Document of

The World Bank

FOR OFFICIAL USE ONLY

Report No. 16183

IMPLEMENTATION COMPLETION REPORT

BRAZIL

RIO RECONSTRUCTION AND PREVENTION PROJECT(Loan 2975-BR)

December 19, 1996

FILE COPYInfrastructure and Urban Development Division (LAlIU)Country Department ILatin America and Caribbean Region

This document has a restricted distribution and may be used by recipients only in the performance oftheir official duties. Its contents may not otherwise be disclosed without World Bank authorization.

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FEDERATIVE REPUBLIC OF BRAZIL

RIO FLOOD RECONSTRUCTION AND PREVENTION PROJECT

CURRENCY EQUIVALENTS

Brazilian Real (R$) 100 CentavosUS$1 = R$1 (as of July 1996)

WEIGHTS AND MEASURES

I Metric Ton (m ton) = 1,000 Kilograms (kg)1 Metric Ton (m ton) = 2,204 Pounds (lb)1 Meter (m) 3.28 Feet (ft)1 Kilometer (km) 0.62 Mile (mi)1 Cubic Meter (m3) = 35.3 Cubic Feet (ft3)

FISCAL YEAR

January 1 - December 31

Acting Vice President Mr. Gobind T. NankaniActing Director Ms. Constance BernardDivision Chief Mr. Asif FaizTask Manager : Mr. Moazzam Mekan

FOR OFFICIAL USE ONLY

LIST OF ACRONYMS

BNH Banco Nacional de Habitacao (National Housing Bank)CBERJ Corpo de Bombeiros do Estado do Rio de Janeiro (State firefighting Corp)CEDAE Companhia Estadual de Agua e Esgoto (State Water and Sewerage Company)CEF Caixa Economica Federal (National Savings Bank)CEHAB Companhia Estadual de Habitaqao (State Low-income Housing Company)COPPE Coordenacao dos Programas de Post Graduacao em Engenharia (Post-Graduate

School of Engineering of the Federal University of Rio de Janeiro)FEEMA Funda;ao Estadual de Engenharia de Meio Ambiente (State Foundation for

Environmental Engineering)FGTS Fundo de Garantia do Tempo de Servicio (Employee Indemnity Fund)FIEF Fundacao Instituto Estadual de Florestas (State Forestry Institute)FUNDREM Fundacao para o Desenvolvimento da Region Metropolitana do Rio de Janeiro

(Foundation for the Development of the Metropolitan Region of Rio de Janeiro)GEORIO Fundacao Instituto de Geotecnica do Municipio do Rio de Janeiro (Geotechnical

Institute of the Municipality of Rio de Janeiro)GEROE Grupo Executivo para Recupera;ao e Obras de Emergencia (Executive Group for

Reconstruction and Emergency Works of the State of Rio de Janeiro)IBAM Instituto Brasileiro de Administracao Municipal (Brazilian Institute of Municipal

Administration)ICMS lInposto sobre Operacoes Relativas a Circulacao de Mercadorias e Servicios

(Taxe on Circulation of Goods and Services)IDB Interamerican Development BankIPLANRIO Empresa Municipal de Informatica e Planejamento S.A. (Rio de Janeiro's

Municipal Enterprise of Data Processing and Planning)RJMR Rio de Janeiro Metropolitan RegionSECPLAN Secretaria de Planejamento (Secretariat of Planning of the State of Rio de

Janeiro)SEDUR Secretaria de Desenvolvimento Urbano e Regional (Secretariat of Urban and

Regional Development of the State of Rio de Janeiro)SEMA Secretaria de Meio Ambiente (Secretariat of the Environment of the State of Rio

de Janeiro)SERLA Superintendencia Estadual de Rios e Lagoas (State Superintendency of Rivers and

Lakes)SMA Secretaria de Estado de Meio Ambiente (State Secretariat of the Environment)SOSP Secretaria de Estado de Obras e Servicos Publicos (State Secretariat of Public

Works and Services)UFRJ Universidade Federal do Rio de Janeiro (Federal University of Rio de Janeiro)UERJ Universidade Estadual do Rio de Janeiro (State University of Rio de Janeiro)UNDP United Nations Development Program

This document has a restricted distribution and may be used by recipients only in the performance of theirofficial duties. ls contents may not othermise be disclosed vwithout World Bank authorization.

IMPLEMENTATION COMPLETION REPORT

BRAZIL

RIO FLOOD RECONSTRUCTION AND PREVENTION PROJECT

Table of Contents

Palm

Preface ............................. i

Evaluation Summary ............................ i

Part I- Project Implementation Assessment

Project Objectives. 1Achievement of Project Objectives. 1Major Factors Affecting the Project. 9Project Sustainability .............. 13Bank Performance .............. 16Borrower Performance .............. 17Assessment of Outcome .............. 19Future Operation .............. 19Key Lessons Learned .............. 20

Part II- Statistical Annexes

Table 1: Summary of Assessments .23Table 2: Related Bank Loans/Credits .25Table 3: Project Timetable .26Table 4: Loan Disbursements: Cumulative Estimated and Actual .27Table 5: Key Indicators for Project Implementation .28Table 6: Key Indicators for Project Operation .33Table 7: Studies Included in Project .36Table 8A: Project Costs .47Table 8B: Project Financing .48Table 9: Economic Costs and Benefits ......................................... 49Table 10: Status of Legal Covenants ......................................... 51Table 11: Compliance with Operational Manual Statements .................. 58Table 12: Bank Resources: Staff Inputs ...................... ................... 59Table 13: Bank Resources: Missions ......................................... 60

Annex 1 Resettlement Component ......................................... 62Annex 2 Main Factors for Delays During Project Implementation ........ 64

Appendixes:

A - Borrower contribution to the ICR ....................... Appendix AB - Map ....................... Appendix B

IMPLEMENTATION COMPLETION REPORT

BRAZIL

RIO FLOOD RECONSTRUCTION AND PREVENTION PROJECT (LOAN 2975-BR)

Preface

This is the Implementation Completion Report (ICR) for the Rio Flood Reconstruction andPrevention Project in Brazil, for which Loan 2975-BR, in the amount of US$175 millionequivalent was approved on June 4, 1988 and made effective on December 29, 1988.

The loan was closed on September 30, 1995, seven years after Board approval and fourand a half years beyond the original closing date of March 31, 1991. An amount of US$6.8 millionwas canceled on December 1994. Final disbursement took place on December 28, 1995, at whichtime a balance of US$902,596 was canceled.

The ICR was prepared by Dominique Babelon and Charles Dahan, consultants, under thesupervision of Moazzam A. Mekan (task manager), from the Infrastructure and UrbanDevelopment Division (LAI IU) of Country Department 1, the Latin America and CaribbeanRegion. It was reviewed by Asif Faiz (Division Chief, LAIIU) and Orville Grimes (ProjectAdviser). The borrower provided comments that are included as appendices to the ICR.

Preparation of this ICR was begun during the Banks final supervision/completion mission(November 1995). It is based on project completion reports prepared by the borrower (CaixaEconomica Federal - CEF), the Government of the State of Rio de Janeiro and the Municipality ofRio de Janeiro, which are available in the project file; materials in the Bank project files; visits tothe field and discussions with project institutions by the consultants; and studies of the Post-Graduate School of Engineering of the Federal University of Rio de Janeiro (COPPE/UFRJ). Theborrower also contributed to the preparation of the ICR by assisting Bank consultants with theorganization of visits and meetings, contributing to discussions during these meetings, andcommenting on the.earlier draft of the ICR. The current ICR takes into account the commentsmade by the borrower.

Evaluation Summary

Objectives and Achievement of Objectives

1. The project was designed as an emergency response to damage from severe floods in theMetropolitan Region of Rio de Janeiro at the end of February 1988. It had three major objectives:(a) to assist state and municipal authorities in the Metropolitan Region of Rio de Janeiro in urgentreconstruction and rehabilitation made necessary by the floods and landslides; (b) to implementessential phiysical works designed to minimize and prevent future flood damage; and (c) to assiststate and municipal authorities in developing a program and the institutional capacity to cope betterwitlh future emergencies.

2. The project included reconstructionl componlenits such as repair of roads and bridges, repair andrehabilitation of public buildings damaged, and the provision of minimally serviced sites for familieswhose homes were destroyed during the floods and landslides. Except for repair of buildings (whichhad already been reconstructed by the time funds became available), implemenitation of the abovecomponents was substantially in accordance with the original objectives.

3. The Project also included works and equipmenit designed to minimize and prevent damageotherwise likely to occur during any major rainfall, includinig optimization of the drainage system;slope stabilization; construction of sewerage systems; improvement of solid waste collection anddisposal; construction of serviced lots needed for the resettlement of families relocated due to theabove works and of families in high risk-areas; and purchiase of emergency rescue equipment neededfor flood-relief activities by civil defense. Implementation of the most costly compolnents, such asoptimization of the drainage systems, stabilization of slopes, constructioni of sewerage systems andprovision of serviced sites, was substantially in accordance with project objectives -- thesecomponents accounted for 80% of actual projects costs, in line withi appraisal estimates. However,implementation of the less costly components, yet those most necessary to ensuire projectsustaiinability, such as solid waste collection and disposal, and reforestation, was at most partial.These often required prior institutional improvements and policy changes wilichi were not addressed.

4. To ensure sustainability of project actions, the project included a number of studies andprograms. Their implementation was uneven. Among those to be carried out by the State of Rio deJaneiro, the digital and convenitional mapping of the State of Rio de Janeiro and the Paraiba do Sulwater basin, and the Master Plan for the lguacu River Basin, were successfuilly completed. TheSlope Stabilization Plan for the State of Rio and of the Solid Waste Managemenit Plan for theMetropolitan Region of Rio de Janeiro were only partially implemented. The EnvironmentalEducation Program was very limited in its concept and achievemenlts. The program to strengthien thefiscal administrationi of beneficiary municipalities, was only partly completed, and no follow Lipactions were taken. Finally, the Civil Defense Plan for the Metropolitan Region and theReforestation Plan for the State of Rio de Janeiro were essentially canceled.

5. Among studies carried out by the Municipality of Rio, envirolimenital educationi programs werenever implemented. The same happenied withi the program for inspectioni and control of illegal andinformal mineral exploration. However, all other studies and programs were successfullyimplemented, including the program for institutionial strengthiniig of the fiscal administrationl of theMunicipality of Rio, which led to significant improvements in municipal finances and a number of

ii

additional studies incorporated into the project in 1993 concerned with socio-economic policies andurban planning in the Metropolitan region of Rio de Janeiro. Many of these studies have beenpublished and are currently used bv public and private entities for better integrated urbandevelopment planning in the Metropolitan Region. An evaluation of the Municipality of Rio'sresettlement component under the Project was also carried out, which is being used to adjustmunicipal housing policies and resettlement procedures.

6. The project only partly reached its financial objectives. While the financial condition of theMunicipality of Rio did improve significantly, this was not the case for the State and Municipalitiesin the Baixada. The State of Rio is currently carrying out a major state reform program addressingcritical issues of financial adjustment and the efficiency of state administration.

7. At the end of 1996, when fully completed, total project costs will amount to US$406 million,only 3% higher than estimated at appraisal. Except for the State of Rio de Janeiro, which contributedmore than planned (US$46.2 million , compared to an appraisal estimate of US$19.8 million), in theend, despite important delays and several changes in the financing plan during projectimplementation, all parties met their funding commitments agreed at appraisal. Only US$7.6 millionwas canceled from the Bank Loan.

8. Project results are significant. It is estimated that the project has reduced by 40% the totalfloodable area (under rainfall conditions similar to those of 1988). An ex-post cost/benefit analysiscarried out by the Post-graduate School of Engineering of the Federal University of Rio de Janeiroshows very significant returns for the drainage components (the largest of the project). During theheavy 1996 rainfalls, which so much affected other areas and would normally have causedsubstantial damage, there were no reported floods in the project areas. Substantial benefits haveresulted for the beneficiaries, as the project broke the steady impoverishment cycle brought about byrepeated floods, and also improved health conditions. For the slope stabilization component, thereare few quantitative indicators of project impact, but there has been a significant decrease in fatalitiesand accidents in Rio and Petropolis since 1988, probably due to the project, and to subsequentpreventive investments of the same nature. During the 1996 rainfall, there were no fatalities in theproject areas, however, if a comprehensive civil defense plan had been developed as planned underthe project and implemented, losses of lives in 1996 could have been reduced in areas which did notbenefit from project investments. With respect to the resettlement components, evaluation studiescarried out by the State and the Municipality of Rio show a high degree of overall satisfaction ofbeneficiaries, although many have complained about the lack of public services.

Major Factors Affecting Project Implementation

9. The project objectives were substantially achieved, but with major delays. Duringimplementation, although the project formally remained an emergency project, the closing date waspostponed four times, until September 30, 1995, i.e., four and a half years beyond the originalclosing date. Implementation thus took seven years from loan signing, compared to two and a halfyears estimated at appraisal. These delays were due to the highi complexity of the project and to acombination of factors subject to federal and state government control, implementing agenciescontrol, and contractors' performance. Bank disbursement procedures also contributed to delays.

10. It is necessary to assess these delays within the political, institutional and economic context atthe time. The project was the first major operation financed in the State of Rio de Janeiro by anymultilateral agency since twenty years, and the first Bank loan to CEF since its merging with the

iii

National Housing Bank (BNH) in 1986. Neither the state or CEF had experience or had developedinstitutional mechanisms to manage such a project. Furthermore, -Implementation took place duringa period of political and macro-economic turmoil: the project implementation period overlappedwith four federal, three state, and three municipal administrations, with consequent disruptions fromlack of continuity and changes in priorities in allocation of funds; high inflation periods, interruptedby four successive stabilization plans, affected the availability of funds to the Employee IndemnityFund (FGTS), the main source of counterpart funds for the project, and to the state budget; finally,the new 1988 Constitution resulted in substantial changes in the share of tax allocated to states andmunicipalities which were not anticipated at appraisal, impacting negatively on the state's ability tocarry out the project and positively on the municipality's.

1 1. The project was highly complex in its content and organization. It included a total of 15components (8 implemented by the state, 5 by the municipality of Rio and 2 by other municipalities),and 22 studies ( 8 carried out by the state and 14 by the municipality of Rio). It was to beimplemented by 9 state and 8 municipal agencies. This complexity required complicated decision-making and coordination mechanisms, and information systems, particularly at the state level, which,due to lack of continuity in state government administrations with different approaches, and otherfactors, did not function consistently (except in 1995, the last year of the project, when statecoordination improved under the Alencar State administration). As a result, Caixa EconomicaFederal (CEF), the Borrower, came to assume most coordination functions.

12. The most significant source of delays was the unavailability of federal counterpart funds, whichessentially paralyzed the project during the first two years of implementation, and continued tosignificantly slow it down during the subsequent two years. The second most significant source ofdelays (which resulted in an additional two-year delay of the largest project component) was incontract execution and design of the state drainage works, due to the detection of irregularities incontract execution (works were stopped pending results of special audits and negotiations withcontractors for the refund of overbilled quantities), and the need to perform an Overall ConceptualDesign Study to reformulate priorities for drainage works and make design changes aimed ateliminating over-design and minimizing relocation costs. Other sources of delays were: (a)Statedefaults on its debt to CEF in 1991 and part of 1992; (b) Bank management of the Special Account in1994 (early recovery of the account); and (c) delays in the resettlement components, which in turnslowed down implementation of the drainage components.

13. On the other hand, tight deadlines for contracting and implementation imposed at the time ofsuccessive closing date extensions contributed to the abandonment or partial implementation of anumber of studies and programs. In December 1994, to bring the project to closure, priority wasgiven to the completion of the drainage, slope containment and resettlement components, and allstudies and works which had not yet been contracted were abandoned. The Solid Waste componentwas the most severely affected by the desire to close the Loan. The responsibility for completing thesolid waste processing plants was to be assumed by the state out of its own funds. To this date(August 1996), due to lack of State funds, timing of completion of this component is uncertain andits efficient operation is far from assured. Furthermore, institutional responsibilities for operationand maintenance of these solid waste processing plants are not defined and corresponding costrecovery mechanisms are not in place; and a strong program of environmental education has notbeen designed to support project effectiveness.

iv

Sustainability

14. Project sustainability critically depends on the development and implementation of integratedactions in the areas of drainage and slope stabilization systems maintenance, solid waste collectionand disposal, reforestation, civil defense, environmental education, and institutional strengthening ofmunicipalities. Many of these programs were only partially implemented or not implemented at all.Although some IDB-financed projects which emerged out of the project will enhance projectsustainability, it will remain uncertain unless these and other follow up programs are carried out.

15. The project slope stabilization components within the boundaries of Rio and Petropolis are themost likely to be sustainable. In Rio, the Geotechnical Institute of the Municipality of Rio de Janeiro(GEORIO) has continued to invest heavily in slope stabilization after project completion, and hassteadily moved from corrective to preventive works and measures. GEORIO is also establishing anearly warning system in collaboration with municipal civil defense services.

16. With respect to drainage works carried out by the state, in August 1995, the StateSuperintendency of Rivers and Lakes (SERLA) prepared a plan for maintenance of drainage works.As of July 1996, however, SERLA had not received this budget (estimated at about US$3.5 millionper year).

17. For the two most important river basins of the Baixada Fluminense (Iguacu and Sarapui rivers).all remaining drainage-related deficiencies have been clearly identified in the Master Plan for theRios Iguasu/Sarapui River Basin. By everyone's recognition, this plan was highly successful inpresenting an integrated program of actions aimed at complete flood control in the entire basin, inclose consultation with local communities. The total cost of implementation of the plan is estimatedat about US$368 million, and should be included in the public investment programs of the state andthe concerned municipalities. A similar plan should be developed for the remaining river basisn inthe Baixada. Implementation of these plans would require external financial assistance. However,current limitations on state and municipal indebtedness capacity may delay early implementation ofthis program targeted at improving the living conditions of some of the poorest inhabitants in the Riometropolitan area.

18. It is likely that some projects, which followed and partly emerged out of the experience andapproaches developed under this project, will contribute in part toward its long-term sustainability:these are: (a) the state and IDB-financed Guanabara Bay pollution control project, which willprovide basic sanitation infrastructure and complete the network of solid waste treatment anddisposal facilities in the Baixada; (b) the state and IDB-financed "Baixada Viva" project, which aimsat providing a number of low-income communities in the Baixada with an integrated package ofurban infrastructure and social equipment and services, developed in conjunction with thesecommunities (including flood control investments totaling about US$80 million, identified under theIgua;u River Master Plan); (c) the "Favela Bairro" project of the Municipality of Rio (also supportedby IDB), with approaches similar to that of the Baixada Viva project, aiming at integrating the Rioslum areas ("favelas") into the city; and (d) the PROSANEAR project, which provides basicsanitation infrastructure in many favelas of Rio de Janeiro. Finally, the state and the municipality ofRio are also preparing flood and landslide control projects in the areas affected by the 1996 rains(Jacarepagua and Itaguai, in particular).

v

Bank Performance

19. Bank performance was highly satisfactory in terms of responsiveness to client needs since theoperation was prepared in record time. Conditions essential to the sustainability of the project werealso well identified, resulting in the inclusion of a number of important studies, plans and programsunder the project. However, preparation and appraisal were deficient with regard to: (i) the projecttimetable (which was unrealistic); (ii) the financial and institutional analysis of CEF (which waslacking); and (iii) at the Bank's insistence, the exclusion of house construction from the projectresettlement component, even when resettlement was caused by project works requirements. Bankperformance with respect to supervision, however, was generally highly satisfactory in terms ofquality and intensity. The Bank should however have been more focused on the studies andprograms needed for project sustainability - these components did not receive sufficient or timelyattention either from the Bank, the Borrower, or the executing agencies, and no clear concepts weredeveloped about how these studies would be used. The Bank should also have recognized theunrealistic timetable of the project and early on formally transformed it into a regular investmentproject, thus allowing proper planning of those actions requiring a longer time to mature. In the end,the project took seven years until closing, in line with the timing of regular investment projects.Finally, the Special Account should have been better managed to support the project fundingrequired for its timely implementation.

Borrower Performance

20. Except towards the end of the project , the performance of CEF, the borrower, wasunsatisfactory with respect to the provision of counterpart funding, but highly satisfactory in terms ofproject coordination and monitoring. The performance of the State of Rio de Janeiro was uneven:The State did provide more than the required counterpart funding and did secure the counterpartfunding required by CEF from the Federal Government, by no means a small achievement. On theother hand, except in the last year of the project, the Executive Group for Reconstruction andEmergency Works of the State of Rio de Janeiro (GEROE), the state project coordination group, wasgenerally deficient due to lack of continuity through three state administrations, and to over-centralization. State executing entities were generally weak. Project management within SERLAimproved dramatically in early 1991 when the new Brizola administration brought a team ofexcellent professionals from the Federal University of Rio (UFRJ), which took over management,but the experience gained in the project was not internalized within SERLA.

21. With respect to the municipalities, except during 1993, the first year of the Maia administration,and with the notable exception of the environmental education program, the Municipality of Rio deJaneiro consistently performed very well both with respect to project execution and financialperformance. The municipality of Petropolis also performed well, after initial difficulties. Themunicipalities of the Baixada Fluminense, however, did not participate much in the project and didnot carry out the financial and institutional strengthening actions which would have helped promoteproject sustainability. In contrast, the Baixada community associations were strongly involved inthe implementation of the state drainage component and related resettlement activities, and thisproved to be essential to their successful implementation.

vi

Assessment of Outcome and Key Lessons Learned

22. On balance, the project outcome may be rated as satisfactory: the project achieved its majorobjectives, although with considerable delay. These delays were partly due to originally unrealistictimetables. Its benefits, in terms of avoided floods and landslides and associated fatalities and lossesmay be presumed high, and the project was strongly poverty-oriented. The project was also the firstBank operation with the State and the Municipality of Rio de Janeiro and the first collaborationbetween the Bank and CEF after its merging with the National Housing Bank (BNH) and contributedto the establishment within these institutions of project coordination mechanisms and structureswhich were later used for other operations with international agencies. The following key lessonsmay be learned from the project: (a) large-scale preventive investments, which require time tomature in their selection and design, should not be part of an emergency recovery project, but of afollow-up project, or, alternatively, a second phase prepared under the emergency phase, but withnormal investment implementation schedules and preparation requirements; (b) whenever possible,project design should be simplified, and when complex projects such as this one are unavoidable,project coordination mechanisms, while avoiding over-centralization, should be designed to makeexecuting agencies responsible and accountable; (c) appraisal of emergency projects should notdispense with financial and institutional appraisal of the financial intermediary and cofinancier; (d)for the resettlement of homeless due to floods or other catastrophic events and/or resettlement offamilies associated with the implementation of works in risky areas, the project should provide forfinancing and construction of housing; (e) involvement and participation of community associationsis essential in mobilizing local support for the project, and in integrating community views and needsin the resettlement actions; (f) contributions from users, communities and municipalities is analternative that should be explored to finance maintenance of drainage infrastructure and generate theright incentives to keep the area safe from floods; (g) all measures and programs necessary to ensuresustainability are as, or more, important than physical investments, so their satisfactory and timelyimplementation should be incorporated into dated covenants; 100% financing for these measuresshould be provided out of the loan; and they should be the last components to be canceled; (h) suchcomponents also need more careful and thorough preparation with clearly defined objectives andimplementation strategy after studies are completed; as successful implementation usually requiresprior institutional improvements and policy changes, time required for their definition andimplementation normally extends beyond the schedule of a emergency project; implementationshould better be part of a regular follow-up investment project together with large preventivedrainage works; and (h) procurement of large works should not take place before detailed designshave been completed or are well advanced, and detailed designs should not be contracted from theconstruction company; finally, it is as important to supervise contract implementation as it is tooversee the procurement process.

