Document of The World Bank

FOR OFFICIAL USE ONLY

Report No: 32941-BR

PROJECT APPRAISAL DOCUMENT

ON A

PROPOSED LOAN

IN THE AMOUNT OF US$57.6 MILLION

TO THE

FEDERAL DISTRICT

WITH THE GUARANTEE OF THE FEDERATIVE REPUBLIC OF BRAZIL

FOR A

BRASILIA ENVIRONMENTALLY SUSTAINABLE PROJECT

July 6,2005

Brazil Country Management Unit Environmentally and Socially Sustainable Development Sector Management Unit Latin America and the Caribbean Region

This document has a restricted distribution and may be used b y recipients only in the performance of their official duties. I t s contents may not otherwise be disclosed without the Wor ld Bank authorization.

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CURRENCY E Q U I V A L E N T S

(Exchange Rate Effect ive July 6,2005)

GDF DF RIDE GEF W&S ADASA PDOT ZEIS SANEAGO

CAAB

ZHIS CEF SEDUH

BELACAP SEMARH

CAESB

so ADS NOVACAP SECAP IBAMNDF

Currency Unit R $ l .OO R$2.34

Real US$0.43 US$l.OO

F I S C A L YEAR January 1 - December 3 1

ABBREVIATIONS AND ACRONYMS

Governent o f the Federal District Federal District Integrated economic development region Global Environmental Fund Water and sanitation Water and sanitation regulatory agency Territorial management plan

State o f Goifis water and sanitation company Brazilian environmental water and sanitation company

Federal financing agency Urban and housing development agency

GDF solid waste department GDF environmental agency

GDF Water and sanitation company

GDF civi l works secretariat GDF social development agency GDF drainage and paving department GDF financing identification secretariat Federal Government environmental agency - department assigned to the DF

Govern0 do Distrito Federal Distrito Federal Regiiio Integrada de Desenvolvimento Economico

Agencia Reguladora de Agua e Saneamento do DF Plano de Ordenamento Territorial Zona de Interesse Social Empresa de saneamento de GoiAs

Companhia Ambiental de Aguas Brasileiras

Zona Habitacional de Interesse Social Caixa Economica Federal Secretaria de Desenvolvimento Habitacional e Urbano ServiGo de Ajardinamento e Limpeza Urbana Secretaria de Estado do Meio Ambiente e Recursos Hidricos Compania de Saneamento Ambiental do Distrito Federal Secretaria de Estado de Obras Agencia de Desenvolvimento Social Cia Urbanizadora da Nova Capital do Brasil Secretaria de Estado de CaptaGBo de Recursos Intituto Brasileiro do Meio Ambiente e dos Recursos Naturais Renovgveis - Gerencia Executiva do DF

Vice President: Pamela Cox Country Managermirector: V i n o d Thomas

S M U Director: John Redwood

Paula Dias Pini Sector Manager: Abe l M e j i a

Task Team Leader:

FOR OFFICIAL USE ONLY

BRAZIL Brasilia Environmentally Sustainable Project

CONTENTS

Page STRATEGIC CONTEXT AND RATIONALE ...................................................................... 1

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

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

A . 1 . 2 . 3 . Higher level objectives to which the project contributes ................................................. 4

PROJECT DESCRIPTION ..................................................................................................... 4 B . 1 . 2 . 3 . 4 . 5 . 6 .

Lending instrument ........................................................................................................... 4

Project development objective and key indicators .......................................................... 4

Project background .......................................................................................................... 5 Project Components description .................................................................................... 10

Lessons learned and reflected in the project design ...................................................... 14

Alternatives considered and reasons for rejection ......................................................... 15

C . IMPLEMENTATION ............................................................................................................ 16

Institutional and implementation arrangements. ............................................................ 16

Monitoring and evaluation of outcomes/results ............................................................ 16

1 . 2 . 3 . Sustainability ................................................................................................................. 16

4 . 5 .

Critical r isks and possible controversial aspects ........................................................... 17

Loankredit conditions and covenants ........................................................................... 17

APPRAISAL SUMMARY .................................................................................................... 17

1 . Economic and financial analyses ................................................................................... 17

2 . Technical., ...................................................................................................................... 19

3 . Fiduciary ........................................................................................................................ 21

4 . Social ............................................................................................................................. 21

5 . Environment .................................................................................................................. 22

6 . Safeguard policies .......................................................................................................... 22

7 . Policy Exceptions and Readiness .................................................................................. 23

Annex 2: Major Related Projects Financed by the Bank and/or other Agencies .......................... 28

D .

Annex 1: Country and Sector or Program Background ................................................................. 24

Annex 3: Results Framework and Monitoring .............................................................................. 29

This document has a res t r i c ted distribution and may be used b y recipients only in the performance of their official duties . I t s contents may not be otherwise disclosed without Wor ld Bank authorization .

Annex 4: Detailed Project Description .......................................................................................... 35 Annex 5: Project Costs .................................................................................................................. 47 Annex 6: Implementation Arrangements ....................................................................................... 48

Annex 7: Financial Management and Disbursement Arrangements ............................................. 51

Annex 8: Procurement Arrangements ........................................................................................... 56

Annex 9: Economic and Financial Analysis .................................................................................. 59

Annex 10: Fiscal Analysis ............................................................................................................. 67

Annex 11: Safeguard Policy Issues ............................................................................................... 73 Annex 12: Project Solid Waste Disposal and Clean Development Mechanism - C D M ............... 89

Annex 13: Social Analysis ................................................................................ :. ........................... 94

Annex 14: Project Preparation and Supervision ............................................................................ 98

Annex 15: Documents in the Project Fi le ...................................................................................... 99

Annex 16: Statement of Loans and Credits ................................................................................. 100

Annex 17: Country at a Glance ................................................................................................... 104

Annex 18: Maps ........................................................................................................................... 106

i v

A. STRATEGIC CONTEXT AND RATIONALE

1. Country and sector issues

Urban environment issues in large urban areas o f Brazi l are imposing increasingly large costs to society in terms o f additional infrastructure to guarantee reliable water supply, and investments to address health impacts o f pollution, and reduce damage associated with flooding. T o address these urban environment issues, a long-term comprehensive strategy i s required. This i s the case o f the largest metropolitan areas o f Brazi l l ike Sgo Paulo, Belo Horizonte, Curitiba, and Recife, but it i s also an emerging demand from fast growing cities such as Brasilia, and medium size cities l ike Betim, Uberaba, Cubatgo which are experiencing similar urban environment issues. Brasilia i s already the tenth largest urban concentration in Brazil, and despite i t s well-known plan for urban development, i t shows high levels o f socioeconomic inequality, uncontrolled urban expansion, and environment degradation, which are found in most o f the largest metro areas o f the country. In addition, the urban sprawl in Brasilia occurs at the expense o f the degradation o f the most stressed ecosystem o f the country, the Cerrado, which i s compromising i t s natural capacity to provide key environmental services to support a sustainable metropolitan expansion.

High population growth, rising water demand, and unabated pollution in many unplanned settlements within the DF and i t s Integrated Development Region (RIDE) adversely impact the quantity and quality o f water resources. Left unchecked, these impacts could potentially impose a high cost on the expansion o f basic services, erode the quality o f l i fe and health o f the most vulnerable population, and ultimately undermine the sustainable development o f the region. Brasilia’s environmental importance lies in two main factors: a) i t s location at the head waters o f three key river basins o f national and regional importance (Parani, Tocantins - Araguaya, and SZo Francisco); and b) as a reservoir o f biodiversity in the Cerrados ecosystem. Additionally, 43% o f the DF territory i s made up o f environmental conservation units. Promoting socially and environmentally sustainable development in Brasilia has been part o f a national development strategy to foster sustainable economic growth in the center-west region o f the country. Undoubtedly, a substantial part o f this strategy has been achieved over the f i f ty year history o f Brasilia. Today, this strategy requires a renewed pol icy consensus on urban and regional environmental issues to more effectively contribute to the control and abatement o f high rates o f environmental degradation affecting capacity and cost o f providing urban and regional services.

The DF requests Bank lending assistance to formulate and implement a sustainable development strategy addressing priority environmental and social development issues. The DF i s also seeking Bank assistance in order to have access to grant resources to deal with global environment issues associated to the Cerrados ecosystem and Climate Change. Specifically, the DF would blend the proposed lending operation with a GEF grant, which would seek sustainable productive landscape and biodiversity conservation in the Cerrados. Additionally, the DF i s keen to build a partnership with the Bank to access carbon credits in exchange for improved solid waste management, which would be financed under the proposed project.

The Brasilia Sustainable Project i s part o f a broad GDF regional development program, which includes urban and rural sectoral investments coupled wi th policies and institutional

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strengthening. A major component o f this broad program i s the sanitation project under final execution stage, financed by the IDB, which i s extending water and sanitation coverage to 90% o f the population and providing waste treatment facilities for one hundred percent o f collected waste water. The Project constitutes a key complementary piece o f this broad program o f the GDF by providing an integrated framework to sectoral initiatives under execution, particularly on the pol icy and institutional efforts which are needed to address development inequalities, degradation o f natural resources, and fostering sustainability o f urban environmental services.

T o respond to these set of challenges, the Brasilia Sustainable Project has been designed to : (a) address the need for reducing regional inequalities, especially the issues associated with a sustainable use o f the scarce regional natural resources such as water; (b) address main pol icy and institutional issues of waste management, particularly water pollution which i s affecting the quality o f the Lake ParanoB, and regional solid waste management and (c) high priority investments to address acute social issues. The main policy themes addressed by the project are:

(a) Policy and institutional development to support sustainable management of water resources in the DF: Responding to the high priority o f WRM in the DF, in July 2004, i t created the water regulatory agency (ADASA), with responsibilities for both WRM and WSS. Taking stock on this decision, the Brasilia Sustainable Project wi l l (i) development o f regulatory, technical and legal tools to consolidate the implementation o f ADASA; (ii) strengthening inter-institutional coordination between A D A S A and ANA (the federal water agency); and (iii) policy formulation on urban and environmental issues aiming to improve synergies and coordination among sectors within the GDF.

(b) Protection of one of the most fragile ecosystem of the country by integrating local and global benefits to befinanced with GEF grants: Since one hundred percent o f the DF territory lies in the Cerrado biome, and the location o f the DF - at the headwaters o f three key national watersheds - underscores the critical role o f the DF for the Cerrado, which strongly depends o f ground water availability to survive during the extended dry season. The project w i l l support development of sustainable urban expansion policies, including the adoption o f appropriate land use patterns, in close coordination wi th development of biodiversity conservation policies.

(c) Development o f a model for integrated management of urban environmental issues in metropolitan areas of Brazil: The asymmetrical planning and management capacity o f municipalities within a metropolitan area as wel l as the need for governance models to deal with common service and development issues require close coordination across political jurisdictions and within government organizational structures. This i s the case o f the DF and i t s surrounding municipalities, which need a close coordination mechanism to joint ly address regional development issues. At the same time, the DF, being the economic engine for the entire region o f northern GoiBs and Minas Gerais, has recognized the need to reduce regional inequalities by financing urban improvements in municipalities located in the neighboring state o f Goifis. I t has also created a WSS and environmental services company (CAAB) to provide services in the twenty-two municipalities o f the metro area o f Brasilia.

(d) Support to land management and territorial development: The creation o f Brasilia has required substantial private land expropriation by the Federal Government, which until now i s incomplete and has left a legacy o f a large number o f land tenure issues. For instance, by year

2

2000, only about 55% o f the DF territory had legal titling entirely expropriated and regularized. There i s also a dynamic process to illegally urbanize rural land. T o address these challenges the GDF has decided to strengthen i t s capacity for policy analysis, update the DF territorial plan (PDOT), and modernize i t s land cadastre.

(e) Improve natural resources management and environmental licensing: Forty-three percent o f the DF territory i s a protected area, belonging to the GDF or the Federal Government through the regional environmental agency o f IBAMA. Moreover, in 2001, the Federal Government created the Planalto Central environmental protected area, which covers practically the entire territory o f the DF and, in addition, transfers to the regional IBAMA agency the environmental licensing authority over major investment intervention. Improving the environmental management system in the DF, and also strengthening the capacity o f the regional IBAMA agency, i s among the first priorities o f the GDF given i t s impact on local and regional development. The GDF would l ike develop more flexible instruments for environmental management instead o f the command-and- control system that i t i s in place. The GDF i s particularly interested in improving the efficiency and effectiveness of licensing mechanisms. Introducing economic and fiscal instruments i s a major thrust, in parallel w i th the development o f market-based instruments. The GDF strategy i s to introduce this environmental approach in urban development policies and tools, e.g. adopting tradable permits, ecological taxes (ICMS ecolo’gico).

(0 Reducing poverty and addressing environmental protection: Vi la Estrutural i s a main challenge for the DF due to i t s high social and environmental impacts. I t i s the major pollution source threatening Lake ParanoB. The area has been declared a ZEZS and it i s owned b y the GDF. The ZEIS regulation and the land tenure allows for upgrading the current settlement. The DF has traditionally removed unregulated low-income settlements to appropriate areas provided wi th basic services. However, land for urban expansion i s currently almost non-existent in the DF. The proposed project would integrate upgrading activities, leading to a better urban standard to both improve the quality o f l i fe and abate the pollution load originating in the area and discharged into rivers tributaries o f Lake ParanoB, as wel l as for protecting the National Park (which encompass a reservoir that produces 21% o f the DF’s water supply).

2. Rationale for Bank involvement

The Bank i s uniquely positioned to support the GDF priorities proposed through the Brasflia Environmentally Sustainable Project. First, the Bank, due to i t s recognized technical expertise and institutional worth, constitutes the ideal partner for addressing the complex institutional issues associated wi th the metropolitan and environmental concerns in the region. Second, the GDF and the Bank’s Environmental SAL goals and priorities coincide, with the latter constituting a powerful instrument guiding key development actions in the region. Third, the Bank partnership would bring acknowledged experience in conceiving and implementing integrated approaches for addressing the brown environmental agenda in Brazil. Fourth, the project i s fully compatible with the Bank’s Water Resources Sector Strategy, prepared in 1993 and revised in 2003, which acknowledges the need for an integrated approach to water resources planning and management, as wel l as the Bank’s comparative advantage in dealing wi th complex water management issues. Fifth, the project w i l l contribute directly to the CAS objective o f a

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‘more sustainable Brazil’, b y supporting the sustainable management o f natural assets, providing local environmental services, and enhancing cooperation among sub-national governments.

3. Higher level objectives to which the project contributes

The project w i l l contribute to higher level objectives in the following key areas: (a) Water Resources Policy Consolidation at the national and state levels, complement strategic water resources programs and abate critical water pollution loads; (b) Metropolitan Development, through the establishing cutting-edge institutional and technical models for metropolitan regional development, which constitutes a key urban issue challenging state and municipal governments; (c) Environmental Policy, b y making effective key recommendations prioritized by the Environmental S A L for improving the environmental institutional and technical framework; and (d) Poverty Reduction, by improving the living conditions in two critical and emblematic poverty pockets (Vi la Estrutural and Aguas Lindas).

B. PROJECT D E S C R I P T I O N

1. Lending instrument

Specific Investment Loan (SIL)

2. Project development objective and key indicators

The Project’s Development Objective i s to meet the growing needs o f the Federal District and the Brasilia Metropolitan Region to reduce regional inequalities and ensure quality water resources, through environmental planning and management activities, integrated wi th poverty reduction interventions and environmental rehabilitation in the most critical river basins.

