerable deliberation, various intersectoral issues. Brazil gave top priority to access to water for human consumption in the Northeast, and the project was seen as a means to deliver on that promise that was instrumental in good implementation. The availability of State “role models” also made it easier for the States that followed to develop their institutions at the State level relatively fast. On the negative side, the economic/financial crisis that hit Brazil in September 1998 made it difficult for the GOB to provide counterpart funding and hampered implementation of the infrastructure

5 Latin America Operational Services Unit

9

component in the first two years. The change of government at the Federal level demanded time and effort to regain momentum during the implementation in 2003. 29. The Additional Financing Loan, although approved by the Board in December 2006, became effective only in November 2007 due to unforeseen delays in the Brazilian Senate (which needed to approve the Loan); and the changes in administration at Federal and State levels following the elections at the end of 2006. Additionally, the Project teams in the Ministry of National Integration and the State water departments were deactivated and could only be reactivated immediately after the AF Loan became effective. All of this resulted in nearly a one and a half year delay of the implementation of a three-year AF, which made infeasible the completion of many of the Project works and some water resources management activities within the Project financing period. During the mid-term review of the AF in September 2008 when all of the teams were reactivated and significant progress was being made, the implementing agencies requested an extension in order to ensure the completion of Project activities. The possibility of an extension was later discussed, however it was decided against because of the overall length of the Project (8 years for original Project and 3 years for AF), and because Bank policy does not allow for extensions of AF beyond 3 years from the date of AF approval. The Project was then restructured in order to reduce its scope and Loan amount. 30. Restructuring: The Additional Financing was restructured in June 2009 to: (1) revise Project scope, targets, and result indicators, including cancellation of some water resources activities and 10 works; (2) revise Project costs related to the 3-year AF period from US$200 million to US$ 72.5 million, cancellation of US$ 23 million from the AF loan amount, and increase in the disbursement percentage to 100%. The main reasons for these changes were: (1) delays in start up and implementation of AF Loan financed activities; and (2) ensuring that results indicators were in line with the restructured Project, measurable within the timeframe for Project completion and in line with the activities being supported by the Project. The reduced Project scope still included some priority works and water resources management activities that were to be completed after the Project closing date. The Government committed to completing these activities with counterpart funds and there was an agreement with OPCS to delay the preparation of the ICR to fully take into account the results of these activities. Although the scope of the AF supported activities was significantly reduced, the activities would still be completed by the Government, however, their completion in many cases was to be well beyond Project closing date. Activities that were cancelled under the Water Resources Management component would also be completed by the Brazilian government, although beyond the closing date, using government resources. Accordingly, Bank supervision continued until June 30, 2010, six months after Project closing. Details on achievements during the AF period are discussed in Section 3 and in Annex 2. 31. An additional implementation problem arose in December 2008 when the Brazilian Federal Controller (Tribunal de Contas da União) issued a ruling that if followed would go against Bank procurement guidelines, affecting procurement under all Bank-financed projects as well as the Inter-American Development Bank supported programs. While this issue was resolved after a few months, several procurement processes under the Project were stalled. This situation was resolved later and procurement procedures of the Bank continued to be used in the project.

10

Factors Generally Subject to Government Control 32. The GoB always showed strong commitment throughout project implementation. Implementation was aided by a clear institutional framework at the Federal level from the third year of implementation onwards. Initially, the project led to interministerial squabbles, but the Bank’s proactive engagement of the GOB in the discussion led to a clearer line of responsibilities. Factors Generally Subject to Implementing Agency Control 33. In spite of the interinstitutional conflicts indicated above, a very competent team was formed within the Secretariat of Water Resources in the Ministry of Environment (SRH/MMA) to coordinate project implementation. Implementation was strengthened with the transfer of responsibilities from the Secretariat of Water Resources in MMA to the recently created National Water Agency (ANA), for the implementation of the Water Resources Management Component; and from the Secretariat of Water Resources–Ministry of Environment (MMA) to the Secretariat of Hydraulic Infrastructure, under the Ministry of National Integration, for the implementation of the Infrastructure Component in 2000. The project teams also focused on strict compliance with Bank Procurement Procedures and delivery of high standards in technical specification for procurement of equipment. 2.3 Monitoring and Evaluation (M&E) Design, Implementation, and Utilization 34. M&E Design: Overall M&E design was dynamic and comprehensive. It was dynamic because, as goals were achieved, M&E indicators were refined and amplified. This suited the project because it started just after the Federal Water Law was enacted, and the participating states were in different stages of their development in project-related matters. Monitoring and Evaluation was comprehensive because in order to support the application/enforcement of the law, the project required implementation of a long list of activities (as is amply demonstrated by the Institutional Development subcomponent of WRM—see section 1.5 above). Annex 6 of the PAD provided detailed information on output indicators. The outcome indicators were continuously improved, and at the time the Additional Financing was prepared, they had been firmly in place for an extended period. 35. M&E Implementation: Primary responsibility for project monitoring and evaluation rested with the Project Monitoring and Evaluation Unit (UMA), a special independent unit created for overseeing projects activities. Together with the federal and State UEGPs, the UMA (in regular consultation with river basin committees, WUAs and other local stakeholders) monitored project progress and identified implementation bottlenecks, in terms of both physical and institutional performance. At the level of Outputs, the M&E system monitored the project closely, which, given the enormity of the task, made M&E implementation satisfactory. In terms of Outcomes (as per the table in section 3.1, below), the M&E system monitored well: (a) satisfactory application/enforcement of the Federal Water Law, existing state water laws in seven states, and creation of state water laws in the remaining three states in the Northeast; and, (b) establishment of State Water Resources Management Entities (SRHs) capable of: (i) supporting competing water users in conflict resolution; (ii) ensuring rational use and equitable distribution of water

11

resources; (iii) administrating water rights system; and (iv) establishing integrated infrastructure management systems for existing and proposed new facilities for water storage and distribution in priority river basins. 36. M&E Utilization: Utilization of data from M&E of this project led to refinement of models for predicting performance of infrastructure investments based on rigorous multi-criteria screening, including: (a) the nature of the problem; (b) socioeconomic conditions prevailing in the area; (c) level of local institutions’ commitment; (d) consistency with water resources management plans; and (e) level of technical preparation of the proposals submitted by the participating States. 2.4 Safeguard and Fiduciary Compliance Environmental Safeguards 37. Adequate planning with an environmental strategy and close field-based supervision for this Category A project ensured satisfactory compliance with environmental safeguards. Procedures were in place, and safeguard specialists were part of the team during preparation and throughout project implementation. The project financed a regional environmental analysis during preparation. Later, during implementation, the project developed and improved a screening system that continues to be used by project beneficiary states. In addition, the project financed major environmental studies, important environmental components (through subprojects, for example, Aguas Vermelhas, in Minas Gerais), and environmental education programs in almost all participating States. In a country with strong civil society groups, PROAGUA was never the source of any complaint. This may have been due to community involvement and stakeholder participation in river basins’ management. 38. In terms of compliance with Bank safeguards, despite the large number of infrastructure systems that have been financed by PROAGUA, overall there were no major unaddressed environmental issues. However, sometimes members of the project’s technical implementation team, at both the state and national level, were unfamiliar with Bank Safeguards and the project’s environmental guidelines. Cases of noncompliance included instances where (a) functioning subprojects held construction licenses, but not operating licenses; (b) subprojects, once licensed, did not conform with licensing requirements; (c) inadequate implementation of programs for environmental and sanitary education; and (d) lack of implementation of mitigation measures. 39. When problems were detected, they were dealt with effectively. For example, there were two small (simplified) subprojects of the Sistema Padrão Central that were not in compliance with Bank safeguards OP 4.11 (Cultural Properties) and OP 4.04 (Natural Habitats). These subprojects, for a planned small water source from an underground river situated in protected areas and in the vicinity of culturally significant caves, were being implemented without precautionary environmental impact assessment and licensing. Implementation of the works was halted and the compliance issues were addressed.

12

Social Safeguards 40. The project provided training, and mobilization support at the community level. Project implementation was highly participatory involving state agencies and water users and beneficiaries. Consultation took place upstream when watershed and state water resources plans were developed, and downstream during the development prior to and during implementation of subprojects. Beneficiaries had the opportunity to provide inputs and suggestions. Often, project designs were adjusted to respond to their inputs. The final designs of most subprojects implemented (for example, Aguas Vermelhas, Congo, Garrincho, and Serra de Santana) were influenced and modified by local communities’ inputs. These designs included the location of standpipes for water withdrawal, communities to be serviced, and the O&M model to be adopted. 41. In terms of indigenous people, model terms of reference were developed following OP 4.20 to be used in the evaluation process of any subproject that could possibly affect indigenous areas. However, no subproject triggered this policy, as Brazilian law highly restricts the implementation of interventions that could possibly affect indigenous lands. Financial Management 42. In general, each implementing agency underwent a financial management review during project implementation, to verify that the project’s accounting and reporting system was in place. Audits complying with Bank requirements were executed and furnished to the Bank, for monitoring purposes and as part of the project reports and financial reports for the project covering the each calendar quarter were prepared in form and substance satisfactory to the Bank. 43. The project’s financial management system used Brazil’s Integrated Federal Financial Administration System (Sistema Integrado de Administração Financeira, SIAFI) and the Project Information System (Sistema de Informações Gerenciais, SIGMA). They complied with OP/BP 10.02 and the Guidelines for Assessment of Financial Management Arrangements, to:

• Ensure that funds were used only for their intended purposes efficiently and economically while implementing agreed activities;

• Enable the preparation of financial reports that show costs budgeted and incurred for the current period and the total budget and cost of the project to date;

• Enable the Federal Implementing Agencies (National Water Agency and the Secretariat of Hydraulic Infrastructure of the Ministry of Integration) and participating states to efficiently monitor implementation of the project; and,

• Safeguard the project’s resources and assets. Procurement 44. In 1993, the GoB passed a new legislation regulating procurement (Law 8,666/93). The legislation, which is in effect to date, is very detailed, as indicated by its many (125) articles. The Government has also been putting a lot of effort into increasing transparency and improving the

13

supervision of Government procurement by making use of e-procurement mechanisms, such as COMPRASNET and OBRASNET. 45. Procurement performance and contract management under this project is mixed. In general, implementing agencies were familiar with the World Bank’s procurement policies and procedures and make use of the Standard Bidding Documents (Documento Padrão de Licitações, SBD), but there are shortcomings in their application and interpretation, which have generally resulted in delays. 2.5 Post-Completion Operation/Next Phase 46. Federal and state institutions completed the project, which continues to successfully attract new program initiatives, such as the Federal Integrated Water Sector Project (P112073), Rio Grande do Norte Integrated Water Resources Management Project (P089929), Pernambuco Sustainable Water Project (P108654) and Sergipe Water Project (P112074), including integrated actions on water resources management and water supply and sanitation; and the Bahia Integrated Health and Water Management Project (P095171). The project design and implementation focused from the beginning on sustainable institutional capacity development and use of country systems. The project had fully integrated Project Management Units (UGPs) that operated within the federal and state frameworks and promoted institutional development of various project implementing agencies and ministries. However, due to the lack of permanent staff, these agencies often had to use consultants. This solution, while effective during project implementation, did not produce the level of sustainability required to implement long term water programs as needed. 3. Assessment of Outcomes 3.1 Relevance of Objectives, Design, and Implementation 47. To better understand the relevance of Objectives, Design, and Implementation, the project can be mapped with Annex 1 (Project Design Summary) of the PAD turned horizontally, showing how components led to attainment of the PDOs (while dropping the indicators and data collection elements) (see Table 2). Table 2. Project Outputs and Outcomes Component Outputs (partial – see also page 5–7 of the ICR)

===>

Outcomes ==> PDOs ===> Country Strategies Goal

WRM Institutional Development: Staff (existing and/or new) of 10 State WRM Agencies working and receiving hands-on training; consultants providing technical assistance Creation of Tech. Basis: Establishment of hydrological databases and Water Resources

Satisfactory application/enforcement of Federal Water Law, existing state water laws in seven states, and creation of state water laws in the remaining three states in the Northeast. Establishment of State Water Resources Management Entities (SRHs) capable of: (a) supporting

PDO 1: Promote rational and sustainable use and participatory

Country Assistance Strategy (FY 97-00): Promote environmentally sustainable development, including water resources basin

14

Information Systems in the participating states Infrastructure Construction progress of water supply systems (water mains) in towns and rural areas; Rehabilitation/expansion of water supply systems; construction of dams and rehab of reservoirs Planning, Studies, and Project Design Federal and State River Basin Master Plans; Basic Data Collection and Analysis on Water Resources; Water Availability Studies; Rehab and maintenance plans for existing water infrastructure; feasibility studies Management, Monitoring, and Evaluation Creation of Federal Project Management Unit (UGP) and Project M&E Unit (UMA); Preparation/Application of the Project Operational Manual; Development of the baseline study; Annual audit reports.

competing water users in conflict resolution, (b) ensuring rational use and equitable distribution of water resources, and (c) administrating water rights system. Establishment of sustainable A, O&M systems, and cost-recovery mechanisms, based on benefits derived and costs incurred, supported by “willingness-to-pay” and “ability-to-pay” analysis. Establishment of integrated infrastructure management systems for existing and proposed new facilities for water storage and distribution in priority river basins. Preparation of Studies of Technical Feasibility, Environmental Impacts and Economic and Financial Feasibility, Basic Projects and/or Engineering Designs for 40 water supply works in the States of Alagoas, Bahia, Ceará, Minas Gerais, Paraíba, Pernambuco, Piauí, Rio Grande do Norte, and Sergipe. Establishment of two Federal and 10 State Project Management Units at start-up and functioning during whole implementation. Creation of a specific Monitoring and Evaluation Unit that, together with the federal and State PIUs, in regular consultation with river basin committees, WUAs and other local stakeholders, monitored project progress and identified implementation bottlenecks, in terms of both physical and institutional performance.

management of water resources in Brazil in general, and in the Northeast in particular. PDO 2: Provide reliable and sustainable access to water for domestic, municipal, and other uses in priority river basins in the Northeast.

management; Emphasize efficient resource allocation and private sector participation; Reduce rural poverty in the Northeast. Country Partnership Strategy (FY 08-11): Reducing endemic poverty in the Northeast through economic inclusion, which strengthens communities’ productive potential and activities and their economic integration.

48. The project achieved significant results in terms of implementing and supporting cutting-edge approaches to WRM regulatory and institutional frameworks at the federal and target state levels, and timely and relevant institutional strengthening of each state. It also contributed to other important advances in the WRM sector in Brazil, including: (i) clear eligibility and

15

evaluation criteria for identifying hydraulic infrastructure investments in the target river basins; (ii) significant beneficiary participation in subproject planning, design and implementation; (iii) allowing in the project design for the fact that the different participating states had very different capacity starting points, and tailoring project interventions to match these differences, while successfully using ‘role model’ states, such as Ceará,; (iv) successfully implementing very large engineering design and civil works construction subprojects through state PMUs with federal oversight; (vi) persistence, patience and pragmatism in implementation – despite there being many factors outside of the control of the Bank and the government counterparts which slowed down implementation at critical junctures; and (vii) competitive basis for accessing project funds by state on a first-come first-serve basis.

49. The PDOs have high overall relevance because the CAS (FY 97-00) and the CPS (FY 08-11) goals fully recognize the priority given by the Government to the project activities, its emphasis in strengthening water resources management, and the actions to reduce poverty in Brazil’s most affected regions. The Project was path-breaking in the sustainable management of natural resources using modern instruments for planning, monitoring, licensing and construction of infrastructure to benefit mostly the rural poor. In addition, active participation of water users is vital to reach sustainability and practical agreements for water allocation and operation and maintenance activities. Institutions and infrastructure developed under the project were and still are essential for productive activity in this semi-arid region. The priorities of the Government in the water sector were maintained through the life of the Project and are again reflected in the Country Partnership Strategy (FY 08-11) Moreover, other projects are deepening these priorities, such as the state projects mentioned above and the Interáguas Project (P112073), presently in advanced stage of preparation. 50. The above table also demonstrates the relevance of the design and implementation as shown by the linkages between Outcomes and PDOs, and Outputs and Outcomes. While these linkages appear to continue to be quite robust, there are developments underway that could weaken the links in the future. Given that the political economy regarding charging for A, O&M remains complex, the GoB might be tempted to continue subsidizing infrastructure maintenance from tax resources, rather than continuing this important reform agenda. 3.2 Achievement of Project Development Objectives PDO 1: Promote rational and sustainable use and participatory management of water resources in Brazil, in general, and in the Northeast, in particular. PDO 2: Provide reliable and sustainable access to water for domestic, municipal, and other uses in priority river basins in the Northeast. 51. While the project, in pursuit of PDO 1 delivered satisfactory application/enforcement of the Federal Water Law, established capable State Water Resources Management Entities, and even established integrated infrastructure management systems for existing and proposed new facilities as required, it was unable to establish the requisite A, O&M systems and cost-recovery mechanisms. In terms of institutions, the project was able to arrive at the structure presented in Figure 1.

16

Figure 1. Project Structure

52. As shown in Figure 1, at the Federal level the project enabled the creation of the existing structure for water management including the support for the critical start-up period of the National Water Agency (ANA), with the mandate to enforce the National Water Resources Policy. The project became the key instrument of SINGREH, particularly in the Semi-Arid region. Upon ANA’s creation, project resources made possible the establishment of a technical team that strengthened the planning and management process. 53. At the state level, the project created the institutional structure indicated in Table 3 below. The project contributed to the strengthening of water resources management entities through acquisition of equipment and infrastructure, contracting of consultants to provide technical support (provision of technical services, development of rights systems, information, among others). In addition, it has supported the creation of states’ water resources management agencies (Rio Grande do Norte and Paraiba), and the restructuring of the Minas Gerais water resources management entity.

17

Table 3. State-Level Institutional Structure supported by the Project

54. All the above institutions, including most of those created before the project, were strengthened under the project based on a comprehensive diagnosis of the institutional situation in each state. After ANA was established, the project helped to determine the programs and strategies needed to implement the SINGREH. 55. The results and impact of the project were different among the states, as a function of their existing technical and institutional capacities when the project started. The project fostered participatory water resources management, expanded the knowledge, its use and constraints, and allowed for a selective preparation of projects and works with defined selection criteria. For the majority of the states, the project was a tool for the development of technical and institutional capacity in water resources management. In some of them, the project became the basis of the state’s capacity, such as in the states of Piauí and Alagoas that made some progress with the project. At the other end there were states to which the project was equally important but more to consolidate their water resources management systems already in place, as in the case of Minas Gerais, Ceará and Bahia. These states already had ongoing institutional development in place when the project started, as result of previous Bank-financed projects (PROURB in Ceará and PGRH in Bahia; please refer to paragraph 23 for more detail).

56. Overall, in terms of their relative development, the States could have been divided into three categories with Bahia, Ceará, and Rio Grande do Norte at the top; Minas Gerais, Paraiba, Pernambuco, and Sergipe in the middle; and Alagoas, Maranhão, and Piauí behind them. After the project, all have improved. In the top group, Ceará has surged ahead (including in the

State Management Body State Council State Fund Basin Committees

Alagoas Yes Yes Yes, operating actively

5 committees

Bahia Yes Yes No 14 committeesCeara Yes Yes No 10 committeesMaranhao Yes Yes No None

Minas Gerais Yes Yes Yes, with 20 million in 2006

29 committees

Paraiba Yes Yes Yes

4 committees (3 of them with entities equivalent to river basin agencies)

Pernanbuco Yes Yes Yes 5 committees

Piaui Yes Yes Yes8 committes, but 3 of them

deactivated

Rio Grande do Norte Yes YesYes, but with few resources and not operating well

1 committee

Sergipe Yes Yes Yes, operating relatively well

3 committees

Total10 states with structured WRM bodies

10 states with operating councils

7 funds, 5 operating well

79 committees created and/or strengthened (3 deactivated)

Institutional Development

18

introduction of cost-recovery mechanisms). Minas Gerais, Rio Grande do Norte and Pernambuco have come out as leaders from the second group. From the third group, Alagoas has caught up with Paraiba and Sergipe, while Maranhao and Piauí, in spite of many developments, need further attention.

57. The project was also key for the development of plans, diagnosis, water rights systems and specific studies. Considering the differences among the states at project start-up, it was expected that they would progress differently during the course of project implementation and that not all states would arrive at the same level by end of the project. See Annex 2 for details on the States’ progress.