PROJECT IMPLEMENTATION ASSESSMENTBRAZIL

RIO FLOOD RECONSTRUCTION AND PREVENTION PROJECT(Loan 2975 - BR)

A. Project Objectives

1. The project had three major objectives: (a) to assist state and municipal authorities in theMetropolitan Region of Rio de Janeiro in urgent reconstruction and rehabilitation made necessary by therecent floods and landslides; (b) to implement essential physical works designed to minimize and preventfuture flood damage; and (c) to assist state and municipal authorities in developing a program and theinstitutional capacity to cope better with future emergencies.

2. The project objectives were clear. It was designed as an emergency response to damage from severefloods in the Metropolitan Region of Rio de Janeiro in March 1988. However, the nature of the damage,the wide geographical disaster-affected area and the potential risk of recurrence of such severe floods in theMetropolitan Region required more than directly-targeted reconstruction and rehabilitation objectives. Itdemanded a broader view of urban environmental management focused on prevention, and the inclusion oflarge preventive physical works (such as drainage, slope stabilization, and solid waste collection anddisposal) and institutional strengthening (coordination between entities, policies, plans, and instruments)that would in time reduce the risk of damages from heavy rains in the Rio area and lead to an increased andsustainable capacity for dealing with Rio's serious environmental problems.

3. The project timetable was not realistic. The two and a half years implementation period as envisagedat appraisal was too optimistic, influenced by the emergency nature of the project and the desire to takeadvantage of the momentum created by the flood by including ambitious long-term preventive measures'.Because of the share in the project of the preventive actions and investrnents (about 70%) and theimportance for project sustainability of the institutional strengthening programs to cope with emergencies, alonger implementation period of 6/7 years, as for a typical environmental sanitation project, would havebeen more reasonable.

B. Achievement of Project Objectives

4. Given the original emergency nature of the project, the key implementation indicators as stated in theMemorandum of the President and Loan Agreement's Schedule 2 (project Description) reflected the broadscope of works to be carried out. Subsequently, in March 1990 and March 1993, although there was nochange in the scope and size of the project, Schedule 2 was amended to: (i) reflect better defined and moreaccurate physical targets; (ii) take into account delays in project implementation (Section C); and (iii)reflect changes in priorities among sub-components for both the State and the Municipality of Rio, basedon mid-course evaluations. Key implementation indicators as estimated at appraisal and included in theLoan Agreement, as formally modified in subsequent amendments, and as actually observed, are presentedin Table 5.

Both the State and Rio were reluctant to agree to the Bank's proposal at appraisal to separate prevention fromreconstruction. It was felt that after presidential elections, the Federal Government might become reluctant tosupport a follow-up project once the immediate emergency conditions were overcome.

2

Reconstruction andRehabilitation Objectives

5. The project included reconstruction components such as repair of roads and bridges, repair andrehabilitation of public buildings damaged and the provision of minimally serviced sites for families whosehomes were destroyed during the floods and landslides. Except for repair of buildings, the implementationof the above components was substantially in accordance with the original objectives: (i) US$36.4 millionwas invested, compared to about US$40 million (including contingencies), estimated at appraisal, to repair10 roads and 10 bridges and build retaining walls at various points along seven roads; and (ii) compared tothe 1,120 serviced sites to be provided at appraisal to families made homeless by the floods, as of May 31,1996, the Municipality of Rio had delivered 1,772 serviced lots2 in five areas and urbanized an existingarea with about 2,700 lots in Nova Cidade; the Municipality of Petropolis urbanized five existing areas,with a total population of about 531 families, where families whose homes had been destroyed during thefloods and landslides had moved, and is about to complete the urbanization of three more areas with a totalpopulation of 500 families (details on implementation of the resettlement component, including costs,areas, type and number of families, are presented in Annex 1). Due to long initial delays in projectimplementation, rehabilitation of public buildings was limited - compared to the US$11.5 million estimatedat appraisal for repairs to schools, public buildings and state water supply installations, only US$ 1.4million will have been spent (of which US$268,000 are still to be completed) to repair only two schools andtwo water supply pipes. (others were rebuilt or repaired out of municipal funds).

Preventive Objectives

6. The project included works designed to minimize and prevent damage otherwise likely to occur duringany major rainfalls, including optimization of the drainage system through dredging of canals and rivers,channeling of rivers, and construction of regulating dams; slope stabilization; construction of seweragesystems; improvement of solid waste collection and disposal; construction of serviced lots needed for theresettlement of families relocated due to the above works and of families in high risk-areas; and purchase ofemergency rescue equipment needed for flood-relief activities by civil defense. Implementation of the mostcostly components, such as optimization of the drainage systems, stabilization of slopes, construction ofsewerage systems and provision of serviced sites, was substantially in accordance with project objectives.These components accounted for 80% of actual projects costs, in line with appraisal estimates. However,implementation of the less costly components, yet those most necessary to ensure project sustainability suchas solid waste collection and disposal, reforestation, and civil defense, was at most partial. These oftenrequired prior institutional improvements and policy changes which were not addressed.

7. After long delays, the drainage component was redesigned to reflect reformulated priorities, minimizecosts and optimize results (para. 33). It then came to include dredging of 63 km and channeling of 35 kIn,in six river basins of the Baixada Fluminense, construction of the important Campo de Gericino regulatingdam on the Sarapui and Pavuna rivers, and other channeling works in six river basins in the Municipalityof Rio. These works, which have already had a major effect in reducing flooding in the BaixadaFluminense (para. 24 (a)), required total investments of US$176 million (including US$17.3 million by theMunicipality of Rio), of which about US$17 million was still needed to complete this component as ofDecember 31, 1995. These amounts are very close to appraisal estimates. As of May 30, 1996: out of atotal of 51 work lots to be implemented by the State Super-intendency for Rivers and Lakes (SERLA), 39had been completed, seven had a physical progress of more than 80%, and five lots between 20% and 70%completed -- These works are being completed with State and CEF funds. As of that date, the

2 The Municipality of Rio not only distributed urbanized lots to homeless families, as part of the project, but alsoassisted them with the construction of houses out of its own funds.

3

Municipality of Rio had completed its program of macro-drainage works in five rivers; however, thechanneling of the Rio Carioca had not been completed. The Municipality of Rio is contracting theadditional works out of its own funds.

8. The slope stabilization component has been completed, and required a total of US$ 50.6 million(US$28.4 million in Rio and US$22.2 in Petropolis), compared with about US$65 million, includingcontingencies, estimated at appraisal. This was the component best implemented. Although amountsspent have been lower than initially estimated, works implemented were more than estimated at appraisal(122 locations, of which 52 in Rio), since they included 152 work lots in 68 locations in Rio, and 25 worklots in 500 locations in Petropolis. This was because specific technical solutions were adapted to eachsituation including integration of drainage and urbanization works on populated slopes. At appraisal itwas agreed that with the help of technical assistance the State would also prepare an integrated medium andlong term development plan for slope containment in the State of Rio. A plan was prepared under anagreement with the State University of Rio (UERJ). However, this plan was limited to three municipalities,and did not address the areas most affected by the heavy rains of 1996.

9. The construction of the sewerage system component cost US$50.5 million, compared to US$30.3million (including contingencies) estimated at appraisal. However, these resources were concentrated onthe construction of the Gramacho sewerage collection and treatment system.

10. Except for 372 houses which are being completed by the Municipality of Rio (Roquete Pinto),relocation offamilies associated with preventive actions in drainage works and high-risk areas wereimplemented by the State. At appraisal, only minimally serviced sites were to be provided, and funds forhousing loans were not included under the project. Houses of 44 m2 with necessary infrastructure includingwater, sewerage, electricity, drainage, paved roads, community equipment and installations have beenprovided to all relocated families to permit execution of civil works under the drainage component, and tofamilies living in areas of extreme risk. Resettlement was carried out according to a plan with a timetableand budget that required frequent revisions over the life of the project. At appraisal, estimates preparedunder emergency conditions were to resettle about 8,280 families from drainage works areas and 1,600families from high-risk areas. Later analysis, improved design of the drainage component and adoption ofalternative solutions reduced the total number of families to be relocated away from drainage works andhigh-risk areas to about 3,428 families3 . Although delays in concluding construction of necessary housesfor famnilies living in the construction areas have caused bottlenecks in drainage works (para. 34), as ofMay 31, 1996: (a) the State had delivered 2,726 houses (1,942 to families displaced by drainage works and784 to families from high-risk areas) and the remaining 270 houses were about to be completed (Annex 1);and (b) the Municipality of Rio had delivered 266 houses for relocation from high-risk areas. CEF willprovide the US$2.6 million necessary for the completion of this component.

11. At appraisal the project did identify risks of recurring floods due to uncollected garbage andinappropriate disposal of solid wastes in canals and rivers, and provided for six composting plants, 149trucks and other vehicles for solid waste collection, in addition to: (a) the provision of technical assistancefor Municipalities to improve solid waste collection; and (b) the preparation of a solid waste disposalmaster plan for the metropolitan region of Rio de Janeiro, based on a technical, financial, institutional,economic and environmental appraisal. As of mid-1996, technical assistance to municipalities had not

3 Due to the need to include financing for house construction for families relocated from drainage works andrisky areas, it is estimated that the total cost of the resettlement component, when completed, (includingserviced lots and/or urbanization for people made homeless due to floods) will reach US$49.4 million, muchhigher than the appraisal estimate of US$37.6 million (which included US$11.3 million for land purchases).

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been provided. A solid waste master plan was completed in March 1991. However, it focused on physicalinftastructure and equipment needs, neglecting the important operational, cost recovery and institutionalaspects. Based on this plan and on funds available, the solid waste disposal component was downsized tofour composting plants in March 1993. The Japeri plant was later canceled from the project. Threecomposting plants, including recycling facilities, hospital waste incinerators and sanitary landfills withnecessary mobile equipment and vehicles, were contracted by the State Secretary of Works and PublicServices (SOSP). As of May 31, 1996, all equipment had been delivered. The Belford Roxo plant workswere 63% completed and construction was continuing at very slow pace, though there is no funding for theaccess road and garbage continues to pile up at the entrance to the plant. The Nova Iguaqu and Queimadosplants were about 50% completed, but their construction was stopped due to lack of funds. To resumeworks, SOSP would now have to re-negotiate the existing construction contracts. Total actual costsestimates of this component are US$6.88 million, including US$1.84 million necessary for completion(however, SOSP indicated that, due the above delays, completion costs are likely to increase to more thanUS$3 million). At appraisal, a total cost of about US$7.6 million (including contingencies) had beenincluded for this component.

12. Initially the project included the reforestation of 1,200 hectares to stabilize 30 steep slopes, to beimplemented by the State Secretariat of Environment (SMA), through its State Forestry Institute (FIEF).In March 1993, this component was downsized to consist of the reforestation of 900 hectares (in Rio andPetropolis). In fact, in a first phase, 297 hectares were reforested in Rio but were almost completely lostdue to lack of maintenance. In a second phase, 448 hectares were reforested in the municipalities of Rioand Nova Iguacu, but are also not in good condition due to poor maintenance by FIEF. Total costamounted to US$3.9 million, compared to US$7.46 million estimated at appraisal (includingcontingencies). Related to this component and included in the project's technical assistance component, theState was to prepare a comprehensive, detailed, integrated medium and long term reforestation plan for thestate of Rio. This study was not implemented, due to FIEF's inability to submit acceptable terms ofreference (Table 7).

13. The issue of civil defense in case of disaster was to be addressed under the project through: (a) theacquisition of emergency rescue vehicles and equipment; and (b) the preparation, with technical assistancecontracted by GEROE, of an in-depth civil defense plan for the Greater Metropolitan Region of Rio,covering different types of possible disasters (Table 7). The State Fire Fighters Corp (CBERJ) didpurchase emergency fire-fighting, salvage and rescue vehicles, for a total cost of US$5.8 million (comparedto US$6.8 million estimated at appraisal). However, spare parts for this equipment were not purchasedunder the loan, due to a procurement problem. In March 1992, a first civil defense plan was submitted tothe Bank, but this plan was judged unacceptable by the Bank - it focused on the Baixada Fluminense andAvenida Brazil and consisted of additional equipment requirements, a plan for training civil defense staff,and TORs for hydro-meteorological studies. Nevertheless, in 1994, GEROE eventually hired a consultantto execute the plan. Since the consultant was not hired according to Bank guidelines, and comments madeby the Bank in March 1992 and February 1993 to the first plan were seemingly not incorporated in theTORs, it was not financed by the Bank. In the end, implementation was suspended following extinction ofthe State Civil Defense Secretariat and was limited to a series of courses in four municipalities on initialmeasures to be taken in case of emergency.

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Institutional Development Objectives

14. To promote the sustainability of project actions, the project included a number of studies andprograms. Their implementation was uneven. Table 7 gives details on the status and impacts of thesestudies.

(a) Programs and Studies Carried out by the State

15. As already discussed above, the studies for the preparation of the a Slope Stabilization Plan for theState of Rio and of a Solid Waste Management Plan for the Metropolitan Region of Rio de Janeiro werepartially implemented, while the studies for the preparation of a Civil Defense Plan for the MetropolitanRegion and of a Reforestation Plan for the State of Rio de Janeiro were essentially canceled.

16. The project also included a program of environmental education, which was very important for itssustainability. However, implementation was also practically negligible. Due to the inability of the StateFoundation for Environmental Engineering (FEEMA) to produce a concrete program, it was eventuallyagreed to limit the program to a pilot project to test and further develop the methodology (for laterexpansion of the program under the Guanabara Bay Pollution Control project). Since the contract wasawarded and signed without Bank approval, the Bank refused to finance it. Some actions were funded bythe state government, but were limited to training of community agents and production of promotionmaterial.

17. The preparation of a program to strengthen the fiscal administration of the beneficiary municipalities,in order to improve the operation and maintenance of project actions, was initiated in December 1989,under a cooperation contract between the Secretariat of Urban and Regional Development of the State ofRio de Janeiro (SEDUR), UERJ (Nucleo Superior de Estudos Fazendarios- NUSEF) and the Foundationfor the Development of the Metropolitan Region of Rio de Janeiro (FUNDREM). It was only partlycompleted, actions were limited to identification of deficiencies and need for remedial actions, and nofollow-up actions were taken.

18. A number of additional studies were included in the project under the March 1993 amendment. One ofthese was the digital and conventional mapping of the State of Rio de Janeiro and the Paraiba do Sul waterbasin (using satellite imagery). This was successfully implemented under the responsibility of the StatePlanning Secretariat, and is already being used for planning under Guanabara Bay Pollution Controlproject and the preparation of a Water Resources project for the Paraiba do Sul basin.

19. At the Bank request, the preparation of the water resources master plan for the Iguacu River basin wasincluded in the March 1993 amendment to the Loan Agreement. The main objectives of this study were to:(i) contribute to the establishment of a water resources management system of the state of Rio de Janeiro;(ii) elaborate a master plan for the Igua;u/ Sarapui basin with emphasis on flood control; and (iii) outlinelong-range strategies for implementation of the plan and its expansion to other areas. This study, which isprobably the most important implemented under the project, was carried out by a team of the Post-graduateSchool of Engineering of the Federal University of Rio (COPPE/UFRJ) in collaboration with SERLA,under an agreement with the United Nations Development Program (UNDP). When implemented, theprogram would eliminate flooding of inhabited areas in the basin and develop ways to ensure sustainability(principally waste collection, reforestation, natural resource management, and zoning). Since the programwas developed with the continuous participation and full support of affected populations, it is likely to besustainable if implemented. This study paved the way for the development of similar programs for theGuanabara Bay, Paraiba do Sul river basin and others(e.g., the Jacarepagua basin). This study has helped

6

build a very capable team within COPPE/UERJ, which is also now participating in the design of theBaxaida Viva Program (para. 48).

(b) Programs and Studies Carried out by the Municipality of Rio

20. The project included educational programs to be implemented by the Municipality of Rio. Theseprograms, which were to be implemented in the Rio favelas by the Municipal Secretariat for SocialDevelopment, included actions important for project sustainability (handling and disposal of solid waste,low-cost housing construction using self-help methods, prevention of reoccupation of hazardous sites,forestry protection). It also included a program for inspection and control of illegal and informal mineralexploration. Final TORs were approved by the Bank, but, like the State environmental educationcomponent, these programs were never implemented, in part due to safety problems in accessing favelas.The same happened with the program for inspection and control of illegal and informal mineral exploration, for which TORs were approved in April 1991.

21. The program for institutional strengthening of the fiscal administration of the Municipality of Rio,originally included in the project, however, was successfully implemented. In 1988, with its own funds, themunicipality of Rio contracted the first phase of a program of elaboration and permanent updating of itsproperty cadaster. The second phase was contracted under the project, directly from the Rio de Janeiro'sMunicipal Enterprise of Data Processing and Planning (IPLANRIO) in December 1990, and completed inMarch 1991. The third phase ofthis program was also contracted under the project in December 1991,and was completed. Since 1988, this cadaster updating has contributed to substantial improvements in theMunicipality of Rio's financial situation, and has helped to implement the agreed financial action plan(para. 26 and Table 10). IPLANRIO is currently revising and improving this cadaster through the use ofmore precise geoprocessing techniques and better integration with municipal finance and urbandevelopment secretariats.

22. The March 30, 1993 Loan Amendment incorporated a number of additional studies concerned withsocio-economic policies and urban planning in the Metropolitan region of Rio de Janeiro. They included:institutional development and management of the metropolitan region of Rio de Janeiro; review of changesin financial management of the municipalities of the metropolitan region; transport structure in themetropolitan region; data communication network in the metropolitan region; evaluation of conservationunits in the metropolitan region; relationship between health and environmental quality in the metropolitanregion; and evaluation of the socio-economic profile of sub-districts in the metropolitan region. Althoughthese were metropolitan in nature, and hence should have been the responsibility of the State, they werecarried out by the municipality of Rio, on the grounds that Rio's particular geophysical characteristicsmade it dependent on the Metropolitan Region. Furthermore, FUNDREM, the metropolitan agency, hadbeen abolished in 1988. These studies were coordinated by IPLANRIO and were successfullyimplemented. Many of these studies have been published and are currently used by public and privateentities for better integrated urban development planning in the Metropolitan Region. An evaluation of theMunicipality of Rio's resettlement component under the project was also included in the above amendment.This evaluation was contracted in October 1994 and completed in 1995. It is being used to adjustmunicipal housing policies and resettlement procedures.

Capital Costs and Financing Plan

23. At the end of 1996, at full completion of the project, total project costs will amount to US$406 million,only 3% higher than estimated at appraisal. Except for the State of Rio de Janeiro, which contributed moreftian planned (US$46.2 million, compared to an appraisal estimate of US$19.8 million), in the end, after

7

important delays and changes in the financing plan during project implementation, all parties nearly mettheir funding commitments agreed at appraisal -- only US$7.6 million were canceled from the Bank Loan,out of an initial loan amount of US$175 million. CEF's co-financing reached US$187 million, comparedwith the US$190 million initially agreed, and the Municipality of Rio's participation will amount to US$6.0million, compared to US$8.7 million estimated at appraisal for all municipalities. Details on capital costsand financing are presented in Tables 8A and 8B.

Project Results

24. It is difficult to compare results with those expected at appraisal, because these were not quantified, andno indicators of impact were then developed. Nevertheless, the following can be inferred:

(a) with respect to the drainage component in the Baixada Fluminense, studies made under the Rio IguaquMaster Plan show that the project has reduced by 40% the total floodable area (under rainfall conditionssimilar to those of 1988), benefiting about 140,000 people (out of an estimated total population of 340,000in the entire 1988 floodable area). During the heavy 1996 rainfalls which so much affected other areas,about 151 mm fell over the Baixada in a single day (compared with 184 mm in 1988). While not quite asheavy as in 1988, they would normally have caused substantial damage, yet there were no reported floods inthe project areas. Substantial benefits have resulted for the beneficiaries, as the project broke the steadyimpoverishment cycle brought about by repeated floods, and improved health. It is also reported that landvalues have increased in project areas and that inhabitants are investing in small businesses and housingimprovements. At the request of the Bank consultants, UFRJ/COPPE prepared an estimated cost/benefitanalysis for the state project drainage investments in the Iguacu/Sarapui river basin (representing about halfof total project state drainage investments), using the mathematical model developed to prioritize investmentsunder the Rio Iguagu Master Plan. This analysis (which is summarized in Table 9), shows very significantnet benefits. The overall internal economic rate of return (IERR) for the state drainage investments may beestimated at over 50 %. There are no data available on the impacts of the (much smaller) drainagecomponent implemented by the Municipality of Rio, but they are likely to be consistent with those of thestate drainage component.

(b) with respect to the slope stabilization component, there are few quantitative indicators of project impact.However, the Geotechnical Institute of the Municipality of Rio de Janeiro (GEORIO) reports significantdecreases in fatalities and accidents in Rio since 1988, due to the project and subsequent preventiveinvestments of the same nature. The 73 fatalities (and 2,000 homeless) which occurred in 1996 were not inthe project areas (where 58 fatalities occurred in 1988). They were in the western part of the municipality(Jacarepagua) and in another municipality to the West (Itaguai), over which 135 mm fell in a single day (and235 mm over two days). In Petropolis, where 170 deaths were reported in 1988, the number of accidentshas significantly decreased, and no deaths were reported in January-February 1996. Nevertheless, should acomprehensive civil defense plan have been developed as planned under the project and implemented, lossesof lives in 1996 could have been reduced in areas which did not benefit from project investments.Currently, GEORIO is completing its risk mapping program in the favelas of the Municipality of Rio and isestablishing an early warning system based on a network of 30 automatic pluviometers and a short termweather forecasting system. However, this program is limited to the Municipality of Rio.

(c) with respect to the resettlement components, both the state and the municipality of Rio have carried outex-post evaluations through surveys of beneficiaries. For resettlement carried-out by the state, the degree ofoverall satisfaction reached 70% (83% were satisfied with the process). In the municipality of Rio, theoverall degree of satisfaction of interviewees in the four original settlements was in 1995 reported at between

8

84% and 95%, with high marks for access, street paving, and size of lots, but poor marks with respect tosafety, social services, commercial activity, and maintenance of community equipment. Both studiesstressed the absence of the state and municipal governments in public services. No systematic analysisexists of the current status of vacated areas.

