Document of

The World Bank

FOR OFFICIAL USE ONLY

Report No: 59014-BR

PROJECT APPRAISAL DOCUMENT

ON A

PROPOSED LOAN

IN THE AMOUNT OF US$107.3325 MILLION

TO THE

FEDERATIVE REPUBLIC OF BRAZIL

FOR THE

FEDERAL INTEGRATED WATER SECTOR PROJECT – INTERAGUAS

June 3, 2011

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

This document is being made publicly available prior to Board consideration. This does not imply a presumed outcome. This document may be updated following Board consideration and the updated document will be made publicly available in accordance with the Bank’s policy on Access to Information.

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CURRENCY EQUIVALENTS

(Exchange Rate Effective November 10, 2010)

Currency Unit = Real (R$) R$ 1.00 = US$0.5859

US$1.00 = R$ 1.7066

FISCAL YEAR January 1 – December 31

ABBREVIATIONS AND ACRONYMS

ANA Agência Nacional de Águas National Water Agency CERH Conselho Estadual de Recursos Hídricos State-level Water Resources Councils CGP Comitê Gestor do Programa Interministerial Management Committee CGU Controladoria Geral da União Office of the Controller General CNRH Conselho Nacional de Recursos Hídricos National Council on Water Resources CODEVASF Companhia de Desenvolvimento dos Vales

do São Francisco e Parnaíba Development Company for the São Francisco and Parnaíba Valleys

COF Coordenação de Orçamento e Finanças Budget and Finance Coordinator CPS Estratégia de Parceria para o País Country Partnership Strategy CQS Seleção Baseada na Qualificação do

Consultor Selection Based on the Consultants’ Qualifications

DARIN Diretoria de Articulação Institucional Director of Institutional Coordination DNOCS Departamento Nacional de Obras Contra as

Secas National Department of Works Against Droughts

EIA Estudo de Impacto Ambiental Environmental Impact Assessment EnvTAL Projeto de Assistência Técnica para a

Agenda de Sustentabilidade Ambiental Environment Sector Technical Assistance Loan

ESMF Arcabouço de Gestão Ambiental e Social Environmental and Social Management Framework EsTAL Projeto de Assistência Técnica ao Setor de

Energia Energy Sector Technical Assistance Loan

ESW Relatório Econômico e Setorial Bank Economic and Sector Work FM Gerenciamento Financeiro Financial Management FMA Avaliação de Gerenciamento Financeiro Financial Management Assessment FMIS Sistema de Informação de Gerenciamento

Financeiro Financial Management Information System

FSL Empréstimo com Amortização Constante Fixed-spreads Loan FUNAI Fundação Nacional do Índio Federal Foundation for Indigenous Peoples FY Ano Fiscal Fiscal Year GDP Produto Nacional Bruto Gross domestic product GEAPR Gerência de Acompanhamento de Projetos

da SIP/ANA SIP/ANA’s Projects General Supervision Management Unit

GEF Fundo Global para o Meio Ambiente Global Environmental Facility GEPRO Gerência Técnica de Projetos da SIP/ANA SIP/ANA’s Projects Technical Supervision

Management Unit GoB Governo do Brasil Government of Brazil GSAN Sistema Integrado de Gestão de Serviços de

Saneamento Integrated Management System for Water Supply and Sanitation

iv

IBRD Banco Internacional para Reconstrução e Desenvolvimento

International Bank for Reconstruction and Development

ICB Concorrência Pública Internacional International Competitive Bidding ICR Relatório de Encerramento do Projeto Implementation Completion and Results Report IEG Grupo de Avaliação Independente Independent Evaluation Group IFC Corporação Financeira Internacional International Finance Corporation IFR Relatórios Financeiros Interinos Interim Financial Reports IIPC Painel Intergovernamental sobre Mudança

Climática Intergovernmental Panel on Climate Change

INMETRO Instituto Nacional de Metrologia, Normalização e Qualidade Industrial

National Institute of Metrology, Normalization and Industrial Quality

IPHAN Instituto do Patrimônio Histórico e Artístico Nacional

National Institute for Historical and Artistic Heritage

IPPF Arcabouço para Planejamento de Povos Indígenas

Indigenous Peoples Planning Framework

JMP Programa de Monitoramento Conjunto Joint Monitoring Program LCR Região da América Latina e Caribe Latin America and Caribbean Region LCS Seleção pelo Menor Custo Least-cost Selection M&E Monitoria e Avaliação Monitoring and Evaluation MCid Ministério das Cidades Ministry of Cities MI Ministério da Integração Nacional Ministry of National Integration MIC País de Renda Média Middle Income Country MMA Ministério do Meio Ambiente Ministry of Environment MOP Manual Operacional do Projeto Project Operational Manual NCB Concorência Pública Nacional National Competitive Bidding NGO Organização Não Governamental Nongovernmental Organization O&M Operação e Manutenção Operation and Maintenance PAC Programa de Aceleração do Crescimento Growth Acceleration Program PAD Documento de Avaliação do Projeto Project Appraisal Document PDO Objetivos de Desenvolvimento do Projeto Project Development Objectives PMSS Projeto de Modernização do Setor

Saneamento Water Sector Modernization Project

PMU Unidade de Gerenciamento do Projeto Project Management Unit PNRH Plano Nacional de Recursos Hídricos National Water Resources Plan POA Plano Operativo Anual Annual Operational Plan PPA Plano Plurianual Multiyear Plan PPP Parceria Público-Privada Public-Private Partnership PROAGUA Nacional

Programa Nacional de Desenvolvimento dos Recursos Hídricos

Federal Water Resources Management Project – Additional Financing

PROAGUA Semi-árido

Sub-programa de Desenvolvimento de Recursos Hídricos para o Semi-Árido Brasileiro

Federal Water Resources Management Project

PROSANEAR Programa de Saneamento para Populações em Áreas de Baixa Renda

Low Income Sanitation Technical Assistance Project

QCBS Seleção com Base em Qualidade e Custo Quality- and Cost-Based Selection REA Avaliação Ambiental Regional Regional Environmental Assessment RIMA Relatório de Impacto no Meio Ambiente Environmental Impact Report RP Plano de Reassentamento Resettlement Plan RPF Arcabouço da Política de Reassentamento Resettlement Policy Framework SAF Superintendência de Administração,

Finanças e Gestão de Pessoas da ANA ANA’s Superintendence of Administration, Finances and Human Resources

SAT Equipe de Salvaguardas Safeguards Advisory Team

v

SBD Documento Padrão de Licitações Standard Bidding Document SEA Avaliação Ambiental Estratégica Strategic Environmental Assessment SEAIN Secretaria Especial de Assuntos

Internacionais Secretariat for International Affairs

SEDEC Secretaria Nacional de Defesa Civil National Secretariat of Civil Defense SFC Secretaria Federal de Controledo Control Federal Secretariat of Control SIAFI Sistema Integrado de Administração

Financeira Integrated Federal Financial Administration System

SIGMA Sistema de Informações Gerenciais Monitoring and Administrative Management SystemSIH Secretaria de Infra-estrutura Hídrica Secretariat of Hydraulic Infrastructure SIL Empréstimo de Investimento Específico Specific Investment Loan SINDEC Sistema Nacional de Defesa Civil National Civil Defense System SINGREH Sistema Nacional de Gerenciamento de

Recursos Hídricos National Water Resources Management System

SIP Superintendência de Implementação de Programas e Projetos da ANA

ANA’s Superintendent of Implementation of Programs and Projects

SNIRH Sistema Nacional de Informações sobre Recursos Hídricos

National Water Resources Information System

SINISA Sistema Nacional de Informações em Saneamento Básico

National Information System on Basic Sanitation

SNSA Secretaria Nacional de Saneamento Ambiental

National Secretariat of Environmental Sanitation

SOE Declaração de Gastos Statement of Expenditures SRH Secretaria de Recursos Hídricos. Secretariat for Water Resources SRHU Secretaria de Recursos Hídricos e

Ambiente Urbano Secretariat for Water Resources and Urban Environment

STN Secretaria do Tesouro Nacional National Treasury Secretariat STP Secretaria Técnica do Projeto Project Technical Secretariat TAL Empréstimo de Assistência Técnica Technical Assistance Loan ToR Termo de Referência Terms of Reference UPP Unidade de Preparação do Projeto Project Preparation Unit WRM Gerenciamento de Recursos Hídricos Water Resources Management WSS Abastecimento de Água e Saneamento Water Supply and Sanitation

Vice President: Pamela Cox Country Director: Makhtar Diop

Sector Director: Laura Tuck Sector Manager: Karin Kemper / Guang Zhe Chen

Task Team Leader: Manuel Contijoch / Thadeu Abicalil

vi

BRAZIL BR Federal Integrated Water Sector Project – Interaguas

CONTENTS

Page

I.  STRATEGIC CONTEXT AND RATIONALE ................................................................. 1 

A.  Country and sector issues.................................................................................................... 1 

B.  Rationale for Bank involvement ......................................................................................... 3 

C.  Higher-level objectives to which the project contributes ................................................... 4 

II.  PROJECT DESCRIPTION ................................................................................................. 5 

A.  Lending instrument ............................................................................................................. 5 

B.  Project Development Objective and key indicators ............................................................ 5 

C.  Project components ............................................................................................................. 6 

D.  Lessons learned and reflected in the project design ............................................................ 9 

E.  Alternatives considered and reasons for rejection ............................................................ 10 

III.  IMPLEMENTATION .................................................................................................... 11 

A.  Institutional and implementation arrangements ................................................................ 11 

B.  Monitoring and evaluation of outcomes/results ................................................................ 12 

C.  Sustainability..................................................................................................................... 12 

D.  Critical risks and possible controversial aspects ............................................................... 13 

E.  Loan/credit conditions and covenants ............................................................................... 14 

IV.  APPRAISAL SUMMARY ............................................................................................. 16 

A.  Economic and financial analyses ...................................................................................... 16 

B.  Technical ........................................................................................................................... 16 

C.  Fiduciary ........................................................................................................................... 16 

D.  Social................................................................................................................................. 17 

E.  Environment ...................................................................................................................... 18 

F.  Safeguard policies ............................................................................................................. 20 

G.  Policy exceptions and readiness ........................................................................................ 20 

Annex 1: Country and Sector or Program Background ......................................................... 21 

Annex 2: Major Related Projects Financed by the Bank and/or other Agencies ................. 32 

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Annex 3: Results Framework and Monitoring ........................................................................ 33 

Annex 4: Detailed Project Description ...................................................................................... 44 

Annex 5: Project Costs ............................................................................................................... 52 

Annex 6: Implementation Arrangements ................................................................................. 53 

Annex 7: Financial Management and Disbursement Arrangements ..................................... 66 

Annex 8: Procurement Arrangements ...................................................................................... 73 

Annex 9: Economic and Financial Analysis ............................................................................. 79 

Annex 10: Safeguard Policy Issues ............................................................................................ 81 

Annex 11: Project Preparation and Supervision ..................................................................... 91 

Annex 12: Documents in the Project File ................................................................................. 93 

Annex 13: Statement of Loans and Credits .............................................................................. 98 

Annex 14: Country at a Glance ............................................................................................... 102 

Annex 15: Maps: IBRD 333778 ............................................................................................... 104 

viii

BRAZIL

FEDERAL INTEGRATED WATER SECTOR PROJECT

PROJECT APPRAISAL DOCUMENT

LATIN AMERICA AND CARIBBEAN

LCSEN

Date: June 3, 2011 Team Leader: Manuel Contijoch and Thadeu

Abicalil Country Director: Makhtar Diop Sector Director: Laura Tuck Sector Manager: Karin Kemper/Guang Zhe Chen

Sectors: Public administration- Water, sanitation and flood protection (100%) Themes: Water resources management (100%)

Project ID: P112073 Environmental category: Partial Assessment Lending Instrument: Technical Assistance Loan

Joint IFC: Joint Level:

Project Financing Data [X] Loan [ ] Credit [ ] Grant [ ] Guarantee [ ] Other: For Loans/Credits/Others: Total Bank financing (US$m.): 107.3325 million Proposed terms: US Dollar denominated IBRD commitment linked Flexible Loan with a variable spread, with level payments of principal, 5 year grace period and 30 years of loan term with all conversion options selected and the Font-End fee capitalized.

Financing Plan (US$m) Source Local Foreign Total

Borrower 35.7775 0.00 35.7775 International Bank for Reconstruction and Development

107.3325 0.00 107.332.5

Total: 143.110 0.00 143.110 Borrower: Federative Republic of Brazil Responsible Agencies: Ministerio do Meio Ambiente, MMA Secretaria Executiva Esplanada dos Ministérios - Bloco Bl. B - 6º andar Brasília DF 70068-900 Brazil Fax: (55-61) 2028-1770/2015 sergio.goncalves@mma.gov.br

ix

Agencia Nacional de Aguas SPO, Área 05 Quadra 03 Bloco M Brasilia DF 70610-200 Brazil Tel: (55-61) 2109-5220 Fax: (55-61) 2109-5296 ricardo.andrade@ana.gov.br Ministerio da Integracao Nacional, MI Gabinete do Ministro Esplanada dos Ministerios Bloco E, Sala 600 Brasilia DF 70062-900 Brazil Tel: (55-61) 3414-5815 Fax: (55-61) 3414-4268 / 5812 fernando.bezerra@integracao.gov.br Ministerio das Cidades, MCid Secretaria Executiva SAUS Quadra 01 Bloco H Ed. Telemundi II, 12º andar Brasilia DF 70070-010 Brazil Tel: (55-61) 2108-1414 Fax: (55-61) 2108-1420 gabinete-snsa@cidades.gov.br

Estimated disbursements (Bank FY/US$m)FY 2012 2013 2014 2015 2016 2017 Annual 10.7333 16.0999 21.4665 26.8331 26.8331 5.3666 Cumulative 10.7333 26.8331 48.2996 75.1328 101.9659 107.3325 Project implementation period: Start August 30, 2011 End: June 30, 2016 Expected effectiveness date: August 30, 2011 Expected closing date: December 31, 2016

Does the project depart from the CAS in content or other significant respects? Ref. PAD I.C.

[ ] Yes [X] No

Does the project require any exceptions from Bank policies? Ref. PAD IV.G. Have these been approved by Bank management?

[ ] Yes [X] No [ ] Yes [ ] No

Is approval for any policy exception sought from the Board? [ ] Yes [X] No Does the project include any critical risks rated “substantial” or “high”? Ref. PAD III.D.

[X] Yes [ ] No

Does the project meet the Regional criteria for readiness for implementation? Ref. PAD IV.G.

[X] Yes [ ] No

Project development objective Ref. PAD II.C., Technical Annex 3 To support the Government of Brazil to improve the coordination and strengthen the capacity among key federal institutions in the water sector toward an integrated approach. Project description [one-sentence summary of each component] Ref. PAD II.D., Technical Annex 4

x

Component 1: Water Resources Management (US$44.2169 million) to provide support to the deployment of tools and instruments to SINGREH; enhance institutional development; reduce the disparities between the Borrower’s federal and states water management systems; identify actions to mitigate and adapt to climate change; streamline procedures; and establish criteria for ongoing monitoring and evaluation systems to increase efficiency and legal compliance of water resources guidelines and policies with the Borrower’s 1997 Water Law No. 9.433 dated January 8, 1997, which established the National Water Resources Policy.

Component 2: Water, Irrigation and Disaster Risk Management (US$40.7335 million) to provide support for institutional strengthening to improve water infrastructure, irrigation and SINDEC activities, and to raise the overall assessment capacity of strategic existing water infrastructure and disaster risk management capacity, including floods and droughts and other hazards.

Component 3: Water Supply and Sanitation (US$32.4391 million) to provision support to the implementation of the Borrower’s 2007 National Sanitation Law No. 11.445, the improvement of the quality of the provision of water supply and basic sanitation services and contribution to promote universal access to these services.

Component 4: Intersectoral Coordination and Integrated Planning (US$20.9606 million) to provide support to integrated planning; identify areas of mutual interest, overlap, or conflict in the sectoral plans which impact and/or depend upon water; carrying out of studies and institutional improvements involving multiple sectors, and support water management and conservation measures preferentially in the São Francisco and the Araguaia-Tocantins river basins.

Component 5: Project Management, Monitoring and Evaluation (US$4.4916 million) to provision support to: (i) the management of the operational aspects of the Project in order to coordinate, monitor, and evaluate all of the interventions undertaken to ensure that they meet the targets, timetables, and objectives originally specified and to ensure overall efficient administration including reporting, financial management, and auditing of the Project; and (ii) the effective transfer of knowledge and the use of best practices at the subnational level including a strong communication program, through, inter alia, workshops and seminars to inform the relevant stakeholders at the river basin, municipal, state, and federal levels. Which safeguard policies are triggered, if any? Ref. PAD IV.F., Technical Annex 10 Environmental Assessment (OP/BP 4.01); Natural Habitats (OP/BP 4.04); Forests (OP/BP 4.36); Pest Management (OP 4.09); Physical Cultural Resources (OP/BP 4.11); Involuntary Resettlement (OP/BP 4.12); and Safety of Dams (OP/BP 4.37) Significant, non-standard conditions, if any, for: Ref. PAD III.F. Board presentation: None Loan effectiveness: (i) the regulations creating the Comitê Gestor do Programa and the Project Management Units have been issued and published in form and substance satisfactory to the Bank; and (ii) the Operational Manual has been adopted through a resolution (deliberação) issued by the Comitê Gestor do Programa and published by the Borrower in form and substance satisfactory to the Bank. Covenants applicable to project implementation (Schedule 2, Section I, A, B, C and D; and

xi

Section V of the Loan Agreement): (a) carry out the Project in accordance with the Operational Manual, including the Procurement Plan, the Annual Operating Plans, the Environmental Management Framework and the Social Framework; (b) establish and thereafter maintain, until the completion of the execution of the Project, an interministerial management committee (the Comitê Gestor do Programa) to convene at least once every semester, and shall submit the minutes of said meetings to the Bank; (c) establish, and thereafter operate and maintain, until the completion of the execution of the Project, Project management units (the Project Management Units) physically located in ANA, MMA, MI and MCid, all with competent staff in adequate numbers with qualifications and experience satisfactory to the Bank; (d) establish no later than three months after the establishment of the Comitê Gestor do Programa and thereafter maintain, until the completion of the execution of the Project, a Project technical Secretariat for the Comitê Gestor do Programa (the Project Technical Secretariat), to be physically located in ANA, and in charge of overall Project coordination, including all intersectoral activities as set forth in the Operational Manual; (e) at least once a year during Project implementation on or about December 1, commencing on the first such date after the Effective Date, prepare and furnish to the Bank a plan, acceptable to the Bank (the Annual Operating Plan for the Project’s operation during the following twelve months); (f) ensure that the Project is carried out in accordance with the provisions of the Anti-Corruption Guidelines; (g) through ANA, MMA, MI or MCid, shall, prior to carrying out any Project activity which requires the assistance of a Participating Entity (as determined by the Borrower in accordance with the provisions of the Operational Manual), enter into an agreement (the Cooperation Agreement) with the relevant Participating Entity under terms and conditions approved by the Bank as further specified in the Operational Manual for purposes of assisting ANA, MMA, MI or MCid in the implementation of the respective Parts of the Project under their responsibility, and thereafter maintain the pertinent Cooperation Agreement throughout the implementation of the Project; (h) through the Project Management Units: (a) implement the Project in accordance with the Environmental Management Famework (including provisions for environmental assessment, natural habitats, pest management, forests, chance finding of cultural property and safety of dams) and the Social Management Framework (including provisions for indigenous peoples and involuntary resettlement); and (b) adopt the procedures detailed in said Environmental Management Framework and Social Management Framework for environmental and social screening, evaluation, implementation and monitoring of the Project; (i) through, ANA, MMA, MI or MCid, shall ensure, and/or cause the Participating Entities to ensure, that the terms of reference for any consultancy in respect of any Project activity shall be satisfactory to the Bank following its review thereof and, to that end, such terms of reference shall duly incorporate the requirements of the Bank Safeguards Policies then in force, as applied to the advice conveyed through such technical assistance; and (j) carry out jointly with the Bank, a mid-term review of the implementation of the Project and following such Midterm Review, act promptly and diligently to take any corrective action as shall be recommended by the Bank.

1

I. STRATEGIC CONTEXT AND RATIONALE

A. Country and sector issues 1. Water is a key element of Brazil’s strategy to promote sustainable growth and a more equitable and inclusive society. Brazil’s achievements in poverty reduction and economic development in recent decades have been closely linked to the expansion of water services to more than 100 million people and sanitation services to more than 50 million people. The generation of hydroelectric power, which represents 80 percent of the total generation, has increased per capita energy consumption from 500 kilowatt-hours (kWh) to more than 2,000 kWh annually, boosting industrial development. Over the past decade, the area of irrigated land increased by more than one-third to an estimated 4.5 million hectares, with potential for further expansion of approximately 30 million hectares. Despite significant achievements, however, water resources management and infrastructure development remain important challenges for the country. 2. Most of the water challenges have a direct impact on the social and economic development of Brazil: (a) water scarcity is prevalent in the predominantly poor Northeast region and in large metropolitan areas; (b) water pollution is a major issue in most urban conurbations, and causes environmental damage and increases the cost of water treatment for downstream users; (c) the severity of drought and flood events is increasing and their impacts are likely to be exacerbated by climate change; and (d) there is unreliable access to water supply and sanitation (WSS) services, especially among the rural and peri-urban poor, with large investments, estimated at R$220 billion, required to meet universal coverage. 3. While Brazil has 12 to 19 percent of the world’s freshwater resources, water is unequally distributed around the country and is increasingly polluted in urban centers. The sparsely populated Amazon region holds about 80 percent of the water resources, while the semi-arid states have only 4 percent of the water but 35 percent of the population, and the metropolis of São Paulo has only 1.6 percent of the water and more than 20 percent of the population. These regional inequities in water endowments are mirrored in the population’s unequal access to WSS services. Coverage in rural areas, where 16 percent of Brazil’s population lives, is low, with 57 percent for improved water supply and only 37 percent for improved sanitation, and only 5 percent of rural Brazilians have access to sewerage services. Geographically, coverage is lowest in the country’s poorest regions. While access is higher in urban areas, the pollution of urban rivers and streams is Brazil’s biggest water quality challenge and continues unabated, since only about 48 percent of municipal wastewater is collected and only 32 percent is properly treated. Moreover, dumping untreated wastewater into the water bodies further exacerbates the already critical problem of water scarcity. 4. Following three decades of declining investment, the Government of Brazil (GoB) launched the Growth Acceleration Program (Programa de Aceleração do Crescimento, PAC) in 2007 to boost investment in infrastructure and stimulate economic growth. Specifically in the water sector, planned PAC investments total about R$90 billion for 2007–10, with the most intense focus on hydropower development and WSS infrastructure. While over this period WSS investment has increased by 40 percent over the annual average of 2000–06, this increased level is still only 60 percent of what is required to achieve universal access by 2020,

2

and is insufficient to achieve the Millennium Development Goals. Despite available financing, the implementation of infrastructure investments faces a number of challenges, such as delays due to inadequate planning and limited institutional capacity. Moreover, there is the practice of investing in infrastructure without adequate attention to the viability and sustainability of these works.1 Making better use of existing infrastructure is an important challenge and will facilitate the effective development of new infrastructure, which is still more important because the Government has just launched the PAC 2 program, to be implemented during 2011–14, which foresees investments of B$56.6 billion for water investments. 5. Modernized and more efficient irrigation models are necessary to balance irrigation needs in an increasingly water-scarce environment. Brazil plays a major role in the world’s food supply, exports, and agro-energy products, thus making the country one of the biggest exporters of virtual water in the world. Despite some of the most successful irrigated farms in the world, including the introduction of innovative private-public partnership (PPP) approaches in irrigation, less than 15 percent of Brazil’s irrigable lands are being used for agriculture. The national irrigation policy and law pending in Congress aims to improve public investment in this sector and the efficiency and sustainability of irrigated agriculture. Notwithstanding some beneficial impacts, public irrigation development has been less successful than anticipated. 6. Brazil also needs to enhance its institutional capabilities and protect its infrastructure to deal with the anticipated impacts of climate change. According to a recent study undertaken by the Inter-governmental Panel on Climate Change (IPCC),2 the Northeast will be the Brazilian region most affected by climate change. Global warming will not only mean that it will rain less, with more intense droughts, but also that groundwater resources will be depleted, with aquifer recharge down by approximately 70 percent by 2050. In an optimistic scenario, an increase in temperature by only 1oC to 2oC by the second half of the century would reduce rainfall by 10 to 15 percent in the Northeast, but in a pessimistic scenario with an estimated temperature increase of between 3oC to 4oC, the corresponding water flow in the São Francisco River will be reduced by as much as 15 to 20 percent. Negative effects include prolonged droughts, reduced potential for agriculture production, and increased evaporation from lakes, dams, and reservoirs. Moreover, long periods without rain will be punctuated by brief torrential downpours resulting in floods. Some of these effects are already evident in the recurrent flooding and droughts that have caused significant social and economic impacts in Brazil. For example, in 2007, 788 Brazilian municipalities experienced emergencies due to water shortages, 88 percent of these in the already water-scarce Northeast. Another 176 municipalities suffered extreme floods. 7. The challenges in the water sector demand the strengthening of policies and coordinated institutional efforts coupled with investment in infrastructure development. Institutional capacity needs to be developed to allow state institutions to effectively exercise their functions, plan and implement policies and investments, and provide a clear regulatory

1 In the Northeast, for example, there are more than 30 billion cubic meters in storage capacity in large reservoirs, which present high losses, poor maintenance, and are often underutilized because expected demands, especially for irrigation, have not materialized. Some irrigation perimeters, such as Jaiba in the State of Minas Gerais, after many years, still use less than 20 percent of their allocated water. 2 Mudanças Climáticas Globais e o Impacto no Bioma Caatinga, Ministério da Ciéncia e Tecnologia, Instituto Nacional de Pesquisas Espaciais.

3

environment for the water sector. Important policy and legal reforms have been undertaken since the mid-1990s with strong presence and support from the Bank, particularly in the water resources management (WRM) and WSS sectors and in the promotion of sound environmental practices. 8. The Brazilian Constitution of 1988 laid the foundation for the National Water Resources Management System (Sistema Nacional de Gerenciamento de Recursos Hídricos, SINGERH). SINGERH consists of a set of legal and administrative mechanisms aimed at coordinating, through a participatory approach, the integrated management of water resources and at implementing the Water Resources National Policy, adopted by Water Law No. 9.433 of 1997. SIGERH is composed of the National Council on Water Resources, the National Water Agency (Agência Nacional de Águas, ANA), state-level water resources councils, basin committees, federal, state, and municipal bodies responsible for water resources management, and water agencies. The National Water Resources Policy establishes the water basin as the territorial management unit, recognizes the public domain of water, and classifies it as a limited natural resource with an economic value. The law established five management instruments: (a) water resources plans, (b) classification of water bodies according to prevalent uses, (c) water rights, (d) water charges, and (e) the National Water Resources Information System (Sistema Nacional de Informações sobre Recursos Hidricos, SNIRH). 9. The implementation of guidelines on WSS has been hampered by limited institutional capacity and financial sustainability. After a decade-long debate, Law 11.445/2007 was passed to set national guidelines for basic sanitation3 and to focus on sector regulation, planning, and service provision arrangements as the key drivers for improving coverage and efficiency. An essential condition is the implementation of these guidelines and policies at the municipal, state, and national levels. B. Rationale for Bank involvement 10. The Bank is well positioned to help Brazil address the challenges in the water sector and to help the country implement a WRM strategy. The Bank has long been Brazil’s main development partner in institutional reforms in federal WRM and has accumulated vast experience in financing water resources projects in Brazil, especially in the Northeast region. The proposed Project is a continuation of long-term Bank support to the water sector at the federal and state level. Under implementation for the past decade, the Federal Water Resources Management Project (PROAGUA – P038895) contributed to the development of the water sector by promoting the rational and sustainable use and participatory management of water resources in Brazil in general and in the Northeast in particular, and by providing reliable and sustainable access to water for domestic, municipal, and other uses in priority river basins in the Northeast. Supported by two Bank loans totaling US$185 million, PROAGUA initially focused on the semi-arid Northeast. It was later extended nationally and it has been the main instrument to provide support to the creation and strengthening of the ANA and to develop and implement water management legal and institutional frameworks in the Northeast, coupled with investments in priority infrastructure. The project also fostered the development of WRM plans in all 26

3 In Brazil, basic sanitation comprises water supply, wastewater, solid waste, and urban drainage.

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states of Brazil and the Federal District. The implementation of a comprehensive set of criteria to select infrastructure subprojects is among the project’s noteworthy achievements.4 11. The Bank also gained significant experience in the federal WSS sector with the Water Sector Modernization Project (PMSS phases I and II – P043420) and the Low Income Sanitation Technical Assistance Project (PROSANEAR – P039199). PMSS I and II supported the National Water Supply and Sanitation Policy, which aimed to provide WSS services to the entire population and to improve service delivery efficiency by encouraging a more competitive and better-regulated environment. PMSS was supported by two Bank loans totaling US$275 million, which financed key initiatives such as the groundbreaking National Information System on Water Supply, Sanitation and Solid Waste (Sistema Nacional de Informaões em Saneamento Básico, SINISA). The project also contributed to the development of national and subnational policies, coordination among stakeholders, and the formulation and passage of the Consortia Law (No. 11107, 2005) and the National Law on Guidelines for Basic Sanitation (No. 11445, 2007).5 PROSANEAR, designed to tackle the WSS sector’s weak institutional and regulatory framework, which at the time contributed to the dismal service coverage to the urban poor, provided technical assistance to the development of participatory engineering designs for use in urban upgrading and WSS service provision to the poor. The targeted beneficiaries were both the poor living in densely populated urban and peri-urban poverty pockets of metropolitan areas and the agencies responsible for policy formulation, planning, implementing, and monitoring WSS projects for the urban poor. 12. Lessons learned from the Bank’s long-term involvement in WRM in Brazil, and the Bank’s international and regional experience in implementing a diverse set of rural and urban water infrastructure projects, give the Bank a comparative advantage over other lenders to bring coherence to Brazil’s federal WRM policies and planning. While it is important to foster advancements in each sector, there are also many opportunities for better integration and coordination among myriad sectors to reconcile conflicting goals, mobilize interests, avoid impasses and setbacks, and spark synergies, the Bank has the implementation experience to facilitate this process. The GoB efforts to prepare and implement Growth Acceleration Program (PAC) investments have revealed the importance of improved coordination and integrated planning in the water sector to optimize public investment, maximize economic and social returns, and ensure environmental and social sustainability. C. Higher-level objectives to which the project contributes 13. The proposed Project has been developed in support of the vision for a more equitable, sustainable, and competitive Brazil as outlined in the World Bank Group's Country Partnership Strategy (CPS) 2008-2011 (Report # 42677) discussed by the Executive Directors on May 1, 2008, and the Progress Report (Report #53356-BR) discussed by the Executive Directors on April 10, 2010, which recognizes water as an essential component of promoting sustainable growth within a more just and inclusive society. Although the Federal Government

4 Report No. 35719-BR, “Project Paper: Additional Financing to the Federal Water Resources Management Project,” World Bank, Washington, DC. 5 Report No. ICR00001083, “ICR for the Second Water Sector Modernization Project (PMSS II),” World Bank, Washington, DC.

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has sufficient resources to fund most of its priorities in the water sector, there is strong demand from many ministries for technical assistance from the Bank, especially to improve the conceptual design of their programs and to support program implementation and monitoring and evaluation. Given the Bank’s longstanding experience in the institutional reforms in the water sector, the GoB has requested that Bank engagement at the federal level be based on technical assistance and targeted to larger sectors and development challenges to avoid the proliferation of small technical assistance loans. 14. In line with the CPS, this Project will tackle the major water development challenges, under the complex Brazilian water resources management system, in particular those related to interagency (ministry) coordination. The Project will also address the key issues of weak planning and portfolio of projects and limited institutional capacity, which have delayed the implementation of many PAC investments.

II. PROJECT DESCRIPTION

A. Lending instrument 15. The proposed Project will be supported by a technical assistance loan (TAL) in the amount of US$107.3325 million over a five-year period. The total project cost is estimated to be US$143.110 million, including US$35.7775 million in GoB counterpart funds. B. Project Development Objective and key indicators 16. The proposed Project Development Objective (PDO) is to support the Government of Brazil to improve the coordination and strengthen the capacity among key federal institutions in the water sector toward an integrated approach. These are the Ministry of the Environment (Ministério do Meio Ambiente, MMA), the Ministry of National Integration (Ministério de Integração Nacional, MI), the Ministry of Cities (Ministério das Cidades, MCid), and the National Water Agency (Agência Nacional de Águas, ANA). The Project will also focus on achieving effective integrated planning across all water sectors. 17. Indicators to measure Project progress toward achieving this objective will cover: (a) policy and regulatory improvements, (b) sector and intersectoral investment plans, and (c) capacity building (organizations, people, and skills). Project outcome indicators are:

An interministerial management committee6, at the Executive Secretariat level, for water sector programs established and functioning regularly with all institutions that participate in Interaguas.