Specifically, the project i s expected to achieve a more sustainable use o f scarce natural resources, such as water, and carry out selective investments that wi l l abate pollution loads that threaten strategic water bodies, while simultaneously addressing a range o f acute social issues. In addition, the project would have strengthened the capacity o f the local government to manage regional development and land management issues, water resources and urban sanitation

The results o f the Project’s six-year intervention wi l l measured by the following three indicators: (i) improved water quality o f the Vicente Pires and Descoberto Rivers (by achieving IQA class 2)’; (ii) improved living conditions in targeted settlements b y providing integrated urban environmental services; and (iii) strengthened technical and institutional capacity contributing to the sustainable development o f the Brasilia metropolitan region.

Based on the Brazilian Environmental legislation (Resolution 20/86- CONAMA) these rivers water quality must be improved in order to comply with class 2 criteria (allows for possible water supply for human consumption after conventional treatment, recreational purposes with primary contact, and, irrigation o f vegetables for uncooked human consumption).

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3. Project background

Project prioritization methodology: The project proposal results f rom a comprehensive regional assessment carried out during project preparation in order to select the most cost effective interventions f rom an urban environmental perspective. The assessment’s main aspects include: (i) a regional dimension; (ii) the river basin perspective adopted; and (iii) the matrix prepared, in which the main variables considered included: issue description; impacts summary; river basin affected; population affected; sectors involved; responsible institutions; and programs and resources addressing the issues. Two strategic decisions were taken as a result o f this broad assessment and the selectivity criteria adopted. First, the issues related to metropolitan development and water resources management at the regional level were prioritized. Second, the project investments would target two strategic river basins: Paranoh and Descoberto. The proposed project design reflects these two strategic priorities by including a robust component addressing development policies and institutional capacity strengthening and the investment components focusing on key environmental and social issues o f the two river basins.

DF water resources management and W&S sector efficiency: The DF’s rivers have a l o w water flow. Consequently, water i s relatively scarce. The water demand from the DF’s two mi l l ion urban inhabitants i s 4.5 m3 per second. T o meet this demand, the DF has six large water production systems delivering a total o f 5.6 m3/second. The recent W&S Master Plan for the DF and the surrounding ‘entorno’ region forecasts that b y 2010 water demand wil l increase to 5.9 m3/second. Based on these projections, in f ive years, the DF’s water production capacity wi l l be dangerously close to the level o f demand. To address this significant challenge, CAESB has carried out major institutional development and investment programs, such as the ones described below. First, it has undertaken important programs to improve i t s efficiency. CAESB i s currently one o f the three most efficient Brazilian water utilities, according to the WB-financed PMSS program. Water service i s delivered to 99 percent o f the population and water loss (UFW), i s only 24 percent - one o f the lowest in L A C .

A subsidy program for low-income families i s fully operational. Through this program, the DF government pays the bill for the portion o f consumption below 10m3 for users meeting a set o f criteria (such as users benefiting f rom the ‘Bolsa Familia’ Program). Secondly, next year, CAESB wil l complete a large sanitation program, financed b y the IDB, extending waste water collection to 87 percent o f the population. - This program substantially expands wastewater treatment capacity in order to process the total wastewater collected. Most o f the wastewater treatment plants (15 in total) include tertiary treatment due to the rivers’ l imi ted dilution capacity. Thirdly, CAESB i s already expanding the water supply production systems to meet the increasing demand. The Corumbi IV reservoir, currently under construction to generate energy and increase water production, i s a major element in this expansion program. This reservoir, located in the state o f Goiis, i s fully financed by the private sector. The GDF and Goi is have reached an agreement on joint use o f this asset. On the basis o f this agreement, the DF i s initiating a bidding process for a 30 year-BTO contract to construct and operate a water treatment plant using the Corumbi IV reservoir. CAESB w i l l buy water f rom the private company executing this BTO contract to help meet the water supply needs o f the DF population.

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CAESB i s also taking steps to provide services beyond the DF territory. The ‘entorno’ region i s currently one o f the major sources o f contamination threatening the DF water resources. Moreover, tackling the lack o f a reliable water supply and sanitation services i s one o f the priorities o f the entorno urban area. T o respond to this challenge, CAESB i s preparing an investment program to improve the W&S services in three cities located in the State o f Goiis, which are the major pollution sources o f the DF’s existent and future water supply reservoirs. One o f these cities, Aguas Lindas, pollutes the Descoberto Reservoir, the major water supply reservoir in the DF. Together with two others cities - Santo Antonio and Samambaia - they are contamination sources to the future Corumbi I V Reservoir.

The Public Prosecutor’s Office and IBAMA have declared that the environmental license to allow Commb6 I V to operate w i l l be issued once the pollution impact f rom these cities has been addressed. T o meet this requirement, the Caixa Economica Federal (CEF) has approved a U S $ 50 mi l l ion loan to the GDF. The proposed Bank loan complements this investment. Together, these integrated operations constitute the Brasilia Environmentally Sustainable Project. In parallel, CAESB in association with the Goi is Water Ut i l i ty Company (Empresa de Saneamento de Goids - SANEAGO), i s creating a new company, the Brazilian Water Environmental Company (Compania Ambientul de Aguas Brasileiras - CAAB) to improve water, sanitation, drainage and solid waste service in the Entorno region. To increase the water supply to the Entorno, C A A B w i l l buy water f rom Corumb6 IV - which w i l l be i t s primary water source.

Effective metropolitan action already being implemented: Reducing the pressure o f urban expansion arising f rom the Entorno region i s a priority for the DF government. Building Corumb6 IV and financing urban environmental services to the Entorno are strong indications o f the GDF’s priorities and represent a symbolic initiative for the metropolitan region. There i s no other public sector project o f this size and i t represents a bold innovation in terms o f investment and institutional arrangements. The proposed investment would be provided by CEF and the World Bank, as described above. In terms o f institutional arrangements, (i) CAESB and SANEAGO established a consortium, to which the Municipality o f Aguas Lindas granted a W&S concession contract, to provide institutional support for the init ial investment in Aguas Lindas, and (ii) the future services extension to the Entorno would be provided by CAAB, which i s in the final stage o f being set up. The Entorno’s Municipalities w i l l be Image 1: The DF and the 22 municipalities that make up the RIDE stakeholders in CAAB.

Furthermore, the Federal Government i s preparing a project proposal to request external financing to improve basic services in the Entorno. CAAB sees this as an additional window o f opportunity for expanding i t s area o f coverage, since the burden o f financing the substantial investment shortfall would be covered b y Federal Government grants. By helping to improve living conditions in the Entorno, the GDF i s seeking to achieve two major

6

goals: first, to reduce the pollution threat to i t s water resources; and second, to increase the Entorno’s attractiveness to new urban settlements in order to reduce the pressure o f urban expansion in the DF territory.

GDF Policy on slums and Vila Estrutural: The GDF’s policy for addressing unregulated low- income settlements has historically been to demolish houses and resettle the population in regularized subdivisions, where basic services are gradually introduced. As a result, the DF has a lower percentage o f population living in slums (3.5 percent, or 80,000 people), than any other Brazilian metropolitan region. These slums are spread over 63 areas, o f which only 10 percent have more than 300 houses. V i la Estrutural, with 6,500 families, i s by far the largest and most critical settlement, in both social and environmental terms. I t s explosive growth dates f rom the early 199Os, when a group o f waste pickers built the first houses alongside the solid waste landfill. I t s privileged location - only 7 km from ‘Plano Piloto’ - i s part o f V i l a Estmtural’s attraction for settlers. Previous DF governments have tried to demolish the settlment without success, with one such attempt triggering street clashes resulting in four residents’ deaths.

These events led to the alternative o f upgrading the V i l a Estrutural as an exception under GDF policy - a solution made easier b y the fact that GDF owns the land. In 2001, V i l a Estrutural was declared a Residence Zone o f Social Interest (Zona Habitacional de Interesse Social - ZHIS), thus providing the legal underpinning for the upgrading alternative and for bringing regular water supply, education and health services to the area. The definitive area upgrading plan i s currently being assessed and w i l l be implemented once the environmental license i s issued. V i l a Estrutural has the region’s highest crime indicators. Some families report that they were forced to leave their houses b y criminals who then sell the houses at a profit. The Government pays for transport to take children to schools in other neighborhoods; however, the children suffer a great deal o f discrimination in these schools, mainly f rom children and parents f rom the nearby host neighborhoods, for they are regarded as delinquents. V i l a Estmtural i s also a challenge f rom a social and environmental perspective: I t borders the Brasilia National Park - which i s a major Cerrado protected area located within the urban perimeter - significantly impacting the park and altering the Cerrado’s flora and fauna. Also, Lake ParanoB, a major Brasilia landmark, i s also affected, as the community produces the major pol lut ion load draining into the lake.

As part o f the process to regularize V i l a Estrutural, the GDF i s undertaking several actions. T w o years ago, a full Environmental Assessment (EA), utilizing a highly participatory methodology, was initiated to propose and assess the upgrading option. The EA w i l l be reviewed by IBAMA as part o f the process o f issuing the environmental license that w i l l regularize the upgrading solution. The alternatives being considered require significant environmental mitigation action. T o improve public administration in the area, GDF has created a regional administration specific to V i l a Estrutural, with offices located within the settlement. More recently, an integrated institutional coordination body was established to increase the government presence in the area. In addition, an ordinance survey map i s being developed to freeze the area o f occupation and provide input for urban design and resettlement options.

The DF plans to complete the upgrading design before the Brasilia Environmentally Sustainable Project becomes operational and carry out the c iv i l works during the first year o f implementation. The design phase w i l l adopt the upgrading participatory methodology applied in

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several Bank-financed projects (e.g. S5o Paulo-Guarapiranga, Prometropole, Prosanear). Two major aims are sought: improving the quality o f l i fe and mitigating environmental impact. Improving the quality o f l i fe b y providing basic services i s not a major technical challenge, due to the flat topography and existing street network. However, a major effort wil l be needed to improve social capital through an integrated citizen assistance program, based on innovative approaches that create community safe spaces and deliver education, health, and promote income generation, together with youth and leisure programs.

DF solid waste collection and disposal services: Solid waste collection and disposal services in the DF are provided by a private company under a five year contract. The overall quality o f services i s satisfactory, decreasing in areas lacking regular urban planning and infrastructure. The most obvious weakness i s solid waste disposal. The Federal District collects 3,000 to 3,500 tons o f solid waste per day; about 50 percent o f this waste (1,600 tons) - comprised o f mixed municipal solid waste, excluding construction debris - are disposed at the 200 hectare ‘Joquei’ sanitary landfill, the official DF land disposal site for the past 35 years, located between the Brasflia National Park and the large slum o f V i l a Estrutural. The remaining 50 percent comprise construction debris disposed in specific land fill sites, recyclable material, and organics processed in the composting units.

Most o f 200 hectares has already been used and covered with soil and vegetation, showing no compliance with rigorous technical criteria. The open waste cells - about 50 hectares - suffer f rom poor construction solutions and operational procedures. The dump only receives periodic soil cover, which i s undertaken after spreading and compaction o f the waste. The site i s not graded to minimize percolation o f rain water, drainage i s not wel l managed, leachate i s not appropriately collected or treated, and gas i s insufficiently managed. The poor design and management resulted in shortening the site operation lifetime, wi th studies estimating the site would continue to be operational for only 2 more years. The current service provision contract w i l l expire in October 2005. The bidding process for selecting a new provider i s under way. However, closing the current dump and opening a sanitary landfi l l site cannot be included in this bidding process because several measures required in order to obtain an environmental license are pending. An EA defining the technology for closing the dump and another EA evaluating five optional areas for the sanitary landfi l l site have been carried out and sent to IBAMA for review. Due to the significant positive environmental impact o f these works and their link with the V i l a Estrutural improvements, the DF decided to bring them under the aegis of this project. The DF also feels the project preparation i s allowing for positive dialogue with IBAMA and creating a constructive environment for proposing alternatives and working towards solutions on the main environmental issues o f the DF.

Solid waste waste pickers and collectors in the DF: There are approximately 750 waste pickers working at the ‘Joquei’ landfill, o f which 85 percent participate in a cooperative denominated ‘Environment’. Those that do not participate sell their production to this cooperative or to independent buyers. The cooperative and the independent waste pickers are part of a national solid waste collectors organization denominated ‘Solid Waste and Citizenship Forum’. This Forum, comprises of other local organizations, i s discussing with local authorities projects to address their needs, fol lowing strategies established at the national level. The Ministry o f Cities

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i s the authority chairing the national dialogue, whereas the representatives f rom the Ministry of Cities represent the GDF in the local dialogue.

The dialogue promoted b y the GDF involves all the waste collector cooperatives in the DF, which are organized in 10 cooperatives. There approximately 1,800 waste collectors in the DF, o f which 80 percent participate in these cooperatives. These entities have agreed upon a project wi th the GDF that would allow them to continue with their current j ob but under better conditions, both in terms o f health protection and revenue generation. Three o f these cooperatives, amounting to 450 participants, work in existing recycling centers. The others collect f rom specific neighborhoods such as public buildings.

As a result o f this dialogue, i t was agreed that the GDF would provide nine areas for the construction o f an appropriate establishment that would improve the waste pickers’ activities. These areas are already being assigned to the cooperatives, wi th the national development bank (Banco Nacional de Desenvolvimento Econdmico e Social - BNDES), financing US$2.5 mi l l ion for the building and equipment. The alternative offered to the waste pickers includes construction o f an establishment and provision appropriate equipment to allow them to continue their activity after the landfi l l closure, but under more adequate social and technical conditions. A more profound and definitive discussion wil l take place once two strategic steps are achieved: (i) the solid waste master plan under preparation presents alternatives for improving the sector efficiency and solutions for the population l iv ing f rom the solid waste; and (ii) the studies being carried out identify the appropriate location for the new sanitary landfill. The cooperatives involved in the dialogue already expressed acceptance o f this alternative, in which positive aspects raised include personal independency provided b y this type o f activity and the possibility o f reaching average revenue far superior to what the formal job market would offer.

DF environmental areas and ZBAMA’s licensing role: Most o f the DF’s Environmental Conservation Units were created in the 1960s, being among the first environmental areas designated by the Federal Government in al l o f Brazil. Many others were created during the 80s and 90s, covering 64 percent o f the DF territory wi th the primary purpose o f protecting water resources. In addition to these protected areas, in 2001, the Federal Government created the Planalto Central environmentally protected area, which covers almost the entire DF territory and part o f GoiBs. From the institutional stand point, the implications o f the creation o f this new environmental unit are extremely important. In practical terms, environmental licensing powers were removed from the DF and transferred to a federal institution - TBAMA (more precisely, to the regional section o f IBAMA in charge o f the Brasflia region). This i s the only instance in Brazi l where a federal agency regulates initiatives that fa l l under the mandate o f the state, as defined in the National Environmental System and the Constitution. In fact, i t s environmental licensing powers are so broad that IBAMA i s the main regulatory body on urban development in the DF.

The peculiarity o f the environmental institutional framework in the DF has profound implications for the processing o f environmental licenses for investment programs. These implications are particularly acute for operations under the Brasilia Project, such as the V i l a Estrutural upgrading and the construction of the new sanitary landfi l l site. Any alternative

9

solution for V i l a Estrutural requires that major environmental issues be addressed due to i t s proximity to the National Park.

The complexity of the Brasilia Environmentally Sustainable Project: Institutional issues are the main challenge for the project proposal. They are o f two orders: First, implementation o f the institutional component i s a challenge in itself since i t must deal wi th the complexity o f a metropolitan region. Second, the complexity o f the environmental institutional framework may create difficulties for the project implementation process, since obtaining the necessary environmental licenses may require significant effort and time.