58. During implementation of the Additional Financing, the project supported the institutional strengthening of water resources planning and management units in 26 states and the Federal District. In addition, equipment to monitor and supervise water entitlements and to expand the hydro-meteorological network was purchased in 17 states. To support the revision and/or adequacy of the States’ legal frameworks, studies were undertaken to review the State Laws in the states of Ceará, Piauí and Maranhão. 59. The project prepared the feasibility and design studies that supported the construction of bulk water supply systems that served two million people by the end of the project. Environmental social, economic and financial studies were prepared for each of the project interventions that helped to select the most pertinent alternatives to suit the local demands and with full participation of the communities involved. It also led to the dissemination of these criteria for funding projects that are now used by all projects of this type, as per the requirement of the Federal Court of Auditors (Tribunal de Contas da União, TCU). The same idea underlies the Certificates of Sustainability of Water Works issued by the ANA since 2002. 60. In terms of establishing the requisite A, O&M systems and cost-recovery mechanisms for bulk water supply systems, which establish goals for the rational use of water and an efficient functioning of the system, the project was partially successful. In terms of construction financed under the project, all subprojects had to submit O&M plans, and required accountability for regular maintenance. While some states, such as Bahia, Ceará, and Sergipe have instituted similar mechanisms for some of the constructions with their own funds, others have been less forthcoming. 61. Similarly, the cost-recovery mechanisms for bulk water supply have had mixed results. Some states such as Bahia and Ceará have established their water management arrangements and made themselves self-sufficient, while others have paid little attention to this important instrument to finance their water management activities in a sustainable manner. At the same time, supported by other Bank projects and Government interventions, most of the state water supply companies, responsible for operating the systems, have been able to cover around 100% of their O&M costs. A planned 25% of investment cost that was supposed to have been returned to the States’ WRM funds could only be achieved in a few cases (see Table 3 above). 62. As a result, this ICR rates the achievement of the PDO as Moderately Satisfactory.

19

3.3 Efficiency 63. In the PAD, the economic, financial and fiscal feasibility of the Project was calculated separately for (1) Water Resources Management and (2) Infrastructure components. Consequently, in this ICR for a clear comparison between the PAD estimate and actual results, the same evaluation methodology applied ex ante by the Bank and used by GoB ex post to verify the economic, financial and fiscal efficiency of the Project, has been used. Consequently, the Water Resources Management Component has been evaluated using a Minimum Impact Approach6, including a calculation of annual values of the most probable impacts, while the Infrastructure Component was evaluated using traditional cost-benefit analysis. No attempt has been made to evaluate other components. 64. As indicated in the PAD, the main benefit of WRM appears to have come through improved coordination of US$210 Million of water-related investments leading to estimated benefits of US$31.5 million. The difference with the ex-ante analysis was due to the unanticipated volume of investments that benefitted from the institutional development (including development of instruments) under the Project. The annual costs of the Water Resources Management Component amounted to a value of US$5.75 million, below that estimated in the ex-ante evaluation of US$8.7 million. This means that the minimum impact value to justify the investment is only around 0.1% of the social value calculated post-project for the water resources sector, which compares favorably with the minimum impact value of 0.2% at Appraisal. 65. For the Infrastructure Component, following the same methodology applied when the ex-ante evaluation was made, the ex-post evaluation presented positive results although a little lower than the estimate but above the threshold return of 12%. By analyzing the group of eight sub-projects selected for implementation in the first year, it was verified that they had an internal economic rate of return (IERR) of 15.6%, below the ex-ante estimate of 17.4%.

66. The cost to state and municipal governments to deliver water by trucks was estimated at appraisal to be as much as US$4.50 per cubic meter compared to an estimated investment and operation and maintenance cost under the project, in present value terms, of US$0.90 per cubic meter. 67. It is noted that the appetite for civil works investments is much higher for investing in asset management and sustainable financial and operational maintenance. However, the Project was able to balance the interest of the states with the operation and maintenance agenda. Operation and Maintenance Plans were prepared, and sound infrastructure criteria were used for decision-making on new investments. 3.4 Justification of Overall Outcome Rating Rating: Moderately Satisfactory

6 For further detail on this methodology, see Cummimngs R.,Dinar A., and Olson D., “New Evaluation Procedures for a New Generation of Water-related Projects” (World Bank Technical Paper No 349), 1996.

20

68. Given the high relevance of the PDOs, the substantial achievement of PDO1, the full achievement of PDO2, and the satisfactory efficiency of the project, the Overall Outcome rating of Moderately Satisfactory reflects the project’s achievements. A Satisfactory rating could have been considered due to the overall achievements of the project; its importance to the structuring and strengthening of water resources sector in Brazil; and to its capability of keeping a sustained and successful dialogue and integration between federal and states water sectors. However, shortcomings in establishing sustainable A, O&M systems for bulk water supply systems and cost-recovery mechanisms, as well as final difficulties in the timely implementation of the Additional Financing Loan, result in a Moderately Satisfactory rating. 3.5 Overarching Themes, Other Outcomes, and Impacts (a) Poverty Impacts, Gender Aspects, and Social Development 69. The target population constituted some of the poorest in Brazil as per the 1995 poverty assessment of Brazil, and water scarcity especially affects this population group. The impact of the project on the target population comes mainly from two sources: (a) through direct reduction of the cost of piped water compared to that obtained from trucks; and (b) through the impact on health from having much cleaner water. While the calculation of the impact on household expenditure on water is straightforward, impacts on agricultural productivity increases and on health are more complicated. As close to two million people benefitted from the provision of clean water, the positive impact on poverty was large. (See indicators tables in Annex 2). 70. Project-financed infrastructure delivered bulk water and enabled the towns to provide better piped water supply. The gender aspects come mainly from the incidence of the burden of providing water at home, which appears to fall mainly on the women. Thus, lack of an adequate supply of piped water can be expected to reduce the availability of time for other tasks for women and girls in the household. If the burden is too onerous, it may even reduce their ability to attend school and study at home, which in turn can be expected to reduce lifetime income and even the woman’s role within the family. 71. The project played a substantial positive role in social development through the formation of 351 WUAs. These gave voice to far-flung communities in the planning process for 10 or so river basins and the construction that followed. With the introduction of bulk water charges to communities, which had to be recouped from its members, the communities’ appreciation for this scarce resource possibly also changed. (b) Institutional Change/Strengthening 72. The project has been the main instrument to provide support for the creation and strengthening of the ANA and to develop and implement water management legal and institutional frameworks in the Northeast. The implementation of a comprehensive set of criteria to select infrastructure subprojects is among the project’s noteworthy achievements. It also fostered the development of WRM plans in all 26 states of Brazil and the Federal District. Finally, as indicated above, the project was instrumental in improving participation of the beneficiaries in the water management process.

21

(c) Other Unintended Outcomes and Impacts (positive or negative) – N/A 3.6 Summary of Findings of Beneficiary Survey 73. The beneficiary survey took place in 2007, upon completion of the Original Project activities. The survey included the application of 812 questionnaires to a total of 3,503 people benefiting from 18 works, out of the universe of 528,333 beneficiaries of these works in 9 states: Alagoas, Bahia, Ceará, Minas Gerais, Paraíba, Pernambuco, Piauí, Rio Grande do Norte and Sergipe. The State of Maranhão was not included in the survey as the project did not finance any work in that state. The survey results are a rough measure given that the project mostly financed bulk water supply and final results would depend on how the water is supplied to the final consumers. 74. The survey focused on a key variable with the question of how the users considered their quality of life improving or not with the project.

Note: “Improved a lot” – weight 10; Improved – weight 8; Didn’t improve or didn’t notice significant changes – weight 5; Got worse – weight 1

75. In the view of users, the project improved the quality of life of the beneficiaries. The states that presented the best results were Ceará and Piauí. The one that had poorer results was Alagoas. Considering that quality of life was the main variable focus, it can be concluded that, in the view of the users, the project, succeeded very well in satisfying the expectations and demands of the population 4. Assessment of Risk to Development Outcome Rating: Low

0

2

4

6

8

10

12

AL BA CE MG PB PE PI RN SE Average

Quality of Life Index

22

76. At the technical level, the risk is negligible to low because the system of selection of water projects is now standard practice in the Brazilian government and other initiatives use a technical process to create a menu for the decisions makers to choose from, ensuring limited pressure from politicians that could reduce the quality of evaluation. In the states, although the situation at the end of the project has improved substantially in comparison to that observed previously, there is some risk that the quality of activities may drop due to the limited number of permanent staff and use of short term consultants. From the environmental aspect, the risk is similarly negligible to low, given the increased awareness in this area. The beneficiaries have been organized by their common need for water access, have strong water agencies serving their needs, and the country is becoming more wealthy. 5. Assessment of Bank and Borrower Performance 5.1 Bank Performance (a) Bank Performance in Ensuring Quality at Entry Rating: Moderately Satisfactory 77. The project was consistent with GOB and Bank priorities, because of the importance of access to water in the Northeast. The project was particularly well timed and was prepared rapidly following the enactment of the Water Law. The project preparation team understood the significance of the Water Law and their design of the WRM component was quite appropriate to the delivery of the outcomes. At the same time, project design was overly optimistic and did not fully take into account the risks of controversy and lack of collection experience, which precluded introduction of water use charges prior to delivering demonstrable benefits to users. It seems to not have entirely appreciated the complex political economy of introduction of bulk water rights and water charges, especially in a rather short time period of only five years. The project did not require any strong covenants or government commitment to project objectives in writing that the Latin America Operational Services Unit regional review had alluded to.7 (b) Quality of Supervision Rating: Satisfactory 78. The project team closely monitored project implementation, involved experienced staff in water resources management, staffed well structured teams, provided the necessary support and sought solutions to problems. Throughout implementation, the team reports indicated that the Bank supervision was focused on the development objective of the project and always advised the counterpart team to focus on the same. It was recognized during implementation by both the Bank team and the Government that having a decentralized team in the Brazil office was extremely important to guarantee adequate and timely responses to the client. The Bank Country

7 The Latin America and the Caribbean Region (LCOSU7) Quality-at-Entry assessment highlighted that the effectiveness of the task team was noteworthy in terms of moving this complex project from the original request of the Government to Board approval in just two years and the rigorous and constructive reviews and support by regional management.

23

Office also ensured adequate transition arrangements related to partial changes in the team and three changes in team leadership. Significant implementation issues developed when the AF financing was not extended, which required prompt action from the Bank. The Government acted promptly to resolve them satisfactorily, and the four works still under construction will be finalized with Government funding (see Table 2.2 in Annex 2). (c) Justification of Rating for Overall Bank Performance Rating: Moderately Satisfactory 79. The Moderately Satisfactory Development Effectiveness rating influenced the overall Bank Performance rating, as reflected by the Moderately Satisfactory rating on Quality at Entry. The project had mixed results during its 11 years of implementation. Persistence and patience was needed to keep the momentum high for implementation. The Bank played a fundamental role in providing for the continuity of the project and explanations to the different counterparts involved. In addition, the Bank’s role in keeping the dialogue led to new state and federal operations as well as a non-lending technical assistance, such as the recently initiated “Adapting Water Resources Planning and Operation to Climate Variability and Climate Change in Selected River Basins in Northeast Brazil (P123869)”. Nevertheless, excessive optimism by the Bank team on the ability to implement cost recovery and water charging practices influenced this rating. 5.2 Borrower Performance (a) Government Performance Rating: Moderately Satisfactory 80. The project gained immensely from the enactment of the Water Law before the project started. The Government was supportive throughout the implementation period except for about one year following the approval of additional financing, when the Senate, due to its focus on an important internal matter, could not devote adequate attention to anything else, including this Bank-financed project. 81. At the same time, during implementation, because of the economic crisis and changes in federal and states governments in 2003, the Project suffered delays that affected the originally planned schedule. During the preparation of the Additional Financing, Senate approval of the Loan Agreement took over nine months causing constraints for the adequate implementation of projects activities. Additionally, the ruling of the Brazilian Federal Controller (Tribunal de Contas da União) caused significant delays in procurement activities. (b) Implementing Agency Performance Rating: Satisfactory

24

82. During the first months of implementation a very competent team was formed in the Project Implementation Unit (UGP) to coordinate project implementation within the SRH in the initial months. Changes in implementation agencies occurred with the creation of the Ministry of National Integration in 1999 and the subsequent establishment of the National Water Agency (ANA) in 2000. With the transfer of activities to these new implementing agencies, both of them were able to create well structured and well functioning project management units. 83. In addition, the States’ Project Implementation Units (UEGPs) were created in each one of the 10 participating states, performing satisfactorily throughout implementation. They were committed to project objectives and facilitated beneficiary/stakeholder consultations and involvement. Though there were some issues with fiduciary aspects of the project, they were few and far between for a project implemented over 11 years. The UEGPs, together with the help of consultants, provided the requisite transition arrangements for regular operation of project-supported activities. One area where implementing agencies could have performed better is in the introduction of cost-recovery mechanisms. (c) Justification of Rating for Overall Borrower Performance Rating: Moderately Satisfactory 84. The Government remained true to its commitment and closely supported the implementation of the project. Although during the implementation of this project the Brazilian economy suffered to some degree a reduction in revenues, the Government made the full counterpart contribution. The Government was always ready and available to discuss issues in the implementation of the project and played an active role in proposing solutions to problems and in most cases implemented agreed action albeit with a delay. However, based on the issues raised above, overall Borrower Performance is considered Moderately Satisfactory. 6. Lessons Learned 85. Many of the findings of the Independent Evaluation Group Evaluation of Water and Development8 have been reconfirmed by the Bank experience in this project. In addition, some of the lessons from this project may help to further refine or enrich approaches to address various sectoral issues. Lesson 1: A longer-term, more comprehensive, multisectoral, and process-focused approach to water support, as has been recommended by the External Advisory Panel of the Independent Evaluation Group Evaluation, may require some changes in Bank thinking about project management and evaluation. 86. The project was able to apply the principles of the 1997 Water Law in its comprehensive, multisectoral approach, and focus on process, but was designed for the “usual” five-year project implementation period. Bank management was possibly aware that the comprehensive project would require a longer-term commitment as well and did approve extensions that added six more

8 “An Evaluation of World Bank Support, 1997–2007,” Water and Development, Independent Evaluation Group 2010. See www.worldbank.org/ieg/water.

25

years (two extensions and through additional financing). However, given the five-to-seven-year normal project implementation period, this 11-year project was considered a great exception, and when the country requested extension for the additional financing phase of the project, it was not approved. If it had been assumed that a 10-year Bank commitment was “normal” for this kind of project, extension beyond the 11th year may not have been an issue. In the end, the additional financing instrument was not the most appropriate solution to deal with the needed long-term engagement for sector. For that reason, the project had to cancel US$23 million from the additional financing loan and activities planned are now being financed with Government own funds. 87. Similarly, project evaluation for this kind of longer-term commitment may have to be revisited. A longer-term commitment will have high variability in disbursements and Implementation Performance because the project will span a number of administrations, and when a new government team is still analyzing the project, it is a fact that progress is slowed. In the case of this project, the difficulties experienced in the slow start-up of the Additional Financing were recorded in the Implementation Status and Results Reports (ISRs) and had a weight in the overall performance rating of the project.

Lesson 2: Projects operating where both Federal and State institutions are involved require flexible support from the project at the state level in line with their stage of development and the use of horizontal transfer of experiences among peer states. 88. The above-mentioned Independent Evaluation Group study found that support for institutional reform and capacity building has had limited success in the water sector. The Quality-at-Entry assessment had rated this as a major risk and expressed doubts about the “weaker” states having “the time needed to pass laws and regulations and establish institutions.” The project appears to have developed a methodology that redresses this sectoral shortcoming. The project’s success in this area came from the long-term commitment, using the leading states, such as Ceará, as a model for others, while keeping a flexible approach at every state. The Water Law (and other changes included in the 1997 Fiscal Adjustment Program9) also made it easier to address issues related to budget and authority accorded to the lower level of government.

Lesson 3: A country’s concerns for high transaction costs due to safeguards (and their consequent reluctance to have Bank financing) are best addressed with clarity about what “processes” the safeguards entail, with an emphasis on the mechanisms to address issues that would put public institutions and their employees above reproach. 89. The concerns for high transaction costs due to safeguards for water projects are well known. However, the Project showed that if it is done right, then the safeguards can actually help in dealing with complex issues in project implementation and provide the guidance and confidence to properly manage technical, environmental and social issues. The project developed environmental frameworks that had checklists of possible positive and negative impacts and the environmental management plans designed to go with these impacts. Similarly, for the safety of dams, the project created a panel of international experts that had to review and approve designs

9 The Fiscal Adjustment Programs, originally designed to resolve states’ debt crises, were also instrumental in the development of the 2000 Fiscal Responsibility Law.

26

and supervise the construction. This also led to avoidance of “fait accompli,” where the contractor would proceed because the review from authorities was delayed due to lack of qualified personnel in the government. The project was able to develop social arrangements to manage complex resettlement issues during project implementation, particularly the ones related to dam construction. Lesson 4: Reforms such as the implementation of water charges systems take considerable time and effort to build consensus and political support.

90. The project supported the implementation of WRM instruments at the federal and states’ levels with success. In terms of planning, studies, cadastre of users, water rights, institutional strengthening and even formulation and adoption of investments selection criteria, the project was very successful. However, further attention and a strong communication with the different stakeholders is needed to ensure the implementation of economic pricing instruments, which require maturity and high-level political support. Lesson 5: An intersectoral approach to water issues is key to the achievement of results that go beyond the WRM agenda.

91. Some of the most serious problems restricting the role of water in Brazil’s development, such as pollution, scarcity, floods, unequal access and conflicts over water use, have their roots and impacts in diverse sectors of the economy, government and society. While it is important to foster advancements in each sector, there are also many opportunities for better integration, innovation and coordination among the different sectors to reconcile conflicting goals, mobilize interests, and avoid impasses and setbacks and spark synergies, as defined in the intersectoral program of the National Water Resources Plan (Plano Nacional de Recursos Hídricos, PNRH). The diversity of Brazil’s physical characteristics, socioeconomic realities and institutional structures imposes challenges related to the management and use of water. Renewing its water policies and strengthening investment capacity is essential to ensure that the water sector can make important contributions to the reduction of poverty and inequality, the protection of the environment and the sustainable growth of the economy. In this sense, the Government of Brazil has prepared the Interáguas project to be financed by the Bank that brings to the table new partners in the process: the Ministry of Cities (MCid) and Ministry of Environment (MMA) together with the Ministry of National Integration (MI) and the National Water Agency (ANA) to have a more comprehensive agenda to facilitate the sound implementation of the IWRM principles and strategies adapted to the Brazilian context. At the same time the project will facilitate the internalization of the future challenges that climate change now imposes on the water sector and the role in South-South cooperation of Brazil with other countries. 7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners (a) Borrower/Implementing Agencies 92. The Borrower prepared a completion report at the end of the implementation period of the Original Project, in December 2006, which served as input for the preparation of this ICR. The completion report that incorporates the results of the Additional Financing is under preparation.

27

The draft ICR was submitted to the counterparts for comments on November 24, 2010. The Borrower’s implementing agencies, ANA and MI presented their comments to the draft report through the letter Ofício n°411/2010/SIH/MI dated December 9 and received by the Bank on December 13, 2010. The letter and a summary of the results of the Original Project and the Additional financing phases received from the counterparts are presented in Annex 7. 93. In the letter, the Borrower expressed its satisfaction with the recognition of the significant benefits of the Project to the quality of life and economic dynamism of its beneficiaries and of the contribution of the works implemented to the increased good quality of water supply. The Borrower also expressed satisfaction with the recognition that the Project, a pioneer in sustainable water resources management, used modern instruments established by the Water Law (Law 9,433/97) to support the implementation of the National Water Resources Management System – SINGREH, particularly in the Brazilian Semi-Arid Region. 94. From the lessons learned presented in the ICR, the Borrower highlighted that the institutional structure for the Project’s management and administration worked adequately despite a few problems resulting from changes in the Federal and States Government teams, typical of projects with long periods of implementation as PROAGUA. The Borrower also highlighted the budgetary priority given to the Project by the Ministry of National Integration and the Ministry of Environment and the completion of 48 bulk water works important to address water supply problems in the beneficiary areas, as well as the full execution of studies and projects needed to promote the strengthening of water resources management. The partnerships were considered fundamental to the success of Project actions, as the technical teams in the States and in the Federal Government, through ANA and MI, were thereby able to overcome and learn from adversities, which arose from time to time. 95. As a consequence of the results obtained by the Project, the letter highlights that the Government of Brazil considers of great importance the following up of the actions in partnership with the World Bank as expressed in the preparation of the Interáguas Project. 96. At the same time, the Borrower expressed its disagreement with the overall outcome rating of moderately satisfactory. In its point of view, this rating does not reflect Project overall performance, considering that its indicators show the achievement or exceeding of physical, financial and social targets and impacts, duly presented in the ICR, which could not have been better owing to the impossibility of extending the Project Closing Date as requested by the Government.