Financial Objectives

25. The State of Rio de Janeiro - When the project started, the financial situation of the State of Rio deJaneiro was very weak. This condition worsened during project implementation due to the 1988constitutional changes, which increased tax transfers to the municipalities at the expenses of the states,while maintaining their obligations. Under the State Project Agreement, the State of Rio de Janeiro was tocarry out a time-bound financial action program which included: (a) increased revenues from the valueadded tax (ICMS); (b) increased water and sewerage tariffs charged by the State Water and SewerageCompany (CEDAE); (c) development of a program with the Municipalities to introduce differential usercharges for solid waste services; and (d) development and implementation by SERLA of a program ofsystematic maintenance of the State's macro drainage network. ICMS revenues increased by 12% over1987 in 1989 after having decreased by 8 % in 19884in Reais; The water company did increase its tariffsto bring them to the National Tariff Law; however, as of mid-1996, no differential user charges for solidwaste services had been introduced by the municipalities of the Baxaida Fluminense. SERLA had prepareda program of systematic maintenance, but the resources required to implement such a program had not yetbeen made available. As of mid-1996, the financial situation of the State remained very poor. However,the Alencar administration has started a major state reform program which, when implemented, shouldconsiderably improve the financial situation and efficiency of the state government.

26. The Municipality of Rio de Janeiro - When the project started, the Municipality of Rio had formallydeclared bankruptcy. Under the Rio Project Agreement, the Municipality of Rio was to carry out a time-bound financial action program which included: (a) an evaluation of the Municipality's budgeting andaccounting systems, to be used as a basis for policy formulation to ensure cost recovery and budgeting formaintenance of infrastructure; (b) improvements in property tax revenues (IPTU); (c) improvement in theefficiency of collection of the service tax (ISS); and (d) implementation of tariff adjustments for solid-wastecollection and disposal (Table 10). The Alencar municipal administration (from January 1989 throughDecember 1992) started a major financial recovery. Tax revenues increased continuously from 1988 to1991, but decreased in 1992 -- accumulated tax collection growth since 1988 was 151% in 1991 and 88%in 1992. The cadaster updating and modernization program was the main reason for this improvement5

(para. 21), the second reason being the new federal constitution which increased revenues from tax transferto municipalities (para. 25). Two additional measures taken by the Alencar administration helped improvethe financial situation: (a) two successive 40% increases in real terms of the solid waste collection tariff in1989 and 1990; and (b) a significant reduction in the ISS tax exemption. When the Maia administrationtook over in January 1993, however, the financial situation of the Municipality of Rio was no longer sosatisfactory. The March 1993 amendment to the Loan Agreement included, as condition of disbursementunder the Municipality of Rio's components, the preparation of an evaluation of municipal finances and afive-year projection, including a targeted action plan. Implementation of the updated action plan resultedagain in an improved financial situation of the Municipality - as of December 1995, it had R$990 millionin cash assets, equivalent to 54% of its 1995 fiscal income. Also, in mid-1996, the Municipality of Riowas able to issue US$125 million in Eurobonds with a three-year maturity, which were well accepted by

4 By 1995, ICMS revenues had increased by about 28% over their 1987 levelS Local property tax (IPTU), which was equivalent to 30% of the service tax (ISS), increased its share to 90% of

the ISS in 1992.

9

the financial market.

27. Municipalities of the Baixada Fluminense - Two studies to review municipal financial managementwere carried out respectively by the State (para. 17) and by the Brazilian Institute of MunicipalAdministration (IBAM) for the Municipality of Rio (para. 22). As of mid-1996, however, the impact ofthese studies on the Baxaida Fluminense remained negligible. Recommendations of the first study were notimplemented or discussed with the concerned municipalities, and the second study has not so far beenfollowed by systematic action programs to implement recommendations. The IBAM study showed that the1988 Constitution did significantly increase the fiscal resources of the Baixada municipalities, but this didnot result in significant improvements in their administrative systems and financial and budgetmanagement.

28. The Municipality of Petropolis - The March 1993 amendment to the Loan Agreement also included,as a condition of disbursement under the Municipality of Petropolis components, the preparation of anevaluation of its finances and presentation of a five-year projection including a targeted action plan. TheMunicipality of Petropolis is currently revising and improving its cadaster using precise geoprocessingtechniques, and there is hope that in the medium term this municipality will be able to improve its finances.

C. Major Factors Affecting the Project

29. As already pointed out, the project's objectives were substantially achieved, but with major delays.The Loan was approved on July 5, 1988 and it was signed at the end of September 1988, but only becameeffective December 29, 1988, more than five months after Board approval, due to delays in meetingconditions of effectiveness (Subsidiary Loan Agreements and agreement between the State and theMunicipality of Rio with respect to coordination mechanisms). During implementation, the closing datewas postponed four times; the final closing date (September 30, 1995) was four and a half years beyond theoriginal closing date. Implementation thus took seven years from loan signing, compared to two and a halfyears estimated at appraisal, in line with time required by normal investment projects. Despite these delaysand very substantial amendments, the project formally remained an emergency project until completion.

30. It is necessary to evaluate problems during implementation within the political, institutional andeconomic context at the time. The project was the first major operation financed in the State of Rio deJaneiro by any multilateral agency since twenty years, thus there were no experience or institutionalmechanisms in place to manage such a project. It was also the first Bank loan to CEF, which although ithad absorbed the National Housing Bank (BNH) portfolio and part of its technical staff in 1986, did notitself have experience in managing multilateral operations. Furthermore, implementation took place duringa period of political and macro-economic turmoil. The project implementation period overlapped with fourfederal, three state, and three municipal administrations, with consequent disruptions from lack ofcontinuity and changes in priorities in allocation of funds. The uncertain macro-economic environment alsohad a strong impact. High inflation periods, interrupted by four successive stabilization plans, affected theavailability of funds to FGTS, the main source of counterpart funds for the project, and to the state budget.It also complicated the management of contracts. Finally, the new 1988 Constitution resulted in substantialchanges in the share of tax allocated to states and municipalities, which also impacted on their ability toimplement the project (para. 25).

31. Delays in project implementation were due to a combination of factors subject to federal and stategovernment control (counterpart funds, CEF and FGTS sub-loan approval procedures, state default on itsdebt to CEF, inadequate inter-agency coordination mechanisms for resettlement activities and for studies),implementing agency short-comings (deficient control over contract execution) and contractors'

10

performance (irregularities in implementation of drainage contracts). Bank disbursement procedures alsocontributed to delays. The estimated sources and duration of delays are summnarized in Annex 2.

32. The most significant source of delays was the unavailability of counterpartfunds, which essentiallyparalyzed the project during the first two years of implementation, and continued to slow it downsignificantly during the subsequent two years. This occurred for the following reasons:

(a) normnal CEF sub-loan approval procedures were applied to project investments, which thus requiredindividual appraisal. CEF was very slow in reviewing and approving each sub-project, which was donecentrally in Brasilia. Furthermore, sub-projects had to fit into existing lines of credit, making the financingof some investment categories (such as solid waste disposal) impossible from counterpart funds; finally,the state itself became ineligible for CEF borrowing for practically one year in 1991 because it was indefault with its other obligations to CEF;

(b) CEF did not have control over FGTS, the source of counterpart funds, an unemployment insurancefund administered by CEF but controlled by the Federal Government. Soon after effectiveness, shortlyafter the presidential elections, the priorities for allocating these funds changed6, and only those few sub-loans which had been approved under the project up to that time remained funded. For a variety of reasons(which include a federal freeze on remittances to CEF as part of the Collor stabilization plan, and politicalrivalry between the federal and state governments), sufficient priority to the project in the allocation ofFGTS funds was given only four and a half years later in July 1994, when, upon intervention of theGovernor of the State of Rio, the Federal Government freed all the required counterpart funds;

(c) consequently, by the end of 1991, only US$43.5 million out of the total of US$190.1 million ofcounterpart funds due to be provided by CEF at that date had effectively been provided. To partiallyremedy this situation, a year and a half after effectiveness (in August 1990) the Bank agreed to include theproject under its Special Assistance Program, thus raising the share of Bank financing retroactively to anaverage of 60% over a two year period (1989-90) (up to 80% for critical components) instead of 40%. Theshare of Bank financing subsequently dropped to an average of 30% to make up for these advances. Thissubstantially accelerated disbursements in 1991 (Table 4). Surplus funds derived from the substantial realcurrency depreciation between commitment dates under contracts with suppliers and contractors and actualpayments, and interest accruing on funds deposited in the Special Account and CEF funds reserved for theproject also somewhat helped alleviate lack of counterpart fuinds; and

(d) as the Special Assistance Program ended, however, and it was still apparent that CEF would not meetits counterpart fund commitments, another amendment to the Loan Agreement was negotiated (March1993) in which the State of Rio de Janeiro reluctantly accepted to provide a large part of the missing funds.But the state itself (which delayed signing the amendment by about three months) also had difficulty inmeeting its commitments in 1994. Project implementation and Bank disbursements, however, did notreally pick up again until mid-1994, when the FGTS Board granted priority to the provision of the fulloriginal counterpart requirements of the project; the State provided more than twice the counterpart fundsagreed at appraisal; and the contractual issue in the drainage component now described in the paragraphbelow had been resolved.

6 While previously the FGTS Board (Conselho Curador) had left BNH and subsequently CEF to decide onallocation of funds without much interference, it decided to fully exercise its role in approving fundsallocation.

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33. The second most significant source of delays was in contract execution and design of the statedrainage component. In February 1991, in light of projected very high cost overruns under the sevencontracts for drainage works and an apparent mnismatch between payments to contractors and work actuallyperformed, at the request of the Bank, a technical audit was commissioned of prices and quantities chargedby the contractors. Meanwhile, works stopped as payments were suspended pending the outcome of theaudit. The technical audit was completed in August 1991. It identified over-billing in the amount ofUS$16.4 million (of which US$9.07 million related to amounts disbursed as of March 1991, includingUS$6.48 million from the Special Account, and US$7.33 million to be invoiced but not disbursed).Simultaneously, it had become clear that the entire design of the component had to be reviewed, in order toset up priorities, minimize costs and optimize its results. An Overall Conceptual Design Study was carriedout by SERLA between March and June 1991, resulting in the reformulation of priorities for drainageworks within the available budget, and in design changes aimed at eliminating over-design and minimizingrelocation costs. Provisions for the deduction of overbilled quantities were agreed upon with contractors inearly 1992, and works resumed in March 1992. The Bank approved the recommendations of the OverallConceptual Design Study in August 1992. Amended contracts were signed with contractors in September1992, incorporating refunding provisions and design changes. In the end, contractors refunded theequivalent of US$5.84 million, including US$4.17 million from the Special Account7 . This issue, however,had resulted in an additional two-year delay of the largest project component.

34. Related to the above discussion, a third significant source of delays stemmed from Bank managementof the SpecialAccount. In December 1993, CEF submitted SOEs to the Bank for expenditures insubstitution for the ineligible expenditures against which disbursements had been made earlier out of theSpecial Account under the drainage component. At that time, the Bank became concerned at thedifferences between the requested amount and what the technical audit had shown (see above paragraph),and determined that it was imperative to recover the ineligible expenditures in advance of loan closing. TheBank then decided to start recovery of the Special Account, and also requested a financial audit of theeligible expenditures submitted in the SOEs. It was not until September 1994 that the Bank finallyaccepted the evidence furnished by CEF both with respect to the amounts of ineligible expenditures and theaudit of substitute expenditures. In the meantime, the Special Account reached a zero balance by June1994. It was replenished to US$5 million only in September 1994, and subsequently increased to US$ 10million in February 1995 to allow CEF to face the heavy payment requests from contractors needed tocomplete drainage works. This matter resulted in a serious loss of momentum in drainage works, ascontractors significantly slowed down implementation or demobilized when the Special Account becamedepleted.

35. Although the project in the end successfully resettled a very significant number of families, and did soin accordance with Bank guidelines, the Resettlement component suffered a variety of delays and itselfcaused further delays in the drainage component, particularly in 1994 and 1995. Resettlement activities bythe municipalities of Rio and Petropolis initially suffered from the five-month delay from Board approvalto effectiveness and from difficulties in securing land for the settlements (some of which were resolved onlyby mid- 1990). As a result, resettlement of families made homeless by the floods through the distribution ofurbanized lots, as originally intended, did not take place. Instead, the municipalities provided basicinfrastructure to areas invaded by the homeless (and others), where they had already rebuilt houses in

7 These figures differ from the amounts quoted above for disbursed ineligible expenditures of US$9.07 millionand US$6.48 million. These lower figures were accepted by the Bank in November 1994, after CEFdemonstrated that their US$ equivalent value had dropped between March 1991 (the base date for thetechnical audit) and September 1992 (the date at which amended contacts were signed), due to differences inmonetary correction and changes in exchange rates.

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precarious condition. With respect to relocation of families in high-risk areas (associated with municipaldrainage works and landslide prevention activities), delays occurred due to the need to secure financing forconstruction of the houses, which was not originally included under the project. In the end, houses werefinanced by the municipalities, using their own resources. Municipal resettlement proceeded smoothly afterthis issue was resolved.

36. Resettlement activities by the State of Rio de Janeiro, all of which were carried out in connection withthe drainage component, suffered much more substantial delays, in turn causing delays throughoutimplementation of the drainage component. As with municipalities, resettlement was constrained by theneed to secure financing for house construction (all displaced families were eventually provided withhouses). Initially, resettlement activities were also affected by insufficient participation of beneficiaries(houses too small, resettlement sites too far, resulting in partial abandonment of the new sites) andinvasions of sites under construction by beneficiaries and others. But these problems were addressed, anddid not subsequently recur, when community associations became involved in the process (para. 58). Moreserious and pervasive throughout implementation, was the poor coordination between the various agenciesinvolved in resettlement and SERLA, to adequately integrate resettlement activities within the scheduling ofdrainage works. These coordination problems, together with difficulties in securing land and problems withcontractors (Campo do America site), resulted in serious delays in the completion of drainage works in1994 and 1995 (in particular along the Rio Pavuna).

37. As already explained in Section B, a number of important studies andprograms (Civil Defense Plan,Environmental Education, Strengthening the Financial Administration of Municipalities, and certainaspects of the Solid Waste Master Plan) were not carried out, or, if (partially) carried out, theirrecommendations were not implemented. This can be attributed to a variety of factors and events: (a) lackof more careful and thorough preparation with clearly defined objectives and implementation strategy afterstudies are completed; (b) weak executing agencies (FEEMA, FIEF, Secretariat of Civil Defense, SEDUR)and lack of commitment to the studies; (c) lack of a well focused and consistent effort on the part ofGEROE to monitor their preparation, promote the implementation of their recommendations, enlist thesupport of municipalities, and ensure the necessary inter-agency coordination; (d) sporadic attention paidby both the Bank and CEF, whose attention was clearly focused on resolving issues arising from theimplementation of the investment components; and (e) tight deadlines for contracting and implementationgiven at the time of successive closing date extensions. In December 1994, to accelerate Loan closing,priority was given to the completion of the drainage, slope containment and resettlement components, andthe studies (or necessary supplements to them) which had not yet been contracted were abandoned.

38. The Solid Waste component was the most severely affected by the desire to close the Loan. First,only three out of the six composting plants recommended in the Solid Waste Master Plan were includedunder the project because agreements could not be reached between the State and the other threemunicipalities. Second, as already pointed out, in December 1994, priority in the allocation of Bank fundswas assigned to the completion of other unfinished components, and, since contracts for the compostingplants works had not yet been entered into, Bank financing for these works was canceled, even though allequipment had already been contracted. The responsibility for completing the plants was to be assumed bythe state out of its own funds. To this date (November 1996), timing of completion of this component isuncertain and its efficient operation is far from assured.

39. Among other factors which caused less significant delays in project execution, one should cite thefollowing two: (a) early in the project, the Tribunal de Contas (the state General Auditor) disagreed withBank procurement procedures as being inconsistent with domestic procurement regulations (this resulted inthe cancellation by the Tribunal de Contas of the invitation to bid for the drainage works, causing a three-

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month delay). These disputes were eventually resolved but required considerable discussions; and (b)delays by the Municipality of Rio in submitting audit reports for FY92 resulted in suspension of newcommitments from CEF under municipal components in early March 1994 and suspension of Bankdisbursements to the municipality for about a month (ending August 1, 1994).

D. Project Sustainability

40. Project sustainability critically depends on the development and implementation of integrated actionsin the areas of drainage and slope containment work maintenance, solid waste collection and disposal,reforestation, civil defense, environmental education, and institutional strengthening of municipalities andexecuting agencies. As already indicated, many of these programs were only partially implemented or notimplemented at all, and without integration among them. Consequently, sustainability of the project isuncertain and will remain so unless follow-up programs are carried out.

41. A comprehensive Civil Defense plan for the state was not developed, illustrating problems ofinstitutional overlaps and conflicts of competence between the state and municipal levels. Even for the firefighting and rescue equipment financed under the project, spare parts were not financed and the state wasnot able to present an acceptable maintenance program. The lack of a well-planned strategy to deal withdisasters was apparent during the 1996 floods and landslides which affected the western part of the state

42. The project slope stabilization components within the boundaries of Rio and Petropolis, however, arethe most likely to be sustainable. In Rio, GEORIO has continued to invest heavily in slope stabilizationafter project completion (a total of 349 works , amounting to a total of US$83 million in 1995 and 1996,including US$53 million in 1996). GEORIO has steadily moved from corrective to preventive works andmeasures, and is also establishing an early warning system in collaboration with the municipal civil defenseservices (para. 24(b)). GEORIO currently spends about 10% of its total budget on maintenance, and doesnot report financing difficulties. GEORIO also participates in the "Favela Bairro" program, an integratedfavela upgrading program of the Municipality of Rio, and is well aware of the need to secure communitysupport for long-term sustainability. Sustainability is also enhanced by the PROSANEAR project whichprovides basic sanitation infrastructure in many favelas in Rio, thus reducing erosion from open sewerageon steep slopes.

43. In August 1995, at the Bank's request, SERLA and the Municipality of Rio prepared plans formaintenance of drainage works under their responsibility. These programs summarized institutionalarrangements and estimated costs for maintenance. With respect to state investments implemented bySERLA, the plan, which, among others, included environmental education, removal of solid waste, andconstruction of roads along rivers to prevent re-invasion, was estimated to require about US$3.5 million ayear, to be contracted out under the supervision of SERLA. As of July 1996, however, SERLA had notreceived this budget. Considering the poor financial condition of the State, contributions from the users,communities and municipalities is an alternative that should be explored to finance maintenance andgenerate the right incentives to keep the area safe from floods. The Municipality of Rio de Janeiroestimated total annual costs of maintenance at about US$423,500. Responsibility for maintenance is withthe municipal Department of Urban Roads, but works are contracted out.

44. Sustainability of drainage investments critically depends on the establishment by the Baixadamunicipalities of adequate solid waste collection and disposal systems. The project has financed threewaste disposal and treatment facilities, and the Guanabara Bay project is supposed to finance another four,thus completing the network of necessary processing and landfill facilities. However, sustainability ofthese investments will not be ensured until: (a) the projects are completed (as already mentioned,

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completion is hampered for lack of state funds); (b) institutional responsibilities for operation andmaintenance are defined (contracting to third parties the responsibility for collection, processing and finaldisposal is recommended, possibly under the supervision of local councils made up of representatives ofusers, NGOs and municipal officials); (c) cost recovery mechanisms are defined and in place; and (d) astrong program of environmental education is implemented.

45. Slope stabilization and control of siltation into rivers through reforestation of slopes was identified asan important element in the flood and landslide control strategy. Yet, due to the institutional weakness ofthe state implementing agency, project implementation (in terms of reforested acreage) and maintenance ofplanted areas fell far short of expectations (para. 12). Poor maintenance is attributed to budgetaryshortages of FIEF, difficult working conditions (safety) and lack of community support.

46. Sustainability of drainage works and slope stabilization also depends on successful resettlement andstrong environmental education programs which were not implemented. Prevention of re-invasion of riverbanks and high-risk areas is very important to project sustainability, and both SERLA and GEORIO havetaken approaches which should prevent such re-invasions (urbanization of vacated areas with roads alongriver banks, or community equipment and leisure areas). Satisfaction of resettled people is also essential sothat they will not abandon the new sites to return to vacated or other high-risk areas. This in turn requiresan intense environmental education program, and is strongly linked to the degree of involvement andsupport by the beneficiaries and their representative associations in design as well as implementation andpreservation of community equipment and infrastructure, acceptance of cost recovery, and participation inprograms of solid waste collection. Participation of beneficiaries and their representative associations wasstrong in resettlement activities performed by the state, particularly from 1993 onwards. It was less so inthe municipality, where concerns have also been raised with inadequate maintenance of communityequipment. Nevertheless, as stated in para. 24 (c), the degree of satisfaction of beneficiaries is generallyhigh, and the municipality has now revised its resettlement policies (which will be applied under the "FavelaBairro" project) on the basis of that experience.

47. Finally, sustainability is affected by the institutional weakness of the Baixada municipalities, whichremained marginalized from the project. First, they did not participate in the design or the implementationof the project, and therefore did not have much interest in developing cost recovery mechanisms orstrategies for operation and maintenance of waste facilities and meso and micro drainage investments.Second, sustainability in the long run depends on well run municipalities capable of financially takingcharge of maintenance of the infrastructure installed in the municipality and/or participating in integratedwater basin management. Although two studies were financed under the project to diagnose theirinstitutional and financial problems and propose remedial programs to strengthen them financially andadministratively (one by the state and one by the municipality of Rio), no programs were subsequentlyimplemented to address their specific needs, train their staff and help them contract out relatively expensiveupdates or establishment of property cadasters.

48. For the two most important river basins of the Baixada Fluminense (Iguacu and Sarapui rivers), allremaining drainage-related deficiencies have been clearly identified in the Master Plan for the RiosIguaqu/Sarapui River Basin. This Master Plan (covering a large part of the Baixada Fluminense andupstream areas) was included for financing under the project (para. 19). This plan was widely regarded ashighly successful in presenting an integrated program of actions aimed at complete flood control in theentire basin. The study identified a series of further drainage investments (fully detailed, this time, andsubject to appropriate cost/benefit analysis), and complementary actions in the areas of resettlement,environmental education, solid waste collection, reforestation, control of siltation through paving of steepstreets, recovery of degraded areas, and other techniques of natural resource management; rainfall

15

monitoring, maintenance of investments, and the development of zoning regulations The novelty in thisplan is twofold: (i) it has adopted a water basin management approach, integrating all actions and agentsaround the need to secure the sustainability of the various flood control measures; and (ii) the design,options and locations of the proposed investments and of the associated resettlement needs has been fullydiscussed with local communities and representative associations of affected populations, which considerthemselves as "co-authors" of the plan. Total costs of implementation of the plan is estimated at aboutUS$368 million, including about US$198 million in works (not including resettlement) and US$169 millionin complementary actions. The Iguacu basin water management model should be extended to the rest ofthe Baixada, including the Pavuna river and the canal da Cunha, located outside the Iguacu/Sarapui basin,but equally affected by floods.