This institutional complexity has already impacted on the project preparation for V i l a Estmtural and for the solid waste sanitary landfi l l site. Only the full environmental assessments have been prepared so far. The chart below summarizes the progress achieved prior to appraisal and the next steps. The chart includes reference to the environmental licenses that have to be obtained in order to progress project implementation, which are: the LicenCa Pr iv ia (LP) covering the design phase; the Licenqa de Instalaqiio (LI) authorizing the c iv i l works bidding process; and the Licenqa de Operaqgo (LO) authorizing the commencement o f infrastructure building work.

Image 2: Project Area of Influence and the Key Intervention Areas

4. Project Components description

Component 1: Policy and Institutional Development (US$7.6 mil)

The main objective o f Component 1 i s to support institutional strengthening and technical assistance for the enhancement o f the technical and institutional environmental enabling the GDF to undertake informed decision-making with respect to metropolitan issues, especially for promoting a more sustainable urban and environmental development. The outcomes o f this component w i l l also be fundamental beyond Brasllia and the Entorno region, as the other Brazilian metropolitan regions face s im i la r development challenges. The institutional strengthening and technical assistance wil l focus on three key metropolitan development issues: (i) Territory Development and Land Management; (ii) Environment and Water Resource

10

Management; and (c) Environmental Sanitation Management. The activities wi l l be executed by SEDUH, SEMARH, IBAMA, ADASA, BELACAP and CAESB, as specified below:

Subcomponent 1.1. Territory Development and Land Management (US$2.6): This subcomponent encompasses four main thematic areas related to territory, urban, housing and land use policies and institutional enhancement. B y developing studies and providing institutional capacity on these themes, the project expects to make available strategic technical instruments and institutional assets to SEDUH so i t can address key metropolitan and local urban development challenges. The four main thematic areas are: 1.1.1. Provision o f technical support to improve territory and urban development policies; 1.1.2. Development updated management technical tools for territory and urban development; 1.1.3. Assessment o f institutional arrangements for territory and urban development; 1.1.4. Enhancement institutional knowledge capacity for territorial and urban development.

Subcomponent 1.2. Environmental and Water Resources Management (US$3.9 mil): This subcomponent addresses six thematic areas related environmental and water resources management. By developing studies and providing institutional capacity o n these themes, the project expects to make available strategic technical instruments and institutional assets to SEMARH and IBAMADF to address key metropolitan and local urban development challenges. The seven thematic areas are: 1.2.1. Provison o f technical support to improve environmental management policies; 1.2.2. Development o f information systems for environmental management; 1.2.3. Enhancement o f institutional knowledge capacity for water resources management; 1.2.4. Development o f strategic planning for environmental licensing and enforcement including; 1.2.5. Development o f strategies to protect the federal conservation units in the DF territory; 1.2.6. Provision o f technical support to improve water resources management policies; and 1.2.7. Development o f updated information systems for water resources management.

Subcomponent 1.3. Environmental Sanitation Management (US$l .O mil): This subcomponent, be executed by CAESB, addresses four thematic issues related to environmental sanitation services. B y developing studies and providing institutional capacity on these themes, the project expects to make available strategic technical instruments and institutional assets to BELACAP and CAESB to address key metropolitan and local urban development challenges. The four thematic areas are: 1.3.1. Provision o f technical support to improve solid waste policies and management capacity; 1.3.2. Enhancement o f institutional knowledge capacity for solid waste management; 1.3.3. Provision o f technical support to the institutional, technical and legal framework o f CAAB; and 1.3.4. Provision o f support to CAESB to conclude i t s environmental certification system.

Component 2: Social Inclusion and Poverty Reduction (US$31.4 mil)

The main objectives o f Component 2 comprise reducing poverty and promoting social inclusion in localities presenting critical social conditions, coupled with actions to abate water resource pollution loads. These objectives wi l l be achieved through (i) an Integrated Development Project for V i l a Estrutural; and (ii) Social and Technical Support to the ‘Joquei Clube’ Sol id Waste Landf i l l Waste pickers.

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Sub-component 2. I. Zntegrated Development Project for Vila Estrutural ( ~ $ 2 9 . 9 mil). This subcomponent i s comprised o f two activities:

2.1.1 V i l a Estrutural Integrated Development Project: Planning, Technical Designs and Community Participation: The main objectives o f this activity are to: (i) Improve the living conditions in V i l a Estrutural, (ii) Insert the community into the regular ci ty planning and services, and (iii) Mitigate the environmental degradation in surrounding areas, including abatement o f pollution loads discharged on creeks and rivers, reverse damages in the National Park, and restore the connectivity o f the biome Cerrado in the area. SEDUH,‘ wi th the participation o f CAESB, NOVACAP, BELACAP, ADS, SEMARH, and IBAMA/DF, wil l play an important role o f coordinating this multisectoral task.

The technical designs for V i l a Estrutural Integrated Development Project wi l l address the following issues: (i) Development o f alternatives for improving local governance; (ii) Proposal for improvements o f social services such as education, health, income generation and youth development; (iii) Development o f technical alternatives for improving basic services including water, sewerage, drainage, streets network, paving, solid waste collection, effective household sewerage connection and sewer pits closure; (iv) Development o f technical alternatives to improve V i l a Estrutural’ s urban design, including land use and construction regulations, and recreational areas; (v) Development o f a Resettlement Plan; (vi) Development o f a technical proposal for environmental rehabilitation and protection, including improving the riparian vegetation o f the Vicente Pires stream, developing land use regulation for the Val0 stream banks, creating an urban park and a buffer zone contiguous to the National Park and the F L O N A boundaries, and creating the biological corridors liking the National Parks to the Vicente Pires and Val0 streams)

2.1.2. V i l a Estrutural C iv i l Works and Participation Activities: This activity entails the execution o f the c iv i l works and community participation activities proposed b y the Planning, Technical Designs and Community Participation tasks carried out for the V i l a Estrutural Integrated Development Project .

Subcomponent 2.2 Support to the Joquei Clube Solid Waste Landfill Waste pickers (US$1.4)

2.2.1 Development o f a Social Inclusion Project for the Joauei Club Waste pickers: The project w i l l finance technical assistance, social activities, and investments needed to improve the working and social conditions o f the waste pickers o f the Joquei Club solid waste landfill. The main activities to be developed based on the social and technical assessment carried out include:

a. Technical support activities: Update a thorough assessment o f the waste pickers’ social and economic conditions; Provide social works to support the waste pickers in their dialogue for an appropriate solution and development o f a working plan; Assessment o f the capacity o f existing recycling units to receive waste pickers coming f rom the landfill; Interaction wi th the technical staff preparing the solid waste master plan to discuss recycling programs being proposed and possibilities o f involving the waste pickers; Assessment o f other opportunities offered b y the

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solid waste collection and disposal services (recycling centers, street cleaning, solid waste transportation).

b. Social support activities: Improve self-esteem and confidence in the dialogue wi th the public sector and the project; Reduce the number o f guns owned; Provide formal personal documents; Improve cooperative organization; Provide j o b s k i l l s training; Support informed decision making with respect to selling prices; Support hygiene education programs; and provide support to families through social development programs, schooling, and health assistance, and youth development programs.

2.2.2. Execution o f the Social Inclusion Proiect for the Joquei Club waste pickers: This activity includes the execution of the social and technical support activities, as wel l as c iv i l works and provision o f equipment, as proposed by the social inclusion project.

Component 3: W a t e r Resources Protection (US$71.5)

The main objective o f Component 3 i s to execute activities that w i l l abate water resource pollution loads and improve the quality o f l i fe in the communities of Aguas Lindas and Vicente Pires, as wel l as protect the Brasflia National Park through solid waste disposal activities.

3. 1. Improving sanitation services in Aguas Lindas (US$33.6): This activity, under the responsibility o f CAESB, involves improving the sanitation services through the execution o f the following c iv i l works: 630 k m s o f condominium sidewalk sewers, 830 k m s o f public sewers, 11 pumping stations, 10 k m s o f interceptors, and one single sewer treatment plant (WTP) (secondary treatment). The treated wastewater produced b y the entire Aguas Lindas population would be discharged into the R i o Verde, since both the Descoberto and the Areias Rivers are used for water supply.

3. 2. Improve Water and Sanitation Services in Vicente Pires (US$19.4 mil): This activity, under the responsibility of CAESB, includes c iv i l works to improve the sanitation services to an estimated 80,000 residents until the year 2024. The sanitation system would built 72 k m s o f sidewalk condominium sewer, 11 k m s of public network and interceptors, and 2 pumping stations. This system wil l be connected to an existing one which includes an STP (North STP, tertiary treatment).

3.3. Closure the Joquei Club Solid Waste Sanitary landfill (US$ 8.3 mil): This activity, to be executed b y BELACAP, includes financing the technical designs for the Joquei Club solid waste sanitary landfi l l closure, and the c iv i l works and equipment according to the technical designs. The preliminary technical alternatives being considered for closing the sanitary landfi l l include: (a) amplification of the existing leachate collection basin and drainage system; (b) implementation o f ground water quality monitoring systems; (c) drilling and implementation o f a sanitary landfi l l gas venting system; (d) complete sealing o f the sanitary landfills; (e) greening and reforestation of the area; (f) superficial drainage system, and (g) other investments to ensure a proper closure to avoid any further environmental impacts.

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3.4. Construction of a solid waste sanitary landfill (US$3 mil): This activity, to be executed by BELACAP, wi l l finance c iv i l works to construct a solid waste sanitary landfi l l for the DF, including appropriate equipment, according to the technical designs that wi l l be developed subsequently to the environmental assessment approval.

% of Total Bank-financing

6.5 7.6

27 31.4

62 13.8

1 3.5 56.8 0.5 0.3

(US$M)

3.5. Rehabilitating environmentally degraded areas (US$2.2 mil): This activity, to be executed by SEMARH, wi l l finance the development o f technical designs and the execution o f works to rehabilitate environmentally degraded areas in the two critical river basins - Descoberto and ParanoB - targeted by the project.

% Bank financing

100.0

100.0

19.4

100.0 51

100

3.6. Waste water sludge treatment (US$5.0 mil): This activity, to be executed by CAESB, w i l l finance equipment that w i l l allow the final disinfection o f the sludge produced by the two DF waste water treatment plants using tertiary treatment levels.

Component 4: Project Management, Monitor ing and Evaluation (US$3.9)

The major objective o f this component i s support the appropriate technical, administrative and financial management conditions to ensure an effective project implementation and achievement o f i t s development objectives.

4.1, Consultancy sewices for assisting project management (US$3.9): This activity w i l l finance contracting a consultancy firm wi th expertise in managing internationally financed development projects, to assist the Project Management Unit (PMU) in ADASA. The consultant firm w i l l perform the broad specialized tasks needed for managing the multisectoral project activities, including monitoring and evaluation, social communication, auditing and enhancing CECAP.

The table below details the resources allocated to each component and their source o f financing:

Table 1:

1. Policy and Institutional

2. Social Inclusion and

3. Water Resources Protection 4. Project Management

Total project costs Non-allocated Front-end fee Total financing required

Development

Environmental Protection

Soject Components Indicative Costs (US$M)

7.6

31.2

71.5

3.5 114.5

0.5 1 .o

115.3 I 57.6 I 50.0

5. Lessons learned and reflected in the project design

The Brown Environmental Agenda (BEA): The Bank has financed state and municipal projects over a number o f decades in Brazi l w i th the dual objective o f reversing the lack o f basic urban services and o f combating the resulting negative impacts on the urban environment and on

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quality o f l i fe for ci ty inhabitants. Traditionally, these projects were restricted to specific sectors. A first generation of Urban Water Quality and Pollution Control (PQA) projects, implemented in the 1990s, demonstrated the importance o f adopting integrated and multi-sectoral approaches to the problem o f urban poverty associated with water quality and pollution control in the urban river basin setting. One key intervention o f the PQAs was the urbanization o f slums and the improvement o f irregular settlements that are major contributors to the domestic pollution o f urban water bodies. These projects provided key lessons such as the importance of: (i) sound legal and institutional agreements to promote appropriate relationships between state and municipal governments to enhance project implementation stability and minimize the impact of political changes; (ii) regional and metropolitan issues when addressing the BEA at the local level; (iii) effective subsidy mechanisms to ensure good service quality and financial sustainability; and (iv) integrated basic service provision in densely populated and high risk areas, especially those along river courses where the poor invariably settle, in order to improve the living conditions o f most vulnerable communities while reducing urban water pollution.

Social Inclusion. Recent experience and analysis indicate that, together wi th conventional poverty reduction programs, special measures are needed to include the most excluded populations. Important aspects o f such measures are: (i) the geographical targeting o f ‘pockets o f poverty’, that have not been reached b y conventional programs because they are in high environmental r isk areas (flooding, landslides, etc.) occupied by families wi th no regularized land titles; (ii) ensuring that populations such as women, youth, racial and ethic minorities are systematically included in such programs and have equal access to services and opportunities; and (iii) ensuring that institutional mechanisms recognize the citizenship rights o f poor populations, including their access to information and to participate actively in the design, implementation and evaluation o f development programs targeted to them. A major outcome o f such inclusive social policies has been to increase both the human and social capital as wel l as the economic opportunities o f poor populations.

6. Alternatives considered and reasons for rejection

Forced resettlement in Vila Estrutural - Removing the entire population of V i l a Estrutural to a new area provided with basic services, following the DF policy for low-income invaded areas, was considered. However, the fol lowing aspects impeded the adoption of this alternative: severe urban land scarcity within the DF (only 4 percent remain for urban expansion); long distance o f lands owned by the DF in the state o f GoiBs; and population conflictive disagreement in being displaced.

Deferring investment in Aguas Lindas -Waiting for Saneago or the Municipality o f Aguas Lindas to undertake the provision o f basic services to the area was also considered. However, due to the poor quality o f existing basic services, the lack o f local investment capacity to improve these services, and the intensity o f the water resource pollution, which put at risk the Descoberto Reservoir, the DF decided to finance these investments.

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C. I M P L E M E N T A T I O N

1. Institutional and implementation arrangements

The project wi l l be executed by Federal District Water Resources Agency (ADASA), in which a project preparation unit has been created, taking advantage o f the existing unit executing the IADB-financed project. This unit has already been formally established and w i l l become the Project Management Unit (PMU) for the execution phase. This unit wil l coordinate and supervise actions with the nine co-executing agencies, which include: CAESB, SEDUH, SEMARH, ADS, SO, SECAP, BELACAP, N O V A C A P and IBAMA/DF. The overall coordination wi l l be carried out b y ADASA, whose president w i l l serve as the project’s general coordinator. Formal agreements defining objectives, expected results, implementation timetable, monitoring, implementation reports, and resources involved establish the responsibilities o f each co-executing agency. ADASA and each co-executing agency w i l l sign its respective agreement. The PMU w i l l be constituted by GDF staff with the following specific tasks; one project executive coordinator, one financial management specialist, one administrative specialist, one procurement specialist and representatives f rom each co-executing agencies. The PMU wi l l be supported by a management consulting firm that w i l l provide technical expertise and trained specialists in implementing projects financed by international multilateral development agency.

