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TRANSCRIPT
Document of
The World Bank
Report No: ICR2836
IMPLEMENTATION COMPLETION AND RESULTS REPORT
(IBRD-81420)
ON A
LOAN
IN THE AMOUNT OF US$ 500 MILLION EQUIVALENT
TO THE
STATE OF PERNAMBUCO, BRAZIL
FOR AN
EXPANDING OPPORTUNITIES, ENHANCING EQUITY IN THE STATE OF
PERNAMBUCO DEVELOPMENT POLICY LOAN
September 30, 2013
Poverty Reduction and Economic Management Department
Brazil Country Management Unit
Latin America and the Caribbean Region
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CURRENCY EQUIVALENTS
Exchange Rate Effective: August 21, 2013
Currency Unit = Real (R$)
US$ 1.00 = R$ 2.45
FISCAL YEAR
January 1 — December 31
ABBREVIATIONS AND ACRONYMS
AGEFEPE Development Agency of the State of Pernambuco
APAC Agency for Water and Climate
BACEN Brazil Central Bank
CAF Andean Development Corporation
CAS Country Assistance Strategy
COMPESA Pernambuco State Water Supply and Sanitation Company
CPS Country Partnership Strategy
DPL Development Policy Loan
EIU Economist Intelligence Unit
FDI Foreign Direct Investment
FPE State Participation Fund
FUNAFIN Retirement and Pension Financial Fund of State of Pernambuco
FUNDEB Fund for the Development of Basic Education and Valuing of
Education Professionals
FUNDEF Fund for the Development of Fundamental Education and
Valuing of Education Professionals
FY Fiscal Year
GDP Gross Domestic Product
GFS Government Finance Statistics
GOP Gross Operating Balance
HDI Human Development Index
HFA Hyogo Framework for Action
HOI Human Opportunity Index
IBC Central Bank - Indicator of Economic Activity
IBGE Brazilian Institute of Geography and Statistics
IBRD International Bank for Reconstruction and Development
ICMS Tax on Goods and Services
IDA International Development Association
IDB Inter-American Development Bank
IFC International Finance Corporation
IGP General Price Index
IMF International Monetary Fund
IOF Tax on Foreign Transactions
IPCA National Index of Consumer Price
IPVA Property Tax on Motor Vehicles
LOA Annual Budget Law
LDO Budget Law Guidelines
LRF Law of Fiscal Responsibility
MAR Metropolitan Area of Recife
MSME Micro, Small, and Medium Enterprises
NCD Net Consolidated Debt
NCR Net Consolidated Revenue
NGO Non-Governmental Organization
PAF Fiscal Adjustment Program
PBM Planning, Budgeting and Management
PE Management Institute of Pernambuco
PEFA Public Expenditure Financial Accountability Assessment
PFM Public Financial Management
PNAD National Household Survey
PPA Multi-year National Plan
PRONAF Programa Nacional de Fortalecimento da Agricultura Familiar
PSIA Poverty and Social Impact Analysis
RLC Net Revenue
SAD Management Secretariat
SAEPE Educational Evaluation System of Pernambuco
SECGE Special Secretariat of the General Controller of the State
SEF-2 Sistema de Escrituracao Fiscal e Contábil 2
SEFAZ Department of Finance
SENAC National Commercial Training Service
SENAI National Service for Industrial Apprenticeship
SEPLAG Secretary of Planning and Management
SME Small and Medium Enterprises
SUS Unified Health System
SWAp Sector Wide Approach
TCE Court of Auditors of the State of Pernambuco
WEO World Economic Outlook WRM Water Resource Management
Vice President: Hasan A. Tuluy
Country Director: Deborah L. Wetzel
Sector Manager: Louise J. Cord
Task Team Leader: Luis-Felipe Lopez-Calva
Co-Task Team Leader: Indu John-Abraham
ICR Team Leader: Luis-Felipe Lopez Calva
ICR Primary Author: Joao Oliveria, Consultant
BRAZIL
EXPANDING OPPORTUNITIES, ENHANCING EQUITY IN THE STATE OF
PERNAMBUCO DPL
CONTENTS
Data Sheet
B. Key Dates ............................................................................................................................... ii C. Ratings Summary ................................................................................................................... ii
D. Sector and Theme Codes ....................................................................................................... iii E. Bank Staff .............................................................................................................................. iii
F. Results Framework Analysis ................................................................................................. iv G. Ratings of Program Performance in ISRs ........................................................................... viii
H. Restructuring (if any) .......................................................................................................... viii 1. Program Context, Development Objectives and Design ........................................................ 1 2. Key Factors Affecting Implementation and Outcomes .......................................................... 9
3. Assessment of Outcomes ...................................................................................................... 23 4. Assessment of Risk to Development Outcome ..................................................................... 25
5. Assessment of Bank and Borrower Performance ................................................................. 26 6. Lessons Learned.................................................................................................................... 28 Annex 1 Bank Lending and Implementation Support/Supervision Processes.......................... 30
Annex 2 Summary of the Borrower Report…………………………………………………...31
ii
A. Basic Information
Country: Brazil Program Name:
Expanding Opportunities,
Enhancing Equity in the
State of Pernambuco
Development Policy Loan
Program ID: P106753 L/C/TF Number(s): IBRD-81420
ICR Date: 09/23/2013 ICR Type: Core ICR
Lending Instrument: DPL Borrower: STATE OF
PERNAMBUCO
Original Total
Commitment: USD 500.00M Disbursed Amount: USD 500.00M
Revised Amount: USD 500.00M
Implementing Agencies:
State Secretariat of Planning and Management (SEPLAG)
Cofinanciers and Other External Partners:
B. Key Dates
Process Date Process Original Date Revised / Actual
Date(s)
Concept Review: 07/21/2011 Effectiveness: 07/12/2012 04/25/2012
Appraisal: 11/18/2011 Restructuring(s): N/A
Approval: 03/22/2012 Mid-term Review:
Closing: 03/31/2013 03/31/2013
C. Ratings Summary
C.1 Performance Rating by ICR
Outcomes: Satisfactory
Risk to Development Outcome: Moderate
Bank Performance: Moderately Satisfactory
Borrower Performance: Satisfactory
C.2 Detailed Ratings of Bank and Borrower Performance (by ICR)
Bank Ratings Borrower Ratings
Quality at Entry: Moderately Satisfactory Government: Satisfactory
Quality of Supervision: Moderately Satisfactory Implementing
Agency/Agencies: Highly Satisfactory
Overall Bank
Performance: Moderately Satisfactory
Overall Borrower
Performance: Satisfactory
iii
C.3 Quality at Entry and Implementation Performance Indicators
Implementation
Performance Indicators
QAG Assessments (if
any) Rating:
Potential Problem Program
at any time (Yes/No): No
Quality at Entry
(QEA): None
Problem Program at any
time (Yes/No): No
Quality of Supervision
(QSA): None
DO rating before
Closing/Inactive status: Satisfactory
D. Sector and Theme Codes
Original Actual
Sector Code (as % of total Bank financing)
SME Finance 5 5
Secondary education 10 10
Sub-national government administration 65 65
Tertiary education 10 10
Water supply 10 10
Theme Code (as % of total Bank financing)
Education for the knowledge economy 20 20
Gender 10 15
Managing for development results 40 35
Micro, Small and Medium Enterprise support 10 10
Water resource management 20 20
E. Bank Staff
Positions At ICR At Approval
Vice President: Hasan A. Tuluy Hasan A. Tuluy
Country Director: Deborah L. Wetzel Makhtar Diop
Sector Manager: Louise J. Cord Louise J. Cord
Program Team Leader: Luis-Felipe Lopez-Calva Luis-Felipe Lopez-Calva, Indu John-
Abraham (Co-TTL)
ICR Team Leader: Luis-Felipe Lopez-Calva
ICR Primary Author: Joao Oliveria, Consultant
iv
F. Results Framework Analysis
Program Development Objectives (from Project Appraisal Document) Program Development Objective is to strengthen public policies that expand economic
opportunities and enhance equity of access to quality services for the people of Pernambuco.
Revised Program Development Objectives (if any, as approved by original approving authority)
Not applicable.
(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 : Secondary school students enrolled in schools providing 40 hours of instruction per
week.
Value
(quantitative or
Qualitative)
22,593 55,474 53,515
Date achieved 12/31/2010 03/31/2013 03/31/2013
Comments
(incl. %
achievement)
96.4% , Emphasis made on schools outside de Metropolitan area of Recife (MAR)
Indicator 2 : Secondary school students enrolled in schools providing 32 hours of instruction per
week.
Value
(quantitative or
Qualitative)
13,310 43,571 48,780
Date achieved 12/31/2010 03/31/2013 03/31/2013
Comments
(incl. %
achievement)
112%, Emphasis was made on expansion of the program in municipalities in the
interior of the State, to enhance equity
Indicator 3 : Secondary school students enrolled in integral and semi-integral schools outside
MAR
Value
(quantitative or
Qualitative)
43,655 62,343 67,714
Date achieved 12/31/2011 03/31/2013 03/31/2013
Comments
(incl. %
achievement)
108.6%, Emphasis was made on expansion of the program in municipalities in the
interior of the State, to enhance equity
Indicator 4 : Issuing water rights for groundwater by APAC.
Value
(quantitative or
Qualitative)
188 212 299
Date achieved 12/31/2010 03/31/2013 03/31/2013
Comments 141%
v
(incl. %
achievement)
Indicator 5 : Issuing water rights for surface water by APAC.
Value
(quantitative or
Qualitative)
168 188 264
Date achieved 12/31/2010 03/31/2013 03/31/2013
Comments
(incl. %
achievement)
140%
Indicator 6 : Creation of reservoir management committee for water basins in the interior of the
state.
Value
(quantitative or
Qualitative)
8 12 8
Date achieved 03/22/2012 03/31/2013 03/31/2013
Comments
(incl. %
achievement)
67%, Emphasis was made on creation of committees in municipalities in the interior
of the State, to enhance equity
Indicator 7 : Establishment of water users cadastre for the water basins of Ipanema, Pajeu
Value
(quantitative or
Qualitative)
0 Established Established
Date achieved 12/31/2011 03/31/2013 03/31/2013
Comments
(incl. %
achievement)
100%
Indicator 8 : State protocol formalizing procedures and responsibilities for the flood risk early
warning system established.
Value
(quantitative or
Qualitative)
0 Established Established
Date achieved 12/31/2010 03/31/2013 03/31/2013
Comments
(incl. %
achievement)
100%
Indicator 9 : Population covered by the monitoring alert system of APAC
Value
(quantitative or
Qualitative)
0
5,886,942 3,640,214
Date achieved 12/31/2010 03/31/2013 03/31/2013
Comments
(incl. %
achievement)
62%
Indicator 10 : Communication strategy developed and implemented to disseminate hydro-
meteorological information by APAC
Value
(quantitative or 0 Implemented Implemented
vi
Qualitative)
Date achieved 12/31/2011 03/31/2013 03/31/2013
Comments
(incl. %
achievement)
100%
Indicator 11 : Secondary school students enrolled in professional education schools, which offers
courses meeting local job demand and vocation
Value
(quantitative or
Qualitative)
5,224 9,348 13,544
Date achieved 12/31/2010 03/31/2013 03/31/2013
Comments
(incl. %
achievement)
144%, Emphasis on interior of the State for equity reasons
Indicator 12 : Secondary school students outside MAR in professional education schools, which
offer courses meeting local job market demands.
