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The World Bank
FOR OFFICIAL USE ONLY
Report No.: RES21019
RESTRUCTURING PAPER
ON A
PROPOSED PROJECT RESTRUTURING
OF THE
CEARÁ RURAL SUSTAINABLE DEVELOPMENT AND COMPETITIVENESS PROJECT
(Projeto de Desenvolvimento Rural Sustentável – Projeto São José III)
IBRD 8124-BR
APPROVED APRIL 5, 2012
TO THE
STATE OF CEARÁ
WITH THE GUARANTEE OF
THE FEDERATIVE REPUBLIC OF BRAZIL
MAY 16, 2016
Agriculture Global Practice
Brazil Country Management Unit
Latin American and the Caribbean Region
This document has a restricted distribution and may be used by recipients only in the performance of
their official duties. Its contents may not otherwise be disclosed without World Bank authorization.
DATA SHEET
Brazil
Ceara Rural Sustainable Development and Competitiveness (P121167)
LATIN AMERICA AND CARIBBEAN
Agriculture
Report No:
RES21019
.
Basic Information
Project ID:
P121167
Lending Instrument:
Specific Investment Loan
Regional Vice President: Jorge Familiar Calderon
Original EA Category:
Partial Assessment (B)
Country Director:
Martin Raiser
Current EA Category:
Partial Assessment (B)
Senior Global Practice
Director:
Juergen Voegele
Original Approval Date:
05-Apr-2012
Practice
Manager/Manager:
Laurent Msellati
Current Closing Date:
31-Oct-2016
Team Leader(s):
Diego Arias Carballo
.
Borrower:
State of Ceara, Brazil
Responsible
Agency:
Secretariat of Agrarian Development
.
Restructuring Type
Form Type:
Full Restructuring Paper
Restructuring
Level:
Level 2
.
Decision Authority: Country Director Approval
Financing ( as of 6 May 2016 )
Key Dates
Project
Ln/Cr/TF
P121167 IBRD-81240
Status
Approval
Date
Effective 05-Apr-2012
Signing Date
Effectiveness Original
Revised
Date
Closing Date Closing Date
03-Oct-2012
06-Dec-2012
31-Oct-2016
31-Oct-2016
Disbursements (in Millions)
Project
Ln/Cr/TF
P121167 IBRD-81240
Status
Currency Original Revised
Effective USD
100.00
100.00
%
Cancelle Disburse Undisbur
Disburse
d
d
sed
d
0.00
57.42
57
42.58
.
Policy Waivers
Does the project depart from the CAS/CPF in content or in other significant
respects?
Yes [ ]
No [ X ]
Does the project require any policy waiver(s)?
Yes [ ]
No [ X ]
.
A. Summary of Proposed Changes
The purposes of this restructuring is to extend the project closing date by 18 months.
Change in Implementing Agency
Yes [ ]
No [ X ]
Change in Project's Development Objectives
Yes [ ]
No [ X ]
Change in Results Framework
Yes []
No [X ]
Change in Safeguard Policies Triggered
Yes [ ]
No [ X ]
Change of EA category
Yes [ ]
No [ X ]
Other Changes to Safeguards
Yes [ ]
No [ X ]
Change in Legal Covenants
Yes []
No [X ]
Change in Loan Closing Date(s)
Yes [X]
No []
Cancellations Proposed
Yes [ ]
No [ X ]
Change to Financing Plan
Yes [ ]
No [ X ]
Change in Disbursement Arrangements
Yes [ ]
No [ X ]
Reallocation between Disbursement Categories
Yes []
No [ X ]
Change in Disbursement Estimates
Yes []
No [X ]
Change to Components and Cost
Yes []
No [X ]
Change in Institutional Arrangements
Yes [ ]
No [X ]
Change in Financial Management
Yes [ ]
No [ X ]
Change in Procurement
Yes [ ]
No [ X ]
Change in Implementation Schedule
Yes [ ]
No [ X ]
Other Change(s)
Yes [ ]
No [ X ]
Appraisal Summary Change in Economic and Financial Analysis
Yes [ ]
No [ X ]
Appraisal Summary Change in Technical Analysis
Yes [ ]
No [ X ]
Appraisal Summary Change in Social Analysis
Yes [ ]
No [ X ]
Appraisal Summary Change in Environmental Analysis
Yes [ ]
No [ X ]
Appraisal Summary Change in Risk Assessment
Yes [ ]
No [ X ]
.