2. Monitoring and evaluation of outcomeshesults

The project Monitoring and Evaluation (M&E) system w i l l require three sets o f information: (a) gathering water quality data for a group o f rivers benefiting f rom the project intervention; (b) evaluating the urban standard achieved in V i l a Estrutural and Aguas Lindas in order simulate the amount o f phosphorus abated; and (c) registering the project results achieved per activity. The PMU and CAESB wil l be responsible for implementing the project M&E system. CAESB already monitors the DF rivers’ water quality through an efficient monitoring system, and has agreed to provide timely information to the PMU with respect to the water quality o f rivers that w i l l benefit f rom the project. The second i tem w i l l be achieved b y an assessment at the end o f the interventions proposed for V i l a Estrutural and Aguas Lindas. The existing ‘Water Resource Master Plan’ provides the comparative baseline for this ex-post assessment. The third i tem wi l l be covered by the regular project implementation monitoring under the PMU’ s responsibility.

3. Sustainability

Two key aspects enhance the project’s sustainability potential. First, the client’s commitment to this project i s extremely high. I t has prepared a sound Carta Consulta, which has been reviewed and approved by the Federal Ministry o f Planning, through SEAIN/COFIEX. The FD has explicitly made the choice o f financing the Brasilia Environmentally Sustainable Project through the Wor ld Bank. Traditionally, the FD’s external financing partner has been the IADB, which has financed major infrastructure such as the sanitation project and a large transportation project currently under preparation. This choice results f rom the project’s nature, which has a stronger focus on institutional complexity, as opposed to a hard infrastructure emphasis. The second key aspect that enhances the project’s sustainability i s the FD’s strong fiscal capacity. Counterpart funds f low i s assured. Additional reinforcement i s provided b y CEF, which jo int ly with the

16

Ministry o f Cities, has approved major financing for Aguas Lindas. This financing w i l l complement the F D ’ s counterpart funds.

Investments are not satisfactory concluded due to technical inconsistence

One aspect that has the potential o f delaying the project implementation constitutes the complex environmental institutional framework ruling the issuing o f environmental licensing. All the project steps for implementing the investment components are conditioned on the approval of IBAMA. Also, political interferences may play an important role in the project execution.

P M U wi l l be assisted by high quality staff L

4. Critical risks and possible controversial aspects

To Components

executing high standard TRs Component I: Failure in developing and

Component 11: Delays caused by the

The following are the project’s potential r i sks project and mitigation measured to address them:

Project includes hiring highly qualified consultants for

Project preparation has build an intense relationship

L

H preparing TR, and assisting the DF

complex environmental licensing arrangement

complex environmental licensing arrangement

Component 111: Delays caused by the

with regional Ibama, which express its ful ly support to the project objectives

with regional Ibama, which express i t s ful ly support to the project objectives

Project preparation has build an intense relationship H

5. Loadcredit conditions and covenants

The following have been established as Conditions of EfSectiveness o f the project: (a) the Borrower has adopted an Operational Manual; (b) the PMU has been established in form and substance satisfactory to the Bank; (c) the Financial Management System has been established in a manner satisfactory to the Bank; and (d) the Governor’s Decree, which delegates to ADASA the responsibility to cany out the Project on the Borrower’s behalf, under terms and conditions satisfactory to the Bank, has been signed; and that the CAESB Agreement and the Executing Agencies Agreements (Conv2nios) have been signed.

D. APPRAISAL SUMMARY

1. Economic and financial analyses

, The Brasflia Sustentivel Program has two branches o f intervention: (i) the reduction o f regional inequalities, particularly through the sustainable use of scarce natural resources such as water resources; and ii) assistance to selected investments that w i l l simultaneously diminish pollution levels that threaten strategic bodies o f water and benefit areas that are currently marginalized.

The principal benefits o f the Brasilia Sustainable Program are related to the improvement of environmental quality in the Federal District and the surrounding area (entorno), and the

17

improvement o f health and quality o f l i fe for the urban populations o f the municipality o f Aguas Lindas, in Goias, and the populations o f Vicente Pires and V i l a Estrutural. The Program would specifically reach about 175,000 low-income residents o f Aguas Lindas and V i l a Estrutural. Particularly, the program would also contribute to the preservation o f two important sources o f potable water and recreation in the D.F.: (i) the lake formed b y the dam on the R io Descoberto, which supplies water to nearly 65% o f the D.F. (about 1.34 mi l l ion people); and (ii) the Paranofi lake, which constitutes a reserve source o f potable water and recreation center.

Vila E&%-al-Microdrainage and Paving 1 10.306 I 8.609

Specifically, the Project's benefits are: (i) improved water quality in the principal sources for the D.F., reducing water treatment costs and avoiding contamination and long-term compromise o f these sources; (ii) improved water quality o f the Paranoa lake for recreation and leisure; and (iii) expanded delivery o f potable water, sewerage collection and treatment in the D.F. and the entorno. The Economic Internal Rate of Return (EIRR) o f the Program i s estimated at 21.2%, wi th a net present value (NPV) o f R$168.9 million, confirming the viability o f the proposed investments. The EIRR and NPV results for seven investment subprojects assessed are presented below. A project horizon o f 20 years i s assumed.

Investment Components

634 I 1.063 I 13.8%

The financial analysis was conducted with the objective o f assessing project investments in terms o f their viability and to determine the need for subsidies for those components wi th less than full cost recovery as required for operation and maintenance over the project horizon o f 20 years. Revenue generation f rom investments in water supply and sanitary sewerage were estimated using the actual tariff structure used by CAESB, which w i l l be responsible for the management o f these investments. Revenue from draining and pavement investments in V i l a Estrutural were estimated based on expected collection o f IPTU. In the case o f the restoration o f the sanitary Joquei Clube sanitary landfi l l and the construction o f the new sanitary landfill, carbon credits were factored into the estimation o f revenue. Overall cost recovery i s estimated at 63.4% of the total program cost, with a negative NPV o f R$182.8 million. Incremental fiscal revenue overall f rom the project i s estimated at R$ 30.4 million, against a required subsidy o f R$75.7 'million.

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Investment

Aguas Lindas-Sewerage Collection Vicente Pires-Sewerage Collection Vi la Estrutural-Sewerage Collection

Present Value (R$ million) Fiscal Net Subsidies Revenues Revenue

5.0 20.2 -15.2 3.7 10.8 -7.1 0.8 2.9 -2.2

2. Technical

Vila Esturural-Microdrainage and Paving Total

The project i s technically sound. The project objectives and components respond to the main priorities raised by the DF key planning tools, notably: the existing Territorial Management Plan (Plano de Desenvolvimento e Ordenamento Territorial - PDOT); the Water Resources Management Plan; and, the Environmental Sanitation Master Plan. These three key planning instruments emphasize the critical need o f preserving the DF’s water bodies - Descoberto Reservoir and Lake Paranofi - through a set o f institutional and physical interventions that the proposed project encompass.

2.9 12.4 -9.5 12.4 46.3 -34

The project physical investments have the fol lowing technical characteristics:

Aguas Lindas: The main objective of this intervention i s to abate pollution loads draining into the Descoberto Reservoir, b y improving living conditions in Aguas Lindas, a low-income neighborhood. The executing agency i s CAESB in consortium wi th the State of Goifis’ Environmental Sanitation Company (SANEAGO). T o replace and improve the existing partial and precarious sanitation system, three alternative sewerage systems were considered based on costs and technical and environmental protection efficiency. The option selected was the condominial technology largely adopted by CAESB. Improving the sanitation services wil l entail the fol lowing works: 630 k m s o f condominial sidewalk sewers, 830 kms of public sewers, 11 pumping stations, 10 k m s o f interceptors and one single sewer treatment plant (WTP) (secondary treatment). The treated wastewater produced by the entire Aguas Lindas population would be discharged into the Rio Verde, since both the Descoberto and the Areias are used for water supply. The R io Verde drains through a region wi th l o w intensity agriculture activities. The impact o f this discharged has been simulated through a mathematical model (QUAL 2E) confirming that the water quality o f the r iver w i l l not be affected, the aquatic l i f e standard wil l remain the same as well as the current water use alternatives offered. The selected waster water treatment technology consists o f 6 ascending f low anaerobic reactors, 5 aerated lagoons and a disinfection unit using ultra-violet rays. The sludge generated in the process w i l l pass through a system of mechanical dehydration and wil l be discharged into the sanitary sanitary landfill. A 25 hectares area owned b y the water and sanitation company and located in an appropriate site i s reserved for the WTP. I t w i l l be constructed in two stages, the f i rs t to serve a population o f 135,000, and the second (2028) for a 270,000.

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Vicente Pires: The main objective o f this activity i s to abate pollution load contaminating the Vicente Pires River, which drains to Lake ParanoB, by improving living conditions in this low- income neighborhood through provision o f improved water and sanitation services. Designs alternatives have been assessed. The condominia1 technology was selected. I t includes the execution o f c i v i l works under the responsibility o f CAESB. To improve the sanitation services by the year 2024 to an estimated 80,000 residents, the sanitation system would include 72 kms sidewalk condominia1 sewer, 11 k m s public network and interceptors and 2 pumping stations. This system wi l l be connected to an existent system which includes a STP (North STP, tertiary treatment). T o improve water supply services, the existing system would be rehabilitated and extended through the construction of 330 km o f pipeline network, 2 pumping stations, and 5 km o f distribution pipeline.

Solid waste landfill and sanitary landfill: The DF collects 3,000 to 3,500 tons o f solid waste per day. About 50 percent o f this amount (1,600 tons) are disposed at the sanitary landfi l l “Joquei”, the official DF’s land disposal site for the past 35 years. The remaining 50 percent comprise construction debris disposed in specific land fill sites, recycle material and organics processed in the composting units. The Joquei landfi l l (200 hectares) receives mixed municipal solid waste, excluding construction debris. The landfi l l i s located between the Brasilia National Park and the large slum V i la Estrutural. Most 200 hectares has already been used and covered with soil and vegetation, showing no compliance with rigorous technical criteria. The open waste cells (about 50 hectares) suffer from poor construction solutions and operational procedures. The dump only receives periodic soil cover, which i s undertaken after spreading and compaction o f the waste. The site i s not graded to minimize percolation o f rain water, .drainage i s not wel l managed, leachate i s not appropriately ,collected or treated, and gas i s insufficiently managed. The poor design and management resulted in shortening the site operation t ime life. Studies carried out estimated that the site would continue to be operational for 2 more years. The technical alternatives being considered for closing the sanitary landfi l l include: a. amplification o f the existing leachate collection basin and drainage system; b. implementation ground water quality monitoring systems; c. drilling and implementation o f a sanitary landf i l l gas venting system; d. complete sealing o f the sanitary landfills; e. greening and reforestation o f the area; f. superficial drainage system and other investments to ensure a proper closure to avoid any further environmental impacts.

An EA has been prepared for the sanitary landfi l l closure, and i s under review by IBAMA/DF. Once the environmental licensing i s issued by IBAMA, along with usual additional environmental recommendations, the technical designs w i l l be concluded. In addition, the closure w i l l be properly integrated to the provision o f better alternatives for the waste pickers working in the area, as described above. The estimated costs for the closure o f the sanitary landfi l l are estimated at US$4,5 million. These costs would increase to US$ 5,4 mi l l ion if forced sanitary landfi l l gas collection systems, including flares, are added.

The construction o f a new sanitary sanitary landfi l l i s considered the most appropriate solution for a large quantity o f the solid in Brasilia. A siting study for the new sanitary landfi l l i s being finalized, analyzing environmental impacts o f 3 different sites close to Ceilandia and one in Gama (all within the Federal District). This study evaluates the four options and rates the criteria. I t i s currently being analyzed by the relevant agencies in the Federal Distr ict (SEMARH and

20

Belacap) and IBAMA. The new sanitary sanitary landfi l l to be constructed and operated by a private concessionaire should include several items to be elaborated in subsequent studies, such as geotechnical studies, superficial drainage systems, liners, leachate treatment systems, internal leachate and gas drainage systems, protection belt around the sanitary landfill, flares, gate control and weighbridge etc. The gas collection system w i l l use state-of-the-art technology. The sanitary landfi l l uses cells coated with an impermeable high-density polyethylene membrane; water residues wil l be channeled and treated in a waste water treatment plant. Sanitary landfi l l gas w i l l be collected and channeled to the flares. Vertical wells wi l l be used to extract gas, and their spacing i s optimized, aiming at maximizing gas collection and minimizing costs. Gas headers wi l l be designed as a looping system in order to allow for partial or total loss o f header function in one direction without losing the gas system functionality.

In order to ensure the sustainability o f investments improvements proposed above, the project w i l l also finance institutional improvements on the solid waste institutional framework. The project contribution on the institutional front includes financing: developing the solid waste master plan; preparing the sector’s regulations based o n the master plan recommendations; and, supporting building technical capacity on the solid waste sector.

3. Fiduciary

Both the financial management and procurement capacity assessments have been carried out and are f i led in the project documents.

The financial management assessment found that the project met Bank requirements. The assessment proposed the use o f a financial management report and rated as low the financial management risk. Also, i t found no major r isks requiring special recommendations or actions. Finally, an action plan has been prepared.

The procurement capacity assessment found that the DF has implemented projects s im i la r to this one, and i t has consistently applied rules for procurement o f goods and services, adhering to L a w 8666/93 or the procurements rules defined by the IADB. The risk associated wi th the lack o f experience in dealing wi th Bank-financed procurement would be removed by training and support f rom a full-time procurement specialist. The project has been rated as average risk regarding procurement.

4. Social

The project addresses critical social issues, such as poverty reduction in Aguas Lindas and V i l a Estrutural. The integrated and multisectoral intervention proposed to V i l a Estrutural wi l l be based on a very participatory approach ratified b y several Bank financed projects. Participation i s meant to enhance social capital and strengthen community organizations. Enhancing community participation in local governance i s another major goal supported b y the project.

The intervention in V i l a Estrutural w i l l entail resettlement. However, since the intervention has not yet been designed, prior to appraisal only a resettlement framework has been developed. This resettlement framework has been prepared based on the upgrading design alternatives proposed by the EA prepare for V i l a Estrutural. Based on these preliminary design alternatives, i t i s estimated that about 1,000 families wi l l be removed and resettled within the Estrutural perimeter.

21

Consultations were undertaken during the EA preparation. Two public consultation events were held, as part o f the EA for Estrutural and as part o f the EA following the Bank’s guidelines.

5. Environment

A comprehensive Environmental Assessment (EA) was carried out, including a Resettlement Framework, according to the Bank Safeguard Policies (see Annex 12). The Project i s o f itself an environmental protection initiative that promotes sustainable metropolitan development. By addressing the major environmental issues in the Parano6 and Descoberto Watersheds, the quality o f l i f e in specific low-income settlements, and strengthening the DF environmental agencies, i t i s expected that the Project w i l l have long-term positive impacts.

As part o f i t s objectives and design, the project has a strong environmental emphasis. I t w i l l strengthen the institutional capacity o f SEMARH and regional IBAMA. The project wi l l assist the DF in reviewing environmental policies and regulations. B y drawing up an updated and comprehensive Water Resources Management Plan in correlation wi th the Territorial Master Plan, the project w i l l improve natural resource management. The project investments w i l l strongly reduce or mitigate social and environmental vulnerabilities and abate substantial pollution loads. I t w i l l also protect public health and the quality o f l i fe and the immediate environment o f households b y preventing contact wi th untreated wastewater.