97. In this sense, the Borrower pointed out the main advances achieved by the Project during its 11 years of implementation: (i) promotion of changes in paradigms for water resources management in Brazil, with emphasis on the Semi-Arid Region, from the structuring of water resources systems in all Brazilian states and the implementation of priority infrastructure; (ii) establishment of lessons learned and best practices that can be replicated in other hydrographic basins, both in the Semi-Arid Region and in other regions of Brazil; (iii) the execution of 48 water infrastructure works that were extremely important to address water needs and improve the quality of life of over two million people; (iv) the evaluation, eligibility and prioritization of works criteria that were implemented by the Project, recognized by the accounting control

28

institutions and which serve as model for other Government programs; and, (v) the participatory methodology adopted by the Project involving social participation and the local public sector in the implemented projects with positive impacts on the environmental education of communities’ beneficiaries of the Project. (b) Co-financiers Not Applicable. (c) Other Partners and Stakeholders Not Applicable.

29

Annex 1. Project Costs and Financing A. Original Project (a) Project Cost by Component (in US$ million equivalent)

Components Appraisal Estimate

(US$ million)

Actual/Latest Estimate

(US$ million)

Percentage of Appraisal

Water Resources Management 48.10 21.03 43.72 Infrastructure Investment 171.40 243.43 142.02 Studies and Project Design 37.00 16.65 45.00 São Francisco Watershed 7.60 0.00 0.00 Management, Monitoring, and Evaluation

13.50 10.42 77.19

Total Baseline Cost 277.60 291.52 105.01 Physical Contingencies 29.00 0.00 0.00 Price Contingencies 23.40 0.00 0.00 Total Project Costs 330.00 291.52 88.34 Front-end fee PPF 0.00 0.00 0.00 Front-end fee IBRD 0.00 0.00 0.00 Total Financing Required 330.00 291.52 88.34 Note: The actual amount of Bank financing is higher than actual disbursements due to differences between the exchange rate being used and the actual exchange rate of each expense. (Exchange rate used in Appraisal was US$1.00 = R$1.11. Actual amounts are calculated in an exchange rate of US$1.00 = R$1.70).

(b) Financing

Source of Funds Type of

Co-financing

Appraisal Estimate

(US$ million)

Actual/Latest Estimate*

(US$ million)


Borrower 62.00 133.52 215.35 IBRD 198.00 158.0010 79.80 Overseas Economic Cooperation Fund 70.00 0.00 0.00 Total 330.00 291.52 88.34

*The amount related to Bank financing relates to actual disbursements. B. Additional Financing (a) Project Cost by Component (in US$ million equivalent)

10 The Original Project cancelled US$40 million in 2003 by request of the GoB due economic crisis.

30


(US$ million)

Restructuring Estimate

(US$ million)


(US$ million)

Percentage of Restructuring

Water Resources Management

60.00 30.00

33.68 112.27

Priority Works 127.00 40.00 30.60 76.50 Management, Monitoring, and Evaluation

10.00 2.37 0.00 0.00

Total Baseline Cost 197.00 72.37 64.28 88.82 Physical Contingencies 3.00 0.00 0.00 0.00 Price Contingencies 0.00 0.00 0.00 0.00 Total Project Costs 200.00 72.37 64.28 88.82 Front-end fee PPF 0.00 0.00 0.00 0.00 Front-end fee IBRD 0.00 0.13 0.13 0.00 Total Financing Required 200.00 72.50 64.41 88.84

Note: The actual amount of Bank financing is higher than actual disbursements due to differences between the exchange rate being used and the actual exchange rate of each expense. (Exchange rate used in Appraisal was US$1.00 = R$2.23. Actual amounts are calculated in an exchange rate of US$1.00 = R$1.70). (b) Financing

Source of Funds Type of

Co-financing

Appraisal Estimate

(US$ million)

Actual/Latest Estimate*

(US$ million)


Borrower 150.00 38.64 25.76 IBRD 50.00 25.7711 51.54

Total 200.00 64.41 32.20 *The amount related to Bank financing relates to actual disbursements.

Original Loan and Additional Financing


(US$ million)

Restructuring Estimate

(US$ million)


(US$ million)

Percentage of Restructuring

Water Resources Management 108.10 78.10 54.71 70.05

Infrastructure Investment 298.40 211.40 274.03 129.63

Studies and Project Design 37.00 37.00 16.65 45.00

São Francisco Watershed 7.60 7.60 0.00 0.00

Management, Monitoring, and Evaluation

23.50 15.87 10.42 65.66

Total Baseline Cost 474.60 349.97 355.81 101.67

Physical Contingencies 32.00 0.00 0.00 0.00 Price Contingencies 23.40 0.00 0.00 0.00

11 The Additional Financing had US$23 million cancelled from the Loan.

31

Total Project Costs 530.00 72.37 357.81 101.67

Front-end fee PPF 0.00 0.00 0.00 0.00 Front-end fee IBRD 0.00 0.13 0.13 100.00 Total Financing Required 530.00 350.10 355.94 101.67

Note: The infrastructure investment cancelled in the AF was covered by the GoB and is not included in the Actual/latest estimate and it is still under construction. The data includes only 48 works supported by the project including the cancellation of the AF loan proceeds.

32

Annex 2. Outputs by Component 1. The detailed original project components and their outputs are described as follows. Component 1: Water Resources Management (WRM) (US$53.1 million – including contingencies, 16 percent of total estimated cost) 2. Description. The component helped establish the National Water Resources Management System (SINGERH), as established in the National Water Law, approved in 1997. The component provided the necessary technical and financial resources to strengthen the Federal Government, 10 state governments, river basin committees, and user associations to effectively manage water resources in the Northeast of Brazil. The Federal Government is responsible for the implementation of the SINGREH in rivers that cross state boundaries, the so-called “federal rivers,” and the State Governments are responsible for the implementation of the SINGREH in the “state rivers,” in both cases, with strong stakeholder participation in the decision-making process. The WRM component had two major elements: (a) institutional development, and (b) creation of the technical basis for the SINGERH, detailed as follows. Institutional Development 3. National Water Resources Management System (SINGREH). Because the National Water Law was very recent, the Federal Government was not yet equipped, both in terms of methodology and human resources, to enforce it. The project provided technical assistance for the implementation of the SINGREH. 4. State Water Resources Management Agencies. Specific WRM agencies existed in only some of the 10 participating states. In many cases, the agency was legally constituted but not very active, in terms of water resources assessment and planning, granting of water rights, issuing of permits for the construction of hydraulic infrastructure, and mediation of water conflicts. The component adopted a tailor-made procedure to help the establishment of capable water resources agencies in all 10 states. State Project Management Units (UEGPs), created to launch PROAGUA at the state level, were the seed for the formation of full-fledged State WRM agencies. 5. Legislation. Not all states had a specific water law, which was to complement the National Water Law. The component adopted a tailor-made procedure to help establish water laws in all 10 states. 6. Bulk water rights and tariffs. The component helped all 10 states to follow the example of Ceará, which already had bulk water tariffs for some sectors. It assisted the states in developing a cadastre of users, a necessary condition for the initial allocation of water rights. 7. Economic and financial tools. To increase the use of economic feasibility and financial sustainability analysis of hydraulic infrastructure construction in the region, the project helped with specific studies and research, such as assessment of the willingness to pay, and evaluation of the economic impact of bulk water tariffs for different user sectors.

33

8. Human Resources. The project supported several training programs designed to produce skilled water resources professionals (a specialization that was difficult to find on the market) and to trained water users and their associations. 9. Water user associations and river basin committees. Ceará and Rio Grande do Norte, had already achieved good results through the organization of water users on local water resources management. For example, water yields from the two largest reservoirs of Ceará (Banabuiu and Oros) were in the past decided by technicians, without much attention to users’ concerns. This changed after the establishment of the State Water Resources Management Company (COGERH), and the discussions among users, helped by decision support systems installed on computers. The project helped spread this approach to all the other states under the project. 10. National PROAGUA. The Federal Government had launched PROAGUA on a nationwide basis. While the Bank-funded project directly supported the implementation of this program in the semi-arid Northeast, it intended to implement everywhere else in Brazil a quality control process to ensure that the same standards and criteria were used. The project was successful in expanding the WRM activities to the states outside the Semi-Arid region. 11. Hydrologic Panel. The component supported assessment studies of water availability developed at the State and river basin levels by quality technical teams. Because investment decisions are made based on competitive evaluations of these assessments, it is necessary to ensure consistent and homogeneous treatment of data. This implied that collection, analysis, and interpretation of data were to be performed under the supervision of a high-level hydrologic panel. Creation of Technical Basis 12. Hydro-meteorological networks. The number of hydro-meteorological gauging stations in the project area was well below the recommendations of the World Meteorological Organization for semi-arid regions. Because all assessments of water availability depend on raw data collected by the network, the project helped expand the network, selecting the best sites for installing new gauges based on cost-benefit analysis. 13. Information systems. Water resources planning depends on information about water rights, water tariffs, hydraulic infrastructure, user associations, and water availability, in quantitative and qualitative terms. The project helped make this information readily available to Government, WUAs and civil society, including a Web-based information system. 14. Outputs. Project implementation at the federal level supported not only the initially planned actions, but also responded to conjectural demands linked to the implementation of the National Water Resources Plan (Plano Nacional de Recursos Hídricos, PNRH) and the National Water Resources Management System (SINGREH). Outputs at the Federal level are presented below.

34

Outputs Completed at Federal Level – Actions under Responsibility of SRH/MMA and ANA Water Entities and Institutional Strengthening

(i) Support to the Institutional Strengthening of the Secretariat of Water Resources, focusing on the organization and implementation of the Water Resources Management National System (SINGREH) in the federal ambit.

(ii) Definition of institutional strategies and programming of ANA’s role. (iii) Preparation and/or evaluation of studies, plans, and projects with the objective of

institutionally strengthening the sector to support the implementation of the Water Resources National Policy.

(iv) Development of a training course to train regulators at ANA. (v) Support to the participation of technical staff in the Symposium of New Perspectives in

Education and Training in Meteorology and Operational Hydrology. (vi) Participation of technical staff in the “Management of groundwater” and “Water right

systems” courses in Washington, DC. (vii) Maintenance and updating of PRÓTON, the Documents Management System.

(viii) Preparation of Communications Strategic Plan and Policy for ANA. (i) Support to the Third Conference of the Parties to the Convention to Combat Desertification

in Recife, State of Pernambuco. (ii) Support to the Multinational Seminar of Guarani Aquifer.

(iii) National coordination of the Project of Environmental Protection and Sustainable Management of the Guarani System.

(iv) Support to the Brazilian representation in the University Committee Fund to Support the Project of Environmental Protection and Sustainable Management of the Guarani System

(ix) Editing and publication of the books O Estado das Águas no Brasil and Atlas da Bacia do rio das Velhas.

(x) Analysis of the implementation of the Water Resources Management Component at the state level.

(xi) Editing of the book Interfaces of Water Resources Management (i) Publication of the Secretariat of Water Resources Magazine

(ii) Support to the Multilateral Seminar of Guarani Aquifer (iii) Support to the carrying out of the workshop, “Dams, Development and Environment” (iv) Mobilization Campaign for the Management of São Francisco River (v) Institutional Analysis and Assessment of ANA and its Training Policies Program

(xii) Training Course on Water Resources Management. Planning and Studies

(i) Evaluation of water supply and sanitation studies, plans, and projects with emphasis on water supply systems.

(ii) Study for the mitigation of problems caused by river sediments. (iii) Atlas of Urban Water Supply in the Northeast. (iv) Study of the Current Situation and Perspectives of Water Supply for the Metropolitan

Regions and Urban Conglomerates.

35

(v) Preparation of the study on the current situation of water supply in Brazil. (vi) Preparation of the water resources strategic plan for ANA.

(vii) Development of rules and criteria for the implementation of the Plan for Control of Water Use and definition of the structure of the Plan for Water Allocation for Piranhas-Açu river basin in the states of Paraíba and Rio Grande do Norte.

(viii) Preparation of the Water Resources Management Plan for Capivara, Piracicaba, Jundiaí, and Paraíba do Sul river basins.

(ix) Support to the Secretariat of Water Resources in the MMA for the Preparation of the Water Resources National Plan.

(x) Annual Report on the Situation of Water Resources in Brazil. (v) Water Resources Management Models for federal river basins.

(vi) Preparation of PROAGUA Nacional (Additional Financing) with studies to orient, discipline, and support actions related to water resources in its multiple uses—support to SRH and ANA in the formulation of the Water Resources National Policy.

(vii) National Basic Hydro-meteorological Network – Diagnosis of the Situation, Evaluations and Recommendations of responsibility of ANA, with the necessary complementation and the referred associated system to monitoring, in the aspects related to maintenance, operation, collection, and treatment of data, considering multiple interest networks, like the electricity sector, navigation, sanitation, irrigated agriculture, leisure, and tourism;

(xi) Medium and Long Term Plan for the implementation of improvements and modernization of the National Basic Hydro-meteorological Network to serve its multiple users.

(xii) Maranhão System – implementation of Simplified Water Supply Systems in small communities in the State of Maranhão.

(xiii) Diagnosis and evaluations of the State Water Resources Systems and the State Water Resources Entities – Management Priorities and Institutional Strengthening of Management Entities – using comparative methodology of the Management Systems.

(xiv) Translation of Master Plans in Immediate Actions. Information Systems

(i) Consolidation of the National Water Resources Information System. (ii) Modernization of the geographic information systems and technical training of ANA staff.

(iii) Purchase of geo-processing software and staff training for its use. (iv) Decision Support System for the analysis and control of rights requests and studies on

water charges in Vaza-barrís river basin. Hydrology and Water Quality

(i) Program of Water Quality Monitoring for the Development of the Brazilian semi-arid region, partnership with the Brazilian Agricultural Research Corporation (Empresa Brasileira de Pesquisa Agropecuária, EMBRAPA).

(ii) Environmental Inventory of Water Resources in Poxim River Basin in the State of Sergipe. (iii) Implementation and Management of the Program for Pollution Control of Hydrographic

Basins. (iv) Action Plan and Integrated Management of Mundaú/Manguaba Estuary Lagoon Complex

in the State of Alagoas.

36

(v) Support to the preparation of a workshop on Water Quality Management. (vi) Preparation of the Program for Technological Modernization of Monitoring and

Hydrological Georeferencing Systems and Technical Training aiming at Water Resources Management – Technical Assistance Project with the World Meteorological Organization.

(vii) International Hydrological Program – Technical documents result of agreements between ANA and multilateral organizations and technical and scientific organizations in the area of water resources, Water International Department, World Meteorological Organization, World Partnership for Water and International Network of Hydrographic Basins.

Bulk Water Rights

(i) Implementation of Water Rights Systems. (ii) Development and Implementation of the Computational System for Water Rights pilot in

Paraíba do Sul River Basin. (iii) System for water rights definition in Paraíba do Sul river basin. (iv) Quantitative diagnosis of water users in Paraíba do Sul river basin. (v) Possibility assessment of the implementation of a water resources simulation model for São

Francisco river basin and vicinity basins. (vi) Preparation and implementation of ANA’s control system (SISFIS).

(vii) Evaluation of the water users registering system in Verde River in the State of Minas Gerais.

(viii) Cadastre of Water Users in Doce River Basin, preparation and definition of guidelines and strategies for implementation.

Water User Associations and River Basin Committees

(i) Support to the Committee for Integration of Piranhas-Açu, Alto Paraguai, and Paraíba do Sul Rivers.

Outputs Completed at Federal Level - Actions under Responsibility of Secretariat of Water Infrastructure (SIH)/MI Planning, Studies and Projects

(i) Baseline socioeconomic studies of 33 pipelines in the States of Alagoas, Bahia, Ceará, Minas Gerais, Paraíba, Pernambuco, Piauí, Rio Grande do Norte, and Sergipe

(ii) Basic Projects of Water Supply Systems, Sanitation and Solid Waste for small rural communities in Seridó Region, State of Rio Grande do Norte.

(i) Preparation of the Identification of Works Report related to Pajeú River Pipeline System. (iii) Implementation of the methodology for management of works including the application of

specific software. (iv) Preparation of the Integration Plan of river basins in the State of Piauí

(i) Preparation of the Plan of Environmental Education, Communication and Environmental Rehabilitation for Estrela de Alagoas-Minador do Negração and Lagoa do São José pipeline system in the State of Alagoas

37

(ii) Study for flood control in Caratinga river basin in the State of Minas Gerais (v) Preparation of a Sustainable Management Model for Serra de Santana Pipeline System in

the State of Rio Grande do Norte

Water Entities and Institutional Strengthening

(i) Training of technical staff. (ii) Establishment of a Dams Safety Panel throughout project implementation.

(iii) Carrying out of three workshops for the establishment of dialog among members of MI and state authorities

(iv) Carrying out of the seminar for the preparation of the Plan of Action for the Integrated Development of Parnaíba Valley (PLANAP).

Outputs Completed at State Level Water Entities, Legislation and Institutional Strengthening

(i) Structuring and functioning of 8 State Project Management Units (UEGPs) in the States of Alagoas, Maranhão, Minas Gerais, Paraíba, Pernambuco, Piauí, Rio Grande do Norte, and Sergipe, which besides being responsible for the project management in each state, also helped to strengthen the state WRM institutions.

(ii) Improvement of the Water Resources Legislation in the States of Alagoas, Ceará, Minas Gerais, Paraíba, and Rio Grande do Norte.

(iii) Support to the creation of state water resources management agencies in the States of Paraíba and Rio Grande do Norte.

(iv) Support to the restructuring of the Minas Gerais Institute for Water Management. (v) Implementation/Expansion/Improvement of the Water Resources Information Systems in

the States of Maranhão, Minas Gerais, Pernambuco, Piauí, Rio Grande do Norte, and Sergipe.

(vi) Financing of Water Resources Specialization Courses, at postgraduate level, in the States of Alagoas, Bahia, Ceará, Maranhão, Piauí, and Sergipe.

(vii) Training of technical staff in the States of Alagoas, Bahia, Ceará, Minas Gerais, Paraíba, Pernambuco, Piauí, and Sergipe

(viii) Training in Operation and Maintenance of the Water Supply Systems in the States of Bahia, Pernambuco, and Piauí

(ix) Training of Water Users in the States of Alagoas, Bahia, Ceará, Maranhão, Minas Gerais, Pernambuco, and Piauí.

(x) Financing of Seminars to Support the Institutional Organization of the Water Resources Sector in the State of Ceará.

(xi) Support to the preparation of career plans and institutional restructuring in the State of Pernambuco.

38

Hydrology and Water Quality

(i) Expansion and Improvement of the Hydro-meteorological Network in the States of Alagoas, Ceará, Pernambuco, Piauí, Rio Grande do Norte, and Sergipe.

(ii) Support to the implementation of the Telemetric Monitoring System of Missão Velha Aquifer in the State of Ceará.

(iii) Support to the Implementation of Surface Water Resources Quality and Quantity Analysis Systems in the State of Paraíba.

(iv) Classification of Water Bodies in the State of Sergipe. (v) Support to the establishment of Environmental Sanitation Programs, from used water in the

States of Bahia, Ceará, Minas Gerais, Paraíba, Pernambuco, and Rio Grande do Norte. (vi) Installation and Training of the National Oceanic and Atmospheric Administration

(NOOAA)/HRTP System in the State of Ceará. (vii) Training in Operation and Maintenance of Data Collection Platforms in the State of Ceará.

Bulk Water Rights

(i) Implementation of Water Rights Systems in the States of Alagoas, Minas Gerais, Pernambuco, and Rio Grande do Norte.

(ii) Cadaster of Water Users in the States of Ceará and Maranhão.


(i) Support to the Creation of Basin Committees and Water Users Associations in the States of Alagoas, Maranhão, Minas Gerais, Paraíba, Pernambuco, Piauí, Rio Grande do Norte, Sergipe.

(ii) Programs for Mobilization and Awareness of communities involved in sanitation works in the States of Bahia, Minas Gerais, and Pernambuco.

Outputs Completed by the Additional Financing at the Federal level Water Entities and Institutional Strengthening

(i) Preparation of the legal norms, identified as priority, aiming at the adequacy, complementation, and conversion of the legal and institutional framework for Integrated Water Resources Management in Brazil (IWRM).

(ii) Implementation of the Strategic Management System. (iii) Preparation of the Strategic Mapping of the National Water Agency (iv) ANA Activities Report – 2007. (v) Publication of the First Edition of the Book I Prêmio ANA.

(vi) Preparation of books about water resources management to guide SINGREH entities – National Water Agency, Basin Committees and Agencies, Elaboração de cadernos sobre os instrumentos de gestão de recursos hídricos destinados a orientar os entes/instituições do SINGREH – Agência Nacional de Águas, Comitês e Agências de Bacia, Órgãos Gestores Estaduais de Recursos Hídricos.

39

(vii) Structuring of ANA’s Institutional Communication. (viii) Preparation of INTERÁGUAS Project.

(ix) Editing of ANA’s Institutional Material and Publications on Water Resources Management.

(x) Acquisition of several types of material and equipment for ANA’s structuring – IT, electrical equipment, filing, furniture.

(xi) Dissemination of ANA’s Program Depollution of Hydrographic Basins – PRODES in the “Exposición Internacional Zaragoza 2008 - Agua y Desarrollo Sostenible”.