25 water sector activities and projects implemented by institutions participating in the Project included in the GoB’s Multiyear Plan (PPA 2012-2015)7 following an integrated approach, as attested by an independent evaluation.

A water indicators portal connecting sector-specific information systems, studies, and analytical work is implemented and available to the public.

6Functioning means at least 2 meetings per year at Secretariat level. 7 Activities and projects included in the GoB’s Multiyear Plan (Plano Plurianual – PPA) are those explicitly included or linked to actions and programs in the PPA.

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C. Project components 18. The proposed Project has five components. The first three are designed to continue the Bank program of support to ongoing water sector reforms and institutional strengthening in individual sectors at the national level. These three components will involve three federal ministries—the MMA, MI, and MCid—and the ANA, and they are subsector specific, with individual sectoral responsibility for implementation. Activities to be supported will fall into three main categories: (a) planning and management, (b) studies and project assessments, and (c) institutional development. Each category will include support at the federal and subnational levels. The more innovative fourth component will be cross-sectoral in nature and designed to improve implementation performance and coordination of sector policies and activities in selected federal river basins. It will promote the multiple use of water in two (or three) priority river basins dealing with complex challenges of allocating water across competing uses (hydropower, navigation, environmental sustainability, WSS, irrigation). The selection of such basins takes into account the need for an integrated planning process; existence of a critical mass of plans and studies; and opportunity for improved coordination across sectors, levels of government, and other relevant stakeholders. The fifth component will cover project management, monitoring, and evaluation. Component 1: Water Resources Management (US$44.2169 million) 19. Implemented by the MMA and ANA, this component will provide support to the deployment of tools and instruments to SINGREH; enhance institutional development; reduce the disparities between the Borrower’s federal and states water management systems; identify actions to mitigate and adapt to climate change; streamline procedures; and establish criteria for ongoing monitoring and evaluation systems to increase efficiency and legal compliance of water resources guidelines and policies with the Borrower’s 1997 Water Law No. 9.433 dated January 8, 1997, which established the National Water Resources Policy. The main activities are as follows:

Planning and management: assessing and supporting the modification of the legal framework for federal and state water resources; strengthening of the National Water Resources Plan and state and river basin plans and agencies; implementation and expansion of the water resources monitoring network; promoting the enforcement of water rights and charges; planning and implementation of a national program for water resources management training; implementation of a results based management system for the National Water Resources Plan; and technical support to integrated urban water management including solid waste and management models.

Studies: to verify feasibility of water projects; monitor and assess groundwater potential; implement demonstration projects for water resource conservation and reuse, and rehabilitation plans; prevent and control of critical events including climate change; develop hydrographic mapping; develop and modernize a water users and infrastructure registry; address topics such as the relationship between environmental degradation, desertification, water resources, technologies for efficient water use, and impacts of climate change on water resource availability, and influence of global macroeconomic

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dynamics on water resources; and development of financial mechanisms and tools for environmental and water management, including solid waste.

Institutional development: training and strengthening of water resources management agencies, including water user associations and water boards; development and implementation of: education and social mobilization campaigns, and communication and dissemination programs; monitoring and improvement of SINGREH’s institutions capacity; enhancement of economic and financial sustainability of water resources management and water resources policies and funding; support to south-south cooperation in the water sector; and strengthening of urban, environmental and water institutions.

Component 2: Water, Irrigation, and Disaster Risk Management (US$40.7335 million) 20. Implemented by the MI, this component will provision support for institutional strengthening to improve water infrastructure, irrigation and SINDEC activities, and to raise the overall assessment capacity of strategic existing water infrastructure and disaster risk management capacity, including floods and droughts and other hazards. The main activities are as follows:

Planning and management: assessment of federal and state water infrastructure plans in the Northeast Region; development of criteria for selecting water infrastructure projects; preparation of state and national irrigation plans with incentives to optimize irrigation systems; creation of a risk management information system; development of a risk management plan, including risk identification, monitoring and early warning systems, and emergency response plans; development of information systems for water infrastructure; and increase of strategic planning for drought risk reduction and climate change.

Studies: to verify the technical, economic, social, financial, and environmental feasibility of water infrastructure activities; prepare water infrastructure management, operation and maintenance plans; assess existing water infrastructure; develop dam safety plans; promote social participation; develop plans for improvement of irrigation activities; support the implementation of the National Irrigation Policy and support disaster risk management.

Institutional development: provision of technical support and capacity building to federal and state agencies to enhance performance in water infrastructure, irrigation, and risk management areas; provision of technical assistance to implement: water infrastructure management and monitoring systems; management plans for public irrigation projects; and training for irrigation user organizations; acquisition and/or development of computer programs for administration and management; preparation of technical and operational manuals for water infrastructure, irrigation and disaster risk management ; and support to irrigation, water infrastructure and SINDEC agencies.

Component 3: Water Supply and Sanitation (US$32.4391 million) 21. Implemented by the MCid, this component will provide support to the implementation of the Borrower’s 2007 National Sanitation Law No. 11.445, the improvement of the quality of the

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provision of water supply and basic sanitation services and contribution to promote universal access to these services. The main activities are as follows:

Planning and management: support to the implementation of the National Basic Sanitation Guidelines and of SINISA; assessment of PAC investments in water supply and basic sanitation infrastructure; development of a national technical cooperation in the water supply and basic sanitation areas; development and expansion of a training, research and technology national network in water supply and basic sanitation; preparation of local and regional water supply and basic sanitation plans for states and municipalities; and review and evaluation of programs and actions included in PPA and PAC.

Studies: to improve the assessment capacity on technical, economic, financial, policy, institutional and management matters; contribute to the monitoring and evaluation of public policies; improve “COM + ÁGUA” Project; expand the Integrated Management System for Water Supply and Sanitation; integrate, expand, and upgrade PMSS systems; expand integrated water supply and basic sanitation services technology in slum areas; adopt clean development mechanisms for water supply and basic sanitation; and disseminate technology.

Institutional development: support to the integration of PAC-financed projects and institutional development of services providers; provision of technical assistance to states, municipalities, regulators, and service providers for sector modernization; incentive to associated management of water supply and basic sanitation services; development of local or regional water supply and basic sanitation plans; support, development and dissemination of transparency instruments and promotion of social participation; and review of water supply and basic sanitation environmental licensing regulations.

Component 4: Intersectoral Coordination and Integrated Planning (US$20.9606 million) 22. Implemented by ANA, MMA, MI and MCid, this component will provide support to integrated planning; identify areas of mutual interest, overlap, or conflict in the sectoral plans which impact and/or depend upon water; carrying out of studies and institutional improvements involving multiple sectors, and support water management and conservation measures preferentially in the São Francisco and the Araguaia-Tocantins river basins. The main activities are as follows:

Planning and management: improvement of water management and use associated with the Integration Project in the São Francisco River Basin; integration of planning and regulation in the water resources and water supply and basic sanitation sectors and in the energy and navigation sectors; implementation of methods to integrate river basin environmental assessment for planning in the hydroelectric, river navigation and water supply and sanitation sectors at the state and municipality level; and development and implementation of systems and methodologies to monitor and evaluate policies and public investments in the water sector.

Studies: to evaluate alternatives to integrate procedures for water rights, emission of environmental licenses, environmental planning, and provision of public services; rehabilitate river basins; undertake studies to improve energy efficiency; develop water conservation and reuse projects; promote efficiency technologies and develop a

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methodology for certification of the proper use of water in irrigated agriculture; control and measure water quality; create clean development mechanisms; undertake studies on payment for environmental services; systematize the database of existing engineering designs and works; and identify projects to encourage rational and efficient water use.

Institutional development: coordination of methods, evaluation systems, and decision support in sectors where water resources are fundamental inputs; coordination and communication among sector information systems; support to the establishment of permanent mechanisms and structures for articulation and coordination of Federal Government actions in the water sector; and training of federal, state and municipality water professionals on Project related activities.

Component 5: Project Management, Monitoring, and Evaluation (US$4.4916 million) 23. Implemented by ANA, MMA, MI and MCid, this component will provide support to: (i) the management of the operational aspects of the Project in order to coordinate, monitor, and evaluate all of the interventions undertaken to ensure that they meet the targets, timetables, and objectives originally specified and to ensure overall efficient administration including reporting, financial management, and auditing of the Project; and (ii) the effective transfer of knowledge and the use of best practices at the subnational level including a strong communication program, through, inter alia, workshops and seminars to inform the relevant stakeholders at the river basin, municipal, state, and federal levels. D. Lessons learned and reflected in the project design 24. Drawing on lessons learned from long-term Bank involvement in the Federal Water Resources Management (Gerenciamento de Recursos Hídricos, WRM) and WSS sectors in Brazil, work supported by the various Bank-financed projects has confirmed valuable lessons concerning effective measures to implement institutional reforms. 25. As PMSS demonstrated, a project grounded on technical assistance can actively contribute to sector reform by (a) working as a think tank to promote national debate on key issues, helping to channel differences and achieve consensus among key stakeholders; and (b) generating solid analytical materials (studies, information systems) on which to base decision making. PMSS was able to fulfill this role through the preparation and dissemination of solid analytical work, which has been extremely valuable for other Bank-financed projects. It also demonstrated that structural sector reform processes have their own pace and timing. A wide-ranging reform in any sector will require the participation of key stakeholder groups and firm government commitment. The experience shows the importance of treating the institutional objectives as long-term programmatic engagements rather than projects, and this requires persistence, patience, follow-up, and flexibility by the Bank team.8 26. The experience of PROSANEAR indicates that doing business in increasingly decentralized and politically complex environments will require flexibility and adaptability if

8 Report No. ICR0000719, “ICR for the Low Income Sanitation Technical Assistance Project (PROSANEAR),” Washington, DC.

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Bank projects are to remain relevant to the borrower and implementers, but such flexibility will also result in additional time and resource costs to the Bank. 27. Technical Assistance Loan (Empréstimo de Assistência Técnica, TAL) projects should provide sufficient incentives to ensure that the anticipated leverage can take place and should consider (a) whether lessons learned from related Specific Investment Loans (Empréstimos de Investimentos Específicos, SILs) can be directly transferred to TALs, (b) whether the results frameworks (including a set of appropriate outcome and output indicators) of such operations should be adjusted to the limitations of what a TAL can actually achieve, and (c) whether implementation arrangements have to be crafted to ensure sufficient incentives to encourage improved performance. 28. For complex projects like the PROSANEAR-TAL, it is important to determine up front what are the possible implications of variations in implementation modalities and the need for extensive learning processes regarding, among others, time, cost, and real risk to ensure that sufficient consideration is given to them in terms of the impacts on a project’s implementation schedule, disbursement profiles, training and other technical assistance needs to stakeholders, and supervision costs. 29. Lessons learned from the PROAGUA Project, which recently closed, include the following: (a) in sophisticated Middle Income Countries (MIC) like Brazil, the use of country systems for financial management, procurement, and safeguards has improved client interaction, expedited implementation, and made Bank loans more attractive; (b) MICs like Brazil are primarily interested in the Bank’s technical expertise and ability to act as an honest broker; and (c) the Bank needs to ensure proper monitoring of outcome indicators and avoid the tendency to report mainly on the status of outputs. 30. The inclusion of disaster risk management aspects in this operation has taken into account the lessons learned from previous global disasters and lessons from 25 years of Bank operations and programs in the area of disaster risk management. The World Bank Independent Evaluation Group (IEG) report, “Hazards of Nature, Risks to Development: An Evaluation of World Bank Assistance for Natural Disasters” (2005), recommends that the Bank assist its clients most vulnerable to natural disasters to shift from focusing entirely on disaster response to implementing programs and policies for comprehensively managing disaster risk. E. Alternatives considered and reasons for rejection 31. One alternative considered was a SIL to combine technical assistance with financing of water infrastructure and water and sanitation works. However, the GoB specifically requested the Bank to prepare a technical assistance project with support to federal agencies to enhance their institutional development and their capabilities to coherently design and implement water policies and plans. The Federal Government already has sufficient resources to fund most of its priorities in the water sector with the PAC 1 and 2. The proposed Project would help tackle inadequate planning and a weak portfolio of projects that has limited the impact of the investments through its focus on more effective planning, studies on the key priorities in the sector, and institutional development.

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32. Another alternative considered was to establish a single federal institution as the focal point of implementation. This was rejected in favor of a more integrated approach that will create synergies in the implementation and will allow other relevant ministries to openly participate in the project. While the implementation arrangements are quite complex, the potential rewards from improved cooperation and communication among the institutions are substantial.

III. IMPLEMENTATION

A. Institutional and implementation arrangements 33. The Federative Republic of Brazil will be the Borrower. Four institutions will have the responsibilities of implementing agencies. Specifically, the MMA through the Secretariat of Water Resources and Urban Environment (Secretaria de Recursos Hídricos e Ambiente Urbano, SRHU) and ANA will be responsible for implementing Component 1 on WRM; the MI through the Executive Secretariat (Secretaria Executiva, SECEX), in close collaboration with the Secretariat of Hydraulic Infrastructure (Secretaria de Infraestrutura Hídrica, SIH) and the National Secretariat of Civil Defense (Secretaria Nacional de Defensa Civil, SEDEC) will implement Component 2 on water, irrigation, and hazard management; and the MCid, through the National Secretariat of Environmental Sanitation (Secretaria Nacional de Saneamento Ambiental, SNSA) will implement Component 3 on WSS. In addition to implementing its own activities, ANA, through the Project Technical Secretariat (Secretaria Técnica do Projeto, STP), will take the lead in overall project coordination and will be responsible for coordinating the implementation of the intersectoral component (Component 4) and transferring the responsibility for specific activities to those ministries most directly tied to the actions being undertaken. Resources from Component 5 will also be used by each of the four implementing agencies and selected states to cover the costs of Project Management and monitoring and evaluation. 34. A Project Preparation Unit (UPP) was formed within each institution to design and plan the envisioned activities under each component. Upon Project approval, PMUs will be created under each of the three ministries and ANA to implement activities directly tied to their specific components. 35. An Interministerial Management Committee (Comitê Gestor do Programa, CGP) will be formed by the three implementing ministries and ANA to oversee project implementation and decide on higher-level strategic issues of an intersectoral nature. The committee includes the Ministries of Energy, Transportation, and Agriculture as consultative members. The CGP will define what is of common interest across components, oversee project implementation, evaluate results, and agree on criteria for the allocation of loan proceeds depending on institutional performance and the need for institutional strengthening. The CGP will also be responsible for approving the Annual Operational Plan (POA) for the Project. Project funds will be assigned to different components in accordance with implementation performance and evolving needs and priorities and agreed with the Bank. The detailed arrangements, including the appropriate environmental and social arrangements, will be included in the Project Operational Manual (Manual Operacional do Projeto, MOP).

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36. Project subnational support will be targeted to those entities (state and municipal water institutions, river basin agencies, service providers, and so forth) that demonstrate strong commitment to advance reforms and improve performance in the water sector. The MOP defines and details the specific criteria and mechanisms that were developed during preparation to determine how subnationals will engage and have access to project support under each component. These criteria include: (a) the activities proposed need to be approved by the management committee, (b) the subnationals should submit a specific funding request and proposal including clear demonstration of institutional capacity to follow up activities preparation and implementation, (c) the proposals should be consistent with existing sectoral or multisectoral plans or programs, (d) the interventions proposed should have an impact on the productive and sustainable use of water, and (e) the proposed interventions should preferably be co-financed by the subnationals. Proposed activities cleared by the relevant water authorities will be prioritized under each component. In addition, clear rules of engagement were established for potential beneficiaries at different levels of capacity, from basic support to improve performance of weaker institutions to strategic engagement with stronger agencies that are willing to push the envelope addressing more advanced and complex issues. B. Monitoring and evaluation of outcomes/results 37. The results framework and monitoring strategy included in Annex 3 was developed in close coordination with the UPP. Each implementing agency has its own monitoring system and regular monitoring and evaluation will be the responsibility of each PMU. ANA, through the STP, will be responsible for consolidating the reports and preparing semiannual reports on implementation progress to be submitted to the Bank. These reports will include progress achieved in relation to the MOP timetable and targets for project activities, the Procurement Plan and schedule, and agreed Annual Operational Plans. The outputs of the Monitoring and Evaluation (M&E) System, as will be indicated in the MOP, will be used to assess the performance of project components and suggest improvements as necessary. An annual report will be prepared indicating project achievements, experiences, problems, and lessons learned for yearly discussions with stakeholders. As required for all Bank-financed projects, evaluations based on the agreed indicators will be carried out at midterm and at the end of project execution. The baseline and ex-ante evaluation of the project will be prepared by the PMU during the first six months of project implementation. These evaluations will be the responsibility of the PMU with the assistance of independent consultants acceptable to all parties. C. Sustainability 38. All project components are directly related to increasing the sustainability of water through more effective management of water resources to improve the effectiveness of instruments and the implementation of national plans; more efficient irrigation and natural disaster preparedness strategies; increased provision of WSS services to improve the living standards of the poor and control and reduce the pollution from untreated wastewater; support the implementation of Law 11.445 to control water pollution; and intersectoral coordination and integral planning to identify and resolve conflicts in sectoral plans and to identify opportunities for compromise solutions that increase the sustainability of the targeted river basins. In addition,

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the overall focus on institutional capacity building, policy development, and strategy refinement for WRM and WSS will also contribute to the sustainability of activities. D. Critical risks and possible controversial aspects 39. The overall risk is considered moderate. The main potential risks and the respective mitigation measures to be incorporated into project design are presented in the matrix below.

Risks

Risk Mitigation Measures

Risk Rating with

Mitigation I. Operation-Specific Risks

Disbursement of technical assistance loans

Although past TALs in Brazil have been very successful in advancing the policy reform agenda, they have a history of becoming problem projects in the Bank’s portfolio due to slow disbursement.

Since the Federal Government already has sufficient resources to fund most of its priorities in the water sector with the PAC, the Bank was requested to prepare a TAL for federal institutions to enhance their institutional development and capabilities to coherently design and implement water policies and prepare sector plans. This technical assistance will support the PACs investments, which are currently facing considerable challenges and delays due to inadequate planning, weak portfolio of projects, and limited institutional capacity. The proposed Project would help tackle these problems through its focus on more effective planning, studies on the key priorities in the sector, and institutional development for the main institutions and service providers. In addition, the four implementing agencies have presented the Bank with an outline of the key investments and costs, which amount to approximately US$70 million or 72 percent of the total loan amount. Draft terms of reference have been prepared.

Moderate

Project priority in implementing agencies

Low priority assigned to the project by the three implementing ministries vis-à-vis other competing demands (such as PAC implementation).

Early engagement of higher decision-making levels in the ministries (national secretaries and vice-ministers) has been promoted since the beginning of project design within the GoB for the preparation of the Carta-Consulta. The Ministry of Planning is actively involved strongly supports the Project. The Project is designed to keep the autonomy of individual sectors to carry out their components while facilitating intersectoral engagement. The team will implement a close and permanent dialogue with new decision makers.

Moderate

Institutional capacity Institutional capacity weaknesses within the executing agencies, especially in the ministries, could hinder project implementation.

The lack of institutional capacity had a strong impact on the implementation of previous Bank-financed technical assistance projects. The Federal Government, however, has recently strengthened involved ministries with new permanent technical staff. Training activities included in the Project will help mitigate such risk.

Substantial

Intersectoral agreements The complexity of intersectoral partnerships and subnational agreements in the selected multistate river basins may impair the advance of necessary institutional arrangements and existing water management instruments.

The selected basins concentrate large amounts of planned and ongoing federal water investments by multiple sectors, which increase the general interest in finding better compromise solutions when conflicts arise. Ample participation of stakeholders and the improved quality of plans and project designs to be supported by the Project in the selected river basins will mitigate this risk. If progress is not being made in any given river basin at the MTR, a decision may be made to reallocate funds

Substantial

Implementation arrangements The reliance on four federal implementing agencies could add to project complexity and thwart aspects of project implementation. In addition, support to multiple

During project preparation the team held multiple meetings with all four institutions to agree on the Project’s objectives, key actions, and implementation arrangements, and there is an ongoing dialogue among the four institutions to ensure that institutional complexity does not hinder project implementation. An interministerial management committee will be formed

Moderate

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Risks

Risk Mitigation Measures

Risk Rating with

Mitigation subnational entities may significantly increase this complexity, especially in fiduciary procedures.

by the three implementing ministries and ANA to oversee project implementation and decide on higher-level strategic issues of an intersectoral nature, with ANA, through the technical secretariat, the lead implementing agency and primary counterpart for the Project with the responsibility of consolidating the implementation reports prepared by each ministry. Project preparation also involved discussion with the GoB on the use of federal agencies with experience in Bank operational rules and guidelines and the operational procedures to support subnational entities. ANA and the other ministries are highly experienced in implementing Bank-financed activities. Project design will take into account the respective internal bureaucratic procedures of each agency and lessons from previous Bank operations.

Social Due to its technical assistance character, there are no public works implied in the Project and therefore it is not expected to have any direct adverse social impacts.

The results of the social assessment, consultations, and previous Bank experience in the water sector were used in the preparation of the Indigenous Peoples Planning Framework and Resettlement Policy Framework. During project preparation, consultations with key stakeholders including municipal authorities, line ministry officials, and representatives from civil society were carried out to discuss project objectives and potential impacts. Based on these consultations, potential negative impacts and mitigation measures were identified and agreed with the Government, as was a plan for periodic consultations as program implementation progresses. A summary of the Indigenous Peoples Planning Framework and Resettlement Policy Framework are presented in Annex 10.

Moderate

Environmental The Project is expected to have positive environmental impacts by improving the capacity of government water sector institutions and focusing on integrated planning across sectors to achieve the sustainable management and use of water resources, providing protection to the environmental functioning of the predominant ecological system, protecting wetland biodiversity, and implementing strategic activities that address the root causes of environmental degradation.

The Project will encourage the use of Strategic Environmental Assessment (Avaliação Ambiental Estratégica, SEAs) in river basin planning to identify and assess the cumulative and broader environmental impacts of plans and the complex system dynamics in watersheds; achieve global environmental benefits where feasible; better understand the different demands on water resources; and ensure that direct, cumulative, and broader impacts are taken into account in the planning process. As part of project preparation, the Bank has (a) reviewed the SEA that already exists for the Araguaia-Tocantins river basin, identified gaps with Bank safeguard policies and, if necessary, helped the Borrower prepare terms of reference (ToRs) for complementary studies; and (b) supported the Borrower in the preparation of the ToRs for an SEA for the São Francisco river basin, to be carried out during project implementation.

Moderate

Severe Adverse Natural Event. A disaster triggered by a hydrological event deviates attention of implementing agencies from project implementation. The risk could be exacerbated with climate variability and lack of capacity to respond.

Moderate

II. Overall Risk (including Reputational Risks) The overall residual risk is rated Moderate and the probability for project implementation to generate a reputational risk to the Bank is rated low.

Moderate

Note: Rating of risks on a four-point scale—high, substantial, moderate, and low—according to the probability of occurrence and magnitude of adverse impact.

E. Loan/credit conditions and covenants 40. Loan Effectiveness Conditions are: (i) the regulations creating the Comitê Gestor do Programa and the Project Management Units have been issued and published in form and substance satisfactory to the Bank; and (ii) the Operational Manual has been adopted through a

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resolution (deliberação) issued by the Comitê Gestor do Programa and published by the Borrower in form and substance satisfactory to the Bank. 41. Other Covenants (Schedule 2, Section I, A, B, C and D; and Section V of the Loan Agreement) are as follows: (a) carry out the Project in accordance with the Operational Manual, including the Procurement Plan, the Annual Operating Plans, the Environmental Management Framework and the Social Framework; (b) establish and thereafter maintain, until the completion of the execution of the Project, an interministerial management committee (the Comitê Gestor do Programa) to convene at least once every semester, and shall submit the minutes of said meetings to the Bank; (c) establish, and thereafter operate and maintain, until the completion of the execution of the Project, Project management units (the Project Management Units) physically located in ANA, MMA, MI and MCid, all with competent staff in adequate numbers with qualifications and experience satisfactory to the Bank; (d) establish no later than three months after the establishment of the Comitê Gestor do Programa and thereafter maintain, until the completion of the execution of the Project, a Project technical Secretariat for the Comitê Gestor do Programa (the Project Technical Secretariat), to be physically located in ANA, and in charge of overall Project coordination, including all intersectoral activities as set forth in the Operational Manual; (e) at least once a year during Project implementation on or about December 1, commencing on the first such date after the Effective Date, prepare and furnish to the Bank a plan, acceptable to the Bank (the Annual Operating Plan for the Project’s operation during the following twelve months); (f) ensure that the Project is carried out in accordance with the provisions of the Anti-Corruption Guidelines; (g) through ANA, MMA, MI or MCid, shall, prior to carrying out any Project activity which requires the assistance of a Participating Entity (as determined by the Borrower in accordance with the provisions of the Operational Manual), enter into an agreement (the Cooperation Agreement) with the relevant Participating Entity under terms and conditions approved by the Bank as further specified in the Operational Manual for purposes of assisting ANA, MMA, MI or MCid in the implementation of the respective Parts of the Project under their responsibility, and thereafter maintain the pertinent Cooperation Agreement throughout the implementation of the Project; (h) through the Project Management Units: (a) implement the Project in accordance with the Environmental Management Famework (including provisions for environmental assessment, natural habitats, pest management, forests, chance finding of cultural property and safety of dams) and the Social Management Framework (including provisions for indigenous peoples and involuntary resettlement); and (b) adopt the procedures detailed in said Environmental Management Framework and Social Management Framework for environmental and social screening, evaluation, implementation and monitoring of the Project; (i) through, ANA, MMA, MI or MCid, shall ensure, and/or cause the Participating Entities to ensure, that the terms of reference for any consultancy in respect of any Project activity shall be satisfactory to the Bank following its review thereof and, to that end, such terms of reference shall duly incorporate the requirements of the Bank Safeguards Policies then in force, as applied to the advice conveyed through such technical assistance; and (j) carry out jointly with the Bank, a mid-term review of the implementation of the Project and following such Midterm Review, act promptly and diligently to take any corrective action as shall be recommended by the Bank.

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IV. APPRAISAL SUMMARY

A. Economic and financial analyses 42. No specific economic evaluation was undertaken for this technical assistance project. The project focuses on institutional strengthening and capacity building to help the involved federal agencies design and implement coherent water policies and prepare plans, and supports studies that would lead to sustainable development of water resources. Much of the analysis to be undertaken during implementation would support improved water resources management and planning and development of water resources with better environmental, social, and economic consideration, and this will generate enormous benefits for Brazil. B. Technical 43. The project will support the implementation of far-reaching planning instruments and best practices. Their purpose is to enhance capacity of the MMA, MI, MC, ANA, and other water sector institutions at the federal, state, municipal, and river-basin level in the coordination of developing water resource management tools and integrated planning practices. State-of-the-art tools, systems, and models will be developed and on-the-job training would be provided to the concerned ministry and agency staff for the sustainability of project activities. C. Fiduciary Financial Management 44. As part of project preparation, a Financial Management Assessment (FMA) was carried out in the four implementing institutions—the MMA, ANA, MI, and the MCid. The FMA was carried out in accordance with OB/BP 10.02 “Financial Management” and the FM Manual “Financial Management Practices in World Bank Financed Investment Operations” approved by the Financial Management Sector Board and published on November 3, 2005. The FMA concluded that the overall FM risk associated with this Project is Moderate based on the said assessments; the FM arrangements as set out satisfy the Bank’s minimum fiduciary requirements. See Annex 7 for further information on the FM assessment of the implementing agencies. 45. Retroactive Financing. To accelerate and facilitate project implementation withdrawals up to an aggregate amount not to exceed $10,733,250 equivalent may be made for payments made within twelve months prior to such date for Eligible Expenditures under Category (1). Procurement 46. Procurement for the proposed Project will be carried out in accordance with the World Bank’s “Guidelines: Procurement under IBRD Loans and IDA Credits” dated May 2004 and revised October 2006 and May 2010; and “Guidelines: Selection and Employment of Consultants by World Bank Borrowers” dated May 2004 and revised October 2006 and May 2010, and the provisions stipulated in the Legal Agreement. For each contract to be financed by the loan, the different procurement methods or consultant selection methods, the need for

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prequalification, estimated costs, prior review requirements, and time frame are agreed between the Borrower and the Bank in the Procurement Plan, which will be updated annually to reflect actual project implementation needs and improvements in institutional capacity. See Annex 8 for further details on the procurement assessment of the implementing agencies. 47. For purposes of carrying out its procurement obligations under the Project, the Borrower may enter into an agreement with an entity with qualifications and procurement experience acceptable to the Bank, under terms and conditions satisfactory to the Bank (the Procurement Agent Agreement), which shall include, inter alia: (a) the obligation of the Procurement Agent (on behalf of the Borrower) : (A) to carry out the procurement of certain goods, consultants’ services and Services (other than Consultants’ Services) under the Project in accordance with the provisions set forth in Section III of this Schedule and in the Operational Manual ; and (B) to keep separate records and accounts in respect of such goods consultants’ services and Non-Consultant Services and to assist the Borrower in complying with its obligations under this Agreement; (b) the obligation of the Borrower: (A) to transfer directly to the Procurement Agent the proceeds of the Loan allocated to Category (1) as required by the Procurement Agent to effect the payments for goods, consultants’ service/.//////s and Services (other than Consultants’ Services) under the Project; (B) to transfer to the Procurement Agent the Project counterpart funds (i.e., non-Loan funds) as required for the Procurement Agent to effect the payments for goods, consultants’ services and Services (other than Consultants’ Services) under the Project; and (C) to pay any administrative fees due to the Procurement Agent under the Procurement Agent Agreement. D. Social 48. The project has no physical investments and is not expected to have adverse social impacts. The project should, however, significantly strengthen local capacity to manage the social aspects of future basin-wide development and improve the quality of both planning and implementation. The intersectoral component will focus on two river basins in predominantly poor regions of Brazil, the São Francisco, in the Northeast and the Araguaia-Tocantins, in the North. The São Francisco contains 11 of the poorest 100 municipalities in terms of their Human Development Index. While 94.4 percent of the population living in the river basin has access to water supply, only 62 percent has access to sewerage services. The project will not directly assist the poor through the provision of these services, but it will strengthen the management of water resources to ensure that this essential resource is distributed more fairly and efficiently.