Value
(quantitative or
Qualitative)
1,832 3,255 7,199
Date achieved 12/31/2011 03/31/2013 03/31/2013
Comments
(incl. %
achievement)
221%
Indicator 13 : Increase in the number of public employees who have received training on gender
issues.
Value
(quantitative or
Qualitative)
600 2000 2,088
Date achieved 12/31/2011 03/31/2013 03/31/2013
Comments
(incl. %
achievement)
104%
Indicator 14 : Creation of regional gender coordinators in the 12 development regions of the state.
Value
(quantitative or
Qualitative)
0 12 0
Date achieved 03/22/2012 03/31/2013 03/31/2013
Comments
(incl. %
achievement)
Regional gender coordinators were not established during the timeframe of the
project, as the legal authorization to create the regional coordination was not passed
until April 19, 2013 (Law no. 14950). On May 17, 2013 Decree no. 39402 created the
posts at the 12 coordination level and on May 23, 2013 the Governor’s Act was
published in the Official Gazette of the State which appointed 10 regional
coordinators.
Indicator 15 : Number of productive projects of several segments among the development regions
of the state supported by AGEFEPE through financing and/or training.
Value
(quantitative or
Qualitative)
3 19 19
vii
Date achieved 12/31/2011 03/31/2013 03/31/2013
Comments
(incl. %
achievement)
100%
Indicator 16 : Increase of ICMS revenues as a percentage of GDP by reducing tax evasion, without
increasing the tax burden.
Value
(quantitative or
Qualitative)
9.1% 12.4% 9.1%
Date achieved 12/31/2011 03/31/2013 03/31/2013
Comments
(incl. %
achievement)
Unrealistic expectations, due to projections. Growth rates under which revenues were
estimated were higher than the realized ones. During project preparation, official
estimates on growth were taken for projections. . These targets should have been
revised during supervision.
Indicator 17 : Real growth of ICMS revenues.
Value
(quantitative or
Qualitative)
$R 8.6 billion 24.3% 12.1%
Date achieved 12/31/2010 03/31/2013 03/31/2013
Comments
(incl. %
achievement)
Unrealistic expectations, due to projections. Growth rates under which revenues were
estimated were higher than the realized ones. During project preparation, official
estimates on growth were taken for projections. These targets should have been
revised during supervision.
Indicator 18 : Approved budget versus executed budget for Strategic Priorities
Value
(quantitative or
Qualitative)
64.1% 75% 92%
Date achieved 12/31/2011 03/31/2013 03/31/2013
Comments
(incl. %
achievement)
122%
Indicator 19 : Number of budgetary revisions approved during the year of execution
Value
(quantitative or
Qualitative)
1,506 1,404 1,204
Date achieved 12/31/2010 03/31/2013 03/31/2013
Comments
(incl. %
achievement)
100+%
Indicator 20 : Social Management Report produced and published online (in accordance with Art.
17 of the Lei Complementar No. 141)
Value
(quantitative or
Qualitative)
0 3 3
Date achieved 12/31/2010 03/31/2013 03/31/2013
Comments
(incl. %
achievement)
100%
viii
(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
G. Ratings of Program Performance in ISRs
No. Date ISR
Archived DO IP
Actual Disbursements
(USD millions)
1 07/01/2012 Satisfactory Satisfactory 498.75
2 03/31/2013 Satisfactory Satisfactory 498.75
H. Restructuring (if any)
Not Applicable
1. Program Context, Development Objectives and Design
1.1 Context at Appraisal
Background
Located in the semi-arid Northeastern Region, Pernambuco has 98.3 thousand km2 (about one
percent of Brazil’s territory), and a population of 9 million inhabitants (4.6 percent of the
country’s population). Pernambuco is the second largest economy in the Northeast, just after
Bahia, with a GDP of R$95 billion in 2010 (about US$45 billion, or 2.4 percent of Brazil’s
GDP).1 The state is one of the poorest, with a poorly educated population and is one of the most
vulnerable states to natural disasters (droughts and flooding) and social hazards (such as disease
and crime).2
After a period of stagnation, the state economy has experienced accelerated growth (between 4
and 5 percent annually) since 2003. Although the service sector accounts for 73 percent of the
state GDP, this growth has been fueled by the industrial sector, which only accounts for 22
percent of the state GDP.3 Growth during this period has been unequally distributed, both
spatially and between social groups: most of the development benefited the Metropolitan Area of
Recife (MAR), with blacks and women trailing behind other groups in terms of access to
economic opportunities. As a consequence, divergences in socioeconomic progress increased
between metropolitan and non-metropolitan areas and social groups. For instance, unemployment
is higher in the interior part of the state, where recent industrial expansion has not reached;4 the
student enrollment rate at secondary schools in the MAR in 2009 (age 15-17) was 50 percent
while its counterpart in the interior was 33 percent; and, while household access to water in the
MAR was 89 percent, in the interior it was only 66 percent.
Since 2004, the state administration has been prudent on the fiscal front: tax administration
efficiency and revenue increased,5 personnel expenditures stabilized, and net consolidated debt to
net current revenue ratio declined systematically in line with the limits established by the LRF
(Fiscal Responsibility Law). Also, the state has been delivering on its commitment to the federal
government through the PAF-Fiscal Adjustment Program. Consequently, debt service has
declined, and fiscal space, as well as new opportunities for the state to access investment
financing, have expanded.
In 2009 the state government established the Pernambuco’s Management Model (Law 141/2009),
by systematically organizing state functions around the formal national planning instruments (the
PPA-Multiannual Planning, the LDO-Annual Budget Guidelines, and the LOA-Annual Budget
1 In 2010, Pernambuco GDP per capita was about R$10 thousand, half of the national average.
2 The share of the population below the poverty line in 2009 was twice that of the country. Both quality of schooling
and life expectancy are below the Brazilian average. Sanitation conditions are poor with significant incidence of
contagious diseases, such as tuberculosis and dengue fever. 3 Agriculture accounts for the remaining 5% of state GDP.
4 Since 2007 the State’s coastal region experienced an industrial boom mostly resulting from large investments in the
Suape Port Industrial Complex. 5 With the introduction of the “taxpayer substitution system” and the electronic invoices.
2
Law) and adopting the results-based management tools for public administration. A participatory
process defines the strategic priorities for a four-year period (such as the current 2011-2014
Government Development Plan), which are formalized in the PPA document, followed by the
annual budget and monitored and evaluated on a quarterly basis through a Social Management
Report. The latter closes the Management Model cycle and feeds back into the discussion for the
next year’s PPA.
Under this framework, the ongoing Government’s Development Plan prioritizes three strategic
areas of intervention: (a) improving the quality of life through ensuring public services delivery;
(b) expanding opportunities for productive inclusion and promoting equity; and (c) enhancing the
capacity of the state’s public administration to generate policy results for the population.6
The interiorization strategy (bringing development and economic activity to the interior) was a
key instrument in the strategy, given the high correlation of territorial inequities and inequities in
other dimensions.
Rationale for Bank Involvement
This DPL was a multi-sector operation integrating growth and equity-oriented policy reforms that
are consistent with the Government’s strategic objectives and with the objectives of the Brazil
Country Partnership Strategy (CPS FY12-15). The operation was aligned with the CPS principles
of flexibility (to respond to the country’s evolving needs), selectivity (focusing on areas of second-
generation challenges), innovation (results-based reforms and multi-sector loans), and leveraging
(use of leveraged resources from the government to maximize development impact) adopted for
Brazil.
The IEG has recommended that the Bank deepen its involvement in the lesser-developed sub-
national governments to enhance poverty impact, and to create desirable demonstration effects.
Given the low levels of income and capacity in the Northeast, the CPS has highlighted the
importance of engagement in the region. The CPS also envisioned a notable participation of the
Bank in Pernambuco, with emphasis in supporting policy reforms to promote regional and social
inclusion. Thus, by supporting the state of Pernambuco governments’ anti-poverty policy strategy,
the operation was consistent with CPS FY12-15 and responded to IEG recommendation of Bank’s
engagement with sub-national governments.
This DPL supported the state’s strategy aimed at improving the quality of life and enhancing
equity by establishing the conditions for more inclusive economic growth patterns, and developing
a culture of efficient governing for results. The DPL represented a complement to the recent and
on-going Bank engagement in the State of Pernambuco,7 reflecting a concerted strategy with the
central government by the Bank to support impoverished regions in key development areas,
6 See the overview of the Government’s “VISÃO DE FUTURO” (Vision for the Future) attached.
7 Including three SILs (the Pernambuco Education Results and Accountability-SWAP, the Pernambuco Sustainable
Water Project, and the Pernambuco Rural Economic Inclusion Project) and a Technical Assistance Loan the
Leveling the Playing Field for Quilombola Communities in Northeastern Brazil.
3
including education, water sustainability and management, and economic and social integration of
the rural sector.8
The Pernambuco government’s commitment to and ownership of previous Bank projects, and the
track record of reforms and successful cooperation between the state and the Bank dictated the
choice of a one-tranche disbursement DPL as the intervention instrument for this operation. The
inclusion of experienced teams, which encouraged better information flow, coordination with the
government, and operation design, was another factor supporting this decision.
The DPL was an instrument that would help shape the institutional environment to enhance the
impact of specific actions being also supported by the Bank through other instruments. A single-
tranche DPL was important to consolidate the impact of actions that required specific investments.
1.2 Original Program Development Objectives (PDO) and Key Indicators (as approved)
The Program Development Objective (PDO) of the operation was to strengthen public policies
that expand economic opportunities and enhance equity of access to quality services for the
people of Pernambuco. The program, defined in close collaboration with the State Government,
promoted policies to improve the quality of life, to establish conditions for a new, more inclusive
economic growth pattern, and to support efficiency in the government’s administrative processes.
Expected outcomes included an increase in the quality of secondary schooling, improved water
management, expanded disaster notification systems and risk management protocols integrated
with municipalities, increased human capital to meet local market demand, social and economic
inclusion of women, increased contribution of micro- and small enterprises to the local supply
chain, reduction of tax evasion, improved quality of public expenditures, and improved public
administration.
1.3 Revised PDO (as approved by original approving authority) and Key Indicators, and
Reasons/Justification
Not Applicable.
1.4 Original Policy Areas Supported by the Program
The operation supported reforms and advances being made in the areas of economic
development, public sector management and gender to facilitate deeper development change,
including the on-going Bank engagement in Pernambuco in education, water resource
management, and rural sector. Specifically the operation (as depicted in Table 1—policy matrix
on Supported Policy Areas) supported critical reforms towards more inclusive development and
growth under three broad policy areas: (a) improving the quality of life, through better education,
water security, and disaster and risk management; (b) expanding economic and social
8 Furthermore, the success of this operation has served as a platform for the preparation of the recently approved
Bank’s DPL2 (Pernambuco Equity and Inclusive Growth DPL - P132768), which aims to consolidate the initial
impacts of the State’s anti-poverty policy strategy.
4
opportunities, through development of human capital, greater gender equity, and support to
SMEs and rural producers; and (c) increasing public administration capacity, through improved
tax administration, greater efficiency and strategic priority on public expenditures, and
institutionalization of the Pernambuco’s Management Model.