49. It is likely that some projects, which followed and partly emerged out of the experience and approachesdeveloped under this project, will contribute in part towards its long-term sustainability: these are: (a) thestate and IDB-financed Guanabara Bay Pollution Control Project, which will reduce the health impacts offloods by providing basic sanitation investments throughout the area, complete the network of solid wastetreatment and disposal facilities in the Baixada, and hopefully develop approaches towards cost recoveryand management which will also be applied to the project-financed facilities; (b) the state and IDB-financed"Baixada Viva" Project, which aims at providing a number of low-income communities in the Baixada withan integrated package of urban infrastructure and social equipment and services, developed in conjunctionwith these communities (including, where relevant, the actions and investments identified under theIguacu/Sarapui River Basin Master Plan); (c) the "Favela Bairro" project of the Municipality of Rio (alsosupported by IDB), with approaches similar to that of the Baixada Viva project, aiming at integrating theRio slum areas ("favelas") into the city (investments include slope stabilization, paving, fencing offprotected areas, reforestation, solid waste collection and environmental education); and (d) thePROSANEAR project, which provides basic sanitation infrastructure in many favelas of Rio de Janeiro(para. 42). In these projects, sustainability is to be clearly based on (i) integration of actions; and (ii)community and beneficiary involvement throughout project design and implementation. Finally, the stateand the municipality of Rio are also preparing flood and landslide control projects in the areas affected bythe 1996 rains (Jacarepagua and Itaguai, in particular).

50. While these projects will undoubtedly contribute to the sustainability of the project, flood and landslideprevention is not their main objective, and it may be that priorities which were identified under the Igua;uriver master plan or other priorities in the other basins may not ultimately be addressed in time or to theextent required to bring a permanent solution to the flood problem in the Baixada. Currently, it isestablished that drainage investments amounting to about US$80 million are included under the BaixadaViva project (compared to total requirements of US$200 million identified for the Iguacu and SarapuiBasins alone).

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E. Bank Performance

51. Bank performance during identification, preparation and appraisal was varied. It was highlysatisfactory in terms of responsiveness to client needs, since the operation was prepared in record time(two and a half months between IEPS and Board approval). Conditions essential to the sustainability of theproject were also well identified, resulting in the inclusion of a number of important studies, plans andprograms under the project (civil defense, slope stabilization and reforestation, environmental education,solid waste collection and disposal, infrastructure maintenance and institutional strengthening programs).However, preparation and appraisal were deficient in four important respects: (i) the timetable for projectimplementation was unrealistic, particularly for the proper design and execution of the large drainageworks and components requiring prior institutional improvements and policy changes-- in retrospect, twoseparate projects for prevention and reconstruction would have been better; if this was not possible (seefootnote 1 on page 1), the project should at least have been split into two phases, an emergencyreconstruction phase, and a second phase incorporating the prevention actions under a normal investmentoperation; (ii) no financial and institutional analysis was made of CEF8, which would have led, first, to anawareness that funds would be provided not out of CEF's own resources but out of FGTS, whose creditallocation mechanisms could be different from those of CEF; and, second, to a realization that CEFindividual subproject approval procedures were incompatible with the emergency nature of this project; (iii)studies and programs needed to ensure sustainability were not adequately defined; and (iv) the Bankwrongly insisted that construction of houses should not be included under the project resettlementcomponent.

52. Bank performance with respect to supervision, however, was on the whole highly satisfactory. Withoutits intensity, level of staff commitment, and continuity, its dedication and flexibility in seeking solutions tokeep the project viable and adapting to unforeseen circumstances and multiple obstacles, the project wouldnot have eventually achieved most of its stated objectives. Supervision was excellent in terms of: (i)quality, in timely identification of issues and assessment of project progress, advice to implementingagencies, contribution to resolution of issues, promoting flexibility within the Bank to help resolve issues(Special Assistance Program, successive adjustments to project scope and timing and to coordinationresponsibilities), follow-up on recommendations and decisions, and enforcement of covenants (Table 10);(ii) intensity of missions, including time spent in the field, and quality, mix and continuity of staff andconsultants, as evidenced in Tables 12 and 13; and (iii) relationships with the borrower (except during thefirst year or so) and executing agencies (except, briefly, with SERLA, when the need for technical audits ofdrainage contracts arose)-- only with GEROE were these relationships somewhat strained at times.

53. There are four areas, however, in which Bank performance during implementation was lesssatisfactory: First, until late 1994, supervision missions did not make an accurate evaluation of the timerequired for completion of contracts. Loan closing extensions were not made based on a detailedassessment of time needed to complete the physical execution of the project. Second, as the missions'attention was absorbed in the enormous problems of counterpart funding, drainage contract irregularitiesand design of the drainage components, and resettlement, not enough systematic and consistent attention

8 The Bank had just completed an appraisal of CEF as Borrower and Executing Agency in connection withanother project (Low Income Water Project- PROSANEAR) that was to be presented to the Board at about thesame time as the project, therefore it had been decided that a separate evaluation would not be necessary.

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was paid to the various studies and programs which were to ensure project sustainability, either to help inthe drafting of satisfactory terms of reference, or to pressure for their implementation. Third, these"sustainability components" suffered from the successive closing date extensions, which repeatedlyimposed unrealistic, yet constantly postponed deadlines and eventually excluded them when priority wasawarded to the completion of the drainage, resettlement and slope stabilization components in December1994-- it would have been better to grant the prevention and sustainability components a timing more inline with regular investment projects when, in 1991, the closing date was extended, or in March 1993, whenthe project was completely reviewed, instead of repeatedly extending the closing date for short periods oftime. Despite very substantial amendments, the project remained an emergency project until completion,while it would have been better to formally transform it into a regular investment project. Fourth, althoughthe Bank was justified in its desire to start the recovery of the Special Account early to press for theresolution of unexplained differences in ineligible expenditures, it took far too long to resolve this issue,since over a year elapsed between the time recovery of the Special Account started pending receipt ofsatisfactory explanations (and SOE audit results for eligible expenditures) and replenishment of the SpecialAccount to levels consistent with the large payment requirements of the drainage contracts at that time.

F - Borrower Performance

54. Because of the complexity of the project institutional arrangements, it is necessary to divide this sectioninto (a) performance of CEF, the borrower; (b) performance of the State and its executing agencies; (c)performance of the participating municipalities; and (d) role of community associations.

55. Performance of CEF. Except towards the end of the project, the performance of CEF wasunsatisfactory with respect to the provision of counterpart funding. Centralization of sub-loan approvalwas also a source of excessive delays and was incompatible with the emergency nature of the project. Itwas not until 1992 that CEF decentralized technical review of subprojects to GERSA, its Rio-based groupin charge of the project, and until 1993 that it also decentralized sub-loan approval to GERSA. Theperformance of GERSA, however, in project supervision, coordination and control was highly satisfactory,after some initial difficulties during the first two years of implementation. In fact, GERSA was called uponto perform many of the supervision, coordination and control tasks which were initially attributed toGEROE. This happened following the identification of irregularities in the drainage contracts, and thevacuum created in GEROE by the change in administration and the reduced participation of the technicalassistance from consulting firms. GERSA's role was also subsequently reinforced by the continuity andprofessionalism of its staff, while continuity in state administration was deeply affected by the threeadministration changes which occurred over the life of the project, and by poor relationships betweenGEROE and the state executing agencies over most of the life of the project (para. 56). In the end, theproject contributed to the establishment within CEF of a highly professional group, which is now beingcalled upon to assist with the implementation of other CEF-financed development projects in the state ofRio.

56. Performance of GEROE and the State Executing Agencies. The conception of the role of GEROEvaried during project implementation with each incoming state administration:

(a) Until the end of 1990 (Moreira Franco administration), GEROE was a special secretariat reportingdirectly to the Governor, with sweeping powers, but a small structure, supported, for project managementand supervision, by a consulting firm specialized in these matters. While adequate to deal speedily withemergency recovery, this structure proved less so in the supervision of more conventional investments andstudies, and did not detect the irregularities in drainage contracts;

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(b) From 1991 through the end of 1994, under the Brizola administration, GEROE was downgraded to thelevel of a division (Gerencia), under the Secretariat of Planning . The structure of GEROE, however, grewenormously, and it established increasingly centralized bureaucratic procedures for project approvals,controls of contract execution, and payments. Although GEROE contracted a project managementconsulting firm to help in these tasks, it used its staff mostly for individual administrative and technicalsupport. During that time, by wanting to become excessively involved in project execution and substitutingexecuting agencies in their role, GEROE became excessively dispersed, antagonized the executing agencies,CEF and the Bank, and, in the end, achieved little. It ended up being by-passed by executing agencies,which dealt directly with CEF. GEROE did register important successes, however, in areas which eitherrequired inter-agency coordination and the organization of beneficiaries and local community associations(resettlement), or high level political intervention (securing funding from FGTS in 1994 for CEF to meetcounterpart funds obligations).

(c) At the beginning of 1995, with the new Alencar administration, GEROE was considerably reduced insize (to 24) and began to report directly to the Vice Govemor. During this year until loan closing, althoughno new works and studies were to be contracted, GEROE became more agile, as matters requiring highlevel decisions were brought up regularly to the projecfts Council of concemed secretaries and presidents ofexecuting agencies. Coordination became more "collegial" and less centralized, and consequently moreeffective. GEROE was abolished after completion of the project at the end of 1995.

57. With respect to the state executing agencies, it is clear that their weakness has considerably affectedproject implementation. Since this weakness was due to fundamental issues of institutional definition, staffqualification and salary levels, and lack of resources, the project did not have institutional strengtheningeffects, not even to guarantee its sustainability. Project management within SERLA improved dramaticallyin early 1991 when the new Brizola administration brought a team of excellent professionals from theFederal University of Rio (UFRJ), who took over management of the project within SERLA. The Alencaradministration maintained this team, guaranteeing continuity and ensuring the successful completion of theRio Iguasu Master Plan. But the experience gained in the project was not intemalized within SERLA,whose professional staff remained marginalized from the project putting the sustainability of the project atrisk. The project did, however, considerably strengthen the COPPE/UFRJ team in the area of water basinmanagement (para . 19). A fundamental restructuring of the state role and its institutions is now in processin the state of Rio de Janeiro.

58. Performance of Municipalities. Except during 1993 (the transition period between the Alencar andMaia administrations), and with the notable exception of the environmental education program, theMunicipality of Rio de Janeiro consistently performed very well both with respect to project execution andfinancial performance. Sustainability of project actions appears better ensured by its well-funded andcompetent institutions, and results from the series of studies which were incorporated in 1993 are beingused to improve urban planning. The project led to the creation of an Advisory Office for ExternalResources, within the municipal secretariat of finance, to coordinate the project. The experience gainedunder the project is now being applied to other extemally-funded projects (such as the IDB-supportedFavela Bairro project). The municipality of Petropolis also performed well, after initial difficulties. Itadopted a project coordination approach similar to that of the municipality of Rio, and the group createdwithin the secretariat of planning (PROGREP) is also now coordinating other extemally-funded programs.The municipalities of the Baixada Fluminense, unfortunately, did not participate much in the project anddid not carry out the financial and institutional strengthening actions which would help ensure projectsustainability.

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59. Role of Conmmunity Associations. The extensive participation of community associations in thedefinition, planning and execution of the state drainage component and associated resettlement activitiesdeserves special mention. Since 1984, municipal community associations of the Baixada Fluminense hadbeen organized into a "Comite de Saneamento da Baixada", which strongly participated in relief activitiesduring the 1988 floods. In 1989, this popular movement, jointly with the Federation of CommunityAssociations of Rio de Janeiro (FAMERJ) organized demonstrations in Brasilia to obtain counterpartfunding for the project. But it was not until 1992 that the Comite de Saneamento, FAMERJ and theFederation of Favela Associations of Rio de Janeiro (FAFERJ) assisted by the Federation of SocialAssistance and Educational Organizations (FASE), a local NGO, started a fruitful dialogue with SERLAand GEROE which led to their full participation in the drainage component and associated resettlementactivities through monthly meetings with executing agencies and organized consultations with groups ofbeneficiaries. Their input resulted in: (a) inclusion of meso-drainage of critical affluents and canals; (b)increase in the size of house constructed area from 22 m2 to 44 in2; (c) resettlement in areas closer to theoriginal locations; and (d) limitation of cost recovery from beneficiaries to 15% during four years.

G. Assessment of Outcome

60. On balance, the project outcome may be rated as satisfactory: the project achieved its major objectives,although with considerable delay (but these delays were partly due to originally unrealistic timetables). Itsbenefits, in terms of avoided floods and landslides and associated fatalities and losses, may be presumedhigh. The project was strongly poverty-oriented and has benefited several hundred thousand low incomefamilies. Resettled families are satisfied. Although sustainability is uncertain, awareness of the need forcomplementary actions is high, and some of these have been incorporated, at least partially, into otherprograms which are building upon the participatory approaches developed under the project. Finally, thevocal participation of associations of residents in the Baixada Fluminense in this as well as the forthcomingBaixada Viva project, and their awareness of missing actions, may become the best guarantee that thesequestions will not be forgotten.

H. Future Operation

61. Performance indicators to monitor and evaluate project results and their sustainability were notdeveloped. Suggested indicators are presented in Table 6. They may be grouped into four broadcategories: (a) indicators of losses of life, health, property and productive time attributed to floods andlandslides; (b) costs of repairs for the state and municipalities; (c) budgets and expenditures in maintenanceof drainage works; and (d) value of land and properties, and rents, in flooded areas and areas subject tolandslides before and after prevention works. The Bank should encourage the state and the municipalitiesto develop such a system. The Bank should also press the state to make available to SERLA adequatebudgetary allocations for maintenance of drainage systems, at least while other complementary approachesare being developed (in particular some cost recovery mechanisms from beneficiaries and municipalities),and to SOSP for the completion of the solid waste component, as agreed before the loan was closed theState and the Municipalities should also be requested to develop a program of regular monitoring ofvacated areas and take necessary measures to avoid re-invasion.

62. As pointed out, the project reduced the flood-prone area in the Baixada Fluminense by about 40%, asignificant achievement. However, there remains another 60% of flood-prone areas which could stillsustain substantial damage. Furthermore, there is an urgent need to address issues of sustainability througha set of integrated actions, as proposed by the Iguaqu River Master Plan. Some of these actions areincluded under the Baixada Viva project (para. 49). A follow-up operation in this sense would helpguarantee the sustainability and continuation of the project. Other follow up operations are also

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conceivable to control floods and landslides in other parts of the state (including the Jacarepagua andSepetiba basins). In light of the poor condition of state finances and limited indebtedness capacity,however, such an operation might not be possible in the short term.

I. Key Lessons Learned

Emergency Projects

63. Large-scale preventive investments, which require time to mature in their selection and design, anddetailed design before contracts are entered into, should not be part of an emergency recovery project andtherefore should be part of a follow-up regular investment project. However, because it is true that longterm prevention measures in high-risk areas have better chances of being addressed during a disaster, whenthere exists momentum for prevention as well as reconstruction, a good alternative might be to group underthe same project: (a) an emergency recovery phase (two-to-three years) to restore basic services, removeobvious obstructions and bottle necks, prepare master plans (such as drainage management, solid waste,and civil defense action plans), generate the coordination mechanisms among the different actors, andprepare a prevention project including associated resettlement plans; and (b) a later, additional, preventionphase (of five years or more) to implement major preventive infrastructure works (such as major hydraulicworks and associated resettlement) and implement the master plans (including, for the civil defense plan,the installation of possibly needed sophisticated forecasting equipment). The second phase would beprepared during the emergency phase along the lines of traditional investment projects.

Complex project Coordination and Management

64. Whenever possible, project design should be simplified. However, when complex projects such as thisone are unavoidable, with many different components carried out by different executing agencies, it seems,from the successive experiences with the various configurations of GEROE, that a possible institutionalset-up for coordination and management could be as follows: (a) a special decision-making Commission,chaired at the highest level and made of top level government officials (involved secretaries and directors ofdecentralized executing agencies), meeting regularly, with powers to decide and expedite matters related tothe project; (b) a project Coordination Unit, with a small, highly professional team, to coordinate andmonitor project implementation; regularly inform the Decision-making Commission and financiers ofprogress and problems to be resolved; assist, train and advise the project teams within the executingagencies; and coordinate resettlement activities; and (c) strong decentralized project teams within eachexecuting agency, responsible and accountable for project implementation, with technical assistance asnecessary. Special attention should be given to the proper establishment of these units during appraisal. Inany event no special institution (such as a special secretariat) should be created to manage and implementthe project. Future projects should not shy away from dealing with the basic institutional constraints, butaddress them from the beginning as an important component.

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Resettlement

1. For the resettlement of homeless due to floods or other catastrophic events and/or resettlement offamilies associated with the implementation of works in high-risk areas, the provision of serviced lotswithout housing is inadequate. The project should provide for financing and construction of housing.

2. To avoid possible delays in the implementation of infrastructure works, the Bank should considerawarding construction of the new houses together with the associated infrastructure works. Theconstruction company would have a strong incentive to complete the housing on schedule in order to beginthe infrastructure work.

3. To avoid later possible delays, when possible the Bank should require that the land necessary forresettlement be available before Board presentation.

4. The project design should include clear actions to avoid re-occupation of high-risk areas.Implementation of these actions should be financed under the project.

5. The 44 m2 houses provided under the project at a high cost of about US$8000 offers severaladvantages. However, simpler design, with standard materials and more land for future expansions canlower the cost and speed up construction. The housing program should also include social infrastructure,be near public transportation and work places, and provide room for small businesses.

Role of Community Associations and Beneficiaries

6. The Bank should strongly insist on the early participation of beneficiaries and their communityassociations in project design, planning and implementation, in particular of resettlement actions -- thedrainage component of the project really advanced when community associations participated andsupported the project.

Sustainability

7. All measures and programs necessary to ensure sustainability are as, or more, important as physicalinvestments. As was done under the project, the Bank should stress their importance from the beginningand include funding to support and implement them. However, in addition: (a) satisfactory and timelyimplementation of these measures should be incorporated in dated covenants, and integrated with theprograms of investments; (b) the project should provide 100% financing for these measures out of the loan,so that they are not affected by problems of counterpart funding (as occurred for the solid waste treatmentplants, for example), and they should be the last components to be eliminated for reasons such as timelycompletion of the project, or reallocation of funds to allow completion of other components; (c) institutionalresponsibilities and cost recovery mechanisms (when relevant) should be stressed; municipalities which willlater be in charge of operation and maintenance should participate in project preparation and design; and, tothe extent possible, these municipalities should share in project financing, even if for a small portion; and(d) contributions from users, comnnunities and municipalities, is an alternative that should be explored tofinance maintenance of infrastructure and generate the right incentives to keep the area safe from floods.With respect to solid waste, a master plan to manage and finance solid waste facilities should be required ata very early stage of the project, including recommended options for possible private sector participation, tobe implemented before the end of the project. If the project is carried out in two phases as suggested above,progress in the implementation of such programs should be a condition of moving ahead with the second

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(preventive) phase.

Counterpart Funding

8. Appraisal of emergency projects should not dispense with financial and institutional appraisal of thefinancial intermediary and co-financier. In the specific case of CEF, for future projects with co-financingfrom FGTS, global co-financing agreements between CEF/FGTS and beneficiaries, for the entire amountsrequired for the life of the project, should be conditions of Board presentation or effectiveness (and not justup to this amount, and conditional on individual appraisal of each sub-project, as was the case under theproject).

Engineering Design and Contract Execution

9. Procurement of large works should not take place before detailed design has been completed or is welladvanced. Furthermore, detailed design should not be contracted, as is often the case in Brazil, from theconstruction company, but from a separate specialized firm, to avoid conflicts of interest. Finally, it is asimportant to supervise contract implementation as well as the procurement process, and executing agenciesas well as the Bank should have specialists in this area involved in project supervision.

Bank Procedures

10. Frequent extensions of loan closing are disruptive. At mid-term, an adequate evaluation should bedone and the loan extended for the period required to bring the project to satisfactory completion.

Type Your Name HereM:\MEKAN\RIO\RFLICRIB.DOCDecember 19,1996 5:42 PM

23 Table I - Page I of 2

RIO FLOOD RECONSTRUCTION AND PREVENTION PROJECT (LOAN 2975-BR)IMPLEMENTATION COMPLETION REPORT

Table 1: Summary of Assessments

A. Achievement of Obiectives Substantial Partial Neglipible Not applicable

Macro policies xSector Policies xFinancial Objectives' xInstitutional Development xPhysical Objectives xPoverty Reduction xGender Issues xOther Social Objectives2 xEnvironmental Objectives3 xPublic Sector Management xPrivate Sector Development x

Likelv Unlikely Uncertain

B. Proiect Sustainability x

HighlvC. Bank Performance satisfactory Satisfactory Deficient

Identification xPreparation Assistance xAppraisal X4

Supervision x5

HiihlyD. Borrower Performance (CEF) Satisfactory Satisfactory Deficient

Preparation x6Implementation:

Provision of counterpart funds xProject Coordination x

Covenant ComplianceProvision of counterpart funds x'

'Rio Municipality and Rio State Financial Action Plans2 Resettlement of population in risk areas3 Control of floods through dredging of blocked waterways, and of siltation and erosion throughreforestation and contention works4 for failure to identify CEF's limitation with respect to use of FGTS funds, and for inclusion of largeportion of non emergency investments, without adequate design'Although supervision of studies and TA programs was sporadic, and management of the Special Accountwas deficient at times, this high rating overall is deserved because, in the midst of multiple adversefinancial, economic, political and managerial conditions in Brazil, the project would never have reached itsobjectives had not it been for the energy, commitment and flexibility of the suprvision teams.6 CEF became involved in the project late and did not inform the Bank of limitations regarding the use ofFGTS funds

24 Table I - Page 2 of 2

Other covenants x

HighlE. Beneficiary Performance: Satisfactory Satisfactory Deficient

(a) State of Rio de Janeiro

Preparation xImplementation:

Project Coordination xCounterpart Funds x

Covenant Compliance xsOperation9 x

(b) Municipality of R. de J.