49. The Project will assist the GoB in assessing salient issues and designing social and environmental management systems to help address the potential social impacts of future water sector investments. For example, given that the project area potentially encompasses the entire country, any of Brazil’s estimated more than half a million indigenous peoples may potentially be affected. The Borrower conducted a social assessment, and its findings have been used in the preparation of an Indigenous Peoples Planning Framework (IPPF) that applies to all the studies and plans financed through the project. 50. Similarly, although the project-supported activities do not require land acquisition or impose restrictions on access to land, the potential impacts of the future investments being studied could include involuntary resettlement. The Borrower prepared a Resettlement Policy

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Framework (RPF) that will apply to all activities financed by the project. The IPPF and RPF were discussed during the public consultations held in Brasilia on August 27, 2010, with close to 120 representatives of various governmental and civil society organizations. The main project implementation agencies have sufficient staff and adequate capacity to implement these frameworks. 51. Finally, to ensure effective transfer of knowledge and use of best practices at the subnational level, the project includes a communication program with workshops and seminars to inform all the relevant stakeholders at the sector, basin, and state levels. The results of the social assessment, consultations, and the IPPF and RPF are summarized in Annex 10, and they were considered highly satisfactory from the comments received. E. Environment 52. The proposed Project is expected to have positive environmental impacts by improving the capacity of government water sector institutions and focusing on integrated planning across sectors to achieve the sustainable management and use of water resources. Project activities are designed to enhance and provide protection to the environmental functioning of the predominant ecological system, protect wetland biodiversity, and implement strategic activities that address the root causes of environmental degradation. The strengthening of basin institutions responsible for WRM, the generation and dissemination of information, and the integration of environmental concerns into water basin economic development activities on a sustainable basis are key elements of this project. 53. Environmental Assessment (OP 4.01). The proposed Project has received an Environmental Category B rating in accordance with the corresponding safeguard policies. Although no physical works are going to be supported by the Project, the Project’s studies and plans financed through technical assistance activities will incorporate Bank safeguards. An Environmental Management Framework (EMF) and a Social Management Framework (SMF) were prepared to ensure that: (i) studies and strategic plans or complementary environmental and social analysis fully reflect and are consistent with the Bank’s social and environmental safeguards; (ii) all documentation is disclosed and consultations were held with relevant stakeholders and future affected communities on studies, assessments, and their results; and (iii) all Bank environmental and social safeguards are adequately addressed (natural habitats, forests, pest management, physical cultural property, indigenous people, involuntary resettlement, and safety of dams). 54. These EMF and SMF was prepared by the Borrower and reviewed by the Bank during project preparation and it will be part of the project legal documents. 55. The Project will encourage the use of Strategic Environmental Assessments (Avaliação Ambiental Estratégica, SEAs) in river basin planning to identify and assess the environmental impacts of plans and the complex system dynamics in watersheds; achieve global environmental benefits where feasible, better understand the demands on water resources (such as agriculture, fisheries, energy, industry, transport, sanitation, tourism, and ecosystem services); and ensure that all possible impacts are taken into account in the planning process. The Bank has (a)

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reviewed the Tocantins-Araguaia river basin SEA; and (b) supported the Borrower in the preparation of the Terms of References for an SEA for the São Francisco river basin, to be carried out during project implementation. 56. The Project will also strengthen the institutional framework for addressing environmental and social issues through basin-wide planning by (a) enhancing the capacity and coordination among government institutions in decision making and implementing public policies that support the sustainable use and conservation of water resources; (b) integrating environmental and social considerations in strategic plans and criteria in the selection of future investments; (c) developing and implementing conservation and sustainable use of water resources, resulting in decreased water pollution and soil erosion, improved recovery of critical habitats, and conservation of biodiversity; (d) developing innovative tools, such as satellite remote sensing, for assessing water resources, particularly for diagnostic and monitoring purposes; (e) introducing innovative policy instruments, such as water charges, for more efficient water use and improved water and natural resource protection; and (f) creating a framework to enhance public and stakeholder participation in the strategic planning and specific project preparation and implementation process. 57. Natural Habitats (OP 4.04). As part of the project’s river basin management approach, an inventory of critical habitats and protected areas will be carried out at the river-basin level. The ESMF includes measures to protect these areas and ensure that development will respect fragile ecosystems and minimize potential impacts. 58. Forests (OP 4.36). The measures taken to address the requirements of OP 4.04 will also address the needs of OP 4.36 for this Project. 59. Pest Management (OP 4.09). The Project will help better understand the impact of pesticides, especially from agricultural activities in irrigation areas, on water quality and resources, and will support the development of improved pest management practices and control measures that are environmentally sound and economically feasible. 60. Physical Cultural Resources (OP 4.11). Under Brazilian law, provisions for the protection of cultural property are part of the environmental licensing procedures. The National Institute for Historical, Artistic and Cultural Heritage (Instituto do Patrimônio Histórico, Artístico Nacional, IPHAN) is the Brazilian institution responsible for handling archeological and cultural property issues. Whenever “chance findings” occur it is mandatory, under federal and state law, for Brazilian Government agencies to seek IPHAN’s support to address “chance finding” issues. The Project will include a Physical Cultural Resources Guide that will ensure national law is followed. 61. Indigenous Peoples (OP 4.10). Since the project area could cover all of Brazil, any of its estimated half million indigenous peoples could be affected. Although the Project does not finance infrastructure or other physical investments, a social assessment was conducted and its findings have been used in the preparation of an Indigenous Peoples Planning Framework (IPPF) that applies to the studies and plans supported under this operation.

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62. Involuntary Resettlement (OP 4.12). The Project does not require any land acquisition or impose any restrictions on access to land or associated resources. However, the potential impacts of future investments might include involuntary resettlement. Because the location, timing, and technical features of such potential investments remain unknown, a Resettlement Policy Framework (RPF) was prepared and the results are summarized in Annex 9. 63. Safety of Dams (OP 4.37). Based on the successful experience in the State of Ceará, the project will help adapt the existing state framework for the national level and disseminate lessons learned to other states. F. Safeguard policies 64. The GoB developed a set of frameworks to address environmental, indigenous peoples, and resettlement risks in the project and discussed them with relevant groups during the consultations that took place during project preparation. The frameworks apply to all activities financed by the Project and capacity to implement these norms is adequate. Each state also has an active Public Ministry to oversee public sector compliance with its own norms and procedures. Building capacity in the implementation of the frameworks is part of the project. The Environmental Management Framework and the Social Management Framework (including the Indigenous Peoples Planning Framework and the Resettlement Policy Framework) were disclosed on the Bank’s website and on the Country website in the following address http://interaguas.ana.gov.br. Bank supervision will closely follow the progress in streamlining social and environmental concerns during the implementation phase. The following safeguard policies apply to the project:

Safeguard Policies Triggered by the Project Yes No Environmental Assessment (OP/BP 4.01) [X] [ ] Natural Habitats (OP/BP 4.04) [X] [ ] Pest Management (OP 4.09) [X] [ ] Indigenous Peoples (OP/BP 4.10) [X] [ ] Physical Cultural Resources (OP/BP 4.11) [X] [ ] Involuntary Resettlement (OP/BP 4.12) [X] [ ] Forests (OP/BP 4.36) [X] [ ] Safety of Dams (OP/BP 4.37) [X] [ ] Projects on International Waterways (OP/BP 7.50) [ ] [X] Projects in Disputed Areas (OP/BP 7.60*)** [ ] [X]

*By supporting the proposed project, the Bank does not intend to prejudice the final determination of the parties’ claims on the disputed areas. G. Policy exceptions and readiness 65. No policy exceptions are envisioned for the project. The Project Operational Manual and the Procurement Plan for the initial 18 months were approved before negotiations. The summary Terms of Reference for the activities planned for the first 18 months of the Project have been presented to the Bank.

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Annex 1: Country and Sector or Program Background

BRAZIL: Federal Integrated Water Sector Project – Interaguas 1. Despite its fast recovery from the global financial crisis, Brazil still faces significant challenges to achieve higher rates of broad-based sustainable growth; some of these challenges have actually been exacerbated by the crisis. The global financial crisis has had a sizable impact on the finances of many subnational governments, mainly through reductions in tax collection and federal transfers. The Government of Brazil (GoB) has thus asked the Bank to expand its financial and technical assistance to selected states and municipalities to help them weather the economic downturn while preserving their fiscal discipline and strengthening their public sector management reform programs. At the national level, despite Brazil’s promising short-term prospects, growth could be hampered in the medium to long term by persistent low rates of investment, growing infrastructure bottlenecks, and a high tax burden. Indeed, despite a very strong fiscal effort during the last decade, fiscal adjustment has been accomplished mainly by reducing public investment and by raising taxes. The fiscal space for increasing public investment has been further reduced as a result of recent increases in current expenditures by the Federal Government. The GoB has thus asked the Bank to support efforts to increase the level and the quality of Brazil’s public and private investments in infrastructure. In this context, the Bank is engaged in helping the Government implement its flagship PAC and in supporting the incipient development of public-private partnerships (PPPs). 2. Following the outbreak of the global economic crisis in September 2008, Brazil underwent a recession that lasted only two quarters; aided by very strong fundamentals, a countercyclical macroeconomic policy stance, and increasing commodity prices, the economy is now recovering at a fast pace. While the prompt response of the authorities to the tightening of financial market conditions avoided a credit crunch, the strong fundamentals allowed time for a countercyclical monetary and fiscal policy stance. Regarding the latter, temporary tax breaks for key industrial sectors (automobile, appliances) were very effective in helping the prompt recovery of industrial production. Financial markets are also exhibiting a robust recovery. After experiencing almost zero growth in 2009, Brazil is projected to grow by 4 to 6 percent in 2010 and 2011. However, the further expansions in irreversible expenditures, such as public sector salaries, are a concern. While fiscal sustainability is not at stake, the increased rigidity in expenditures and the reduced fiscal space for investment might negatively affect long-term growth prospects. 3. Water is a key element of Brazil’s strategy to promote sustainable growth and a more equitable and inclusive society. Brazil’s recent achievements in terms of poverty reduction and economic development have been closely linked to the expansion of WSS services, to the development of hydraulic infrastructure for hydroelectric power generation and, recently, to the development of irrigation infrastructure, especially in the Northeast region. Brazil has expanded water services to more than 100 million people and sanitation services to more than 50 million people, so that according to the last figures of the World Health Organization/UNICEF Joint Monitoring Program (JMP), 79 percent of the population has piped household access to water

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services and 45 percent has access to sewerage services (JMP 2006).9 The generation of hydroelectric power has increased per capita energy consumption from 500 kilowatt-hours (kWh) to more than 2,000 kWh annually, boosting industrial development, and represents 80 percent of the total power generation in Brazil. Over the past decade, the area of irrigated land increased by more than one-third to an estimated 4.5 million hectares, with potential for further expansion of approximately 30 million hectares when considering the availability of suitable land and water resources. Moreover, the development of Brazil’s nascent inland waterways is critical for enhancing the competitiveness of the economy, particularly in the agribusiness sector, which accounted for 25 percent of GDP in 2007, along with 37 percent of jobs and 36 percent of exports and high growth potential. Yet despite these significant achievements in the construction of major civil works, expansion of WSS services, and water resources development, important challenges remain for the country. 4. Most of the water challenges stand out for their direct impact on the social and economic development of Brazil: (a) water scarcity is prevalent in the predominantly poor Northeast region and in large metropolitan areas such as São Paulo; (b) water pollution is a major issue in most urban conurbations because the degradation of water quality compromises health and living standards, especially of the peri-urban poor, and causes environmental damage and increases the cost of water treatment for downstream users; (c) the severity of drought and flood events is increasing and their impacts are likely to be exacerbated by climate change; (d) there is unreliable access to WSS services, especially among the rural and peri-urban poor, and large investments, estimated at R$220 billion, are required to meet universal coverage; (e) the scarcity of water and the access gap of the poor are aggravated by service inefficiency, particularly high levels of water losses in urban areas, where almost half of the potable water is lost in the distribution systems and in semi-arid states where these losses are even as high as 60 percent; (f) the untapped irrigation potential is the largest in the world, but modernization is required to improve efficiency and productivity; and (g) water is important in economic development, primarily through hydropower and the export-oriented agribusiness sector, both of which are essential for sustained growth and increased competitiveness of the Brazilian economy. Water resources have been important in working toward social equity and promoting economic growth, but further infrastructure development and allocation of water across competing uses often involves complex trade between environmental conservation and economic development. 5. While Brazil possesses 12 to 19 percent of the world’s freshwater resources, water is unequally distributed around the country and is increasingly polluted in urban centers. The sparsely populated Amazon region holds about 80 percent of the water resources, while the semi-arid states have only 4 percent of the water and 35 percent of the population, and the metropolis of São Paulo has only 1.6 percent of the water and more than 20 percent of the population. These regional inequities in water endowments are mirrored in the population’s unequal access to water supply and sanitation (WSS) services. In urban areas, where 84 percent of the Brazilian population lives, coverage is significantly higher at 96 percent for improved water supply and 83 percent for improved sanitation, including 53 percent access to sewerage services, the rest accounted for by on-site sanitation. Coverage in rural areas, where 16 percent of Brazil’s

9 When viewed by the broad definition of improved access to WSS services, 90 percent of the overall population has access to potable water and 79 percent has access to improved sanitation.

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population lives, is much lower, with 57 percent for improved water supply and only 37 percent for improved sanitation, and only 5 percent of rural Brazilians have access to sewerage services. Geographically, coverage is lowest in the country’s poorest regions, such as the predominantly rural North, Northeast, and Center-West. While access is higher in urban areas, the pollution of urban rivers and streams is Brazil’s biggest water quality challenge and continues unabated, as only about 48 percent of municipal wastewater is collected and only 32 percent is properly treated. Moreover, dumping untreated wastewater into the water bodies further exacerbates the already critical problem of water scarcity because it reduces the amount of water readily available for consumption and industrial use. 6. Following three decades of declining investment, the GoB launched the Growth Acceleration Program (PAC) in 2007 to boost investment in infrastructure, including the water sector, and stimulate economic growth. Specifically in the water sector, planned PAC investments total about R$90 billion for 2007–10, with the most intense focus on hydropower development and WSS infrastructure. While over this period WSS investment has increased by 40 percent over the annual average of 2000–06, this increased level is still only 60 percent of what is required to achieve universal access by 2020, and is insufficient to achieve the Millennium Development Goal. Despite available financing, the implementation of infrastructure investments faces a number of challenges, such as delays due to inadequate planning and limited institutional capacity. After two-and-a-half years of PAC implementation, only 42 percent of the WSS works have been completed or are under construction, and the implementation of planned irrigation and multipurpose water infrastructure investments has been slower than anticipated, especially in the Northeast. Moreover, there is the tradition in Brazil of investing in infrastructure without adequate attention to the viability and sustainability of these works. Resources that should be invested in management, administration, and operation and maintenance are more often than not allocated to new ventures, resulting in large numbers of inefficient irrigation, water supply, and sanitation systems. It is critical to assess rehabilitation needs, ensure adequate operation and maintenance, and make more productive and sustainable use of existing infrastructure, especially in the Northeast, where a supply-driven investment policy has often led to low productivity of water.10 Making better use of existing infrastructure is an important challenge and will facilitate the effective development of new infrastructure. 7. Modernized and more efficient irrigation models are necessary to balance irrigation needs in an increasingly water-scarce environment. Brazil plays a major role in the world’s food supply, exports, and agro-energy products, thus making the country one of biggest exporters of virtual water in the world. Despite some of the most successful irrigated farms worldwide, including the introduction of innovative PPP approaches in irrigation, less than 15 percent of Brazil’s irrigable land is being used for agriculture. The national irrigation policy and law under discussion in Congress aims to improve public investment in this sector and the efficiency and sustainability of irrigated agriculture. Notwithstanding some beneficial impacts, public irrigation development has been less successful than anticipated, mainly due to poor selection of beneficiaries, lack of commercial orientation, and weak integration with productive chains. Low

10 In the Northeast, for example, there are more than 30 billion cubic meters in storage capacity in large reservoirs, which present high losses, poor maintenance, and are often underutilized because expected demands, especially for irrigation, have not materialized. Some irrigation perimeters, such as Jaiba in the State of Minas Gerais, after many years, still use less than 20 percent of their allocated water.

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collection of water fees has contributed to the poor operation and maintenance and deterioration of public infrastructure. 8. Brazil also needs to enhance its institutional capabilities and protect its infrastructure to deal with the anticipated impacts of climate change. According to a recent study undertaken by the IPCC,11 the Northeast will be the Brazilian region most affected by climate change. Global warming will not only mean that it will rain less, with more intense droughts, but also that groundwater resources will be reduced, with aquifer recharge down by approximately 70 percent by 2050. In an optimistic scenario, an increase in temperature of only 1oC to 2oC by the second half of the century will reduce rainfall by 10 to 15 percent in the Northeast, but in a pessimistic scenario with an estimated temperature increase of between 3oC to 4oC, the corresponding water flow in the São Francisco River will be reduced by as much as 15 to 20 percent. Negative effects include prolonged droughts; reduced potential for agriculture production; and evaporation from lakes, dams, and reservoirs. Moreover, long periods without rain will be punctuated by brief torrential downpours resulting in floods. Some of these effects are already evident in the recurrent flooding and droughts that have caused significant social and economic impacts in Brazil. For example, in 2007, 788 Brazilian municipalities experienced emergencies due to water shortages, 88 percent of these in the already water-scarce Northeast. Another 176 municipalities suffered extreme floods. The increasing frequency and severity of drought and flood events requires a systematic and coordinated approach to disaster risk management for sustainable investments, emergency response planning to minimize human losses, and contingency planning to assure continuity of services. 9. The challenges in the water sector demand the strengthening of policies and coordinated institutional efforts coupled with investment in infrastructure development. Institutional capacity needs to be developed to allow state institutions to effectively exercise their functions, plan and implement policies and investments, and provide a clear regulatory environment for the water sector. Important policy and legal reforms have been undertaken since the mid-1990s with strong presence and support from the Bank, particularly in the water resources management (WRM) and WSS sectors, and sound environmental practices have been implemented. The Brazilian National Water Resources Policy, established by the 1997 Water Law (Law 9.433), recognizes the public domain of water and classified it as a limited natural resource with an economic value, establishing the water basin as the territorial unit for the management of the multiple uses of water. The law also made clear that WRM should be done in a participatory and decentralized manner. While the law embraces all modern principles of WRM, its implementation has been unbalanced. Efforts to promote participation and decentralization have not always been accompanied by sound management instruments, resulting in weak enforcement of water rights and limited use of economic instruments. 10. The implementation of guidelines on WSS has been hampered by limited institutional capacity and financial sustainability. After a decade-long debate, Law 11.445/2007 was passed to set national guidelines for WSS and focus on sector regulation, planning, and service provision arrangements as the key drivers for improving coverage and efficiency. An essential condition is the implementation of these guidelines and policies at the municipal, state, and

11 “Mudanças Climáticas Globais e o Impacto no Bioma Caatinga,” Ministério da Ciéncia e Tecnologia, Instituto Nacional de Pesquisas Espaciais.

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national levels, but this has been disrupted by the general incapacity of many federal agencies and service providers to leverage investments. The inefficiency of the majority of WSS service providers is reflected in their high costs and losses, low productivity, and low operating margins. Although decisions restricting public credit were revised in 2003 to permit service providers to finance new investments, most of them do not have the required short-term capacity to leverage the financial resources for necessary investments. Moreover, capacity strengthening is essential to ensure the proper operation and maintenance of WSS infrastructure to improve the environmental quality of the watersheds. The low level of institutionalization and lack of appropriate scale for service provision also has effects on the management of solid waste and storm water. 11. Water’s inherent intersector nature calls for better coordination of these institutional efforts. Some of the most serious problems restricting the role of water in Brazil’s development, such as pollution scarcity, floods, unequal access, and conflicts over water use, have their roots and impacts in diverse sectors of the economy, government, and society. While it is important to foster advancements in each sector, there are also many opportunities for better integration and coordination among myriad sectors to reconcile conflicting goals, mobilize interests, avoid impasses and setbacks, and spark synergies, as defined in the intersectoral program of the National Water Resources Plan (PNRH). The diversity of Brazil’s physical characteristics, socioeconomic realities, and institutional structures imposes tremendous challenges related to the management and use of water. Renewing its water policies and strengthening investment capacity are essential to ensure that the water sector can make important contributions to the reduction of poverty and inequality, the protection of the environment, and the sustainable growth of the economy. 12. Public policies guiding water policies are defined and enforced by a variety of institutions at the federal level. It is not uncommon that public policies developed for one sector affect other sectors, and if done in an integrated manner this can bring positive externalities. For example, the construction of dams for hydropower generation often expands navigation possibilities if done in a planned manner. Similarly, improvements in irrigated agriculture practices can contribute to the protection of water basins that are critical for public water supply. The collection and treatment of domestic wastewater generate multiple benefits, from improving the health of communities living on the banks of water bodies to reducing the costs of downstream treatment, not to mention benefits for the ecosystems. The reduction of water losses directly contributes to the conservation of water. Given these multiple examples, it is essential for the myriad federal institutions operating in the water sector to integrate their planning and policies to ensure a coordinated approach to the challenges facing the WRM and WSS sectors in Brazil. The following is a description of the main functions and responsibilities of the key federal entities involved in the water sector. 13. The Brazilian Constitution of 1988 laid the foundation for the National Water Resources Management System (SINGREH) to take into account the multiple water uses and their potential conflicts. SINGREH consists of a set of legal and administrative mechanisms aimed at coordinating, through a participatory approach, the integrated management of water resources and at implementing the Water Resources National Policy, adopted by Water Law No. 9433 of 1997. SINGREH is composed of the ANA; state-level water resources councils; basin

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committees; federal, state, and municipal bodies responsible for water resources management; and water agencies. The National Water Resources Policy establishes the water basin as the territorial management unit, recognizes the public domain of water, and classifies it as a limited natural resource with an economic value. The law made clear that water resources management should be done in a participatory and decentralized manner and that human water supply and livestock needs take priority in situations of water scarcity. While it embraces all modern principles of water resources management, its implementation has been unbalanced. Efforts to promote participation and decentralization have not always been accompanied with sound management instruments, resulting in weak enforcement of water rights and limited use of economic instruments. The law established five management instruments: (a) water resources plans, (b) classification of water bodies according to prevalent uses, (c) water permits, (d) collection of charges for water use, and (e) the National Water Resources Information System (SNIRH). 14. Figure A1.1 presents an overview of SINGREH, which is composed of the National Council on Water Resources (Conselho Nacional de Recursos Hídricos, CNRH); ANA; state-level water resources councils (Conselho Estadual de Recursos Hídricos, CERH); basin committees; federal, state, and municipal bodies responsible for water resources management; and water agencies.

Figure A1.1: The National Water Resources Management System (SINGREH)

15. ANA (National Water Agency), created in 2000, was put in charge of the coordination of SINGREH and the implementation of the National Water Resources Policy. The Agency’s mission is to implement and coordinate integrated water resources management, regulate access to water, and promote its sustainable use for the benefit of current and future generations. Its responsibilities are to: (a) plan and regulate the use of water resources; (b) grant and enforce

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water rights; (c) mediate conflict among water users; (d) strengthen, provide capacity building, and inform water users’ bodies, committees, associations, and society; and (e) develop the conservation, rational use, and quality of water resources. Among ANA’s responsibilities are complying with and implementing the instruments of the Water Law (Law No. 9.433), including managing water resources under the federal domain in an integrated manner; regulating water rights in federal water bodies; developing water resources plans for states or specific water basins; incentivizing the creation of water basin committees; collecting data and managing the SNIRH information system, which provides updated data on the quantity and quality of Brazil’s water resources and on the current levels of supply and demand for these resources; and producing studies and reports on water resources issues. ANA has made substantial progress in developing water management instruments applied in several emblematic projects, but institutional capacities at the state and basin levels remain weak. Only a few Brazilian states have been able to establish WRM agencies adequately staffed with technical capacity to perform their functions. Ensuring financial sustainability is the key challenge for further development of local WRM capacities, since the fiscal space for expanding expenditures in public administration is very limited and fiercely disputed with other important sectors. 16. The MMA (Ministry of Environment) formulates water resources and environment policies, with the Secretariat for Water Resources (SRHU) responsible for the implementation of the National Water Resources Policy, including assessing its articulation and results and promoting integrated management of water resources in a sustainable manner. It also has an important urban environmental focus that aims to revitalize water basins through the provision of WSS services, the control and mitigation of pollution, and the integrated management of urban solid waste. SRHU, the executive secretary of Conselho Nacional de Recursos Hidricos (CNRH), coordinates the preparation and update of the PNRH and supports states in the implementation of water resources policies and the development of specific water resources plans. The PNRH represents an agreement among the main users of water resources, in particular industry, irrigation, water supply and power generation, and civil society to set guidelines and goals to ensure the rational use of water in Brazil until 2020. 17. The MI (Ministry of National Integration) is responsible for the construction of hydraulic infrastructure, including drought-protection works, and for the formulation of the National Irrigation Policy, whose objective is to promote and consolidate the sustainable development of irrigated areas. The policy is currently under discussion in the Brazilian Congress. The Secretariat of Hydraulic Infrastructure (SIH) implements irrigation infrastructure, including dams, pipeline systems and channels, and macro-drainage works. Subordinate to MI are two federal institutions with a regional focus: (a) the National Department of Works Against Droughts (Departamento Nacional de Obras Contra as Secas, DNOCS), which administers public irrigation perimeters and implements works and services to prevent and mitigate the effects of droughts in the semi-arid region; and (b) the Development Company for the São Francisco and Parnaíba Valleys (Companhia de Desenvolvimento dos Vales do São Francisco e Parnaíba, CODEVASF), which manages water resources and land use for agricultural, farming, and agribusiness activities in these two river valleys in the Northeast region of Brazil, directly or through other public and private entities, to promote the integrated development of priority areas and the implementation of agricultural and industrial districts. The National Secretariat of Civil Defense (SEDEC) is the central organ of this National Civil Defense System and is responsible

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for coordinating the actions of civil defense in the entire national territory. The role of civil defense aims to reduce disaster risk and includes prevention, preparedness, disaster response, and reconstruction. It implements a multisectoral range of activities at all three levels of government—federal, state, and municipal—including broad community participation. 18. The MCid (Ministry of Cities), through the Secretaria Nacional de Saneamiento Ambiental (SNSA), is responsible for the National Water Supply and Sanitation Policy, as outlined by Law No. 11.445/2007, with the guiding principal of universal access to WSS services, including wastewater treatment, solid waste collection and treatment, and urban drainage. SNSA is in charge of integrating WSS sector actions and assessing and monitoring results. In addition, it promotes the development of the Brazilian WSS sector through supporting technical assistance, undertaking surveys and studies, participating in capacity-building activities for cities and states, collaborating in the development of legal frameworks and local and regional WSS plans, and investing in the restructuring of management and the revitalization of service providers. 19. There is an uneven playing field for allocating water across competing sectoral uses, which brings additional challenges for integrated river basin planning and implementation of sound water infrastructure plans. With a long and positive history of hydropower development, the energy sector has stronger institutions and planning capacity than other water user sectors and has consequently moved ahead in “claiming water rights” at the expense of other sectors, especially inland waterway development, though hydropower development has also been challenged and delayed by difficult environmental licensing processes. With support from the Bank, recent improvements were introduced to promote the use of integrated environmental assessments at the river basin level.12 GoB efforts to prepare and implement Growth Acceleration Program (PAC) investments have revealed the importance of improved coordination and integrated planning in the water sector to optimize public investment, maximize economic and social returns, and ensure environmental and social sustainability. 20. The current period of robust economic growth has put intense pressure on Brazil’s water resources. The expansion of industrial production requires water as an input and as a direct source of energy, and the use of water for hydroelectric power generation and navigation is essential to ensure the continued growth and competitiveness of the economy. Economic development, however, needs to be balanced to include environmental concerns, not only to preserve natural habitats and protect ecological diversity and biodiversity, but also to ensure the natural resources that will continue to fuel economic growth in the future. 21. The Bank is well positioned to help address these aforementioned challenges since it has long been Brazil’s main development partner in institutional reforms in federal WRM. The Bank has accumulated vast experience in financing water resources projects in Brazil, especially in the Northeast region. Under implementation for the past decade, PROAGUA contributed to the development of the water sector through its twofold objective: (a) to promote rational and sustainable use and participatory management of water resources in Brazil in general and in the Northeast in particular; and (b) to provide reliable and sustainable access to water for

12 Report No. 40995-BR, “Environmental Licensing for Hydroelectric Projects in Brazil: A Contribution to the Debate,” World Bank, Washington, DC.

29

domestic, municipal, and other uses in priority river basins in the Northeast. Supported by two Bank loans totaling US$185 million, PROAGUA was implemented by the Ministries of Environment and National Integration. While initially focused on the semi-arid Northeast, it was later extended nationally and it has been the main instrument to provide support to the creation and strengthening of ANA and to develop and implement water management legal and institutional frameworks in the Northeast, coupled with investments in priority infrastructure. The project also fostered the development of WRM plans in all 26 states of Brazil and the Federal District. The implementation of a comprehensive set of criteria to select infrastructure subprojects is among the project’s noteworthy achievements.13 As a follow up of this project, the Bank is financing state water projects in Bahia, Ceará, Pernambuco, and Rio Grande do Norte among other states like Santa Catarina and Sergipe in Brazil. 22. The Bank also gained significant experience in the federal WSS sector with the Water Sector Modernization Project (PMSS phases I and II). PMSS emerged from the context of the National Water Supply and Sanitation Policy, developed in 1997, to universalize the provision of WSS services and to improve service delivery efficiency by encouraging a more competitive and better-regulated environment. Under implementation for roughly the same 10-year period, PMSS was supported by two Bank loans totaling US$275 million, which financed key initiatives such as the groundbreaking Sistema Nacional de Informaões sobre Saneamento (SNIS) system. The project also contributed to the development of national and subnational policies and coordination among stakeholders, including an important role in the formulation and approval of the Consortia Law (No. 11107, 2005) and the National Law on Guidelines for Basic Sanitation14 (No. 11445, 2007).15 PROAGUA and PMSS successfully combined support to the Federal Government in its planning efforts and institutional reforms with support to selected subnational entities (states, municipalities, river basin committees, WSS service providers). 23. PROSANEAR (Low Income Sanitation Technical Assistance Project) represents another focus of Bank-financed technical assistance in the provision of WSS services to the urban and peri-urban poor. The project was designed to tackle some of the most important issues facing the WSS sector that contributed to the dismal state of service coverage to the urban poor at the time, namely a weak institutional and regulatory framework; a lack of incentives, mechanisms, and capacity to serve the poor; and ineffective water pollution control policies. The targeted beneficiaries were not only the poor living in densely populated urban and peri-urban poverty pockets of metropolitan areas but also the agencies responsible for policy formulation, planning, implementing, and monitoring WSS projects for the urban poor. The project aimed to revitalize the national PROSANEAR civil works investment program by providing technical assistance to a stock of subprojects and undertaking training programs to strengthen the capacity of project-executing agencies in preparing and implementing subprojects. It also worked toward strengthening the GoB’s policy formulation, planning, and coordination capacity for WSS and urban infrastructure investments in low-income areas. Through the incorporation of participatory methods in the preparation of WSS and urban upgrading projects in over 30 municipalities,

13 Report No. 35719-BR, “Project Paper: Additional Financing to the Federal Water Resources Management Project,” World Bank, Washington, DC. 14 According to the law, basic sanitation comprises water supply, wastewater, solid waste, and urban storm water. 15 Report No. ICR00001083, “ICR for the Second Water Sector Modernization Project (PMSS II),” World Bank, Washington, DC.

30

leveraging over US$500 million of investments, PROSANEAR also developed a manual and standard terms of reference for undertaking these participatory engineering designs. The proposed Project would build on the achievements and the lessons learned in PROAGUA, PMSS, and PROSANEAR through the provision of technical assistance to take advantage of the Bank’s technical capacity to foster integrated approaches based on its longstanding experience dealing with similar experiences in global contexts. 24. Although the Federal Government has sufficient resources to fund most of its priorities in the water sector, there is strong demand from many ministries for technical assistance from the Bank, especially on improving the conceptual design of their programs and in supporting program implementation and monitoring and evaluation. Given the Bank’s longstanding experience in the institutional reforms in the water sector, the GoB has requested that Bank engagement at the federal level be based on technical assistance and targeted to larger sectors and development challenges to avoid the proliferation of small loans. The World Bank Group's Country Partnership Strategy (CPS) 2008-2011 (Report # 42677) discussed by the Executive Directors on May 1, 2008, and the Progress Report (Report #53356-BR) discussed by the Executive Directors on April 10, 2010, specifically highlighted the need for the Bank to work toward improving the capacity of the Federal Government to prepare and implement sectoral plans. Moreover, the CPS also noted that the Bank may be requested to provide support to PAC investments. The proposed Project will address the key issues of inadequate planning, weak portfolio of projects, and limited institutional capacity that have delayed the implementation of many PAC investments. For example, the Project will support the preparation of national plans for WSS and irrigation and it will also support the preparation of feasibility studies in the water sector. The capacity of the involved ministries to formulate, implement, and monitor their programs will be strengthened by improving decision-making tools and processes, technical skills, the knowledge base, and the information system. The GoB’s interest in and commitment to the Project is confirmed by the fact that the Ministry of Planning has given full support to the Project throughout its preparation. 25. The Bank sponsored a workshop in which relevant federal authorities and state governments encompassing the São Francisco river basin were invited to participate in a technical discussion on the most important issues facing the basin. The participants presented an overview of the basin committee and the 10-year plan for the basin. Created by presidential decree in 2001, the São Francisco Basin Committee has 124 members, with participation from federal, state, and municipal representatives; water users; civil society; and indigenous communities. The priority areas for the river basin committee include the: (a) Decennial Plan; (b) implementation of water licensing for uses outside the basin; (c) collection of water charges for all uses, both inside and outside the basin; and (d) development of a roadmap to establish a water agency for the basin. The objectives of the Decennial Water Resources Plan for the São Francisco River Basin (2004–2013) include the following: (a) implementation of the SINGREH management system; (b) establishment of guidelines for the allocation and use of water resources; (c) definition of a strategy for the rehabilitation, recovery, and environmental conservation of the basin; and (d) preparation of action and programs for water resources and land use management and environmental WSS services, including their respective civil works. The plan also supports water rights negotiation and allocation to support irrigation, hydropower generation, and navigation. It envisions investments of R$5.2 billion over 10 years, with R$91.5

31

million (1.8 percent) for the implementation of SINGREH; R$141.8 million (2.7 percent) for the sustainable use of water resources and environmental recovery; R$128 million (2.5 percent) for water resources and land use management services and works; R$465.1 (8.9 percent) for water sustainability in the semi-arid region; R$1,388.4 million (26.7 percent) for WSS services and works in the semi-arid region; and R$2,984.8 million (57.4 percent) for WSS services and works outside the semi-arid region. Over half of this investment comes from federal resources and another quarter comes from state budgets. The rest is financed from public service concessions, water charges, municipal and state hydropower compensation, and the Global Environmental Facility. 26. Among the main observations of the outside experts participating in the discussion were the need to make the relationship between water and development more explicit, the need for an operational system to monitor the physical and financial advances of the plan, and the importance of sufficient qualified staff to manage the water resources plan and its investments. The plan needs to make clear that compromises are necessary for the integrated management of water resources in the basin, and this can only occur if coordination is enhanced among the federal authorities, the National Water Resources Council, and the São Francisco Basin Committee. Although the São Francisco Basin Committee is committed to creating a water agency for the basin, the federal authorities are still deliberating over what type of model to adopt. There is also very little evidence of comprehensive economic analysis over water use allocations to quantify and evaluate the trade involved. 27. Given these observations, the following issues were raised by the panel of experts as actions that could improve the effectiveness of the Decennial Plan: (a) to undertake a review and evaluation of the basin’s hydrometeorological plan and improve and modernize it to meet the needs of integrated WRM in the basin. This review would identify areas needing reinforcement and increase the credibility of information and its impact on decision making; and (b) to assess progress in the implementation of the Decennial Plan, namely: (i) the incorporation of lessons learned and experiences and input from the states; (ii) the review and updating of water allocation models to make more explicit links between economic development and societal preferences, including the quantification of this analysis; (iii) the inclusion of groundwater resources, environmental impacts, and the effects of climate change in the planning process; (iv) the incorporation of economic costs and benefits, action plans to implement the instruments referred to in Law No. 9.433, and climate change mitigation and adaptation measures to comply with environmental requirements; (v) the implementation of the water pact for the proper allocation of water; (vi) the definition of the rules concerning water rights and allocation of water uses, including drought and flood conditions, and the definition of responsibilities for implementing these rules; and (vii) the strengthening of federal and state water agencies with additional qualified staff, including the provision of capacity-building and training activities.