B. Project Status
Overall implementation and progress towards achievement of the PDO have been upgraded to Moderately
Satisfactory to reflect the approval and implementation of agribusiness plans under Component 1 as well
with a general acceleration in the implementation of project activities and disbursements. The project was
approved with a 4 year implementation period (implementation time since effectiveness is 3.5 years),
which is insufficient even in relation to other similar projects in the Northeast region and Brazil as a whole.
Other similar projects have project implementation periods between 5 to 6 years. The project has now 6
months left before the closing date with 57.42% of the funds disbursed. The project is now in route to
achieve most of the project outcomes and indicators, but additional time will enable them to fully achieve
those objectives and reach all targets.
Development Objectives/Results
Project Development Objectives
Original PDO
Project Development objective: The objectives of the Project are to: (i) improve the sustainability of rural
production and rural income generation; and (ii) contribute to the Borrower’s efforts to universalize access
to Water Services.
Change in Project's Development Objectives
Change in Results Framework
.
Change in Legal Covenants
.
Financing
Reallocations
Disbursement Estimates
Change in Disbursement Estimates
.
Components
Change to Components and Cost
Other Change(s)
ABBREVIATIONS AND ACRONYMS
ATER
BB
BNB
CA
CAGECE
CDD
CEDR
CENTEC
CMDS
COGERH
CONAB
CONPAM
CONTAG
CPS
CTDRS
EMATERCE
EMBRAPA
FECOP
FUNASA
FUNCEME
HDI
IICA
IPPF
IRR
PA
MDA
MDS
Rural Technical Assistance
Assistência Técnica e Extensão Rural
Banco do Brasil
Banco do Nordeste do Brasil
Community Association
State Water and Sanitation Company
Companhia de Água e Esgoto do Ceará
Community-Driven Development
State Rural Development Council
Conselho Estadual de Desenvolvimento Rural
Technological Learning Center Institute
Instituto Centro de Ensino Tecnológico
Municipal Sustainable Development Council
Conselho Municipal de Desenvolvimento Sustentável
State Water Resources Management Company
Companhia de Gestão dos Recursos Hídricos do Ceará
National Supply Company
Companhia Nacional de Abastecimento
Environmental Policies and Management Council
Conselho de Políticas e Gestão do Meio Ambiente
National Federation of Agricultural Workers
Confederação Nacional de Trabalhadores na Agricultura
Country Partnership Strategy
Territorial Council for Rural Sustainable Development
Colegiado Territorial de Desenvolvimento Rural Sustentável
Ceará State Rural Extension and Technical Assistance Company
Empresa de Assistência Técnica e Extensão Rural do Ceará
Brazilian Agricultural and Livestock Research Company
Empresa Brasileira de Pesquisa Agropecuária ESMF
Environment and Social Management Framework
State Fund for Poverty Reduction
Fundo Estadual de Combate à Pobreza
National Health Foundation
Fundação Nacional da Saúde
Ceará State Meteorology and Hydrological Resources Foundation
Fundação Cearense de Meteorologia e Recursos Hídricos
Human Development Index
Inter-American Institute for Cooperation on Agriculture
Indigenous Peoples Planning Framework
Internal Rate of Return
Productive Alliance
Ministry of Agrarian Development
Ministério do Desenvolvimento Agrário
Ministry of Social Development
Ministério do Desenvolvimento Social e Combate à Fome
NGO
O&M
PAM
PDO
PPP
PO
PREVINA
PRONAF
PTDRS
SDA
SEBRAE
SEDUC
SECITECE
SISAR
SOE
SOHIDRA
SRH
TCE/CE
UGP
UGT
WSS
Nongovernmental Organization
Operation and Maintenance
Municipal Water Plan
Plano de Águas Municipal
Project Development Objective
Public-Private Partnerships
Producers’ Organization
State Program to Prevent, Monitor and Combat Forest Fires
Programa Estadual de Prevenção, Monitoramento, Controle de
Queimadas e Combate aos Incêndios Florestais
National Program to Strengthen Family Agriculture
Programa Nacional de Fortalecimento da Agricultura Familiar
Territorial Rural Sustainable Development Plan
Plano Territorial de Desenvolvimento Rural Sustentável
Ceará State Secretariat of Agrarian Development
Secretaria do Desenvolvimento Agrário
Brazilian Agency for Micro- and Small-Business Assistance
Serviço Brasileiro de Apoio às Micro e Pequenas Empresas
Ceará State Secretariat of Education
Secretaria da Educação