6. Safeguard policies

Safeguard Policies Triggered by the Project Yes No Environmental Assessment (OP/BP/GP 4.01) [XI [I Natural Habitats (OP/BP 4.04) [ I [XI Pest Management (OP 4.09) [I Cultural Property (OPN 11.03, being revised as OP 4.1 1) [XI Involuntary Resettlement (OPBP 4.12) [XI Indigenous Peoples (OD 4.20, being revised as OP 4.10) [I Forests (OP/BP 4.36) [I Safety o f Dams (OP/BP 4.37) [I Projects in Disputed Areas (OP/BP/GP 7.60)* [ I Projects on International Waterways (OP/BP/GP 7.50) [I

The Project triggers and addresses the following Bank safeguard policies: Environmental Assessment (OP 4.01); Natural Habitats (OP 4.04); Involuntary Resettlement (OP4.12); and Safety of Dams (OP 4.37). The Project design incorporates the mitigation measures for each policy, as described below:

OP 4.01 Environmental Assessment (EA). In addition to the project specific environmental assessments required by Brazilian law, a comprehensive EA has been carried out in accordance with Bank policy for Category “A” projects. The mitigation and enhancement measures (including associated costs, responsibilities and schedule) are summarized in the Environmental Management Plan (EMP).

* By supporting the proposedproject, the Bank does not intend to prejudice the final determination of the parties’ claims on the disputed areas

22

OP 4.04 Natural Habitats. The Project w i l l have a highly positive impact on biodiversity and natural habitats. Two APPs exist within the project area - the Vicente Pires and Val0 streams - presenting different levels o f environmental degradation. The Project wi l l finance the rehabilitation and protection of the riparian vegetation o f these two streams, with measures covered in the EMP.

OP 4.12 - Involuntary Resettlement. Only two interventions w i l l require involuntary resettlement: (i) the Integrated Development Project to be carried out in Vila Estrutural, which w i l l require the relocation o f approximately 1,000 families, and (ii) the closure of the Joquei solid waste landfill, which w i l l affect 700 the waste pickers who work in the area. The cost of all resettlement activities i s estimated at US$9.5 million, and are 100 percent covered by the project budget. The other project activities w i l l not entail resettlement as verified by the technical studies carried out for these activities.

OPN 11.3 Phvsical Cultural Propertv. To comply with the Bank’s safeguard policy on cultural property, ‘Chance Finding’ Procedures w i l l be included in all construction contracts.

7. Policy Exceptions and Readiness

The project does not require any exceptions f o r m Bank policies. In addition, the project meets the regional criteria for readiness for implementation, as set forth in the procurement and financial management assessments.

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Annex 1: Country and Sector or Program Background

BRAZIL: Brasilia Environmentally Sustainable Project

Brazil - Main Environmental Issues

Key environmental issues in Brazil relate to soil degradation, air, water and soil pollution, deforestation and protection of the Amazon rain forest, protection o f the Atlantic Forest, the degradation o f the central Brazilian savannas (Cerrado) and other fragile ecosystems. Problems with water supply, sewerage, and solid waste collection services beset also many smaller towns with scant financial and managerial capacity to address them. While overall access o f Brazil’s urban households to water supply service i s high, at about 90 percent, coverage varies considerably f rom region to region and state to state, and quality differs dramatically f rom one part o f a city to another. Some 56 percent o f urban households are connected to a sewerage system and 16 percent have septic systems, but the unevenness o f coverage i s even more dramatic for sanitation than for water supply. L i t t le o f the collected wastewater i s treated, adding to health hazards and environmental degradation, especially in urban areas. Coverage with water supply and sanitation i s highest in the relatively affluent South and Southeast and lowest in the poorer states of the North and Northeast. A large part o f the unserved population lives in peri- urban areas, slums (fizvelus), and smaller towns, with mainly lower-income populations.

In few countries i s the national environment as crucial to development and people’s welfare, and at the same time vital to a sustainable global ecology, as in Brazil. Among other things, Brazi l has one third o f al l the tropical rain forest o f the world, the largest reservoir o f fresh water (20 percent), the second longest coastal l ine with over 8,500 km, and the savanna (Cerrado) with the highest biodiversity in the world. These natural assets are especially important for the poor for whom they constitute a significant share o f their wealth.

I t i s di f f icult to estimate the social costs o f environmental degradation in Brazil. Rough estimates o f such costs, focused only on a l imited range o f the consequences o f environmental problems, indicate that they may be in the range of 1-4 percent o f the country’s GDP per year. This emphasizes the fact that environmental management and protection involve major welfare issues which go beyond simple amenity issues and small externalities. There are clearly direct welfare gains to be obtained from improved environmental conditions, particularly for the poor.

The “mainstreaming” o f environmental concerns in and wi th other sectors i s another major challenge for the country. The approach o f leaving environmental management almost exclusively to the environmental agencies led to an over-emphasis on command-and-control mechanisms, which tended to create attritions with sector ministries. The poor integration o f environmental wi th sectoral and macroeconomic policies causes environmental aspects to be neglected or considered too late in project planning and sector pol icy design, leading to high transaction costs. Environmental decisions usually come after economic decisions have been made. In many parts o f government resistance remains to incorporating such matters in the planning o f core economic and sector decisions.

Brazil has done a lo t over the past two decades to improve environmental management at both the national and sub-national levels. The progress achieved during this period has stalled or even

24

reversed the trend o f rapid environmental degradation in some key areas. Several key areas o f intervention are currently high priorities, including: (i) increasing the transparency and accountability o f the environmental management system (EMS); ( i i ) improving the effectiveness o f the EMS through better coordination and clearer definition o f responsibilities among the three levels o f government; (iii) increasing the use o f economic instruments compared to command- and-control mechanisms; (iv). improving water resources management through increased decentralization, improved local management and increased financial autonomy; and (v) promoting the upstream inclusion of environmental sustainability concerns in the planning and implementation o f major development projects.

Environment and Poverty

The Wor ld Bank Environmental Strategy notes that, in general, environmental degradation affects the poor disproportionately. In the case o f “brown” (pollution and urban) problems, a vicious cycle exists between urban congestion and polluted environments with poor socioeconomic conditions. L iv ing in more polluted and inhospitable environments, the poor are at greater risk from air and water pollution, f rom f lood and hillside erosion, and f rom other forms o f congestion and pollution. They can also least afford to pay for preventive or protective health treatment for the impacts.

For these reasons, pollution abatement programs, the provision o f safe water and sewerage services in Brazi l are pro-poor. A poor Brazilian chi ld i s six times more l ikely to die than a chi ld born to a wealthy household; in the Philippines, the same ratio i s two. Even air pollution, a relatively “equal opportunity” hazard, can generate air contaminant concentrations in poorer urban areas double those in richer ones (as has been found in R io de Janeiro). * Environmental management decentralization

According to the new Constitution o f 1988, environmental management in Brazi l i s largely decentralized across the three tiers of government - federal, state and municipal. The federal government establishes the general guidelines and norms and provides enforcement through IBAMA; states and municipalities are responsible for supplemental legislation and i t s enforcement. The federal government has exclusive competence in certain fields - energy, minerals and mining, and indigenous peoples. In other areas, such as forests, biodiversity conservation, pollution control, and environmental liability, the competences are concurrent (i.e., the responsibility o f the Federal Government to adopt general rules i s supplemented by the responsibility o f the states), although lower levels can only impose more stringent rules and standards than higher levels. States are responsible for implementing federal legislation, resolutions o f C O N A M A (including environmental quality standards), in addition to formulating and implementing their own policies, including licensing and control o f resource use activities.

Especially in the management o f urban and pollution problems, states have long taken a lead in the country, notably S2o Paulo and R i o de Janeiro states. In practice, pol lut ion management i s

A comprehensive study and discussion of the “brown” issues and how they affect the poor i s contained in the World Bank report “Brazil - Managing Pollution Problems - The Brown Environmental Agenda”, 2 volumes, 1998, Report Nr. 16635-BR

25

almost entirely handled by states. Although the Constitution assigns some environmental responsibilities to municipalities, apart from the largest metropolitan cities very few have actually developed capacity in environmental management. Municipalities are responsible for zoning, urban solid waste management and for noise pollution. They have recently been more active in requesting a greater participation in the system, particularly wi th regard to licensing. The water resources management system i s also highly decentralized.

Environmental management instruments

The choice of enforcement mechanisms i s also largely left to the lowers level o f government within the constraints o f relevant national laws. In addition, environmental management in Brazi l i s largely based on command-and-control instruments. The four main being: Environmental quality and emission standards; Land use regulations; Environmental licensing; and Economic instruments.

Environmental quality and emission standards are defined by C O N A M A , although states can apply more stringent standards.

Land use regulations. These include “zoning” and establishment o f conservation units. Urban zoning i s responsibility o f municipalities, whereas ecological-economic zoning (ZEE) involves the states, municipalities, private sector and c iv i l society, under guidelines and methodologies issued by the federal government. ZEE has not yet been widely implemented3. I t may or may not have legally binding character. Traditionally, i t has been considered by governments more as scientific data-collection and interpretation exercise rather than a political negotiation subsidized b y technical work. Most importantly, zoning, where i t has been completed, i s rarely implemented, due to a lack o f incentivating instruments beyond restrictive legislation, and lack o f integration wi th regional planning. All three levels o f government establish public conservation units. In addition, the Forest Code provides for the maintenance o f natural vegetation cover in each private rural property as a “legal reserve”, ranging f rom as much as 80 percent o f properties in the Amazon rain forest to 20 percent in other parts o f Brazil.

Environmental licenses have been introduced in the 1980s, and are at the core o f environmental management. The Brazilian licensing system i s probably the most advanced among developing countries. Public and private projects or activities considered to be potentially polluting or representing a risk for environmental degradation require licenses, and in some cases broader environmental impact assessments. Licenses are handled mostly by state environmental agencies. Municipalities or the federal government may be responsible, depending on the size, nature and location o f the activity4. Environmental licensing i s also mandatory for some fiscal benefits and credit entitlements. The licensing system i s consolidated in Brazil, particularly for fixed sources, but infrastructure projects (roads, hydropower schemes, waterways, etc.) face serious uncertainties f rom licensing. A more detailed discussion o f licensing i s included in Annex VII.

State-wide zoning was funded by Bank loans in the case o f Mato Grosso and Rondonia states, but has also not

IBAMA, at the federal level, handles no more than 1% o f licenses, which are often for large infrastructure (roads, been fully implemented.

ports, energy) projects.

26

Sanctions such as fines and compensations are imposed by environmental agencies at a l l levels. Prison sentences can be applied in case o f certain environmental crimes. Agreements between a violator and the government authority and/or judiciary (TAC) provide a grace period to achieve full compliance. Fine levels have been revised upward, but are not high enough to motivate treasuries to collect. Many environmental agencies lack incentive to collect them, as they do not get a share o f the resulting revenue. Application and collection o f fines are complex, subject to long delays, and often not effective.

Economic (market-based) instruments are few and have been applied more in order to raise revenues. Instruments to influence behavior are rare and only recently employed. The same i s true for market creation instruments, such as tradable permits. As examples o f economic instruments (related to forestry) there are (i) a reforestation fee charged on volume o f timber exploited, to be paid in lieu o f actual reforestation b y owners (which i s their f i rs t option), but the revenues are rarely used for that purpose; and (ii) a forestry tax in the state o f Minas Gerais, applied on forest products consumed by industry, which finances the state’s forest agency and has created incentives for reforestation and substitution o f traditional fuels by charcoal.

Environmental criteria have been introduced in several states into the rules o f sharing state sales tax revenues among municipalities (ICMS Ecoldgico). In addition to criteria such as sale levels, population and agricultural land area, the percentage o f areas under conservation, sanitation coverage and social parameters have been added in some states. Nine states have already established some kind o f “ICMS Ecoldgico” and four states are currently introducing similar legislation. The instrument has created significant incentives for local governments to promote conservation. In a s im i la r vein, federal revenues earmarked for transfer to the states (Fundo de Participaga‘o dos Estudos - FPE) could - but currently do not - incorporate environmental parameters as incentives to states to improve environmental management.

Another example o f economic instruments i s the entitlement of firms that use recycled plastic material to a rebate o f 15 percent o f the tax on industrial products (law o f 2002). Water charge i s an economic instrument recently introduced as part o f the new water resource management system. The legislation recognizes water as an economic good, to be charged for to achieve efficient allocation and raise resources for basin water resource management. River basin management councils are free to set prices, but must fol low general principles including investment and rationing targets. A recent law has made i t possible for ANA to delegate authority to basin committees and to assign water charge revenues to basin agencies.

Tradable permits are virtually unused in Brazil. The Forest Code allows for trading o f mandatory forest “legal reserves” obligations among land owners, which could reduce the overall opportunity cost o f conservation, but this has hardly been implemented. There i s substantial interest, however, o f the private sector in benefiting f rom international trade wi th carbon credits. A first PCF-funded project’ (substitution o f mineral coal by charcoal in pig i ron production) i s under implementation while a second6 (municipal land f i l l s ) i s just starting.

PLANTAR Project (P078571) in the State of Minas Gerais Nova Gerar in the State of Rio de Janeiro (P079182)

27

Annex 2: Major Related Projects Financed by the Bank and/or other Agencies BRAZIL: Brasilia Environmentally Sustainable Project

Sector Issues

Water and Sanitation

Water Resources Management

Urban and Municipal Development

Other Development Agencies

Projects

BR-PE-06541 Stio Paulo, Paran6 and Federal Water Quality Projects (closed)

BR-PE-043420 Water Sector Modernization Project

BR-PE-082328 Betim Municipal Integrated

BR-PE-06436 State of Cearh Urban Development and Water Resources Management

BR-PE-035728 State of Bahia Water Resources Management

BR-PE-06524 State of Minas Gerais Municipal Development

BR-PE-06436 State of CearA Urban Development and Water Resources Management

BR-PE-0429265 Recife Urban Upgrading Project

BR- Municipality o f Juiz de For a Urban Environmental Rehabilitation (IDB)

BR- Municipality o f Belo Horizonte DRENURBS (IDB)

BR- Municipality o f Porto Alegre Environmental Rehabilitation (IDB)

Latest Supervision [mplementation Progress

Vot Yet Effective

S - WRM component (ICR rating)

S

S (ICR rating)

S - Urban Component (ICR rating)

S

Not Yet Effective

S - WRM component (ICR rating)

S

S (ICR rating)

S - Urban Component (ICR rating)

S

’ Provide for Bank-financed projects only

28

Annex 3: Results Framework and Monitoring BRAZIL: Brasilia Environmentally Sustainable Project

Results Framework

PDO

To ensure quality water resources to meet the growing needs o f the Federal District and the Brasilia Metropolitan Region, through environmental planning and management activities, integrated with poverty reduction interventions and environmental rehabilitation in the most critical river basins.

termediate Results

Component One: Policy and Institutional Development Component wi l l finance technical assistance and institutional strengthening in order to create an appropriate technical and institutional environment enabling the GDF to take informed decisions with respect to metropolitan issues especially for promoting a more sustainable urban and environmental development.

Component Two: Social Inclusion and Poverty Reduction Component comprises activities to promote social inclusion and reduce poverty including: i) Integrated Development Project for V i la Estrutural, and ii) Support to the Joquei Clube Solid Waste Landfil l Waste pickers

me Indicators

(a) Improved to I Q A class 2 the water quality o f the Vicente Pires and Descoberto rivers (see methodology described below);

Estrutural by providing integrated urban environmental services measured by increasing the area Social Environmental Indicator (ISA) (see methodology described below);

(c) Generated technical and institutional capacity contributing to the Brasilia metropolitan region development.

(b) Improved living conditions in Vi la

esul cators for Each Component

Component One:

1. High quality technical assistance provided

2. Wel l targeted institutional capacity activities carried out

Component Two :

i) Vi la Estrutural Social Environment Indicator (ISA) improved (see methodology described below)

ii) Joquei Club solid waste waste pickers working in improved social and environmental conditions .