(xii) Support to events, workshops, lectures and meetings of interest of the National Water Agency.

Planning and Studies

(i) Preparation of the Strategic Planning of the National Water Resources Management System (SINGREH).

(ii) Metropolitan Regions Atlas – Urban Water Supply. (iii) Brazil Water Resources State of the Art – Functioning and Integration of the State of the

Art Report with ANA’s Corporative Database. (iv) Updating and Improvement of Northeast Atlas – Urban Water Supply. (v) South Atlas – Urban Water Supply.

(vi) Atlas of Urban Water Supply – Brazil (complementation of the Atlases Northeast, South and Metropolitan Regions)

(vii) Conceptual Founding and Structuring of the Water Resources Strategic Plan of the Amazon Basin – Right Side Affluents.

(viii) Physical-Biotic Characterization of Basins for the Water Resources Strategic Plan for the Amazon Basin – Right Side Affluents.

(ix) Socioeconomic, Cultural and Political Framework of the Amazon Region and the Basins for the Water Resources Strategic Plan for the Amazon Basin - Right Side Affluents.

(x) Institutional and Legal Aspects Assessment for the Water Resources Strategic Plan for the Amazon Basin - Right Side Affluents.

(xi) Assessement of Multiple Uses of Water Resources, Conflicts and Environmental Vulnerabilities for the Water Resources Strategic Plan for the Amazon Basin - Right Side Affluents.

(xii) Technical Support to ANA for Programs, Projects and Actions in Basins for the Water Resources Strategic Plan for the Amazon Basin - Right Side Affluents.

(xiii) Technical Support to ANA for the Investments Program for the Water Resources Strategic Plan for the Amazon Basin - Right Side Affluents.

(xiv) Support to ANA in the Paranaíba River Basin Plan. (xv) Development of an Alternative Financial Mechanism to Provide Incentives to the Rational

Use of Water Resources. (xvi) Assessment of Groundwater Resources and Proposal of a Joint Management Model for

Apodi Aquifers in the States of Rio Grande do Norte and Ceará. (xvii) Rational Water Use Program.

(xviii) Preparation, Development and Implementation of the Program: Water Resources Management integrated to the Coastal Management, including Humid Areas.

40

(xix) Seminar of Consolidation of the Strategic Planning for Adequacy, Complementation and Convergence of IWRM Legal and Institutional Frameworks in Brazil.

(xx) National Seminar of SINGREH Planning. Information Systems (i) National Water Resources Information System – Technological Architecture for Integration

of External Agents with ANA. (ii) National Water Resources Information System – Analysis and Project Planning and

Document Inteligence Subsystem. (iii) National Water Resources Information System – Development of Geographical Web

Services to Respond to the Demand of the Geographical Intelligence Subsystem. (iv) National Water Resources Information System – Development (Analysis, Project and

Construction) of HIDRO. (v) Acquisition of equipment to the National Water Information System (SNIRH).

(vi) Acquisition of software for structuring ANA’s Hydrological Studies Nucleus. Hydrology and Water Quality

(i) Preparation of the Water Observatory Project and acquisition of equipment. (ii) Qualification of Hydrological Data and Reconstitution of Natural Flows in the Country.

(iii) Development of the Portal of the National Water Quality Program. (iv) Preparation of Indicators for Operation Costs of Water Quality Monitoring Networks, to be

used as an auxiliary tool to the analyses of the National Water Quality Program. (v) International Workshop on Groundwater Monitoring.

Bulk Water Rights

(i) Establishment of norms and procedures for water rights enforcement control and preparation of ANA’s water rights enforcement manual.

(ii) Preparation of Water Rights Manual with ANA’s Technical and Administrative Procedures.

(iii) Acquisition of equipment for water rights enforcement. (iv) Establishment of Equipment Norms for Measuring and Registering of Flows and Volume

for the use of Water Users. (v) Development of Functions and Improvement of Modules of the National Water Users

Cadastre System (CNARH). (vi) Acquisition of ArcView and ArcGIS software, including training and maintenance

services. (vii) Technical Meeting on Cadastre and Water Rights.

(viii) Second Workshop for the Integration of Operational Procedures for Bulk Water Charging. (ix) Study for Bulk Water Charging in Doce, Paranaíba and Grande River Basins.

41


(i) Preparation of books aimed at guiding staff of various public entities, NGOs and private organizations on the creation, organization and functioning of river basin committees.

(ii) Preparation of books aimed at guiding staff of various public entities, NGOs and private organizations on the creation, organization and functioning of water agencies.

(iii) Social Mobilization for the Implementation of Piranhas-Açu River Basin Committees. (iv) Support to the “General Assembly of Installation and Elections of the Board of Directors of

Paranaíba River Basin Committee. (v) Support to the “General Assembly of the Latin American Network of Basins Organizations.

Outputs Completed by the Additional Financing at the States level Water Entities and Institutional Strengthening

(i) Training of technical staff in the states’ water entities. (ii) Institutional Strengthening of the states’ water entities (acquisition of furniture, books,

technical journals, IT equipment, telecommunicaiton equipment, software). (iii) International Seminar "Water Governance: The River Basin and the Ecosystmes” – State of

Ceará. (iv) Production of Videos about Jaguaribe Hydrographic Regions and Water Resources

Management in the State of Ceará. (v) Creation, Editing and Printing of Materials and Publications (participatory management,

institutional publications). (vi) Extension Course – Water Mangement in Ceará and Context in the International Scenario.

(vii) Technical Study on Water Resources and Environmental Legislation in the State of Ceará. (viii) Post Graduation Course on Water Resources and Environmental Management in

Hydrographic Basins – State of Ceará. (ix) Study for the Structuring of the Water Resources Management Entity – State of Maranhão. (x) Study for the preparation of Draft Regulation of the Instruments included in the State

Water Resources Law – State of Piauí. (xi) Study of the Implementation of a Water Resources Management agency in the State of

Piauí. Planning and Studies

(i) Preparation and Implementation of the Communication Plan – State of Alagoas. (ii) Preparation of the Alagoas State Water Resources Plan.

(iii) Preparation of the Water Resources Master Plan and Classification of Rivers of Camaragibe and Northern Littoral Hydrographic Region – State of Alagoas.

(iv) Studies for Classification of Water Bodies in the State of Bahia. (v) Review and Update of the Water Management Plan of the Metropolitan Basins and

Preparation of the Water Management Plan of Littoral Basins, Coreaú and Acaraú River Basins in the State of Ceará.

(vi) Support to the preparation of the Water Resources Strategic Plan of the State of Ceará.

42

(vii) Preparation of Terms of Reference for the Maranhão State Water Resources Plan. (viii) Preparation of Terms of Reference for the Diagnosis of Current Water Situation and

Scenarios for Future Uses of Surface and Groundwater Resources in the State of Maranhão. (ix) Support to the Second Phase of Minas Gerais State Water Resources Plan. (x) Preparation of the Water Resources Master Plan of Araçuai River Basin in the State of

Minas Gerais. (xi) Preparation of the Water Resources System Communication Plan in the State of Minas

Gerais. (xii) Monitoring of Flows in State Water Bodies – State of Paraíba.

(xiii) Preparation of the Hydro-Environmental Plan of Capibaribe River Basin in the State of Pernambuco.

(xiv) Preparation of the Hydro-Environmental Plan of Ipojuca River Basin in the State of Pernambuco.

(xv) Preparation of the Hydro-geological Study of Jatoba Sedimentary Basin in the State of Pernambuco.

(xvi) Support to the preparatory studies for the Pernambuco Sustainable Water Project. (xvii) Preparation of Piauí State Water Resources Plan.

(xviii) Support to the Hydrographic Basin Plans in the State of Paraná. (xix) Bathymetric Survey in Reservoirs in the State of Rio Grande do Norte. (xx) Preparation of the Water Resources Master Plan of Maxaranguape River Basin in the State

of Rio Grande do Norte. (xxi) Studies on Sources of Revenue and Costs of the Water Resources Management System of

the State of Rio Grande do Norte. (xxii) Preparation of Sergipe State Water Resources Plan.

(xxiii) Preparation of Japaratuba, Piauí and Sergipe River Basin Plans in the State of Sergipe. Information Systems

(i) Acquisition of equipment for the structuring of the Water Resources Information Systems in the State of Alagoas and Rio Grande do Norte.

Hydrology and Water Quality (i) Acquisition of equipment for the strengthening of the Hydro-meteorological Monitoring

Network in the State of Alagoas. (ii) Structuring of the Water Quality Analysis Laboratory in the State of Alagoas.

(iii) Acquisition of Data Collection Platforms for the Meteorological Network of the State of Minas Gerais.

(iv) Support to the Expansion and Increase in Density of the Sergipe State Hydro-meteorological Network.

(v) Acquisition of equipment for the strengthening to the Hydro-meteorological and Water Quality Networks in 11 States outside the Semi-Arid region: Acre, Amazonas, Amapá, Pará, Rondônia, Roraima, Tocantins, Mato Grosso do Sul, Mato Grosso, Espírito Santo, Rio Grande do Sul and Paraná; and the Federal District.

43

Bulk Water Rights

(i) Acquisition of equipment for the structuring of the Water Rigths Enforcement Control Systems in the Management Entities in the States of Alagoas and Maranhão and in 15 States outside the Semi-Arid region: Acre, Amazonas, Amapá, Pará, Rondônia, Roraima, Tocantins, Mato Grosso, Goiás, Espírito Santo, São Paulo, Rio de Janeiro, Rio Grande do Sul, Paraná and Santa Catarina; and the Federal District..

(ii) Cadastre of Users and Regularization of Water Uses of Water Sources in the State of Paraíba.

(iii) Technical and legal study on water charging in the State of Ceará. (iv) Methodology Study and Impact Evaluation of Water Charges in Rio das Velhas Basin in

the State of Minas Gerais. (v) Training to support the water rights enforcement control in the State of Minas Gerais.


(i) Courses and Seminars for Training of Members from the State Water Resources Council and the River Basin Committees in the State of Alagoas.

(ii) Acquisition of equipment for the support to the Structuring of River Basin Committees in the States of Alagoas and Sergipe.

(iii) Implementation of Committees in Bahia State Hydrographic Basins. (iv) Establishment of the Bahia Committees Forum. (v) Seminars for discussion about the demands of the Metropolitan and Littoral River Basins,

and Jaguaribe, Curu, Acaraú and Coreaú River Basins in the State of Ceará. (vi) Logistical support to the National Meeting of Hydrographic Basins in the State of Minas

Gerais. (vii) Social Mobilization to support the Ceará-Mirim River Basin Committee in the State of Rio

Grande do Norte. (viii) Preparation of Proposals for the Creation of Ininhema and Pardo River Basins Committees

in the State of Mato Grosso do Sul. 15. In summary, the project also established of basin committees in the States of Alagoas, Bahia, Ceara, Sergipe, Rio Grande do Norte, Minas Gerais and Mato Grosso do Sul. In the federal rivers the establishment of the Piranhas-Açu River Basin Committee and the Paranaíba River Basin Committee where a comprehensive federal and state water allocation system was implemented. 16. The project supported dissemination, training and study tours in Brazil as well as 27 Symposiums, Congresses and Workshops to discuss milestones and activities directly linked to water resources management. 17. As part of the capacity building activities, the project funds were critical to buy PC computers, which were a very exclusive asset at the time, meteorological and hydro equipment to improve the coverage of the Water Information System in Brazil. 18. The project supported the formulation of the National Water Plan for Brazil, which is the stone edge in the hydraulic policy of the country and has received considerable political support

44

at the federal and state levels. and the formulation of Ceará’s Strategic Water Resources Plan, called Pacto das Aguas (Water Agrement of the Parties), which has been approved by the State Assembly considering the different points of view of stakeholders and basin committees. 19. The Northeast Atlas for urban water supply was prepared to identify and select alternatives to secure water sources to respond to present and future demands. The Atlas includes: (a) diagnosis for the bulk water supply situation in the municipalities; (b) analysis of existing and possible water conflicts considering the future economic growth; (c) identification of possible alternatives to guarantee the supply of water for future demands and its technical solutions; (d) review of future sustainability of the identified solutions. The Atlas provided information on surface and groundwater, demand estimates, economic and financial analysis of alternatives, cost recovery and institutional arrangements for the operation of the proposed solutions. 20. A summary of the achievements of the States in Water Resources Management supported by Project is presented in the Table 2.1 below. Component 2: Infrastructure (US$212.0 million—including contingencies, 64 percent of total estimated cost) 21. Description: This component financed the construction of water storage and conveyance infrastructure to provide reliable water supplies (in terms of both quality and quantity) for towns and communities with enduring problems of water supply for domestic consumption. The local Project Preparation Unit, under the federal Secretariat of Water Resources (SRH), selected the first-year works based on rigorous multi-criteria screening, including: (a) the nature of the problem, (b) socioeconomic conditions prevailing in the area, (c) the level of local institutions’ commitment, (d) consistency with water resources management plans, and (e) the level of technical preparation of the proposals submitted by the participating States. 22. The component also o elaborated the eligibility criteria to be used for selecting proposed subprojects and incorporate them into the Operational Manual. The major criteria were related to the following indicators: (a) technical, for example, per capita water consumption of 150 liters per day for towns with populations between 4,000 and 50,000 inhabitants and, for communities of less than 4,000 inhabitants, 60 liters per day initially but increasing to 120 liters per day in 20 years; (b) economic/financial, for example, internal economic rates of return of at least 12 percent and water charges (based on applicable tariffs) covering 100 percent of O&M cost and at least 25 percent of investment cost; (c) institutional, for example, construction of subprojects to be preceded by the issuance of formal water rights for the proposed works and approval by the Bank of a plan for A, O&M of the infrastructure considered (established criteria for acceptance of the A, O&M plans were also incorporated into the Operational Manual); and (d) environmental, for example, strict compliance with Bank procedures and guidelines, including for resettlement and indigenous development plans. 23. The original project completed 41 works and the additional financing has already completed three out of the seven works included in its revised scope. The total of 48 works, including construction of pipelines, three dams, and recovery of pipeline systems directly benefiting a population of 2 million inhabitants (originally estimated at 1.3 million). In addition, 2 million

45

water users in the Fortaleza Metropolitan Area have benefited directly from the completion of the rehabilitation work in the Umburanas subproject, bringing the total number of beneficiaries to nearly 4 million.

24. The works financed by the project include mostly bulk water supply systems. The project also financed the construction of 3 dams and a few rural water supply systems, some of them including environmental sanitation programs. (See Table 2.2 below.)

46

States Water Law

Resolutions of

the State Water

Resources

Councils

River Basins

Committees in

operation

River Basins

Committees

in installation

(2010)

Water Users

Associations

Water

Resources

Funds

% of water

users

cadastre

Water

Rights

granted

Water ChargesRiver Basin

Plans

State Water

Resources

Plans

Coverage of

the

Meteorological

Network (% of

territory)

Coverage of

the Quantity

Network (%

of territory)

Coverage of

the Quality

Network (%

of territory)

Alagoas

Approved in 1997. The consolidation of

a new law is currently underway.

35 5 2 3Yes, operating

actively

40%, of an universe of 7.500 users

850 Not implemented

13 plans corresponding to

more than 80% of the total

Yes, updated 57% 26% 0%

Bahia1995, 1998, 2005,

2006 and 200878 14 0

63 (including intermunicipal consortia of water users)

No 20% 4500

Implemented in the reservoirs operated by the Rural Water Company (CERB) in the Paraguaçu

and Itapicuru river basins.

17 plans out of 26 to be prepared. All of the current plans

will be revised.

Yes, but being complemented

80% 40% 38%

Ceará Approved in 199234 resolutions and

4 deliberations10 -

90 commissions of reservoirs

No 73% 1564

Implemented with charges to the

industrial, WSS and irrigation sectors in

all basins.

8 plansYes, updated in

2005100% 90

Data not available

MaranhãoApproved in 1997

and revised in 2004

2 resolutions. The Concils is being

restructuredNone 0

No Water User Association, only an intermunicipal

consortion.

No 8% 142 No

None, but there are 3 studies that are being used in the water resources

management

No 100%

Only the network

operated by ANA (no

percentage available)

Only WSS company in the

main capital and large towns

Minas GeraisApproved in 1994

and revised in 1999 19 normative deliberations

29 05 organizations of

water usersYes, with 20

million in 2006

% not available. Cadastre of 6

basins was done.

41,134

Not implemented but there are studies

in Velhas and Paracatu river

basins

18 plansYes, being finalized

more than 50% 50% 96%

ParaíbaApproved in 1996

and revised in 20069

4 (3 of them with entities equivalent

to river basin agencies)

0 54 associations Yes More than 80% 2696Not implemented

but there are advanced studies

6 plans (55%) Yes and updated 100% 80% 60%

PernambucoApproved in 1997

and revised in 2005 50 5 - 9 users councils Yes No information 1600 Not implemented 10 plans Yes but outdated 90% 100% 100%

Piauí Approved in 2000 58 committes, but 3

of them deactivated- - Yes 2% 1393 Not implemented 1 plan Yes

100%, but with low density



Rio Grande do

NorteApproved in 1996 11 None 0

127 association or water users commissions

Yes, but with few resources

and not operating well

25% 2,453 Not implemented 1 plan Yes but outdated 100% 60%

Data not available, but there are two networks in operation.

SergipeApproved in 1997

and modified in 2002 7 3 - -

Yes, operating relatively well

54% 300 Not implemented 3 plans (100%)Yes, being finalized

80% 20%

There is no network, only

punctual monitoring.

Water Resources Management in the States

47

Table 2.2 – Works financed by the project

State WorkKm of

Pipeline

Benefited

Population

(inhab.)

Total Cost of

the Work

(R$Million)

Total Cost

of the Work

(US$Million)

Alagoas Estrela Alagoas / Minador do Negrão Pipeline 23 10,500 2.00 1.18Amélia Rodrigues Pipeline 30 32,564 6.04 3.55Feijão Pipeline (2nd Phase) 101 20,000 5.42 3.19Feijão Pipeline (3rd Phase) 377 55,000 25.75 15.15Piritiba/Mundo Novo Pipeline and Sewage Treatment - 20,100 8.97 5.27Padrão Central Rural Water Supply Simplified System 113 10,500 3.66 2.15Padrão Central Rural Water Supply Simplified System 27 8,500 5.90 3.47Planalto/Barra do Choça Pipeline 22 43,723 20.21 11.89Trici-Tauá Pipeline 20 26,000 2.70 1.59Cascável Pipeline 9 49,261 1.54 0.91Lima Campos/Icó Pipeline 12 19,122 1.69 0.99Iguatu Pipeline 20 53,506 5.23 3.07Acarape Pipeline 56 154,000 10.59 6.23São Gonçalo do Amarante Pipeline 19 20,886 2.66 1.56Baturite/Aracoiaba Pipeline 25 50,719 5.89 3.46Chaval/Barroquinha Pipeline 30 21,937 2.65 1.56Arneiroz II Dam - 20,000 21.21 12.47Rehabilitation of Umburanas Siphon* 8 * 20.28 11.93Catarina Pipeline 19 12,918 7.55 4.44Catunda Pipeline 2 6,712 2.31 1.36Graça/Pacujá/Mucambo Pipeline 42 27,271 11.05 6.50Lavras da Mangabeira Pipeline 26 20,634 7.93 4.66Serra do Félix Pipeline 19 7,210 4.57 2.69Pires Ferreira Pipeline 16 5,571 3.77 2.21SISAR - Rural Water Supply Simplified System - 15,000 0.89 0.53Ibaretama Pipeline 28 7,445 4.05 2.38Missi Dam** - 55,864 22.16 13.03Riacho da Serra Dam** - 8,231 12.19 7.17Águas Vermelhas System - 22,810 13.69 8.05Araçuaí- 1A System - 48,200 7.44 4.38Araçuaí- 1B System - 11,315 16.21 9.53Araçuaí- 1C System - 17,123 14.68 8.64Diamantina System - 13,629 11.17 6.57Cariri Pipeline 160 49,300 26.74 15.73Congo Pipeline 125 55,354 35.00 20.59Afrânio Dormentes Pipeline 177 33,671 13.39 7.87Afogados da Ingazeira Pipeline*** 111 46,086 19.87 11.69Arcoverde Pipeline 102 24,000 8.89 5.23Luiz Gonzaga Pipeline 119 45,500 28.25 16.62Rehabilitation of Belo Jardim Water Supply System - 68,000 5.00 2.94Expansion of Limoeiro Pipeline** 15 46,000 7.28 4.28Expansion of Agrestina Pipeline** 38 47,863 21.40 12.59

Piauí Garrincho Pipeline 195 61,000 37.20 21.88Mossoró Pipeline 123 317,719 40.38 23.75Serra da Santana Pipeline (2nd Phase) 207 40,457 25.13 14.78Serra de Santana Pipeline (3rd Phase) 24,000 7.40 4.35Piauitinga Pipeline 42 135,000 21.40 12.59Agreste Pipeline 56 147,627 22.11 13.01

TOTAL 48 works 2,514 2,037,828 611.47 359.69*The rehabilitation of Umburanas Siphon gave more efficiency to the Trabalhador Canal and improved water supply to about 2 million inhabitants at Fortaleza Metropolitan Region.**Works at final stage, completion during first semester of 2011.***Pipeline not in operation yet. The State is fixing problems found with the pipes. Completion expected by June 2011.