32

Annex 2: Major Related Projects Financed by the Bank and/or other Agencies

BRAZIL: Federal Integrated Water Sector Project – Interaguas

Sector Issues Projects Latest Supervision (ISR/ICR) Ratingsa

Implementation Progress

Development Objective

Bank-financed Projects

Water Supply and Sanitation

BR - P006368 First Water Sector Modernization Project

S (ICR rating) S (ICR rating)

BR - P043420 Second Water Sector Modernization Project

S (ICR rating) S (ICR rating)

BR - P039199 Prosanear Technical Assistance Loan

MS (ICR rating)

MS (ICR rating)

BR - P087711 Espírito Santo Water & Coastal Pollution Management

S S

BR - P108654 Pernambuco Sustainable Water Project

MS MS

Water Resources Management

BR - P006436 State of Ceará Urban Development and Water Resources Management

S (ICR rating) S (ICR rating)

BR- P006449 Ceará Integrated Water Resources Management Project

MS MS

BR - P089929 Rio Grande do Norte Integrated Water Resources Management

MU MS

BR - P035728 State of Bahia Water Resources Management

S (ICR rating) S (ICR rating)

BR- P100154 Brazil Federal Water Resources Management Project (PROÁGUA)

MS (ICR rating) MS (ICR rating)

Other Development Agencies

a. Provided for Bank-financed projects only. S = Satisfactory MS = Moderately Satisfactory .

33

Annex 3: Results Framework and Monitoring

BRAZIL: Federal Integrated Water Sector Project – Interaguas

PDO Project Outcome Indicators Use of Project Outcome Information

To support the Government of Brazil to improve the coordination and strengthen the capacity among key federal institutions in the water sector toward an integrated approach.

Interministerial management committee16, at the Executive Secretariat level, for water sector programs established and functioning regularly with all institutions that participate in Interaguas.

Y1–Y5. Minutes of the Interministerial Committee

Y1–Y5: Annual Operative Plans (POAs)

Y3–Y5. Independent reports of projects and activities implemented following integrated approach.

Y4-Y5. Number of accesses to the website.

Y-5. ICR report

25 water sector activities and projects implemented by institutions participating in the Project included in the GoB’s Multiyear Plan (PPA 2012-2015) following an integrated approach, as attested by an independent evaluation.17

A water indicators portal connecting sector-specific information systems, studies, and analytical work is implemented and available to the public.

Intermediate Outcomes Intermediate Output Indicators for Each Component

Use of Intermediate Output Monitoring

Component 1:

Output 1: Output 1: Output 1:

Implementation of the National Water Resources Management System created by Law 9433 is advanced and strengthened at federal, state, and river basin levels.

13 state water agencies and 4 federal river basin water agencies that are properly functioning, applying the management instruments established by law.

Y3–Y5. Progress Reports.

13 Water agencies reasonably well staffed. Y2–Y5. Technical reports of water institutions.

400 Professional specialists in the national and state water system that have been trained (e.g., water agency staff, national and state council’s members, river basin committee’s members).

Output 2: Output 2: Output 2:

Improved application of water resources management instruments by federal, state, and river basin institutions.

Information system established and functioning to monitor and evaluate the implementation of the National Water Resources Plan.

Y2–Y5. Yearly information system reports, including databases and online web18.

2,400 kilometers of rivers being regularly monitored for water quality though the National Water Quality Monitoring Program.

Y2–Y5. water quality monitoring system reports

16Functioning means at least 2 meetings per year at Secretariat level. 17 Activities and projects included in the GoB’s Multiyear Plan (PPA) are those explicitly included or linked to actions and programs in the PPA. 18Database available online, producing annual reports

34

Volume (8 billion m3 per year) of bulk water being invoiced (and 50% percentage paid of that volume) in the country, excluding power generation.

Y2–Y5. water fee collection reports

Component 2:

Output 3: Output 3: Output 3:

Management capacity of the Ministry of National Integration strengthened.

Integrated technical planning unit functioning.

Y1-Y5. Progress reports

Y3-5. Progress reports and webpage.

100 Technical staff in the areas of Hydraulic Infrastructure, Irrigation and Civil Defense have been trained.

Technical, operational and Hydraulic Infrastructure, Irrigation and Civil Defense19 manuals established.

Output 4: Output 4: Output 4:

New planning and information integrated management, safety, efficiency, and productivity of water infrastructure instruments are established.

Monitoring and Evaluation System for Water Infrastructure Projects established and under implementation.

Y1-5. Studies and system implementation progress reports.

Information System on dams (water supply, irrigation, flood control) infrastructure implemented.

Y1-5. Studies and system implementation progress reports and webpage.

Output 5: Output 5: Output 5:

Effectiveness of MI actions in relation to the National Irrigation Policy improved leading to the sustainability of irrigated agriculture.

Mapping of areas with potential to irrigated agriculture completed.

Plan to improve the dynamism of 30 irrigation perimeters prepared, completed and approved with short, medium and long term solutions that guarantee the feasibility of technical, economic, social and environmental actions.

Y 3-5. Progress reports.

Output 6: Output 6: Output 6:

Knowledge base and decision capacity for irrigation improved inside MI.

Irrigation technical and operational rules established.

Y 3-5. Progress reports.

Output 7: Output 7: Output 7:

New National System for Risk and Disaster Management conceived, institutionalized and implemented.

Secretariat of Civil Defense (SEDEC) restructured with institutional and operational normative instruments established.

CENAD20 expanded and improved with trained staff, and modernized structure, equipment and operation.

15 States teams trained in risk and disaster management.

Y2-5. Progress reports and webpage.

19 Civil Defense is responsible for risk and disaster management activities.

35

Component 3:

Output 8: Output 8: Output 8:

Federal institution responsible for the WSS policy strengthened and working in coordination with other federal institutions in the water sector.

The WSS National Information System (SINISA) implemented including all its subsectors (potable water supply, sanitation, solid waste, and drainage) and functioning as evidenced by online data and annual reports.

Y1–Y5. System Online Reports.

Operational manuals of federal WSS programs revised to incorporate coordination with water resources management policy and plans.

Y2–Y5. Progress reports on the preparation of the WSS manuals.

Output 9: Output 9: Output 9:

Improved programs to promote efficiency in the WSS sector.

Regulators supported by the Project represent 10 million WSS service users21 with access to services which are formally regulated according to Law 11.445.

WSS service providers supported by the Project, which are implementing non-revenue water management and energy efficiency programs, supplying services to at least 10 million users22.

Y3–Y5. Semiannual progress reports on the implementation of the WSS programs.

Component 4:

Output 10: Output 10: Output 10:

Effective institutional framework and technical and operational arrangements functioning to coordinate multisector activities in the São Francisco and Araguaia-Tocantins river basins.

A decentralized technical and operational structure established and functioning in the São Francisco river basin.

The institutional coordination arrangement in the Araguaia-Tocantins river basin is functional and strengthened.

100 staff trained in the two river basins

Y2–Y5. Basin agencies or similar properly working at the selected basins.

Output 11: Output 11: Output 11:

Relevant institutions working in a coordinated way to promote effective use of water and associated infrastructure in the São Francisco river basin.

Management models for WSS services and operation and maintenance of water infrastructure defined and established in 10 systems properly regulated as reported by the relevant ministries.

Y3–Y5. WSS companies properly functioning progress reports.

20 National Center for Disaster Management under the Ministry of National Integration. 21 Service users are measured by number of water supply clients as measured by SINISA. 22 Service users are measured by number of water supply clients as measured by SINISA.

36

Output 12: Output 12: Output 12:

Multisector integrated impact evaluation methodology defined and tested in the São Francisco river basin.

Impact evaluation is tested on a pilot basis and reports published.

Y3. Methodology defined.

Y4–Y5. Impact evaluation is tested on a pilot basis.

Y5. Reports prepared and published.

Output 13: Output 13: Output 13:

Information in the water sector is more integrated across subsectors and readily available for decision making and public consultation.

A water indicators portal connecting sector-specific information systems, studies, and analytical work is implemented and available to the public and functioning as evidenced by online data for the São Francisco river basin.

Y4-Y5. Number of accesses to the website.

Component 5:

Output 14: Output 14: Output 14:

Interaguas adequately managed, monitored, and evaluated.

10 quarterly, semiannual, and yearly program progress reports, financial management and audits of the program.

Assess progress in the monitoring and evaluation of the program.

Output 15: Output 15: Output 15:

Communication program designed and implemented.

10 seminars and workshops held. Workshops and seminars to inform stakeholders of the new water management.

37

Arrangements for Results Monitoring

Target Values Data Collection and Reporting

Project Outcome Indicators

Baseline YR1 YR2 YR3 YR4 YR5 Frequency

and Reports

Data Collection

Instruments

Responsibility for Data

Collection Interministerial management committee23, at the Secretariat level, for water sector programs established and functioning regularly with all institutions that participate in Interaguas.

Not established

1 2 2 2 2 Annual Minutes of the Interministerial

Committee STP/ANA

25 water sector activities and projects implemented by institutions participating in the Project included in the GoB’s Multiyear Plan (PPA 2012-2015) following an integrated approach, as attested by an independent evaluation.24

0

0 0 10 15 25 Annual

Annual

Operative Plans (POAs)

and Independent

reports

STP/ANA

A water indicators portal connecting sector-specific information systems, studies, and analytical work is implemented and available to the public.

Not established

Not established

Not established

Established Established and

Functioning

Established and

Functioning Annual

Online report - Number of

accesses to the website

STP/ANA

Intermediate Outcome Indicators Component 1 13 state water agencies and 4 federal river basin water agencies that are properly functioning,

6 SA 6 6 8 10 13

Semiannual Progress and

technical reports

SRHU–ANA 2 BA 2 2 2 4 4

23Functioning regularly means at least 2 meetings per year at Secretariat level. 24 Activities and projects included in the GoB’s Multiyear Plan (PPA) are those explicitly included or linked to actions and programs in the PPA.

38

applying the management instruments established by law. (cumulative). 13 Water agencies reasonably well staffed. (cumulative)

6 6 6 8 10 13 Progress and

technical reports

400 Professional specialists in the national and state water system that have been trained (e.g., water agency staff, national and state council’s members, river basin committee’s members).

0 150 250 300 350 400 Semiannual Water sector specialists

SRHU & ANA

Information system established and functioning to monitor and evaluate the implementation of the National Water Resources Plan.

Not established

Not established

Established Established and

Functioning Established and

Functioning

Established and

Functioning Annually Reports SRHU

2,400 kilometers of rivers being regularly monitored for water quality though the National Water Quality Monitoring Program. (additional)

0 0 500 1,000 1,800 2,400 Semiannual Reports ANA

Volume ( 8 billion m3 per year) of bulk water being invoiced (and 50% percentage paid of that volume) in the country, excluding power generation.

6 billion m3 6 6.5 6.5 7 8 Annual Management

Reports ANA

Component 2*

Integrated technical planning unit functioning.

Technical team with

partial dedication.

Unit created.

Unit functioning

with specific team working with Project’s

activities.

Unit functioning with specific team

working with Project’s activities.

Unit functioning integrating other

technical areas and established within

the Ministry’s structure.

Unit functioning integrating

other technical areas and

established

Annual Reports SECEX/MI

39

within the Ministry’s structure.

Technical staff in the areas of Hydraulic Infrastructure, Irrigation and Civil Defense have been trained.

0 0 0

Training diagnosis and program for technical staff

concluded.

50 technical staff trained.

100 technical staff trained.

Annual Reports SECEX/MI

Technical, operational and Hydraulic Infrastructure, Irrigation and Civil Defense25 manuals established.

0 0 0 0

2 operational and 2 technical

manuals completed and in

use.

4 operational and 4 technical

manuals completed and

in use.

Annual Reports and

webpage SECEX/MI

Monitoring and Evaluation System for Water Infrastructure Projects established and under implementation.

-

- 0

Technical diagnosis of the

national infrastructure completed.

Manuals with methodologies,

technical, operational and

patterning criteria completed and consolidated.

System completed and implemented

in the ambit of SIH.

Annual Reports SECEX/MI –

SIH

Information System on dams (water supply, irrigation, flood control) infrastructure implemented.

- - -

Technical and operational diagnosis of

selected dams completed.

Dams Risk Mapping and

Action Plan for management and

monitoring of critical

infrastructure risk completed.

Information System on

Dams in the ambit of MI

completed and fed.

Annual Reports and

webpage SECEX/MI –

SIH

Mapping of areas with potential to irrigated agriculture completed.

- - -

Potentialities for the sustainable development of

irrigated agriculture

defined.

Potentialities for the sustainable development of

irrigated agriculture

defined.

Potentialities for the

sustainable development of irrigated agriculture

defined.

Annual Reports SECEX/MI –

SIH

Plan to improve the dynamism of irrigation perimeters prepared, completed and approved with short, medium and long term solutions that guarantee the feasibility

0 0 0 0

15 irrigation perimeters with Plan prepared, completed and

approved.

30 irrigation perimeters with Plan prepared,

completed and approved.

Annual Reports SECEX/MI –

SIH

25 Civil Defense is responsible for risk and disaster management activities.

40

of technical, economic, social and environmental actions.

Irrigation technical and operational rules established.

- - -

Evaluation of the implementation of the Irrigation Plan

for the Northeastern

Semi-Arid through PPP.

Measures to encourage private

sector participation in

irrigation implemented.

Solutions proposals and

instruments for private and

public sectors irrigation

established.

Annual Reports SECEX/MI –

SIH

Secretariat of Civil Defense (SEDEC) restructured with institutional and operational normative instruments established.

- - SEDEC

Diagnosis completed.

Solution proposals and legal,

institutional and operational instruments established.

New procedures implemented and

physical and organizational

structures realigned.

SEDEC structured with

institutional and

operational normative

instruments established and

functioning.

Annual reports SECEX/MI –

SEDEC

CENAD26 expanded and improved with trained staff, and modernized structure, equipment and operation.

- -

CENAD expansion

being implemented.

CENAD expanded and improved.

CENAD expanded and improved.

CENAD expanded and

improved. Annual Reports

SECEX/MI – SEDEC

States teams trained in risk and disaster management.

0 0 Training plan

prepared. 5 states with

trained teams. 10 states with trained teams.

15 states with trained teams.

Annual Reports SECEX/MI –

SEDEC

Component 3 The WSS National Information System (SINISA) implemented including all its subsectors (potable water supply, sanitation, solid waste, and drainage) and modules and functioning as evidenced by online data and annual reports.

SINISA functioning with WSS subsectors

and operational

module

SINISA functioning with WSS subsectors

and operational

module

SINISA functioning with WSS,

Solid Waste, Urban

Drainage subsectors and

operational module

SINISA functioning with

WSS, Solid Waste, Urban

Drainage subsectors and operational and

institutional modules

SINISA functioning with

WSS, Solid Waste, Urban

Drainage subsectors and operational and

institutional modules

SINISA functioning with

WSS, Solid Waste, Urban

Drainage subsectors and operational and

institutional modules

Annual Online reports SNSA

Operational manuals of federal WSS programs revised to incorporate

0 0 3 3 5 5 Semiannual Progress Reports

SNSA

26 National Center for Disaster Management under the Ministry of National Integration.

41

coordination with water resources management policy and plans. Regulators supported by the Project represent 10 million WSS service users27 with access to services which are formally regulated according to Law 11.445

0 0 NA28 2 million 6 million 10 million Semiannual Progress Reports

SNSA

WSS service providers supported by the Project, which are implementing non-revenue water management and energy efficiency programs, supplying services to at least 10 million users29

0 0 NA30 2 million 6 million 10 million Semiannual Progress Reports

SNSA

Component 4

A decentralized technical and operational structure established and functioning in the São Francisco river basin.

River Basin Agency selected,

management contract signed

River Basin Agency selected,

management contract signed

Agency is functional

ANA’s Evaluation Commission

Annual Assessment Report on

management contract

performance is sent to the Basin Committee and

disclosed

ANA’s Evaluation Commission

Annual Assessment Report on

management contract

performance is sent to the Basin Committee and

disclosed

ANA’s Evaluation

Commission Annual

Assessment Report on

management contract

performance is sent to the Basin Committee and

disclosed

Annual Reports

ANA-SRHU based on basin

agencies report

The institutional Management Management Management Management Management Management Annual Report ANA-SRHU

27 Service users are measured by number of water supply clients as measured by SINISA. 28 NA = not applicable. In the year 2 of the Project the MofCities will: (i) implement a training program on economic and technical regulation for basic sanitation to federal institutions and staff, applying the guidelines set by the Federal Law #11445 of 2007; (ii) enter into cooperation agreement(s) and work program(s) for capacity building, technical assistance and training on regulation, with regulatory institution(s) that either represent regulators nationwide or regulatory agencies that together could be considered as having national coverage. 29 Market is defined as total number of water supply clients as measured by SINISA. 30 NA = not applicable. In the year 2 of the Project the MofCities will: (i) implement a training program on non-revenue water management and energy efficiency programs to federal institutions and staff; (ii) enter into cooperation agreement(s) and work program(s) for capacity building, technical assistance and training on non-revenue water management and energy efficiency programs with service providers institution(s) that either represent service providers nationwide or service providers that together could be considered as having national coverage.

42

coordination arrangement in the Araguaia-Tocantins river basin is functional and strengthened

Committee comprising ANA and relevant states

created

Committee comprising ANA and relevant

states created

Committee comprising ANA and

relevant states created

Committee’s Assessment

Report of River Basin’s strategic plan disclosed

Committee’s Assessment

Report of River Basin’s strategic plan disclosed

Committee’s Assessment

Report of River Basin’s strategic plan disclosed

100 staff trained in the two river basins

0 - 10 40 70 100 Semiannual Reports ANA-SRHU

Management models for WSS services and operation and maintenance of water infrastructure defined and established in 10 systems properly regulated as reported by the relevant ministries.

0 — 3 6 8 10 Annual Reports

ANA-SRHU based on relevant

ministries reports

Impact evaluation is tested at a pilot basis and report published.

0 - - Methodology

defined Methodology is applied to a pilot

IE pilot report Published

Annual Reports ANA-SRHU

A water indicators portal connecting sector-specific information systems, studies, and analytical work is implemented and available to the public and functioning as evidenced by online data for the São Francisco river basin.

0 - -

Project-specific website portal

designed to reflect the integrated

approach functioning and available to all

public.

Project-specific website portal

designed to reflect the integrated

approach functioning and available to all

public.

Project-specific website portal

designed to reflect the integrated

approach functioning and available to all

public.

Annual

Online report – Number of

accesses to the website

SNSA-ANA

Component 5 10 quarterly, semiannual, and yearly progress reports, financial management, and audits of the program (cumulative)

Not prepared 2 4 6 8 10 Semiannual Reports STP/ANA

10 seminars and workshops held (cumulative).

Not prepared 2 4 6 8 10 Semiannual Progress reports

STP/ANA

43

Objectives and Methodology for Evaluating the Impact of the Proposed Project Main Activities: 1. An impact evaluation will be carried out to determine whether the project’s activities had an impact on multisector activities. The objective of the impact evaluation is to determine whether the proposed integrated activities have a significant impact on the project outcomes by measuring it against compared similar areas that did not have a similar approach. In order to undertake the impact evaluation, control and treated groups will be selected, analyzed, and compared. 2. The Impact Evaluation would help assert the causality between project activities and the project outcome indicators. The Impact Evaluation methodology will be prepared during the first year of project implementation and agreed with the Bank. A baseline survey of both treated and control groups will be undertaken in the first year of project implementation. One follow-up survey will be implemented to collect comparable information and assess changes in outcomes between the control and the treated groups. 3. The project’s impacts would be measured through the comparison of outcomes between the treated group and the control group. The evaluation would use the difference-in-difference method to compare treated and control groups. It would also use propensity scoring matching techniques to improve the quality of the control group.

44

Annex 4: Detailed Project Description

BRAZIL: Federal Integrated Water Sector Project – Interaguas Project components 1. The proposed Project has five components, the first three of which are designed to continue the Bank-supported program of ongoing water sector reforms and institutional strengthening in individual sectors at the national level. These three components will involve three federal ministries—the MMA, MI, and MCid—and the ANA, and they are subsector specific, with individual sectoral responsibility for implementation. Activities to be supported fall into three main categories: (a) planning and management, (b) studies and project assessment, and (c) institutional development. Each category will include support at the federal and subnational levels. The more innovative fourth component will be cross-sectoral in nature and designed to improve implementation performance and coordination of sector policies and activities in selected federal river basins. It will promote the multiple use of water in two (or three) priority river basins dealing with complex challenges of allocating water across competing uses (hydropower, navigation, environmental sustainability, WSS, irrigation). The selection of such basins takes into account the need for an integrated planning process; existence of a critical mass of plans and studies; and opportunity for improved coordination across sectors, levels of government, and other relevant stakeholders. The fifth component will cover project management, monitoring, and evaluation. Component 1: Water Resources Management (Cost: US$44.2169 million, Bank loan US$33.1419 million) 2. Implemented by the MMA and ANA, this component will provide support to the deployment of tools and instruments to SINGREH; enhance institutional development; reduce the disparities between the Borrower’s federal and states water management systems; identify actions to mitigate and adapt to climate change; streamline procedures; and establish criteria for ongoing monitoring and evaluation systems to increase efficiency and legal compliance of water resources guidelines and policies with the Borrower’s 1997 Water Law No. 9.433 dated January 8, 1997, which established the National Water Resources Policy. The main activities are divided into the following groups: 3. Planning and management: The planning and management subcomponent includes support to: (a) assess and support the modification of the legal framework for federal and state water resources; (b) strengthen the National Water Resources Plan and state and river basin plans and agencies, integrating them with overall sector plans including climate change adaptation and mitigation measures; (c) implement and expand the water resources monitoring network; (d) promote the enforcement of water rights and charges; (e) plan and implement a national program for water resources management training; (f) implement a results based management system for the National Water Resources Plan; and technical support to integrated urban water management including solid waste and management models; (g) update and improve the National Register of Water Resources Users; (h) implement and update the National Water Resources Information System (SNIRH); (i) promote the enforcement of water rights and charges, including granting

45

groundwater rights; and (j) plan and implement a national program for water resources management training.

4. Studies: The studies subcomponent will support the preparation of studies, including: (a) verifying the feasibility of water projects; (b) monitoring and assessment of groundwater potential for direct use and through desalinization; (c) water demand and balance; (d) implementation of demonstration projects for water resource conservation and reuse, and rehabilitation plans; (e) decision support systems; (f) mathematical models to measure water quality and quantity; (g) prevention and control of critical events including climate change; (h) update, development, and improvement of hydrographic mapping and a database; (i) development and modernization of a water infrastructure registry and water users registry; (j) regulation and supervision of water uses under PPP concessions; (k) development of conceptual documents for obtaining external funding; (l) definition and implementation of strategies for urban and rural watershed protection; (m) development of a methodology to estimate support capacity for water rights applications; (n) results-based models; (o) integrated urban water management including water safety in urban areas; (p) addressing topics such as the relationship between environmental degradation, desertification, and water resources, technologies for efficient water use, impacts of climate change on water resource availability, influence of global macroeconomic dynamics on water resources, impacts of dynamic economic sectors on water resources, and alternatives for the effective implementation of international commitments on transboundary water bodies; and (q) development of financial mechanisms and tools for environmental and water management, including solid waste. 5. Institutional development: The institutional development subcomponent includes support to (a) train and strengthen water resources management agencies, including (when necessary) creating river basin agencies and committees, water user associations, and water boards; (b) develop and implement education and social mobilization campaigns and communication and dissemination programs; (c) monitor and improve SINGREH’s institutions capacity; (d) link legal and institutional frameworks related to water resources management; (e) enhance economic and financial sustainability of water resources management and water resources policies and funding; (f) support to south-south cooperation in the water sector; and (g) strengthening of urban, environmental and water institutions. 6. The component activities are an important part of the ANA’s comprehensive strategic plans, which are presented in Table A4.1 The table presents the actions that the ANA is implementing and relevant indicators. The ANA is using different sources of financial resources to implement these activities, one of which is Interaguas funding. A criterion for selection of the activities to be supported in Interaguas was the status of preparation of detailed terms of reference and the ANA’s capacity to accompany its implementation with the support and Bank involvement and technical input.

46

Table A4.1: ANA Strategic Plan and Interaguas Objectives ANA Strategic Plan

Thematic Areas

Interaguas Over

all Ob-jec-tives

Specific Objectives

Expected Results Initial Actions Expected Results Objec-tives

Component

Indicators

Impl

emen

t Nat

iona

l Wat

er R

esou

rces

Pol

icy

Guarantee the fulfillment of objectives and guidelines of Law No. 9.433.

Availability of water in assured quality and quantity.

Monitoring and improvement of water resources quality and quan-tity.

Pilot study on the development of methodologies for mapping the quality of water and the factors affecting water quality and vulnerability.

Strengthen water quality monitoring with the instal-lation of 50 new monitoring points. Support

the objec-tives of the Na-tional Water Resources Policy.

Com

pone

nt 1

: Wat

er R

esou

rces

Man

agem

ent

2,400 kilometers of rivers being regularly monitored for water quality though the National Water Quality Monitoring Program. Incentivize rational and

integrated water resources.

Rational and integrated use of water resources.

Hydrogeological and hydro-chemical assessment of Urucuia aquifer between Tocantins, Maranhão, Piaui, and Bahia to implement integrated water resources management and develop a map of natural vulner- ability and pollution risk.

Implementation of 10 rational water user projects under the groundwater and sustainable use agendas of ANA.

Critical events prevented and impacts minimized.

Prevention of critical events.

Flood management plan for Rio Doce basin.

Development of 5 projects for the prevention of critical events.

Information system established and functioning to monitor and evaluate the implementation of the National Water Resources Plan.

Implement management instruments foreseen in Law No. 9.433.

Water resources man-agement instruments implemented in confor-mity with management map.

Water resources plans.

Development or updating of 5 water resources plans.

Imple-ment water resources man-agement instru-ments in an inte-grated manner.

Classification of water bodies.

Accreditation of 10 water quality laboratories with INMETRO.

Water rights. Development of water rights system for groundwater in 5 federal units.

Collection of charges for water.

Collection of water charges in 2 federal river basins.

Information system on water resources.

Development of a planning and management subsystem of SNIRH and integration conjec-ture, geographic intelligence, and security report.

Integration of 27 state water resources information sys-tems with the national information system.

Sector users and individual users act together in impartial and effective manner.

Sector users operating in integrated manner for management of water resources.

Integration with water users.

Support for the implementation and management of the urban water supply atlas.

Development of 10 inter-sectoral studies on the multiple uses of water. Inter-

sectoral integra-tion.

Com

pone

nt 4

: Int

er-

sect

oral

Coo

rdin

atio

n an

d In

tegr

ated

Pla

n-ni

ng

25 water sector activities and projects implemented by institutions participating in the Project included in the GoB’s Multiyear Plan (PPA 2012-2015) following an integrated approach, as attested by an independent evaluation

Regulation of irrigation and water supply services implemented and evaluated.

Regulation of irrigation and water supply services.

Creation of a regulatory framework for monitoring public irrigation services.

47

B

uild

Nat

iona

l Wat

er R

esou

rces

Man

agem

ent S

yste

m (

SIN

GR

EH

)

Expansion and strengthening of SINGREH.

SINGREH implemented in conformity with management map.

Training for SINGREH.

Specialization course in devel-opment and management of municipal water resources man-agement projects. Realization of 25 training

events for SINGREH mem-bers.

Streng-thening of National Water Resources Manage-ment System.

Com

pone

nt 1

: Wat

er R

esou

rces

Man

agem

ent

400 Professional specialist in the national and state water system that have been trained (e.g., water agency staff, national and state council’s members, river basin committee’s members).

Professional course in regulation and management of water re-sources for SINGREH members. Training for water resources in the states.

Financial sustainability of SINGREH guaran-teed.

Financial sustain-ability of SING-REH.

Study on the financial sustaina-bility of SINGREH.

Creation, regulation, and operation of 4 state water resources funds.

Assessment and adequacy of legal and institutional frame-work and development of pro-posal for the regulation and operation of state water resources funds.

Strengthening of National Water Resources Council (CNRH).

Technical subsidies from ANA for effec-tiveness of expanded CNRH activities.

Improvement of management model.

Development and implementa-tion of management project based on ANA processes – strategic planning.

Development of management project based on ANA processes. Scientific and

technological development.

Strengthening of state management entities.

Federative integration of river basin management expanded with the states.

Decentralized and participatory management.

Development of strategic plan for the state water resources management systems in Mato Grosso do Sul and Paraná.

Adequacy or revision of 7 state water resources laws. Creation, implementation, or strengthening of 11 state water resources councils. Support for the development of 2 state water resources programs or projects, together with financial institutions.

48

Component 2: Water, Irrigation, and Disaster Risk Management (Cost: US$40.7335 million, Bank loan US$30.5310 million) 7. Implemented by the MI, this component will provision support for institutional strengthening to improve water infrastructure, irrigation and SINDEC activities, and to raise the overall assessment capacity of strategic existing water infrastructure and disaster risk management capacity, including floods and droughts and other hazards. The main activities are divided into the following groups: 8. Planning and management: The planning and management subcomponent will provide support to: (a) the assessment of federal and state water infrastructure plans in the Northeast Region; (b) the development of criteria for selecting water infrastructure projects; (c) the preparation of state and national irrigation plans with incentives to optimize irrigation systems; (d) the creation of an information system for risk management aiming the development of an integrated platform of information including a database; an emergency module; resource management; and hazard, vulnerability, and risk assessment; (e) the development of a risk management plan, including risk identification, monitoring and early warning systems, and emergency response plans with contingency plans, mitigation measures, and prioritization of vulnerabilities including climate change; (f) development of information systems for water infrastructure; and (g) the increase of strategic planning for drought risk reduction, including, but not limited to, analyses for projects proposed in the water atlas study developed by ANA. 9. Studies: The studies subcomponent will support: (a) the preparation of technical, economic, social, financial, and environmental feasibility of water infrastructure activities; (b) the preparation of water infrastructure management, operation, and maintenance plans; (c) the assessment of existing water infrastructure; (d) the development of dam safety plans; (e) the promotion of social participation; (g) the development of plans and improvement of irrigation activities; (f) the implementation of the National Irrigation Policy; and (g) support disaster risk management. 10. Institutional development: The institutional development subcomponent aims to strengthen water infrastructure planning and implementation, and consolidate strategic and operational planning as instruments to guide government action. It also aims to ensure the optimal use of resources through more appropriate works management. Specific actions include: (a) provision of technical support and capacity building to federal and state agencies to enhance performance in water planning, irrigation, and risk management areas; (b) provision of technical assistance to implement water infrastructure management and monitoring systems; management plans for public irrigation projects, and training for irrigation user organizations; (c) acquisition and/or development of computer programs for administration and management; (e) preparation of technical and operational manuals for water infrastructure, irrigation and disaster risk management; and (f) support to irrigation and water infrastructure and SINDEC agencies.