Table 1— Supported Policy Areas
OBJECTIVES STRATEGY POLICY ACTIONS EXPECTED
OUTCOMES COMPONENT 1—IMPROVING THE QUALITY OF LIFE FOR PERNAMBUCANS
1.1. PROVIDE
QUALITY
EDUCATION
Increase the number of
hours of instruction in secondary schools, with an emphasis on schools in the interior of the State, as part of a broader strategy to improve the quality of
education.
Policy Action 1: The Borrower
has created conditions conducive to improving the quality of education, including an increase in the hours of instruction, as evidenced by:
(a) Gubernatorial Decree No.
36.120 of January 21, 2011,
authorizing full-day instruction
(40 hours per week) in six (6)
additional secondary schools, for an
aggregate total of 65 secondary
schools; and
(b) Gubernatorial Decree No.
36.119 of January 21, 2011,
authorizing expanded hours of
instruction (32 hours per week) in
fourteen (14) additional secondary
schools, for an aggregate total of
108 secondary schools.
An increased proportion
of students enrolled in secondary schooling will receive greater academic training through expanded school hours.
1.2 IMPROVE WATER
SECURITY AND
INCREASE
RELIABILITY OF
WATER SUPPLY
Strengthen the institutional
and regulatory framework
for the management of the
scarce water resources in the
State
Policy Action 2: The Borrower has
strengthened its management of
water resources through the
appointment of permanent technical
personnel for APAC in accordance
with competitive procedures, as
evidenced by Gubernatorial Act No.
4570 of May 10, 2011 and Joint
Resolution (Portaria Conjunta)
SAD/APAC No. 117 of December
14, 2010, all in accordance with
the APAC Law29
and the APAC
Resolutions30
.
Improved water resource
management with the
implementation of
management tools and
issuance of new water
rights.
1.3 DISASTER AND RISK
MANAGEMENT
Improve the ability of the
state to communicate
forecast and early warnings
of hydrometereological
hazards to better protect the
poor and vulnerable
communities located
primarily in the rural parts
of the state that are
disproportionately affected
by natural disasters.
Policy Action 3: The Borrower has
improved the management of
disaster risks through the issuance
of APAC’s Board Resolution No.
001-2011 dated August 22, 2011,
defining activities related to
forecast and early warning of
disasters linked to hydro-
meteorological events in the
Borrower’s territory, and
identifying such activities jointly as
activities of a situation room, as
said activities have been integrated
into the Hydrological Critical
Events Forecast System of the
Guarantor’s Federal Government.
Development of disaster
risk management,
emergency alert system,
and emergency response
protocols for Pernambuco.
OBJECTIVES STRATEGY POLICY ACTIONS EXPECTED
OUTCOMES COMPONENT 2—NEW ECONOMY – EXPANDING OPPORTUNITIES FOR PERNAMBUCANS
2.1. PROMOTE JOB
CREATION THROUGH
THE DEVELOPMENT
OF HUMAN CAPITAL
Provide vocational training, principally in the interior of the State, in order to promote job creation, while
allowing students the opportunity to pursue further education if desired.
Policy Action 4: The Borrower has improved and developed human
capital for the job market with
emphasis on professional education
through the transformation of six
(6) state schools into schools of
professional education, as evidenced
by Gubernatorial Decrees No.
36.355 of March 29, 2011 and No.
36.121 of January 21 2011.
Improve and develop human capital to meet local job market demand and generate additional
job creation.
2.2 INCREASE
OPPORTUNITIES
THROUGH
GREATER
GENDER EQUITY
Promote gender
mainstreaming in public
administration by elevating the Women's
Secretariat to a permanent secretariat with the
responsibility of informing
and advocating on issues for increased gender equity in the
public sector.
Policy Action 5: The Borrower
has strengthened its institutional
framework aimed at promoting
gender equality through the creation
of a permanent Women’s Secretariat
(Secretaria da Mulher) to replace
the former temporary special
Women’s Secretariat, and the
approval of regulations for said
secretariat, as evidenced by the
Borrower’s Law No. 14.264 of
January 6, 2011 and Gubernatorial
Decree No. 36.659 of June 14,
2011, respectively.
Improved policies in
support of the social and
economic inclusion of
women.
2.3 PROMOTE
ECONOMIC
DEVELOPMENT
THROUGH
SUPPORT TO
SMES AND RURAL
PRODUCERS
Promote economic
development in the State by
supporting micro, small and medium-size enterprises through the provision of
credit, technical assistance and business development in
order to link to targeted local supply chains
Policy Action 6: The Borrower
has taken the following steps to
establish its Development Agency
(Agência de Fomento do Estado de
Pernambuco, S.A.) (―AGEFEPE)31
,
aimed at promoting economic and
social development by supporting
micro, small and medium-size
enterprises and rural producers in
local production chains:
(a) the authorization by the
Guarantor’s Central Bank (Banco
Central do Brasil) to commence the
operations of AGEFEPE on
December 9, 2010; and
(b) the enactment of the Borrower’s
Law No. 14.282 of March 29,
2011, allocating resources to
AGEFEPE.
An increased number
of micro, small and
medium-size enterprises
supported by AGEFEPE
through financing and/or
training contributing to
local supply chains in the
State of Pernambuco
OBJECTIVES STRATEGY POLICY ACTIONS EXPECTED
OUTCOMES
COMPONENT 3—INCREASING PUBLIC ADMINISTRATION CAPACITY FOR GENERATING RESULTS
3.1 IMPROVE ICMS TAX REVENUES WITHOUT
INCREASING TAX
BURDEN ON FIRMS
AND CITIZENS, TO
EXPAND FISCAL
SPACE FOR
INVESTMENT AND
PROMOTE PRIVATE
SECTOR
DEVELOPMENT
Increase in revenue in the State in order to provide
greater support to policies
and programs for equity
through mechanisms to
facilitate tax collection
The Borrower has taken the following measures to improve tax revenues without increasing tax burdens on taxpayers:
Policy Action 7: (a) the establishment of a
regulatory framework for the implementation of a new fiscal control system (Sistema de Escrituração Fiscal e Contábil 2)
(―SEF-2)32
, as evidenced by the Borrower’s Resolution (Portaria) No. 190, dated November 30, 2011, issued by SEFAZ; and www.transparencia.pe.gov.br; and
(c) letter dated September 12, 2011
from Secretary of SEPLAG
attaching a report on the budget
execution by strategic priorities for
the period January 1, 2011 through
August 31, 2011.
Policy Action 8:
(b) the establishment of a Tax
Substitution System33
for selected products, as evidenced by Gubernatorial Decrees No. 35.655 of October 7, 2010 (linens), No. 35.656 of October 7, 2010 (bicycles), No. 35.657 of October 7, 2010 (toys), No. 35.677 of October 13, 2010 (cosmetics, pharmacy products and toiletries), No. 35.678 of October 13, 2010 (construction and home design materials), No. 35.679 of October 13, 2010 (automobile parts), No. 35.680 of October 13, 2010 (electric materials) and No. 35.701 of October 19, 2010 (electronic products and home appliances).
Increased tax revenue through the reduction of tax evasion, with no increase of tax burden.
8
OBJECTIVES STRATEGY POLICY ACTIONS EXPECTED
OUTCOMES 3.2 IMPROVE
EFFICIENCY OF
ALLOCATION AND
EXECUTION OF PPA
AND BUDGET TO
MAKE SURE PUBLIC
EXPENDITURES
REFLECT
PERNAMBUCO’S
STRATEGIC PRIORITIES
Ensure compliance with
the State's equity-focused reform agenda through budget allocation and oversight of strategic priorities
Policy Action 9:
The Borrower has improved the
efficiency of budget allocation and
execution through the formulation and execution of the PPA and budget, both structured into strategic
priorities, as evidenced by:
(a) the Borrower’s Law No. 14.234
of December 13, 2010;
(b) the Detalhamentos de Despesas por Elemento (DDEs) published in www.transparencia.pe.gov.br; and
(c) letter dated September 12, 2011
from Secretary of SEPLAG
attaching a report on the budget
execution by strategic priorities for
the period January 1, 2011 through
August 31, 2011.
Improved quality and
efficiency of public
expenditures and budgeting
process through an effective
integration of planning and
budgeting (formulation and
execution).
3.3. IMPROVE
CAPACITY TO PLAN
AND IMPLEMENT
PUBLIC POLICIES
THROUGH
INSTITUTIONALIZATION
OF PERNAMBUCO’S
MANAGEMENT MODEL
Promote results-based management through a
management institute for continuous learning and training of the public sector.
Policy Action 10: The Borrower has consolidated its
Management Model36
and strengthened its capacity to generate results through the establishment of the Management Institute, as evidenced by Gubernatorial Decree No. 37.828, dated February 2, 2012.
State’s Management Model is consolidated,
improving public administration’s capacity for generating results and transparency.
9
1.5 Revised Policy Areas
Not Applicable
1.6 Other significant changes
No significant changes were made to the DPL
2. Key Factors Affecting Implementation and Outcomes
2.1 Program Performance (supported by a table derived from a policy matrix)
Overall progress in implementation of the Government of Pernambuco’s medium term strategy
for the expansion of opportunity and enhancing equity for the people of the state was
Satisfactory. The reform support activities planned under each of the three components
progressed well and the 10 prior actions for the release of the single-tranche were met. All the
required policy actions were enacted prior to tranche release through Government Laws, Decrees,
Acts, Agencies’ Resolutions, Central Bank authorization, and budget restructuring.9
Disbursement took place as expected in the program (Table 2).
Table 2: DPL actual and effective disbursement structure
Tranche # Amount Expected
Release Date
Actual Release
Date
Release
Single Tranche US$500 M May 2012 May 2012 Select: (1) Regular
The twenty result-indicators matrix for the Project Development Objectives (PDO) are presented
in Table 3, including the 2010/2011 baselines, the 2011/2012 targets and the actual achievements.
Program performance discussion at each component and target level is presented below.
9 See Table 1 above (third column), and the Program Document (Report no. 62869-BR), Annex 2—Operation Policy
Matrix, for a complete list of the official documents.
10
Table 3: Results Indicators Matrix10
Indicator Baselines Targets11
Actual12
Fully
Achieved
2010 2011 2011 2012 Component 1:Improving the
quality of life
1.1 Provide quality education (a) Secondary school students
enrolled in schools providing 40 hours
of instruction per week
22,593 55,474 53,515 N
(b) Secondary school students
enrolled in schools providing 32 hours
of instruction per week
31310 43,571 48,780 Y
(c) Secondary school students
enrolled in integral and semi-integral
schools outside MAR
33,373 43,655 62,343 67,714 Y
1.2 Improve water security and increase
reliability of water supply
(a) Issuing water rights for both
groundwater and surface water by
APAC:
- Groundwater 188 212 299 Y - Surface water 168 188 264 Y (b) Creation of reservoir management
committee for water basins in the
interior of the state
8 13
12 14
8 15
N
(c) Establishment of water users
cadastre for the water basins of
Ipanema, Pajeú and Moxotó 16
0 Concluded Concluded Y
1.3 Disaster and Risk Management (a) State protocol formalizing
procedures and responsibilities for the
flood risk early warning system
established
0 Established Established17 Y
(b) Population covered by the 0 2,192,76418
5,886,94219
3,640,21420
Y
10 Last column denotes whether the individual indicator was achieved (Y) or not (N) by the project closing date
(March 31, 2013). 11
According to the Project Document, to be achieved by the project closing date (March 31, 2013). 12
Measured at the project closing date (March 31, 2013). See also notes on individual indicators, about the current
situation by the ICR mission’s date (July 1-5, 2013), when applied. 13
Committees formed: Moxotó, Ipanema e Pajeú. 14
Additional 4 committees to be formed in Terra Nova, Brigida, Garças, and Pontal. 15
Only three provisional commissions for the formation of permanent “committees”/councils were created until
March 31, 2013. The ICR mission was informed that APAC continued intensively, after the project closing date,
with the creation of additional provisional commissions, electoral commissions, and undertaking elections towards
the establishment of the permanent “committees”/councils. 16
For the water basins of Ipanema, Pajeú, and Moxotó. 17
Decree no. 38253 (June 4, 2012) instituted the “Manual Técnico de Defesa Civil para Resposta a Desastres em
Pernambuco” (Disaster Early Warning Protocol for the State of Pernambuco).