R$1.70 = US$1.00

Sergipe

Bahia

Minas Gerais

Ceará

Pernambuco

Rio Grande do Norte

Paraíba

48

Component 3: Planning, Studies, and Project Design (US$41.6 million – including contingencies, 13 percent of total estimated cost) 25. Description: The component: (a) produced water resources plans, which are the basic tools for implementing a sustainable water resources management system in the region; (b) developed specific studies aimed at increasing rationality in the use of water (action on demand) and water availability/supply; and (c) developed a portfolio of subprojects of needed infrastructure expansion, sufficiently detailed to be procured, for construction under the infrastructure component of the project. 26. The component had two major elements: (a) planning, at both the State and river basin levels, and (b) specific studies and pre-investment studies, necessary for the identification of solutions to the imbalance between water demand and availability, during dry spells, in river basins of the semi-arid region. 27. The planning subcomponent included: (a) initial assessment of water resources (to be implemented only in those states that needed to elaborate basic water resources issues), (b) implementing state WRM systems covering strategy specific to each state, (c) state water resources master plans (for states that did not have one and updating for those that did) that went beyond a collection of river basin plans to include ranking of initiatives for budgetary purposes, (d) river basin water resources plans selected for river basins with actual or potential conflict in the use of water, and (e) plan for rehabilitation of existing infrastructure. 28. The specific studies and pre-investment studies subcomponent included: (a) study of water availability that included both surface water and groundwater (particularly in the context technological advances on salt extraction); (b) pre-investment feasibility studies that encompassed sufficient details (engineering designs, cost estimates, social and environmental impact assessments, resettlement and compensation plans) to be procured under the infrastructure component; (c) refinement of operation rules of several large reservoirs of the region to incorporate long-term consequences and interests of downstream areas; and (d) drought emergency plans that can coordinate various agencies better, for example, in the provision of water trucks during droughts, and bring down costs. 29. The Federal and State Governments shared resources and responsibilities in the implementation of the specific studies and pre-investment studies subcomponent. Allocation of resources managed by the States was to be on a competitive basis, from the project-supported State Studies Fund, using the same procedure as for the WRM component. States that were “beginners” received initial financial support, outside the scope of State Studies Fund. This support helped establish an initial basic knowledge that would serve as a launching platform for competing for resources under the State Studies Fund. Key Outputs per State

30. State of Alagoas: (a) Master Plans of Coruripe, Jequiá, Lagoas, Niquim, Paraíba/Sumaúma, Poxim, Pratagy/Meirim, and São Miguel, River Basins; (b) Study of Demand for Water in the Main State River Basins; (c) Study for the identification of potential and quality of groundwater;

49

(d) Study for the Implementation of a sewage net in the municipality of Coqueiro Santo; and (e) Study for Regionalization of Flows in Riacho do Limeira River Basin. 31. State of Bahia: (a) Study for definition of the Hydrometeorological Network; (b) Project of Organization of water users in Reconcavo Norte river basin; (c) Administration, Operation and Maintenance Plan of the Third Phase of Feijão Pipeline, Planalto/Barra do Choça Pipeline, and Piritiba/Mundo Novo Integrated System. 32. State of Ceará: (a) Impact of Small Dams and Reservoirs; (b) Environmental Impact Evaluation of Arneiroz II and Taquara Dams; and (c) Project of Telemetric Monitoring System of Missão Velha Aquifer. 33. State of Maranhão: (a) Participatory Management Plan in Water Resources of the Baixada Maranhense Environmental Protection Area; State Water Resources Information System; (b) Organization of the Munim River Basin; and (c) Preparation of Water Users Inventory in Munim River. 34. State of Minas Gerais: (a) Project for Participatory/Environmental Management of Riachão and Calhauzinho Rivers; (b) Consolidation of Technical Studies about the Region of Riachão River Basin; (c) Study for the improvement of the sanitation system in Doce River Basin; (d) Project of Social Mobilization and Environmental Education of Araçuaí and Diamantina Systems; (e) Studies for Water Negotiated Allocation and Cadastre of River Basins with Potential Conflict; (f) Evaluation of Adequacy in programs, communitary mobilization, and environmental and sanitary education plans and in the Operation and Maintenance Plans of the water supply systems in the state of Minas Gerais; (g) Preparation of Manual and Reference Script of Actions and Procedures for Implementation of River Basin Committees; (h) Preparation of the Administration, Operation and Maintenance Plan for Águas Vermelhas and Diamantina Systems; and (i) Preparation of the First Phase of the State Water Resources Plan. 35. State of Paraíba: (a) Strategy for Management and Use of Reservoirs; (b) Water Demand Survey; (c) Master Plans of Gramame and Paraíba River Basins; (d) Bulk Water Charging Study; (e) Administration, Operation, and Maintenance Plan of Cariri Pipeline System; (f) Preparation of the Water Resources State Plan; and (g) Preparation of Methodology for the Implementation of the Regulatory Framework of Cremas-Açu System. 36. State of Pernambuco: (a) Revision of the State Water Resources Plan; (b) Survey of Hydraulic Works; (c) Marter Plans of Capibaribe and Ipojuca River Basins; (d) Studies of Water Availability in Goiana, Sirinhaém, and Una River Basins and in coastal basins; (e) Reservoirs Operation and Maintenance Plan; (f) Preparation of the State Project of Water Resources Investment; (g) Preparation of Cartographic Maps; (h) Study for Modernization of the Meteorologica Nucleus; (i) Administration, Operation, and Maintenance Plans for Afogados da Ingazeira and Luis Gonzaga Pipeline Systems; (j) Preparation of the Water Resources Use Plan of Recife Metropolitan Region, Zona da Mata, and Agreste Pernambucano and Integrated Management Model; (k) Hydrogeological Study of the Sedimentary Basin of São José Belmonte and Fátima; and (l) Preparation of the Proposal for the Creation of the State Water Resources Agency.

50

37. State of Piauí: (a) Study on Management Model, Use of Groundwater and Bulk Water Charging; (b) Preparation and Implementation of Integrated Procedures System for the Licensing and Guarantee of Hydraulic Infrastructure Rights in the State of Piauí; (c) Studies of Availability Scenarios and Hydraulic Demand in Several State River Basins; (d) Environmental Control and Administration, Operation and Maintenance Plans of Garrincho, Fartura and Caracol Pipeline System; (e) Preparation of the Engineering Design Projects for Implementation of Wells Flow Systems in Gurgéia Valley; and (g) Evaluation of the Exploitation Conditions of the Aquifers in the Municipality of Teresina. 38. State of Rio Grande do Norte: (a) Study of Water Availability of Boqueirão and Extremoz Lagoons; (b) Water Tariffs Study; (c) Evaluation of Demographic, Economic, and Social State Indicators; (d) Evaluation of the Institutional and Operational Impact in CAERN, from the charging of bulk water; (e) Diagnosis and Training Proposal to the Rio Grande do Noite State Institute for Water Management (IGARN) and SRH; (f) Reformulation and Updating of the Proposal for the Rio Grande do Norte Integrated Water Resources Management Project; (g) Preparation of a Pilot Proposal for the use of existing hydraulic infrastructure as part of the Água Boa Program; (h) Study of causes of degradation in Jandaira aquifer; (i) Study to Quantify the Water Supply of Jacu River Basin; (j) Preparation of the Rio Grande do Norte Integrated Water Resources Management Project; (k) Management Model for Small Communities Rural Water Supply Systems; (l) Purchase of Mobile Labs for Water Analysis; (m) Development of a Database and Computational System for the Cadastre of Water Users in Apodi/Mossoró and Piranhas/Açu River Basins; and (n) Study and Socioeconomic Analysis of Communities located at the lower part of Carmo River. 39. State of Sergipe: (a) Decision Support System for Water Resources Management; (b) Evaluation of Water Demand in the state main river basins; (c) Concept Study and Basic Detailing for the Supervision and Monitoring of Piauitinga Water Supply System; (d) Monitoring of Rivers; (e) Hydro-geologica Evaluation of Boquim, Estância, and Agreste Lagarto; (f) Preparation of a Digital Water Resources Atlas; (g) Operation and Maintenance Plan for Agreste and Piauitinga Integrated Systems; (h) Implementation and Organization of Piauí River Basin Committee; (i) Study for the implementation of the Efluents Licensing System; and (j) Preparation of Proposal for the Creation of the State Water Resources Agency and the State Water Resources Information System. 40. The Component also included the preparation of Studies of Technical Feasibility, Environmental Impacts and Economic and Financial Feasibility, Basic Projects and/or Engineering Designs for 40 water supply works in the States of Alagoas, Bahia, Ceará, Minas Gerais, Paraíba, Pernambuco, Piauí, Rio Grande do Norte, and Sergipe.

Component 4: São Francisco Watershed (US$8.6 million – including contingencies, 3 percent of total estimated cost) 41. Description: São Francisco river basin, the major river that traverses five of the 10 states of the project area, was experiencing a number of problems including: (a) the degradation of its upper basin where over 75 percent of the river total water flow is generated; (b) intensification of

51

water conflicts within the basin, especially between hydropower and irrigation; and (c) significant potential regional conflicts as the proposal of a trans-basin diversion to supply water to other States (Ceará, Paraiba, and Rio Grande do Norte) was the most controversial water issue in the Northeast. Solutions depended on political agreement on the principles that should guide the allocation of water rights by the Federal and State Governments, for users in the São Francisco river basin and for the eventual trans-basin diversion. 42. The component was to: (a) support the creation and effective start-up of the São Francisco River Basin Committee, as defined by the National Water Law; (b) provide financial support toward the development of WUAs in the basin; and (c) develop a simulation model for water allocation under the principle that water is an economic good, with emphasis on aspects such as: (a) the system of water allocation; (b) the costs for the different groups of users; (c) revenues of the Water Agency, also to be created as per the Water Law; and (d) the priority investments, at the river basin level, that would be financed by the future São Francisco Water Agency. 43. The activities planned under this Component were executed by the GoB with own resources. The Loan amount was reallocated to other components. Component 5: Management, Monitoring, and Evaluation (US$14.7 million – including contingencies, 4 percent of total estimated cost) 44. Description: This component was subdivided into three major interrelated but autonomous elements: (a) project oversight at the highest level; (b) project management at federal level, in support of State UEGPs (see WRM component); and (c) project monitoring and evaluation (M&E), and auditing. 45. The interministerial PROAGUA Managing Committee (Comite Gestor, essentially the same as the Executive Committee that was established to supervise project preparation), had responsibility for overall project oversight and decision making on major issues affecting the course of project implementation. With the federal Secretariat for Water Resources (SRH) acting as its Executive Secretary, the Comite Gestor fulfilled the following functions: (a) definition of the operational procedures to be followed for the planning, programming, and physical execution of project activities, including procurement and contracting; (b) approval of project Annual Operating Plans (Planos Operativos Anuais, POAs), both at the individual State level and in consolidated form for the whole project; (c) approval of contract agreements (convenios) between the Federal Government and participating States for project/subproject execution; and (d) evaluation of project performance results and deficiencies, in order to issue opinions and recommend corrective actions whenever necessary. 46. The core project management and coordinating unit was the Federal Project Management Unit (Unidade de Gerenciamento do Projeto, UGP), established within SRH, initially with consultants and private firm inputs. Consisting of a small general coordination team and two operational units, the central UGP worked in close collaboration with sister UEGPs at the state level, ensuring common standards and procedures for implementing and monitoring project activities in each of the participating states.

52

47. Primary responsibility for project monitoring and evaluation rested with the Project Monitoring and Evaluation Unit (Unidade de Monitoria e Avaliação, UMA), a special unit to be created within the Secretariat for Regional Policies (SEPRE), MPO. Together with the Federal and State UEGPs and in regular consultation with river basin committees, WUAs, and other local stakeholders, the UMA operated a permanent system of monitoring project progress and identifying implementation bottlenecks, in terms of both physical and institutional performance. In particular, UMA monitored the adequate allocation of water rights and enforcement of water use rights, efficient utilization of project infrastructure, participation of beneficiaries in A, O&M and/or satisfactory resolution of water conflicts in project areas. It also evaluated the project’s socioeconomic impact and monitored the existence of adverse environmental impacts, if these emerged during project implementation. Project auditing was undertaken under the supervision of the Federal Secretariat for Control of the Ministry of Finance. Since Bank requirements for audit may not follow the same procedures as those normally used by the Federal Secretariat for Control. 48. Outputs: Structuring of Management Units within ANA (UGPG) and within MI (UGPO) and the structuring of a Monitoring and Evaluation Unit (UMA); Technical Cooperation Agreement with UNESCO to support the federal management units at the total cost of US$4,920,899.00; Technical Cooperation Agreement with United Nations Development Programme to support the Monitoring and Evaluation Unit at the total cost of US$3,000,000.00; Technical Cooperation Agreement with UNESCO to support UGPO at the total cost of US$6,370,000.00; Technical Cooperation Project between SIH/MI and the U.S. Bureau of Reclamation to carry out the Project’s Monitoring and Evaluation activities at the total cost of US$2,629,050.00. Outcome and Output Indicators achieved by the Original Project and the Additional Financing

53

Table 2.3 – Original Project Indicators

Key Performance Indicators - Original Project Target End of Project Status at 12/31/2006

Standard criteria established for the implementation of new hydraulic infrastructure based on technical, economic, environmental, social and legal feasibility

standard criteria established

standard criteria established

Effective water users organizations, with strong user representation and participation created and/or strengthened

85 organizations 351 organizations

Numbers of families receiving stable and clean water in project areas increased115000 families of 5

people average407,565* families of 5

people averageLiving and health conditions of beneficiaries improved Not available Not availableRegulatory and institutional frameworks to formulate and implement efficient and sustainable water resources management policies and plans at federal level established

1 1

Regulatory and institutional frameworks to formulate and implement efficient and sustainable water resources management policies and plans in all 10 participating States established

10 10

Socio-economic baseline studies prepared 25 studies 27 studiesNumber of households in project areas with year-round access to water for human consumption by 15% by the second year of project implementation increased

115000 households 407,565* households

Federal Water Law (No. 9.433, passed January 1997) and existing state water laws in Bahia, Ceará, Minas Gerais, Rio Grande do Norte, Paraíba, Pernambuco and Sergipe applied and/or enforced

7 states 7 states

State water laws in the remaining three Northeast states (Piauí, Alagoas and Maranhão) created 10 laws 10 lawsState-specific water resources management plans prepared in good quality 7 plans 4 plansFederal and States River Basin Master Plans prepared 5 plans 5 plansStudies with the use of water quality hydrological models prepared 24 studies 48 studies

Demonstration of State Governments' commitment to grant State SRHs financial and administrative autonomy by or after project completion (e.g. appointment of autonomous SRHs in all 10 states, funding of these SRHs, establishment of bulk water tariffs system in at least five states);

appointment of autonomous SRHs in

all 10 states; funding of these SRHs;

appointment of autonomous SRHs in all

10 states; funding of these SRHs

By project completion, 50% of the WUAs in the project area effectively participate in A, O&M of water supply systems constructed under the project;

20 WUA 24 WUA

Bulk water charges established, based upon rational operational and management costs and beneficiaries’ socio-economic conditions

Bulk water charges established

No bulk water charge established

Implementation of A,O&M Plans for water supply systems 41 24Infrastructure Operation and Maintenance Manual for Basin and User Levels Organizations prepared and used for training of operators and users

Manual prepared No manual prepared

Socio-economic Base-line studies updated at project mid-term and completion; 25 studies 27 studiesTraining courses given at the federal level (organization of training events) 290 courses 254 coursesTechnical federal agencies trained 300 staff 1012 staffStates agencies trained 1300 staff 2723 staffRepresentatives of water users associations trained 85 staff 240 staffNumber of hydro-meteorological and water quality stations installed; 150 stations 16 stationsHydrological database and water resources information systems implemented in project states 10 states 10 statesSpecific environmental studies prepared 10 10Number of resettlement plans prepared (if any) 1 1Total of water supply systems (pipelines) constructed 25 40Total of dams constructud (if any) 1 1Km of pipelines constructed 1500 2,433Number of rehabilitation and maintenance plans for existing water infrastructure prepared; 7 plans 2 plansFeasibility studies prepared for water supply systems to be constructed by end of project period;

15 studies 51 studies

One Federal and 10 State UGPs (Project Management Units) established at project start-up 11 units12 (at the Federal level the project was divided

into two agencies)

Setting up of Project Information System; System set up and

functioningSystem set up and

functioning

Preparation of Annual Operating Plans (POAs) and progress reports of UGPsPOAs and Progress

reports prepared

POAs submitted to the Bank each year and

Progress Reports every quarter

Establishment of Project Monitoring and Evaluation Unit (UMA) at project start-up; monitoring reports;

UMA established and opertional

UMA established and opertional

Annual project audit reports by independent auditors.Reports prepared and

considered satisfactory to the Bank

Reports prepared and considered satisfactory to

the Bank

*In addition, the rehabilitation of Umburanas Siphon gave more efficiency to the Trabalhador Canal and improved water supply to about 2 million inhabitants at Fortaleza Metropolitan Region.

54

Table 2.4 – Additional Financing Indicators Key Performance Indicators - Additional Financing Target End of Project Status at 06/30/2010

Number of Brazilian states that have specific water management agencies and that are reasonably well-staffed or have promoted public selection processes for hiring personnel

6 states 6 states

Use of eligibility criteria for the approval of PROÁGUA works being applied to the selection of works financed by the MI.

Some water resources works at federal level

Most works at federal level

Population with improved, reliable water supply in areas benefited by PROÁGUA works

258,052 people 118,472*

Number of river basin committees supported by the Project 6 committees 16 committeesNumber of states outside the Brazilian Semi-Arid Region that have been supported by the Project

11 states 16 states

Number of states with improved implementation of basic water resources management instruments**

3 states 5 states

Number of states with improved implementation of intermediate water resources management instruments**

3 states 9 states

Number of states with improved implementation of advanced water resources management instruments**

3 states 5 states

Number of municipalities covered in the water supply Atlas developed by ANA 3,000 4,025

Number of new water infrastructure works completed and functioning 7 works 5 worksNumber of completed works with an Administration, Operation, and Maintenance Plan

7 works 5 works

Number of works with public hearings held with the benefited population 7 works 14 works

There are periodic reports by the PMU (MI/ANA) on: i) analysis of the program’s operational performance; ii) data and analysis of outcome indicators; iii) records of decisions and changes on actions, terms and resources.

Reports prepared and delivered to the Bank

Reports prepared and delivered to the Bank

Number of contracted works that are suspended or cancelled Zero ZeroNote: * During the Additional Financing phase, the project financed 5 water supply systems. These works are starting partial A3operation, but not totally completed yet. The calculation of benefited population adopted a criteria that considered the inhabitants that have already received water from the new system.** According to the monitoring system developed by ANA in 2006 to evaluate water resource management at state level, which includes 30 variables classified in three levels of complexity: basic, intermediate, and advanced. Water rights and plnning showed the best qualitative improvements with more social participation. Although it was not object of this assessment, it was noticed that the lack of permanent staff is the main limitant factor to the progress of water reources management.

55

Annex 3. Economic, Financial and Fiscal Impact Analysis 1. According to the PAD, the economic, financial and fiscal feasibility of the Project was verified separately for the components (1) Water Resources Management and (2) Infrastructure. In this ICR, for a clear comparison between the PAD estimate and actual results, the same evaluation methodology ex-ante, applied at appraisal, was used to verify the economic, financial and fiscal efficiency of the Project, after its implementation, incorporating all of the actual costs of the investment, operation and maintenance, as well as the revenues. The Water Resources Management Component was evaluated using a Minimum Impact Approach (Cummings, et al.12), including a calculation of annual values of the most probable impacts, while the Infrastructure Component was evaluated using the traditional cost-benefit analysis, with analytical tools specific for each type of analyzed activity and the SIMOP. Water Resources Management Component 2. The Water Resources Management Component promoted rational and efficient water resources use by: (i) helping establish relevant institutions and entities in those States where they did not exist; (ii) providing technical and financial assistance to strengthen relevant institutions and entities; and (iii) developing the tools for establishing and implementing the National Water Resources Management System (SINGREH). 3. The Minimum Impact Approach was then used to assess the minimum economic impact needed to justify the investments in the Water Resources Management Component. This approach determines the minimum impact (increased benefits and/or decreased cost) that the component must have on the relevant values within the water sector, to yield a minimum feasibility condition whereby benefits equal costs. 4. Therefore, the ex-post evaluation of the Water Resources Management Component, as the ex-ante evaluation, considered that the impacts generated were calculated from economic values of the following parameters: (i) rational water infrastructure investment decision-making (through better coordination and planning, as well as demand management), which in turn would impact the States’ expenditures on water-related emergency and health expenditures; (ii) positive affect on water demand, by establishing charges for water rights and water use; and (iii) improvements in the A, O&M of existing and new water infrastructure. 5. Using the same methodology applied in the ex-ante evaluation, Table 3.1 below shows the results of the ex-post evaluation that calculated an annual level of benefit equivalent to US$4.623 million, above the estimated during the ex-ante evaluation of US$3.881 million (the annual average of investments in the water sector currently, is R$3.15 billion, above the value used in the ex-ante evaluation). The annual costs of the Water Resources Management Component resulted in an average value of US$5.75 million, below the estimated in the ex-ante evaluation of US$8.7 million. This means that the minimum impact value to justify the investment, according to the ex-ante evaluation methodology, was around 0.1% of the social value calculated for the

12 Cummings R., Dinar A. and Olson D., “New Evaluation Procedures for a New Generation of Water-Related Projects”(World Bank Technical Paper No. 349), 1996.