Preparation xImplementation xCovenant Compliance xOperation x'°

(c) Municipality of Petropolis

Preparation xImplementation xCovenant Compliance xOperation x

Highl Highlysatisfactory Satisfactory Unsatisfactory unsatisfactory

F. Assessment of Outcome x

7although in the end all counterpart funds were provided, delays in their provision significantly affectedproject implementations except for implementation of the financial action plan9maintenance of drainage works, removal of solid waste and maintenance of reforested areas'° maintenance of slope contention works satisfactory, but maintenance of resettled areas less satisfactory

25 Table 2 - Page 1 of 1

RIO FLOOD RECONSTRUCTION AND PREVENTION PROJECT (LOAN 2975 BR)IMPLEMENTATION COMPLETION REPORT

Table 2 - Related Bank Loans/Credits

Loan Purpose Year of Status Loan inCredit Approval Million of

US$Preceding Operations

Ln 0757 Sao Paulo Water Supply 1971 Closed: June 30, 1977 22.0Ln 1009 CEF - MG Water Supply and 1974 Closed: Aug 15, 1980 36.0

Sewerage *Ln 1309 CEF - Second Water Supply 1976 Closed: Sept 30, 1982 40.0

and Sewerage *Ln 1525 CEF - Sewage Collection & 1978 Closed: Sept 30, 1984 110.0

Treatment *Ln 1654 CEF - Sites & Services & Low 1979 Closed: Dec 31, 1984 93.0

Cost Housing *Ln 1656 CEF -Northeast Water Supply 1979 Closed: Dec 31, 1985 100.0

& Sewerage *Ln 1823 CEF- South States Water 1980 Closed: Dec 31, 1985 130.0

Supply & Sewerage *Ln 1850 CEF - 3rd MG Water Supply 1980 Closed: Dec 31, 1986 139.0

& Sewerage *Ln 1970 CEF - Water Supply & 1981 Closed: Dec 31, 1987 180.0

Sewerage *Ln 2193 Metropolitan Development 1982 Closed: June 30, 1985 8.9

ProgramLn 2249 CEF - Water Supply and 1983 Closed: Sept 30, 1989 302.3

Sewerage Sector *Ln 2343 Towns Improvement 1983 Closed: Dec 31, 1988 52.7Ln 2532 Technical Assistance and 1985 Closed: Sept 30, 1990 16.3

Water SupplyLn 2645 Northeast Urban Flood 1985 Closed: Dec 31 1988 100.0

ReconstructionLn 2681 Salvador Metropolitan 1986 Closing Date: Dec 31, 55.0

Development 1996

Following Operations

Ln 2983 CEF - Municipal & low 1988 Closing Date: June 80.0Income Areas 30, 1996

Ln 3129 Rio Grande do Sul - Municipal 1989 Closed: Dec 31, 1995 100.0Development

Ln 3789 Ceara - Urban Development 1994 Closing Date: Mar 31, 140.0and Water Resources 2000Management

* Borrower was originally BNH. CEF and BNH were merged in 1987.

26Table 3 - Page I of I

RIO FLOOD RECONSTRUCTION AND PREVENTION PROJECT (LOAN 2975-BR)IMPLEMENTATION COMPLETION REPORT

Table 3: Project Timetable

Steps in project cycle Date planned Date actual/latestestimate

Identification (Initial Executive Project Summary) April 12, 1988

Preparation/Preappraisal April 18, 1988' April 18-20, 1988

Appraisal May 1- 6, 1988 May 1- 6, 1988

Negotiations May 23-25, 1988 May 31-June 6, 1988

Board Presentation July 5, 1988 June 24, 1988

Signing July 1988 September 29, 1988

Effectiveness August 1, 19882 December29, 1988

Project Completion September 30, 1990 end of 19963

Loan Closing4 March 31, 1991 September 30, 1995

' Planned dates for preparation through negotiations are as per IEPS2 As per Memorandum of the President3Investments in solid waste treatment and disposal facilities are yet to be completed.4 Loan closing date was extended four times, as per the following amendments:

to March 31, 1992 under amendment of March 9, 1990to March 31, 1993 under amendment of April 6, 1992to December 31, 1994 under amendment of March 30, 1993to September 30, 1995 under amendment of December 23, 1994

27

Table 4 - Page 1 of I

RIO FLOOD RECONSTRUCTION AND PREVENTION PROJECT (LOAN 2975- BR)IMPLEMENTATION COMPLETION REPORT

Table 4 - Loan Disbursements: Cumulative Estimated and Actual(US$ million)

Bank FY Cumulative Loan Disbursementand Semester Appraisal Actual as Date of Final

Ending Estimate Actual % of Estimate Disbursement

1989 Dec. 1988 42.10 22.50 53.4Jun. 1989 95.50 22.50 23.6

1990 Dec. 1989 134.40 27.09 20.2Jun. 1990 168.00 31.48 18.7

1991 Dec. 1990 174.00 76.95 44.2Jun. 1991 175.00 98.32 56.2

1992 Dec. 1991 101.21 57.8Jun. 1992 109.44 62.5

1993 Dec. 1992 111.97 64.0Jun. 1993 112.87 64.5

1994 Dec. 1993 112.87 64.5Jun. 1994 112.92 64.5

1995 Dec. 1994 133.85 76.5Jun. 1995 161.48 92.3

1996 Dec. 1995 167.30 95.6 Dec.31, 1995

180.00

160.00

140.00

120.00

.210000

Ue 80.0o

60.00

40.00

20.00

0.000') a - '. U) toOD o) a) 0) 0)

0) ) a) 0) 0)0 0) 0)

Bank FY

-4+Estimate -_-Actual -

28 Table 5 - Page I Of 5

RIO FLOOD RECONSTRUCTION AND PREVENTION PROJECT (LOAN 2975-BR)IMPLEMENTATION COMPLETION REPORT

Table 5: Key Indicators for Project Implementation

Key implementation indicators Estimated Actual

L In MOP and Loan Agreement

1. Road and bridge reconstruction, 122 km. of roadsrehabilitation & repair 24 bridges:

M. State: 110 km of roads and 17 (see section II)bridges, and 7.5 km ofretaining walls.

N. M. of Rio: 12.5 km of roadsand 7 bridges and 3.2 km ofretaining walls

2. Drainage systems dredging and canalization State: dredging andworks, construction of canalization works in sixoutfalls, dikes, and repairs to river basins:existing systems in 14 dredging of 62.8 km,drainage basins (primary, canalization of 35 km;secondary and tertiary construction of a retainingdrainage) (eight of which the dam in two parts;responsibility of the state) M. of Rio: canalization works

in six rivers

3. Slope Stabilization M. of Rio: 52 locations(removal of debris, securing rock Other municipalities:70 (see section II)formation, drainage channels, retaining locationswalls and barriers, planting vegetation)

4. Sewerage 370 km of sewerage; 14,630sewerage connections; 5pumping stations; and 2 (see section 11)filtering and biologicaltreatment plants

5. Solid Waste Disposal 6 solid waste compostingplants; 149 solid waste (see section II)collection vehicles'

Solid waste collection vehicles are mentioned in the Memorandum of the President, but not in the LoanAgreement

29 Table 5 - Page 2 Of 5

Key implementation indicators Estimated Actual

6. Reforestation 1,200 hectares on 30 slopes (see section II)

7. Serviced sites for low-income families 11,000 minimally serviced lots(4,000 lots to be provided bythe state to resettle 16,000people and 7,000 by the M. ofRio to resettle 28,000 people) (see section II)including:(a) 1,120 low-income

families made homelessby the floods;

(b) 8,280 families relocateddue to civil works; and

(c) 1,600 families in high-risk areas

8.Public Buildings and Installations Repair and rehabilitation of:(a) 129 municipal (89 in Rio

and 30 in othermunicipalities) and 37state schools;

(b) reconstruction of 6 other (see Section 2)state public buildings; and

(c) repair and protection ofstate water supplyinstallations (onepumping station, 16 smallreservoirs and 8 sectionsof pipes).

9. Civil Defense Provision of 21 emergencyrescue vehicles and equipment(amphibious trucks, salvage (see section II)and lighting equipment, heavyduty pumps and cranes)

30 Table 5 - Page 3 0f 5

Key implementation indicators Estimated Actual

II. in Subsequent AmendmentsModified Indicators

1. Road and bridge reconstruction, State: repaving of roads, paving repairs andrehabilitation & repair (March 1993) constructing retaining walls improvements and drainage

and related drainage, repair of works on 10 roadssome bridges, selected road reconstruction/repairs to 10maintenance and road bridges; retaining walls atmanagement equipment for various points of 7 roadsAvenida Brasil;M. of Rio: repaving of roads,construction of retaining wallsto provide drainage and repairof 3 bridges

3. Slope stabilization (March 1990) M. of Rio: 49 locations M. of Rio: 152 lots (1,000Other municipalities:70 work sites); M. of Petropolis:locations 25 lots (500 work sites)

4(a). Sewerage (March 1990) 9.5 km of primary sewagecollectors, 60.5 km ofsecondary sewage collectors, (see 4.b below)17,000 sewerage connections,3 pumping stations and Itreatment plant.

4(b). Sewerage (March 1993) subprojects for installation of 14.3 km of primaryprimary sewage collectors, collectors, 67 km ofsecondary sewege collectors, secondary sewage collectors;pumping stations and a 9,718 sewerage connections;treatment plant. 3 pumping stations and I

treatment plant (stabilizationpond)

5. Solid waste treatment (March 1993) Solid waste system in the 3 solid waste compostingmunicipalities of Nova Iguaqu, plants 2(each with recyclingQueimados,Belford Roxo and facilities, hospital wasteJaperi incinerator and sanitary

landfill); 32 mobileequipment for plants andlandfills; and 4 collectionvehicles

2not yet completed

31 Table 5 - Page 4 Of 5

Key implementation indicators Estimated Actual

6. Reforestation (March 1993) 900 hectares in Rio and 745 hectares in 13 slopes (12Petropolis slopes, riverbanks, in Rio de Janeiro and one inmangrove recovery and pilot Nova Iguaqu)program of urban forestrecreation use

7 (a). serviced sites for resettled families 12,400 lots (7,000 urbanized(March 1990) lots to be provided by the state

and Petropolis to resettle35,000 people and 5,400 (see 7 (b) below)minimally serviced by the M.of Rio to resettle 21,600people)

7 (b). Serviced sites for resettled families 6,500 lots (3,500 urbanized 9,233 serviced lots (4,089 by(March 1993) lots to be provided by the state the state, including 1,033 in

to resettle 25,000, and 3,000 Petropolis, and 5,144 by theurbanized lots to be provided M. of Rio) for:by the M. of Rio to resettle (a) 5,805 low income10,000) families living in areas

which benefitted fromurban infrastructureprovided under theproject, including mostfamilies made homelessby the floods;

(b) 1,942 families displacedby civil works under thedrainage component3 ;

(c) 1,050 families displacedfrom risk areas; and

(d) 436 families to benefitfrom future distribution.

In addition, the projectfinanced the provision ofwater/sewerage to MorroDona Marta.

3992 units are yet to be delivered in Barro Vermelho and Campo do America

32 Table S - Page 5 Of 5

Key implementation indicators Estimated Actual

8. Public Buildings 37 schools and 6 public (a) two municipal schoolsbuildings by the state and 89 (I in Rio and I inschools by the M. of Rio (no Nilopolis); andfinancing beyond March 31, (b) repairs and1993) improvements to 2 water

supply pipes inPetropolis (75%completed, worksparalized due todifficulties withcontractors)

9. Civil Defense acquisition of emergency 12 fire-fighting trucks, 9rescue vehicles and equipment search and salvage vehicles(remaining wording identical and 2 cranes.to section I above)

3.3Table 6 - Page I of 3

RIO FLOOD RECONSTRUCTION AND PREVENTION PROJECT (LOAN 2975-BR)IMPLEMENTATION COMPLETION REPORT

Table 6 - Key Indicators for Project Operation

Indicators Estimated Actual

I. Key Operating Indicatorsin Memorandum of the not available not available

President

II . Modified Indicators

1- Rainfall Measured by Feb. 3, 1988: 184 mmBangu Monitoring Station Feb. 13, 1996: 151 mm

2- Flooded Area 40% less than the 1988 Rio During the heavy rains offlood, in similar heavy rains 1996, flooded area in the

project areas was notsignificant

3- Water Level and Volume in During February 1996 thethe Project-financed Gericino water level in this dam reachedDam 19m, and about 5.5 million

cubic meters could becontained

4 - Incidence of Landslides in During the heavy rains ofthe Project Areas 1996, no significant landslides

were reported in the projectareas of Rio and Petropolis,while important landslidesoccurred in areas outside theproject (Jacarepagua andItaguai).

5- Satisfaction Survey ofResettled Families Surveys carried out by the

State of Rio and theMunicipality of Rio indicatedthat 70% of the familiesrelocated by the State and 85%

34 Table 6 - Page 2 of 3

Indicators Estimated Actual

of the families relocated by theMunicipality are satisfied.

6- Deaths due to Floodingand Landslides In the Municipality of Rio:

1988 581989 91990 51991 21992 81993 141994 11995 51996 45

HI. Modified Indicators forFuture Operation (inaddition to the above

indicators)

1 - Changes in Tax Collection(IPTU) by the Municipalitiesof the Project Area

2 - Flooded Area

3 - State and MunicipalBudgets for Maintenance ofDrainage Systems, Slopes andForests

4- Incidence of DiseasesTransmitted by Water

* Hepatitis* Leptospirosis

6 - Losses of Property due to:(a) floods; and (b) landslides

Table 6 - Page 3 of 3

Indicators Estimated Actual

7 - Interruptions of Train andRoad Traffic

8 - Cost of Repairs and ofDealing with Emergencies

9 - Casualties (deaths, andinjured) and homelessnessrelated to floods andlandslides, in relation torainfall

Table 7 - Page I of 11

RIO FLOOD RECONSTRUCTION AND PREVENTION PROJECT (LOAN 2975-BR)IMPLEMENTATION COMPLETION REPORT

Table 7: Technical Assistance and Studies Included in Project

Study Purpose as defined at appraisal/redefined Status Impact of Study

Studies to be Carried out by the State

1. Civil Defense Plan for Defined at appraisal. For different types of possible After purchase of civil defense Negligiblethe Greater disasters (floods, landslides, fires in high rises, toxic equipment, a plan was submitted toMetropolitan Region waste spillage, etc.): assessment of risks and the Bank in March 1992, focused on

vulnerability to disasters, physical and institutional the Baixada and Av. Brazil,arrangements to prevent disasters and/or minimize consisting of additional equipmentdamage and reduce risks, institutional preparedness for requirements, a plan for trainingresponse to disasters, multi-agency coordination, civil defense staff ,and TORs forreconstruction mechanisms and financing sources. hydro-meteorological studies.

Comments made by the Bank in wMarch 1992 and February 1993 o0were seemingly not incorporatedinto the TORs of the consultanteventually hired by GEROE toexecute the plan in 1994. Since theconsultant was not hired accordingto Bank Guidelines, and the Bankdid not agree to fund some of theproposed activities, this plan was notfinanced by the Bank. In the end,implementation was limited to aseries of courses in fourmunicipalities for mayors, municipalofficials and community leaders oninitial measures to be taken in caseof emergency. Suspended followingabolition of Civil DefenseSecretariat.

Table 7 - Page 2 of 11

Study Purpose as defined at appraisal/redefined Status Impact of Study

2. Medium and long Defined at appraisal. Discussion of technical, financial Not implemented, due to IEF's Noneterm reforestation and institutional aspects of the program, description of inability to submit acceptable termsplan for the state of the state secretariat of the environment and its of reference.Rio de Janeiro institutional capacity to implement the program;

proposed arrangements for protecting the reforestedareas; discussion of land tenure issues; and schedule forimplementing the program.

3. Program for slope Defined at appraisal. Comprehensive, detailed, Prepared by a consulting firm under Identified 18 areas of extremecontainment in the integrated medium and long term development plan for an agreement with UERJ, but limited risk in these threestate of Rio slope stabilization in the state of Rio to Sao Gonsalo, Niteroi and municipalities, and proposed

Petropolis. and implemented anenvironmental educationprogram in these communitiesaiming at improved safety.Since the plan did not cover therest of the state, it did notaddress the areas most affectedby the 1996 heavy rains(Jacarepagua/Itaguai).

Table 7 - Page 3 of 11

Study Purpose as defined at appraisaVredefined Status Impact of Study

4. Program to improve Defined at appraisal. Preparation of a master plan for Contracted in August 1990 to a The program resulted in thethe management of final disposal of solid waste in the metropolitan region of consulting firm. Completed in inclusion of three wastesolid waste RJ, including phasing of proposed actions, identification March 1991. Focused on physical disposal and treatment facilities

of operational costs of existing services, financial infrastructure and equipment needs, under the project (Novaprojections for implementing the proposals, neglecting operational, cost recovery Iguacu, Belford Roxo andrecommendations for appropriate tariff and other charges and institutional arrangements. Queimados), and identified 4to ensure full cost recovery, and policies and Resulted in the contracting of other which are included undermechanisms by which participating municipalities will engineering designs for treatment the Guanabara Bay pollutioncontribute towards capital and operating costs and and disposal plants in three control project (Sao Gonsalo,recover these from beneficiaries. municipalities. Sao Joao de Meriti, Niteroi and

Mage). It failed, however, toestablish an institutional(including role of privateoperators) and cost recoveryframework for themunicipalities to manage thesefacilities and improve waste wcollection. oo

Table 7 - Page 4 of 11

Study Purpose as defined at appraisal/redefined Status Impact of Study

5. Program in Defined at appraisal. To be designed to ensure Following presentation of Negligible. Inability to carryenvironmental conservation and maintenance of actions included under unsatisfactory TORs, and inability of out such a program will impacteducation the project. FEEMA to produce a concrete negatively on project

program (link with works under the sustainability.project, methodology, areas ofconcentration, resources, etc..), itwas eventually agreed to limit theprogram to a pilot project to test andfurther develop the methodology(for later expansion of the programunder the Guanabara Bay de-pollution project). As the contractwas awarded and signed withoutBank approval, and the Bank did notconcur with its timing, the Bankrefused to finance it. Some actionswere thus funded by the state wgovernment, limited to training of NOcommunity agents and production ofpromotion material.

6. Program to Defined at appraisal. Preparation and implementation of Initiated in December 1989, under a Since there was no follow up tostrengthen the fiscal a program to improve tax administration (revision of cooperation contract between the studies initial diagnosticsadministration of the cadasters and improvements in financial administration) SEDUR, UERJ (Nucleo Superior de and recommendations, thebeneficiary in Petropolis and the seven Baixada municipalities, Estudos Fazendarios- NUSEF) and impact of the study wasmunicipalities including identification of deficiencies; proposing a FUNDREM. Only partly completed negligible.

program of remedial actions; assisting with the (limited to identification ofcontracting of consultants and purchase of necessary deficiencies and need for remedialcomputer equipment; and training of municipal officials. actions).Intended to better ensure sustainability of project actionsby improving their ability to contribute to operation andmaintenance.

Table 7 - Page 5 of 11

Study Purpose as defined at appraisal/redefined Status Impact of Study

7. Water resources Included in Loan Agreement amendment of March 1993. Carried out by a team of If implemented, the programmaster plan for the Main objectives are: (I) to contribute to the establishment COPPE/UFRJ in collaboration with would eliminate all inhabitedIguaqu river basin of the water resources management system of the state of SERLA, under an agreement with floodable areas in the basin and

Rio de Janeiro; (ii) elaboration of a master plan for the UNDP. Final report sent end- develop ways to ensureIguasu/ Sarapui basin with emphasis on flood control; and September 1996. sustainability (waste collection,(iii) outline long-range strategies for implementation of reforestation, natural resourcethe plan and its expansion to other areas. management, zoning, etc).

Since the program wasdeveloped with the continuousparticipation and full support ofaffected population, it is likelyto be sustainable ifimplemented. This studypaved the way for thedevelopment of similarprograms for the GuanabaraBay, Paraiba do Sul river basin 4

and other. C

8. Digital and Diagnostic and analysis of the physical, social and Centralized in Fundagao CIDEconventional environmental situation of the state and the Paraiba do (SECPLAN), data will bemapping of the State Sul water basin (which also extends over the states of widely used in planning byof Rio de Janeiro Minas Gerais and Sao Paulo), using satellite imagery. researchers and public andand the Paraiba do Output to include maps on: soil use and vegetation, private agents. It is also beingSul water basin urban occupation, physical/environmental used in planning under the

characteristics; water resources; and main road Guanabara Pollution Controlinfrastructure. project and the preparation of a

Water Resources project for theParaiba do Sul basin

Table 7 - Page 6 of 11

Study Purpose as defined at appraisal/redefined Status Impact of Study

Studies to be carried-out by the Municipality of Rio

9. Educational program Defined at appraisal. Final TORs approved by Bank Not implementedfor Handling and mission of September 1993. To be implemented in Riodisposal of solid favelas by the Municipal Secretariat for Socialwaste Development, with materials and equipment purchased

under the project.

10. Educational program Defined at appraisal. Final TORs approved by Bank Not implementedfor Low-cost housing mission of September 1993. To be implemented in Rioconstruction using favelas by the Municipal Secretariat for Socialself-help methods Development, with materials and equipment purchased

under the project.

11. Educational Defined at appraisal. Final TORs approved by Bank Not implementedprograms for mission of September 1993. To be implemented in Rio .

Prevention of favelas by the Municipal Secretariat for Socialreoccupation of Development, with materials and equipment purchasedhazardous sites under the project.

12. Educational Defined at appraisal. Final TORs approved by Bank Not implementedprograms for mission of September 1993. To be implemented in Rioforestry protection favelas by the Municipal Secretariat for Social

Development, with materials and equipment purchasedunder the project.

13. Program for Defined at appraisal. Terms of reference approved byinspection and April 1991. Not implementedcontrol of illegal andinformal mineralexploration

Table 7 - Page 7 of ll

Study Purpose as defined at appraisal/redefined Status Impact of Study

14. Strengthening of the Defined at appraisal. The municipality contracted in Completed. Contracted directly Contributed to substantialfiscal administration 1988 a program of preparation and permanent updating from IPLANRIO in February 1990 improvements in the M. ofof the Municipality of its property cadaster. (Phase I) and December 1990 (Phase Rio's financial situation andof Rio II). Phase II was completed in permitted implementation of

March 1991. Now being updated/ the agreed financial actionimproved on basis of latest plan. Now beingtechnologies. revised/refined using more

precise geoprocessingtechniques and betterintegration with municipalfinance and urban developmentsecretariats.

15. Institutional Included in amendment, dated March 30, 1993. Contracted directly from IBAM in Identified and discussed withdevelopment and Summary of history of metropolitan organizations in June 1994. Completed in May 1995. municipal authorities duringmanagement of the RMRJ and their legal framework; identification of various seminars, mechanismsmetropolitan area of problems including lack of mechanisms for coordinating for better integration of actionsRio de Janeiro services of metropolitan interest; and identification and in areas of common interest.

evaluation of alternative means (including of legal, Results are being used by statefinancial and organizational implications). and municipal governments for

project planning (including forthe Guanabara Bay de-pollution project)

Table 7 -Page 8 of 11

Study Purpose as defined at appraisaUredefined Status Impact of Study

16. Review of changes Included in amendment dated March 30, 1993. Analysis Contracted directly to IBAM in June Study perfonned a thoroughin financial of revenues and expenditures of the 17 municipalities of 1994. Completed in May 1995. diagnostic of state of municipalmanagement of the the metropolitan region of RJ over the period 1985-92. finance and administration ofmunicipalities of the Study would document trends overtime (noting impact of each municipality. Determinedmetropolitan region 1988 Constitutional Reform), and disparities between that 1988 Constitution didof RJ. municipalities, and recommend actions within the increase significantly resources

control of municipal administrations to increase revenues obtained from tax collectionand improve effectiveness of expenditures. (local taxes and automatic tax

transfers from federal and stategovernments), but did notresult in significantimprovements in administrativesystems and financial andbudget management. Studyrecommended strong emphasison professional training ofmunicipal officials and _increased delegation of wauthority from mayors tofinance secretariats. Study hasnot so. far been followed bysy stematic action programs topromote implementation ofrecommendations at themunicipal level.