Use of Outcome Information

Monitor project implementation progress toward achieving project objectives

Use of Results Monitoring

Component One:

1. High quality technical assistance activities successfully concluded in years 2- 6 indicate building capacity

2. Well targeted institutional capacity activities concluded in years 2-6 indicate building capacity Component Two: i) Vila Estrutural Integrated Development Project successfully carried out 2) Social and technical support to waste pickers successfully carried out

29

Component Three: Water Resources Protection component wi l l finance activities to i) abate water resource pollution loads in Aguas Lindas and Vicente Pires, ii) close the Joquei Clube solid waste landfil l and construct a solid waste sanitary landfi l l

Component Three: Component Three:

i) Aguas Lindas: # households connected to sewerage systems

ii) Vicente Pires: # households connected to sewerage systems

iii) Closed Joquei Clube landfill

Indicators demonstrate successful implementation o f Aguas Lindas, Vicente Pires and solid waste activities

iv) Technically and Environmentally sound sanitary landfill constructed

MONITORING METHODOLOGY PROPOSED

1. Improved to I Q A class 2 the water quality of the Vicente Pires and Descoberto rivers

0 I Q A (water quality index as defined by the Brazilian National Environmental System) establishes that the Vicente Pires and Descoberto rivers must have a water quality classified as 'class 2'. This water quality class must be appropriate for the following uses: possible water supply for human consumption after conventional treatment; recreational purposes with primary contact; and, irrigation o f vegetables appropriate human consumption even uncooked; The following parameters w i l l be monitored: PH, color, turbidity, conductivity, total dissolved solids, suspended solids, chemical oxygen demand (DQO), Dissolved Oxigen (DO), biological oxygen demand (DBO), Chlorites, total Phosphorus, Phosphorus-soluble, NO3 nitrates, NH3 ammonium, total nitrogen, total phosphorus , Sulfates, Sulfites, total and fecal Coliphormes; For more than 30 years CAESB carries out a periodical monitoring o f these indicators for the Vicente Pires and Descoberto rivers. CAESB wi l l continue the monitoring activities and inform the project; The Descoberto river monitoring includes the following monitoring points: Lajinha, Coqueiro, Queimado, Descoberto. The Vicente Pires river monitoring includes 3 monitoring points: 1 upstream and 2 midstream points. The monitoring points are presented below:

0

0

0

0

Descoberto R iver Monitoring. Point

Vicente Pires Reservoir Monitoring Points

CAESB water quality monitoring system

Descobertc

06/0 5/2 0 03 07/17/2003 08/27/2003 10/30/2003 1 1 /20/2003 12/11 /2003 02/12/2004 03/23/2004 04/13/2004

-iver: Rocinha mor

12.77 12.21 10.20 16.70 21.10 6.30 10.60 18.40 19.30

06/05/2003 07/17/2003 08/27/2003 10/30/2003 1 1/20/2003 1 2/11 /2003 02/12/2004 03/23/2004 04/13/2004

7.01 2.98 6.60 2.80 6.90 3.60 6.60 7.80 6.40 18.00 6.80 6.00

9.45 9.18 9.80 9.80 11.90 9.50

::/I: 1 41.70 1 16.00

28.70 16.20 6.80 19-90 17.70

t data

0.01 3 0.002 0.009 0.004 0.033 0.039 0.030 0.043 0.071

i t data

0.020 0.067 0.020 0.020

0.126 0.098 0.1.22 0.059

0.169 0.84 8.68 0.306 0.89 8.30 0.432 0.25 6.94 0.450 0.98 11.40 0.61 1 14.30 0.065 4.30 0.853 7.20 1.098 12.50 1.012 13.10

0.01 3 0.003 0.01 7 0.01 8 0.021 0.006

0.020 0.070 0.138 0.84 0.020 0.089 0.426 1.04 0.020 0.089 0.403 0.49 0.020 0.113 0.500 1.13

0.656 0.403

0.01 8 1.060 0.035 0.773 , -

0.184 0.71 5

0.8 2.8 6.8 3.6 11.6 20.4 37.2

264.4 22.0

6.66 6.70 8.10

31

Iescoberto

06/05/2003 07/17/2003 08/27/2003 10/30/2003 1 1 /20/2003

ver: Coc

12/11/2003 02/12/2004 I 6.40 03/23/2004 I i::: 04/13/2004

6.98 6.46 6.40 6.40 6.20 6.90

eiro m o

6.41 6.72 5.30

20.60 208.00 18.10 70.90 I 8.90 60.80 1 $9:; 84.00

14.34 1 1.65 13.30 14.40 14.90 15.10

int data

0.01 0 0.008 0.008 0.078 0.068 0.104 0.027 0.043 0.037

0.020 0.022 0.464 0.234

0.135 0.031 0.031 0.224

0.298 0.455 0.683 2.400 2.597 0.966

10.10 10.30

1.526 6.00 0.998 7.40 1.820 6.50

2. Improved living conditions in Vila Estrutural settlement by providing integrated urban environmental services measured by increasing the area Social Environmental Indicator for slums (ISA- F)

The Social Environmental Indicator ‘F’ (ISA-F: Indicador Socio Ambiental para Favelas) was developed for mesuring social and environmental condition in unregulated l ow income settlements denominated slums. The ISA-F derives f rom a broad ISA methodology used to monitor urban environmental improvements in a municipal territory. Specifics parameters have been included to enable the ISA-F to capture the socio environmental conditions found in slums areas.

ISAF monitor 14 parameters including: water supply coverage; sewerage system coverage; solid waste collection coverage; drainage systems coverage; streets network coverage; geological and geotechnical safety; population density; energy services coverage; land tenure; street cleaning services; public lightning; areas for community use; income indicator; and education indicator.

4.0 6.4 6.0 62.8 108.4 9.2 48.8 39.2 42.0

For implementing the ISAF methodology, an assessment wi l l be carried out in V i l a Estrutural prior to the project intervention in order to create the base l ine data. A second evaluation wil l be carried out at the project mid-term review. And a post-evaluation wil l be executed after the intervention in V i l a Estrutural conclusion.

32

3 8

2 e, " m 'Fi 8 -

3

8

M M

3 3 E 8

m- m" & d >i >i

3 8

3 z,

3 8

In"

d & >i

s In- In' z & + +

rs mi d a: >i >i

0 0

8 3

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0 0

Annex 4: Detailed Project Description BRAZIL: Brasilia Environmentally Sustainable Project

COMPONENT 1: Policy and Institutional Development (US$7.6 mil)

The main objective o f Component 1 i s to support institutional strengthening and technical assistance for the enhancement o f the technical and institutional environmental enabling the GDF to undertake informed decision-making with respect to metropolitan issues, especially for promoting a more sustainable urban and environmental development. The outcomes o f this component wi l l also be fundamental beyond Brasilia and the Entorno region, as the other Brazilian metropolitan regions face similar development challenges. The institutional strengthening and technical assistance w i l l focus on three key metropolitan development issues: (i) Territory Development and Land Management; (ii) Environment and Water Resource Management; and (c) Environmental Sanitation Management. The activities w i l l be executed by SEDUH, SEMARH, IBAMA, ADASA, BELACAP and CAESB, as specified below:

Sub component 1.1. - Territory Development and Land Management (US$2.6 mil)

This subcomponent encompasses four main thematic areas related to territory, urban, housing and land use policies, and institutional enhancement. B y developing studies and providing institutional capacity on these themes, the project expects to make available strategic technical instruments and institutional assets to SEDUH to address key metropolitan and local urban development challenges. The four main thematic areas are:

1.1.1. Provision of technical support to improve territory and urban development policies, which includes three main thematic activities: (i) Updating o f the territorial management plan for the metropolitan region (PDOT); (ii) Revision o f the urban and housing development policy for the DF; and (iii) Development o f improved institutional arrangements for metropolitan region coordination.

1.1.2. Development of updated management technical tools for territory and urban development, including: (i) Development monitoring and evaluation systems for the DF urban development plans; ii. Prepare Local Development Plans accordingly to the the ‘Estatuto das Cidades’ requirements; iii. Develop simplified tecnical norms for urban subdivision projects; iv. Assess mechanisms to enhance governance levels in metropolitan management; and v. develop strategy to assist unregulated low-income settlements in the DF.

1.1.3. Assessment of institutional arrangements for territory and urban development including: i. Review SEDUH mandate and internal organization rules; and ii. Evaluate alternatives to strength the regional development coordination.

1.1.4. Enhancement of institutional knowledgement capacity for territorial and urban development including: i. Promote the dissemination o f cutting edge studies on territorial and urban management; and ii. Develop information systems (SICAD, SITU-, SIHAB, property cadastre).

35

Sub component 1.2 - Environment and Water Resources Management (US$3.9 mil)

This sub component comprises addressing six thematic areas related environment and water resource management. By developing studies and providing institutional capacity o n these themes, the project expects to make available strategic technical instruments and institutional assets to SEMARH and IBAMA/DF to address key metropolitan and local urban development challenges. The six thematic areas are described below:

1.2.1. Provide tecnical support to improve environmental management policies including: i. Assess alternatives for improving institutional arrangements for environmental management; ii. Review the DF environmental legislation to indicate duplicities and outdated rules; iii. Develop alternatives to improve technical administrative procedures for water resources management; and iv. Support improvements on the DF environmental education program.

1.2.2. Develop information systems for environmental management including: i. Promote the dissemination o f cutting edge scientific knowledgement on environmental management; and, ii. Develop environmental management geographical information system.

1.2.3. Enhance institutional knowledgement capacity for water resources management including carry out training activities on environmental and water resources management.

1.2.4. Develop strategic planning for environmental licensing and fiscalization including: i. Review legislation and technical procedures for environmental licensing and fiscalization; ii. Develop regulation and procedures for environmental licensing and fiscalization.

1.2.5. Develop strategies to protect the federal conservation units in the DF territory including: i. Develop management plans for the conservation units; ii. Develop alternatives to strengthen the NPB and surrounding area land use management. This activity w i l l be executed exclusively by IBAMA/DF.

1.2.6. Provide technical support to improve water resources management policies including: i. Develop alternatives for improving the water resources institutional arrangement within the DF; ii. Evaluate the consistency o f the DF water resources management legislation; iii. Provide support to the implementation o f the DF river basin committees and water resources counsel; iv. Carry out the groundwater cadastre; and, v. Assess alternatives to improve technical and administrative procedures on water resources management.

1.2.7. Develop updated information systems for water resource management including develop information systems for water resources management.

Sub-component 1.3 - Environmental Sanitation Management (US$l.O)

This sub component comprises addressing four thematic issues related to environment sanitation services. By developing studies and providing institutional capacity on these themes, the project expects to make available strategic technical instruments and institutional assets to BELACAP and CAESB to address key metropolitan and local urban development challenges. The six thematic areas are described below:

36

1.3.1. Provide technical support to improve solid waste policies and management capacity including develop regulation for solid waste management based on the solid waste master plan under preparation. This activity w i l l be executed b y BELACAP.

1.3 -2. Enhance institutional knowledgement capacity for solid waste management, including training and equipment. This activity w i l l be executed by BELACAP.

1.3.3. Provide technical support to the institutional, technical and legal framework of CAAB including: i. Technical review o f existent sanitation system in the Entorno municipalities; ii. Revise and improve CAAB institutional framework; iii. Develop CAAB ' s internal regulation and related documentation. This activity w i l l be executed b y CAESB.

1.3.4. Provide support to CAESB conclude i t s environmental certification system and initiate informatic's systems for the Water Museum. This activity w i l l be executed by CAESB.

COMPONENT 2 - Social Inclusion and Poverty Reduction (US$31.4 million)

The main objectives o f Component 2 comprise reducing poverty and promoting social inclusion in localities presenting critical social conditions coupled with actions to abate water resource pollution loads. These objectives w i l l be achieved through the fol lowing sub-components; a. Integrated Development Project for V i l a Estrutural; and b. Social and Technical Support to the Joquei Clube Solid Waste Landf i l l Waste pickers.

Sub-component 2.1 - Integrated Development Project for Vila Estrutural (US$29.9)

2.1.1 - Vila Estrutural Integrated Development Project - Planning, Technical Designs and Community Participation

The main objectives o f this sub-components are: (i) Improve the living conditions in V i l a Estrutural, (ii) Insert this community into the regular ci ty planning and services, and (iii) Mitigate the environmental degradation in surrounding areas, including abatement o f pollution loads discharged on creeks and rivers; reverse damages in the National Park and restore the connectivity o f the biome Cerrado in the area.. SEDUH w i l l play an important role o f coordinating this multisetoral task which also involves the participation o f the fol lowing agencies: CAESB, NOVACAP, BELACAP, ADS, SEMARH, IBAMADF.

The technical designs for V i l a Estrutural Integrated Development Project wi l l address the fol lowing issues:

i. Develop alternatives for improving local governance ii. Propose improvements for social services such as education, health, income generation and youth

development iii. Develop technical alternatives for improving basic services including water, sewerage, drainage,

streets network, paving, solid waste collection, effective household sewerage connection and sewer pits closure

37

iv. Develop technical alternatives to improve Vila Estrutural’ s urban design including regulations to the land use and constructions, and recreational areas

v. Develop a Resettlement Plan vi. Develop technical proposal for environmental rehabilitation and protection including: improving

the riparian vegetation of the Vicente Pires stream, develop land use regulation for the Val0 stream banks, creation of an urban park and a buffer zone contiguous to the National Park and the FLONA boundaries, creation of biological corridors liking the National Parks to the Vicente Pires and Val0 streams)

2.1.2. Vila Estrutural Integrated Development Project - Civi l Works and Participation Activities

Execution o f the c iv i l works and community participation activities proposed by the Planning, Technical Designs and Community Participation tasks carried out for the V i l a Estrutural Integrated Development Project.

Sub-component 2.2 - Support to the Joquei Clube Solid Waste Landfill Waste pickers (US$1.4)

2.2.1 Develop a social inclusion project for waste pickers at the Joquei Club landfill

The project wi l l finance technical, social activities and investments needed to improve the working and social conditions o f the waste pickers o f the Joquei Club solid waste landfill. The main activities to be developed based on the social and technical assessment carried out includes:

Technical activities:

0

0

0

0

Update thorough assessment o f the waste pickers social and economic conditions; Provide social works to support the waste pickers in their dialogue for an appropriate solution and development o f a working plan; Assessment o f the capacity of existent recicling units to receive some waste pickers coming f rom the Joquei Club (JC); Interaction wi th the techcnical staff preparing the solid waste master plan under to discuss recycling programs being proposed and possibilities o f involving the JC waste pickers; Assessment o f other opportunities offered by the solid waste collection and disposal services (reciclying centers, street cleaning, solid waste transportation);

0

Social support activities:

0 Improving self-esteem; 0 Improving confident in the dialogue with the public sector and the project; 0 Reducing the number o f guns; 0 Providing formal personal documents; 0 Improve cooperative organization; 0 Job sk i l l s training; 0 Support informed decision making with respect to selling prices;

38

Support to higiene education programs; Support to the families involving them in social development programs, school, health assistance; Support to youth development programs;

2.2.2. Execute the social inclusion project for waste pickers at the Joquei Club landfill

This activity includes the execution of social and technical support activities, c i v i l works and provision o f equipments as proposed by the social inclusion project for waste pickers working at the Joquei Clube landfill.

COMPONENT 3 - Water Resources Protection (US$71.5 million)

The main objectives o f the Component 3 are to finance the execution of activities that wi l l abate water resource pollution loads. The localities o f Aguas Lindas and Vicente Pires that wi l l receive f rom the project investments w i l l also benefit of an improved quality o f life. The solid waste disposal activities w i l l also provide a major positive impact in protecting the National Park o f Brasilia.