56

water sector, well below that estimated in the ex-ante evaluation, indicating more economic efficiency. The ex-post cost-benefit ratio was 19.68, above the estimate in the ex-ante evaluation of 15.75.

Table 3.1 – Economic Benefits/Costs and Impacts US$1.00 = R$1.70

Economic Values (Benefits and Costs)

NPV

Impacts

(US$ million) ex ante

(US$ million) ex post

Type Annual Level (US$ million)



Annual water-related investments:

- Water Supply 245.0 210.1 +15% efficiency gain

36.8 31.5

- Sewage

467.0 400.2

- Public Irrigation 35.5 50.0 +15% efficiency gain

5.3 7.5

Total 747.5 660.3 Costs overruns on water-related investments

112.0 + 25% reduction 28.0

Minimum expected benefits from water-related investments:

- Eliminating 50% of water truck programs

293.3 315.7

- Reducing 50% of hospitalization costs

2.0 6.7

- Reducing 50% water-related emergency programs

63.8 70.9

- Reducing 50% time spent in procuring water

110.0 215.7

Other 249.0 435.8 Total 718.1 1,044.8 + 5% increase due

to coordination 35.9 52.2

Market value of water demand

1,694.5 2,202.8 + 1% Reduction through supply management

16.9 22.0

Physical water losses 608.9 715.8 Promote reduction 13.9 10.2

57

Economic Values (Benefits and Costs)

NPV

Impacts



Type Annual Level (US$ million)



by Water Supply Companies

to 25% over 20 years

Total Value 3,881.0 5,050.7 136.8 113.2

6. In Table 3.2 below, a comparison is made of results between the ex-ante and the ex-post evaluations, in which it can be verified that the results of the Water Resources Management Component were highly positive considering the same previous evaluation parameters.

Table 3.2 Summary of comparative analysis ex-ante and ex-post for the Water Resources Management Component

US$1.00 = R$1.70

Specification ex-ante ex-post

Annual level of benefits (*) 3,881.0 4,623.7 Estimated Result (*) 136.8 113.2 Annual Average Costs of the Component (*) 8.7 5.75 Minimum Impact 0.2% 0.1% Benefit/Cost Ratio 15.75 19.68

(*) Values in US$ million Infrastructure Component 7. In the ex-post evaluation of the Infrastructure Component the same methodology was used as that applied in the ex-ante evaluation. 8. The following economic and financial considerations have been made: 9. Once the projects were conceived in a time horizon of 30 years, equipment replacements were added at every 10 year point in the project. In relation to the benefits, from year 20 only the increase in demand as a result of the vegetative growth of the beneficiary populations was considered. 10. The conversion factors used in the transformation of financial prices into economic prices are the same used in the studies carried out in the ambit of the water supply and sanitation sector, financed by the Bank. These conversion factors are described in Table 3.3 below.

58

Table 3.3 – Conversion Factors

Items Conversion Factor Standard 0.94 Skilled labor 0.81 Unskilled labor 0.46 National and Imported Goods 0.88 National and Imported Equipment 0.80 Chemicals 0.83 Power 0.97

Source: PMSS II13

11. The price elasticity of demand of water used in the construction of the simulation model was -0.55021 for residential users and -4.74 for commercial, industrial and public users, according to the initial evaluation of the project Infrastructure Component. 12. The water tariffs used in the SIMOP modeling for consumption of current and future users of the water supply public system correspond to the marginal cost of water obtained in the effective tariff structure of the companies responsible for the operation of water supply systems. 13. Water demand is explained by economic relations that express the interaction between consumed quantities, prices, income and socioeconomic characteristics of the users. 14. In the evaluations of these sub-projects, alternative costs and average consumption of users currently not connected to the water supply public system, necessary for the SIMOP modeling, were taken into account and are presented in Table 3.4 below.

Table 3.4 – Costs of Alternative Sources of Water in the Brazilian Northeast US$1.00 = R$1.70

Type of Source Average Price (R$/m3)

Average Consumption

(m3/month/family)

Average Per Capita (l/inhab/day)

Water truck 1.16 4.14 46.96 Well with electric pump

1.38 12.20 138.26

Picking-up water14 3.85 3.85 43.67 Buying water15 7.90 3.17 35.94

Source: Information obtained during field visits to the water companies 15. Following the ex-ante evaluation, the opportunity cost of capital used was 12% and the time horizon considered for all analyzed projects was 30 years as described in Table 3.5 below.

13 PMSS II (Projeto de Modernização do Setor Saneamento II) – Bank-financed Second Water Sector Modernization Project (P043420) 14 Walking to the nearest water source to pick up water in containers. 15 Buying water in sources other than water trucks.

59

Table 3.5 – Economic Analysis Summary of the Main Assumptions, Benefits and Direct

Beneficiaries

Main Assumptions Discount rate 12% Time horizon 30 years Growth in real prices of output Constant Real Exchange Rate Constant (R$ 1.70 – US$ 1.00) Input prices Constant, last quarter of 2009 Output prices Constant average of prices 2002-2009 Coverage 95%

Benefits Water Supply and Sewage Increased, safe, year round water supply, and

access to sewage service

Direct Beneficiaries Water Supply 94,430 residences in urban areas and 3,970 in

rural areas and a total of 695,575 inhabitants by the year 2018.

16. Following the same methodology applied when the ex-ante evaluation was made, the ex-post evaluation presented positive results although with a few indexes somewhat lower than the ones previously estimated. By analyzing the group of eight sub-projects selected for implementation in the first year, an internal economic rate of return (IERR) of 15.6% was calculated, below that estimated in the ex-ante evaluation (17.4%). 17. A comparison between the results of the ex-ante and ex-post economic evaluations is presented in Table 3.6 below.

Table 3.6 – Comparative Summary of the Economic Evaluation

of the Infrastructure Component

Sub-project

NPV (US$ million) IERR (%) Benefit Cost Net Benefit

ex-ante ex-post ex-ante ex-post ex-ante ex-post ex-

ante ex-post

Mossuró Pipeline (RN) 34,459 36,701 29,718 30,458 4,741 6,243 13.7 14.2

Águas Vermelhas System (MG) 12,321 14,431 2,410 3,450 9,911 10,981 24.6 25.4

Cascavél Pipeline (CE) 2,232 2,700 919 1,148 1,404 1,552 20.3 20,5

Trici-Tauá Pipeline (CE) 3,421 3,078 1,326 1,657 1,915 1,421 23.2 20.3

Cariri Pipeline System (PB) 28,191 27,345 17,472 21,840 10,719 5,505 16.3 12.7

60

Arcoverde Pipeline System (PE)

16,853 17,695 8,322 10,402 8,531 7,293 23.6 21.2

Feijão Pipeline (BA) 6,667 7,067 3,374 4,217 3,293 2,850 19.4 16.6

Amélia Pipeline Rodrigues (BA) 10,634 11,697 3,775 4,718 6,859 6979 27.6 27.8

First year sub-projects

114,689 120,714 67,316 77,890 47,373 42,824 17.4 15.6

18. The internal financial rate of return (IFRR) calculated in the ex-post evaluation was 11.5%, higher than the estimated value in the ex-ante evaluation of 10.7%.

19. A comparison between the results of the ex-ante and ex-post financial evaluations is presented in Table 7 below.

Table 7 – Comparative Summary of the Financial Evaluation of the Infrastructure Component

Sub-project

NPV (US$ million) IFRR (%) Benefit Cost Net Benefit

ex-ante ex-post ex-ante ex-post ex-ante ex-post ex-ante

ex-post

Mossuró Pipeline (RN) 52,366 64,220 32,100 40,125 20,266 24,095 18.9 20.4

Águas Vermelhas System (MG) 1,351 1,918 3,460 4,186 -2,109 -3,268 3.4 3.0

Cascavél Pipeline (CE) 2,913 3,762 2,537 3,196 376 566 13.8 16.5

Trici-Tauá Pipeline (CE) 1,347 1,454 1,660 2,075 -313 -621 9.4 7.3

Cariri Pipeline System (PB) 5,656 6,221 18,860 22,140 -13,204 -15,919 1.2 0.9

Arcoverde Pipeline System (PE) 2,676 3,211 8,948 10,737 -6,272 -7526 3.4 2.5

Feijão Pipeline (BA) 2,302 2,555 4,302 5,506 -2,000 -2951 5.5 4.1 Amélia Rodrigues Pipeline (BA) 5,592 8,822 4,623 6,009 970 2,813 14.8 17.9


74,203 92,163 76,490 93,974 -2,287 -2,811 10.7 11.5

20. The ex-post fiscal impact evaluation, as well as the ex-ante evaluation, considered a fiscal gain generated by the Infrastructure Component as the effect of the infrastructure investment on revenue from: (i) taxes generated by expanded water supply services; (ii) decrease in water losses. Thus, in the ex-post evaluation a negative net present value of the net fiscal benefits of approximately US$3.8 million was calculated, higher than the estimate in the ex-ante evaluation of approximately US$5.4 million.

61

21. A comparison between the results of the ex-ante and ex-post fiscal evaluations is presented in Table 8 below.

Table 8 – Comparative Summary of the Fiscal Evaluation of the Infrastructure Component

Sub-project NPV (US$ million)

Benefits Subsidy Impact ex-ante ex-post ex-ante ex-post ex-ante ex-post

Mossuró Pipeline (RN) 865 994 -- -- 865 994

Águas Vermelhas System (MG) 2,062 2,165 3,892 4,098 -235 -332

Cascavél Pipeline (CE) 950 1,064 -- -- 950 1,064

Trici-Tauá Pipeline (CE) 1,275 1,377 316 354 959 1,028

Cariri Pipeline System (PB) 8,097 8,906 12,829 13,787 -4,732 -4,882

Arcoverde Pipeline System (PE) 714 856 6,427 6,654 -5,713 -5,835

Feijão Pipeline (BA) 2,727 3,026 2,045 2,890 682 1,908

Amélia Rodrigues Pipeline (BA) 1,860 2,269 -- -- 1,860 2,269


18,550 20,657 23,915 27,783 -5,365 -3,786

Based on the results of the ex-post economic analyses, it can be concluded that there are significant differences on the financial results of the subproject. Five projects have overall positive results.

62

Annex 4. Bank Lending and Implementation Support/Supervision Processes (a) Task Team members

Names Title Unit Responsibility/

Specialty

Lending

Luiz Gabriel T. Azevedo Lead Water Resources Specialist

LCSEN Task Team Leader

Irani Escolano Procurement Specialist LCSPT Procurement Alexandre Borges de Oliveira Senior Procurement Specialist LCSPT Procurement

Susana Amaral Financial Management Specialist

LCSFM Disbursement & Financial Management

Paula Silva Pedreira de Freitas Operations Analyst LCSEN Operations

Juliana Menezes Garrido Pereira Infrastructure Specialist LCSUW Water Resources & Environment

Daniele La Porta Consultant LCSEN Water Resources Manuel Felipe Rego Consultant LCSEN Economist Supervision/ICR

Luiz Gabriel Azevedo Lead Water Resources Specialist


Douglas C. Olson Lead Water Resources Specialist


Alexandre Moreira Baltar Water Resources Specialist LCSEN Task Team Leader

Manuel Contijoch Senior Water Resources Specialist


Paula Silva Pedreira de Freitas Operations Analyst LCSEN Operations Manuel Felipe Rego Consultant LCSEN Economist

Juliana Menezes Garrido Pereira Infrastructure Specialist LCSUW Water Resources & Environment

Lilian Pena Pereira Water & Sanitation Specialist LCSUW Water Resources & Environment

Musa S. C. Asad Senior Institutional Development Specialist

SASDA Water Resources

Marcelo Henrique G. Pereira Civil Engineer LCSEN Water Resources Infrastructure

Jose Baigorria Pera Senior Procurement Specialist LCSPT Procurement Efraim Jimenez Senior Procurement Specialist LCSPT Procurement Luiz C. Gazoni Senior Procurement Specialist LCSPT Procurement Luis R. Prada Villalobos Senior Procurement Specialist LCSPT Procurement Alexandre Borges de Oliveira Senior Procurement Specialist LCSPT Procurement Anemarie Guth Proite Procurement Specialist LCSPT Procurement

63

Luciano Wuerzius Procurement Specialist LCSPT Procurement Frederico Rabello Procurement Specialist LCSPT Procurement

Jose C. Janeiro Senior Financial Management Specialist

LCSFM Financial Management

Susana Amaral Financial Management Specialist


Claudio Mittelstaedt Consultant LCSFM Financial Management

Tulio Henrique Lima Correa Financial Management Specialist


Soraya Melgaço Consultant LCSSO Resettlement Katia Medeiros Natural Resources Specialist FAO Environment

(b) Staff Time and Cost

Stage of Project Cycle

Staff Time and Cost (Bank Budget Only)

No. of staff weeks USD Thousands

(incl. travel and consultant costs)

Lending

FY98 * 230.58 FY07 20.10 61.96 FY08 2.01 2.66 Total: 22.11 295.31

Supervision/ICR

FY99 * 85.14 FY00 42.54 136.26 FY01 19.82 104.00 FY02 38.68 103.61 FY03 32.63 95.44 FY04 29.75 63.94 FY05 34.49 75.00 FY06 29.34 110.82 FY07 36.22 126.97 FY08 57.00 170.61 FY09 61.28 181.70 FY10 29.12 96.16 FY11 2.18 79.30 Total: 413.05 1,428.95

* Number of staff weeks not recorded in the system.

64

Annex 5. Beneficiary Survey Results 1. The beneficiary survey took place in 2007, upon completion of the Original Project activities. The survey included the application of 812 questionnaires to a total of 3,503 people benefiting from 18 works, out of the universe of 528,333 beneficiaries in 9 states: Alagoas, Bahia, Ceará, Minas Gerais, Paraíba, Pernambuco, Piauí, Rio Grande do Norte and Sergipe. The State of Maranhão was not included in the survey as the project did not finance any work in that state. The survey results are a rough measure given that the project mostly financed bulk water supply and final results would depend on how the water is supplied to the final consumers. 2. The survey focused on a key variable with the question of how the users considered their quality of life improving or not with the project. In this sense, considering that “improved” encompasses “improved” and “improved a lot”, the answers were, in general, not very dispersed. 3. The key variables used were: (i) quality of life, with the question “how do you compare your current quality of life now with the period before the work that brought water to your house?”; (ii) economic dynamism, with the question “in your opinion, did the life of the people in this community improve with the completion of the water supply works?”; and (iii) quality of current water, with the question “how is the quality of the water used for consumption after the implementation of the systems (taste, odor, purity, etc)?”.

4. Using the beneficiary population in each work area as the ordering variable, it’s possible to aggregate and consolidate the works data by state. The Figure 5.1 below presents the results of the quality of life index. It can be concluded that regarding improvement in quality of life, the project presented very satisfactory answers in the users’ opinion. The graph (Figure 5.1) shows the states of Ceará and Piauí standing out the most positively; Bahia and Pernambuco slightly above average; Rio Grande do Norte, Sergipe, Minas Gerais slightly below, and finally Paraíba and Alagoas.

Figure 5.1

0

2

4

6

8

10

12


Quality of Life Index

65

5. The Quality of Life Index was created, weighting the answers with weights: “improved a lot” weight – 10; “improved” weights – 8; “didn’t improve or didn’t notice significant changes” weight – 5; and “got worse” weight – 1. 6. The other variables, although they are not the key research focus, also illustrate the users’ view of the project and are being analyzed in summary below.

7. For the economic dynamism variable the answers are similar to the above. Figure 5.2 below shows the results.

Figure 5.2

Note: “good” – weight 10; “regular” – weight 6.5 (average from 8 to 5); “bad” – weight 1.

8. The highlight is again the states of Ceará and Piauí. At the lower level, there are: Alagoas, Bahia, Minas Gerais and Paraíba. The remaining states are close to the average. In relation to this index, it is seen that, in general, the values are slightly below the previous ones referent to the quality of life. 9. With regards to the quality of water, the analysis becomes more clear when the comparison is made of answers for situations “before” and “now” with the project, as Figure 5.3 below shows. This analysis shows that it was the state of Ceará that had the greatest difference between the quality of water “before” and “now”, thus, the works in that state are the ones that had, in the users’ view, the most significant improvements in quality. The figure also indicates that, in general, there was quality improvement with the exception of the states of Alagoas, Paraíba and Sergipe, where the users pointed to a small decrease in quality.

0

2

4

6

8

10

12


Economic Dynamism Index

66

Figure 5.3

10. The aggregate graph for the supply index is the following.

Figure 5.4

11. In this aspect the highlights are the states of Ceará, Paraíba, Piauí and Sergipe. The states that indicate that they still have problems in supply are: Alagoas and Bahia, to a smaller degree. Conclusion 12. Quantitative research was made for 18 works in 9 states: Alagoas, Bahia, Ceará, Minas Gerais, Paraíba, Pernambuco, Piauí, Rio Grande do Norte and Sergipe. These works have a high social impact, with a total number of beneficiaries of around 500 thousand people.

0

2

4

6

8

10

12


Quality of Water

Before

Now

0

2

4

6

8

10

12


Supply Index

67

13. In the view of users, the project improved the quality of life of the beneficiaries. The states that presented the best results were Ceará and Piauí. The one that had poorer results was Alagoas. Considering that quality of life was the main variable of focus, it can be concluded that, in the view of the users, the project, in general, succeeded very well.

14. In respect to the economic dynamism aspect, it is curious to observe that the simple arithmetic average of the index used (7.9) is lower than the quality of life index (8.2). This indicates that the users tend to perceive that there was a bigger gain from the individual point of view than to the community in general. In that aspect, it’s worth noting that probably more time is needed for the works to influence positively the local economic dynamics.

15. Another relevant aspect that was studied was the improvement in the quality of water. In this aspect, there was general improvement in the quality with the exception of the states of Alagoas, Paraíba and Sergipe, where the users pointed out a small decrease in quality.

16. Finally, the last relevant aspect considered was the lack of water supply, analyzed through a supply indicator. The analysis points out the positive evaluation of the states of Ceará, Paraíba, Piauí and Sergipe. The states that indicate that they still have problems in supply are Alagoas and Bahia, at smaller scale. It can conclude that, for the majority of the states, the project resolved a regionally chronic problem related to supply.

17. Based on the data presented, it can be concluded that the project works brought significant benefits to the quality of life and, at a slightly lower scale, contributed to the economic dynamism of the beneficiary communities. The works also have provided water of good quality, representing the greatest improvement to some served communities, while, in others, the previous system already provided good quality water. Finally, the project contributed in a significant way to resolve water supply problems in the region.

18. In terms of results by state, the states of Ceará and Piauí were the ones that showed better results. These were also the ones that presented the largest group of works evaluated positively by the users. The worse results are with Alagoas and Minas Gerais, when excluding Águas Vermelhas System – which was very well evaluated by users. It is still worth noting that only one work was analyzed in the state of Alagoas.

68

Annex 6. Stakeholder Workshop Report and Results Not Applicable.