17. Structuring transport Included in amendment dated March 30, 1993. (A) Contracted in September 1994. Results are being used by allin the metropolitan improving information data base through an Completed in 1995. Surveyed 5,000 transport planning agencies. Aregion of RJ. origin/destination household survey, field traffic counts household and provided first well- permanent working group

and assignment and calibration of traffic flows; (b) documented data on origin and within IPLANRIO is workingevaluation of mechanisms for more permanent destination by transport mode and on the basis of study resultsinstitutional arrangements for coordinating transport type of households. towards the articulation of aplanning in the region. mass transport plan for the

metropolitan area. Results arealso being used in thepreparation of the Rio MassTransit Project.

Table 7 - Page 9 of 11

Study Purpose as defined at appraisal/redeflned Status Impact of Study

18. Data communication Included in amendment dated March 30, 1993. (A) contracted in October 1994. Equipment limitations innetwork in the Survey of availability of consistent data on the physical Completed in 1995. municipalities other than M. ofmetropolitan region and demographic characteristics, municipal revenues and Rio prevented theof RJ. expenditures, environmental quality and coverage of establishment of a data base for

infrastructure, and educational and health facilities in the the metropolitan region.17 municipalities of the metropolitan region; (b) (Equipment could not bepreparation of a plan for the incorporation of these data procured under the project)into a regional data base; and (c) testing of system in The data base was establishedRio, Niteroi and Nova Iguasu. for the M. of Rio on the basis

of data available in themunicipal secretariats, and is apowerful help to urbanplanning. This interactive database and is now beingconstantly updated andextended to other sectors (basicsanitation, ICMS collection).Data was recently consolidatedinto the first comprehensivestatistical yearbook for the M.of Rio.

19. Evaluation of 10 Included in amendment dated March 30, 1993. Assess Contracted in October 1994. Study and maps about to benature conservation physical and biological characteristics and management Completed in 1995. Detailed published. Stateunits in the status of federal, state and municipal environmental diagnostic and management Environmentalmetropolitan region conservation units in the RMRJ (including detailed recommendations for 3 federal, 3 Secretariat/FEEMA interestedof RJ. mapping) and make proposals for future monitoring and state and 4 municipal conservation in results but, similar to

management for each area, the recuperation of degraded areas, with strong participation of IBAMA, have not followed upsections, and the creation of new conservation units. municipal environmental secretariat, on recommendations. Study

but little interest from IBAMA and results are being better used bystate environmental secretariat the Rio municipalduring the execution of the study. environmental secretariat for

the conservation areas under itsjurisdiction.

Table 7 - Page 10 of 11

Study Purpose as defined at appraisal/redefined Status Impact of Study

20. Relationship Included in amendment dated March 30, 1993. Contracted from Fiocruz in June Dissemination and discussion

between health and Document spatial incidence of specific health problems 1994. Completed in 1995. Resulted of results was carried out in

environmental and risks and their correlation with the supply of basic in mapping incidence of diseases various courses and seminars

quality in the sanitation infrastructure, public health services, and and their link with environmental directed to municipal health

metropolitan region pollution, and define specific intervention strategies to and sanitary conditions on the basis secretariats in the metropolitan

o RJ. address them. of information available in region. Same work now beingmunicipal health secretariats. done by Fiocruz in the otherPerformed in the M. of Rio, and two municipalities of theothers (including Belfort Roxo) metropolitan region.

21. Evaluation of the Included in amendment dated March 30, 1993. Contracted in October 1994. Study shows high degree of

project resettlement Evaluation of socio-economic impact of the urbanized Completed in 1995. satisfaction of resettled persons

component. lots component of the Rio Flood Reconstruction Project, with houses and basicincluding a survey of areas which were vacated, and, infrastructure provided, but

based on assessment, propose changes in policies and also complaints of lack ofprocedures used in resettlement projects in the RMRJ. community services (in

particular security, health, tneducation, tree planting andleisure infrastructure). Studyshows strong link betweenpermanence in the area anddegree of beneficiaryinvolvement in projectplanning and execution, andenvironmental education.Results are being used to adjustmunicipal housing policypolicies, in particular. In theframework of the "Favela-Bairro" project.

Table 7 - Page 11 of 11

Study Purpose as defined at appraisal/redefined Status Impact of Study

22. Evaluation of the Included in amendment dated March 30, 1993. Contracted directly from Fundasao Study provided and tested asocio-economic Assemble socio-economic data from existing census and Universitaria Jose Bonifacio in methodology forprofile of other data bases; produce indicators of socio-economic September 1994. Completed and disaggregating data collectedsubdistricts in the conditions by sub-districts; analyze changes between published in 1995. under federal householdmetropolitan region censuses; and disseminate results. surveys at the level of theof RJ. metropolitan region to the

municipal and sub-municipallevel. Study permitted adetailed geographic assessmentof key socio-economicconditions (demographic,income, education, economicactivity, family, housing andbasic sanitation).

0.f

Table 8A - Page 1 of 1

RIO FLOOD RECONSTRUCTION AND PREVENTION PROJECT (LOAN 2975- BR)IMPLEMENTATION COMPLETION REPORT

Table BA- Project Costs

Appraisal Estimate Actual/Latest Estimate

of which to

Project Component Local Foreign Total Local Foreign Total be Completed

(USS Million) (USS Milion)

Roads and Bridges- A.1 State 26.76 1.24- B.1 Municipality of Rio 9.62

Subtotal 21.15 14.69 35.84 21.47 14.91 36.38 1.24

Drainage-A.2 State 158.85 16.90- B.2 Municipality of Rio 17.33

Subtotal 101.89 54.86 156.75 114.52 61.66 176.18 16.90

Slope Stabilization- B.3 Municipality of Rio 28.48-C.1 OtherMunicipalities 22.16 0.06

Subtotal 49.06 8.66 57.72 43.04 7.60 50.64 0.06

Sewerage50.49

Subtotal 17.45 9.40 26.85 32.82 17.68 50.49

Solid Waste- A.4 State 11 6.88 1.84

Subtotal 4.38 2.36 6.74 4.47 241 6.88 1.84

Reforestation- A.5 State 3.93

Subtotal 5.59 0.99 6.58 3.34 0.59 3.93

Serviced Sites 2/- A.6 State 28.39 1.97-B.4 Municipality of Rio 21.03 0.58

Subtotal 30.72 3.43 34.15 44.45 4.96 49.42 2.56

Public Buildings-A.7 State 1.11 0.38-B.5 Municipality of Rio 0.26-C2 Other Municipalities 0.01

Subtotal 9.79 1.73 11.52 1.17 0.21 1.38 0.38

Civil Defense- A.8 State 5.77

Subtotal 6.01 6.01 0.00 5.77 5.77

Technical Assistance- A.9 State 20.61 0.54-B.6 Municipality of Rio 4.53

Subtotal 3.29 0.58 3.87 21.37 3.77 25.14 0.54

Project Administration- A.10 State (GEROE) 31

Subtotal 1.40 1.40

Project Base Cost 244.72 102.71 347.43

Physical Contingencies 25.21 10.58 35.79Price Contingencies 7.33 3.07 10.40

Total Project Cost 277.26 116.36 393.62 286.651 119.65 406.21 23.51

Total Spent as of December 31, 1995 382.70

Notes:

11 Representatives of SOSP indicated that, due to major delays in the construction of the three solid waste composting piants of Belford Roxo,Queimados and Nova Iguacu their completion may in fact require about US$3 million.2/ Appraisal estimate for serviced sites includes US$11.27 million for land purchases.31 the costs of GEROE were paid by the State. While the amount was not indicated, it is probably indluded in the technical assistance component (A9).

48 Table 8B- Page I of 1

RIO FLOOD RECONSTRUCTION AND PREVENTION PROJECT (LOAN 2975- BR)IMPLEMENTATION COMPLETION REPORT

Table 8B - Project Financing

Appraisal Estimates Actual EstimatesOf which to

Source Local Cost Foreign Cost Total Local Cost Foreign Cost Total be Completed

(US$ million) (US$ million)

World Bank 58.6 116.4 175.0 47.8 119.55 167.4

Caixa Economica Federal 190.1 190.1 186.6 186.6 8.7

State of Rio de Janeiro 19.8 19.8 46.2 46.2 14.2

Municipalities 8.7 8.7 6.0 6.0 0.6

Total 277.2 116.4 393.6 286.7 119.55 406.2 23.5

Total Spent as ofDecember 31,1995 263.2 119.55 382.7

49 Table 9 - Page 1 of 2

RIO FLOOD RECONSTRUCTION AND PREVENTION PROJECT (LOAN 2975-BR)IMPLEMENTATION COMPLETION REPORT

Table 9: Economic Costs and Benefits

No financial or economic cost and benefit analyses were carried out at appraisal. TheCOPPE/UFRJ team, which prepared the Iguacu River Master Plan, prepared an ex-postfinancial cost- benefit analysis of the part of state drainage component, using themathematical model developed for the master plan. Their report is attached in Annex 3 andsummarized and commented below. This financial analysis may be considered as a lowerbound of the economic analysis (the main difference would consist of indirect taxes oninvestment and maintenance costs).

Summary of COPPE/UFRJAnalysis

This analysis covers project investments in the seven sub-basins of the Iguacu/Sarapuirivers basin, representing about 50% of the state drainage component investments, andbenefiting a total population of 161,300. These sub-basins were selected because they are partof the Master Plan for the Iguacu/Sarapui basin, for which data were therefore available fromfield surveys and from the mathematical model developed to assess costs and benefits ofindividual investments for the Master Plan.

Costs include actual investment costs. Estimated benefits include: (a) losses toproperty and belongings avoided; (b) income losses due to interruption of work and timeneeded for repairs; and (c) incremental health care costs due to leptospirosis outbreaks(hospital care, drugs and resting time at home). Average annual benefits were derived fromthe above, a population growth of 1.22% per year, and the probabilistic recurrence of floodintensity. Net present values of costs and benefits were calculated over a 30-year estimatedlife-time of the investments, assuming a 12% discount rate, and assuming that all investmentare made during the first year.

Results show yearly benefits of US$ (or R$) 65 million for a total investment ofUS$78 million, and a benefit cost ratio of 6.5 (costs exclude maintenance costs).

Comments and Extrapolation

An individual rate of return was calculated for each sub-basin based on the samehypotheses, and an extrapolation was made for the entire state drainage component, using thefollowing additional assumptions: (a) annual maintenance costs were assigned at a rate of2.2% of investment costs (equivalent to US$3.5 million per year indicated by SERLA,including periodic dredging of canals and rivers every 7 years); (b) extrapolation of theremaining drainage investments was done on the basis of only the five most representative

50Table 9 - Page 2 of 2

sub-basins' (the attached map shows the location of all investments under the state investmentcomponent). Results are presented below:

Sub-Basin Internal Rate of Return Net Present Value°/% US$ Million

1 - Botas Montante 40 5.22 - Machambomba 61 14.63 - Iguacu-Botas 29 23.84 - Sarapui Montante >100 181.45 - Sarapui Jusante 58 72.26 - Rosali >100 59.27 - Jacatirao 26 12.9

Total 1 to 7 81 386.6

Total excluding Sarapui Montanteand Rosali 45 146.0

Remaining areas 45 192.0

Total State Drainage Component 63 578.6

Sensitivity Analysis - As shown below, the estimated rate of return for the project isnot sensitive to maintenance costs. Furthermore, it is not very sensitive to benefits since itwould take a reduction of benefits by over 70% to decrease the rate of return to 12%.