49

Component 3: Water Supply and Sanitation (Cost: US$32.4391 million, Bank loan US$24.3141 million) 11. Implemented by the MCid, this component will provide support to the implementation of the Borrower’s 2007 National Sanitation Law No. 11.445, the improvement of the quality of the provision of water supply and basic sanitation services and contribution to promote universal access to these services. This component will maintain activities initially undertaken as part of PMSS by continuing support to the MCid. Activities contributing to these aims include: 12. Planning and management: The planning and management subcomponent will provide support and technical assistance to: (a) implement the National Basic Sanitation Guidelines and the Water Supply and Sanitation System (SINISA); (b) assess PAC investments in water supply and basic sanitation areas infrastructure and evaluate and monitor results; (c) develop a national technical cooperation in the water supply and basic sanitation areas, including international technical cooperation in planning and management, technical and institutional exchanges, studies, and scientific and technical research; (e) develop and expand a training, research, and technology national network in water supply and basic sanitation; (f) prepare local and regional water supply and basic sanitation plans for states and municipalities; and (g) review and evaluate programs and actions included in the PPA and PAC. 13. Studies: The studies subcomponent will provide support to: (a) improve the assessment capacity on technical, economic, financial, policy, institutional, and management matters; (b) contribute to the monitoring and evaluation of public policies; (c) improve COM + ÁGUA Project; (d) expand the Integrated Management System for Water Supply and Sanitation (GSAN); (e) integrate, expand, and upgrade PMSS systems; (f) expand integrated water supply and basic sanitation services technology in slum areas; (g) adopt clean development mechanisms for water supply and basic sanitation; and (g) disseminate technology. 14. Institutional development: The institutional development subcomponent will provide support to: (a) the integration of PAC-financed projects and institutional development of services providers; (b) provide technical assistance to states, municipalities, regulators, and service providers for sector modernization; (c) encourage associated management of water supply and basic sanitation services, including the establishment of public consortia, under Law No. 11.107/2005; (d) develop local or regional water supply and basic sanitation plans; (e) provide technical assistance to the regulators of water supply and basic sanitation services; (f) develop and disseminate transparency instruments and promote social participation; (g) review water supply and basic sanitation environmental licensing regulations; and (h) improve and implement water and energy efficiency programs, with priority to projects supported by PAC and located in water scarce areas, as defined by ANA’s Atlas. Component 4: Intersectoral Coordination and Integrated Planning (Cost: US$20.9606 million, Bank loan US$15.7106 million) 15. Implemented by ANA, MMA, MI and MCid, this component will provide support to integrated planning; identify areas of mutual interest, overlap, or conflict in the sectoral plans which impact and/or depend upon water; carrying out of studies and institutional improvements

50

involving multiple sectors, and support water management and conservation measures preferentially in the São Francisco and the Araguaia-Tocantins river basins. This component will focus on integrated planning with a preferential focus on the selected priority river basins. The Project Technical Secretariat inside ANA will be responsible for coordinating the activities. The São Francisco and the Araguaia-Tocantins river basins were preliminarily selected by an interministerial group formed for preparation of the Project, which includes the ANA, MMA, MI, and MCid, and also includes the Ministries of Energy and Transportation as consultative members. Intersectoral activities under the component will be complemented by sectoral activities in the same river basins under Components 1, 2, and 3. The main activities are the following: 16. Planning and management: The planning and management subcomponent will: (a) support the improvement of water management and use associated with the Integration Project in the São Francisco River Basin; (b) integrate planning and regulation in the water resources and water supply and basic sanitation sectors and in the energy and navigation sectors; (c) implement methods to integrate river basin environmental assessment for planning in the hydroelectric, river navigation, and water supply and basic sanitation sectors at the state and municipality level; and (d) develop and implement systems and methodologies to monitor and evaluate policies and public investments in the water sector, including proposing national and state regulation coordination mechanisms. 17. Studies: The studies subcomponent will: (a) evaluate alternatives to integrate procedures for water rights, emission of environmental licenses, environmental planning, and provision of public services; (b) rehabilitate river basins; (c) undertake studies to improve energy efficiency; (d) develop water conservation and reuse projects; (e) promote efficiency technologies and develop a methodology for certification of proper use of water in irrigated agriculture; (f) control and measure water quality; (g) create clean development mechanisms; (h) undertake studies on payment for environmental services; (i) systematize the database of existing engineering designs and works; and (j) identify projects to encourage rational and efficient water use. 18. Institutional development: The institutional development subcomponent will: (a) coordinate methods, evaluation systems, and decision support in sectors where water resources are fundamental inputs; (b) support the coordination and communication among sector information systems; (c) support the establishment of permanent mechanisms and structures for articulation and coordination of Federal Government actions in the water sector; and (d) train federal, state and municipality water professionals on project related activities. Component 5: Project Management, Monitoring and Evaluation (Cost: US$4.4916 million, Bank loan US$3.3666 million) 19. Implemented by ANA, MMA, MI and MCid, this component will provide support to: (i) the management of the operational aspects of the Project in order to coordinate, monitor, and evaluate all of the interventions undertaken to ensure that they meet the targets, timetables, and objectives originally specified and to ensure overall efficient administration including reporting, financial management, and auditing of the Project; and (ii) the effective transfer of knowledge and the use of best practices at the subnational level including a strong communication program,

51

through, inter alia, workshops and seminars to inform the relevant stakeholders at the river basin, municipal, state, and federal levels. 20. The Project Technical Secretariat (Secretaria Técnica do Programa, STP), which will be created within ANA, will take a leading role in coordinating the different project activities at the federal, basin, and state levels. The STP will also provide support to all operational aspects of the Project and monitor and evaluate all the interventions undertaken to ensure that they meet the targets, timetables, and objectives originally agreed by the Interministerial Management Committee as described in paragraph 37. It will also carry out the overall administration duty, including reporting, financial management, and auditing of the Project. The STP at ANA will function as the liaison for all PMUs and will provide support and coordination to the entire project. ANA’s experience in the successful implementation of the PROAGUA water management component will provide the leadership and ensure knowledge transfer to the participating agencies.

52

Annex 5: Project Costs

BRAZIL: Federal Integrated Water Sector Project – Interaguas

World Bank GoB TotalUS$ million US$ million US$ million

Water Resources Management 33.1419 11.0750 44.2169

Water, Irrigation, and Hazard Management 30.5310 10.2025 40.7335

Water Supply and Sanitation 24.3141 8.1250 32.4391

Intersectoral Coordination and Integrated Planning 15.7106 5.2500 20.9606

Project Management, Monitoring, and Evaluation 3.3666 1.1250 4.4916

Total Baseline Cost 107.0642 35.7775 142.842Physical ContingenciesPrice Contingencies

Total Project Costsa

Interest during constructionFront-end Fee 0.2683 0 0.2683

Total Financing Required 107.3325 35.7775 143.110

Project Cost By Component

53

Annex 6: Implementation Arrangements

BRAZIL: Federal Integrated Water Sector Project – Interaguas 1. The Federative Republic of Brazil is the Borrower. Since one of the Project’s main aims is to promote coordinated planning and implementation of water policies among the Ministries of Environment (MMA), National Integration (MI), and Cities (MCid), and the National Water Agency (ANA), all four institutions have the responsibilities of implementing agencies, under the coordination of ANA, through the Project Technical Secretariat (STP). Specifically, MMA, through SRHU and ANA, is responsible for implementing Component 1 on WRM; MI, through SIH and SEDEC, is responsible for implementing Component 2 on water, irrigation, and hazard management; and MCid, through SNSA, is responsible for monitoring Component 3 on WSS. PMUs will be created under each of the three ministries and ANA to implement activities directly tied to their specific components. In addition to implementing its own activities, ANA, through STP, will be responsible for the overall project coordination and the coordination of the execution of the intersector component activities delegating responsibility for specific activities to those ministries most directly linked to the actions being undertaken. 2. As shown in Figure A6.1, an Interministerial Management Committee (Comitê Gestor do Programa, CGP) will be formed by the three implementing ministries and ANA to oversee project implementation and decide on higher-level strategic issues of an intersectoral nature. The committee will also include the Ministries of Energy, Transportation, and Agriculture as consultative members. The CGP defines issues that are of common interest across components, oversees project implementation, evaluates results, and agrees on allocation criteria for loan proceeds depending on institutional performance and the need for institutional strengthening. Project funds will be assigned to different components in accordance with implementation performance and evolving needs and priorities defined by each ministry and agreed with the Bank. The detailed arrangements are included in the MOP. Among the responsibilities of the CGP are: (a) to act as the Project’s deliberation and decision-making body; (b) to provide strategic guidelines concerning project implementation; (c) to ensure the proper functioning of the PMUs; (d) to agree on intersector actions; (e) to approve the structure, functions, and composition of the Technical Secretariat (described below), the project’s implementation plan, and the division of funding; (f) to define criteria for the approval of resources reallocation depending on each implementing agency’s performance; (g) to oversee the implementation of the Project and the evaluation of its results; (h) to develop further actions that will contribute to the achievement of the overall objectives under the scope of the Project; and (i) to approve the Annual Operational Plan (POA) for the Project.

54

Figure A6.1:

3. The STP will implement the management, coordination, monitoring, and evaluation of the Project and will consolidate the reports by the various PMUs and carry out the decisions of the CGP. It has an Operations Committee composed of the project coordinators of each PMU, which in addition to executing and monitoring the intersector activities also coordinates and optimizes activities related to their specific component. The STP has the following responsibilities: (a) to provide specific guidelines for the project’s implementation; (b) to integrate project activities and coordinate the various institutions to promote the integrated and multiple use of water resources; (c) to prepare and keep updated the Project Operational Manual, which will bring together the respective operational manuals of each ministry; (d) to prepare the terms of reference and other procurement documents for the monitoring and evaluation activities; (e) to coordinate with the other relevant institutions and assist and/or accompany the preparation of studies and technical specifications and procurement documents related to the intersectoral component; (f) to prepare the Annual Operative Plan, which will consolidate the proposals of the PMUs; (v) progress and monitoring reports, also consolidating the reports of the PMUs; and (vi) project evaluations.

Specific Sectoral Programs

Interministerial Management Committee

SRHU SNSA SIH - SEDEC Policy and Programming

MMA MCid MI

Technical Secretariat

ANA

SRHUSNSA SIH

SEDEC

Water Resources Environment

Water Supply & Sanitation

Hydraulic Infrastructure

Crosscutting Actions

55

4. The Annual Operational Plan (POA) takes into consideration a competitive allocation of funds for each component. Under the first year of implementation the proposal of activities and funds for each of the implementing institutions will include a certain amount of resources provided in accordance with the estimated costs of their proposed activities. In the following year, the CGP and the Bank will evaluate the performance of each institution with regard to implementing the planned actions according to the estimated budget. The evaluation criteria take into account each institution’s budgetary context, including the relative importance of the Project in discretionary spending and the levels of budget contingency. The institutions that have satisfactorily met their targets would be able to increase their project-related expenditures in the following POA. Institutions not achieving satisfactory performance will face a proportional reduction in their project funding in the next year. 5. Project subnational support will be targeted to those entities (state and municipal water institutions, river basin agencies, service providers, and so forth) that demonstrate a strong commitment to advance reforms and improve performance in the water sector. The MOP defines and details the specific criteria and mechanisms developed during project preparation to define how subnationals will engage and have access to project support under each component. These criteria include: (a) the activities proposed need to be approved by the management committee, (b) the subnationals should submit a specific funding request and proposal including clear demonstration of institutional capacity to follow up activities preparation and implementation, (c) the proposals should be consistent with existing sectoral or multisectoral plans or programs, (d) the interventions proposed should have an impact on the productive and sustainable use of water, and (e) the proposed interventions should preferably be co-financed by the subnationals. Proposed activities cleared by the relevant water authorities will be prioritized under each component. In addition, clear rules of engagement were established for potential beneficiaries at different levels of capacity, from basic support to improve performance of weaker institutions to strategic engagement with stronger agencies that are willing to push the envelope addressing more advanced and complex issues.

6. The following section details the institutional arrangements of the three ministries and ANA, which are responsible for implementing the Project.

Secretariat of Water Resources and Urban Environment, (Secretaria de Recursos Hídricos e Ambiente Urbano, SRHU), within the Ministry of the Environment 7. Within MMA, SRHU will implement part of the Water Resources Management Component, which will focus on improving the effectiveness of WRM instruments and the implementation of the national water resources plan. It will also be responsible for implementing its respective actions under the intersector component (Component 4). SRHU is the federal agency responsible for the management of water resources and the urban environment. It is led by the Chief of Cabinet and is composed of three departments—water resources, urban environment, and watershed rehabilitation. 8. A PMU will be established within SRHU to implement the Project. The PMU will include a General Coordinator, supported by a coordination assistant and a control center, and core procurement, financial, and technical centers, with the objective of coordinating and

56

managing the various activities under the responsibility of SRHU and undertaking the procurement, financial management, and budget execution activities necessary for the Project. Figure A6.2 shows the organizational structure of the PMU.

Figure A6.2: Organizational Structure of PMU within SRHU 9. General Coordination. The General Coordinator of the PMU is the Secretary of SRHU, with the responsibility for promoting strategy and policy and coordinating the various actors, in accordance with the general guidelines of the Project. 10. Sub-Coordination. The sub-coordinator is in charge of planning, implementing, supervising, and monitoring the activities under SRHU’s responsibility for Components 1 and 4. It is led by a representative from the Chief of Cabinet of SRHU, who coordinates the technical, procurement, and financial centers. The subcoordinator assists in the preparation of the procurement plans, monitors indicators, revises the annual operational plans, and proposes budgets, among other duties. 11. Control Center. The control center performs the internal audits and analyzes procurement, payment, and accounting processes. In addition, it is responsible for understanding the Procurement Guidelines and analyzing other rules set out in the Loan Agreement. It also supervises the procurement and financial management procedures to ensure they are in accordance with these agreements. 12. Technical Center. The technical center is composed of three representatives from the departments of SRHU—water resources, urban environment, and watershed rehabilitation—and is in charge of the technical planning and monitoring of the activities. This includes writing terms of reference and other bidding documents, preparing and updating procurement plans, participating in the selection processes, monitoring and evaluating indicators, and any other activities related to the technical aspects of the activities.

13. Procurement Center. The procurement center is composed of three representatives from the three different departments and is in charge of all activities related to procurement in accordance with Bank guidelines. It is responsible for writing the procurement plans, reviewing

General Coordination

Sub- Coordination

Technical Center

Procurement Center

Financial Center

57

terms of reference and other bidding documents, preparing review reports on the procurement processes, and guiding the other centers in the Bank procurement rules and procedures.

14. Financial Center. The financial center is composed of three members representing the Chief of Cabinet and other support staff, and it monitors budgetary, financial, and accounting matters. Financial management monitoring employs the Integrated Financial Management System (Sistema Integrado de Administração, SIAFI). It also develops statements of expenditures, enters data into the Environmental Management Information System (Sistema de Informações Gerenciais do Meio Ambiente, SIGMA), monitors the payments processes, prepares routine reports on financial management, and provides information to the annual independent audits. Regarding the disbursement of funds to project executing agencies, it will request the disbursement of funds from the Special Account, control the flow of funds between the Bank and the Banco do Brasil, authorize the Banco do Brasil to credit the accounts of the executing agency, develop financial statements, train representatives from the executing agencies on the verification processes to disburse funds, and record financial information in SIGMA. National Water Agency (Agência Nacional de Águas, ANA) 15. ANA will complement SRHU in the implementation of the Water Resources Management Component. ANA’s overall responsibilities include: (a) to supervise, control, and evaluate actions and activities resulting from the compliance of federal water resources legislation; (c) to regulate the implementation, control, and evaluation of the instruments of the National Water Resources Policy; (c) to grant water rights in federal rivers; (d) to enforce the use of water resources in federal rivers; (e) to prepare technical studies to subsidize the definition, by the National Water Resources Council, of the amounts to be charged for the use of water resources in federal rivers based on mechanisms and amounts suggested by the basin committees; (f) to stimulate and support initiatives directed to the creation of basin committees; (g) to implement, in coordination with the basin committees, the water use charges in federal rivers; (h) to collect, distribute, and apply revenues obtained through water use charges in federal rivers; (i) to plan and promote actions directed to prevent or minimize the effects of droughts and floods in the realm of SINGREH, in coordination with the central institution of the National Civil Defense System, in support to states and municipalities; (j) to provide and prepare studies to subsidize the application of federal funds in works and services for regulating water bodies, allocating and distributing water, and controlling water pollution, in accordance with the water resources plans; (k) to define and monitor the conditions of operation of reservoirs by public and private agents, aimed at ensuring the multiple use of water resources, in accordance with the water resources plans for the respective hydrographic river basins; (l) to promote the organization of activities developed in the ambit of the national hydrometeorological network, in coordination with public and private agencies that form the network or belong to it as users; (m) to organize, implement, and manage SNIRH; (n) to stimulate water resources management research and capacity building; (o) to provide support to states in the creation of water resources management agencies; (p) to propose to the National Water Resources Council the establishment of incentives, including financial, for the qualitative and quantitative conservation of water resources; (q) to participate in the preparation of the National Water Resources Plan; and (r) to regulate and monitor, whenever involving federal waters, the provision of public irrigation

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services, concession of bulk water, including rules for the provision of these services and efficiency standards, and establish tariffs and to manage and audit concession contracts. 16. Project coordination at ANA is the responsibility of the Superintendent of Implementation of Programs and Projects (Superintendência de Implementação de Programas e Projetos, SIP), under the Collegiate Board of Directors. SIP coordinates activities with the support of two management units: the Projects General Supervision Management Unit (Gerência de Acompanhamento de Projetos, GEAPR) and the Projects Technical Supervision Management Unit (Gerência Técnica de Projetos, GEPRO). 17. The responsibilities of the Project’s General Supervision Management Unit include: (a) overall supervision of the project’s planning within the Agency and with the states; (b) follow up the implementation of activities under the SIAFI); (c) enter data into the SIGMA; (d) monitor the payments processes; (e) control transfer of resources to the states; and (f) prepare routine reports on financial management. 18. The Project’s Technical Supervision Management Unit is responsible for: (a) the technical oversight of the Project, including the preparation of terms of reference, selection and bidding documents, and procurement plans; (b) the analysis of activities proposed by the states and technical supervision of the state activities; and (c) the monitoring of contracts. The accounting, budgeting, administrative, and financial activities under the Project are the responsibility of the Superintendence of Administration, Finances and Human Resources (Superintendência de Aministração, Finanças e Gestão de Pessoas, SAF), also under the Collegiate Board of Directors. Figure A6.3 shows the implementation structure of the Project within ANA.

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Figure A6.3: Implementation Structure of Interaguas within ANA

Executive Secretariat (Secretaria Executiva, SECEX), Secretariat of Hydraulic Infrastructure (Secretaria de Infraestrutura Hídrica, SIH) and National Secretariat of Civil Defense (Secretaria Nacional de Defesa Civil, SEDEC), within the Ministry of National Integration 19. Within the MI, Project coordination will be responsibility of the SECEX in close collaboration with SIH and SEDEC. The Water, Irrigation, and Hazard Management Component will focus on providing institutional strengthening to water infrastructure agencies and raise the level of strategic and operational planning for water infrastructure and increase the preparedness of civil defense for floods and droughts. SECEX will provide interaction among the MI’s Secretariats involved in the project; approve general guidelines for planning, programming, monitoring and evaluation of project’s actions; and approve budgetary proposals, work plans, contracts, operational guidelines, expenses. 20. SIH is responsible for the construction of irrigation and water supply works, including dams, pipelines, and canals, and micro drainage structures. Its main objectives are to: (a) formulate and lead the National Irrigation Policy; (b) guide and supervise the formulation of water resources plans, programs, and projects; (c) support the operation, maintenance, and rehabilitation of water infrastructure works; (d) develop and conduct drought management programs and activities, with an emphasis on water resources for human use; (e) promote the implementation of irrigation programs and projects and ensure their administrative and operational autonomy; (f) propose and regulate the deployment, operation, and maintenance of public water infrastructure works concessions; (g) contribute to the formulation of the national integrated development policy; (h) propose, review, and approve socioeconomic, environmental,

Collegiate Board of Directors

Superintendence of Implementation of Programs and Projects

SIP

Superintendence of Administration, Finances and Human Resources

SAF

Logistical Resources Division

DIREL/SAF

Project’s Technical Supervision

Management Unit

GEPRO/SIP

Project’s General Supervision

Management Unit

GEAPR/SIP

Internal Audit

AUD

General Secretariat

SGE

External Resources Division

DIREX/SAF

Documentation Center

CEDOC

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and hydraulic studies and projects concerning the use of water resources; and (i) supervise and monitor water resources and land management interventions.

21. The SEDEC is the central agency of the National Civil Defense System and is responsible for coordinating the actions of civil defense in the entire national territory. The role of civil defense is to reduce disaster risk and includes prevention, preparedness, disaster response, and reconstruction. It implements a range of multisectoral activities at all three levels of government—federal, state, and municipal—including broad community participation. The Secretariat will be responsible for activities in the following priority areas: (a) development of an information system for risk management, (b) development of a risk management plan, and (c) strategic planning for risk reduction. These actions will be a pilot initiative focused on the São Francisco and Araguaia-Tocantins river basins, with an emphasis on floods and droughts. At the same time, the SEDEC will focus on integration with all other institutions working on the project, mainly ANA.

22. SIH and SEDEC as the secretariats involved in the implementation of the Project will provide interaction among the MI’s Secretariats involved in the project both at the management and the technical levels; approve specific guidelines for planning, programming, monitoring and evaluation of project’s actions; assess and prioritize the activities to be implemented under the project; and close coordinate project’s actions with other sectoral actions within the Secretariats. 23. A PMU will be established within SECEX for the implementation of the Project. The PMU will include a General Coordinator and a Sub-Coordinator, with administrative support and administrative and technical units, with the objective of coordinating and managing the various activities under the responsibility of SECEX and undertaking procurement, financial management, and budget execution activities necessary for the Project. Figure A6.4 shows the organizational structure of the PMU within the SECEX.

24. The General Coordinator will (i) assist the Executive Secretary in technical-administrative issues related to project; (ii) coordinate, plan and orient the implementation of activities; (iii) provide guidance to the technical and administrative units on the planning, programming, monitoring and evaluation of project’s actions; (iv) supervise the preparation and implementation of work plans; interact with the Bank and other federal agencies; (v) submit project related documents to the technical and administrative units; and (vi) provide technical guidance and interact with the project units for the preparation of plans and reports.

25. The Sub-Coordinator will have responsibilities related to planning, monitoring, and evaluation with focus on the following: (i) planning and management control over the project’s actions; (ii) monitoring and evaluation of overall project performance; (iii) negotiation of financial resources; (iv) presentation of the budget proposal; (v) preparation and monitoring of the Annual Operational Plan; (vi) verification of classification of planning actions; (vii) preparation of quarterly reports on project implementation; (viii) monitoring of the disbursement timetable; (ix) implementation of actions to supply information to the Bank; (x) interaction with MMA, MCid, ANA, and the Bank on project implementation; and (xi) prepare and consolidate costs data.

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26. The PMU will have administrative support to enable the functioning of project’s activities. This area will assist the PMU with the following activities: (i) carry out general administrative activities for the functioning of the PIU; (ii) writing, transcription and handling of documents; (iii) reception, selection, control, distribution, and archiving of correspondence and other documents sent to the PMU; (iv) reception, analysis, and monitoring of national and international travel and per diems; (v) maintenance and updating of patrimony goods acquired with project resources; and (vi) maintenance and updating of data and registry of contracted consultants.

27. The Special Procurement Commission will be responsible for procurement and contracting with focus on the following: (i) conducting the procurement processes for all activities under the project, in interaction with the PMU technical and administrative units, and together with the Ministry’s technical and procurement units; and (ii) forwarding processes for technical and legal analyses, when appropriate; (iii) carry out procurement activities with involvement in all the phases.

28. The technical unit will have the following responsibilities: (i) monitoring, supervision and support to the Special Bidding Commission and the technical units in actions related to procurement, contracts, preparation of terms of reference, safeguards and implementation project’s activities; (ii) implementation, monitoring and supervision of institutional strengthening activities; (iii) monitoring and supervision of the quality of services and products; (iv) dialogue with technical areas; and (v) management of technical cooperation projects, when needed. 29. Under the administrative unit, there will be two areas: (a) budget and financial programming and implementation, and (b) procurement and contracting. The administration area will be responsible for the following: (i) preparation and consolidation of costs data; (ii) monitoring of budget and financial control for the resources allocated to each activity; (iii) budget discussions with the appropriate areas; (iv) provision of managerial and disbursement information to the Bank; (v) monitoring of budgetary and financial actions in the systems; (vi) preparation of applications and disbursement documentation; (vii) monitoring and supervision of sub-national agreements (convênios); and (viii) undertaking of budget, financial, and patrimony audits in cooperation with internal units.

30. The procurement and contracting area will be responsible for the following: (i) activities needed for preparation, processing and execution of contracts, convênios and other legal instruments; (ii) maintenance of database for these contracts; (iii) monitoring of activities related to contracts, convênios, and other legal instruments; (iv) support to internal audit related to monitoring of procurement instruments; (v) undertaking of activities related to procurement of goods and services necessary for the implementation of the Project; (vi) implementation of activities necessary for the preparation, processing, and implementation of contracts; (vii) interaction with procurement commission for monitoring the procurement process; (viii) interaction with the relative internal units for the finalization and signing of contracts and other legal instruments; (ix) establishment of monitoring controls related to the quality of contracted services; (x) analysis of requests for contract adjustments and amendments; and (xi) analysis of proposal and preparation of managerial reports related to the contracts of consulting services. If needed, the unit will count with specialized procurement support of an individual consultant to

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support the preparation of terms of reference and procurement documents; support the processing of procurement activities; monitor and evaluate procurement activities; provide assistance to the project team in the use of Bank’s procurement guidelines.

Figure A6.4: Organizational Structure of PMU within SIH

National Secretariat of Environmental Water Supply and Sanitation (Secretaria Nacional de Saneamento Ambiental, SNSA), within the Ministry of Cities 31. Within the MCid, SNSA will implement the Water Supply and Sanitation Component, with the objective of supporting the implementation of Law No. 11.445/2007, specifically in its objective to improve the quality of WSS service provision and to contribute to promoting universal access to these services. It will also be responsible for implementing its respective actions under the intersectoral component. Technical and administrative activities related to the implementation of the Project will be carried out in a decentralized manner within the SNSA, according to Figure A6.5.

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Figure A6.5: Organizational Structure of PMU within SNSA

SNSA (Secretary): The highest decision-making body, responsible for strategic, policy, and project coordination. DARIN: The executive director of the Project, it is responsible to the Director. COF: Subordinate to the Secretary, it is responsible for budget, financial, and procurement management. PMU: Subordinate to DARIN, its role is to act as an agent of internal dialogue between the technical units and COF and between the Bank and the Ministry, in addition to the monitoring and evaluation of project activities. TECHNICAL ADVISORY COUNCIL: It will consist of two representatives from each board, one the director and the other a technical member, and two representatives from the Cabinet of Secretary, who will be responsible for assessing the technical specifications of each intervention. TECHNICAL TEAMS OF DARIN, DDCOT, and DAGES: These teams are responsible for implementation of the various activities.

SNSA (Secretary)

DARIN COF

PMU

Cabinet of Secretary

Planning and Monitoring Team

Evaluation and Control Team

Technical Advisory Council

Procurement Team and CEL

Budget and Financial Team

DARIN, DDCOT and DAGES

Technical Team- DDCOT

Technical Team - DAGES

Technical Team - DARIN

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32. PMU has been established within the SNSA for the planning, implementation, and monitoring of the Project. As shown in Figure A6.5, the PMU reports to the Director of Institutional Coordination (Diretoria de Articulação Institucional, DARIN). The PMU is an agent of internal communication among the various technical units and the Budget and Finance Coordinator (Coordenação de Orçamento e Finanças, COF) within the SNSA and an agent of external communication with the Bank and other implementing institutions. The PMU consists of two teams whose roles and responsibilities are described below. 33. Planning and Monitoring Team. This team is responsible for monitoring the activities of the technical teams to pursue implementation continuity. The team maps out the implementation of the activities according to terms agreed in the contracts to ensure that the expected outputs are delivered on time and according to standards. It supports the PMU and DARIN with the information necessary to plan and successfully implement the Project. Among its main activities are to: (a) monitor the foreseen planning activities to ensure compliance with deadlines and targets; (b) establish the sequence of activities by identifying their interdependence; (c) ensure that the legal agreements related to Components 3 and 4 are fulfilled; (d) collect, organize, and contextualize relevant data and information related to the activities; (e) establish a system of control over the activities; (f) train and support the users of this system of control; (g) identify trends, atypical situations, or problems; (h) create a database of results to serve as a parameter of reference in the future; (i) detect deviations from what is planned and determine their causes; (j) suggest means of remedying the situation and bringing activities back to the planned route; (k) control process flow; (l) meet the demands of the audit; and (m) provide logistical support. 34. Evaluation and Control Team. This team is responsible for ensuring that strategic actions are undertaken and that goals are achieved. It confirms that activities are undertaken in accordance with the Loan Agreement and other legal agreements applicable to the Project. It ensures the completeness of information and evaluates the activities undertaken to provide feedback for future decisions. Among its main activities are to: (a) establish control parameters and key performance indicators, (b) compare data on key performance indicators with historical data, (c) review the financial accounts (including Interim Financial Reports (IFRs), SOEs, financial statements and so forth) prepared by the COF, (d) exercise control over processes, (e) measure outputs and their progress and performance and propose corrective actions if necessary, and (f) prepare the Project’s progress reports. 35. The COF is responsible for the fiduciary aspects of implementation within the SNSA, including monitoring funds for the project and funds from external sources. It also supervises the agreements signed with states, municipalities, or other decentralized executing agencies that may undertake activities under Components 3 and 4 within the scope of the SNSA. Specifically, the COF will be responsible for activities of administration and control. 36. Administrative activities include: (a) performing administrative procedures necessary for procurement processes in accordance with Bank guidelines; (b) organizing and maintaining documents related to the financial management and procurement aspects of the Project; and (c) guiding the technical units on procurement procedures as outlined in the Bank guidelines and the Loan Agreement.

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37. Control activities include: (a) analysis of the accountability of funds transferred to other executing agencies, namely states and municipalities; (b) guiding the representatives of these executing agencies on accounting; (c) answering requests from federal, state, and municipal control agencies related to financial management and procurement procedures; and (d) providing the PMU with necessary subsidies to meet the financial management and procurement audits. 38. The COF is also responsible for contract management and procurement. It provides support to procurement through the following actions: (a) assisting in the technical preparation of terms of reference and expressions of interest; (b) assisting in the preparation of technical documents related to the bidding process; (c) monitoring and evaluating activities and documents related to the bidding process; (d) internalizing knowledge and expertise on procurement rules and procedures; (e) preparing publications in Business Development and major newspapers; (f) developing short-lists; (g) requesting no objections from the Bank; (h) communicating with potential bidders, including answering questions, submitting documentation, and informing bidders of the results of the bidding process; (i) reviewing submitted bidding documentation; and (j) evaluating the bidding process, among other procurement-related activities.

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Annex 7: Financial Management and Disbursement Arrangements

BRAZIL: Federal Integrated Water Sector Project – Interaguas 1. This annex is based on the Financial Management Assessment (FMA)31 for the Federal Integrated Water Project undertaken in the four implementing agencies: a) the National Water Agency (ANA – Agência Nacional de Águas), b) the Ministry of Environment (MMA – Ministério do Meio Ambiente), c) National Integration Ministry (MI – Ministério da Integração Nacional), and d) the Ministry of Cities (MCid - Ministério das Cidades). The purpose of the assessments were to determine whether the executing agencies have acceptable financial management arrangements in place to adequately control, manage, account and report on Project funds, and if necessary agree on an action plan to be followed by the project. 2. The overall financial management risk associated with this Project is considered Moderate, and based on the said assessments , the financial management arrangements as set out for this Project satisfy the Bank's fiduciary requirements, e.g: (i) FM is adequate, the entities (ANA, MMA, MI and MCid) are satisfactory to Bank’s requirements: (ii) the Project Management Units (UGP32s) in place have previous experience with Bank operations and procedures, and the roles and responsibilities of the financial management staff of the UGPs are adequate and reasonable; (iii) Financial Management Systems: Although the Federal Integrated Financial Administration System (SIAFI)33 to be used for accounting purposes and the (SIGMA)34 Monitoring and Administrative Management System to be used for monitoring and report purposes are not integrated, they can provide reasonable assurance, accurate and timely information on the financial management needs of the Project.