69

Annex 7. Summary of Borrower's ICR and/or Comments on Draft ICR

WATER RESOURCES SUSTAINABLE DEVELOPMENT PROGRAM PROAGUA16

1. The Water Resources Sustainable Development Program for the Brazilian Semi-Arid – PROAGUA/Semi-Arid, Loan Agreement 4310-BR, was implemented from 1998 to 2006, with investments of US$ 236.6 million, out of which US$ 158 million of World Bank financing and US$ 78.6 million of counterpart funds (Federal and States Governments). 2. The Project’s general objective was to guarantee the expansion of good quality water supply to the Brazilian Semi-Arid Region, promoting rational water use and sustainable development of the Region, including the States of Alagoas, Bahia, Ceará, Maranhão, Minas Gerais, Paraíba, Pernambuco, Piauí, Rio Grande do Norte and Sergipe. 3. The PROAGUA/Semi-Arid was the first Federal Government Project that encouraged public participation in water resources management. For the financing of bulk water infrastructure, the Project required the preparation of technical, financial, economic, environmental and social feasibility studies; and it recognized the importance of associating works with water resources management practices. The Project promoted big advances in water resources management in Brazil, with emphasis on the Northeast Region, through the structuring of the States’ Water Resources Management Systems and the implementation of priority infrastructure, guaranteeing expansion of good quality water supply. 4. For the implementation of the Project, a team of specialists was created inside the Secretariat of Water Resources of the Ministry of Environment (SRH/MMA). The implementation was even more strengthened with the transfer of responsibilities from the Secretariat of Water Resources to the newly created National Water Agency (ANA) in 2001, for the execution of the water resources management component; and from the Secretariat of Water Resources to the Secretariat of Hydraulic Infrastructure (SIH), in the Ministry of National Integration (MI) in 2000, for the execution of the infrastructure component. 5. The Project institutional framework included Hydrographic Basins of federal and participating states rivers that were beneficiaries of Project activities. The arrangements also included a Management Committee and two Project Management Units at the federal level: Project Management Unit – Management Components (UGPG/ANA) and Project Management Unit – Works Component (UGPO/SIH/MI). Project actions were defined in the Procurement Plans, which had yearly updates after the approval of the Consolidated Annual Operative Plan (POA) by the Management Committee. Actions were carried out in two distinct areas: from one side, the execution of actions under responsibility of the state management entities bodies defined in the POA of each State; and, from the other side, the execution of actions under responsibility of the federal executing entities, represented by ANA and SIH/MI, executed

16 The name of the Project given by the Government was Water Resources Sustainable Development Program – PROAGUA, divided into PROAGUA/Semi-Arid (Original Project) and National PROAGUA (Additional Financing).

70

directly as included in the Federal POA, or via contracts or cooperation agreements (convenios) signed with the States. 6. From 2001 to 2006, ANA was responsible for the management and implementation of the Water Resources Management, Studies and Projects, and part of the Administration, Monitoring and Evaluation Components, both at Federal and States levels, the latter through the use of specific cooperation agreements (convenios) with the States in the Semi-Arid Region. At the States’ level, ANA gave emphasis to the institutional strengthening of water resources management bodies, to the implementation of water resources management instruments and to the development of studies and projects, many which were needed for the execution of bulk water infrastructure, under the responsibility of the Ministry of National Integration (MI). From 2001 to 2006, the agreements with the States amounted to R$53.4 million of federal and state resources. 7. In the ambit of ANA, actions for institutional strengthening were carried out for the Agency aiming at the continuity of the implementation of the National Policy of Water Resources and the structuring of the National Water Resources Management System. Therefore, from 2001 to 2006, R$27.7 million were invested in the acquisition of goods and services; studies and projects, including Technical Cooperation Projects with international organizations. 8. In summary, during the first 8 years of implementation, the Project was responsible for major advances and benefits to the Brazilian Semi-Arid Region, with continued and sustainable actions, in the context of water resources planning and participatory management. 9. Water resources management actions developed included:

• Structuring of Water Resources Management Organizations;

• Updating of Legal Instruments Applied to Water Resources;

• Structuring of Water Rights Systems;

• Training for Water Resources Management;

• Support to the Creation of River Basins Committees;

• Structuring of State Water Resources Management Systems;

• Expansion of Hydrometeorological and Water Quality Networks;

• Structuring of the States’ Cartographic Database;

• Structuring of Information Systems;

• Environmental Education Projects;

• Studies on Water Charges;

• Water Resources Master Plans;

• Water Resources State Plans;

• Feasibility Studies and Basic Design Projects;

• Surface and Groundwater Availability Studies;

• Projects for Simplified Water Supply and Sanitation Systems;

• Environmental Impact Studies;

71

• Plans of Administration, Operation and Maintenance of Water Supply Systems;

• Cadastre of Bulk Water Users;

• Plan of Rehabilitation and Maintenance of Water Infrastructure;

• Plan of Water Resources Quantitative and Qualitative Monitoring;

• Hydrogeological Studies. 10. Activities that are worth pointing out include the preparation of 50 Feasibility Studies and Basic Designs Projects for Works; the preparation of 52 specific studies (environmental, water availability, etc.) and 12 River Basin Master Plans and State Water Resources Plans; and the creation and strengthening of 351 Water Users Organizations. 11. From 2000 to 2006, MI was responsible for the management and implementation of the Priority Works Component, both at Federal and States levels, through specific cooperation agreements (convenios) with the States in the Semi-Arid Region. 12. This component financed the construction of infrastructure works for supply and storage of bulk water (quality and quantity) in small towns and communities that suffered of permanent water supply problems for domestic consumption. The Project Preparation Unit, established under the Secretariat of Water Resources, selected the first year works based on rigorous multi-criteria, including (a) the nature of the problem; (b) the socioeconomic conditions in the area; (c) the level of commitment of local institutions; (d) the coherence with water resources management plans; and (e) the level of technical preparation of the proposals presented by the States. 13. The Component included eligibility criteria to be used for the selection of future proposed subprojects that were incorporated to the Operational Manual. The main criteria were related to the following indicators: (a) technical, i.e. the consumption of water per capita of 150 liters per day for cities with population between 4,000 and 50,000 inhabitants, and, for communities with less than 4,000 inhabitants, 60 liters per day initially, increasing to 120 liters per day in 20 years; (b) economic-financial, i.e. economic internal rates of return of at least 12% and water tariffs (based on operating tariffs) covering 100% of the O&M cost and at least 25% of investment costs; (c) institutional, i.e. the construction of subprojects should be preceded by the issuance of formal water rights to the proposed works and the approval by the Bank of an O&M plan for such infrastructure (criteria established for the preparation of O&M plans were also incorporated to the Operational Manual); and (d) environmental, i.e. strict compliance to the Bank’s procedures and policies, including resettlement plans and indigenous peoples plans. 14. In summary, the Priority Works Component of PROAGUA/Semi-Arid promoted the construction of 41 Bulk Water Supply Systems benefiting a population of around 4.7 million people, 2 with million direct beneficiaries. 15. Continuing with the philosophy of PROAGUA/Semi-Arid and recognizing the importance of associating structural works to water resources management practices, ANA in partnership with MI carried out, during from 2007 to 2009, the National PROAGUA.

72

16. The Project was based on the successful experience of PROAGUA/Semi-Arid and kept its structuring mission, with emphasis on the institutional strengthening of all actors involved in the water resources management in Brazil and in the implementation of water infrastructure feasible from the technical, financial, economic, environmental and social points of view, promoting the rational use of water resources. PROAGUA/Semi-Arid and National PROAGUA were part of the same partnership of the Brazilian Government with the World Bank in the water resources area. 17. The National PROAGUA project was conceived as an Additional Financing to the previous loan, through Loan Agreement 7420-BR, with duration of three years and, originally, with resources equivalent to US$ 200 million, out of which 25% of World Bank financing and 75% of national counterpart funds (Federal and States Governments). 18. The general objective of the Project was to contribute to the improvement of the quality of life of the population, especially in the less developed regions of Brazil, through water resources planning and management simultaneously with the expansion and optimization of water infrastructure, in order to guarantee sustainable water supply in quantity and quality adequate to the multiple uses. 19. Specifically, the Project had the following objectives:

• To consolidate the National Water Resources Management System, through the implementation and improvement of management instruments and the institutional strengthening of water resources management organizations;

• To expand the efficacy and efficiency of the management of surface and groundwater resources, in a decentralized and participatory way;

• To implement infrastructure works, observing sustainability principles, quality and technical, environmental, financial, economic and social feasibility; and,

• To consolidate the strategic and operational planning as guiding instruments of governmental action in the water resources area.

20. From the technical point of view, the National PROAGUA addressed relevant questions, including: (i) the strengthening of water resources planning and management structures; (ii) the obligation of carrying out executive planning, associating the selection of works to water resources management, using adequate basic design studies; (iii) the implementation of mechanisms that guarantee the adequate administration, operation and maintenance of implemented systems; and (iv) the evaluation of impacts and results. 21. In comparison to PROAGUA/Semi-Arid, the main changes incorporated to the National PROAGUA were: (i) the expansion of the project coverage area to the whole country for the implementation of water resources management actions; and (ii) the consideration of broader infrastructure investments in the Water Resources Management System, not only investing in expanding water supply but also in works of multiple use. 22. For the implementation of Loan Agreement 7420-BR, the same arrangements and institutional, managerial and operational models of PROAGUA/Semi-Arid were used. One the

73

important points of the institutional arrangement is the sharing of Project management between MI and ANA. 23. The National PROAGUA Project coverage area included all the States in the Semi-Arid Region for the execution of water infrastructure actions; and expanded to the whole country for the execution of water resources management actions. 24. The National PROAGUA reorganized the components included in PROAGUA/Semi-Arid, keeping the same types of activities from the previous Project, with the following structure. 25. The Water Resources Management Component had the objective of consolidating the National Water Resources Management System and supporting the Federal and State Governments in the creation, improvement, modernization and qualification of water resources management arrangements and instruments, as well as the preparation of plans, studies and projects. 26. At the Federal level, the Component was divided into four sub-components and respective actions:

a) Institutional Development • Institutional Strengthening of ANA; • Water Rights and Charges Systems; • Training of Human Resources; • Preparation of Programs and Projects in the Water Resources Area; • Hydrometeorological Network and Water Resources Information System; • Creation of Water Users Associations and River Basin Committees.

b) Plans, Studies and Projects • Management Plans of River Basins with Water Use Conflicts; • Plans for Rehabilitation of Water Infrastructure; • Water Resources Master Plans for the Mitigation of Emergency Situations; • Related Technical Studies.

c) Management Models of Hydrographic Basins and Pilot Initiatives • Models or Pilot Initiatives applied to Water Quality; • Models or Pilot Initiatives applied to Estuary Management; • Models or Pilot Initiatives applied to Coastal Zones Management; • Models or Pilot Initiatives applied to Erosion Control; • Models or Pilot Initiatives applied to Transport of Sediments; • Models or Pilot Initiatives applied to River Basins Protection and Conservation; and • Models or Pilot Initiatives applied to Reuse of Water.

d) Studies to Support the Implementation of Water Infrastructure in the Northeast • Environmental Studies; • Environmental Impact Evaluations; and • Feasibility Studies.

27. At the level of the States, the Component was divided into three sub-components and respective actions:

74

a) Institutional Development • Structuring of Water Resources Management Bodies and State Project Management Units

(UEGPs); • Legal and Regulatory Framework for Water Resources Management; • Water Rights and Charge Systems; • Projects of Communication, Dissemination and Participatory Management; • Training of Human Resources; • Hydrometeorological Network and Water Resources Information System; • Creation of Water Users Associations and River Basin Committees.

b) Plans, Studies and Projects • State Water Resources Plans and Hydrographic Basin Plans; • Management Plans of River Basins with Water Use Conflicts; • Plans for Rehabilitation of Water Infrastructure.

c) Specific Studies • Feasibility Studies, Environmental Impact Evaluations and Basic Design Projects; • Water Availability Studies; • Operational and Decision Support Models.

28. The Priority Works Component had the objective of financing bulk water infrastructure of social interest, for storage and distribution of bulk water to communities suffering from permanent supply problems, as well as multiple-use works. The Priority Works Component had one sub-component with its respective actions:

a) Water Infrastructure • Pipelines; • Simplified Water Supply Systems; • Other Water Infrastructure, such as Water Treatment Plants, etc.; • Implementation of Environmental and Resettlement Mitigation Measures; • Systems for Catchment and Distribution of Groundwater; • Dams and Reservoirs;

29. The Management, Monitoring and Evaluation Component had as its objective the management, monitoring and evaluation National PROAGUA actions, in order to guarantee the compliance of targets, schedules and general and specific objectives of the Project. The actions included in this Component are common to projects that use international financing resources, such as the financing of management units, development and implementation of monitoring and evaluation system. The eligible actions included:

• Coordination of Project Activities; • Implementation and Operation of Managerial Information System; • Preparation of Procurement Plans and Operative Plans; • Preparation of Supervision, Monitoring and Evaluation Reports; • Preparation of Independent Evaluation Reports; • Joint Supervision with World Bank staff; • Preparation of Case Studies; • Preparation of Mid-Term Evaluation; • Final and Ex-post Evaluations;

75

• Preparation of Baseline Studies. 30. Several factors contributed to the delays in the implementation of Project’s activities, both with regard to works and water resources management actions in the Semi-Arid States. The main factors are listed below. 31. Delay in Project Effectiveness. Although the Loan Agreement 7420-BR was approved by the World Bank Board of Directors on December 19, 2006, the Brazilian Federal Senate approval took place only in August 2007 and the Agreement signing took place on September 20, 2007. Only after the Loan effectiveness date, November 8, 2007, did the Project effectively start its implementation. These events led to a delay of almost one year in the start-up of Project’s activities. 32. Discontinuity of the technical team in the Ministry of National Integration. In 2007, with the closing of a Technical Cooperation Project between MI and UNESCO, there was a reduction of the technical team in the Project Management Unit – Works Component (UGPO), making it impossible to renew the contracts of consultants who supported the UGPO. The situation was resolved only in September 2008, with the hiring of permanent and temporary staff, who still needed to acquire knowledge in the area of external financing. These factors were reflected in the pace of the supervision of Project actions in the States, affecting the preparation and analysis of documents. 33. Discontinuity of the technical teams in the States. Similarly, the technical teams in the States Project Management Units (UEGPs) were demobilized due to changes in State Governments and to the gap between the closing of PROAGUA/Semi-Arid and the effectiveness of the National PROAGUA. 34. With the closing of PROAGUA/Semi-Arid, the States didn’t have resources to maintain their technical teams until the start of the new Project, which affected the preparation of the technical and bidding documents needed to start National PROAGUA activities. 35. Only in December 2007, with the signing of cooperation agreements (convenios) between ANA and the States, were UEGPs teams reestablished and actions initiated. Part of the teams effectively started to work only in March 2008. 36. National Accounts Court (Tribunal de Contas da União – TCU) Ruling. In addition to the delays in the States in the preparation of bidding documents following Bank’s guidelines, a ruling issued by TCU created an impasse for carrying out procurement activities. TCU issued in the Official Federal Government Journal (Diário Oficial da União – DOU), on December 1, 2008, the Ruling (Acórdão) No. 2690/2008, which specified to the Ministry of National Integration a series of modifications in the works bidding documents, which were conflicting with Bank’s guidelines. 37. On December 9, 2009, the Department of Hydraulic Works of the Secretariat of Hydraulic Works of the Ministry of National Integration sent a copy of this TCU ruling to the World Bank for its reaction, followed by meetings and discussions with the Bank about the subject. In

76

response, the World Bank kept the same position expressed before when consulted about the issue, which is reflected in the ruling, stressing that the Bank would not give “no objections” to works that didn’t follow the Bank’s guidelines, as stated in the signed Loan Agreement. The TCU determination, together with the Bank position, created an impasse that basically affected all of the works under National PROAGUA. 38. Considering this context and the impossibility of extending the Additional Financing Closing Date, in March 2009, the Brazilian Government proposed to the World Bank an amendment to the Loan Agreement, including the reduction of its physical and financial targets, as well as the revision of disbursement percentages, Project indicators and results. As a result, there was a significant reduction in planned resources, with cuts in the number of works and water resources management actions financed by the Project. The amendment to the Loan Agreement, including the Project restructuring was countersigned by the Federal Government on July 17, 2009. 39. After the restructuring, 10 works were excluded from the Priority Works Component, out of the 17 works initially planned for financing with Loan funds. However, the Federal Government kept its commitment to guarantee resources needed for the completion of the works taken out of the Agreement, implementing them with resources from the Government’s Growth Acceleration Program (Programa de Aceleração do Crescimento – PAC). 40. Among the actions planned, the Project main results are presented below.

41. Institutional strengthening of water resources planning and management bodies in 27 states and at the Federal level. During the implementation of the National PROAGUA, cooperation agreements (convênios) were signed with 10 States in the Semi-Arid Region. Also, equipment was acquired for water rights monitoring and for the hydrometeorological networks in other 17 states, strengthening the states management bodies in the execution of their tasks.

42. Review and/or Adequacy of State Water Resources Laws. Studies were developed for the adequacy of State Water Resources Laws in three States: Ceará, Piauí and Maranhão. The actions are presented below: • Technical Consulting Services Specialized in Water Resources and Environmental Legislation

in the State of Ceará; • Technical Consulting Services Specialized in the Implementation of Judicial and Extrajudicial

Charge for Water Rights as Instrument for Water Resources Management in the State of Ceará;

• Study for the Preparation of Draft Decrees for Regulation of Instruments of the State Water Resources Law in the State of Piauí;

• Study for Implementation of the Water Resources Management Body in the State of Piauí; • Preparation of Proposal for the Creation of Water Resources Management Body in the State

of Maranhão. 43. Creation, implementation or strengthening of the Federal and States River Basins Committees. Directly, the Project supported River Basin Committees in the States of Alagoas, Bahia, Ceará, Sergipe, Rio Grande do Norte, Minas Gerais and Mato Grosso do Sul. ForFederal rivers, the installation of Piranhas-Açu and Paranaíba River Basins Committees was achieved.

77

Among the activities for strengthening of Committees, financing with Project funds, the following are included: • Support to the Structuring of 5 River Basins Committees in the State of Alagoas with

acquision of information technology equipment and furniture; • Implementation of 4 River Basins Committees in the State of Bahia: 1) Recôncavo Sul, 2)

Paramirim and Santo Onofre, 3) Peruíbe, Itanhém and Jucuruçu, and 4) Frades, Buranhém and Santo Antônio;

• Discussion of Demands from the River Basins Committees in the State of Ceará: 1) Metropolitana; 2) Acaraú; 3) Coreaú; 4) Curu; 5) Litoral; 6) Alto Jaguaribe; 7) Médio Jaguaribe; 8) Baixo Jaguaribe; 9) Banabuiú; and 10) Salgado.

• Support to the participation of Minas Gerais Management Institute (IGAM) and the members of 36 River Basins Committees in Minas Gerais in the X and XI National Meetings of River Basins Committees;

• Support to the Social Mobilization Process in the Ceará-Mirim River Basin Committee in the State of Rio Grande do Norte;

• Strengthening of River Basins Committees in the State of Sergipe: 1) Japaratuba, 2) Piauí and 3) Sergipe;

• Preparation of Proposals for the Creation of Ininhema and Pardo River Basins Committees in the State of Mato Grosso do Sul;

• Support to the Creation of Piranhas-Açu River Basin Committee; • Support to the Creation of Paranaíba River Basin Committee. 44. Carrying out of training events for members of the National Water Resources Management System. Several training events were carried out by National PROAGUA, both directly financed by ANA and by the Semi-Arid States. Below is a list, not exhaustive, of the events carried out with the support of National PROÁGUA. • "XV National Meeting of Wells Drillers / I Symposium of Hydrogeology of the South-

Southeast", State of Rio Grande do Sul, October 28 to 31, 2007. • "Technical Meeting about Cadastre and Water Rights", Distrito Federal, July 02 and 03, 2008. • "II Semi-Arid Water Management Meeting", State of Pernambuco, September 16 to 18, 2008. • "2nd Workshop for Integration of Operational Procedures for Water Charges", Distrito

Federal, September 30 to October 1, 2008. • “International Workshop of Groundwater Monitoring", Distrito Federal, December 09 to 11,

2008. • "Americas Water Forum", "Meeting of Governors of the World Water Council" and "V

Meeting of the Program Cultivating Good Water of Itaipu", State of Paraná, November 23 to 27, 2008.

• "General Assembly of the Latin American Network of Basin Organizations - RELOB", State of Rio de Janeiro, November 11 and 12, 2008.

• 3rd Workshop for the Integration of Operational Procedures for Water Charges", Distrito Federal, September 22 and 23, 2009.

• “1st Workshop for the Implementation of Water Charges in Doce River Basin”, State of Minas Gerais, September 02 and 03, 2009.

• "I Internationl Seminar of Water Producer Program", Distrito Federal, August 26 to 28, 2009. • “25th Brazilian Congress of Sanitary and Environmental Engineering - ABES”, State of

Pernambuco, September 20 to 25, 2009.

78

• Workshop "Between action and policies: an education for the sustainable development in communities", Distrito Federal, September 21 and 22, 2009.

• XVIII Brazilian Symposium of Water Resources, State of Mato Grosso do Sul, November 22 to 26, 2009.

• Training Course of the Committees of the Lagoon Estuary Complex Mundaú-Manguaba – CELMM, State of Alagoas, June 19 and 20, 2008.

• Training of Members of the State Water Resources Council and the Basins Committees in Participatory Methodologies, State of Alagoas, June 15 to 19, 2009.

• International Seminar “Governance of water, the Hydrographic Basin and the Ecosystems”, State of Ceará, November 5 to 7, 2008.