Rate of Return Net Present Value% US$ million

Base Case 63 578.6Maintenance Costs + 100% 61 553.5Benefits: -20% 50 429.5

-50% 30 205.0-70% 17 56.7- 80% 10 -17.9

Benefits -50% and MaintenanceCosts +100% 28 180.0

The Sarapui Montante and Rosali sub-basins are not representative because: the Sarapui Montantebasin which is highly populated, essentially benefited from the construction of the Gericino dam; andthe Rosali investment in mesodrainage of affluents and canals benefited a large population at a smallcost.

* ~~~OBRAS CONCLUIDASGOVERNO DO ESTADO DO R10 DE JANEIRO SzxOMCNLIA()Canal a~oV.Guanabara - fozSECRETARIA DE MEIO0 AM B I E NTE av,'d_=Bu^n_880-ll=t .. M. M=Hermslav. Amoricas

:-.- f ....... .; ;:': X :.E 02l-:;::: f::' R _ = Z l I (!) Canaliiagio V.Guanabara - av.Am6ricas

- (3) Dragagem Canal do Cunha

:4: Ponte av.Suburbana - Rio Jacare

- Canalizaao rio Jacar6

Canalizao afluentes do ro Bota(EstrelalBranca e Caramuru)

07 Dragagem do Pavuna/Meriti

Q_ Canalizagao do Pavuna (Lotes I e 2)

Barragem do rio Pavune

-l i Cf - >) Av.<Afluentes do dio Sarapul Pavuna(Meriti e Igua2u

Barragem do Gericin6

Canaliza9ao V.DJ1io Guaranai

| ..... uquedeCaxias .... # < <) |C analdo Canalizacao V.Ant6nc o Nohra

|~.i- -M age | . RioJoana wn u (134 Canaliz. VCoelho da RochaAv Pros. 2 Canaliz. V.TRio de Ouro e Vilar dos Telles

.0 -"~'~ Canaliza9ao V.Alberto de Oliveira (Trecho Jusante)

Linha ~ ~ ~ OU/6{S aaoPnu

-'~~~~~~ Linha C~~~~1-) anal Auxiliar do Sarapult hVemrnelha18Canaliza9io V.Vila Rosaly

...... ....... ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ -~ -- ~~'~Canaliz. av.Presidente Kennedy

:i;;20Dragagem Sarapul

-- ___~'~ ' 0 Canalizaglo dio Jacatirlo (Trecho I e 2)

Dragagem dos dios lgu9u e Bota jusante

~~ (~~~2) Dragagom do rio Bota - Montante

Dragagm e comportas do Pilar e canalizagio

Drenagevr~ do bairro Xavantes e obrasBelford Roxo a~~~~~~~~~~~~~~~~~~ mergenciais no rio Bota

Canal ~ ~ ~ 26Canalizaglo Machambombamag6 ~~~~ ~~~~Rio Joania Mangue (~7) Canal do Outeiro

(*) []P~~raga (0) Prote90o de taludes ria nomdMamcanI~~~~~ BandeIm Canalizaglo av.Serenidade

Novaiguagu ~~~Ri Mraan ~ ~Dragagem e comportas do Canal Barbuda e- Rio de Janeiro ~~~~~~~~~~~~Ro arcdrenagem r.Flores - Mag6

® Conjunto issEl-S. J. de Meriti Obras Concluldas (3:) \38 lau

Table 10 - Page 1 of 7

RIO FLOOD RECONSTRUCTION AND PREVENTION PROJECT (LOAN 2975-BR)IMPLEMENTATION COMPLETION REPORT

Table 10: Status of Legal Covenants

Original RevisedAgreement Section Covenant Present Fulfillment Fulfillment Description of Covenant Comments

Tvpe Status Date Date

Loan 3.01 (a) Institutional C CEF not to take action that couldprevent State and Municipalityefficiency.

Loan 3.01 (d) Counterpart CD 12/31/88 12/31/1994 CEF to make available as counterpart During project implementation the amounts andand funds funds under CEF loans, aggregate fulfillment were revised 3 times as follows: (a)

amounts on a cumulative basis addendum to LA dated March 9, 1990 specifiesequivalent to US$57 million before US$57 million before 8/31/1989, US$1148/31/1988, US$114 million before million before 9/30/1990 and US$190 million10/31/1988 and US$190.1 million before September 30,1991; (b) addendum to LAbefore 12/31/1988. dated March 30, 1993 specifies, first, that CEF ,,

will only finance a total of US$114 millionbefore 12/31/1994 and second, that the state willfinance on behalf of CEF up to US$62 million inaddition to its own contribution (US$20 million);and (c) addendum to LA dated July 29, 1994specifies US$75 million before March 31, 1994and US$176 million before December 31, 1994.

Loan 4.01 Monitoring C adequate CEF staffing and managementof project.

Loan 5.01 (a) Accounts/ C June 30 of CEF financial statements and project The 1995 audit report was sent to the Bank on(b) & (c) Audits each year accounts for each fiscal year to be October 15, 1996.

audited by auditors acceptable to theBank. CEF to furnish certified copies ofaudited financial statements and theaudit report not later than six monthsafter the end of each fiscal year.

Table 10 - Page 2 of 7

Orieinal RevisedAereement Section Covenant Present Fulfillment Fulfillment Description of Covenant Comments

YlTvpet Status Date Date

Loan 7.01 Disbursement C December 29, Additional conditions to the Effectiveness was declared on December 29,conditions 1988 effectiveness of the Loan Agreement, 1988.

including LA duly registered withCentral Bank, the State and Rio SLAswith CEF have been executed, the statehas entered into Municipal SLAs for atleast 75% of all loans to be made underthe municipal SLAs and the state andRio have entered into an agreementdefining their obligations with respect tothe carrying out of the project.

Loan Schedule Counterpart CD March of each In addition to section 3.01 of Loan In fact, at appraisal the Bank was not aware of1, 3 (b) funds year Agreement, Schedule 1 conditions CEF loan procedures., in particular, that CEF

withdrawals to evidence to be received loans were to be appraised and signed for eachby the Bank before March 31 of each specific sub-project. Technically, during theyear that the aggregate disbursements first eighteen months of the project, while projectfrom the CEF loans during the previous implementation was being seriously delayed due -

calendar year shall have been at least to lack of counterpart funds, CEF was in N

equal to 75%, as set forth in the compliance with the few sub-projects it haddisbursement schedules of the approved.respective CEF loan Agreements.

Loan Schedule Studies and CP Consultants to be hired in accordance Consultants for the preparation of the civil4, technical with Bank guidelines. defense plan and of the environmental educationSection assistance program were directly hired by GEROE withoutII prior Bank acceptance. The Bank therefore did

not accept to finance these contracts.

Loan Schedule Disbursement C Payments out of the special account to5 paras. definitions and be made exclusively for eligible2 and 4 conditions expenditures and evidence furnished to

the Bank.

State Project 2.01 (a) Institutional CD State to carry out project with dueAgreement diligence and efficiency in conformnity

with appropriate practices includingenvironment and to provide as neededfunds, and other resources and facilitiesrequired for part A and C of the project.

Table 10 - Page 3 of 7

Original RevisedAereement Section Covenant Present Fulfillment Fulfillment DescriDtion of Covenant Comments

Type Status Date Date

State Project 2.01 0 Resettlement CD State to carry out the State Resettlement Delays occurred in the resettlement programAgreement Plan. implementation, resulting in difficulties and

delays in the implementation of the drainagecomponent.

State Project 2.02 Procurement C Procurement of goods, works andAgreement services to be financed, according to

Schedule 4 of Loan Agreement

State Project 2.05 Project CP The State shall relend the proceeds Except for a single agreement with NilopolisAgreement Implement. allocated to part C of the project to the where a public building was rebuilt, the State

Arrangements municipalities under agreements (SLAs) entered into a substantial agreement only withthe municipality of Petropolis.

State Project 2.07 Project C The State to provide staff, funds and In fact, GEROE did not supervise Part B of theAgreement Implement. other facilities to GEROE to coordinate project, which was coordinated without major

Arrangements Parts A&C and supervise the execution problems by the "Assessoria de Captacao deof Part B of the prject. Recursos externos" (ACR) of the Municipality of V

Rio.

State Project 2.08 Monitoring C GEROE to furnish quarterly progressAgreement reports to the Bank and CEF for Parts A

& C of the project.

State Project 2.09 (a) Facilities NC State to operate and maintain (or cause SERLA indicated that there is no maintenanceAgreement maintenance to) the facilities provided under the budget for the drainage facilities.. The problem

project. of solid waste collection was not fully addressed,the operation and maintenanie responsibility ofthe three composting plants which are beingconstructed is not yet defined..

Table 10 - Page 4 of 7

Original RevisedAgreement Section Covenant Present Fulfillment Fulfillment Description of Covenant Comments

T.Me Status Date Date

State Project 2.09 (b) Financial NC For purpose of financing operation and A study to define the actions necessary toAgreement maintenance of the facilities, State improve the financial situation of the

should cause the Municipalities to Municipalities of the Baxaida Fluminense wasmaintain or increase taxes and user contracted, however, as of mid-1996, thecharges, to cover at least the operating recommendations of this study were notand maintenance costs of such facilities. implemented nor even discussed with the

Municipalities. In addition, as already indicated,operation and maintenance financing of the threecomposting plants which are being constructedare not yet defined. However, recently, theMunicipality of Petropolis has started a majorupdating and modernization of its propertycadaster.

State Project 3.01 (a) Accounts/ C State to maintain (or cause theAgreemnent audits Municipalities to) separate records and

accounts in respect to Part A and C ofthe Project %

Statec Project 3.01 (b) Accounts/ June 30 of State to have above project accounts for The 1995 auditor's was received by the Bank.Agreement audits each year each fiscal year audited by auditors

acceptable to the Banla State to firnishthe auditor's report not later than sixmonths after the end of each fiscal year.

Table 10 - Page 5 of 7

Original RevisedAgreement Section Covenant Present Fulfillment Fulfillment Description of Covenant Comments

Type Status Date Date

State Project 3.02 (a) Financiial CP State to carry out the State financial ICM revenues decreased d by 8 % over 1987 inAgreement Action Program in a manner and 1988 and thereafter increased by 12% over 1987

according to timetable satisfactory to the for 1989 in Reais;Bank. This action program wasdetailed in a supplemental letter and The water company did increase its tariffs toincluded: (a) increase revenues from bring them to the National Tariff Law;the value added tax (ICM) over 1987by 35% in 1988 and 50% for 1989 in As of mid-1996 no differential users charges forreal terms; (b) the State water company solid waste services were introduced by theto increase water and sewerage tariffs to municipalities of the Baxaida Fluminense;bring them to the National Tariff Law;(c) develop a program with the SERLA prepared a program of systematicMunicipalities to introduce not later maintenance, however, the needed resources tothan March 1, 1989 differential users implement such program were not madecharges for solid waste services; and (d) available.cause SERLA to complete an analysisof the cost of maintaining the State's In spite of this program of actions, as of mid-macro drainage network, implement 1996, the financial situation of State remain very _nstarting January 1, 1989, a program of poor. However, the Alencar Government has Lsystematic maintenance and make the started a major state reform program which,necessary resources available to when implemented should improve seriously theSERLA. financial situation of situation.

State Project 3.02 (b) Financial C State not to amend State FinancialAgreement Action Program without agreement of

Guarantor and Bank.

Rio Project 2.01 (a) Institutional C Rio to carry out project with dueAgreement diligence and efficiency in conformity

with appropriate practices includingenvironment and to provide as neededfunds, and other resources and facilitiesrequired for part B of the project.

Rio Project 2.01 © Resettlement CD Rio to carry out the Rio Resettlement Delays occurred in implementation of theAgreement plan in a manner satisfactory to the resettlement program.

Bank

Table 10 - Page 6 of 7

Original RevisedAgreement Section Covenant Present Fulfillment Fulfillment Description of Covenant Comments

Type Status Date Date

Rio Project 2.02 Procurement C procurement of goods, works andAgreement services to be financed according to

Schedule 4 of Loan Agreement

Rio Project 2.06 (a) Facilities C Rio to operate and maintain (or causeAgreement maintenance to) the facilities provided under the

project.

Rio Project 2.06 (b) Financial C For purpose of financing operation andAgreement maintenance of the facilities, Rio should

establish, maintain or increase taxes,user charges to cover at least theoperating and maintenance costs of suchfacilities.

Rio Project 2.07 Monitoring C Rio to furnish quarterly progress reportsAgreement to the Bank, CEF and GEROE for Part

B of the project.

Rio Project 3.01 (a) Accounts/ C Rio to maintain separate records andAgreement audits accounts in respect to Part B of the

Project.

Rio Project 3.01 (b) Accounts/ CD June 30 of Rio to have above project accounts for Audit submission performance was poor. 1992Agreement audits each year each fiscal year audited by auditors and 1993 Audits were received in 3rd quarter of

acceptable to the Bank. Rio to furnish 1994. Audits were reviewed and found to bethe auditor's report not later than six acceptable.months after the end of each year. The 1995 auditor's report was received by the

Bank.

Table 10 - Page 7 of 7

Original RevisedAgreement Section Covenant Present Fulfillment Fulfillment Description of Covenant Comments

Tvpe Status Date Date

Rio Project 3.02 (a) Financial C Rio to carry out the Rio financial Action Rio was formally declared bankrupt in 1988Agreement Program in a manner and according to when the project initiated. The Alencar

timetable satisfactory to the Bank. This administration started a major recovery. Taxaction program was detailed in a collection was seriously improved - accumulatedsupplemental letter and included: (a) the tax collection growth since 1988 was 151% inpreparation before October 1, 1988 of 1991 and 88% in 1992. The cadaster updatingan evaluation of the Municipality and modernization program have been the mainbudgeting and accounting systems to reason for this improvement. Local property taxidentify actual costs of municipal (IPTU) which was equivalent to 30% of theservices -- the evaluation with service tax (ISS) increased its share to 90% ofrecommendations to improve these ISS in 1992. On November 30, 1988 thesystems was to be used as the basis for Municipal assembly voted a 40% increase in realpolicy formulation to ensure cost terms of the solid waste collection tariff for 1989recovery and budgeting for and an additional equivalent increase to takemaintenance of infrastructure; (b) place in 1990. Also the ISS tax exemption wascompletion by June 30, 1989 of reduced significantly.property tax assessments to improve In 1993, when the new Municipal GovernmentIPTU revenues; (c) improvement of the took place the financial situation of Rio was no s.,efficiency of collection of the service longer so satisfactory. Implementation of thetax (ISS); and (d) implementation before updated action plan resulted again in anMarch 1, 1989 of tariffs adjustments to improved financial situation of the Municipalityrecover the full cost of operations - as of December 1995 it had R$990 million in(including depreciation) of its solid cash assets equivalent to 54% of its 1995 fiscalwaste collection and disposal. income, also, in mid-1996, the Municipality of

Rio was able to issue US$125 million inEurobond with 3 years maturity which were wellaccepted by the financial market.

Rio Project 3.02 (b) Financial C Rio not to amend Rio Financial Action When the new Municipality Government tookAgreement Program without agreement of over in 1993, the financial action plan was

Guarantor and Bank. updated as a result of a financial evaluation of theMunicipality which was a condition ofdisbursement in the 1993 amendment to the LoanAgreement.

Definitions

C = covenant complied with; CD = complied with after delay; CP complied with partially; NC = not complied with

58 Table l - Page l of I

RIO FLOOD RECONSTRUCTION AND PREVENTION PROJECT (LOAN 2975-BR)IMPLEMENTATION COMPLETION REPORT

Table 11: Compliance with Operational Manual Statements

There was no significant lack of compliance with applicable Operational Manual Statements.The most relevant are: Operational Directive 8.50 (Emergency Recovery Assistance); OperationalDirective 4.30 (Involuntary Resettlement); and Operational Directive 1 1.00 (Procurement).

59 Table 12 - Page I of I

RIO FLOOD RECONSTRUCTION AND PREVENTION PROJECT (LOAN 2975-BR)IMPLEMENTATION COMPLETION REPORT

Table 12: Bank Resources: Staff Inputs

Stage of project cycle Planned 1/ Revised 1/ Actual

Weeks US$ '000 Weeks US$ '000 Weeks US$ '000Preparation to appraisal 33.5 48.2Appraisal 1.4 2.0Negotiations through 17.7 30.8Board approvalSupervision 251.7 480.0Completion 12.1 32.5TOTAL 316.4 593.5

1/ Not available

60 Table 13 - Page I of 2

RIO FLOOD RECONSTRUCTION AND PREVENTION PROJECT (LOAN 2975-BR)IMPLEMENTATION COMPLETION REPORT

Table 13: Bank Resources: Missions

Performance rating

Stage of Month/year Number Days Specialized staff skills Impeme Developm Types of problemsproject cycle of in represented ntation ent

persons field status objectives

Through appraisal

Pre-appraisal March 1988 7 9 Urban planner,engineer, other

Appraisal May 1988 6 7 Same as above

Negotiations through Board Approval

No mission | r _ I _ ( _ ISupervision

1. August 1988 5 12 Urban planner 2 2 Counterpart funds, project managementeconomist. Fin. (SERLA)Analyst., engineer,disb.officer

2. December I n.a Urban planner. No rating No rating Project management(CEF subproject1988 review)

3. February 2 13 Architect, procurement 2 1 Sub-laon approval by CEF1989

4. May 1989 1 n.a Procurement No rating No rating No major issue reported (field review ofprocurement documentation)

5. July! August 5 12 Urb. plan. (TM), econ., 2 2 Counterpart funds, project management1989 fin. anal.., eng., disb. (CEF subloan approval), procurement

off. (SERLA), resettlement (Rio Mun. landownership)

6. November/ I n.a Urban plan. (TM) n.a n.a Project management (CEF subprojectDecember review, issue of operational manual)1989

7. February 2 7 Urban plan. (TM), 2 2 Counterpart funds, project management1990 architect (CEF internal procedures)

8. October 1990 1 2 Urb. plan. (TM) 2 1 Project management (CEF bureaucraticsubproject approval procedures)

9. Jan/feb 1991 6 9 Urb. plan (TM), econ., 2 2 Project management (inadequate control offin. anal.., eng.., arch. drainage works contracts by SERLA, CEF

and GEROE, CEF bureaucratic procedures(delaying Petropolis components)

61Table 13 -Page 2 of 2

Performance rating

Stage of Month/year Number Days Specialized staff skills Impeme Developm Types of problemsproject cycle of in represented ntation ent

persons field status objectives

10. April 1991 4 5 Eco., Fin.anal.., eng. 2 2 Project management (CEF bureaucraticprocedures), uneven progress of TA andstudies

11. November 4 8 Urb. plan. (TM), econ., 3 2 Counterpart funds, project management1991 eng. (CEF and state bureaucratic procedures),

work contracts execution (drainage)

12. February 4 7 Urb. plan., econ., eng. 3 2 Counterpart funds, project management1992 (CEF subproject approval)

13. September 2 3 Urb. plan. (TM), eng. 3 2 Counterpart funds, works contract1992 implementation, Project management (CEF

subproject approval).

14. February 7 9 Urb. plan. (TM), eng., 2 1 Resettlement, Project coordination1993 resettlement, Inst. dev., (GEROE- contrats plans)

Env. educ.

15. September 5 4 Urb plan. (TM), Inst. 2 2 Audit reports (State and Rio Munic.),1993 dev., Eng., Env. Educ. resettlement, project coordination (GEROE

and Rio Munic.)

16. March 1994 4 4 Urb. plan. (TM), eng., 2 2 Resettlement,audit report (Munic. of Rio)eco.

17. July 1994 1 3 Urban plan. (TM) U S Audit (of SOEs under drainage component),procurement (env. education)

18. November 2 13 Urb. plan. (TM), eng. S S Resettlement1994

19. February 5 5 Div. chief, urb. plan. S S Resettlement1995 (TM), op. off., eng.

20. June 1995 2 6 Op. off., eng. S S No major issue reported

Completion

Completion November 3 2 1 Op. off., eco., eng..1995

Note: the above list does not include some short additional visits from Bank staff members and consultantsmade either from the Bank office in Brasilia or at the opportunity of other Bank missions.

62 Annex 1 - page 1 of 2

RIO FLOOD RECONSTRUCTION AND PREVENTION PROJECT (LOAN 2975- BR)IMPLEMENTATION COMPLETION REPORT

Annex I - Resettlement Component

tvpe Housesilots Distributed as of 5130196 forState/Area Cause No. of Lots Physical

Houses Lots Urbanization Drainage Risk Areas Area wI ProgressHomeless As of 5131196

State

Bento Ribeiro Dantas Drainage 541 541 541 100%Barro Vermelho II Drainage and Risk 750 750 589 161 100%Barro Vermelho II Drainage and Risk 275 275 111 150 99%Barro Vermelho I Risk 475 475 473 93%Bota Drainage 290 290 290 100%Compo do Amenca Drainage and Risk 425 425 111 80%Missoes (SERLA) Drainage 300 300 300 100%

Subtotal State 3056 3056 1942 784

Municipality of Petropolis 1/

Vila Sao Jose Urb. and Homeless 89 89 89 100%Alto Independencia Urb. and Homeless 45 45 45 100%Contorno I Urb. and Homeless 66 66 66 100%Vila Constancia Urb. and Homeless 286 286 286 100%Alto America Urb. and Homeless 45 45 45 100%Sargento Boening 144 144 95%Carangola I 156 156 89%Carangoia II 202 202 59%

Subtotal Petropolis 1033 1033 531

Municipality of Rio 21

Vila Nova Cruzado Homeless 571 571 571 100%Pavuna Homeless 402 402 402 100%Moca Bonita Homeless 268 268 268 100%Manguinhos II Homeless 455 455 455 100%Inhoaiba Homeless 76 76 76 100%Nova Cidade Urb. and CEDAE 3000 300 2700 3000 100%Roquete Pinto Risk 372 372 266 93%

Subtotal Rio 5144 372 2072 2700 266 4772

Total Proiect 9233 3428 2072 3733 1942 1050 5303

Notes

1/ In Petropolis no lots have been distributed. In fact, works consisted in the urbanization of existing populated areas where homelessfamilies whose homes were destroyed during the floods and landslides moved. These services consisted of drainage, grading, water supply,slope stabilization, sewage treatment and paved roads.21 The Municipality of Rio, not only distributed urbanized lots to homeless families as part of the project, but assisted to the construction ofmost houses with its own funds.

In addition, as part of the Project, the Municipality of Rio, constructed the sewerage system of the Dona Marta favela with a total populationof about 7000 families.3/ In Nova Cidade the Municipality of Rio urbanized an existing populated area with about 2,700 lots and built 300 urbanized lots for thenecessary resettlement of families to allow CEDAE to implementation potable water system.

63 Annex 1- Page 2 of 2

RIO FLOOD RECONSTRUCTION AND PREVENTION PROJECT (LOAN 2975-BR)IMPLEMENTATION COMPLETION REPORT

Annex 1 - Resettlement Component

Cost Summary(US$ Million)

Lots CostAppraisal Actual Appraisal Actual of which to beestimates Estimates completed

As of 12/31/95

State 3056Other Municipalities 1033

Total financed through State 4000 4089 28.4 2.0

Municipality of Rio 7000 5144 21.0 0.6

Total 11000 9233 34.2 49.4 2.6

64

BRAZIL- RIO FLOOD RECONSTRUCTION AND PREVENTION PROJECTMain Factors Causing Delays During Project Implementation Annex 2 - page 1 of 1

Factors of Delay 1989 1990 1991 1992 1993 1994 1995

A- Counterpart Funds

1. Lack of CEF funds

(Aug. 90: Bank approved Special Assistance Program)

2. CEF subloan approvalprocedures (centralization, lackof existing credit lines)

(March 1993: Bank agreed to modify disbursement percentages and categories tocompensate for CEF inability to fund certain credit lines; and state agrees to

increase its share of financing-- Mid 1993: decentralization of project authority toGERSAIRJ)

3. State delay in signing March1993 amendment

4. State default on debt with CEF -

(essentially resolved when debt restructuring agreement is reachedbetween CEF and state government on December 12, 1991)

B- Execution of Drainage Works Contracts

1. Cancellation of bid invitationby Tribunal de Contas

(TC canceled bid invitation on April 11, invitation to prequalify re-issued June 30).

2. From technical audit, toredesign of component, toagreement with contractors andresumption of works

C- Audit Reports

Municipality of Rio audit reportfor FY92

(New commitments by CEF suspended early March,disbursements suspended between July and August 1).

0- Replenishment Special Account

Early Bank recovery of SA

(Bank starts recovering SA in Dec. 93; zero balance reached Aug. 94; SAreplenished to USS5 in Sep. 94; and to USSIO in Feb. 95- caused slow-down of

drainage component).

E- Resettlement

Delays in resettlement causingdelays in some phases ofdrainage works

Though delays affected all drainage works throughout implementation, delays weremore for drainage of Rio Pavuna (Lots 3 and 4). Resettlement and works not

completed at project closing date.

APPEND IXA

EXECUTIVE SUMMARY

1. HISTORICAL BACKGROUND OF THE PROJECT

The Rio de Janeiro Metropolitan Region is extremely vulnerable to disasters

caused by heavy rainfall.

The natural environmental condflons of the region make it highly susceptible

to erosion on the hillsides and to flooding along river banks. The hot humid

tropical climate, the topography with steeply sloping hills adjacent to open plains,

and the proximity of the coastline which makes the region subject to tidal effects

and torrential squalls, are all factors which contnibute to the problem.

In addition to these natural environmental hazards, rapid and uncontrolled

urban growth in the region over the last 50 years has made the effet of

landslides and flooding increasingly catastrophic.

Wth a population of 9.8 million, (in 1991) the Rio de Janeiro Metropolitan

Region is made up of 17 municipalities, and covers an area of 5,737.8 square

kilometers. In the 1950s the rate of urban growth in the region was so great that

by 1960 the Metropolitan Region accounted for 73% of the population of the State

of Rio de Janeiro. Since that time, despite lower rates of population growth, the

proportion of the State's population living in the Metropolitan area has risen to

78% in 1970, and to 81% by 1990.

Rapid urban growth, without the requisite planning and aggravated by the

lack of a an effective housing policy, led to the intensified occupation of the

hillsides and along the banks of rivers and canals, this pattem of land use being

practically the only option open to the low-income population. This disordedy

occupation of the land, combined with a lack of basic infrastructure, resulted in the

5.utAW0 $wy. . ........

APPENDIX A

emergence of new densely populated nsk areas without minimum living

conditions.

The increased dumping of solid wastes into the nvers and the volume of silt

washed down by the rains from the deforested and eroded hillsides, further

aggravated the effects of heavy rainfall. The ineffectiveness of sewage collection

and absence of treatment systems has contributed to the pollution of

watercourses, worsening the effects of flooding and raising the specter of

epidemics of water-born diseases.

This was the urban context when the rains of February 1988 afflicted the City

of Rio de Janeiro and the towns of Duque de Caxias, Nova lguaqu, Nilopolis, Sao

Joao do Meriti and Mage in the surrounding lowlands (Baixada Fluminense), and

the town of Petr6polis in the mountains.

The Rio Reconstruction Project (Projeto Reconstrugo Rio) was a

response to the damages caused by those floods, which took a toll of 300 people

dead, 735 injured, 22,590 homeless, and the worst epidemic of leptospirosis ever

experienced in the State, not to mention the financial damages.

The disaster rallied Brazilian society and the intemational community and led

pooling of efforts by local authorities under the leadership of the State

Government, to obtain funding from the International Bank for Reconstruction and

Development - IBRD, for an emergency project aimed at reconstruction and the

prevention of future disasters.

In the City of Rio de Janeiro, besides the landslides, the wastes washed down

from the hillsides destroyed a large portion of the city's streets and the drainage

system. In the Baixada Fluminense, insufficient drainage and the silting up of

rivers and canals, aggravated by the accumulation of solid wastes, led to the

flooding of densely populated areas. In Petr6polis, a town in the mountains,

landslides and flooding also occurred. The disaster directly affected more than 3.5

million people in the Metropolitan Region, particularly the Baixada Fluminense.

&en ............... , , , o,fve ,S,m,m,a,y...... . .... .

APPENDIX A

In order to carrying out immediate interventions in the areas most severely

afflicted by the disaster, the State Government and the Mayors' Offices of Rio de

Janeiro and the adjacent municipalities began to coordinate activities, and, after a

relatively short time, they had come up with a preliminary model of what was to

become the Rio Flood Reconstruction and Prevention Project, also known as the

Rio Reconstruction Project.

In view of the emergency nature of the project, approval by the World Bank

was obtained in a very short period of time. The Project included actions for

reconstruction and prevention of future disasters, made feasible by the granting of

a loan covering approximately 50% of the total cost, initially estimated as being

US$ 396 million. Financing agreed upon with IBRD amounted to US$ 175 million,

of which US$ 125 million for the State Government and US$ 50 million for the

Municipality of the City of Rio de Janeiro.

To cover the national counterpart (roughly 50% of total cost, in accordance

with IBRD norms) the State and Municipal administrations of Rio de Janeiro, in

view of the financial difficulties they were experiencing, sought assistance from the

Federal Govemment, which delegated responsibility for financing the national

counterpart, and for passing through World Bank funding to the State and

Municipality, to Caixa Econ6mica Federal - CEF.

Negotiations between IBRD, the State Government, the Municipality of Rio de

Janeiro, and CEF, were conducted throughout 1988, and simultaneously the

Project took form as its details were discussed with the various protagonists

involved. On September 29, 1988, Loan Agreement 2975 BR was signed, thus

making it possible to issue the first tender documents before the end of 1988.

The initial budget forecast for the Project amounted to US$ 393.61 million,

with the contribution of IBRD accounting for 44.5%, CEF, 48.3%, and those of the

State and Municipality of Rio de Janeiro, together for 7.2%.

Ex",,,vm, SImma'-

APPENDIX A

For those parts of the Project under the responsibility of the State

Government, the initial budget amounted to US$ 298.25 million, shared as

follows: IBRD - US$ 125.05 million; CEF - US$ 152.69 million; the State

Govemment - US$ 20.51 million. For the portion of the Project under the

responsibility of the Municipal Govemment of Rio, the initial forecast amounted to

US$ 95.36 million, of which US$ 49.95 million were from the World Bank; US$

37.41 million from CEF; and US$ 8.00 million from the Municipality.

With this initial funding arrangement, the Rio Reconstruction Project financed

works, services and various actions under the responsibility of the State

Government - Part A; of the Municipal Govemment of Rio de Janeiro, - Part B;

and of other Municipal Governments in the Metropolitan Region under the

supervision of the State Govemment - Part C.

The overall objectives of the Rio Reconstruction Project included the

execution, reconstruction and rehabilitation of the basic infrastructure in the

Project area, which had been damaged by the rains of February 1988; the

implementation of preventative measures of a physical and institutional nature to

ensure against the effects of future heavy rains and flooding; technical assistance

services for the State and Municipal Governments of Rio de Janeiro, for the

development of a program for dealing with emergencies and natural disasters.

The various sectoral actions included within the overall scope of the Project