31 in accordance with OP/BP 10.02 and the Financial Management Practices in World Bank Financed Investment, dated March 5, 2009 32 UGP – Unidade Gerenciadora de Projeto 33 SIAFI – Sistema Integrado de Administração Financeira 34 SIGMA - Sistema de Informações Gerenciais do Meio Ambiente

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A. Risk Assessment Matrix

Risk Risk rating Risk issues/measures

Inherent Risk

Country-level M

Entity-/project-specific

M

Control Risk

Budget preparation L Budget will be clearly defined, reflected in annual budgetary authorization, and approved by the Bank.

FM system M ANA, MMA, MI and MCid’s systems are adequate, although not integrated. In consonance with the Bank’s country systems agenda, each agency will use SIAFI and SIGMA for budgetary planning, execution, recording of payables and reporting.

Reporting/monitoring L IFRs are generated by SIGMA.

Funds flow M A funds flow process has been designed for the project, based on the previous projects (PROAGUA).

Staffing L UGP FM staff has previous experience implementing Bank projects.

Accounting procedures and system

L Accounting procedures and internal controls are adequate.

External audits L Audited by the Controladoria Geral da União (CGU).

H-High S-Substantial M-Moderate L-Low

B. Implementation Arrangements 3. ANA, MMA, MI and MCid will be directly responsible for the fiduciary and legal aspects of the loan, and perform the following: (a) prepare the Project’s budget proposal, (b) implement and maintain adequate Financial Management Information Systems (FMIS); (c) keep all Project documentation properly filed/archived; (e) prepare and forward to the Bank quarterly interim unaudited financial reports (IFRs); (f) regularly reconcile information that was entered in the FMIS (financial management information system) on Project expenditures, and assure timely follow-up on discrepancies; (g) prepare and forward to the Bank timely disbursement applications (h) reconcile Project designated account; and (i) prepare and provide all financial documentation and reports requested by external auditors and Bank staff. 4. The current UGPs (Unidade de Gerenciamento do Projeto – Project Management Unit) were established using allocated staff members of the Ministries, as the Project operating arm of the Ministries (MMA, MI and MCid) involved in the project. The proposed institutional arrangements are as follows: the financial management of the Project would be implemented using the regular day-to-day financial management processes of each UGP, which shall separately send all financial management information, documents and reports to ANA, which

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will have a coordination role, being responsible for consolidating all IFRs and sending them to the Bank. C. Internal Control 5. The agencies involved have the same Monitoring and Administrative Management System, SIGMA, capable of ensuring the control over: (i) investment projects, (ii) payments to suppliers and contractors and investment reporting by UGP (iii) review of expenditure reports and physical progress on investment projects, and (v) fund flows from the Single Treasury account to the UGPs. 6. In accordance with Bank policies, the Project Operational Manual, another internal control tool, will detail by each UGP: (i) staffing duties and routines, assuring segregation of functions, (ii) the internal control system and procedures to be implemented (iii) format and contents of the reports that will be consolidated into the IFR; and (iv) terms of reference for external auditing and other information deemed necessary. D. Accounting 7. All Federal agencies follow the Brazilian Accounting Rules (NBC), Law 4320/64 that establishes certain high level accounting principles, and the Accounting Manual Applicable to the Public Sector (MCASP) issued under Law 10180 of February 6, 2001 and Decree 3589 of September 6, 2001. It will be required to follow the first set of national accounting standards applicable to the public sector (NBCASP) and the revised Accounting Manual Applicable to the Public Sector (MCASP) issued under Portaria STN 467 of August 6, 2009 beginning with Fiscal Year 2011. The Bank and National Treasury have agreed to jointly carry out a Gap Analysis (expected 2010) to confirm that the accounting for the Brazilian public sector conforms to international accounting standards applicable to the public sector (IPSAS) or identify any important differences from the IPSAS. The last Country Financial Accountability Assessment (CFAA) for Brazil indicated that law 4320/64 was in line with international accounting standards. All accounting ledgers are kept by the National Treasury Secretariat, which is subject to audit by the Supreme Audit Institution (TCU). The loan reporting process would use the cash accounting system. Accounting and payments are made through electronic transfers, directly through SIAFI. Each UGP will have a specific UG (unidade gestora) to execute (and properly account for) the respective component expenditures. The UGPs will maintain accounting records encompassing respective components and activities. They will reconcile these records on a monthly basis. Each UGP shall assure proper budgetary availability, including counterpart funds.

E. Financial Management System and Reporting 8. Besides SIAFI (as stated above), SIGMA – The Monitoring and Administrative Management System - will be used for Project monitoring. The systems are not integrated. All agencies will enter transactions in SIAFI and download data to SIGMA to produce reports35.

35 SIGMA is currently in place at ANA for the PROAGUA program, and shall be used as the Monitoring and Administrative Management System bt all UGPs. The system should be in place in all UGPs by Negotiations.

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9. In consonance with country systems, UGPs will use SIGMA to report expenditures, and to monitor the project. Automated financial reporting will be able to produce the Interim un-audited Financial Reports (IFRs) according to the report format to be agreed with the UGPs. The UGPs will forward the quarterly IFRs to ANA, which will have a coordination role, being responsible for consolidating all IFRs and sending them to the Bank no later than 45 days after each quarter. The IFRs will show the total expenditures for the quarter, calendar year and the accumulated total since Project effectiveness (including counterpart amounts), and be used for project financial monitoring purposes. The year-end IFRs, consolidated and complemented by Explanatory Notes, may serve as the Project’s year-end financial statements. In summary, UGPs will prepare and ANA will forward to the Bank the following consolidated IFRs:

IFR-1: Sources and Applications of Funds by Disbursement Category as per Loan

Agreement. IFR-2: Statement of Investments by Project Components and Activities. IFR-3: Actual Spending Statement F. Flow of Funds and Disbursement Arrangements 10. The Project can use the following disbursement methods: Direct Payment, Reimbursement and Advances. The Minimum Application Size for Direct Payments and Reimbursements will be US$ 1 million equivalent. STN will open a comingled segregated account under its name in Banco do Brasil in Brasilia (BSB) to receive advances (in USD) from the loan proceeds. Each Implementing Entity would make payments through electronic transfers, directly through SIAFI. Each UGP will have a specific UG (unidade gestora) to execute (and properly account for) the respective component expenditures. The Ceiling of the Designated Account will be US$ 10 million Fixed. The project is expected to submit Withdrawal Applications every 6 months documenting the use of Advances. Each agency will submit its supporting documentation through Summary Sheets with Records and Statement of Expenditures (SOEs) for Reimbursements and Advances, and Records for Direct Payments. 11. The project is expected to have funds transferred to states and municipalities during the second phase of the project (after 18 months). The FM capacity of the participating states and/or municipalities must be assessed by the UGPs36 and approved by the Bank before any funds are transferred. The method used by the UGPs to perform the assessment must be previously discussed and approved by the Bank. The scope of the assessment must include: (i) an evaluation of existing financial management systems in place to be used for program monitoring, accounting and reporting; (ii) review of staffing requirements; (iii) review of the flow of funds arrangements and disbursement methodology; (iv) review of internal control mechanisms in place; (v) reporting requirements, including the format and content of SOEs and SSs back to the UGP; and (iii) an action plan for improving FM processes agreed and under implementation for states/municipalities where such a plan is deemed necessary based on a risk assessment. The Bank could carry out on site evaluations of the federal agencies, states and municipalities, before the approval of the assessments. For any FM weaknesses, an FM action plan would be agreed. 36 in accordance with OP/BP 10.02 and the Financial Management Practices in World Bank Financed Investment, dated March 5, 2009

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12. A subsidiary finance agreement (Convenio de Financiamento) with each participating state and/or municipality must be signed, enabling it to receive funds in a specific account opened for the project. In addition, counterpart funds are expected to be deposited to the same specific account. Management of the primary project FM activities would be undertaken by the UGPs. This includes budget preparation and execution, technical and financial supervision of investment project implementation, payment authorization, request for payment to vendors, accounting, and financial and Project progress reporting - all in accordance with the procedures that will be described in the Project Operational Manual. Specific fund flow arrangements for participating state and municipalities will be defined in updates to the Project Operating Manual (MOP) and in the Convenios de Financiamento and will be reviewed and agreed to by the Bank at that time. The responsibility of the Borrower to obtain the Bank’s agreement to these arrangements is expected to be included in a Loan Agreement dated convenant. 13. Retroactive Financing-Withdrawals up to an aggregate amount not to exceed $10,733,250 equivalent may be made for payments made within twelve months prior to Loan Signing. 14. The following table specifies the categories of Eligible Expenditures that may be financed out of the proceeds of the Loan (“Category”), the allocation of the amounts of the Loan to each Category, and the percentage of expenditures to be financed for Eligible Expenditures in each Category.

Category Amount of the Loan Allocated

(expressed in USD)

Percentage of Expenditures to be financed

(inclusive of Taxes) (1) Goods, Consultants’

Services, Services (Other than Consultants’ Services) and Training for the Project

107,064,168

100%

(2) Front-end Fee

268,332

Amount payable pursuant to Section 2.03 of the Loan Agreement in accordance with Section 2.07 (b) of the General Conditions

(3) Premium for Interest Rate Caps and Collars

0 Amount payable pursuant to Section 2.07 (c) of the Loan Agreement

TOTAL AMOUNT 107,332,500

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15. The financial flow is shown below:

G. External Auditing Arrangements

16. An external audit will be done by CGU – Controladoria Geral da União / SFC – Federal

Secretariat of Control, observing the auditing guidelines established in the ToR37 satisfactory to the Bank, to carry out the annual external audit of the Project. Yearly audit reports for the Project will be sent to be Bank within six months after the close of each calendar year.

17. The auditors will issue a single opinion on (a) the financial statements; (b) eligibility of

expenses, (c) loan contractual agreements; and (d) the Project designated account. The auditors’ opinion will cover all sources and applications of funds for the Project, including the counterpart funds. In addition, the auditor will issue a management letter on internal controls and other matters that came to the auditors’ attention during the audit.

I. ACTION PLAN: Summary of FM actions to be taken

N/A

37 ToR – Terms of Reference

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J. Supervision Plan. 18. The Bank will undertake semi-annual supervision missions to monitor the

implementation and performance of the Project, at each UGP and confirm that the financial management arrangements, including staffing, disbursement, reporting and audit arrangements as described in this annex and detailed at the operational manual are being adhered to and continue to be valid. FM supervision should pay particular attention to the following matters:

The reliability and consistency of UGP payment requests, payments and payments

reported on IFRs Effectiveness of physical and financial supervision of UGPs investment projects UGPs control over loan proceeds and respective expenditures payments, follow-up on

audit report and previous FM supervision reports and agreed action plans Reconciliation of transfers to states/municipalities Documentation of expenditures by states/municipalities

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Annex 8: Procurement Arrangements

BRAZIL: Federal Integrated Water Sector Project – Interaguas 1. Procurement for the proposed project would be carried out in accordance with the World Bank’s “Guidelines: Procurement under IBRD Loans and IDA Credits” dated May 2004 and revised on October 2006 and May 2010; and “Guidelines: Selection and Employment of Consultants by World Bank Borrowers” dated May 2004 and revised on October 2006 and May 2010 and the provisions stipulated in the Legal Agreement. The various items under different expenditure categories are described in general below. For each contract to be financed under the project, the different procurement methods or consultant selection methods, the need for prequalification, estimated costs, prior review requirements and time frame are agreed between the Borrower and the Bank in the Procurement Plan. The Procurement Plan would be updated at least annually or as required to reflect the actual project implementation needs and improvements in institutional capacity.

2. This is a Technical Assistance Loan with four implementing agencies: ANA, MMA, MI and MCid. The Project implementation will be carried out directly by each of the four implementing agencies.

3. Implementation at the centralized level: procurement of goods and selection of consultants will be processed at each implementing agency PMU. There is a minimal requirement of 2 dedicated procurement specialists in each PMU. They will be, preferably, civil servants, but individual consultants can be hired to assist. In the case consultants are need and cannot be directly contracted by the implementing agency, an agreement can be entered with an International Multilateral Organization to hire such consultants, provided the Bank is satisfied with its procurement capacity. If needed, the International Multilateral Organization could also carry out the procurement of goods and selection of consulting firms. The same Organization shall be selected to work with the 4 agencies. The Organization fee shall be financed with counterpart funds.

4. Implementation at the decentralized level: selection of consultants will take place at the sub-national level. It is at the implementation agency discretion to:

a. process these selection at the PMU level with the technical involvement of the sub-national requester, or

b. assess the procurement capacity of the sub-national requester and decide to decentralize the selection process. In that case the procurement unit at the PMU has the responsibility for (i) the capacity assessment, (ii) procurement technical support, (iii) prior review and no-objection of each phase of all selection processes, (iv) updates of the procurement plan to include all decentralized procurement, and (v) keeping a record of all decentralized contracts signed and its performace.

5. The project comprises five components: (a) Component 1, implemented by ANA and MMA – US$44.2169 million, US$33.1419 million from the Bank; (b) Component 2, implemented by MI – US$40.7335 million, US$30.5310 million from the Bank; (c) Component 3, implemented by MCid – US$32.4391 million, US$24.3141 million from the Bank; (d) Component 4, coordinated by ANA as the Project Technical Secretariat – US$20.9606 million,

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US$15.7106 million from the Bank; and (e) Component 5, implemented by all agencies and STP/ANA as the Project Technical Secretariat – US$4.4916 million, US$3.3666 million from the Bank.

6. Each implementing agency will have a procurement team of at least 2 procurement specialists, preferably, civil servants, but individual consultants can be hired to assist. They will process their own procurement applying Bank’s guidelines and using Bank’s standard bidding documents. However, if needed, an International Multilateral Organization will be used to carry out the procurement activities. Some decentralization is expected and selected states and municipalities and their own selection of consultants will either be processed centrally by the PMU or decentralized, as described in paragraph 4 above. When selection of consultants is decentralized, it is the responsibility of each implementing agency to provide procurement support in preparing the ToR, short list, RFP, in analyzing the proposals, in preparing reports, requests for no-objections, and all required steps of the selection process. The procurement support team is expected to travel to provide in-loco assistance whenever necessary. This is a requirement for decentralized selection of consultants as neither are the states and municipalities known at this moment, nor has the Banks the operational capability to conduct a capacity assessment of each one of them. A data base of all decentralized procurement shall be kept at the central level.

7. For purposes of carrying out its procurement obligations under the Project, the Borrower may enter into an agreement with an entity with qualifications and procurement experience acceptable to the Bank, under terms and conditions satisfactory to the Bank (the Procurement Agent Agreement), which shall include, inter alia: (a) the obligation of the Procurement Agent (on behalf of the Borrower) : (A) to carry out the procurement of certain goods, consultants’ services and Services (other than Consultants’ Services) under the Project in accordance with the provisions set forth in Section III of this Schedule and in the Operational Manual ; and (B) to keep separate records and accounts in respect of such goods consultants’ services and Non-Consultant Services and to assist the Borrower in complying with its obligations under this Agreement; (b) the obligation of the Borrower: (A) to transfer directly to the Procurement Agent the proceeds of the Loan allocated to Category (1) as required by the Procurement Agent to effect the payments for goods, consultants’ services and Services (other than Consultants’ Services) under the Project; (B) to transfer to the Procurement Agent the Project counterpart funds (i.e., non-Loan funds) as required for the Procurement Agent to effect the payments for goods, consultants’ services and Services (other than Consultants’ Services) under the Project; and (C) to pay any administrative fees due to the Procurement Agent under the Procurement Agent Agreement.

8. Procurement of Works. No procurement of works is anticipated.

9. Procurement of Goods: Goods procured under this project would include: IT equipment and so forth Procurement of goods will follow Bank’s guidelines. Procurement of common off-the-shelf goods up to the National Competitive Bidding (NCB) threshold may also be carried out in accordance with the method known as pregão eletrônico, as provided in Brazil’s Law, under “COMPRASNET,” the procurement portal of the Federal Government or any other e-procurement system approved by the Bank. All contracts estimated to cost more than US$1,000,000 equivalent per contract would be subject to prior review by the Bank.

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10. Procurement of non-consulting services: Non-consulting services to be procured under the project include: training logistics (hotel services, catering, travel services, printing services), workshops, seminars, events, printing services and so forth. Procurement of non-consulting services will follow Bank guidelines. Procurement of common readily available services up to the NCB threshold may also be carried out in accordance with the method known as pregão eletrônico, as provided in the Brazil’s Law, under “COMPRASNET”, the procurement portal of the Federal Government or any other e-procurement system approved by the Bank. All contracts estimated to cost more than US$1,000,000 equivalent per contract would be subject to prior review by the Bank.

11. Selection of Consultants. Selection of consultants will include studies, researches and so forth Throughout the project, these services will be hired through Quality and Cost-Based Selection (QCBS), Quality Based Selection (QBS), Selection Based on Consultants Qualification (CQS), Least-Cost Selection (LCS), Fixed Budget Selection (FBS), Single-Source Selection (SSS – with due Bank’s No-objection Letter on a case-by-case basis) and Individual Consultants (IC). Short lists of consultants for services estimated to cost less than US$500,000 equivalent per contract may be composed entirely of national consultants in accordance with the provisions of paragraph 2.7 of the Consultant Guidelines. All contracts estimated to cost more than US$500,000 equivalent per contract would be subject to prior review by the Bank.

12. Operating Costs. During project preparation, it was agreed that operating costs would include staff-related expenses, supplies and miscellaneous expenses. The operating costs to be financed by the project would be procured using the implementing agency’s administrative procedures, which were reviewed and found acceptable to the Bank. Contracting of individual consultants to compose the procurement team, if necessary, will follow Individual Consultants’ selection processes as per chapter V of the Consultant’s guidelines.

13. Considering the need to develop knowledge about the Bank’s guidelines on the implementing agencies, the procurement risk has been rated as SUBSTANTIAL and the prior review and procurement method thresholds were defined as follows:

Expenditure Category

Contract Value Threshold VT

(US$ thousands)

Procurement Method

Processes Subject to Prior Review

Goods ≥ 3,000 ICB All processes

< 3,000 ≥ 100 NCB First process and all processes above US$1 million < 100 Shopping First process.

Non-consulting services

≥ 3,000 ICB All processes < 3,000 ≥ 100 NCB First process and all processes above US$1 million

< 100 Shopping First process

Consulting (firms)

≥ 200 QCBS/QBS/ LCS/FBS First process for each selection method and for each implementing agency and all processes above US$500,000

< 200 ≥ 100 FBS/LCS/CQS

< 100

Individual consultants

Section V in the

Guidelines

Direct contracting

All cases regardless of the amounts involved

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Assessment of the agency’s capacity to implement procurement 14. The overall project risk for procurement is SUBSTANTIAL, due to the need to develop knowledge on Bank’s guidelines and the decentralization to the sub-national level.

15. ANA’s capacity was assessed by the Bank during the preparation of the additional financing of Federal Water Resources Management Project and reviewed during project appraisal in November 2010. At that point ANA’s capacity was already excellent and it has only improved since then. The agency became a role model in procurement, performing with quality and transparency and within very short time frames.

16. MMA’s SRHU capacity was assessed by the Bank on November 2009 and reviewed during project appraisal in November 2010. There will be no decentralized procurement under SRHU and all centralized one will be processed by their bidding committee. SRHU lack’s Bank’s guidelines knowledge, but since last year their key members have been attending Bank’s procurement training. Furthermore they might be able to add to the team an experienced procurement specialist working for another MMA project, the Environment TAL. The requirement to keep at least 2 procurement specialists through the project shall be observed.

17. MI’s capacity was assessed during the preparation of the additional financing of Federal Water Resources Management Project and reviewed during project appraisal in November 2010. Although the implementation of Interaguas will require a different procurement team, their capacity will be the same as for the Federal Water Resources Management Project. The requirement to keep at least 2 procurement specialists through the project shall be observed.

18. MCid’s capacity was assessed by the Bank on November 2009 and reviewed during project appraisal in November 2010. Procurement will take place at the bidding committee located at SPOA – Administration, Budget and Planning sub-secretariat. One procurement person of SPOA recently attended training on Bank’s procurement guidelines, but more training will be required. A procurement specialist consultant will be contracted to work with them and the requirement to keep at least 2 procurement specialists through the project shall be observed.

19. The procurement procedures and standard bidding documents to be used for each procurement method, as model contracts for works and goods procured, are an integral part of the POM. Decentralized procurement will be thoroughly described by the POM.

Procurement Action Plan

Action Timeframe

1 Training Implementing agencies staff on Bank-procurement policies.

By effectiveness.

2 Establishment of procurement teams Before first procurement

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Procurement Plan 20. Each implementing agency, at appraisal, developed a procurement plan for the first 18 months for project implementation, which provides the basis for the procurement methods. This plan will be agreed between the agencies and the Bank during negotiations. It will also be available in the project’s database and in the Bank’s external website. The Procurement Plan will be updated in agreement with the Bank annually or as required to reflect the actual project implementation needs and improvements in institutional capacity. Frequency of Procurement Supervision 21. In addition to the prior review supervision to be carried out by the Bank, the capacity assessment of the Implementing Agency suggests the need for yearly supervision missions to visit the field to carry out post-review of procurement actions. 22. A yearly external procurement audit satisfactory to the Bank or yearly Independent Procurement Reviews (IPR) will be a covenant in the Loan Agreement and will be required to assess and verify a sample of processes procured at the decentralized level. As a result of the post-reviews, IPR and external procurement audits, the Bank would be in a position to identify cases of noncompliance and apply the remedies provided for in the loan agreement. Complete files of procurement by states and municipalities shall be kept at the implementing units offices in Brasilia.

Details of the Procurement Arrangements Involving International Competition 1. Goods, Works and Non-Consulting Services (a) List of contract packages to be procured following ICB and direct contracting: N/A (b) ICB contracts for Goods and Non-consulting services estimated to cost above US$500,000 per contract and all direct contracting would be subject to prior review by the Bank. (c) ICB contracts for Works estimated to cost above US$5,000,000 per contract and all direct contracting would be subject to prior review by the Bank. 2. Consulting Services (a) List of consulting assignments with short-list of international firms.

1 2 3 4 5 Description of Assignment Estimated

Cost 1,000

Selection Method

Review by Bank

(Prior / Post)

Expected Proposals

Submission Date

Plano Nacional de Infraestrutura Hídrica – PNIH

2,470 QCBS Prior To be defined

Avaliação das Potencialidades para Desenvolvimento

1,176 QCBS Prior To be defined

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Sustentável da Agricultura Irrigada no Brasil Elaboração do Programa Nacional de Agricultura Irrigada

1,470 QCBS Prior To be defined

Elaboração do Programa de Dinamização dos Perímetros Públicos de Irrigação

1,470 QCBS Prior To be defined

Sistema Nacional de Informações de Infraestruturas Hídricas de Barragens (SNIIHB-MI)

1,529 QCBS Prior To be defined

Atualização do Manual de Irrigação e Capacitação de Técnicos Usuários

1,294 QCBS Prior To be defined

Capacitação Continuada dos Servidores Envolvidos na Implementação e Gestão de Políticas Píblicas de Infraestrutura Hídrica, Defesa Civil e Irrigação

2,941 QCBS Prior To be defined

Sistema de Informação para Gerenciamento Integral de Risco

10,588 QCBS Prior To be defined

Planejamento Estratégico para Redução de Riscos

2,941 QCBS Prior To be defined

(b) Consultancy services (firms) above US$500,000 and all single-source selection of consultants would be subject to prior review by the Bank.

(c) Short lists composed entirely of national consultants: Short lists of consultants for services estimated to cost less than US$500,000 equivalent per contract may be composed entirely of national consultants in accordance with the provisions of paragraph 2.7 of the Consultant Guidelines.

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Annex 9: Economic and Financial Analysis

BRAZIL: Federal Integrated Water Sector Project – Interaguas 1. The objective of the proposed Project is to improve coordination among key federal institutions in the water sector by using an integrated approach and strengthen the capacity of the key federal and state water institutions. 2. The overall benefits from this technical assistance will be substantial for Brazil’s federal water sector because the Project would contribute to added value in strategic sectors including institution building, enhancing skills across institutions, and bringing innovative technical and financial solutions for the sustainable development and management of Brazil’s water resources. Interventions undertaken in water resources management, water infrastructure, risk management, and water supply and sanitation will contribute to enhanced water security in Brazil through (a) improved water sustainability and water productivity, (b) better quality of public expenditures in the water sector, (c) increased access to and efficiency of water services, (d) strengthened institutional capacity to manage environmental and social issues, and (e) more integrated federative arrangements and cooperation across different tiers of government. Moreover, interventions will specifically target areas where the vulnerability of the poor to water-related issues and risks are higher, particularly in the Northeast and in water-scarce metropolitan regions. The expected benefits of the Project are broad and varied, with the specific benefits from each component summarized below. 3. Component 1 on Water Resources Management will support the deployment of tools and instruments to strengthen SINGREH, enhance institutional development, reduce the disparities between the Federal Government and states and even among states, streamline procedures, and establish criteria for ongoing monitoring and evaluation, thus contributing to increasing the efficiency of implementing government water resources guidelines and policies and meeting the standards of the 1997 Water Law (Law 9.433), which established the Brazilian National Water Resources Policy. 4. Component 2 on Water, Irrigation, and Hazard Management will provide institutional strengthening to water infrastructure agencies and raise the level of strategic and operational planning for water infrastructure, ensuring that resources are used efficiently and effectively. In addition, this component would help to buffer Brazil against unforeseen natural disasters such as floods or droughts through the creation of a risk information system and the development of a risk management plan that would help federal entities increase their strategic planning for risk reduction. 5. Component 3 on Water Supply and Sanitation will have a large range of benefits, in particular: (a) improved management of WSS services; (b) improved performance indicators for WSS services; (c) improved quality of WSS services and the consequent positive health benefits for the local population; (d) increased efficiency and effectiveness of WSS services, a prerequisite for universal access to these services with improved quality and in a sustainable manner; (e) reduced operational, maintenance, and investment costs for WSS services; (f) increased access to goods and public services in the sector; (g) improved capacity of public and

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private sector professionals in the sector; (h) improved training of these professionals; (i) improved sanitary and environmental education and social mobilization and participation programs; and (j) improved integration and coordination of programs, actions, and policies for the WSS sector. 6. Component 4 on Intersectoral Coordination and Integrated Planning will contribute to improvements in public expenditures, with more efficient allocation of financial resources and streamlined procedures to facilitate investments and rationalize water uses, preferentially in the two targeted river basins of São Francisco and the Araguaia-Tocantins.

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Annex 10: Safeguard Policy Issues

BRAZIL: Federal Integrated Water Sector Project – Interaguas

1. This annex summarizes the consultations organized during project preparation in March 2010 and August 2010 that contributed to the preparation of the Interaguas Project. The GoB has developed frameworks to address environmental, indigenous peoples, and resettlement risks related to the project. These frameworks provide the operating principles for how the environmental and social assessment, mitigation of potential impacts, and supervision and consultation processes will take place for the project-financed activities. These frameworks were discussed with relevant groups during the consultations and the Borrower understands that these frameworks apply to all activities financed by the project. Government capacity to implement these norms is considered adequate. The main institutions are adequately staffed and have widespread presence in the territory. Each state also has an active Public Ministry to oversee public sector compliance with its own norms and procedures. In addition, efforts to build capacity in the implementation of the frameworks is included as part of the project. Moreover, Bank supervision will closely follow progress in streamlining social and environmental concerns during the implementation phase and confirm that multidisciplinary teams are deployed by the implementing agencies to identify and manage possible safeguard issues. Following is an overview of the environmental and social setting in the region and of the relevant safeguard issues. 2. The Project will assist the Government in assessing salient issues and designing social and environmental management systems to facilitate planning for activities needed to address the potential social impacts of future water sector investments. For example, given that the project area potentially encompasses the entire country, any of Brazil’s estimated more than half a million indigenous peoples may potentially be affected. The Borrower conducted a social assessment, and its findings have been used in the preparation of an Indigenous Peoples Planning Framework (IPPF) that applies to all the studies and plans financed through the project. Similarly, although the project-supported activities do not require any land acquisition or impose any restrictions on access to land or associated resources, the potential impacts of the future investments being studied could include involuntary resettlement. For this reason, the Borrower prepared a Resettlement Policy Framework (RPF) that will also be applied, as necessary, to all activities financed by the project. 3. The social and environmental frameworks were discussed during the public consultations held in Brasilia on August 27, 2010, with close to 120 representatives of various governmental and civil society organizations. ANA officials described each of the components, and the consultants undertaking the social and environmental assessments discussed the main points of the proposed frameworks. Feedback from the participants indicates that the main public concerns involve project objectives and opportunities to participate. At the conclusion of the consultation, the Government ensured participants that their recommendations would be used to revise the final project documents, and that additional suggestions can always be made by visiting the project website http://interaguas.ana.gov.br. The Environmental Management Framework and the Social Management Framework (including the Indigenous Peoples Planning Framework and

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the Resettlement Policy Framework) were disclosed on the Bank’s website and on the Country website, in the following address http://interaguas.ana.gov.br. 4. As described below, the main project implementation agencies have sufficient staff and adequate capacity to implement these frameworks. Furthermore, in order to ensure effective transfer of knowledge and the use of best practices at the subnational level, the project includes a communication program with workshops and seminars planned to inform all relevant stakeholders at the sector, basin, and state levels. Finally, at the community level, the beneficiary stakeholders will be engaged in the design and implementation of the local interventions and will benefit from the social outreach and environmental education campaigns that are designed to promote the sustainability of the interventions. The results of the social and environmental assessments, and the institutional arrangements for managing the social and environmental frameworks, are summarized below. Institutional Arrangements 5. The project will strengthen the institutional framework for addressing environmental and social issues through basin-wide planning by: (a) enhancing the capacity and coordination among government institutions in decision making and implementing public policies that support the sustainable use and conservation of water resources; (b) integrating environmental and social considerations in strategic plans and criteria in selection of future investments; (c) developing and implementing conservation and sustainable use of water resources, resulting in decreased water pollution, soil erosion, improved recovery of critical habitats, and conservation of biodiversity; (d) developing innovative tools, such as satellite remote sensing, for assessing water resources, particularly for diagnostics and monitoring; (e) introducing innovative policy instruments, such as water charges, for more efficient water use and improved water and natural resource protection; and (f) creating a framework to enhance public and stakeholder participation in the strategic planning and specific project preparation and implementation process. 6. The project Technical Secretariat (Secretaria Técnica do Programa, STP) within the ANA will take a leading role in coordinating the different project activities at the federal, basin, and state levels. The STP will also provide support to all operational aspects of the Project and monitor and evaluate all the interventions undertaken to ensure that they meet the targets, timetables, and objectives originally agreed by the interministerial management committee. The ANA will function as the liaison for all Project Management Units and will provide support and coordination to the entire project, including safeguard issues. ANA experience in the successful implementation of the PROAGUA water management component will serve to provide the leadership and ensure knowledge transfer to the participating agencies. Each state also has an active Public Ministry to oversee public sector compliance with its own norms and procedures. In addition, efforts to build capacity for improving implementation of the frameworks is also included as part of the Project. Bank supervision will also follow the progress in streamlining social and environmental concerns during the implementation phase.