11
monitoring alert system of APAC
(c) Communication strategy
developed and implemented to
disseminate hydro-metereological
information produced by APAC
0 Implemented21 Implemented22 Y
Component 2: New Economy—
Expanding Opportunities for
Pernambucanos
2.1 Promote Job Creation through the
Development of Human Capital
(a) Secondary school students
enrolled in professional education
schools, which offers courses meeting
local job demand and vocation
5,224 23
9,348 24
13,544 Y
(b) Secondary school students outside
of the MAR in professional education
schools, which offer courses meeting
local job market demands
1,320 1,832 3,255 7,199 Y
2.2 Increase Opportunities through
Greater Gender Equity
(a) Increase in the number public
employees who have received training
on gender issues
600 2,000 2,088 Y
(b) Creation of regional gender
coordinators in the 12 development
regions of the state
0 12 0 25
N
2.3 Promote Economic Development
through Support to SMEs and Rural
Producers
(a) Number of productive projects of
several segments among the
development regions of the state
supported by AGEFEPE through
3 19 1726
N
18 Covering 21 municipalities (according to the PD), corresponding 2,192,764 people. Government officials
informed the ICR mission that only 18 municipalities were actually covered. 19
According to Operation Policy Matrix (PD), the target was to cover an additional 37 municipalities,
corresponding to an additional 3,694,178 people. 20
Government officials informed the ICR mission that the program target is incorrect. A totality of 35
municipalities (total 3,640,214 people) where water-basins are required to be monitored had already been monitored
by the program closing date. Authorities report that the inclusion of “37 municipalities” and “additional 3,694,178
people” must have been typos, since these increases would be impossible given the size of the regions’ population
under risk condition. 21
APAC’s communication strategy plan has been developed and implemented. 22
Implemented and available at http://www.apac.pe.gov.br/monitoramento/ 23
August 2010. 24
According to the Program Document, an additional of 4,124 students until August 2012. 25
None was established until the closing date of the project. The legal authorization for the creation of the regional
coordination was passed only on April 19, 2013 (Law no. 14950). Only on May 17, 2013 Decree no. 39402 created
the posts at the 12 coordination level, and on May 23, 2013 Governor’s Act published in the Official Gazette of the
State appointed ten (10) regional coordinators. Earlier mission reported that all had been selected and hired, but
there was a legislative delay. 26
By the project closing date 17 operations were finalized. One more operation was concluded by April 18, 2013.
12
financing and/or training
Component 3: Increasing Public
Administration Capacity for
Generating Results for
Pernambucanos
3.1 Improve ICMS Tax Revenues
without Increasing Tax Burden on
Firms and Citizens, to Expand Fiscal
Space for Investment and Promote
Private Sector Development
(a) Increase of ICMS Revenues as %
of State’s GDP by reducing tax
evasion, without increasing tax burden
9.1%27 12.4% 9.1%28
N
(b) Real growth of ICMS revenues R$ 8.6B29
24.3%30
12.1%31
N 3.2 Improve Efficiency of Allocation
and Execution of PPA and Budget to
Make Sure Public Expenditure Reflect
Pernambuco’s Strategic Priorities
(a)Approved budget versus executed
budget for Strategic Priorities 64.1%
32 75.0%
33 92.0
34 Y
(b) Number of budgetary revisions
approved during the year of execution 1,560 1,404
35 1,204 Y
3.3 Improve Capacity to Plan and
Implement Public Policies through
Institutionalization of Pernambuco’s
Management Model
(a) Social Management Report
produced and published online (in
accordance with Art. 17 of the Lei
Complementar No. 141)
0 336
3 Y
Component 1: Improving Quality of Life
Under the DPL program, the Improving Quality of Life component was tackled on three fronts
by: a) providing quality education, b) improving water security and supply reliability, and c)
27 Baseline is based on 2009 estimate.
28 The actual 2012 ICMS revenue registered at the General Balance-Sheet of the State, R$10,468 million (ICMS/PIB
= 9.06%). 29
According to PD, R$8,613,857,888. 30
According to PD, 24.3% above 2010-2012 projected inflation or R$11,584,122,900. 31
The actual 2010-2012 real growth of the ICMS revenue registered at the General Balance-Sheet of the State—
discounted the accumulated inflation in the period (1.2632/1.1272 – 1 = 12.07%). If, alternatively, E-FISCO
management concept of revenue (that includes Funds, penalties, and interest related to the ICMS) is used, the
resulting real increase would be 13.4% (see Table 5). 32
According to PD, projection based on period Jan-Aug 2011, “as this is the first year for which information was
available.” 33
Unclear measurement criteria. 34
For computation criterion, see Table 6 at this ICR text. 35
I.e.,10% reduction. 36
Social Management Reports produced and published online per year (covering periods of four months each)
13
upgrading the disaster and risk management system. By and large, the government of
Pernambuco achieved good performance under this component during the implementation, and
even after the loan was closed.
Quality Education. Two of the three indicators of this sub-component were achieved, as
measured by the DPL program closing date (March 31, 2013).37
The actual full-time (integral,
or 40 hours of schooling per week) secondary student enrollment target was missed by a margin
of 3 percent. Nevertheless, both the targets for semi-integral (32 hours per week) secondary
students enrollment and for the total secondary students enrolled outside the Metropolitan Area
of Recife (MAR) were surpassed by significant margins (12 percent and 8.6 percent,
respectively). Overall, in the period 2010-2012 the reference secondary student enrollment
(ensino médio em escolas públicas de referência—i.e., integral and semi-integral schooling)
increased significantly: 3.3 percent above the program target in the interior and 8.6 percent in the
MAR.
Despite missing the target for enrollment of full-time students, the implementation results of the
subcomponent can be, overall, considered Satisfactory particularly when considering the state’s
budgetary conditions. The transformation of the teaching scales to the new regimes (semi-
integral and integral schooling) impacted the public education wage bill significantly (159
percent and 199 percent increases, respectively, between 2010 and 2013). Thus, in order to keep
the State government responsibilities under the parameter of the LRF, the implementation of the
planned transformation of semi-integral schooling to integral schooling had to be partly
postponed to 2014.
The objective of the government program with this subcomponent supported by the DPL was to
expand the number of schooling hours especially in those municipalities with low Human
Development Index-IDH. The expected outcome was better quality education, better access to
employment and higher salaries, and less juvenile involvement with drugs and street violence. In
this vein, the impact of the government program on the quality of secondary education was
positive (Table 4). The 2008-2011 IDEPE index, which indicates students’ learning progress (in
mathematics and Portuguese), revealed that students attending the reference schools (Integral and
Semi-Integral systems) evolved faster than the average. Unfortunately, more recent data are not
yet available, hence outcomes during the 2012 DPL implementation could not be observed.
Another indication of positive impact of the new system on the quality of education might be the
significant increase in the number of students from the secondary integral schooling approved at
university entrance examinations, which evolved from 1,070 in the year 2009 to 1,599 in the year
2010, 2,380 in the year 2011, and 5,445 in the year 2012.38
37 Table 3 already reflects the number of students enrolled in February 2013, for the 2013 academic year. For the
record, enrollments in the 2012 academic year were: 49,321 students in the integral and 34,775 in the semi-integral
schooling program. 38
A related note, although not directly part of this DPL program, is the remarkable effort made by the government
to improve the quality of state education in general. Beside the implementation of the new public education regime
(semi-integral and integral schooling, aiming at 15-17 year-old children, for the 1st, 2
nd, and 3
rd secondary education
14
Water Security and Water Supply Reliability. To reduce distress brought about by frequent
droughts, the misuse of scarce ground and surface water, and to improve water security and
supply reliability, the DPL supported planning and regulation of water resources multiple uses.
The program focused mainly on actions implemented by APAC-Pernambucan Water and
Climate Agency, created in March 2010 (State Law no.14028). The DPL support program
envisaged implementation by APAC of water security instruments targeting both urban
communities and rural areas. The targets set for the groundwater, surface water, as well as for
the development of water user cadaster for 3 water basins (Ipanema, Pajeú, and Moxotó) were all
accomplished, even surpassed (see Table 3).
However, until the program closing date (March 31, 2013), the target for the establishment of
four new Reservoir Management Committees/Councils in the interior of the state (at Terra Nova,
Brígida, Garças, and Pontal river basins) was missed. As of March 31, 2013, APAC installed
only three provisional commissions to prepare the formation of three of the Management
Committees/Councils.
Additionally, the authorities explained that APAC studies have shown that the Pontal river
hydrographic basin does not have any water reservoir with accumulation capacity sufficient for
multiple types of uses (equal or larger to 5 million cubic meters). Such small reservoirs are
intended for specific use only. On the other hand, other reservoirs in the basins of Brígida and
Terra Nova rivers are more promising, including the Entremontes Reservoir and Chapéu
Reservoir that are expected to benefit from São Francisco river transposition in the future. To
proceed with the program for the establishment of management Committees/Councils for water
series/grade), the State has been implementing: (a) the municipalization of the basic education (pre-schooling and
fundamental teaching from the 1st to the 8
th grade); (b) the integration with the SecMulher (Women’s Secretariat)
and STQE (Secretariat of Labor, Professionalization, and Entrepreneurship), by including in its criteria concerns
about gender and job creation; and (c) the expansion of the technical schooling (to respond to the local labor markets’
short-term demand) in collaboration with the federal programs through SENAI/SENAC, as well as MEC’s distance
education programs, evidencing an effort for social inclusion, while avoiding duplication.
15
sharing, APAC has decided, and is now focusing attention on the three (instead of the previous
four) main hydrographic basins: Terra Nova, Garças, and Brígida. APAC also informed the ICR
mission that, after closing of the DPL program, provisional and electoral commissions were
established towards the formation of the respective Committees/Councils in these basins.
Disaster and Risk Management. In order to improve its management of disaster risks,
Pernambuco has been developing several activities for a full integration into the Hydrological
Critical Events Forecast System of the federal government. The DPL program supported three
main activities towards this goal: (a) establishment of a protocol for the flood risk early warning
system, (b) expansion of the number of municipalities and people covered by the alert system,
and (c) developing and implementing a communication strategy to disseminate hydro-
meteorological information.