Ceará State Secretariat of Science and Technology
Secretaria da Ciência e Tecnologia do Ceará
Integrated Rural Water Supply and Sanitation System
Sistema Integrado de Saneamento Rural
Statement of Expenditure
State Superintendency for Water Works
Superintendência de Obras Hídricas
Ceará State Secretariat of Water Resources
Secretaria dos Recursos Hídricos do Ceará
Tribunal de Contas do Estado de Ceara
Project Management Unit
Unidade de Gerenciamento do Projeto
Project Territorial Management Unit
Unidade de Gestão Territorial
Water and Sanitation Services
Regional Vice President:
Country Director:
Global Practice Senior Director
Practice Manager:
Task Team Leader:
Jorge Familiar
Martin Raiser
Juergen Voegele
Laurent Msellati
Diego Arias
BRAZIL
CEARÁ RURAL SUSTAINABLE DEVELOPMENT AND COMPETITIVENESS PROJECT
CONTENTS
A. SUMMARY
B. PROJECT STATUS
C. PROPOSED CHANGES
D. APPRAISAL SUMMARY
ANNEX 1: RESULTS FRAMEWORK AND MONITORING
BRAZIL
CEARÁ RURAL SUSTAINABLE DEVELOPMENT AND COMPETITIVENESS PROJECT
RESTRUCTURING PAPER
A. SUMMARY
1. This Restructuring Paper seeks the approval of the Country Director to the proposal from the State
of Ceará for the restructuring of the Ceará Rural Sustainable Development and Competitiveness
Project (P121167; Loan 8124-BR). The proposed restructuring will not change the original Project
Development Objective (PDO) of the project. The purposes of this restructuring is to extend the
project closing date by 18 months. This is their first request for project closing date extension.
2. The proposed restructuring follows communications exchanged between the Borrower and the
Bank about the conditions needed in order to assess a potential extension of the closing date. Those
main conditions being: (i) achieving 50% disbursements; and (ii) having at least an MS DO rating.
Both conditions (as well as the achievement of agreed action plans) have been reached. The reason
behind the need for extending the project are twofold: (i) the project was designed and approved
with a very optimistic time frame of 4 years (3.5 years of effective implementation); and (ii) both
agriculture and rural water investments have taken longer to implement than originally expected.
3. This is the third project restructuring. The first one conducted in April 2014 was to reallocate
resources from the productive inclusion component (Component 1) to the rural water and sanitation
component (Component 2) to respond to the severe drought the State was (and is) undergoing. The
second one in March 2015 was after the midterm review to include changes in the pari-passu
arrangement for expenditure categories, modify some specific activities that were deemed
unfeasible, and adjust the results framework.
4. There are no changes to the Project’s safeguards category and no new safeguards policies are being
triggered.
B. PROJECT STATUS
5. Original Loan. The Ceará Rural Sustainable Development and Competitiveness Project has a total
estimated cost of about US$150 million, supported by a Specific Investment Loan (SIL) of US$100
million from the IBRD. The Loan was approved by the Board of Executive Directors on April 5,
2012, and became effective on December 06, 2012. The current closing date is October 31, 2016.
6. According to the Loan Agreement, the PDO is to (i) improve the sustainability of rural production
and rural income generation; and (ii) contribute to the Borrower’s efforts to universalize access to
water services.
7. The Project, implemented over a four-year period, has the following three components to achieve
its objectives:
Component 1: Economic inclusion. The component promotes investments in rural economic
inclusion in the borrower's territory, through:
(a) the provision of support for: (i) the preparation of business plans, implementation and
supervision; (ii) the construction of warehouse facilities in selected rural areas for collecting,
processing and distributing farm products;
(b) the provision of support to Producers’ Organizations (POs) for the carrying out of: (i)
Productive Subprojects; and (ii) Environmental Services Subprojects, all included in eligible
Business Plans;
(c) the provision of support to State Secretary for Agrarian Development (SDA) for the
development of a state-wide disaster risk management policy, contingency plans and early
warning systems for the prevention of natural disasters.