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Social Analysis 7. Brazil’s recent achievements in terms of poverty reduction and economic development have been closely linked to the expansion of WSS services, to the development of hydraulic infrastructure for hydroelectric power generation and, recently, to the development of irrigation infrastructure, especially in the Northeast region. Yet despite these significant achievements in the construction of major civil works, expansion of WSS services, and water resources development, important challenges remain. While the project’s broad national focus makes it difficult to assess the social impacts of the proposed activities, the intersectoral component will specifically focus on two river basins in predominantly poor regions of Brazil, namely the São Francisco, in the Northeast, and the Araguaia-Tocantins, in the North. 8. The São Francisco (635,000 square kilometers [km2]) and Araguaia-Tocantins (918,000 km2) river basins are large, multistate river basins under high water demand pressure from multiple uses. In the São Francisco river basin, most of the hydropower potential has been developed, but a significant increase in irrigation is expected following successful experiences in the Juazeiro-Petrolina region. Over R$5 billion in WSS investments are planned in the basin and a 600-km inland waterway is under consideration. The river basin committee is active and the basin is close to starting to charge for bulk water. The key challenges in this basin are water allocation conflicts from competing demands and interbasin transfers. The São Francisco river basin, for example, contains 11 of the poorest 100 municipalities in terms of their Human Development Index, notably in the states of Alagoas, Bahia, and Sergipe. Moreover, while 94.4 percent of the population living in the river basin has access to water supply, only 62 percent has access to sewerage services. The project will not directly assist the poor through the provision of these services, but it will strengthen the management of water resources to ensure that this essential resource is distributed more fairly and efficiently. 9. The Araguaia-Tocantins region faces strong pressure for hydropower and navigation development. The use of irrigation is increasing to improve productivity of the fast growing agribusiness sector. WRM institutional arrangements at state and basin levels are very incipient and there are low levels of WSS service coverage (only 8 percent of urban wastewater is collected), which poses additional threats to water quality, human health, and the environment. Improved WRM, environmental sustainability, and integrated water investment planning are the key challenges. 10. Notwithstanding some beneficial impacts, public irrigation development has so far often been less successful than anticipated, mainly due to poor selection of beneficiaries, lack of commercial orientation, and weak integration with production chains. Low assessment and collection of water fees have contributed to the poor operation and deferred maintenance and deterioration of public infrastructure. Alternative solutions designed through the project could, if eventually implemented, help to promote more sustainable and efficient irrigation methods, diversify the agricultural economy, raise employment, reduce social pressures on land, increase income for farmers, and promote the export of agricultural products within Brazil and abroad. Water supply and sanitation measures should similarly facilitate extending household connections to the potable water and sanitation systems and constructing wastewater treatment plants. Greater access to WSS services will contribute to improved health, environmental, and

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urban development indicators throughout the country. The climate change and adaptation and mitigation strategies supported through the project could also play a crucial role in the future. Climate change is expected to exacerbate the frequency and severity of droughts and floods. If left unchecked, water and soil degradation will increase migration from the arid regions of the northeast to the coastal cities, aggravating water pollution and water and sanitation service provision issues in these already strained urban environments. Involuntary Resettlement 11. The Project will not require any land acquisition or impose any restrictions of access to land or associated resources. However, the potential impacts of future investments, the feasibility of which will be studied under the project, could result in involuntary resettlement. Because the location, timing, and technical features of such potential investments remain unknown, an RPF was prepared. The RPF was publicly disseminated and discussed with stakeholders during the project consultations held August 27, 2010, in Brasilia and will form part of the Project Operational Manual. This RPF will serve as the guide to the site-specific formulation of Resettlement Action Plans (RAP) and will help to ensure that the principles outlined under OP 4.12, Involuntary Resettlement, (that is, avoid, minimize, mitigate, consult, and disclose value assets at replacement costs and so forth) are taken into account during project preparation and implementation. The RPF requires that land acquisition be avoided or minimized by modifying the technical design of the proposed investments as much as feasible. If land acquisitions and/or involuntary resettlement prove unavoidable, proper participatory mechanisms will be used to ensure that affected peoples are consulted on their preferences. The RPF described the measures that the implementing agencies will adopt to assist potentially displaced peoples to restore and improve their livelihoods and living conditions. 12. The RPF is consistent with the existing legal framework in Brazil. There are, however, three main differences between the Bank’s Operational Policy on resettlement and the Brazilian legal framework. First, the Bank’s policy recognizes the right to compensation of those who have no recognizable legal right or claim to the land they are occupying at the time the census begins but have a claim to such assets. Second, the Bank’s policy considers support to affected people after displacement to restore their livelihood and standard of living (loss of income sources or means of livelihood). Third, the Bank’s policy considers effective compensation at full replacement cost for losses of assets attributable directly to the project. Based on the analysis of these differences and common points, the Borrower has agreed to implement the policy principles of the RPF as stated above in the formulation of the executive designs of projects to be financed by the Project. 13. The Resettlement Policy Framework details the different steps in managing land acquisition and involuntary resettlement. These tasks are PMU responsibilities in partnership, as needed, with municipalities and specialized consulting firms. The first step in this process involves contacting potentially affected people and establishing the means for direct dialogue throughout the life of the project. In support of these outreach activities, each PMU will appoint an ombudsman who will receive and channel suggestions and concerns voiced by the public to the adequate authorities (within or outside the implementing agency). The Ombudsman will

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receive communications through a “hotline,” the Internet, e-mail, and letters, and ensure that adequate and timely replies are provided to the public. 14. Mitigating land acquisition impacts is a GoB responsibility, as needed, in partnership with municipalities and specialized consulting firms. The institutions responsible for each project component will oversee the work of the social supervision consultancies (cadastre, asset evaluation, negotiation, and compensation). The following steps will be discussed and completed as needed: (a) data collection, including a cadastre of affected families and a land cadastre; (b) preparation of a Resettlement Plan (RP), including a socioeconomic profile of affected families, evaluations of affected assets, qualitative and quantitative aspects of degrees of impacts, and refined definitions of options and eligibility criteria; and (c) an action plan that includes institutional responsibilities, a timetable, and a budget. The real estate and other asset compensation values are based on the replacement cost of the current property, structure, and so forth. In cases where the affected property owners or tenants do not have all the required documents to complete the land acquisition procedures, for example, property registration, taxation records, birth or death certificates, and so forth, the executing agencies will assist the affected persons in obtaining these legal documents at no personal cost. The composition of the teams responsible for resettlement will need to be in line with the type and importance of the impacts. 15. When the impacts on the resettled population are minor, (if the affected population is not relocated and they have lost less than 10 percent of their productive assets) and/or when relocated people are fewer than 200, there can be an Abbreviated Resettlement Plan (ARP). It will be necessary to establish the minimum scope of the ARP, following the guidelines as in OP 4.12 Annex A, para. 22. 16. In the case where any of the Project activities might provoke the involuntary restrictions in access to natural resources in legally designated parks and protected areas marked by local law, causing negative effects on the population relocated, there will be a process framework in which members of potentially affected communities participate in some relevant project activities (OP 4.12 Annex A, par 27). Indigenous peoples and other vulnerable groups 17. Although the Project does not envision support for the implementation of any infrastructure or other physical investments, a social assessment was conducted to inform the preparation of an Indigenous Peoples Planning Framework (IPPF). The IPPF will help to ensure that the principles outlined under OP 4.10 (that is, screening, social assessment, consultation, and participation, and so forth) are taken into account during project preparation and implementation. The Project will also assist the Government in assessing salient issues and designing social and environmental management systems and criteria to facilitate planning for activities needed to address the potential social impacts of future water sector investments. In the case where the initial study indicates that there are indigenous peoples present in the project area or related to it in a collective manner, the indigenous peoples guidelines agreed with the Government will be followed.

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18. As mentioned briefly above, the findings of the social assessment were used in the preparation of the IPPF and a separate Traditional Peoples Planning Framework (TPPF)38 that will guide the preparation of the studies and plans supported through the project. Among the most vulnerable groups in the country are those in rural areas, particularly landless groups, traditional people whose livelihoods are closely tied to land or particular natural resources, and indigenous peoples. Indigenous peoples are among the poorest and most vulnerable population in the country. Social indicators among indigenous communities are below the national average and in many cases below the levels observed in rural areas in general. 19. Close adherence to the policy and planning principles outlined in the IPPF will help to ensure that (a) indigenous rights are fully observed; (b) no indigenous land would be affected, and in the case of activities proposed within indigenous lands, these would have to be agreed after informed consultation by the indigenous community and the Federal Foundation for Indigenous Peoples (FUNAI); and (c) indigenous peoples would not be forced to agree with the proposed activities, and if they have agreed to certain activities, the implementation of such activities will have to be carried out under specific guidelines. 20. Among the most vulnerable groups in the project area are those in rural areas, particularly landless groups and indigenous peoples. Although many of the cultural, economic, and historic rights of the Quilombolas39 have been formally recognized, these actions have not resulted in widespread titling of the land where they have lived and survived for several centuries. This represents a serious threat to the communities since the property rights of their lands and water against potential encroachment or takeovers either by private individuals or the state can be challenged in court. Among the urban poor, the black population is at higher risk, particularly those in the informal sector, women, children, and youth. In general, the black population youth and women experience higher levels of unemployment than other segments of the population. 21. Historically, indigenous peoples have been displaced by the migration of workers and landowners that has resulted in land invasions and in some cases long-standing conflicts among indigenous communities, landowners, private companies, and the state. Indigenous peoples in Brazil currently number approximately 700,000 (0.40 percent of the national population, 60 percent of which live in the Amazon region), comprised of 220 ethnicities who speak 180 different languages. Indigenous lands are now 13 percent of the Brazilian national territory (21 percent of the Amazon and 1.3 percent of the other regions). Generally speaking, indigenous peoples’ livelihoods throughout most of the vast project area are comprised primarily of extractive activities, subsistence agriculture with some items commercialized, sale of handicrafts, income from agricultural day labor, and public sector jobs such as teachers or health agents. Despite increasing contacts between indigenous peoples and national society, and in particular

38 There is no definitive classification of the non-indigenous traditional populations, but existing studies describe at least 14 types: quilombolas, pantaneiros, babaçueiros, campeiro-gaúchos, faxinais, varjeiros não amazônicos, açorianos, caiçaras, pescadores artesanais, caipiras, jangadeiros, sertanejos, praieiros e caboclos ribeirinhos amazônicos. 39 A quilombola (from the Kimbundu word kilombo) is a Brazilian hinterland settlement founded by people of African origin, Quilombolas or Maroons. Most of the inhabitants of quilombolas were escaped slaves and, in some cases, a minority of marginalized Portuguese, Brazilian aboriginals, Jews, and Arabs and/or other non-black, non-slave Brazilians who experienced oppression during colonization. (Source: Wikipedia.)

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greater integration of indigenous peoples into the larger rural economy, they are, for the most part, trying to maintain their languages, cultures, and worldviews linked to their territories, traditional knowledge, and the sustainable use of natural resources. 22. Until the 1980s, the GoB promoted linguistic and cultural integration of all the population into a presumed single national identity. To a large extent, the approach since the colonial period has been the establishment of a homogeneous Brazilian identity, subsuming into it all cultural specificities that came from different groups in one of the most diverse societies in the world. In the late 1980s, as a result of intensive mobilizations and debates promoted by indigenous organizations and various sectors of civil society, Brazil inaugurated a new framework for indigenous rights. Under the Constitution adopted in 1988, the constitutional rights of indigenous peoples were granted prominence and space, with a specific chapter of the Constitution dedicated to them (title VIII, “On Social Order,” and chapter VIII, “On Indigenous Peoples”), as were various other provisions and an article in the Transitional Constitutional Provisions Act. 23. Two significant conceptual innovations with regard to previous Constitutions, to the 1916 Civil Code, and to the so-called “Indigenous Statute,” were highlighted. The first abandoned the idea that Indigenous Peoples will have to assimilate into Brazilian society and the expectation that their culture, social organization, usages, and customs were transitory. The second and most relevant, because it involved the interest in land possession and ownership, defined indigenous peoples as traditional owners of their lands. By this definition, the Brazilian State recognized that indigenous peoples’ rights to the land even precede the existence of the Brazilian State. In addition to extending certain land rights to indigenous peoples, the 1988 Constitution also assured them of respect for their social organization, customs, languages, beliefs, and traditions. Overall, the constitutional provisions gave rise to the legal basis for defining ownership and state protection with regard to preservation, demarcation, integrity, and respect for indigenous lands. In particular, Article 231 prescribes a variety of elements with regard to the nature of the ties of possession, occupation, and domain. 24. Since 1988, Brazil’s constitutional provisions have given rise to the legal basis for defining ownership and state protection with regard to the preservation, demarcation, integrity, and respect for indigenous lands. In particular, Article 231 prescribes a variety of elements with regard to the nature of the ties of possession, occupation, and domain. These include:

Indigenous lands are Federal Government property. Indigenous lands are intended for the permanent occupation by indigenous peoples. Any legal acts that affect this right of possession are declared null and void, except those

of relevant public interest to the Federal Government. Only indigenous peoples may enjoy the wealth of the soil, the rivers, and the lakes

existing within indigenous lands. The exploitation of water resources, research, and the extraction of mineral wealth may

only be carried out [on indigenous lands] with the authorization of the National Congress after hearing the concerns of the affected communities and assuring their participation in the benefits of such exploitation.

Indigenous lands are granted inalienability and immunity and the rights over these lands cannot be assigned to any other party.

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Indigenous peoples may not be removed from their lands except in exceptional and temporary situations.

25. To identify indigenous and traditional peoples during the initial evaluation of the subproject area, the Implementing Agency will follow these proposed actions:

Carry out a Social Assessment to understand the positive and/or negative impacts on the population identified during the selection process;

Establish an open and informed consultation process with the affected communities to verify and document their full support or main concerns with the project;

With the information obtained from the Social Assessment and the consultation process, the Implementing Agency will prepare an Indigenous Peoples Plan (IPP) describing the measures taken by the Implementing Agency that will ensure that (a) the affected communities get the social and economic benefits approved, and (b) adverse effects will be identified and later avoided, minimized, mitigated, or compensated.

The Implementing Agency will provide the Social Assessment report and the IPP to the affected peoples in an appropriate manner, means, and language.

Before the evaluation of the Project, the Implementing Agency will send to the Bank the Social Assessment and the IPP for their final analysis.

Environmental Analysis 26. The proposed Project Development Objective (PDO) is to support the Government of Brazil to improve the coordination and strengthen the capacity among key federal institutions in the water sector toward an integrated approach. The Project will focus on less-developed parts of the country. This will be accomplished by (a) improving the effectiveness of WRM instruments and the implementation of the PNRH; (b) providing institutional strengthening to water infrastructure agencies at the federal and state levels to raise the overall assessment capacity of strategic and operational planning for water infrastructure and increasing the preparedness of civil defense for floods and droughts; (c) supporting the implementation of Law No. 11.445/2007, specifically in its objective to improve quality of WSS service provision and contribute to promoting universal access to these services; and (d) focusing on integrated planning and actions with a preferential focus on selected priority river basins. 27. The Project is expected to have positive environmental impacts by improving the capacity of government water sector institutions and focusing on integrated planning across sectors to achieve the sustainable management and use of water resources. Project activities are designed to enhance and provide protection to the environmental functioning of the predominant ecological system, protect wetland biodiversity, and implement strategic activities that address the root causes of environmental degradation. The strengthening of basin institutions responsible for WRM, the generation and dissemination of information, and the integration of environmental concerns into water basin economic development activities on a sustainable basis are key elements of this project. 28. Social Communication Plan: The social communication plan will include the different actors, the issues raised, the content, and the media to be employed to guarantee genuine access to the information and the possible alternatives available to the population to participate in the

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proposed project. There will be a full disclosure of the information using the most convenient media (radio, television, one-on-one interviews, focal group discussion) to guarantee the full access of information and facilitate in the future the implementation of the agreed subprojects.

29. Bank safeguard policies require that even if the Bank does not finance the implementation of such plans and designs, they must be developed “as if” they would be implemented under a Bank-supported operation. In light of this, an Environmental Management Framework that seeks to promote environmental and social objectives and minimize related risks of future plans, policies, and programs was prepared. It does this by incorporating into the analysis the following principles: (a) integrating environmental and social objectives into the TAL, (b) promoting transparency through stakeholder participation and public information disclosure, (c) enhancing the use of innovative environmental and social assessments such as Strategic Environmental Assessments (SEAs), (d) devising systematic and comprehensive analysis of alternatives, and (e) formulating environmental and social capacity building and institutional strengthening. Project activity typology 30. Project activities have been broken down into their component parts and the following main typologies will be the object of the environmental assessments:

Component Levels / Subcomponents Main Typologies

Water Resources Management

Plans and Programs Water Resource Basin Plans State Water Resource Plans River Basin Plans

Studies and Projects Concept and pre-feasibility of water works Spring protection and recovery programs

Institutional Strengthening Training, capacity building

Water, Irrigation, and Hazard Management

Plans and Programs Assessment of existing Water Infrastructure, development of investment criteria, and assessment of investment needs for irrigation at both national and state levels

Studies and Projects Water Infrastructure Feasibility Studies Dam safety plans Irrigation schemes rehabilitation proposals

Institutional Strengthening Works management and supervision Management of existing water infrastructure

Water Supply and Sanitation

Plans and Programs Local and regional sanitation plans

Studies and Projects Integrated sanitation projects in poor areas

Institutional Strengthening Information systems Capacity building

Intersectoral Coordination and

Integrated Planning

Plans and Programs Integrated planning and infrastructure management actions in selected priority river basins (state and municipal)

Studies and Projects

Watershed revitalization Environmental flow studies Water infrastructure projects anticipated in the Basin Master Plan

Institutional Strengthening Strengthen institutional capacity of project implementing agencies regarding social and environmental issues

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31. Most (but not all) of the activities of Component 4 – Intersectoral Coordination and Integrated Planning will be concentrated in the São Francisco and Araguaia-Tocantins watersheds, the Master Plan of which have been concluded. The Araguaia-Tocantins watershed, the Master Plan developed an SEA. Environmental Management Framework 32. The ESMF describes the measures that will be adopted so that project implementation is consistent with Bank safeguard requirements. It reviews national systems and procedures with regard to water resource management and assesses the capacity and track record of intermediary and implementing institutions to identify, assess, and mitigate adverse environmental and social impacts. The ESMF benefits from upstream analysis such as the SEA, mentioned above. 33. The ESMF is the environmental reference document for the Project. It provides the basis for determining what capacity building is required, financing eligibility of activities under the project, and what Bank oversight, including prior review and agreement, is required for subprojects. It also establishes procedures and methodologies as guidance for assessments and studies to be carried out during implementation. The ESMF has four main functions:

To present the legal and institutional framework and a comparative analysis of federal environmental regulations vis-à-vis Bank safeguard policies

To undertake an analysis of the existing federal environmental regulations and manuals of the executing agencies as they relate to the components and subcomponents and the typologies of the plans, studies, and projects

To analyze the environmental aspects of these different typologies, ensuring that they comply with Bank environmental safeguards

To conceive procedures for environmental management and supervision that will be needed for compliance verification of the triggered operational policies.

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Annex 11: Project Preparation and Supervision

BRAZIL: Federal Integrated Water Sector Project – Interaguas Planned Actual PCN review 09/10/2009 09/10/2009 Initial PID to PIC 12/10/2009 08/23/2010 Initial ISDS to PIC 12/17/2009 04/08/2010 QER Meeting 05/19/2010 06/02/2010 Decision Meeting 10/26/2010 10/26/2010 Appraisal 11/08/2010 11/08/2010 Negotiations 05/23/2011 05/23/2011 Board/RVP approval 07/12/2011 Planned date of effectiveness 08/30/2011 Planned date of midterm review 07/31/2014 Planned closing date 12/31/2016 Key institutions responsible for preparation of the project: National Water Agency – ANA Ministry of Environment – MMA Ministry of National Integration – MI Ministry of Cities – MCid Bank staff and consultants who worked on the project included: Name Title Unit Manuel Contijoch Senior Water Resources Specialist, TTL LCSEN Thadeu Abicalil Senior Water Supply and Sanitation Specialist LCSUW Paula Freitas Operations Analyst LCSEN Mark Lundell Sector Leader LCSSD Sameh Wahba Sector Leader LCSSD Joaquin Toro Senior Disaster Risk Management Specialist LCSUW David Michaud Senior Water Supply and Sanitation Specialist LCSUW Flavio Chaves Operations Analyst LCSTR Eric Lancelot Transport Engineer LCSTR Leopoldo Montanez Senior Energy Specialist LCSEG Federico Rabello Procurement Specialist LCSPT Susana Amaral Financial Management Specialist LCSFM Eduardo França Financial Management Specialist LCSFM Gunars Platais Senior Environmental Economist LCSEN Jason Jacques Paiement Social Consultant LCSSO Isabella Micali Drossos Senior Counsel LEGLA Catarina Isabel Portelo Senior Counsel LEGLA Julia Tierney Junior Professional Associate LCSUW Lara Chinarro Junior Professional Officer LCSEN Michele Martins Team Assistant LCC5C Geise Santos Program Assistant LCSEN

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Bank funds expended to date on project preparation: 1. Bank resources: US$277,600 2. Trust funds: US$ 0 3. Total:US$277,600 Estimated Approval and Supervision costs:

Remaining costs to approval: US$20,000 Estimated annual supervision cost: US$100,000

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Annex 12: Documents in the Project File

BRAZIL: Federal Integrated Water Sector Project – Interaguas

ANA: Planejamento Estratégico, 2009–2010.

AESA (2010). Ppt presentation, Brasília, março 2010. Agéncia Executiva de Gestão das Águas do Estado de Paraíba.

Alves Rennó, Célia Regina (2010), Superintendente de Recursos Hídricos e Meio Ambiente da CPASA MG. Missão Técnica do Banco Mundial, Discussão Sobre a Bacia do São Francisco. Ppt presentation, COPASA, Governo de Minas, 03 março 2010.

ANA (2009). Management Report 2008. Brasília-DF, 2009.

ANA/GEF/PNUMA/OEA (2002b). Projeto de Gerenciamento Integrado das Actividades Desenvolvidas em Terra na Bacia do São Francisco. Desenvolvimento de um Sistema de Monitoramento de Qualidade de Água no Submédio do Rio São Francisco: Índice de Sustentabilidade Ambiental do Uso da Água (ISA_Água). Resumo Executivo do Relatório Final. Embrapa, Meio Ambiente, Jaguariúna-SP. Dezembro 2002.

ANA/GEF/PNUMA/OEA (2002c). Projeto de Gerenciamento Integrado das Actividades Desenvolvidas em Terra na Bacia do São Francisco. Proposta de uma Rede de Monitoramento Piezométrico na Sub-Bacia do Rio Verde Grande. Resumo Executivo do Relatório Final. Belo Horizonte-MG. Setembro 2002.

ANA/GEF/PNUMA/OEA (2003e). Projeto de Gerenciamento Integrado das Actividades Desenvolvidas em Terra na Bacia do São Francisco. Proposta para Implementação da Cobrança Pelo Uso da Água na Bacia do Rio São Francisco. Relatório Final. Salvador-BA. Agosto 2003.

ANA/GEF/PNUMA/OEA (2003i). Projeto de Gerenciamento Integrado das Actividades Desenvolvidas em Terra na Bacia do São Francisco. Rede de Informações da Bacia do Rio São Francisco-RISF. Resumo Executivo do Relatório Final. Brasilia – DF. Março 2003.

ANA/GEF/PNUMA/OEA (2003j). Projeto de Gerenciamento Integrado das Actividades Desenvolvidas em Terra na Bacia do São Francisco. Desenvolvimento e Implantação do Sistema de Informações Gerenciais dos Projetos GEF. Relatório Final. Brasilia – DF. Maio 2003.

ANA/GEF/PNUMA/OEA (2004a). Projeto de Gerenciamento Integrado das Actividades Desenvolvidas em Terra na Bacia do São Francisco. Subprojeto 4.5C-Plano Decenal de Recursos Hídricos da Bacia Hidrográfica do Rio São Francisco-PBHSF (2004-2013). Estudo Técnico de Apoio ao PBHSF-No. 01: Disponibilidade Hídrica Quantitativa e Usos Consuntivos. Brasília-DF, abril 2004.

ANA/GEF/PNUMA/OEA (2004b). Projeto de Gerenciamento Integrado das Actividades Desenvolvidas em Terra na Bacia do São Francisco. Subprojeto 4.5C-Plano Decenal de Recursos Hídricos da Bacia Hidrográfica do Rio São Francisco-PBHSF (2004-2013). Estudo Técnico de Apoio ao PBHSF-No. 02: Abastecimento de Água. Brasília-DF, abril 2004.

ANA/GEF/PNUMA/OEA (2004c). Projeto de Gerenciamento Integrado das Actividades Desenvolvidas em Terra na Bacia do São Francisco. Subprojeto 4.5C-Plano Decenal de Recursos Hídricos da Bacia Hidrográfica do Rio São Francisco-PBHSF (2004-2013). Estudo Técnico de Apoio ao PBHSF-No. 03: Coleta e Tratamento de Esgotos Sanitários. Brasília-DF, abril 2004.

ANA/GEF/PNUMA/OEA (2004d). Projeto de Gerenciamento Integrado das Actividades Desenvolvidas em Terra na Bacia do São Francisco. Subprojeto 4.5C-Plano Decenal de Recursos Hídricos da Bacia Hidrográfica do Rio São Francisco-PBHSF (2004-2013). Estudo Técnico de Apoio ao PBHSF-No. 04: Resíduos Sólidos. Brasília-DF, abril 2004.

ANA/GEF/PNUMA/OEA (2004e). Projeto de Gerenciamento Integrado das Actividades Desenvolvidas em Terra na Bacia do São Francisco. Subprojeto 4.5C-Plano Decenal de Recursos Hídricos da Bacia Hidrográfica do Rio São Francisco-PBHSF (2004-2013). Estudo Técnico de Apoio ao PBHSF-No. 05: Enquadramento dos Corpos D’Água. Brasília-DF, abril 2004.

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ANA/GEF/PNUMA/OEA (2004f). Projeto de Gerenciamento Integrado das Actividades Desenvolvidas em Terra na Bacia do São Francisco. Subprojeto 4.5C-Plano Decenal de Recursos Hídricos da Bacia Hidrográfica do Rio São Francisco-PBHSF (2004-2013). Estudo Técnico de Apoio ao PBHSF-No. 06: Levantamento de Programas e Ações do PPA Federal e dos PPA’S Estaduais. Brasília-DF, abril 2004.

ANA/GEF/PNUMA/OEA (2004g). Projeto de Gerenciamento Integrado das Actividades Desenvolvidas em Terra na Bacia do São Francisco. Subprojeto 4.5C-Plano Decenal de Recursos Hídricos da Bacia Hidrográfica do Rio São Francisco-PBHSF (2004-2013). Estudo Técnico de Apoio ao PBHSF-No. 07: Análise Sobre a Implantação de Sistemas de Barragens de Regularização. Brasília-DF, abril 2004.

ANA/GEF/PNUMA/OEA (2004h). Projeto de Gerenciamento Integrado das Actividades Desenvolvidas em Terra na Bacia do São Francisco. Subprojeto 4.5C-Plano Decenal de Recursos Hídricos da Bacia Hidrográfica do Rio São Francisco-PBHSF (2004-2013). Estudo Técnico de Apoio ao PBHSF-No. 08: Navegação. Brasília-DF, abril 2004.

ANA/GEF/PNUMA/OEA (2004i). Projeto de Gerenciamento Integrado das Actividades Desenvolvidas em Terra na Bacia do São Francisco. Subprojeto 4.5C-Plano Decenal de Recursos Hídricos da Bacia Hidrográfica do Rio São Francisco-PBHSF (2004-2013). Estudo Técnico de Apoio ao PBHSF-No. 09: Aproveitamento do Potencial Hidráulico para Generação de Energia Elétrica. Brasília-DF, abril 2004.

ANA/GEF/PNUMA/OEA (2004j). Projeto de Gerenciamento Integrado das Actividades Desenvolvidas em Terra na Bacia do São Francisco. Subprojeto 4.5C-Plano Decenal de Recursos Hídricos da Bacia Hidrográfica do Rio São Francisco-PBHSF (2004-2013). Estudo Técnico de Apoio ao PBHSF-No. 10: Controle de Cheias. Brasília-DF, abril 2004.

ANA/GEF/PNUMA/OEA (2004k). Projeto de Gerenciamento Integrado das Actividades Desenvolvidas em Terra na Bacia do São Francisco. Subprojeto 4.5C-Plano Decenal de Recursos Hídricos da Bacia Hidrográfica do Rio São Francisco-PBHSF (2004-2013). Estudo Técnico de Apoio ao PBHSF-No. 11: Programa de Abastecimento da População Rural da Região Semi-Árida. Brasília-DF, abril 2004.

ANA/GEF/PNUMA/OEA (2004l). Projeto de Gerenciamento Integrado das Actividades Desenvolvidas em Terra na Bacia do São Francisco. Subprojeto 4.5C-Plano Decenal de Recursos Hídricos da Bacia Hidrográfica do Rio São Francisco-PBHSF (2004-2013). Estudo Técnico de Apoio ao PBHSF-No. 12: Agricultura Irrigada. Brasília-DF, abril 2004.

ANA/GEF/PNUMA/OEA (2004m). Projeto de Gerenciamento Integrado das Actividades Desenvolvidas em Terra na Bacia do São Francisco. Subprojeto 4.5C-Plano Decenal de Recursos Hídricos da Bacia Hidrográfica do Rio São Francisco-PBHSF (2004-2013). Estudo Técnico de Apoio ao PBHSF-No. 13: Recuperação e Conservação Hidroambiental. Brasília-DF, abril 2004.

ANA/GEF/PNUMA/OEA (2004n). Projeto de Gerenciamento Integrado das Actividades Desenvolvidas em Terra na Bacia do São Francisco. Subprojeto 4.5C-Plano Decenal de Recursos Hídricos da Bacia Hidrográfica do Rio São Francisco-PBHSF (2004-2013). Estudo Técnico de Apoio ao PBHSF-No. 14: Diretrizes para a Fiscalização Integrada e Monitoramento dos Usos dos Recursos Hídricos. Brasília-DF, abril 2004.

ANA/GEF/PNUMA/OEA (2004o). Projeto de Gerenciamento Integrado das Actividades Desenvolvidas em Terra na Bacia do São Francisco. Subprojeto 4.5C-Plano Decenal de Recursos Hídricos da Bacia Hidrográfica do Rio São Francisco-PBHSF (2004-2013). Estudo Técnico de Apoio ao PBHSF-No. 15: Desenvolvimento da Pesca e Aqüicultura. Brasília-DF, abril 2004.

ANA/GEF/PNUMA/OEA (2004q). Projeto de Gerenciamento Integrado das Actividades Desenvolvidas em Terra na Bacia do São Francisco. Subprojeto 4.5C-Plano Decenal de Recursos Hídricos da Bacia Hidrográfica do Rio São Francisco-PBHSF (2004-2013). Estudo Técnico de Apoio ao PBHSF-No. 17: Qualidade das Águas. Brasília-DF, abril 2004.

ANA/GEF/PNUMA/OEA (undated1). GEF São Francisco; Projeto de Gerenciamento Integrado das Atividades Desenvolvidas em Terra na Bacia do São Francisco.Ppt presentation. Undated.

ANA/GEF/PNUMA/OEA (undated2). Projeto de Gerenciamento Integrado das Actividades Desenvolvidas em Terra na Bacia do São Francisco. Médias Mensais de Precipitação e Vazão; Áreas Irrigadas; Usinas Hidrelétricas; Disponibilidade Hídrica; Principais Sistemas Aqüíferos; Pólos de Desenvolvimento. Maps. Undated.

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ANA/MMA (2008a). Cobrança pelo Uso da Agua. Exemplo de Simulação de Impacto naCultura de Arroz sob Pivot Central, Na Região Próxima á Januária-MG (brochure). ANA/Ministério do Meio Ambiente. Brasília-DF, 2008.

ANA/MMA (2008b). Cobrança pelo Uso da Agua. Exemplo de Simulação de Impacto em Usuário do Setor Industrial (brochure). ANA/Ministério do Meio Ambiente. Brasília-DF, 2008.

ANA/MMA (2008c). Cobrança pelo Uso da Agua. Exemplo de Simulação de Impacto em Usuário do Setor de Saneamento, COPASA (brochure). ANA/Ministério do Meio Ambiente. Brasília-DF, 2008.

ANA/OEA, “Plan Decenal de Recursos Hidricos da Bacia Hidrografica do Rio Sao Francisco (2004-2013)”.

ANA/SAR (2008). Programa de Ações para Apoio á Implementação do Sistema de Gerenciamento do Projeto de Integração do Rio São Francisco ás Bacias Hidrográficas do Nordeste Setentrional-PISF, no Exercício de 2008; Avaliação dos Custos de Instalação e Manutenção dos Equipamentos, Meta 3-Projeto de Monitoramento Hidráulico e Hidrológico. Brasília-DF, março 2008.

ANA/SGH (2010a). Atuação da ANA no Semi-Árido. Ppt presentation. Petrolina, março 2010..

ANA/SGH (2010c). Programa de Ações para apoio á implentaão do Ssistema de Gerenciamento do Projeto de Integração do Rio São Francisco ás Bacias Hidrográficas do Nordeste Setentrional – PSF. Ppt presentation,2009.

ANA/SGI (2009). Base Hidrográfica Ottocodificada. Superintendéncia de Gestão da Informação – SGI. Brasília/DF – 2009.

ANA/UNESCO/Banco Mundial/PROÁGUA/MMA (2005a). A Agenda da ANA em Águas Subterrâneas/Principais Sistemas Aqüiferos do Brasil (brochure). Brasilia-DF, março 2005.

ANA/UNESCO/Banco Mundial/PROÁGUA/MMA (2005b). Recursos Hídricos no Brasil. Situação Atual dos Planos de Recursos Hídricos (plano). Brasilia, Junho 2005.