As shown in Table 3, the targets for the three actions were accomplished by the closing date of
the DPL program, with a caveat. The caveat is that, according to APAC managers and state
authorities, the agreed target for the number of people to be covered by the alert system was not
an additional 3,694,178 (as it appears in the Program Document and its Operation Policy Matrix),
but, instead, the number reported as the target was meant to be the total number of people
covered. In addition, this target was meant to comprise 35, not 37 municipalities, with a total
population of 3,640,214. Moreover, APAC reports that the totality of the 35 (rather than 37)
municipalities where water-basins are required to be monitored had already been monitored by
the program closing date. In this respect, there is a problem that should have been spotted during
supervision. Thus, the problem with state authorities’ report (regarding 37 municipalities and the
word “additional” in front of 3,694,178 people) should have been detected by the team and
modified in agreement with client. .
Component 2: Expanding Opportunities
This component’s main objective was to support government policies to increase opportunities
through investment in human capital, encouraging equity (including gender equity), and
promoting small and medium businesses and rural producers.
Job Creation and Development of Human Capital. Under the DPL, Pernambuco has increased
investment in human capital by expanding vocational and professional schooling, with an aim to
meet the demand of the local labor market, emphasizing investment in the interior of the state.
In 2012 the state had already established 25 technical schools, from 13 in 2010 and only 6 in
2009. The technical schooling enrollment in 2012 reached a total of 13,544 students, exceeding
the DPL target of 9,348. From this total, 7,199 were enrolled outside of MAR, exceeding the
target of 3,255.
Opportunities for Gender Equity. Greater gender equity is another important dimension of the
government program supported under this component of the DPL. Issues of special importance
to women (teenage pregnancy, high maternal mortality, violence against women, and female
access to education and the labor market) are critical in Pernambuco, including in the interior and
rural areas of the state. In 2011, the state government replaced the special Women’s Secretariat,
16
a temporary group, with the permanent Women’s Secretariat (SecMulher). Since then, the
Women’s Secretariat has, among other things, been working to achieve two DPL targets: (a) a
training program for the promotion of gender equity to cover at least 2,000 professionals
working with women at risk of being victims of violence, and (b) the establishment of 12
regional coordinators aiming at increasing socioeconomic inclusion of women throughout the
State by interacting at the municipality level. The DPL training target [target (a)] was
successfully achieved, and SecMulher delivered beyond the target. During 2012, it trained an
additional 1,488 professionals from several secretariats and other institutions, covering five
regions of the state (Mata Sul, Mata Norte, Sertão, RMR, and the Agreste). Combined with the
baseline of 600, it surpassed the program target of 2,000 trained professionals.39
However, the regional coordination target [target (b)] was not met by the closing date of the DPL
project. According to SecMulher, legal requirements to create the regional coordination posts
delayed the implementation of this subcomponent. Nevertheless, the legal authorization for the
creation of the regional coordination was passed on April 19, 2013 (Law no. 14950). On May 17,
2013 Decree no. 39402 created the 12 coordination posts, and on May 23, 2013 the Governor’s
Act published in the Official Gazette of the State appointed ten (10) regional coordinators.40
Two coordinator appointments remain to be made.
Support to SMEs and Rural Producers. In the last 10 years the Suape port-industrial complex
has had an important positive impact on Pernambuco’s economy, pushing the State growth rate
above the national average. This development, however, was concentrated along the coastal area,
which generates 74 percent of the state GDP, but represents only 17 percent of the state’s
territory and 57 percent of the population. Links with the interior communities and local
suppliers are still weak. In this context, the DPL supported the government program that
established a State Development Agency (AGEFEPE-Agência de Fomento do Estado de
Pernambuco) aiming at promoting the economic and social development by incentivizing the
integration of micro, small and medium-sized enterprises and rural producers into local
production chains, especially in the interior of the State. Created in 2008, in 2010 AGEFEPE
received operation authorization from the Central Bank, and in 2011 state resources were
allocated to start its activities. The following activities are included under the scope of
AGEFEPE: fixed and working capital financing, lending from state, regional and international
funds, provision of guarantees, fund management, and financial consultancy, among other
financial and advisory support. 41
39 Through seminars, expositions, workshops, debates, including human rights, violence against women, lei Maria
da Penha, access and inclusion in the labor market, and other gender related issues. 40
Governor’s Acts nos. 2709-16, 2741 and 2748 published in the State Official Gazette on May 31, 2013. 41
AGEFEPE manages the resource of the newly reactivated Special Programs Development Fund of Pernambuco
(FUPES-PE-Fundo para Fomento a Programas Especiais de Pernambuco), a State budget unit, under the State
Secretariat for Labor and Entrepreneurial Qualification (STQE), aimed at equalizing interest rates of the State
priority programs.
17
Under AGEFEPE operations, financing and training were carried out in several productive
segments (including textile and clothing, metal-mechanics, leasing of equipment and services,
handicraft, furniture, government procurement, creative economy, microcredit, shuttle service) in
six regions (Mata Norte, Mata Sul, Metropolitana, Agreste Setentrional, Moxotó, and São
Francisco) out of the 14 development regions. Nevertheless, by the DPL closing implementation
date AGEFEPE had finalized only 17 out of the 19 operations with the productive segments
originally agreed as target for this subcomponent.
After the closing date of the project, one more operation with the gypsum production segment in
the Araripe Region was finalized on April 18, 2013. Thus, out of all the segments originally
foreseen by AGEFEPE to operate during the project period, the apiculture segment was still
missing by the time of the ICR mission.42
AGEFEPE, following the dynamics of the economy, is
developing coordinated plans with other state secretariats in order to be engaged in new
microcredit operations, including supporting motofrentistas (for acquisition of individual
protection equipment) and local merchant associations (through collective financing schemes).
Component 3: Increasing Public Administration Capacity for Generating Results
The DPL support to the government program for increasing public administration capacity
focused on the enhancement of three key management areas: (a) effectiveness and efficiency of
tax administration, resulting from an effort to reduce tax evasion, (b) improvement of budget
management, resulting from a more effective allocation and budget execution of strategic
priorities (i.e., strengthening the link between policy planning and execution), and (c)
consolidation of the Pernambuco’s Public Management Model, resulting from the full
institutionalization of the Management Institute.
ICMS Revenue Increase Through Reduction of Tax Evasion. ICMS tax represents the single
most important state revenue source over which the Pernambuco’s government has
administrative power. Thus, to improve effectiveness and efficiency of tax administration
without increasing tax burden, the government program has to increase revenue by reducing
ICMS tax evasion. For this purpose, the government has implemented two new mechanisms to
facilitate tax collection: (a) a new system of fiscal and accounting registration (the SEF-2, an
electronic invoicing control system),43
and (b) a tax anticipation and substitution system for
selected products.44
Although these two new fiscal policy actions seem to have been properly implemented and are
now in full operation, neither of the results-indicator targets for 2012 were achieved by the
42 Although under precarious production conditions, apiculture is an expanding segment in the interior of
Pernambuco. A survey of apiculture in the State developed by AGEFEPE has indicated that illiteracy,
misinformation, lack of access to Internet, rudimentary technology, long distance, lack of registration of producers,
and lack of access to credit are the difficulties facing this activity. 43
SEFAZ Resolution (Portaria) no. 190, November 30, 2011. 44
State Decrees 35655, 35656, 35657, 35677, 35678, 35679, 35680, 35701 all published from October 7 to October
19, 2010.
18
closing date of the DPL project: (a) the actual 2012 ICMS tax revenue was only 9.1% of the
state’s GDP (against a program target of 12.4%), and (b) the actual 2012/2010 real growth of the
ICMS tax revenue was only 12.1% (against a program target of 24.3%).45
It should be considered, however, that the Program Document is not clear regarding the metric of
these indicators on two accounts:46
First, the baseline ICMS/GDP ratio for 2009 was an
estimated value rather than an observed value. The client reports that this may have distorted
true ratios (both the baseline and the target). The baseline was a projection of the 2008 GDP
without accounting for the 2009 inflation. Second, the Program Document does not clearly
define which specific variable should be used for the measurement of ICMS revenue: (i) the
ICMS revenue as published by the General Balance-Sheet of the State, or (ii) the more
encompassing cash concept of the E-FISCO Management’s CGR-Revenue General
Classification.47
The ICR mission, in discussion with state officials, decided to base its decision about the
subcomponent performance on the information contained in Table 5 below, which uses actual
data (including for the baseline)—and considering the two alternative ICMS revenue concepts
[(i) and (ii)] presented in the previous paragraph. Thus, Table 5 indicates that, although the
program baseline was in fact slightly overstated, the actual results of the program performance
(ICMS/GDP ratio and real growth of ICMS revenues) missed both targets by a large margin,
regardless of the concept of ICMS revenue used. The government has detected the need for a
higher effort in the implementation of this policy.
45 See table 5 for details on the calculations.
46 Nor there is any officially agreed Aide-Memoire (or signed Technical Memorandum) on how to measure the
variables involved. 47
The latter includes not only the ICMS tax collection proper, but also everything else related to ICMS revenues
such as fees, interest, past debt, transfers to Funds and restitutions that occurred during the measurement period.
19
Two factors, considered exogenous, contributed, at least partially, to the less-than-satisfactory
performance of this subcomponent of the program: (i) a judicial decision in May 2012 that
exempted the construction industry from interstate ICMS tax,48
and (ii) the weak state GDP
performance (coinciding with the national economic crisis of 2012).49
In fact, the ICMS
collection was affected by both factors, but the impact of the first was not significant50
, and the
second factor should not have directly affected the ICMS/GDP ratio. Therefore, the new adopted
tax policy reforms (program policy actions 7 and 8) did not produce the results expected from the
program (at least during the DPL implementation period). Nevertheless, the authorities have
also claimed that achieving these program targets, as originally designed, would have required
ICMS tax collection by the state of R$14.3 billion in 2012, requiring that the ICMS tax revenue
more than double during the short-term of this DPL program. This would require a truly
extraordinary collection effort, particularly given the macroeconomic circumstances. The ICR
mission considered this argument in its rating decision, and concluded that this was a concern
that should have been raised, and possibly reviewed, during supervision missions and not ex-post
at the ICR phase. The government has acknowledged the need for a higher effort in the
implementation of these policies.
48 STJ-Súmula no.432 03/24/2010-DJe 05/13/2010: “As empresas de construção civil não estão obrigadas a pagar
ICMS sobre mercadorias adquiridas como insumos em operações interestaduais”. Oficio PFE no.631/2012
(03/28/2012) issued by Procuradoria do Estado de Pernambuco excluding the construction industry from the ICMS
cadastre of taxpayers. 49
The Program Document had projected 2.9% and 3.0% national real GDP growth, and inflation rate (IPCA) of
6.5% and 5.4%, for 2011 and 2012, respectively. The actual national real GDP growth rates were 2.7% and 0.9%,
and inflation rates were 6.5% and 5.8%, respectively. 50
This accounted for only approximately R$9.42 million, or 0.1% of 2012 ICMS revenue, according to a SEFAZ
estimate.
20
Efficient Expenditure Allocation on Strategic Priorities. Beginning in 2011, the government of
Pernambuco started implementing a budget control system based on a programmatic
classification of PPA by detailing the expenditures down to the level of sub-action (detalhamento
de despesas por elemento), thus allowing for more efficient and effective budget implementation
(reflecting the government’s strategic priorities). Financial programming and expenditure
execution have followed sequential procedures of credit commitment and liquidation phases in
the process.51
Moreover, potential budgetary modifications made during execution are now
regulated by a governance system and specific period for ordinary changes, and the new E-
FISCO tracks expenditures related to specific policy priorities in real time.52
In order to measure how efficiently and effectively the expenditure planning system has been
performing, two results targets for 2012 were selected: (a) to execute a minimum of 75 percent
of the budgeted strategic priorities, and (b) to approve less than 1,404 budgetary revisions (i.e.,
10 percent reduction from the previous year’s execution). The implementation of this
subcomponent of the program was successful: the budgetary and financial control system has
been working properly, and both targets were accomplished by the closing date of the project.