• “Specialization Course on Water Resources and Environmental Management in Hydrographic Basins: participation of 16 technical staff of COGERH and SRH”, State of Ceará, January 2008 to December 2009.

• “Extension Course on Water Resources Management to Members of Committees”, State of Ceará, July 17 to September 12, 2009.

• “Training in Geographic Processing”, State of Minas Gerais, April 1 to June 30, 2009. • Support to the Technical Staff of the Management Body (SEMARH) and linked institutions

(IGARN / CAERN / IDEMA), State of Rio Grande do Norte. 45. Preparation of States Water Resources Plans; Hydrographic Basin Plans; and Proposals for Classification of Water Bodies by Classes of Uses. The Project financed the State Water Resources Plan of Piauí, Alagoas and Sergipe. With regards to the Hydrographic Basin Plans, the National PROÁGUA supported the preparation of the following: • Camaragibe Hydrographic Region, State of Alagoas; • North Littoral Hydrographic Region, State of Alagoas; • Metropolitans Basins, State of Ceará; • Littoral Basins, State of Ceará; • Acaraú River Basin, State of Ceará; • Coreaú River Basin, State of Ceará; • Araçuaí River Basin, State of Minas Gerais; • Ipojuca River Basin, State of Pernambuco; • Capibaribe River Basin, State of Pernambuco; • Maxaranguape River Basin, State of Rio Grande do Norte; • Japaratuba River Basin, State of Sergipe; • Piauí River Basin, State of Sergipe; • Sergipe River Basin, State of Sergipe. 46. In relation to the studies for classification of water bodies in hydrographic regions, the Project supported the following actions: • Camaragibe Hydrographic Region, State of Alagoas; • North Littoral Hydrographic Region, State of Alagoas; • Recôncavo North Hydrographic Region, State of Bahia; • Inhambupe Hydrographic Region, State of Bahia; • East Hydrographic Region, State of Bahia; • Paraguaçu Hydrographic Region, State of Bahia; • Salitre Hydrographic Region, State of Bahia;

79

• Japaratuba Hydrographic Basin, State of Sergipe; • Piauí Hydrographic Basin, State of Sergipe; • Sergipe Hydrographic Basin, State of Sergipe. 47. Preparation of Institutional Strategic Plans. The State of Ceará worked on its Water Resources Strategic Plan, called Water Pact, with the support of National PROAGUA. 48. Preparation of Hydrogeological Studies; Water Availability Studies; and Water Infrastructure Projects. The Project supported the State of Pernambuco with the Hydrogeological Study of Jatoba Sedimentary Basin. In terms of the Water Availability Studies, ANA contracted the study of “Qualification of Hydrological Data and Reconstitution of Natural Flows in the Country”. Besides, the State of Rio Grande do Norte developed the “Bathymetric Study of Reservoirs”. 49. Preparation of the Proposal for the Regulatory Framework for Joint Management of Groundwater in Aquifers. With the support of the National PROAGUA, the study of “Evaluation of Groundwater Resources and Proposition of Joint Management Model for the Apodi Plateau Aquifers, between the States of Rio Grande do Norte and Ceará” was carried out, conducted by ANA. 50. Preparation of Proposal for the Project of the National Network for Water Quality Monitoring. This activity was initially procured with PROAGUA financing. However, the winning proposal presented a price much higher than the cost estimate, which caused the cancellation of the process. ANA is now financing this contract with its own resources. 51. Structuring of the National Water Resources Information System - SNIRH. Several actions were financed by the Project for the structuring of the Information System, including the following: • Acquisition of two files storage units with control boards (HBAS) to support SNIRH. • Development of Functionalities and Improvement of Modules of the National Water Users

Cadastre System – CNARH. • Acquisition of five licenses of the ArcView System and three expansions of use of the ArcGIS

System, including Training and Technical Support. • Development of Technological Architecture to be used by the National Water Resources

System of ANA and of the Integration Models with External Agents. • Analysis, Project and Development of Geographical Referenced Components –

Geowebservices, Portlets and Layers in support to the National Water Resources Information System.

• Analysis, Project and Development of HIDRO System, component of the National Water Resources Information System.

• Analysis and Project including Subsystems Specifications – Documental Intelligence; and Planning and Management, components of the National Water Resources Information System.

52. Strengthening of the National Hydrometeorological Monitoring Network through the acquisition of Data Collection Platforms – PCDs. With Project resources, ANA acquired 108

80

PCDs. Also, the State of Sergipe acquired 18 telepluviometers, and the State of Pernambuco acquired 15 telepluviometers. 53. Support to the development of States Water Resources Programs and Projects for national and international financing. National PROAGUA effectively supported the preparation of the Pernambuco Sustainable Water Project. 54. Expansion of the Planning of Water Supply in, at least, 1,500 municipalities. The National PROAGUA financed four big studies that together cover all Brazil’s municipalities in relation to planning of water supply. These are: Update and Improvement of Northeast Atlas – Urban Water Supply; South Atlas – Urban Water Supply; Metropolitan Regions Atlas – Urban Water Supply; and Water Supply Atlas – Complementing Brazil. With the completion of the Complementary Northeast Atlas, the South Atlas and the Metropolitan Regions Atlas, the number of municipalities with planned water supply systems for a 20-year horizon is 2,965. With the completion of the Brazil Atlas, under final stage, the remaining municipalities will be covered, totalizing 5,561 municipalities. 55. Systematizing of the State of the Art Report of Water Resources in Brazil. With the objective of presenting a broad vision of water resources conditions in Brazil, ANA prepared, with PROAGUA support, the State of the Art Report, which has its 2010 version already available in the ANA website for consultations. 56. Implementation of bulk water infrastructure in the Northeast, benefiting around 250,000 inhabitants. Under the Priority Works Component, out of the seven works planned for financing of National PROAGUA, two of them are completed: Third Phase of Serra de Santana Pipeline in the State of Rio Grande do Norte, and Ibaretama Pipeline in the State of Ceará. The works of Rehabilitation of Water Losses of Belo Jardim System and Limoeiro and Agrestina Pipeline Systems in the State of Pernambuco are partially completed and under operation. The works of Missi and Riacho da Serra dams in the State of Ceará are in advanced stage of implementation (table presented in Annex 2). Lessons Learned 57. One of the main characteristics of PROAGUA was its structuring mission, with emphasis on the institutional strengthening for Water Resources Management in the States of the Northeast Region and Minas Gerais and, at the federal level, combined with the development of structuring actions addressed to guaranteeing the expansion of good quality water supply for the Brazilian Semi-Arid Region. 58. The first aspect to be stressed was the importance of the Project at its start-up for the specific situation through which the water resources sector in the Brazilian Northeast was passing. Until the beginning of the 1990s, the use and management of water resources in the Brazilian Semi-Arid was the responsibility, in great part, of the Federal Government – which has the responsability for combating the effects of droughts by constitutional mandate – specifically the National Department of Works against Droughts – DNOCS. At the State level, there were no legal basis or organization for the water resources sector; the States’ roles were dispersed among

81

several institutions and limited essentially to the construction and operation of small reservoirs and wells. The Federal Government was responsible for the big and medium-size works, considered more strategic to water resources management. The water infrastructure built by DNOCS and other federal institutions is responsible for the largest part of water storage in these States. 59. For decades, the dominant culture was the “hydraulic solution”, meaning the belief was that big drought problems could be resolved with the indefinite construction of reservoirs and complementary water infrastructure to increase water supply; many reservoirs built didn’t even have pipeline systems capable of transporting the stored water to the population. Very little focus was made on the actual water resources management and appropriate maintenance of the vast water infrastructure. However, this approach reached its limit because although these investments had decreased the vulnerability to droughts, these conditions continued to strongly affect the populations. 60. This context suffered major modifications, with the insertion in the Federal Constitution of 1988, among the competencies of the Federal Government, of the obligation to institute a national water resources management system; the regulation and institutionalization of the National Water Resources Management System – SINGREH, with its administrative arrangement and its management instruments (Law 9,433/97); the creation of the National Water Agency, the federal entity responsible for implementation of the National Water Resources Policy and coordination of SINGREH; and the launch, in 2006, of the National Water Resources Plan. The States started to organize themselves for the management of water resources, following institutional reforms initiated in São Paulo, Ceará and other pioneering states. 61. It was exactly in this context that PROAGUA was prepared: at a very timely moment and favorable to institutional changes in search of new practices of water resources management. However, the challenges were huge, for with a few exceptions – Minas Gerais, Ceará and Bahia, for example – everything or almost everything was to be done in terms of installing the institutional capacity for water resources management. 62. After a little more than ten years from Project start, the role played by PROAGUA in the States, its results and impacts are recognized as highly positive. The influence of the Project in the process of technical and institutional development of the states is remarkable, in terms of the incentive to participatory water resources management, in terms of water infrastructure; in the expansion of knowledge about water resources, its uses and problems; and in a more selective preparation of projects and works. Nevertheless, difficulties and constraints are observable, and this restricted some of the potential impacts of the Project in relation to its objectives. 63. PROAGUA influence and impacts were translated in distinct ways in the different states as a result of the technical and institutional capacities existent at Project start. For most of the states, the Project was certainly structuring for the development of technical and institutional capacity in water resources management. In a few of them, PROAGUA was not only a structuring influence but also became the essence of the installed institutional capacity. In the extreme of this situation, in some states PROAGUA was equally of great importance but only to the consolidation of the water resources management systems already in place, i.e. Minas Gerais,

82

Ceará and Bahia. In these states, when the Project started its activities, there was already an ongoing structural institutional dynamic, supported by other Bank financed projects (PROURB and PROGERIRH in Ceará, and PGRH in Bahia). 64. In relation to the constraints observed, the main one refers to the state management bodies which, in general, do not have permanent staff or logistical and infrastructure resources commensurate to their missions. In general, the technical personnel are composed of professionals from other state institutions, temporary nominated staff or consultants. Therefore, the dominant situation in terms of technical and institutional capacity of the state water resources managers is still fragile, more or less depending on the state. There are exceptions to this situation as observed in the States of Ceará, Bahia and Minas Gerais, for example. In this sense, the objectives of institutional strengthening of PROAGUA were partially achieved: the situation is incomparably better than what was observed in 1997/1998 – as there was almost nothing in most of the states, but it is still unsustainable from an institutional point of view. 65. As observed in various international agencies’ documents, institutional changes require more time for their implementation and consolidation than the usual time period of implementation of infrastructure works. Therefore, considering the current circumstances of most of the states, PROAGUA will be able to completely account for the big advances generated and impelled in the water resources management only if there is a similar follow up project that is capable of evoking more efforts from the state governments to guarantee the consolidation of the state water resources management system, particularly the strengthening of state water resources management bodies. 66. Following this direction, the Government of Brazil is currently preparing the Water Sector Development Program – Interáguas, to be financed with World Bank funds. Interáguas originated from the need to seek better dialogue and coordination of actions in the water sector (water resources multiple uses and associated services) and has the objective of contributing to strengthen the planning and management capacity in the water sector, especially in the less developed regions of the country, aiming at: increasing the efficiency in water use and services; increasing sustainable water supply in quantity and quality adequate to the multiple uses; and improving the application of public resources in the water sector reducing diseconomies caused by deficiencies in intersectoral dialogue and coordination. 67. In regards to the Priority Works Component, PROAGUA contributed to form a new technical culture in the water infrastructure sector, reflected in the quality of its projects compared to the traditional practices, such as with the incorporation of socio-environmental variables, and with concern for the operation and maintenance of the water infrastructure built. 68. The social benefits brought about by the Project are clear, as demonstrated in its evaluations. In reference to the achieved results, it is possible to affirm that the effects of the Project in the Semi-Arid Region contributed to significant changes in the socioeconomic situation of the benefited regions, also contributing to the rooting of populations who traditionally migrate in search of better alternatives of life, thus transcending the Project benefits to other regions beyond those assisted.

83

69. Finally, it is possible to affirm that the main impact related to the Priority Works Component consisted of the reduction of child mortality rates and the incidence of waterborne diseases, although it is not always possible to demonstrate this reduction based on data from the health and other systems. Another substantive impact, although less evident, is the possibility of structuring social and economic life in the localities benefited by the works implemented by PROAGUA. Water scarcity and the unreliability of its supply disarticulate the social network as they lead to strategies of life for subsistence in a context of permanent privation. 70. The main lessons learned from the implementation of PROAGUA are presented below. • More than an infrastructure project, PROAGUA revealed to be a Project of cultural change

and strengthening of social capital – prerequisite to any sustainable process of economic, social, political and environmental development;

• PROAGUA successfully used evaluation and prioritization criteria for works that became models for public administration;

• The competitiveness that was established as a criterion for the distribution of resources among beneficiary states can and should be used in investments financed with public resources;

• The States where the best Project overall performance was verified are the ones in which the institutions are well organized, have more autonomy and experienced, during this period, less administrative changes;

• PROAGUA made it clear that the solution to the difficult challenge that governs the relationship between man and natural resources, water especially, necessarily turns on one word: “management”;

• The restructuring of water resources systems associated with the implementation of priority infrastructure, in all Brazilian States and with emphasis on the Semi-Arid Region, promoted by PROAGUA contributed to change paradigms of water resources management in Brazil;

• The evaluation, eligibility and prioritization of works criteria that were implemented by the Project were recognized by the accounting control institutions and serve as models for other Government programs;

• The participatory methodology adopted by the Project involving social participation and the local public sector in the implemented projects had positive impacts on the environmental education of communities’ beneficiaries of the Project;

• The Project established lessons and best practices that can be replicated in other hydrographic basins, both in the Semi-Arid Region and in other regions of Brazil.

86

Annex 8. Comments of Co-financiers and Other Partners/Stakeholders There were no Co-financiers or other partners/stakeholders.

87

Annex 9. List of Supporting Documents

1. Project Appraisal Report (PAD), Report No. 17451-BR, March 13, 1998

2. Project Paper (Additional Financing), Report No. 35719-BR, November 27, 2006

3. Restructuring Paper, June 5, 2009

4. Ministério do Meio Ambiente Arranjo Institucional, March 1997

5. DEPIN Synthesis of Baseline Study, April 1999

6. SRH Reassentamento da População, October 2001

7. Francisco Nunes Correia Avaliação nos Piauí, Maranhão e Ceará, March 2001

8. Gilberto Valente Canali, Avaliação nos Sergipe, Bahia, e Minas Gerais, na SRH/MMA e SIH/MI, March 2001

9. Francisco Jose Lobato da Costa, Avaliação nos Alagoas, Paraíba, Pernambuco e Rio Grande do Norte, March 2001

10. PROAGUA Semi-Árido Síntese do Projeto e Principais Resultados, June 2002

11. ANA PROAGUA Semi-Árido Achievements and Results, 2005

12. Avaliação Final das Ações do PROÁGUA/Semi-Árido, Fundação COPPETEC, June 2007

13. IEG Evaluation of World Bank Support, 1997–2007, Water and Development

14. Relatório de Acompanhamento UGPO/SIH/MI, Ministry of National Integration, December 2006

15. PROÁGUA Nacional, Perfis dos Projetos, Ministry of National Integration, August 2008

16. Relatório de Monitoria PROÁGUA Nacional, Componente Gestão de Recursos Hídricos, Anexo I – Ficha das Ações, ANA, December 2008

17. Relatório de Monitoria PROÁGUA Nacional, Componente Obras Prioritárias, Anexo II – Perfil do Projetos, ANA, December 2008

18. Relatório de Marco Zero e Meio Termo PROÁGUA Nacional, ANA, September 2008

19. 2° Relatório de Monitoria PROÁGUA Nacional, ANA, October 2008

20. Relatório de Monitoria PROÁGUA Nacional, ANA, March 2009

21. 3° Relatório de Monitoria PROÁGUA Nacional, ANA, May 2010

22. Relatório de Avaliação das Ações, Componente Gestão de Recursos Hídricos, PROÁGUA Nacional, ANA, October 2010

23. Implementation Status Reports

24. Supervision Aide Memoires

25. Loan and Guarantee Agreements (including amendments)

Map IBRD

Porto AlegrePorto Alegre

Rio deRio deJaneiroJaneiro

São PauloSão Paulo

VitóriaVitória

SalvadorSalvador

MaceióMaceió

RecifeRecife

João João PessoaPessoa

FortalezaFortaleza

São LuísSão LuísBelémBelém

Porto VelhoPorto Velho

CuiabáCuiabá

Belo Belo HorizonteHorizonte

GoiâniaGoiânia

TeresinaTeresina

PalmaPalma

FlorianópolisFlorianópolis

CuritibaCuritiba

AracajuAracaju

NatalNatal

MacapáMacapá

Boa VistaBoa Vista

ManausManaus

Rio BrancoRio Branco

CampoCampoGrandeGrande

BRASÍLIABRASÍLIA

M A T OM A T OG R O S S OG R O S S O

TOCANTINSTOCANTINS B A H I AB A H I A

M I N A S G E R A I SM I N A S G E R A I S

F.D.F.D.

GOIÁSGOIÁS

MATO GROSSOMATO GROSSODO SULDO SUL

SÃO PAULOSÃO PAULO

ESPÍRITOESPÍRITOSANTOSANTO

RIO DERIO DEJANEIROJANEIRO

PARANÁPARANÁ

STA CATARINASTA CATARINA

RIO GRANDERIO GRANDEDO SULDO SUL

A M A Z O N A SA M A Z O N A S

RONDÔNIARONDÔNIA

PA R ÁPA R Á

RORAIMARORAIMAAMAPÁAMAPÁ

MARANHÃOMARANHÃO CEARÁCEARÁ

P I A U ÍP I A U Í

RIO GRANDERIO GRANDEDO NORTEDO NORTE

PARAÍBAPARAÍBA

ALAGOASALAGOAS

SERGIPESERGIPE

PERNAMBUCOPERNAMBUCOACREACRE

PARAGUAYPARAGUAY

A m a z o nA m a z o n

B a s i nB a s i n

B r a z i l i a nB r a z i l i a n

H i g h l a n d sH i g h l a n d s

Mato GrossoMato GrossoPlateauPlateau

COLOMBIACOLOMBIA

PERUPERU

BOLIVIABOLIVIA

URUGUAYURUGUAY

ARGENTINAARGENTINA

CHILECHILE

GUYANAGUYANA

SURINAMESURINAME

FrenchFrenchGuianaGuiana

(Fr.)(Fr.)

R.B. DER.B. DEVENEZUELAVENEZUELA

Porto Alegre

Rio deJaneiro

São Paulo

Vitória

Salvador

Maceió

Recife

João Pessoa

Fortaleza

São LuísBelém

Porto Velho

Cuiabá

Belo Horizonte

Goiânia

Teresina

Palma

Florianópolis

Curitiba

Aracaju

Natal

Macapá

Boa Vista

Manaus

Rio Branco

CampoGrande

BRASÍLIA

M A T OG R O S S O

TOCANTINS B A H I A

M I N A S G E R A I S

F.D.

GOIÁS

MATO GROSSODO SUL

SÃO PAULO

ESPÍRITOSANTO

RIO DEJANEIRO

PARANÁ

STA CATARINA

RIO GRANDEDO SUL

A M A Z O N A S

RONDÔNIA

PA R Á

RORAIMAAMAPÁ

MARANHÃO CEARÁ

P I A U Í

RIO GRANDEDO NORTE

PARAÍBA

ALAGOAS

SERGIPE

PERNAMBUCOACRE

COLOMBIA

PERU

BOLIVIA

PARAGUAY

URUGUAY

ARGENTINA

CHILE

GUYANA

SURINAME

FrenchGuiana

(Fr.)

R.B. DEVENEZUELA

A m a z o n

B a s i n

B r a z i l i a n

H i g h l a n d s

Mato GrossoPlateau

Amazon

Amazon

O

r inoco

Negro

Puru s

Madeir

a

Teles Pir es

Juru

ena

Xin

gu

Ara

guai

a

Toca

ntin

s

São

Fran

cisco

Paran

á

Grande Paraguay

Ta

pajó

s

ATLANTICOCEAN

ATLANTICOCEAN

PACIFICOCEAN

To Ciudad Guayana

To Santa Cruz

To Santa Cruz

To BuenosAires

To Montevideo

70°W 60°W 50°W 40°W

70°W 60°W 50°W 40°W

20°S

30°S

0°

10°S

20°S

30°S

0°

BRAZIL

This map was produced by the Map Design Unit of The World Bank. The boundaries, colors, denominations and any other informationshown on this map do not imply, on the part of The World BankGroup, any judgment on the legal status of any territory, or anyendorsement or acceptance of such boundaries.

0 200 400

0 200 400 Miles

600 Kilometers IBRD 33377R

SEPTEMBER 2009

BRAZIL

STATE CAPITALS

NATIONAL CAPITAL

RIVERS

MAIN ROADS

RAILROADS

STATE BOUNDARIES

INTERNATIONAL BOUNDARIES