3. 1. Improving sanitation services in Aguas Lindas (US$33.6 million)

The main objectives o f this activity are to abate pollution load contaminating the Descoberto Reservoir and the Areias River by improving l iv ing conditions in low-income neighborhood through provision o f improved water and sanitation services. I t includes the execution o f c iv i l works and the responsible agency i s CAESB.

Improving the sanitation services w i l l entail the fol lowing works: 630 k m s of condominia1 sidewalk sewers, 830 k m s o f public sewers, 11 pumping stations, 10 kms o f interceptors and one single sewer treatment plant (WTP) (secondary treatment). The treated wastewater produced by the entire Aguas Lindas population would be discharged into the R io Verde, since both the Descoberto and the Areias are used for water supply.

The selected waster water treatment technology consists o f and 6 ascending f low anaerobic reactor, 5 aerated lagoons and a disinfection unit using ultra-violet rays. The sludge generated in the process w i l l pass through a system o f mechanical dehydration and wil l be discharged into the sanitary sanitary landfill. A 25 hectares area owned by the water and sanitation company and located in an appropriate site i s reserved for the WTP. I t wi l l be constructed in two stages, the f i rs t to serve a population o f 135,000, and the second (2028) for a 270,000.

3.2. Improve Water and Sanitation Services in Vicente Pires (US$33.8)

The main objectives o f this activity are to abate pollution load contaminating the Vicente Pires river b y improving living conditions in low-income neighborhood through provision o f improved water and sanitation services. I t includes the execution o f c iv i l works and the responsible agency i s CAESB.

39

T o improve the sanitation services to the year 2024 estimated 80,000 residents, the sanitation system would built 72 k m s sidewalk condominia1 sewer, 11 kms public network and interceptors and 2 pumping stations. This system w i l l be connected to an existent system which includes a STP (North STP, tertiary treatment).

3.3. Closure the Joquei Club Solid Waste Sanitary landfill (US$8.3)

This activity includes financing the technical designs for the Joquei Club solid waste sanitary landfi l l closure, the c iv i l works and equipments accordingly to the technical designs. The activity executing agency i s BELACAP.

The preliminary technical alternatives being considered for closing the sanitary landfi l l include: a. amplification o f the existing leachate collection basin and drainage system; b. implementation ground water quality monitoring systems; c. drilling and implementation o f a sanitary landfi l l gas venting system; d. complete sealing o f the sanitary landfills; e. greening and reforestation o f the area; f. superficial drainage system and other investments to ensure a proper closure to avoid any further environmental impacts.

3.4. Construction of a solid waste sanitary landfill (US$3)

This activity wi l l finance the c iv i l works to construct a solid waste sanitary landfill, including appropriate equipments, for the DF accordingly to the technical designs that wi l l be developed subsequently to the environmental assessment approval. This activity wi l l be executed by BELACAP.

3.5. Rehabilitating environmentally degraded areas (US$2.2)

This activity wi l l finance the development o f technical designs and the execution o f works to rehabilitate environmentally degraded areas in the two critical river basins (Descoberto and Paranoi) targeted by the project. This activity w i l l be executed by SEMARH.

3.6. Waste water sludge treatment (US$5.0)

This activity w i l l finance equipments that wi l l allow the final disinfection o f the sludge produced by the two DF waste water treatment plants using tertiary treatment levels. This activity w i l l be executed by CAESB.

COMPONENT 4 - PROJECT IMPLEMENTATION MANAGEMENT, MONITORING AND EVALUATION (US$3.9)

The major objective o f this component i s to finance the appropriate technical, administrative and financial management conditions to ensure an effective project implementation.

40

4.1. Consultancy services for assisting the PMU

This activity wi l l finance contracting a consultant firm with expertise in managing internationally financed development projects. The consultant firm w i l l perform the broad specialized tasks needed for managing the multisetoral project activities, including monitoring and social communication. A D A S A P M U i s the agency responsible for this activity.

4.2. Project Evaluation

This activity wi l l finance contracting specialized consultancy services for carrying out the project evaluation. A D A S A P M U i s the agency responsible for this activity.

4.3. Auditing

This activity wi l l finance contracting specialized consultancy services for carrying out the project audits accordingly to the Bank’s requirements. ADASAPMU i s the agency responsible for this activity.

4.4. Enhance GDF funding raising capacity

This activity wi l l finance contracting specialized consultancy services for developing a strategic business planning and required office equipments for improving SECAP funding raising capacity, as wel l as developing Public Private Partnership models for strategic urban environmental sectors. SECAP i s the agency responsible for this activity.

41

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I

Annex 5: Project Costs BRAZIL: Brasilia Environmentally Sustainable Project

Local Foreign Total U S $million U S $million U S $million Project Cost B y Component and/or Activity

1. Policy and Institutional Development 4.0 1 .o 5.0

2. Social Inclusion and Poverty Reduction

3. Water Resource Management and Protection

4. Project Management and M&E

31.4

60.0

2.9

11.5

31.4

71.5

2.9

Total Baseline Cost 98.3 12.5 111.8

Price Contingencies 1.5 1.5 Total Project Costs' 101.8 12.5 114.3

Interest during construction Front-end Fee 1 .o 1 .o

Total Financing Required 102.8 12.5 115.3

Physical Contingencies 2.0 2.0

'Identifiable taxes and duties are US$15 million, and the total project cost, net of taxes, i s US$99 millions. Therefore, the share of project cost net of taxes i s 86%.

47

Annex 6: Implementation Arrangements BRAZIL: Brasilia Environmentally Sustainable Project

A D A S A w i l l be responsible for the project coordination. To undertake such coordination, A D A S A wil l be assisted b y a Project Management Unit (PMU), which w i l l have the adequate technical staff and resources for performing i t s activities. The project institutional arrangement i s illustrated below:

PMU: The PMU creation i s a condition for loan signature. The PMU w i l l be constituted b y the PMU' s coordinator and representatives o f the co-executing agencies. A consulting firm will be competitively selected to provide technical support to the PMU carry out the project management activities. The consultant firm w i l l have recognized knowledge in managing integrated and multi-sectorial projects supported by international agency financing. The PMU and co-executing agencies detailed responsibilities wi l l be described in the proiect operational manual, which i s a condition for the proiect signature.

A legal agreement (Convenios) w i l l be sign between each executing agency and ADASA. The document to be sign with CAESB i s denominated a 'contract' since i t includes transfer o f financing funds f rom the GDF to CAESB and repayment conditions. A draft o f these documents wi l l be ready for the project appraisal. A revised as needed version w i l l be included in the negotiation package. During negotiations the f inal 'convenios' and contract version wi l l be signed.

The table below summarizes the co-executing agencies responsibilities during the project implementation.

48

Brasilia Environmentally Sustainable Project: Executing Agencies Responsibilities

= Provide technical support A = Prepare bidding documents = Prepare TR for consultancy and/or technical

specifications for works e = participate proposals evaluation committee 0 = review and approve products

lT = carry out bidding tender 4 = sign contract

I 1.1.1 Provide technical support to improve territory and urban I ~~

development policies 1.1.2. Develop updated management technical tools for territory, urban and housing development 1.1.3. Assess the institutional arrangements for territory and urban development 1.1.4. Enhance knowledge management for territorial

1.2.1. Provide technical support to improve environmental management policies 1.2.2. Develop information systems for environment management 1.2.3. Enhance knowledge management for environmental management 1.2.4. Develop strategic planning for environmental licensing and supervision

1.2.5. Develop strategies to protect the federal conservation units in the DF territory 1.2.6. Provide technical support to improve water resources management policies 1.2.7. Develop updated information systems for water resources management

i nent

4 TI

4

TI

4 I

I I 49

2.2.1 Develop a social inclusion project for the waste pickers working at the Joquei Club landfill

I 2.2.2 Execution o f the social inclusion proiect for the waste I

3.1 - Execute the water and sanitation system in Aguas Lindas

T I

4 3.2 - Execute the water and sanitation system in Vicente Pires

3.3 - Execute the closure of the Joquei Club landfill and the works for a sanitary landfill

3.4 - Construction and equipments for a solid waste land fill v H

4 3.5 -Waste water sludge disinfection

I 3. 6 - Develop project and execute works for rehabilitating I

4.1 - Consultancy services for project management,

4.2 - Evaluation

5.2 -Audit ing

monitoring evaluation

4.3 - Enhance SECAP institucional capacity

50

Annex 7: Financial Management and Disbursement Arrangements

BRAZIL: Brasilia Environmentally Sustainable Project

The Project Implementation Unit (PMU) w i l l report to head o f the ADASA. A capacity assessment was carried out to determine whether the borrower has, or w i l l have acceptable financial management arrangements in place by loan effectiveness. These include, but are not l imited to, capacity to (a) properly manage and account for al l project’s proceeds, expenditures and transactions; (b) produce timely, accurate and reliable project’s financial statements and reports, including Financial Monitoring Reports ( FMRs ), for general and Bank special purposes; (c) safeguard project’s assets; (d) engage independent auditors acceptable to the Bank in a timely fashion and (e) disburse Bank funds in accordance to applicable Bank rules and procedures.

The project wi l l benefit from existing institutional arrangements for the implementation o f the IDB project “Programa de Saneamento Basic0 no Distrito Federal”. Such arrangements consist o f (a) an PMU with six departments (finance, institutional, technical, social, environmental and procurement) whose coordinator, w i l l have the overall responsibility for both the IADB and the Bank’s project; (b) a Gerenciadora, an outsourced consortia, reporting directly to the PMU’s coordinator; (c) Secretaria de Estado de Infra-Estrutura e Obras, whose staff wi l l support project implementation and (d ) 5 Co-Executing entities, which include CAESB, for approximately 90% of project, S E M A R H - Secretaria de Meio Ambiente e Recursos Hidricos do DF, SEDUH - Secretaria de Desenvolvimento Urbano e Habitaqiio do DF, BELACAP - ServiCo de Ajardinamento e Limpeza Urbana do DF and A D S - Ag6ncia d Desenvolvimento Social.

The financial management assessment was joint ly conducted with the PMU, the Gerenciadora and CAESB and included the (a) discussion wi th the PMU Coordinator, and the Gerenciadora ’s finance manager and CAESB’s financial management staff; (b) evaluation o f financial management systems in place and/or those to be used for project’s monitoring, accounting and reporting; (c) review o f staffing requirements, including training and qualifications; (d) discussion regarding f low o f funds arrangements and disbursement methodology; (e) review o f internal control mechanisms (0 discussion with regard to reporting requirements, including the format and content of Financial Monitoring Reports and (g) review o f audit arrangements.

Financial Management Assessment Conclusion: The overall Financial Management Assessment conclusion i s that, provided an external partner with capacity similar to the present Gerenciadora is retained, the project’s implementing agency - ADSA through i t s PMU, with the collaboration o f CAESB, Gerenciadora and Secretaria de Obras’ staff w i l l have satisfactory financial management arrangements in place and meet Bank’s minimum requirements. The financial management risk associated with the proiect has been assessed as low. The project’s financial management system w i l l be able to provide relevant and reliable financial information, in a timely manner, and to support project’s management in the control, planning, implementation and monitoring o f the project, towards the achievement o f i t s objectives.

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Financial Management Arrangements

Staffing. All financial management’s aspects o f the project w i l l be handled by the PMU with the support o f a Gerenciadora, whose staff w i l l be also based at some o f the co-executing agencies for data entry, o f ADASA’s own staff, and with additional resources provided by the Secretaria de Obras and CAESB, as appropriate. The overall responsibility o f finance and administration issues, wi l l rest with the Gerenciadora ’s finance manager, who in collaboration with the PMUfinancial manager ensures that the system i s properly updated o n a timely basis b y executing agencies’staff, and also reviews al l supporting documentation before payments are made. Once project activities pick up, i t i s l ikely that more accounting and financial management staff w i l l need to be recruited and/or reassigned, both by the Gerenciadora and by A D A S A staff.

Systems. All payments w i l l be made by the Secretaria da Fazenda do GDF, using the SIGO - Sistema Integrado de Gest5o Governamental, upon instructions f rom the PMU, and after submission by the executing agencies o f a detailed plan of activities and actual expenditures in l ine with that plan. The SIGO system encompasses control procedures s i m i l a r to the SIAFI system, utilized at the federal level. All GDF’s expenditures and payments are necessarily recorded in the SIGO system under “Programas de Trabalho”, equivalent to cost centers; f rom a budgetary standpoint, sources o f funds are earmarked b y source. More than one Programa de Trabalho may be open for the project; our recommendation i s that a l imited number be utilized, as to find an acceptable balance between the level o f detail required by Secretaria de Planejamento, and PMU and project’s reporting requirements.

Financial data i s entered in another system (SIG), b y an executing agency - CAESB - who i s l inked on-line to the PMU’s central server, and by ADASA/Gerenciadora staff, for their own and other executing agencies expenditures. The SIG system, i s a wel l developed parallel system that has been adopted for the implementation o f the IDB project and has proven to be a much more flexible management tool, namely in terms o f reporting format and project detailed data, when compared to SIGO.

Nevertheless, as above mentioned, SIGO w i l l s t i l l be utilized for the processing o f a l l project payments, thus ensuring a satisfactory financial management environment, as the system builds on existing government arrangements and embedded internal control mechanisms (commitments, sources o f funds by financier except for CAESB’s counterpart funds, payments through ordens banccirias only when properly authorized).

Financial Reporting and Supervision. The ‘PMU, with the support o f the Gerenciadora’s financial manager, wi l l ensure the timely production o f quarterly financial monitoring reports (FMRs). These FMRs w i l l be produced f rom the SIG system and wil l consolidate the project’s financial data for all components, including counterpart funds and components exclusively financed from Borrowers’ resources, i f any. Given the Borrowers’ satisfactory financial management arrangements, the PMU coordination has opted for report-based disbursements from the outset. Accordingly, the format and content o f the FMRs, agreed with the Borrower wi l l cover the following items:

52

- 1. Financial Reports: FMR 1A - Sources and Uses o f Funds ( by disbursement category, wi th evidence o f the Bank’s share in the financing o f expenditures, cumulative ( project- to-date; year-to-date and for the period ) vs actual expenditures, including a variance analysis; FMR 1B - Uses o f Funds by Project Activi ty or Component, cumulative ( project-to-date; year-to-date and for the period ) vs actual expenditures, including a variance analysis; FMR 1C Cash Flow Forecast ( expenditure forecast for the project and for the Bank’s share ); FMR 1D - Reconciliation o f the Project Account. . . .

- 2. Phvsical Progress Report: FMR 2 - MonitoringPerformance Indicators;

- 3. Procurement Report: FMR 3

Financial management supervision w i l l take place every six months and include (a ) reviewing o f quarterly FMRs; (b) reviewing of the auditors’ reports and follow-up o f issues raised b y auditors in the management letter, as appropriate; (c) participation in project supervision and (d) updating the financial management rating in the Project Status Report (PSR).

Accounting Basis, Procedures and Policies. Project financial statements w i l l be prepared every quarter - FMRs -, and annually. Ideally, the fourth FMR, showing cumulative figures for the period, w i l l be the basis for the auditors work. These statements wi l l be prepared in accordance with consistently applied accounting standards, acceptable to the Bank. (on a cash basis accounting ).As part o f the Operational Manual, a financial procedures manual wi l l be prepared, and w i l l provide guidance with regard to al l financial and administrative routines. PMU’s staff wi l l periodically reconcile expenditures, in the SIG system wi th payments made through SIGO.