ANA/UNESCO/Banco Mundial/PROÁGUA/MMA (2007). Disponibilidade e Demandas de Recursos Hídricos no Brasil. Cadernos de Recursos Hídricos 2. Superintendência de Planejamento de Recursos Hídricos, Superintendência de Usos Múltiplos. Brasilia-DF, Maio 2007.

Andrade, Renata (2002). Da Transposição das Águas do Rio São Francisco á Revitalização da Bacia: as Varias Visões de um Rio. Forum Permanente de Defesa do São Francisco/International Rivers Network/Colaizão Rios Vivos. Agosto 2002.

CHESF (2010). Chesf e a Bacia do São Francisco; Recursos Hídricos, Meio Ambiente, Revitalização e Compromisso Social. Ppt presentation, Brasília, março 2010. Companhia Hidro Elétrica do São Francisco.

Cirilo, José Almir (2010), Secretario Executivo de Recursos Hídricos, Estado de Pernambuco. Ações de Infra-Estrutura e de Gestão das Aguas em Pernambuco. Ppt presentation, Brasília, março 2010.

CLMMSF (undated). Modelagem de Concessão Integrada. Ppt presentation, março 2009. Corredor Logístico Multimodal “São Francisco”. Undated.

CODEVASF (2002). O Rio de São Francisco. Companhia de Desenvolvimento dos Vales do São Francisco e do Parnaíba, 2002.

CODEVASF (2010). Projeto de Execução de Obras de Sistemas de Esgotamento Sanitário na Bacia do São Francisco; Discussão Sobre a Bacia do São Francisco, Ações de Revitalização, Missão Técnica do Banco Mundial. Ppt presentation, Brasília, março 2010.

COGERH (2010). Gerenciamento dos Recursos Hídricos no Estado de Ceará. Ppt presentation, Governo do Estado de Ceará, Secretaría dos Recursos Hídricos, Brasilia, março 2010.

EMBASA (2010). Ações na Bahia e na Bacia Hidrográfica do Rio São Francisco. Ppt presentation, Secretaría de Desenvolvimento Urbano, Estado de Bahia, Brasilia, março 2010.

Falcón, María Lucía (2010), Secretária de Estado do Planejamento de Sergipe. Desenvolvimento Integrado na Bacia do São Francisco. Ppt presentation, Brasília, março 2010.

IFC (2010). O Brasil, as PPP e as Desestatizações. Ppt presentation, Brasília, março 2010. International Finance Corporation.

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IGAM/SISEMA (2010). Missão Técnica do Banco Mundial, Bacia Hidrográfica do São Francisco, Atividades, Planejamento e Desafíos. Ppt presentation, Brasília, março 2010. Instituto Mineiro de Gestão das Águas/ Sistema Estadual de Meio Ambiente e Recursos Hídricos, Governo de Minas.

Lopes Viana, Francisco (2010). Regulacão e Gestão dos recursos hídricos na bacia do rio São Francisco e áreas de integração. Ppt presentation, ANA, Brasília-DF, março 2010.

MC/SENASA (2010). Ações na BSF. Ppt presentation, Brasília, março 2010. Ministério das Cidades, Secretaria Nacional de Saneamento Ambiental.

MIN (2005a). Estudo de Sustentabilidade Institucional, Administrativa, Financeira e Operacional do Projeto de Integraão do Rio São Francisco com Bacias Hidrográficas do Nordeste Setentrional; Resumo Executivo; Relatório Final. Ministério da Integração Nacional. Brasília, Julho 2005.

MIN (2005b). Nota Técnica 14/2005. Anexo do Ofício No. 373/MI de 16/09/2005. Esclarecimentos Solicitados pela Agência Nacional de Águas sobre o Projecto de Integração do Rio São Francisco. Anexo I: Relação de Açudes do Nordeste Stetentrional com Vazão Firme (m3/s); Anexo II: População e Demandas Urbanas; Anexo III: Avaliação da Operação do Projeto de Integração da Bacia do Rio São Francisco com as Bacias Hidrográficas do Nordeste Setentrional. Ministério da Integração Nacional.

MIN (2005c). Projecto de Integração do Rio São Francisco. Anexo III: Avaliação da Operação do Projeto de Integração da Bacia do Rio São Francisco com as Bacias Hidrográficas do Nordeste Setentrional. Ref: Of. 230/2005-DP/ANA, de 06/09/2005. Respostas ás solicitações do oficio supra citado: Aprovação dos valores de demanda e de oferta hídrica do projeto de integração da Bacia do Rio São Francisco com bacias hidrográficas do Nordeste Stentrional: Estado de Ceará, Rio Grande do Norte, Estado de Paraíba, Estado de Pernambuco. Ministério da Integração Nacional.

MIN (2008). Ações incluidas no Programa de Aceleração do Crescimento (PAC) relacionadas ao Projeto de Integração do Rio São Francisco; Segmento Integração de Bacias. Atualizado em 07.01.2008.

MIN (2010). Ações no Bacia do São Francisco. Ppt presentation, Brasília, março 2010. Ministério da Integração Nacional.

MIN (undated). Revitalização do Rio São Francisco no ámbito do Programa de Revitalização da Bacia Hidrográfica do Rio São Francisco – PRBHRSF (2004-2006)/Programa de Aceleração do Crescimento-PAC (2007-2010). Undated.

MIN/FGV (2005a). Estudo de Sustentabilidade Institucional, Administrativa, Financeira e Operacional do Projeto de Integraão do Rio São Francisco com Bacias Hidrográficas do Nordeste Setentrional. Relátorio 1: Avaliação das Estruturas Institucional e Administrativa de Gestão dos Recursos Hídricos dos Estados; Ministério da Integração Nacional/FGV Projetos, Versão Final, 21/06/2005.

MIN/FGV (2005b). Estudo de Sustentabilidade Institucional, Administrativa, Financeira e Operacional do Projeto de Integraão do Rio São Francisco com Bacias Hidrográficas do Nordeste Setentrional. Relátorio 2: Revisão e Atuialização dos Estudos de Rateio dos Custos Operacionais do Projeto de Integração da Bacia do Rio São Francisco-PISF-entre os Estrados Receptores; Ministério da Integração Nacional/FGV Projetos, Versão 18/07/2005.

MIN/FGV (2005c). Estudo de Sustentabilidade Institucional, Administrativa, Financeira e Operacional do Projeto de Integraão do Rio São Francisco com Bacias Hidrográficas do Nordeste Setentrional. Relátorio 3: Proposta de Estructuração Institucional e Administrativa dos Estados para a Gestão das Águas do Projeto de Integração de Bacias; Anexo I: Decreto Federal Instituindo o Sistema de Gestão da Integração de Bacias; Anexo II: Convénio de Integração para Implementação do “Pacto Pela Sustentabilidade do PISF”. Ministério da Integração Nacional/FGV Projetos, Versão Preliminar 13/07/2005.

MIN/SIH (2005). Projeto de Integraão do Rio São Francisco com Bacias Hidrográficas do Nordeste Setentrional; Pedido de Outorga. “Considerações Sobre o Balanço Hídrico, a Operação e a Outorga”. Ministério da Integração Nacional, Secretaria de Infra-Estrutura Hídrica. Brasília, Julho 2005.

MMA/SRH (2006). Plano Nacional de Recursos Hídricos; Síntese Executiva. Ministério do Meio Ambiente, Secretaria de Recursos Hídricos. Brasília, 2006.

MMA/SRH (2010). Ações da SRHU/MMA na Bacia do Rio São Francisco. Ppt presentation, Brasília, março 2010. Ministério do Meio Ambiente, Secretaria de Recursos Hídricos e Ambiente Urbano.

97

MT/SPNT (2010). Hidrovia do São Francisco. Ppt presentation, Brasília, março 2010. Ministério dos Transportes, Secretaria de Política Nacional de Transportes.

Narciso Sobrinho, José (2010), Banco do Nordeste. Ações do BNB na Bacia do Rio São Francisco. Banco do Nordeste, Ppt presentation, Brasília, março 2010.

SEMARH (2010a). Ações do Estado do Rio Grande do Norte nas Bacias Receptoras do PISF. Ppt presentation, Brasília, março 2010. Secretaria de Estado do Meio Ambiente e dos Recursos Hídricos, Rio Grande do Norte.

SEMARH (2010b). Política Estadual de Recursos Hídricos e Ações no Baixo São Francisco. Ppt presentation, Governo do Estado de Alagoas, Brasília, março 2010.

Carta-Consulta Programa de Desenvolvimento do Setor Água: INTERAGUAS.

Mudanças Climáticas Globais e o Impacto no Bioma Caatinga. Ministério da Ciéncia e Tecnologia, Instituto Nacional de Pesquisas Espaciais.

Project Appraisal Document for the Federal Water Resources Management Project (PROÁGUA) Report No 17451-BR.

Project Appraisal Document for the Low Income Sanitation Technical Assistance Project (PROSANEAR) and its ICR Report No ICR0000719.

Project Appraisal Document for the Second Water Sector Modernization Project – PMSS II and its ICT Report No ICR00001083.

98

Annex 13: Statement of Loans and Credits

BRAZIL: Federal Integrated Water Sector Project – Interaguas

Original Amount in US$ Millions

Difference between expected and actual

disbursements

Project ID FY Purpose IBRD IDA SF GEF Cancel. Undisb. Orig. Frm. Rev’d

P111665 2011 BR- RJ Munic Fiscal Consolid DPL 1,045.00 0.00 0.00 0.00 0.00 500.00 -545.00 0.00

P106702 2011 BR Integr. Solid Waste & Carbon finance 50.00 0.00 0.00 0.00 0.00 50.00 0.00 0.00

P095171 2011 BR Bahia Health and Water Mgt. (SWAP) 60.00 0.00 0.00 0.00 0.00 60.00 7.78 0.00

P106768 2011 BR Rio de Janeiro PSM/Fiscal MST 18.67 0.00 0.00 0.00 0.00 18.63 0.06 0.00

P118540 2011 BR Santa Catarina Rural Competitiveness 90.00 0.00 0.00 0.00 0.00 89.78 0.00 0.00

P122391 2011 BR-Rio de Janeiro Urban and Housing DPL

485.00 0.00 0.00 0.00 0.00 485.00 0.00 0.00

P120391 2011 BR-Federal Univ. Hospitals Modernization 150.00 0.00 0.00 0.00 0.00 150.00 0.00 0.00

P101504 2011 BR Bolsa Familia 2nd APL 200.00 0.00 0.00 0.00 0.00 200.00 2.28 0.00

P111996 2010 BR RJ Mass Transit II 211.70 0.00 0.00 0.00 0.00 183.75 119.01 0.00

P104995 2010 BR Municipal APL5: Santos 44.00 0.00 0.00 0.00 0.00 41.48 10.26 0.00

P101508 2010 BR-RJ Sustainable Rural Development 39.50 0.00 0.00 0.00 0.00 36.59 8.60 0.00

P106703 2010 BR SP Water Reagua 64.50 0.00 0.00 0.00 0.00 64.33 2.08 0.00

P099469 2010 BR (APL2) 2nd National Environmental 24.30 0.00 0.00 0.00 0.00 23.29 -0.95 0.00

P108443 2010 BR SP Sust Rural Dev & Access to Markets

78.00 0.00 0.00 0.00 0.00 77.81 9.50 0.00

P118410 2010 BR Mato Grosso do Sul Road 300.00 0.00 0.00 0.00 0.00 228.42 -70.83 0.00

P106390 2010 BR SP METRO LINE 4 (PHASE 2) 130.00 0.00 0.00 0.00 0.00 129.68 0.00 0.00

P116170 2010 BR Sao Paulo Metro Line 5 650.40 0.00 0.00 0.00 0.00 648.77 0.00 0.00

P006553 2010 BR SP APL Integrated Wtr Mgmt 104.00 0.00 0.00 0.00 0.00 103.74 43.82 0.00

P106663 2010 BR Sao Paulo Feeder Roads Project 493.43 0.00 0.00 0.00 0.00 115.34 -225.54 0.00

P114204 2010 ELETROBRAS Distribution Rehabilitation

495.00 0.00 0.00 0.00 0.00 495.00 0.00 0.00

P108654 2010 BR Pernambuco Sustainable Water 190.00 0.00 0.00 0.00 0.00 188.93 6.31 0.00

P113540 2010 BR AIDS-SUS 67.00 0.00 0.00 0.00 0.00 66.83 1.88 0.00

P106208 2009 BR Pernambuco Educ Results& Account. 154.00 0.00 0.00 0.00 0.00 67.38 -4.85 0.00

P104752 2009 BR Paraiba 2nd Rural Pov Reduction 20.90 0.00 0.00 0.00 0.00 19.12 10.28 0.00

P106765 2009 BR Ceara Inclusive Growth (SWAp II) 240.00 0.00 0.00 0.00 0.00 92.21 47.16 0.00

P099369 2009 BR Ceara Regional Development 46.00 0.00 0.00 0.00 0.00 45.13 0.71 0.00

P107146 2009 BR Acre Social Economic Inclusion Sust D

120.00 0.00 0.00 0.00 0.00 68.55 -14.48 0.00

P094315 2009 BR Municipal APL4: Sao Luis 35.64 0.00 0.00 0.00 0.00 32.78 -1.70 0.00

P107843 2009 BR Fed District Multisector Manag. Proj. 130.00 0.00 0.00 0.00 0.00 114.44 57.64 0.00

P088716 2009 BR Health Network Formation & Quality Im

235.00 0.00 0.00 0.00 0.00 234.41 53.73 0.00

P110614 2009 BR: Sergipe State Int. Proj.: Rural Pov 20.80 0.00 0.00 0.00 0.00 13.53 9.12 0.00

P106038 2008 BR Sao Paulo Trains and Signalling 662.91 0.00 0.00 0.00 0.00 176.26 53.15 0.00

P101324 2008 BR-Second Minas Gerais Dev't PArtnership

1,437.00 0.00 0.00 0.00 0.00 103.26 -375.73 32.26

P095626 2008 BR (APL2)Family Health Extension 2nd APL

83.45 0.00 0.00 0.00 0.00 62.38 43.39 0.00

P094199 2008 BR-(APL) RS (Pelotas) Integr. Mun. Dev. 54.38 0.00 0.00 0.00 0.00 34.31 15.21 0.00

99

P089929 2008 BR RGN State Integrated Water Res Mgmt 35.90 0.00 0.00 0.00 0.00 22.42 19.95 0.00

P089013 2008 BR Municipal APL: Recife 32.76 0.00 0.00 0.00 0.00 31.61 23.95 -0.78

P088966 2008 BR Municipal APL3: Teresina 31.13 0.00 0.00 0.00 0.00 26.52 11.64 0.00

P083997 2008 BR Alto Solimoes Basic Services and Sust 24.25 0.00 0.00 0.00 0.00 13.17 6.29 0.00

P082651 2007 BR APL 1 Para Integrated Rural Dev 60.00 0.00 0.00 0.00 0.00 44.27 44.27 0.00

P089011 2007 BR Municipal APL1: Uberaba 17.27 0.00 0.00 0.00 0.00 5.26 5.30 0.00

P089793 2007 BR State Pension Reform TAL II 5.00 0.00 0.00 0.00 0.00 1.91 1.93 0.00

P095460 2007 BR-Bahia Integr.Hway Mngmt. 100.00 0.00 0.00 0.00 0.00 6.76 -20.16 0.00

P089440 2006 BR-Brasilia Environmentally Sustainable 57.64 0.00 0.00 0.00 0.00 20.09 20.09 0.00

P092990 2006 BR - Road Transport Project 501.25 0.00 0.00 0.00 0.00 164.00 164.00 0.00

P081436 2006 BR-Bahia Poor Urban Areas Integrated Dev

49.30 0.00 0.00 0.00 0.00 32.96 32.96 0.00

P093787 2006 BR Bahia State Integ Proj Rur Pov 84.35 0.00 0.00 0.00 0.00 26.93 -3.00 0.00

P087711 2005 BR Espirito Santo Wtr & Coastal Pollu 107.50 0.00 0.00 0.00 0.00 2.99 -68.33 -18.66

P060573 2004 BR Tocantins Sustainable Regional Dev 60.00 0.00 0.00 0.00 0.00 4.44 4.44 0.00

P006449 2000 BR CEARA WTR MGT PROGERIRH SIM

239.00 0.00 0.00 0.00 0.00 72.66 -30.08 31.92

Total: 9,635.93 0.00 0.00 0.00 0.00 5,497.12 - 523.86

44.74

BRAZIL STATEMENT OF IFC’s

Held and Disbursed Portfolio In Millions of US Dollars

Committed Disbursed

IFC IFC

FY Approval Company Loan Equity Quasi Partic. Loan Equity Quasi Partic.

2005

ABN AMRO REAL 98.00 0.00 0.00 0.00 15.77 0.00 0.00 0.00

2005 ABN AMRO REAL 98.00 0.00 0.00 0.00 15.77 0.00 0.00 0.00

2001 AG Concession 0.00 30.00 0.00 0.00 0.00 30.00 0.00 0.00

2002 Amaggi 17.14 0.00 0.00 0.00 17.14 0.00 0.00 0.00

2005 Amaggi 30.00 0.00 0.00 0.00 30.00 0.00 0.00 0.00

2002 Andrade G. SA 22.00 0.00 10.00 12.12 22.00 0.00 10.00 12.12

2001 Apolo 6.04 0.00 0.00 0.00 3.54 0.00 0.00 0.00

1998 Arteb 20.00 0.00 0.00 18.33 20.00 0.00 0.00 18.33

2006 BBM 49.40 0.00 0.00 0.00 49.40 0.00 0.00 0.00

2001 Brazil CGFund 0.00 19.75 0.00 0.00 0.00 18.15 0.00 0.00

2004 CGTF 54.01 0.00 7.00 65.12 54.01 0.00 7.00 65.12

1994 CHAPECO 10.00 0.00 0.00 0.00 10.00 0.00 0.00 0.00

1996 CHAPECO 1.50 0.00 0.00 5.26 1.50 0.00 0.00 5.26

2003 CPFL Energia 0.00 40.00 0.00 0.00 0.00 40.00 0.00 0.00

1996 CTBC Telecom 3.00 8.00 0.00 0.00 3.00 8.00 0.00 0.00

1997 CTBC Telecom 0.00 6.54 0.00 0.00 0.00 6.54 0.00 0.00

1999 Cibrasec 0.00 3.27 0.00 0.00 0.00 3.27 0.00 0.00

2004 Comgas 11.90 0.00 0.00 11.54 11.90 0.00 0.00 11.54

100

2005 Cosan S.A. 50.00 5.00 15.00 0.00 50.00 5.00 15.00 0.00

Coteminas 0.00 1.84 0.00 0.00 0.00 1.84 0.00 0.00

1997 Coteminas 1.85 1.25 0.00 0.00 1.85 1.25 0.00 0.00

2000 Coteminas 0.00 0.18 0.00 0.00 0.00 0.18 0.00 0.00

1980 DENPASA 0.00 0.52 0.00 0.00 0.00 0.48 0.00 0.00

1992 DENPASA 0.00 0.06 0.00 0.00 0.00 0.06 0.00 0.00

Dixie Toga 0.00 0.34 0.00 0.00 0.00 0.34 0.00 0.00

1998 Dixie Toga 0.00 10.03 0.00 0.00 0.00 10.03 0.00 0.00

1997 Duratex 1.36 0.00 3.00 0.57 1.36 0.00 3.00 0.57

2005 EMBRAER 35.00 0.00 0.00 145.00 35.00 0.00 0.00 145.00

1999 Eliane 14.93 0.00 13.00 0.00 14.93 0.00 13.00 0.00

1998 Empesca 1.33 0.00 2.67 0.00 1.33 0.00 2.67 0.00

2006 Endesa Brasil 0.00 50.00 0.00 0.00 0.00 50.00 0.00 0.00

2006 Enerbrasil Ltda 0.00 5.50 0.00 0.00 0.00 0.00 0.00 0.00

2006 FEBR 12.00 0.00 0.00 0.00 12.00 0.00 0.00 0.00

2000 Fleury 0.00 0.00 6.00 0.00 0.00 0.00 6.00 0.00

1998 Fras-le 4.00 0.00 9.34 0.00 4.00 0.00 6.04 0.00

2006 GOL 50.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

2005 GP Capital III 0.00 14.00 0.00 0.00 0.00 0.14 0.00 0.00

GP Cptl Rstrctd 0.00 2.22 0.00 0.00 0.00 2.16 0.00 0.00

2001 GPC 0.00 0.00 9.00 0.00 0.00 0.00 9.00 0.00

GTFP BIC Banco 44.91 0.00 0.00 0.00 44.91 0.00 0.00 0.00

GTFP BM Brazil 4.22 0.00 0.00 0.00 4.22 0.00 0.00 0.00

GTFP Indusval 5.00 0.00 0.00 0.00 5.00 0.00 0.00 0.00

1997 Guilman-Amorim 18.08 0.00 0.00 14.37 18.08 0.00 0.00 14.37

1998 Icatu Equity 0.00 5.46 0.00 0.00 0.00 4.16 0.00 0.00

1999 Innova SA 0.00 5.00 0.00 0.00 0.00 5.00 0.00 0.00

1980 Ipiranga 0.00 2.87 0.00 0.00 0.00 2.87 0.00 0.00

1987 Ipiranga 0.00 0.54 0.00 0.00 0.00 0.54 0.00 0.00

2006 Ipiranga 50.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

2006 Itambe 15.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

2000 Itau-BBA 12.86 0.00 0.00 0.00 12.86 0.00 0.00 0.00

2002 Itau-BBA 70.61 0.00 0.00 0.00 38.47 0.00 0.00 0.00

1999 JOSAPAR 7.57 0.00 7.00 0.00 2.57 0.00 7.00 0.00

2005 Lojas Americana 35.00 0.00 0.00 0.00 35.00 0.00 0.00 0.00

1992 MBR 0.00 0.00 10.00 0.00 0.00 0.00 10.00 0.00

2006 MRS 50.00 0.00 0.00 50.00 0.00 0.00 0.00 0.00

2002 Microinvest 0.00 1.25 0.00 0.00 0.00 0.82 0.00 0.00

Net Servicos 0.00 10.93 0.00 0.00 0.00 10.93 0.00 0.00

2002 Net Servicos 0.00 1.60 0.00 0.00 0.00 1.60 0.00 0.00

2005 Net Servicos 0.00 5.08 0.00 0.00 0.00 5.08 0.00 0.00

1994 Para Pigmentos 2.15 0.00 9.00 0.00 2.15 0.00 9.00 0.00

1994 Portobello 0.00 0.59 0.00 0.00 0.00 0.59 0.00 0.00

2000 Portobello 4.28 0.00 7.00 0.00 4.28 0.00 7.00 0.00

2002 Portobello 0.00 0.90 0.00 0.00 0.00 0.90 0.00 0.00

2000 Puras 0.00 0.00 1.00 0.00 0.00 0.00 1.00 0.00

2003 Queiroz Galvao 26.67 0.00 10.00 0.00 26.67 0.00 10.00 0.00

2004 Queiroz Galvao 0.60 0.00 0.00 0.00 0.08 0.00 0.00 0.00

2006 RBSec 22.83 1.51 0.00 0.00 0.00 1.51 0.00 0.00

101

Randon Impl Part 2.33 0.00 3.00 0.00 2.33 0.00 3.00 0.00

1997 Sadia 2.55 0.00 2.33 3.28 2.55 0.00 2.33 3.28

1997 Samarco 3.60 0.00 0.00 0.00 3.60 0.00 0.00 0.00

1998 Saraiva 0.00 1.24 0.00 0.00 0.00 1.24 0.00 0.00

2000 Sepetiba 26.24 0.00 5.00 0.00 11.24 0.00 5.00 0.00

2002 Suape ICT 6.00 0.00 0.00 0.00 6.00 0.00 0.00 0.00

1999 Sudamerica 0.00 7.35 0.00 0.00 0.00 7.35 0.00 0.00

2006 Suzano petroq 50.00 0.00 10.00 140.00 39.50 0.00 10.00 110.50

2001 Synteko 11.57 0.00 0.00 0.00 11.57 0.00 0.00 0.00

2006 TAM 50.00 0.00 0.00 0.00 17.00 0.00 0.00 0.00

1998 Tecon Rio Grande 3.55 0.00 5.50 3.71 3.55 0.00 5.50 3.71

2004 Tecon Rio Grande 7.87 0.00 0.00 7.76 7.59 0.00 0.00 7.48

2001 Tecon Salvador 2.95 1.00 0.00 3.10 2.95 0.77 0.00 3.10

2003 Tecon Salvador 0.00 0.55 0.00 0.00 0.00 0.55 0.00 0.00

2004 TriBanco 10.00 0.00 0.00 0.00 10.00 0.00 0.00 0.00

2006 TriBanco 0.35 0.00 0.00 0.00 0.35 0.00 0.00 0.00

2002 UP Offshore 9.01 9.51 0.00 23.29 0.00 2.51 0.00 0.00

2002 Unibanco 16.89 0.00 0.00 0.00 16.89 0.00 0.00 0.00

Total portfolio: 1,164.15 253.88 144.84 503.45 703.91 223.86 141.54 400.38

Approvals Pending Commitment

FY Approval Company Loan Equity Quasi Partic.

2000 BBA 0.01 0.00 0.00 0.00

1999 Cibrasec 0.00 0.00 0.00 0.00

2006 Ipiranga II 0.00 0.00 0.00 0.10

2002 Banco Itau-BBA 0.00 0.00 0.00 0.10

Total pending commitment: 0.01 0.00 0.00 0.20

102

Annex 14: Country at a Glance

BRAZIL: Federal Integrated Water Sector Project – Interaguas

Brazil at a glance 2/25/11

Lat in Upper-P OVER T Y and SOC IA L A merica middle-

B razil & C arib. inco me2009Population, mid-year (millions) 193.7 573 1,002GNI per capita (A tlas method, US$) 8,070 6,993 7,495GNI (Atlas method, US$ billions) 1,564.2 4,003 7,508

A verage annual gro wth, 2003-09

Population (%) 1.1 1.2 0.9Labor fo rce (%) 2.2 2.2 1.7

M o st recent est imate ( la test year available, 2003-09)

Poverty (% of population below national poverty line) 22 .. ..Urban population (% of to tal population) 86 79 75Life expectancy at birth (years) 72 73 71Infant mortality (per 1,000 live births) 17 19 19Child malnutrition (% of children under 5) 2 5 ..Access to an improved water source (% of population) 97 93 95Literacy (% of population age 15+) 90 91 93Gross primary enrollment (% of school-age population) 127 116 111 M ale 132 118 111 Female 123 114 110

KEY EC ON OM IC R A T IOS and LON G-T ER M T R EN D S

1989 1999 2008 2009

GDP (US$ billions) 425.6 586.9 1,652.6 1,594.5

Gross capital fo rmation/GDP 26.9 16.4 20.7 16.5Exports o f goods and services/GDP 8.9 9.4 13.7 11.1Gross domestic savings/GDP 30.4 15.0 20.9 16.5Gross national savings/GDP 35.8 12.1 18.7 14.7

Current account balance/GDP 0.2 -4.3 -1.7 -1.5Interest payments/GDP 1.2 3.0 1.0 0.9Total debt/GDP 26.9 41.6 15.9 17.4Total debt service/exports 36.3 103.3 25.5 17.6Present value o f debt/GDP .. .. .. 16.3Present value o f debt/exports .. .. .. 103.7

1989-99 1999-09 2008 2009 2009-13(average annual growth)GDP 2.4 3.5 5.2 -0.6 5.9GDP per capita 0.9 2.2 4.1 -1.5 ..Exports o f goods and services 5.5 7.6 0.5 -10.2 11.7

ST R UC T UR E o f the EC ON OM Y

1989 1999 2008 2009(% of GDP)Agriculture 8.5 5.5 5.9 6.1Industry 42.7 25.9 27.9 25.4 M anufacturing 29.5 16.1 16.6 15.8Services 48.8 68.6 66.2 68.5

Househo ld final consumption expenditure 54.1 64.7 58.9 61.7General gov't final consumption expenditure 15.5 20.3 20.2 21.8Imports o f goods and services 5.5 10.8 13.5 11.2

1989-99 1999-09 2008 2009(average annual growth)Agriculture 3.0 3.8 6.1 -4.6Industry 1.8 2.8 4.1 -6.7 M anufacturing 2.1 2.7 3.0 -8.2Services 3.4 3.9 4.9 2.1

Househo ld final consumption expenditure 4.0 3.5 6.8 0.2General gov't final consumption expenditure 0.4 3.1 3.2 3.9Gross capital fo rmation 2.8 3.7 13.6 -10.3Imports o f goods and services 13.1 6.8 15.4 -11.5

Note: 2009 data are preliminary estimates.

This table was produced from the Development Economics LDB database.

* The diamonds show four key indicators in the country (in bold) compared with its income-group average. If data are missing, the diamond will be incomplete.

-15-10

-505

101520

04 05 06 07 08 09

GCF GDP

Growth of capital and GDP (%)

-15-10-505

10152025

04 05 06 07 08 09

Exports Imports

Growth of exports and imports (%)

Brazil

Upper-middle-income group

Development diamond*

Life expectancy

Access to improved water source

GNIpercapita

Grossprimary

enrollment

Brazil

Upper-middle-income group

Economic ratios*

Trade

Indebtedness

Domesticsavings

Capital formation

103

Brazil

P R IC ES and GOVER N M EN T F IN A N C E1989 1999 2008 2009

D o mest ic prices(% change)Consumer prices 1,972.9 8.9 7.1 5.9Implicit GDP deflator 1,209.1 8.5 8.3 5.7

Go vernment f inance(% o f GDP, includes current grants)Current revenue .. 19.8 23.6 23.2Current budget balance .. 2.7 3.9 2.9Overall surplus/deficit 208,202.5 -0.7 -0.4 -3.4

T R A D E1989 1999 2008 2009

(US$ millions)Total exports (fob) 32,975 47,551 184,216 208,178 Coffee 2,447 2,746 20,183 20,615 Soybeans 3,647 1,593 13,462 13,902 M anufactures 17,575 27,330 88,483 108,534Total imports (cif) 18,263 49,210 155,475 172,782 Food 1,249 1,655 2,582 2,761 Fuel and energy 3,753 4,258 24,978 26,002 Capital goods 4,873 13,577 32,190 37,543

Export price index (2000=100) 86 93 128 124Import price index (2000=100) 55 96 100 99Terms of trade (2000=100) 157 97 127 125

B A LA N C E o f P A YM EN T S1989 1999 2008 2009

(US$ millions)Exports o f goods and services 36,394 55,205 228,393 180,723Imports o f goods and services 21,486 63,382 220,247 174,679Resource balance 14,908 -8,177 8,146 6,044

Net income -13,265 -18,848 -40,562 -33,684Net current transfers 249 1,689 4,224 3,338

Current account balance 1,032 -25,335 -28,192 -24,302

Financing items (net) -146 17,513 31,161 70,953Changes in net reserves -886 7,822 -2,969 -46,651

M emo :Reserves including gold (US$ millions) 9,679 36,342 216,881 273,123Conversion rate (DEC, local/US$) 1.00E-6 1.8 1.8 2.0

EXT ER N A L D EB T and R ESOUR C E F LOWS1989 1999 2008 2009

(US$ millions)Total debt outstanding and disbursed 114,356 244,108 262,139 276,932 IBRD 8,311 6,822 10,671 10,065 IDA 0 0 0 0

Total debt service 14,117 71,073 56,460 44,317 IBRD 1,475 1,380 1,310 2,231 IDA 0 0 0 0

Composition of net resource flows Official grants 44 65 211 196 Official creditors 235 380 1,962 3,438 Private creditors -3,710 -11,130 27,250 23,842 Foreign direct investment (net inflows) 1,131 28,576 45,058 25,949 Portfo lio equity (net inflows) -57 2,572 -7,565 37,071

World Bank program Commitments 933 1,863 3,082 1,861 Disbursements 819 1,533 1,726 1,274 Principal repayments 871 952 812 1,872 Net flows -52 580 914 -598 Interest payments 604 428 498 359 Net transfers -656 152 416 -957

Note: This table was produced from the Development Economics LDB database. 2/25/11

-2

-1

0

1

2

03 04 05 06 07 08 09

Current account balance to GDP (%)

0

50,000

100,000

150,000

200,000

250,000

03 04 05 06 07 08 09

Exports Imports

Export and import levels (US$ mill.)

0

5

10

15

04 05 06 07 08 09

GDP deflator CPI

Inflation (%)

A: 10,065 D:

14,688

E: 7,632

F: 204,758

G: 39,789

A - IBRDB - IDA C - IMF

D - Other multilateralE - BilateralF - PrivateG - Short-term

Composition of 2009 debt (US$ mill.)

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