In discussion with government officials, the following criterion was adopted by the ICR to
compute this indicator, both for the baseline and its 2012 target: end of the year total liquidation
value for the list of LOA approved expenditure priorities adjusted by all revisions (additions/
discontinuation) throughout the fiscal year (excluding transfers and credit operations outside the
control of the state). The results in Table 6 show that target (a) was surpassed. Also, considering
all budgetary revisions that took place during the fiscal year (722 additional credits and 482
expenditure cuts and reshuffling) target (b) was achieved as well.
51 Lei no.14234 (dez. 13, 2010), DDE Report (Relatório do Detalhamento de Despesas por Elemento) published at
www.transparencia.pe.gov.br, and letter no.470/11 (September 12, 2011) from SEPLAC Secretary’s to the World
Bank. 52
Revisions of budgeted expenditure during the fiscal year are regulated by Decree no. 36092 (January 10, 2011)
and Joint Order no. 2 (January 11, 2011) from SEPLAG/SEFAZ/SAD/SCGE.
21
Improving Planning and Implementing Capacities. Institutionalization of the State’s new
Management Model is critical for the effectiveness of the “All for Pernambuco” government
strategy. In order to consolidate the Management Model and strengthen government planning
and management capacity, the Management Institute was established within SEPLAG as an
analytical tool to critically review strategies, monitor policy results, generate inputs for policy
making, and develop human resources to deliver results.
The Management Institute is already fully operational, with a mandate that includes the
following: (i) monitor and ensure a whole-of-government view to avoid inconsistencies from
line secretariats and agencies, (ii) review the State’s sectoral development policy results, by
developing, updating and disseminating the quarterly Social Management Report, (iii) design
and implement training programs for public policy-makers and analysts, and (iv) link the State
with external entities. The Management Institute’s performance under the context of the DPL
program was Satisfactory, since it achieved the online publication of the three 2012 quarterly
Social Management Reports.53
2.2 Major Factors Affecting Implementation:
Government team commitment was strong, although poor social and political conditions
described in section 1.1 above contributed, at times, to slow program implementation in some
specific areas. SEPLAG team technical qualification is high and has led the government to
converge most budgetary execution to the planned strategic priorities.
53 http://www2.seplag.pe.gov.br/web/seplag/downloads/relatorio-da-acao-do-governo.
22
Program background analysis was sound. The design of the operation tackled State critical
issues, but events affected implementation of some subcomponents. On the quality of education
sub-component, the target for the student enrollment in secondary integral schooling (40 h/w)
was influenced by budgetary conditions. Transformation of semi-integral to integral schooling
required increases in teachers wages, which was constrained by the State overall wage bill
expenditure limit imposed by the LRF. In this case, the government strategic objective of
concluding the transformation of semi-integral into integral schooling was postponed for 2014.54
On the water security sub-component, APAC has delayed the establishment of the new reservoir
management committees/councils without a clear justification, and it removed the Pontal
reservoir from the strategy (it was determined to be unsuitable for multiple uses due to its
relatively small size).
Regarding gender issues, in the Expanding Opportunities component, the Women’s Secretariat
reports that the implementation of 12 regional coordinators was delayed owing to bureaucratic,
fiscal and political reasons. Nevertheless, the laws creating and distributing the public functions
and posts for the Secretariat (Law (no. 14959) and the Decree (no. 39402)) were approved on 19
of April and 17 of May 2013, respectively.
On the SMEs and Rural Producers sub-component, AGEFEPE fell short of achieving full
implementation of its target due to: (a) operational difficulties with project appraisal (lack of
suitable credit access in the gypsum segment), and (b) necessity of further research to identify
the best way to approach a sector (apiculture) which is still extremely informal and serves
primarily as a source of food for the household rather than a traded good.
The implementation of the Improvement of ICMS Tax Revenue subcomponent (under the
component Increasing Public Sector Administrative Capacity) was affected by factors outside
the State’s control: (a) the State GDP parameters that were used for the revenue estimation (both
baseline and target) were proved unrealistic due to the 2012 national economic crisis, and (b) a
judicial decision in May 2012 exempting the construction industry (housing construction) from
interstate ICMS tax incidence. However, although these factors affected the ICMS collection
during the program, they cannot fully account for the gap between the target values and the
realized values of the indicators.
By and large, the risks faced by the operation were the ones identified in the preparation stage of
the program, including the vulnerability of state GDP to the national and global economic crisis,
the deficits in institutional capacity (in some sectors and especially in relation to the interior of
the state), the fiscal competition among states, and the political economy of reforms in education.
54 Although some may argue that, to a certain extent, this could have been anticipated during the planning phase of
the DPL, the failure to reach the projected State revenue collection (as seen above) resulted in slowing down some
expenditure programs.
23
2.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization:
M&E design. Most of the indicators appearing in the results indicator matrix are suitable to
monitor the PDO progress in components and sub-components. Most indicators cut
simultaneously across issues, sectors, gender and space. Nevertheless, shortcomings were
observed in monitoring and evaluation design of indicators for the following sub-components: (i)
people covered by APAC alert system (subcomponent 1.3.b), where there was a confusion
between total and additional people covered in the original PD; (ii) ICMS/GDP ratio
(subcomponent 3.1.a), where the 2009 baseline may have been incorrectly estimated, and (iii)
ICMS real growth rate (sub-component 3.1.b), where the target indicator was overly optimistic.
M&E implementation and utilization. Most of the indicators were collected since 2007. With
the DPL program, this practice became more systematic and, more recently, the results indicators
have been analyzed and disseminated by the respective secretariat and published online through
the quarterly Social Management Reports by SEPLAG/Management Institute. As the agency
overseeing the implementation of the program, SEPLAG has consolidated its role as a central
secretariat.
2.4 Expected Next Phase/Follow-up Operation:
The Bank Board has recently approved (June 25, 2013) a follow-up Pernambuco Equity and
Inclusive Growth DPL (the DPL II – P132768) with the client. DPL II will build upon the
reforms supported by this DPL to assist the government of Pernambuco in its strategy to
strengthen the design, implementation, monitoring and evaluation of policies and programs
aimed at promoting sustained growth and improved economic opportunities for the poor,
consolidating public sector management innovations, preventing crime and violence, and
reducing the burden associated with chronic diseases. Given the one-tranche disbursement type
of loan and the new economic reality facing the State (and the country), intense supervision and
close monitoring of the evolution of results indicators is highly advisable.
3. Assessment of Outcomes
3.1 Relevance of Objectives, Design and Implementation
During the project appraisal, the objectives of this operation were considered of high relevance
to the State and federal governments, as well as to the Bank. Pernambuco is still a poor
Northeastern state and, in spite of the relatively fast economic growth experienced until recently,
growth replicated the regional, economic and social disparities previously found in the state.
This DPL project promoted a more equitable, sustainable and competitive Pernambuco, by
supporting the State’s economic and social development agenda with emphasis on non-
metropolitan areas, and by focusing on quality education, better water security and disaster risk
management, gender inclusion and job creation opportunities, and increasing public
administration capacity. In this sense, the DPL was fully consistent with the priorities of Brazil
24
CPS FY12-15. With this DPL, the Bank expanded its experience of engagement with the
northeastern states on fighting poverty in Brazil.
3.2 Achievement of Program Development Objectives
The DPL operation was successful in achieving most of its objectives. Out of the 20 targets in
the results indicators matrix, 14 were achieved before the closing date of the project, and 3 others
(new water reservoir committees, women’s regional coordination, and SME project financing)
were completed or almost completed by the ICR mission date. The increase in the total number
of integral and semi-integral secondary schools and student enrollment, the noteworthy
improvement in the provision of water security (by granting water-rights, preparing for the
establishment of reservoir councils, setting up water users cadastre, and strengthening disaster
and risk management), are bringing about better quality of life, particularly for people living
outside the metropolitan area of Recife. Moreover, on granting opportunities for all, by
supporting the expansion of vocational schooling (including out of MAR), training of
professionals on gender issues, establishing regional coordinators for gender issues, and
increasing funding to SMEs and rural producers, the PDO has been largely achieved.
Also, although the objective of a significant reduction on ICMS tax evasion was not clear during
project implementation, the PDO of increasing public administrative capacity is being evidenced
by a better allocation and execution of strategic expenditure priorities, and increased
transparency on public policies through systematic online publication of the Social Management
Report which upgraded the delivery of policy monitoring and analysis.
3.4 Justification of Overall Outcome Rating
Rating: Satisfactory
The operation was rated Satisfactory, since the PDO indicators were largely achieved. Minor
shortcomings were recorded (see Sections 2.1 and 2.3) with respect to targets on integral
secondary schooling, establishment of reservoir committees, gender regional coordinators,
AGEFEPE project financing, ICMS tax revenue. In spite of these missed targets, the overall
intended objective of the project was achieved.
3.5 Overarching Themes, Other Outcomes and Impacts
A predominant institutional aspect that facilitated implementation of the DPL was the governor’s
and his governing core team’s assertive attitude towards consolidation of the “All-for-
Pernambuco Strategy,” through the adoption of the “Pernambuco’s Management Model” and the
creation of the “Instituto de Gestão” (Management Institute) inside SEPLAG. The Model
focused on improving the quality of public management to deliver results on the strategic areas
of education, health, and security, while impacting issues of gender, job creation and SMEs,
water and sanitation, infrastructure and mobility, and taking economic and social development to
the interior of the state. By supporting the government policy reform program, the DPL
25
strengthened Pernambuco’s Management Model arrangements, whose consolidation will be
further helped by the follow-up DPL II project.
4. Assessment of Risk to Development Outcome
Rating: Moderate
Economic and fiscal uncertainties are the major potential risks to development outcomes of this
DPL. Recent experience has shown that ICMS and FPE (i.e., the most important state revenue
sources) are highly vulnerable to GDP fluctuations and to global economic environment
volatilities; this may affect future space for investment and priority social expenditures.
Nevertheless, a risk-mitigating factor is that Pernambuco has maintained a sound fiscal position
and has exhibited a prudent approach for the budget management. For example, through the
economic crises, the State managed to keep its fiscal stand and its strategic expenditure program
in good shape in 2012.55
Institutional instability may also be a risk to development outcomes. Although the central
secretariats (SEPLAG and SEFAZ) are well equipped to coordinate and monitor implementation
of the government program, reform sustainability hinges on: (a) completing implementation,
maintenance and further improvements of the initiated policy reforms, and (b) overcoming the
still constrained capacity at sectorial and municipal levels. As risk-mitigation factors, the
institutional sustainability may count on the already established: (i) SecMulher as a permanent
secretariat and its regional coordination network; (ii) APAC infrastructure of disaster and risk
management; and (iii) Management Institute/SEPLAG’s efforts to put together the Social
Management Reports, by coordinating government policy actions and monitoring and evaluating
results.
Another important risk-mitigating factor is the policies, reforms, training program, and,
particularly, the supervision work, that are being conducted under the DPL II, just approved by
the Board of the Bank for Pernambuco as a follow-up program for this DPL.