Component 2: Water services. The component supports the State's efforts to ensure universal access
to potable water and water services in rural areas through:
(a) the provision of support to: (i) SDA for the preparation and implementation of engineering
designs for selected potable water and basic sanitation infrastructure investments; and, (ii)
CAGECE (Water and Sanitation Company of Ceará) and SOHIDRA (Superintendency of
Water Infrastructure) for the analysis of engineering designs and supervision of works for the
implementation of selected potable water and basic sanitation infrastructure investments, using
existing water sources to complete the link between the main water distribution system and the
relevant household.
(b) the provision of support to CAGECE and SOHIDRA for the scaling up of existing water
distribution management system models, including SISAR, and the development of pilot
solutions for the sustainable operation and management of Water Services delivery and
management in selected rural areas.
(c) the provision of support to Community Associations for the carrying out of Greywater Reuse
Pilot Subprojects.
Component 3: Institutional strengthening and project management. The component supports for,
Provision of support for, inter alia: (a) the technical and administrative management of the Project;
(b) the necessary updates to SDA's management information system, including the design,
development and implementation of a monitoring and impact evaluation module to track progress
on results indicators; (c) the development and implementation of a training program for technicians,
Project Beneficiaries and stakeholders; (d) the development and implementation of a
communication plan to disseminate information on the Project; and (e) institutional strengthening
of the Court of Audits of Ceará (TCE-CE) for the carrying out of audits under the Project.
8. The Project remains managed and implemented by the State Secretariat of Agrarian Development
(SDA). SDA is supported by the co-executing agencies: Ceará Rural Extension and Technical
Assistance Company (EMATERCE) and Institute of Technological Studies (CENTEC) to carry
out Components 1 and 2(c); CAGECE and SOHIDRA to carry out Components 2(a) and (b); and,
Inter American Institute for Agriculture Cooperation (IICA) for purposes of assisting in the
carrying out of Components 1, 2 and 3.
9. Implementation Progress. Overall implementation and progress towards achievement of the PDO
have been upgraded to Moderately Satisfactory to reflect the approval and implementation of
agribusiness plans under Component 1 as well with a general acceleration in the implementation
of project activities and disbursements. The project was approved with a 4 year implementation
period (implementation time since effectiveness is 3.5 years), which is insufficient even in relation
to other similar projects in the Northeast region and Brazil as a whole. Other similar projects have
project implementation periods between 5 to 6 years. The project has now 6 months left before the
closing date with 57.42% of the funds disbursed. The project is now in route to achieve most of the
project outcomes and indicators, but additional time will enable them to fully achieve those
objectives and reach all targets. An additional financing has been requested by the Government (to
achieve the US$200 million of lending stipulated in the original Carta Consulta), but such request
will not be evaluated until a new country strategy has been approved.
C. PROPOSED CHANGE
10. The proposed change responds to a request from the State Government of Ceara dated February 2,
2016 to extend the closing date of the Loan Agreement (LA), which was approved by the Federal
Government (the Guarantor) on May 4, 2016 (COFIEX Recommendation Nº 09/270 approved on
March 28, 2016; and Letter from STN Nº 324/2016 dated April 13, 2016).
11. Project’s Development Objective. The original PDO will not be changed in the restructuring
process. The PDO will remain as follows: “The objectives of the Project are to: (i) improve the
sustainability of rural production and rural income generation; and (ii) contribute to the
Borrower's efforts to universalize access to Water Services”.
12. Results Framework. The results framework remains the same.
13. Components. The activities for Project’s Components remain the same.
14. Safeguards. The Project would remain classified as an environment Category B and no additional
safeguards policies would be triggered. Overall, environmental and social safeguards have been
managed in compliance with Bank policies.
15. Institutional Arrangements. The Project Implementation Unit (PIU) will remain the same.
16. Financing. The detailed Project costs remain the same.
17. Financing Plan. The Financing plan of the project would remain unchanged.
18. Cancellations. No cancellation of loan proceeds is being considered in the restructuring of the
Project.