were grouped into Components according to the nature of their use, as is

described later in this document. As a consequence of the diversity of these

actions, the implementation of the Rio Reconstruction Projed required the

participation of a number of executing agencies, at the State Government level, as

well as at the level of the Municipality of Rio de Janeiro and other Municipalities.

Efficient management of the Project, especially with regard to planning and

coordination, were considered essential to its success.

E"'" x ''o-u-|-tWe Sumai iv- T0-- ,tk

APPENDIX A

It should be noted that, when the Rio Reconstruction Project was launched, in

1988, the administrative structure of the State of Rio was recognized as

excessively complex and rigid. Thus for the execution of a program of an

emergency nature, requiring streamlined procedures for the management and

control of resources, the Grupo Executivo para Recuperagao e Obras de

Emergencia - GEROE (Executive Group for Reconstruction and Emergency

Works) was established, directly subordinated to the Govemor's Office. Besides

having its own technical and administrative staff, GEROE relied on the services of

a private consulting firm for the overall coordination of Parts A and C of the

Project.

With regard to the Municipality of Rio de Janeiro, it should be noted that when

the Loan Agreement was signed (in 1988) the Mayor had formally declared that

the city was bankrupt, and announced a plan for its financial recovery. In 1989 a

new Mayor took office and proceeded to put the plan into effect. The World Bank

encouraged and supported this initiative, and financed a new property cadaster

for the city, including a revaluation of all properties.

With the recovery of the City's financial health, with a view to obtaining

investments from abroad, the Mayor's Office established the Assessoria de

Captagao de Recursos Externos - F/ACR (Advisory Office for Attracting Foreign

Resources), charged with conducting negotiations with national and intemational

financing agencies. Like GEROE, F/ACR then coordinated all activities related to

the Rio Reconstruction Project within the scope of the Municipality of Rio de

Janeiro - Part B of the Project.

Early on in Project execution, the Municipal Governments of the Baixada

Fluminense and of Petr6polis experienced difficulties in meeting Project

requirements owing to weaknesses in their administrative structures. In Petr6polis

these problems were overcome with the establishment of a technical group,

Programa de Reconstru,co de Petr6polis - PROGREP (Petr6polis

,xu,iv S.-:mmay-- v

APPENDIX A

Reconstruction Program), affached to the Municipal Planning Coordination. In the

other municipalities these difficulties were resolved through GEROE coordination.

Caixa Economica Federal - CEF, had a significant role as the main Brazilian

financing agency and also as the agency responsible for the transfer of funds. As

such, its role included analysis and approval of projects, monitoring of execution of

works and services, disbursement of funds and evaluation of the overall progress

of the Project.

Furthermore, the Worid Bank monitored, supervised and controlled the

Project throughout its execution. In this context, the role of the supervision and

evaluation missions, during which various aspects of the implementation process

were discussed and defined, deserves special mention.

Another aspect worth highlighting is the fact that, during the period of the

Loan Agreement, certain conditions which had been previously agreed upon were

altered, which led to the signing of contractual amendments relating to:

postponement of the closing date of the Project; adjustments to the financial

participation of the various protagonists; review of the scope and budget for each

component; and reallocation of resources among components.

2. QUANTITATIVE ASPECTS OF THE PROJECT

The Rio Reconstruction Project was funded with World Bank and Caixa

Econ6mica Federal - CEF resources, complemented by resources of the State

and Municipality of Rio de Janeiro. CEF contributed the major portion of resources

requirements under the Agreement, through its financing programs using

resources from the Fundo de Garantia do Tempo de Servico - FGTS (Insurance

for Time of Service Fund).

As a consequence of the above-mentioned alterations, changes were made

throughout Project execution in terms of the amounts originally foreseen, both

Ex..... Sumary.

APPENDIX A

with regard to the total cost of the Project, and also by Component and by source

of funding.

Thus, up until December 1995, resources in the order of US$ 409.3 million

were foreseen, of which IBRD was to participate with 41%, CEF with 46%, the

Govemment of the State of Rio de Janeiro with 11%, and the Municipal

Govemment of Rio de Janeiro with 2%. Up until the aforementioned date, US$

382.69 million had been invested in the Project, and of these, IBRD has

participated with 43.73%o, CEF with 46.48%, and the State and Municipal

Govemments of Rio de Janeiro jointly with 9.79%.

In Parts A and C of the Project, under the responsibility of the State

Govemment, US$ 302.03 million were invested, from the following sources: IBRD

- US$ 124.85 million; CEF - US$ 145.15 million; and the State Govemment - US$

32.03 million. In Part B of the Project, under the responsibility of the Municipality of

Rio de Janeiro, US$ 80.66 million were invested, of which US$ 42.50 million from

IBRD; US$ 32.72 million from CEF; and US$ 5.44 million from the Municipal

Govemment.

The various sectoral actions, organized into Components, according to their

purpose were carried out as follows:

* Component A.01 - Roads and Bridges - The objective of this Component

was the repair of damages caused to the main access routes into the State. To

this end, repair and reconstruction work was carried out on 10 bridges;

rehabilitation of paving and of drainage systems on 10 streets or highways; the

reinforcement of steep slopes at several locations along 7 highways or

avenues in the form of anchored retaining walls, gabions, facing with shotcrete

and planting vegetation cover.

* Component A.02 - Drainage - The objective of this Component was to

promote flood control through dredging operations carried out in 6 river basins:

Canal do Cunha, Sarapui, Pavuna/Meriti, lguacu/Bota, Inhomirim/Estrela, and

Executive Summary -- vii

APPENDIX A

Valao Guanabara. This involved dredging along linear stretches over 62,770

meters; channeling 32,226 meters of rivers and canals; the building of 2 dams

to control floodwater on the Sarapui and Pavuna rivers; the building of 2,800

meters of storm drains; the building and rehabilitation of 11 bridges, besides

dozens of pedestrian walkways and crossings; the building and rehabilitation of

dikes and the system of floodgates; relocation of 2,570 families; the building

and rehabilitation of housing units; besides other small and medium-scale

drainage and related civil engineenng works which included: the cleaning of

ditches; containment of riverbanks; building and repair of sewage and drainage

networks, repairing road surfaces and urban rehabilitation; the building of

avenues alongside the canals; and the building of community centers.

Component A.03 - Sewerage - Sewage collection and treatment facilities are

virtually non-existent in the Baixada Fluminense and, as a consequence,

resources available for this Component were concentrated on the Gramacho

System, consisting of one sedimentation pond, three pumping stations, 7.7

kilometers of sewage mains; 67.3 kilometers of collection network and 11,000

household connections.

C Component A.04 - Solid Waste - The objective of this Component was the

establishment of a system for collection and disposal of household and hospital

waste in three municipalities of the Baixada Fluminense: Queimados, Belford

Roxo and Nova Iguagu. Investments were carried out in the building of three

recycling and composting plants; 3 dumps, the landfills and operation of 3

incinerators for hospital wastes, 20 tractors with trailers, 3 bulldozers, 3

excavators, 5 mechanical shovels, 4 waste collection and compacting trucks,

and I forklift.

* Component A.05 - Reforestation - Through this Component reforestation

was carried out 614 hectares on 12 hillsides in the City of Rio de Janeiro and

on over 131 hectares of land in the Municipality of Nova Iguagu where

.x . .utive S.. ., y ... VI..II.,..,.. ...........,........ ..#.00.,..t. 0ff.f.j .

APPENDIX A

environmental rehabilitation was deemed necessary or where hillsides were

occupied by communities living in precanous housing.

Component A.06 - Serviced Sites - Included in this Component was the

provision of housing to receive those populations which resided on the banks of

the rivers where large-scale dredging was camed out (Component A.02) and

other areas of high risk; and also the rehabilitation of areas occupied by those

who lost their homes in the Municipality of Petr6polis. For resettlement of

populations living on river banks and in other high risk areas, 4 housing

complexes were built, comprising a total of 2,756 units. The housing units were

provided with the necessary infrastructure, including water supply, drains,

power, drainage and paved roads. In addition to basic infrastructure services,

these complexes were provided with community equipment and leisure areas,

taking into account the requests of the communities. In the town of Petr6polis, 8

complexes offering plots and providing urban facilities such as water supply,

drains, drainage and paved roads were built to the benefit of 1,031 families.

e Component A.07 - Renewal of Public Installations - Through this

Component, 2 water mains were restored in the Municipality of Petr6polis over

a 5,040 meters stretch. The execution of these works made it possible to

improve the water supply system for the entire Municipality.

* Component A.08 - Civil Defense - The objective of this Component was to

re-equip the civil defense system of the State of Rio de Janeiro through the

acquisition of 12 fire-fighting vehicles, 9 search and rescue vehicles and 2 self-

propelled winches.

* Component A.09 - Technical Assistance - The objective of this Component

was the provision of technical assistance services to various agencies of the

State Government, in accordance with the nature of their operations. Such

services included the preparation of projects and the supervision of the various

Components, and also the conducting of audits and the preparation of various

Exuive Smmar -x

APPENDIX A

plans and studies, altogether requifing 26 service contracts. Among the studies

and plans carried out the following stand out: the Master Plan for Water

Resources of the Iguacu River Basin; the Digital and Conventional Mapping of

the State of Rio de Janeiro, the Plan for the Protection of Steeps Slopes, the

Study on Municipal Financial Administration; and the Master Plan for the

Management of Solid Waste.

* Component A.10 - Project Administration - This Component included the

provision of personnel, equipment and physical installations for the

management and supervision of Project execution. Al spending for these

purposes was done by the State out of its own resources.

• Component B.01 - Roads and Bridges - The objective of this Component

was to repair damages to roads and canals in the City of Rio de Janeiro. The

work was carnied out through of 19 work contracts, covering construction and

rehabilitation of drainage and paving of various roads, construction of storm

drains, and the repair to canals and gutters.

* Component B.02 - Drainage - The investments made under this Component

aimed at flood control in the City of Rio de Janeiro, through the construction of

channels along stretches of 5 rivers in the Suburban area of the City, and on a

stretch of the river Carioca, located in the South Zone.

* Component B.03 - Slope Stabilization - The objective of this Component

was to restore the steep slopes in Rio de Janeiro. To this end, 152 contracts

were signed for the execution of engineering works of various types, depending

upon the extent of the interventions, including anchored retaining walls;

reinforced concrete walls, cyclopean concrete and gabion walls; anchored

concrete structures; shotcrete; drainage channels and decking.

* Component B.04 - Serviced Sites - Through this Component 6 complexes

offenng serviced lots were constructed, comprising 4,772 lots, provided with

water supply, electric power, sewage collection, drainage and paved roads.

Executiv Summaryf-|-;--S,-}-X--}---} }}x

APPENDIX A

Furthermore, a sewage system was installed in a slum area (Favela do Morro

Dona Marta) and a housing complex with 372 units was built, where

foundations were also laid for an additional 258 units, with all the necessary

infrastructure (Complexo Residencial da Mare - Roquete Pinto). Of the six

housing estates offering urban lots, 5 were developed on unutilized land,

allocated for the resettlement of populations made homeless by the floods. The

last of these (Nova Cidade) included the provision of urban infrastructure to a

large area which had been occupied spontaneously by slum dwellers and

those made homeless by the floods. The remaining investments benefited a

population of roughly 7,000 (in the Favela Dona Marta alone, more than 1,350

registered households) and poor communities living in shacks above the

swamp (palafitas), or in temporary shelters provided by the Municipality of Rio

de Janeiro (as occurred in the case of the Complexo da Mare - Roquete Pinto,

which houses 630 families).

* Component B.05 - Renewal of Public Buildings - Under this Component,

aimed at the renewal/reconstruction of public buildings, only one school in the

Municipality of Rio de Janeiro was rebuilt. All other works initially contemplated

under this Component were carried out by the Municipality using its own funds.

C Component B.06 - Technical Assistance - The objective of this Component

was the provision of technical assistance services to the Municipality of Rio de

Janeiro. Such services included the supervision of drainage works, the

preparation of a new property cadaster in the Municipality, 9 studies aimed at

the integration of public policies in the Metropolitan Region, in addition to audits,

and management of Part B of the Project.

C Component C.01 - Slope Stabilization - The aim of this Component was to

secure steep slopes in the Municipality of Petr6polis, where work was carried

out through 25 contracts, covering 500 work sites and providing benefit to

various neighborhoods. The interventions carried out used a variety

approaches, most of which were of great simplicity, with a view to benefiting the

xuivSmm:---ry xi

APPENDIX A

greatest possible number of people with resources available for this

Component. Thus, besides the use of anchored retaining walls, gabions,

shotcrete, etc., slopes were also stabilized by means of the re-vegetation,

applying cement soils and other non-conventional systems.

Component C.02 - Renewal of Public Buildings - Through this Component

the renewal of only one school was carried out in the Municipality of Nil6polis, in

the Baixada Fluminense.

3. EVALUATIONS AND RECOMMENDATIONS

The Rio Reconstruction Project was initially conceived to address an

emergency situation. Thus, despite its complexity, various aspects relating to

inter-sectoral relations, to management and institutional coordination were not

initially contemplated. The primary interest was to initiate work on measures to

mitigate the dramatic effects of flooding and landslides.

A Project of such scope and complexity, with the participation of so many

institutional protagonists (approximately 22 distinct govemment agencies and

entities were involved), requires adequate management, both from the technical

standpoint (execution of the works and services) and from the organizational point

of view (institutional coordination, mobilization of financial and management

resources).

In this regard, the association of multilateral (World Bank), federal (CEF) and

local (State and Municipal) interests has been extremely complex from the policy

and administrative point of view, even though it is possible to point to many

positive aspects which contributed to the success of the Rio Reconstruction

Project.

The World Bank, besides supplying financial resources, provided its

experience in the monitoring of urban infrastructure projects. When negotiating

ecut -i -S -mm a . . .. i.....

APPENDIX A

the Loan Agreement for the implementation of the Project, the Bank sought to

ensure the full legal, institutional and financial framework necessary for the

execution of the work and services. Furthermore, detailed planning was

requested, especially in areas later-on identified as bottlenecks. This concern for

the coordination and dissemination of procedures was another distinctive

characteristic of Project monitoring, as carried out by IBRD.

As a consequence of the World Bank's demands, administrative procedures

were streamlined, and information flows were computerized, which at the same

time assisted in recording the memory of the Project (something which is often

lacking in Brazil).

With regard to the role of Caixa Econ6mica Federal - CEF, it should be noted

that its participation in the Project started without any prior planning for its role as

co-financier, borrower and agent for the transfer of IBRD funding to the State and

Municipality of Rio de Janeiro. Though it is true that, as the successor of Banco

Nacional da Habitacao - BNH (National Housing Bank), CEF was already carrying

out operations with World Bank funding in sectoral sanitation and urban

development programs, however, it had only limited experience in programs of

this scope and complexity, involving so many protagonists.

In the initial phase of the Rio Reconstruction Project, issues such as

unavailability of funds and the need to adapt loan operations to FGTS rules

contributed to delay disbursements, thus affecting the progress of the Project. On

the other hand, CEF had no streamlined operational system for disbursement of

resources, which should have been based upon arrangements with Banco

Central (Central Bank) with regard to exchange operations and other measures.

Furthermore, there was no precedent for the monitoring of activities in areas in

which CEF had no prior experience, such as reforestation, solid waste

management and civil defense.

:xecu ve S.rnma,y ... :.:,.:i:-::i:'-i''- -'' . . ......... -

APPENDIX A

Despite these difficulties, while CEF was facing difficulty in obtaining

resources, an experienced technical team and support staff was assembled within

CEF Regional Office in Rio de Janeiro, carry out the analysis of the financial and

economic aspects of the projects, the contracting and monitoring of works and all

the activities foreseen within the scope of the Project. The World Bank, for its part,

expressed interest in working with an efficient Federal Agency capable of serving

as financial intermediary in its Loan Agreements. In this respect, CEF

representation in Rio de Janeiro became the model for improving operational

procedures for the institution as a whole.

With respect to the management of the Project at the level of the executing

agencies in the State and Municipalities, planning and coordination were essential

to the success of the Project, and these elements required strengthening during

the course of Project implementation. In the case of the State Government,

especially, it proved necessary to provide systematic support to the technical

teams of the agencies involved, as these proved to be ineffective to handle the

scope and complexity of the tasks falling under their responsibility. To overcome

these difficulties, the State resorted to contracted specialists.

This was not the case with respect to the Municipality of Rio de Janeiro, whose

executing agencies - some of which had a long established tradition - proved fully

capable of conducting the works and services for which they had been made

responsible.

In summary, the performance of GEROE at the level of the State Government, of

F/ACR at the level of the Municipality of Rio de Janeiro, and of PROGREP in the

Municipality of Petr6polis were of fundamental importance in the success of the Rio

Reconstruction Project, since they were in charge of the definition of priorties,

organization of tenders, coordination, and execution of works and services under the

Project.

Exec Summay x iv

APPENDIX A

Another aspect worth mentioning is the influence of the popular movements

in the Baixada Fluminense on the definition and planning of the Rio

Reconstruction Project, and their tenacity undoubtedly contributed to the depth

and scope of the interventions carried out by the Project in that region.

The original concept of the Project was of an emergency nature. However,

during implementation, difficulties arose which led to delays, and these in turn led

to changes in approach, to the point that, over time, the Project began to take on

a much broader and multi-sectoral character. It was for this reason that, in 1993,

an Amendment to the Loan Agreement was signed, whereby the Rio

Reconstruction Project ceased to be regarded as an emergency project and

began to be perceived as being the first effective experiment in dealing, with the

critical problems of the urban environment of the Metropolitan Region of Rio de

Janeiro.

The Rio Reconstruction Project was, effectively, the first large-scale

intervention in the Metropolitan Region which sought to integrate actions with a

view to achieving far-reaching physical and social results. Among the actions

carried out under the Project, those relating to drainage, resettlement of

populations, and the reinforcement of slopes deserve special mention.

Studies carried out in the context of the lguacu Project show that there has

been a reduction in areas susceptible to flooding in the Baixada Fluminense as a

consequence of drainage works carried out under the Project, and that rains of

similar intensity would now affect 40% less of the area previously afflicted. This

proportion is also valid in terms of the number of lives which would be lost, the

incidence of water-born diseases, the number of working days lost, and losses in

terms of production and circulation of goods. Also among the positive effects of

the Project, are the increase in property values for homes which had previously

been susceptible to flooding, and the resumption of investment by home owners

and others in the market

Executive Summarr xv

APPENDIX A

Among the most positive effects of the Project, the resefflement program has

resulted in an unquestionable improvement in the quality of life of the resettled

families, not only because of improvements in the standard of their housing but

also as a consequence of criteria adopted for family relocation. An effort was

made to keep them as near as possible to their oniginal homes, to preserve their

neighborhood relationships and to continue to provide the assistance and support

which was given to them at the time of the inventory and during the move to their

new homes.

Surveys carried out so far by the State Govemment and by the Municipality of

Rio de Janeiro of the resettled families have recorded average rates of

satisfaction of 70% among the families relocated by the State, and of 85% among

families relocated by the Municipality. It should be observed that, while living in

their former dwellings these people were doomed periodically to loose all of their

meager savings and to fafl victim to epidemics of water born diseases, in a

perverse process of chronic impovenshment, and disincentive to the exercise of

citizenship.

As a consequence of improvement in the quality of life of these families, the

cycle of chronic impoverishment has been abruptly broken, making it possible for

them now to accumulate modest savings and apply them to improve their material

condition, thus generating jobs and potential consumers, and consequently

bringing an inflow of private investment into the region.

It has been proved that the local population reacts immediately to

investments made with work and creativity. People who live in the new homes,

built on more valuable land, begin to expand their houses, while businesses invest

in construction and renewal. Infrastructure thus made available to the population

has increased the value of their property, has raised the levels of tax revenue

collected by the Municipalities, and has opened up a new phase of economic and

social development in the regions benefited.

Executive.$ur.. . .. ......

APPENDIX A

A similar reaction has been noticed among populations affected by slope

stabilization works, especially after the change in focus from an emergency to a

preventative approach. The benefit resulting from these actions can be assessed in

terms of a marked reduction in the number of accidents in the hillsides, both in the

Municipality of Rio de Janeiro and in Petropolis, after Project works were

implemented.

It is true that much remains to be done, to effectively reduce the seriousness

of the effects rainstorms in the Rio de Janeiro Metropolitan Region, and that this

will continue to be at great expense, given the way problems have been allowed

to accumulate over recent decades. However, it is estimated that positive results

of the measures carried out under the Project have had a highly positive impact

on social, sanitary, and environmental conditions in the Rio de Janeiro

Metropolitan Region.

Such results are due to the convergence of interest of the various

protagonists involved in the Project, which led to the consolidation of the political

will to intervene to effect changes in the urban environment. From the political

viewpoint, it is no coincidence that the Project received priority in three

consecutive State and Municipal administrations.

Furthermore, implementation of the Project has led to an increase in

interventions carried out to improve the urban environment, for example, the

Projeto de Despoluiq5o da Bafa de Guanabara (Project for Cleaning up of the

Guanabara Bay) and the Programa de UrbanizaXo de Assentamentos

Populares - PROAP-RIO (Program for Urban Renewal of Popular Settlements),

which encompasses the Slum Neighborhoods and Legalization of Irregular

Estates Programs, all of which are receiving funding from the Inter-American

Development Bank - IDB, not to mention other projects which are currently under

negotiation by the State Government and Municipality of Rio de Janeiro with IBRD

and IDB.

APPENDIX A

In summary, given the chronic shortages and precariousness of land use in

the Metropolitan Region, the greatest impact of the Rio Reconstruction Project at

the regional level has been in terms of management and planning. Given its

scope and complexity, the execution of the Project has resulted in the

improvement of public agencies and has contributed to better performance in

planning and management activities related to the urban environment.

Financial management, at the level of the State and Municipal Governments

is, however, still deficient Although the guarantee of resources for program

implementation depend, to a great extent, upon the political will of decision

makers, the availability and regularity of these resources depend on an efficient

public administration. Considering that the components of the Project were divided

into as many financing packages as groups of works or services to be contracted,

applicable rules often excessively slowed down the process of committing and

disbursing counterpart funds from the State and Municipal Governments of Rio de

Janeiro.

With regard to the allocation of resources by CEF, it should be noted that its

high level of participation in the financing of the Project, although it made Project

approval feasible, should have been made operational in ways permitting efficient

Project execution. At certain times, budgetary difficulties related to CEF's

resources for urban development - the FGTS - thus compromised the progress of

the Project.

In conclusion, it can be stated that the Rio Reconstruction Project, in terms of

planning, was a leaming process for all protagonists. For the local governments,

which had had no prior experience with multilateral agencies, it represented an

altemative source of funding to be considered in their future planning activities.

The success achieved is leading to signing of further agreements, providing

continuity for actions carried out so far. Furthermore, the Project was a learning

experience in terms of articulation between the State Govemment and local

Municipal Govemments, and the opening-up of channels for popular participation.

* -glve .Sur.,y i ...

APPENDIX A

For CEF, it meant a broadening of its purely financial role to that of a more

effective form of action, as the agent orienting the actions of the various other

protagonists, seeking to adapt World Bank policies and the Federal Govemment

urban development programs to local priorities, and providing general

coordination.

Finally, in light of the difficulties and failures encountered throughout

implementation of the Project, it seems appropniate to make the following

recommendations:

* new intemational agreements, to be negotiated by CEF, should make

available the full amount of the resources required, so as to eliminate

delays in their disbursement;

* local governments should assign expenditures resulting from projects

which are the object of financing agreements into their multi-annual plans,

and annually issue commitment requests covering the execution of works,

from the time of the initial memorandum until the end of the final fiscal year;

• relations between public agencies and university research centers should

be strengthened, with a view to promoting an exchange of knowledge on

urban infrastructure technologies and environmental management;

* the implementation of the Plano de Manutengao das Calhas dos Rios

(Plan for the Maintenance of River Courses), drawn up by SERLA, for the

maintenance of dredging services executed within the scope of the Project,

should be made feasible by the State;

* populations living in areas affected by Project works should be the object

of environmental education programs, aimed at preserving the benefits

gained through actions carried out so far, or yet to be carried out;

* new projects to be implemented should forecast:

Executive S.m...e.....

APPENDIX A

a) a participation approach in order to accomplish mobilization of the

beneficiary community through its representative associations from

the project design; and

b) a explicit participation of beneflciary municipalities when the projects

are under state responsibility.

Exe utiv Slmmary xx

IBRD 20959

| 44 ~~~~~~~B R A Z I L 5 , . -

METROPOLITAN AREA OF RIO DE JANEIRO 5 Q2--FLOOD RECONSTRUCTION AND PREVENTION PROJECT N1Y I

[ 22 ,, ",/ $ 22O1 /

POIULA KON DEN4S TY BUILT UP AREAS | B R A Z I L,PERSONS PFE SQIR RIKILOMETER N 1985 C a _ PROJECT MUNIC PAL BOUNDA/E

15,000 - 6,000 E-R METROPOL TAN BOIUPDARTI

m 4,000 ~8,000 - MUNICIPAL BOUNDARIES' 0 BRASIL A

1,oOc - 4,A 0, STATE BOUNDARIESINTERNAT ONAL BOUNDARIES

*ONLY MUNIC PAL TIES FOUND _

R~~~~~~~j ~~~~~~W THIN THE MTETROPOL TAN. 406,000 |- 1980 POPULAT ON AREA ARE ME POCED

S-58OSROD 1090 ESTIMATED POPULATON 0 soT 1000

_: ^ % ~~~~~~~~1990 ElTMATFn POP JIATOtj INS A w.i ~.2|kKILOMETERSF.7 PERCENT OF TOTAL STAIE POPUL-TI ON '- . ,MTES

03.463 - PERSONS PER SQUARE K LOMETER IN 1985

-- v 1 ' < v - R i35wo 246,700 ' ~~~~~~~~~~~~~~~~~ESPIRITOSOURCE APf-e F-Ad,a.A Cenro 00 Idto,AA;001 DAdA, do RA dA JARIRA ICIDEA BA OTRO D br, 1987 sSANTO

V_, SMINAS GERAIS

j X;~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

AREA OP 1R88

AT0

!PARACAMBI , <y IS A 1MDO

PAULO

ITAGUAI ~~~~~~~~~~~~~~~~~ITABOWA

MANGARATIBA NITER&z .C. ARC

23-~ ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~3

KILOMETERS

BANE 1988