Thus, notwithstanding some political economy factors that might affect reforms sustainability
(e.g., uncertainties introduced by the 2014 government election, teachers’ wages for the
completion of integral secondary education), the risk to development outcome is considered
Moderate, since the core government team’s commitment to reforms is high and the Bank will
remain engaged with the client.
55 Since 2005 the debt/revenue ratio has been declining and is less than 1. Also, primary surplus, own tax revenue,
personnel expenditures/revenue ratio, and investment expenditures/revenue ratio have all been in line with the
federal LRF-Fiscal Responsibility Law and the agreement with the central government PAF-Programa de Ajuste
Fiscal (for the STN evaluation of Pernambuco financial situation under its current PAF, see www.sefaz.pe.gov.br ).
26
5. Assessment of Bank and Borrower Performance
5.1 Bank Performance
(a) Bank Performance in Ensuring Quality at Entry
Rating: Moderately Satisfactory
In the preparation of the operation, the Bank performed moderately satisfactory. Local experts
were used for diagnostics, and the government team was directly involved in discussions, from
identifying issues to the formulation of the operation policy matrix. Government officials
acknowledge the critical Bank contribution to the design of the program, the advices on the legal
instruments, and the synergy among sectors of the administration. A sound results-indicator
matrix was prepared in consultation with the government, and indicators were adequate in
number, simple, focused, and mostly well-defined. The only exceptions were some flaws in the
measurement criteria of two sub-components: the people covered by APAC alert system (1.3.b),
and the improved ICMS tax revenue (3.1.b)—the former by mistakenly including as additional,
instead of as total, the number of people to be covered by the flood alert system, and the latter by
incorrectly computing the baseline parameter and setting up a rather over-optimistic target.
Although these minor flaws were spotted only at the ICR phase (see Section 2.1 and 2.3), they do
not undermine the overall quality of the Bank’s preparation work. Bank performance in ensuring
quality at entry is rated moderately satisfactory.
(b) Quality of Supervision
Rating: Moderately Satisfactory
The Bank sent two supervision missions to Pernambuco (October 2012, and February 2013) with
the objectives of guiding state officials through the supported policy reforms, monitoring the
program implementation, and discussing follow-up reports and the closing of the operation.
Both missions met with SEPLAG (the implementing agency). The first mission, composed by
the TTL and co-TTL, focused on AGEFEPE, SecMulher, and issues related to the writing and
content of the follow-up reports. The second mission was composed by the co-TTL, one water
and sanitation expert, one gender issues consultant, one LCSPP expert, and was previously
assisted by a EDUCAR project TTL mission. The second mission worked intensively with the
SecMulher and SDS-Social Development Secretariat, besides discussing aspects of the ICR
preparation and monitoring of results indicators, especially those related to water security,
disaster and risk management.
Beyond program supervision, the Bank has also contributed with capacity building in
Pernambuco by extending invitations for government officials to attend trainings provided by the
Bank in areas of the reforms supported, as well as to participate in courses and seminars in other
states and abroad.
27
The Bank supervision failed to pay enough attention to each component of the program. The
weakest of these was the fiscal sub-components, where the delays and difficulties in reaching the
targets for tax evasion reduction (ICMS/GDP increase) and ICMS real growth (subcomponent
3.1.a and 3.1.b) were not spotted by the two ISRs before the ICR. This flaw may be due to the
discontinuation of a Bank staff fiscal expert presence during supervision.
(c) Justification of Rating for Overall Bank Performance
Rating: Moderately Satisfactory
Despite the minor shortcomings in ensuring quality at entry and at supervision—referred to in (a)
and (b) above—Bank performance is rated moderately satisfactory as, on the whole, it provided
outstanding assistance to the client during project preparation and during implementation of the
operation.
5.2 Borrower Performance
(a) Government Performance
Rating: Satisfactory
Government ownership and commitment to the reforms and achievement of the development
objectives are undeniable. Nevertheless, the uneven implementation capacity at sectoral and
municipal levels has led to some shortcomings and delays in target delivery. On the other hand,
the intensive participation of the state government officials in all phases of the project, and their
efforts to internalize the operation’s M&E arrangement on following up actions and properly
reporting on the targets (including online publications) justifies a Satisfactory rating.
(b) Implementing Agency or Agencies Performance
Rating: Highly Satisfactory
The State Secretariat of Planning and Management (SEPLAG) was the implementing agency,
showing a strong commitment to the program by ably coordinating the actions and stakeholders
involved. Moreover, during project implementation, SEPLAG completed the institutionalization
of the Pernambuco’s Management Model by consolidating the Management Institute (Instituto
de Gestão) and systematically maintaining the online publication of the Social Management
Report. SEPLAG data reporting and following up program events were outstanding. Its rating is
Highly Satisfactory.
(c) Justification of Rating for Overall Borrower Performance
Rating: Satisfactory
28
The overall borrower performance was rated satisfactory due to the authorities’ ownership and
the implementing agency’s commitment to the project, in spite of some implementation minor
shortcomings owing to limited implementation capacities in certain sectors and localities, and
also owing to factors beyond the state’s control.
6. Lessons Learned
Some lessons can be drawn from this DPL’s successful operation. The positive lessons include
the following:
(a) Vision and leadership from the highest-level state authority were essential to keep the
focus on program execution. Bank background studies, efforts to align the project
strategic design to the government program objectives (the “All for Pernambuco”), and
flexibility during implementation facilitated communication with government officials
during preparation, implementation and evaluation of the DPL.
(b) The government core team’s participation from the design stage of the project reinforced
their ownership of and commitment to the program.
(c) Bank support, including technical assistance during the project implementation, was
acknowledged as important and was very much appreciated by the client. This was
particularly the case with the extended invitations for public officials’ participation in
training programs,56
and the technical assistance provided to SecMulher.57
(d) The simplicity of the matrix of result indicators was essential for a successful
implementation. Although some targets were not well defined or realistic, the DPL
matrix had the merit of being simple, with an appropriate number of indicators that, for
the most part, were under the power of the executive authority to deliver.
(e) The ability of the DPL implementing agency to manage coordination was essential for
delivery of program policy actions. All in all, SEPLAG conducted the project
implementation successfully, and encouraged a new culture of taking decisions on the
basis of priorities, objectives and targets. SEPLAG also boosted capacity and
transparency through the analytical activities of the Management Institute.
Areas calling for further attention to strengthen Bank performance may include:
(a) Bank supervision can ensure the progress and correct the course of the project execution.
The DPL supervision, however, was uneven among components, and component 3 of the
indicators matrix (particularly the fiscal component 3.1) did not have adequate follow-up
from the Bank. Consequently, measurement mistakes and over-optimistic targets set
during preparation phase were not identified by ISRs and were not revised prior to the
56 E.g., in seminars, courses and interactions with other states’ similar experiences and abroad.
57 Discussions during supervision about a study proposal on women under risk of violence, as well as the visit by an
expert consultant to diagnose and make recommendations on the SecMulher information system, and to monitor and
evaluate the Pacto Pela Vida program.
29
end of the DPL. Because of this, the opportunity to review the parameters and discuss
corrected indicators was lost. Consequently, these targets were not achieved.
(b) Like other projects in education, the DPL set targets on student enrollment into integral
and semi-integral schools. But, as the project objective was to provide quality education,
the achievement of the enrollment target does not necessarily mean that the objective of
quality in education was achieved through this DPL.58
The rationale for the selection of
this indicator is that previous research (as cited in the PD) has shown that higher
enrollment in integral and semi-integral schooling implies higher quality education since
those programs have been shown to lead to better student outomes. However, other and
perhaps more direct measures of quality could have been used: lower repetition rates,
improved student test scores, improved teaching competence, and development of school
capacity to deliver.59
(c) Usually, in low capacity environments, reform policies take time to implement, and their
results/outcomes takes longer to manifest. Therefore, it does not seem clear whether a
sole-tranche upfront disbursement DPL is the most effective instrument to operate
reforms of the kind envisaged at subnational level. Effective outcomes to be monitored
and evaluated by the closing of the program may require data that the DPL short-term
implementation cannot provide. In these circumstances, perhaps alternative
programmatic multi-sector loan instruments, based on disbursement-linked result-
indicators, might be more effective in terms of target/outcome achievement in weak
capacity environment.
Another important lessons for the Bank relates to the incentives generated by multisectoral tasks
in single-tranche operations. The latter involves potential challenges in the supervision stage,
which requires strong leadership of the TTL and commitment by all team members.
58 Although the Program Document claims that the objective of this component is also to keep children off the street,
and to prepare the youngsters for the labor market, aiming at social inclusion. 59
Table 4 presented an indicator of improvement in the quality of education in Pernambuco previously to this DPL.
Provided that the IDEPE Index could be able to capture all the relevant variables in quality of education (beyond
longer school hours), then it should be used as program target instead.
30
Annex 1 Bank Lending and Implementation Support/Supervision Processes
(a) Task Team members
Names Title Unit Responsibility/
Specialty
Lending
Luis-Felipe Lopez Calva Lead Economist LCSPP TTL
Marcos T. Abicalil Sr Water & Sanitation Spec. LCSWS Co-TTL
Ane Perez Orsi de Castro Program Assistant LCC5C Team Assistant
David Evans Senior Economist AFRCE Team Member
Indu John-Abraham Senior Operations Officer LCSPP Co-TTL
Miriam Muller Consultant LCSPP Team Member
Aude-Sophie Rodella Economist LCSPP Team Member
Mariano Lafuente Public Sector Management Specialist LCSPS Team Member
Pilar Gonzalez Senior Counsel LEGCF Country Lawyer
Erik Alda Consultant LCSPP Team Member
Supervision
Luis-Felipe Lopez Calva Lead Economist LCSPP TTL
Miriam Muller Consultant LCSPP Team Member
Indu John-Abraham Senior Operations Officer LCSPP Co-TTL
Aude-Sophie Rodella Economist LCSPP Team Member
Joao Olivera Consultant LCSPP ICR Author
Tatianna Guerrante Schlottfeldt Program Assistant LCSPP Team Assistant
(b) Staff Time and Cost
Stage
Staff Time and Cost (Bank Budget Only)
No. of staff weeks USD Thousands (including
travel and consultant costs)
Lending
Total: 82.14 $582,588.15
Supervision/ICR
Total: 9.85 $84,984.15
31
Annex 2
SUMMARY OF THE BORROWER REPORT
1. A comprehensive report (Relatório de Fechamento) on the implementation of the Expanding
Opportunities, Enhancing Equity in the State of Pernambuco DPL was presented by the
Borrower before the end of July 2013, accounting for the performance on project’s prior
actions, effective disbursements, and attainment of the targets in the results indicators matrix
of the policy reform program. What follows is a summary of the Borrower’s Report on the
project achievements.
2. This DPL was critically important for strengthening the three main areas of the State’s policy
reform program (i.e., improving the quality of life, expanding opportunities, and expanding
public sector administrative capacity) already in place since 2007. Moreover, the DPL helped
considerably in the adoption of an inclusive economic development approach and the
consolidation a new culture of policy making in the State based on planning, objectives and
targets to be achieved.