19. Financial Management. Financial management arrangements under the Project would remain
unchanged.
20. Procurement. All procurement arrangements will remain unchanged.
21. Closing Date. The restructuring proposal is considering an extension of the closing date of 18
months.
22. Implementation Schedule. The overall Project implementation schedule will be extended by 18
months.
23. Loan Agreement. No changes to the Loan Agreement are proposed.
D. APPRAISAL SUMMARY
1. Economic and financial analysis. The original economic and financial analysis of the Project
carried out at appraisal, which considered a sample of investment proposals for project financing,
is still consistent and valid. The analyzed projects generated Financial Internal Rates of Return
(IRR) greater than 25 percent in all cases and demonstrated significant incremental contributions
to rural producer income (R$262/month on average).
2. The preliminary cost-benefit assessment of potable water supply investments to be financed by
Component 2 is based on cases drawn from the Implementation Completion and Results (ICR)
report for the Rural Poverty Reduction Project (RPRP) of Ceará (December 2009), a precursor to
this project. The nature of the projects demanded for Component 2 financing are similar in nature
and scale to those implemented by the RPRP.
3. Technical. Given the successful second and third call for proposals for productive subprojects and
the execution of water and sanitation investments, the project would benefit from additional time
in order to fully achieve its PDO. The 18 month closing date extension request is deemed
appropriate, in particular to achieve the objectives of the project in relation to the productive
inclusion of small producers through market inclusion. If no extension is provided, about 30 to
40% of agribusiness plans would go unfunded, partially achieving beneficiary targets and allowing
for short time of technical support after the productive investments are implemented on the ground.
4. The project strongly contributes to the State’s efforts to ensure universal access to potable water
and basic sanitation in rural areas by financing the extension of potable water supply infrastructure
and basic sanitation services to rural communities. The State’s long-term experience with the
management of rural potable water supply services (such as SISAR) has also been adopted by the
project. In addition, the project includes a strong aspect related to technical support to producers’
and community organizations, and social and environmental requirements for project investments,
as well as a project capacity-building plan targeting participating stakeholders. The extension of
the closing date would allow the project to provide additional implementation support and follow
up to the rural potable water investments, as well as to expand into regions that are currently being
affected by a severe drought due to an El Niño year.
5. Financial Management. A financial management assessment for the proposed project was
conducted during project preparation, in accordance with OP/BP 10.02 and the Financial
Management Practices in World Bank Financed Investment, dated March 5, 2009. The overall
conclusion on the assessment of SDA is that the financial management arrangements, as set out for
the proposed project, are adequate and, during implementation are currently considered
Satisfactory. The Control Risk is currently considered as Moderate. Procedures have been
discussed and reinforced to mitigate any additional risks associated with the transfer of resources
to productive subprojects.
6. Procurement. The quality of procurement processes has been improving consistently.
7. Social. Overall, the project is in compliance with social safeguard policies (OP 4.10 and OP 4.12).
At appraisal, an Indigenous People Policy Framework (IPPF) and an Involuntary Resettlement
Framework (IRF) were prepared, publically disseminated and consulted. The IPPF and IRF are
available to the public through the project’s web page.
8. Environmental. The Project remains classified as environmental Category B and no additional
environmental safeguards policies are triggered.
9. Exceptions to Bank Policy. There are no exceptions to Bank policies.
a. Risk. Overall Project risk remains moderate. The main risks that could jeopardize the achievement
of the project development objective and outcome targets are related to institutional capacity.
Although the State of Ceará has a long-term partnership and experience in implementing Bank
projects, the implementation of the current Project has had problems in the implementation of the
new approach for market-driven productive subprojects and in the supervision of rural water
investments and has taken a long time to adjust to the new market-oriented focus of agriculture
production subprojects. Moreover, the multiyear drought faced by the States of Northeast has put
additional pressure on Governments to prioritize emergency measures over medium to long-term
investments. In order to mitigate identified risks, the State Government and the Bank agreed to: (i)
strengthen the institutional capacity of the State, developing drought contingency plans, and (ii)
move quickly in implementing the disaster risk management activities of the project to help better
plan for future catastrophe events.