3. During the project implementation, the results indicators of policy reform to improve quality
of life were quite positive. The enrollment in state integral and semi-integral secondary
education increased 95 percent, thus improving the prospective success for the citizens and
the social gain by removing from the street more than 80 thousand children. Water security
was also considerably improved by the issuance of ground and surface water rights beyond
the targets and users cadaster for three water basins were implemented, although the
establishment of the four new reservoir management committees in the interior are still
underway. Considerable improvements were achieved on disaster and risk management,
including the enactment of a flood risk early warning protocol, the implementation of the
APAC hydro-meteorological communication strategy, besides the completion of coverage by
the APAC alert system of the all 35 municipalities under risk of flood and drought.
4. The DPL implementation also achieved expressive results in expanding opportunities for the
population. In this policy area the focus was to promote enhanced economic equity across
32
regions, gender, and economic activities. In fact, job creation and investment in human
capital development were very much advanced during the project implementation period,
with increased student enrollment in vocational/professional schools (159 percent in relation
to the base line), especially in those out of MAR (445 percent), beyond the program’s targets.
Regarding to greater opportunities for gender equity, the SecMulher achieved the target of
training trainers in all relevant secretariats and sectors, as well as throughout all the regions of
the State, although owing to legislative difficulties the targeted number of newly created
regional coordination were still to be completed by the project closing date. The economic
development of SMEs and rural producers was tackled through the creation of AGEFEPE
(State Development Agency), which has acted across all regions of the State and had almost
achieved the target by the project closing date.
5. Finally, the improvement of public sector administrative capacity was carried out by a more
effective revenue collection (tax evasion reduction), better resource allocation and budget
execution, and the institutionalization of the State Management Model. In spite of the fact
that both targets for the tax revenue increase (the state ICMS/GDP ratio and the ICMS real
growth) were not achieved, mainly due to the unanticipated economic crisis of the period, the
financial result was significant. On its turn, the improvement of the execution of strategic
priorities was evident, both in regard to the executed/approved budget ratio and to the number
of budgetary revisions approved. Last, but not least, the achievement of the targeted
publication of the three Social Management Reports by the Management Institute/Planning
and Management Secretariat represented an important advancement in the process of the
institutionalization of the Pernambuco Management Model.
6. As indicated by the results achieved, the implementation of this DPL was successful. The
majority of targets were reached by the closing of the project, or just after that date. Some of
the targets not achieved were motivated by factors beyond the state government decision
power or legislative difficulties.
7. SEPLAG, the implementation agency, performed a great coordination work with the other
secretariats involved, and kept a constant and excellent communication with the World Bank
during project preparation and implementation.
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
AfrânioAfrânio
PetrolinaPetrolina
OrocóOrocó
InajáInajá
TrindadeTrindadeGranitoGranito
São José doSão José doBel MonteBel Monte
CedroCedro
DormentesDormentes
AraripinaAraripina
IpubiIpubi
BodocóBodocó
CabrobóCabrobó
FlorestaFloresta
IracurabaIracuraba
Nova PetrolândiaNova Petrolândia
TacaratuTacaratu
Belem de sãoBelem de sãoFranciscoFrancisco
Terra NovaTerra Nova
ParnamirimParnamirim
SerritaSerrita VerdejanteVerdejante
MirandibaMirandiba
CalumbiCalumbi
FloresFlores
BetâniaBetânia
BrejinhoBrejinho
TuparetamaTuparetama
IbimirimIbimirim
TupanatingaTupanatinga
IatiIati
CanhotinhoCanhotinhoParanatamaParanatama
CaetesCaetes
S. Vicente FerrerS. Vicente FerrerMacaparanaMacaparana
CamutangaCamutanga
AliancaAlianca
JupiJupi
João AlfredoJoão Alfredo
CupiraCupiraS. BentoS. Bentodo Unado Una
SalaoSalao PalmeirinaPalmeirina
CalcadoCalcadoXexeuXexeu
S. José daS. José daCoroa GrandeCoroa Grande
BarreirosBarreiros
Água PretaÁgua PretaRio FormosoRio Formoso
SirinhaémSirinhaém
RibeirãoRibeirão
IpojucaIpojuca
Cabo de S. AgostinhoCabo de S. Agostinho
GameleiraGameleira
MaraialMaraial
PanelasPanelas
AgrestinaAgrestina
GravatáGravatáPombosPombos
S. LourençoS. Lourençoda Matada Mata
CatendeCatende
BelemBelemde Mariade Maria
QuipapaQuipapa
LajedoLajedo
CachoeirinhaCachoeirinha
TerezinhaTerezinhaBrejãoBrejão
VenturosaVenturosa
AlagoinhaAlagoinha
PocãoPocão
JataúbaJataúba
Aguas BelasAguas Belas CorrentesCorrentes
CustódiaCustódia
CarnaíbaCarnaíbaIguaraciIguaraci
PesqueiraPesqueiraBelo JardimBelo Jardim
São CaitanoSão Caitano
ToritamaToritama
BezerrosBezerros
CamocimCamocimdes Felixdes Felix
BonitoBonito CortesCortes
PrimaveraPrimavera
Riacho das AlmasRiacho das Almas
PassiraPassiraCumaruCumaru
VertentesVertentes
EscadaEscada
Châ GrandeChâ Grande
SurubimSurubim
TimbaúraTimbaúra
MachadosMachados
Feira NovaFeira NovaGlóriaGlória
do Goitádo Goitá
IgaraçuIgaraçu
PaulistaPaulistaAbreule LimaAbreule Lima
ItapissumaItapissumaItamaracáItamaracá
CarpinaCarpina
Nazare da MataNazare da MataItaquitingaItaquitingaVicénciaVicéncia
TambéTambé
GoianaGoianaCondadoCondado
Pau-D'AlhoPau-D'Alho
OlindaOlinda
Jaboatão dosJaboatão dosGuararapesGuararapes
Vitória deVitória deSto. AntãoSto. Antão
Sta. Cruz daSta. Cruz daBaixa VerdeBaixa Verde
CarnaubeiraCarnaubeirada Penhada Penha
ExúExú
MorelândiaMorelândia
Santa CruzSanta Cruz
SerraSerraTalhadaTalhada
S. JoséS. Josédo Egitodo Egito
SertâniaSertânia
ItaíbaItaíba
BuíqueBuíque
Brejo daBrejo daMadre de DeusMadre de Deus
Santa CruzSanta Cruzdo Capibaribedo Capibaribe
Bom ConselhoBom Conselho
OuricuriOuricuri
Sta. MariaSta. Mariada Boa Vistada Boa Vista
SalgueiroSalgueiro
ArcoverdeArcoverde
Afogados daAfogados daIngazeiraIngazeira
GaranhunsGaranhuns
CaruaruCaruaru
PalmaresPalmares
LimoeiroLimoeiro
RECIFERECIFE
P A R A Í B AP A R A Í B AC E A R ÁC E A R Á
P I A U ÍP I A U Í
B A H I AB A H I A
A L A G O A SA L A G O A S
Afrânio
Petrolina
Orocó
Inajá
TrindadeGranito
São José doBel Monte
Cedro
Dormentes
Araripina
Ipubi
Bodocó
Cabrobó
Floresta
Iracuraba
Nova Petrolândia
Tacaratu
Belem de sãoFrancisco
Terra Nova
Parnamirim
Serrita Verdejante
Mirandiba
Calumbi
Flores
Betânia
Brejinho
Tuparetama
Ibimirim
Tupanatinga
Iati
CanhotinhoParanatama
Caetes
S. Vicente FerrerMacaparana
Camutanga
Alianca
Jupi
João Alfredo
CupiraS. Bentodo Una
Salao Palmeirina
CalcadoXexeu
S. José daCoroa Grande
Barreiros
Água PretaRio Formoso
Sirinhaém
Ribeirão
Ipojuca
Cabo de S. Agostinho
Gameleira
Maraial
Panelas
Agrestina
GravatáPombos
S. Lourençoda Mata
Catende
Belemde Maria
Quipapa
Lajedo
Cachoeirinha
TerezinhaBrejão
Venturosa
Alagoinha
Pocão
Jataúba
Aguas Belas Correntes
Custódia
CarnaíbaIguaraci
PesqueiraBelo Jardim
São Caitano
Toritama
Bezerros
Camocimdes Felix
Bonito Cortes
Primavera
Riacho das Almas
PassiraCumaru
Vertentes
Escada
Châ Grande
Surubim
Timbaúra
Machados
Feira NovaGlória
do Goitá
Igaraçu
PaulistaAbreule Lima
ItapissumaItamaracá
Carpina
Nazare da MataItaquitingaVicéncia
També
GoianaCondado
Pau-D'Alho
Olinda
Jaboatão dosGuararapes
Vitória deSto. Antão
Sta. Cruz daBaixa Verde
Carnaubeirada Penha
Exú
Morelândia
Santa Cruz
SerraTalhada
S. Josédo Egito
Sertânia
Itaíba
Buíque
Brejo daMadre de Deus
Santa Cruzdo Capibaribe
Bom Conselho
Ouricuri
Sta. Mariada Boa Vista
Salgueiro
Arcoverde
Afogados daIngazeira
Garanhuns
Caruaru
Palmares
Limoeiro
RECIFE
P A R A Í B AC E A R Á
P I A U Í
B A H I A
A L A G O A S
600
800
800600
600
400
400
400
400
600
800
1200
1600
1800
2000
2200
2200
2000
1800
160014
00
12001000
800
1400
1000
600
600
ATLANTIC
OCEAN
ItaparicaReservoir
SobradinhoReservoir
Rio São Francisco
41°00'
7°30'
8°00'
8°30'
9°00'
7°30'
8°00'
8°30'
9°00'
40°30' 40°00' 39°30' 39°00' 38°30' 37°30' 37°00' 36°00' 35°30' 35°00'36°30'38°00'
41°00' 40°30' 40°00' 39°30' 39°00' 38°30' 37°30' 37°00' 36°00' 35°30' 35°00'36°30'38°00'
URBAN AREA
ISOHYETS IN MM
CLIMATIC ZONES:
SEMI ARID REGIAO DO SEMI-ARIDO
TRANSITIONAL ZONE AGRESTE
COASTAL FOREST ZONA DA MATA
MAIN ROADS
MAIN CITIES
REGIONAL OFFICES
STATE CAPITAL
STATE BOUNDARIES
OCTOBER 2013
IBRD 40447
KILOMETERS
10 20 30 400
600
BRAZILEXPANDING OPPORTUNITIES:
ENHANCING EQUITY IN THE STATE OF PERNAMBUCO DPL
ATLANTIC
OCEAN
AREA OF MAP
BOLIVIA
CHILE
ARGENTINA
PERU
R.B. DE VENEZUELA
URUGUAY
GUYANA
SURINAMEFRENCHGUIANA (Fr.)
AMAZONAS
MATOGROSSO
PARÁ
MATOGROSSODO SUL
ACRERONDÔNIA
RIOGRANDEDO SUL
SANTACATARINA
PARANÁ
SÃOPAULO RIO DE
JANEIRO
ESPÍRITOSANTO
SERGIPEALAGOAS
PERNAMBUCO
PARAÍBA
RIO GRANDEDO NORTE
MINASGERAS
GOIÁS
BAHIA
PIAUÍ
CEARÁ
B R A Z I L
PARAGUAY
COLOMBIA
STATE BOUNDARIES
NORTHEASTREGION BOUNDARIES
INTERNATIONALBOUNDARIES
BRASILIA
TOCANTINS
MARANHAO
RORAIMA
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.
GSDPMMap Design Unit