Audits. Annual financial statements w i l l be audited by independent auditors, satisfactory to the Bank, in accordance wi th accordance with acceptable auditing standards. The external audit w i l l be conducted according to Terms o f Reference acceptable to the bank. Auditors wi l l be required to issue a single opinion on project’s financial statements, as per the guidelines “Annual Financial Reporting and Auditing for World Bank-financed activities”, o f June 30,2003. Auditors w i l l also have to produce a management letter, where any internal control weaknesses wil l be identified, which w i l l contribute to the strengthening o f the control environment. The auditor’s report wi l l be submitted to the Bank no later than six months after the closing of the Borrowers’ fiscal year, and the annual audit w i l l be financed out of loan proceeds. The project may also be audited by the Tribunal de Contas do DF and by the Corregedoria Geral do DF, which might be considered the GDF’s Internal Audit Department.

The PMU wil l prepare and consolidate - activities to be implemented by CAESB and the other project components - project annual financial statements for auditing purposes.

Disbursements and Flow of Funds Arrangements

As previously discussed, the PMU, within ADASA, and wi th the support o f the Gerenciadora and CAESB, w i l l be the primary responsible for project implementation. All payments wi l l be made by the Treasury o f the Federal District (Secretaria da Fazenda do GDF), using the SIGO system, upon instructions f rom the PMU, once expenditures have been incurred and properly

53

documented. Payments w i l l be made directly f rom Treasury, through the issuance o f an ordem bancdria, to service providers and contractors, or to CAESB who w i l l then pay c0ntractors.d In order to make payments, the GDF’s system requires that funds be committed b y source ( Worldand/or GDF, as applicable ), making possible the tracking of loan disbursements to project expenditures, due to this earmarking mechanism within SIGO. As the loan wi l l disburse against management reports, funds w i l l be advanced, based o n a cash forecast and upon request from the borrower, f rom the loan account, in Reais, to an account specifically open for the project (the “project accout”) with Banco Regional de Brasilia. Disbursements f rom the loan account w i l l be made gradually, according to the project implementation needs and in line wi th i t s short term cash-flow forecast. Every quarter, with the production o f FMRs, expenditures for the period wil l be accounted for, and revised cash f low forecasts, for the ensuing period, w i l l determine the level o f disbursement f rom the loan account, which w i l l also take into account the project account’s balance.

Project Flow of Funds

(1) WB advances funds into project account upon PMU requests (2) PMU transfers funds from project account into central treasury account (3) GDF‘s Treasury upon instructions from P M U makes direct payment to providers or contractors (other no CAESB executed components) (4) GDF treasury makes payment to CAESB under ‘contract’ with CAESB (5) Payments made from CAESB to contractors (6) Supporting documentation submitted to P M U (7) PMU sends quarterly FMRs to the Bank accounting for advances from the Bank (8) P M U sends withdrawal applications to Bank based on cash flow forecast

The envisaged f low o f funds w i l l not require a tri litional Special Account. InsteaL, a project account, in local currency, w i l l be open at the Banco Regional de Brasilia (BRB) and funds wil l be directly deposited into this account.. The FMR wil l show project expenditures and reconcile advances made into the project account wi th closing balances, and the Bank’s share o f actual expenditures.

The component implemented by CAESB and for which a specific C o n v h i o for the total amount o f the component wi l l be signed, wi l l benefit f rom the company’s satisfactory fiduciary arrangements, as per external auditors’ assessments, including adequately trained staff and systems, and a large experience in procurement and financial management. Payments for works,

54

under this component, w i l l require monitoring o f physical progress o f works, b y CAESB staff, and then w i l l be entered into the SIG system, which w i l l update data in SIGO for payment processing. Payments for other project components w i l l be handled directly b y the PMU.

For Bank monitoring purposes, al l payments made for contracts above Bank’s prior review thresholds wi l l be separately documented, as part o f the FMR.

Financial Management Risk Assessment

Program Risk Assessment. The Risk Assessment Matr ix below, presents the items o f potential risk for the project f rom a Financial Management standpoint.

Table 1 - Financial Risk Assessment

IDB exnerience vii. Information Systems 1 I I I x I Same as above H-High S-Substantial M-Moderate L - L o w

The overall Financial Management risk is considered low, provided that a gerenciadora is appointed on approved terms of reference. (with capacity similar to the one who is implementing the IDB project )

55

Annex 8: Procurement Arrangements BRAZIL: Brasilia Environmentally Sustainable Project

A. General

Procurement for the proposed project would be carried out in accordance with the Wor ld Bank’s “Guidelines: Procurement Under IBRD Loans and IDA Credits” dated M a y 2004; and “Guidelines: Selection and Employment o f Consultants by Wor ld Bank Borrowers” dated M a y 2004, and the provisions stipulated in the Legal Agreement. The general description o f various items under different expenditure category are described below. For each contract to be financed b y the Loadcredi t , the different procurement methods or consultant selection methods, the need for prequalification, estimated costs, prior review requirements, and time frame are agreed between the Borrower and the Bank project team in the Procurement Plan. The Procurement Plan w i l l be updated at least annually or as required to reflect the actual project implementation needs and improvements in institutional capacity.

Procurement of Works: Works procured under this project, would include: large infrastructure works contracts for human resettlement, road paving, drainage, sewage. The procurement wi l l be done using the Bank’s Standard Bidding Documents (SBD) for al l ICB and the model bidding documents published b y SEAIN w i l l be used for N C B contracts. Some contracts w i l l couple c iv i l works wi th supply and install of equipment, in which cases the standard bidding documents for supply and installation published by the Bank w i l l be used. Special provisions to be added to the Loan Agreement include: (i) there w i l l be no use o f two-envelopes, (ii) bracketing (minimum and maximum amount for bids) w i l l not be accepted, (iii) bidders w i l l not be required to reduce bid prices to the price o f a lower rejected bid, (iv) bids for c iv i l works contracts cannot be based on a multiplier factor (fator “k”).

Procurement of Goods: Procurement o f goods i s l ikely to be o f l ow volume and wil l include some specific scientific equipment for Caesb that w i l l be used for “lodo” analysis. The procurement w i l l be done using Bank’s SBD for al l I C B and the model bidding documents published b y SEAIN for NCB.

Procurement of non-consulting services: no contract of non-consulting services was identified.

Selection of Consultants: There wil l be consulting contracts for water resource management plans, hazard management plan, engineering designs, water resources diagnosis. Short l i s t s o f consultants for services estimated to cost less than $500,000 equivalent per contract may be composed entirely o f national consultants in accordance wi th the provisions of paragraph 2.7 o f the Consultant Guidelines.

B. Assessment of the agency’s capacity to implement procurement

Procurement activities wi l l be carried out by (i) Secretaria de Obras (SO) o f the GDF (Govern0 do Distrito Federal), (ii) Caesb (Companhia de Saneamento do Distrito Federal), and (iii) Novacap (Companhia Urbanizadora da Nova Capital do B r a d ) .

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An assessment of the capacity o f the three Implementing Agencies to implement procurement actions for the project has been carried out by Alexandre Borges de Oliveira on November 17, 2004 and later discussed with the client on December 07, 2004. The assessment reviewed the organizational structure for implementing the project and the interaction between the project’s staff responsible for procurement Officer.

There i s no major issue/risk identified.

The proposed action plan was fully discussed and agreed with the client to ensure ownership o f the proposed actions. This action plan should be part o f the project implementation documentation and should be agreed to wi th the Borrower during negotiations as a project component.

Action Timeframe

1

2

Training o f procurement staff o f al l three implementing agencies (SO, Caesb and Novacap) as wel l as controllers. Include a senior procurement specialist with experience on Bank-financed procurement on the TORs o f the project management consulting firm. after effectiveness Adaptation o f the procurement module o f SIG to generate the procurement plan as a predefined report Prepare the procurement plan for the first twelve months o f project implementation Hiring o f a procurement specialist under TORs acceptable to the Bank before effectiveness. Once activity number 2 above i s completed, this specialist may be replaced by a consultant

Before effectiveness

Firm should be hired up to six months

Before effectiveness

Before negotiations

Before effectiveness

3

4

5

The overall project risk for procurement i s average.

C. Procurement Plan

The Borrower, at appraisal, developed a Procurement Plan for project implementation which provides the basis for the procurement methods. This plan has been agreed between the Borrower and the Project Team on March 21, 2005 and i s available at GDF and the Bank CMU files. I t w i l l also be available in the Project’s database and in the Bank’s external website. The Procurement Plan wil l be updated in agreement with the Project Team annually or as required to reflect the actual project implementation needs and improvements in institutional capacity.

D. Frequency of Procurement Supervision

In addition to the prior review supervision to be carried out f rom Bank offices, the capacity assessment o f the Implementing Agency has recommended two post-reviews for the first year o f project implementation and annually f rom there on.

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E. Procurement Methods and Thresholds

Goods and Works:

Procurement Method Shopping for goods

Thresholds (US$) Prior Review (US$) < 100,000

Shopping for works NCB Works

NCB Goods ICB Works ICB Goods

Consultants:

<500,000 L 500,000 and I 10 mill ion mill ion L 100,000 and 5 500,000 L 10 mill ion All L 500,000 All

All above U S $ 5

All above US$350,000

Selection Method QCBS Quality and cost Selection based on

Thresholds (US$) Pr ior Review

I200,000 ? 200,000

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consultant’s qualifications Least cost selection 5100,000

Annex 9: Economic and Financial Analysis BRAZIL: Brasilia Environmentally Sustainable Project

Introduction

The Brasilia Sustentdvel Program has two branches o f intervention: (i) the reduction o f regional inequalities, particularly through the sustainable use o f scarce natural resources such as water resources; and ii) assistance to selected investments that w i l l simultaneously diminish pollution levels that threaten strategic bodies o f water and benefit areas that are currently marginalized.

Economic benefits of the project

The principal benefits o f the Brasilia Sustainable Program are related to the improvement o f environmental quality in the Federal District and the surrounding area (entorno), and the improvement o f health and quality o f l i fe for the urban populations o f the municipality o f Aguas Lindas, in Goias, and the populations o f Vicente Pires and V i l a Estrutural. The Program would specifically reach about 175,000 low-income residents o f Aguas Lindas and V i l a Estrutural. Particularly, the program would also contribute to the preservation o f two important sources o f potable water and recreation in the D.F.: (i) the lake formed by the dam on the R io Descoberto, which supplies water to nearly 65% o f the D.F. (about 1.34 mi l l ion people); and (ii) the Paranoi lake, which constitutes a reserve source o f potable water and recreation center.

Specifically, the Project’s benefits are as follows: ( i ) improved water quality in the principal sources for the D.F., reducing water treatment costs and avoiding contamination and long-term compromise of these sources; ( i i ) improved water quality of the Paranoa lake for recreation and leisure; and ( i i i ) expand the delivery of potable water and sewerage collection and treatment in the D.F. and the entorno.

Estimation of benefits

Preservation of Potable Water Sources: The preservation o f Descoberto lake, the primary water source for the D.F., and o f the Commba system, the principal source o f future water supply, wi l l generate direct benefits for approximately 1.4 mi l l ion individuals, who w i l l be integrated as users into the Brasilia water supply system. These benefits result f rom the actions financed under the project associated with the export and secondary treatment o f sewerage f rom Aguas Lindas and the transport o f the treated effluent to the Verde river basin, the construction o f a new sanitary sanitary landfi l l for solid waste in the same river basin, and the territorial management o f the basin itself, in terms o f containment o f discharges, such as urban and rural run-off. Benefits were calculated applying the Continent Valuation method and the transfer o f benefits through the adoption o f a functional form estimated as a model for natural resources management in the Al to Iguacu Basin under the Water Quality Program (PQA) in the Curitiba Metropolitan region. The research, conducted in 1996, sought to determine the Willingness to Pay (WTP) for improved environmental quality in the Al to Iguacu region, the principal water source for the Curitiba Metropolitan region. Given that the PQA sought to (i) install sanitary sewerage and (ii) control erosion in order to recoup the water source and preserve water quality - both expected outcomes of the proposed project - the transfer o f benefits based on this previous research i s justified. A

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total o f 954 households were surveyed, f rom which a median WTP o f R$3.43 per family per month was calculated, wi th a variation o f 13.4%, drawn f rom the logit functional form estimated in Table 1.

Variable

Cons tan t GPARQ DOENC LNRENDA LNVDAP

Coefficient Std error t-test Problt(>x

-2.2326 .62180 -3.591 .00033 .74525 .19720 3.779 .00016 .75379 ,29850 2.526 .01155 .35416 .OS838 4.007 .00006

- .61601 .07236 -8.513 .OOOOO

M e a n 1 Std deviation I A2180 .38288 .05870 .23519 6.5858 ,81148 i 1.9101 .9955 1

GPARQ = DOENC = LNRENDA = natural log of income LNVDAP =

1 if interviewee responds that they world like to have a leisure area near home, 0, otherwise. 1 if a family member has an illness associated with water quality, 0, otherwise.

natural log of WTP

Eliminating al l variables except LNRENDA and transferring the above estimation to the context of the D.F., a WTP for the D.F. was estimated at R$6.57 per family per month.

Preservation of Paranoa Lake: Some 255,000 dwellers in Brasilia - particularly Lago Norte and Lago Sul -- wi l l directly benefit f rom the preservation o f water quality in Paranoa lake in leisure and recreational activities. These economic benefits f low from the removal o f sewerage discharges f rom V i l a Estrutural and Vicente Pires, by transferring these effluent discharges to treatment stations (ETE Norte and ETE Melchior, respectively); drainage run-off f rom V i l a Estrutural; and the deactivation and environmental recuperation o f the Joquei Clube sanitary sanitary landfill. In estimating these economic benefits, as in the previous case, benefits transfer was performed. Under the Basic Sanitation Program for the D.F., financed by the IDB in 1997, a WTP equivalent to R$3.57 per family per month was calculated for the use o f Paranoa lake in terms o f leisure and recreation.* This estimation applied a Discrete Choice model which incorporated primary and secondary treatment options. Despite the fact that in both Vicente Pires and V i l a Estrutural, (i) tertiary treatment o f sewerage w i l l be undertaken and (ii) the absence in the model o f diffuse discharge removal and the closing o f the sanitary sanitary landfill, a conservative decision was made to use the results from the secondary treatment in the 1997 model, as reported in Table 2. Updating the functional form based on the mean income for Brasilia, the WTP was estimated at R$4.49 per family per month.

A function developed under the Basic Sanitation Program in 1996 (for the cities o f Goidnia and Cidade de GoiBs) was validated via a pilot study in Taguatinga.

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- First Stage (Secondary Treatment)

Monthly Household Income (Y 1)

Coefficient (t statistic) M e a n

7.72 0.03 (4.257)

Length of stay in home (P5A) -0.0 1

(-1.51 1) 0.02

I1 Second Stage (Primary Treatment)

Sewerage line nearby (PlOA) 0.5 1

(2.410)

Home Value (Precio)

1 (3.056) I II

4.5668 -0.18 (-7.969)

Sanitary Drainage in Aguas Lindas and Vila Estrutural: The benefits associated wi th investments under the project in sanitary drainage are estimated using Contingent Valuation, based on household surveys in Aguas Lindas to determine the maximum WTP. Focus groups were conducted to pre-test and calibrate the household questionnaire, and a subsequent pi lot f ield study in which 30 households were surveyed. The actual household survey sampled 1,027 households, yielding 961 observations, and f rom which 858 heads o f household indicated a willing to pay for a domestic sewerage connection and associated service. The mean WTP observed from the f ield research was R$12.06 per family per month.

Homeowner Age (P2A)

An alternative WTP was also estimated, using least squares estimation.' Let Yi equal the WTP for individual i . The population mean can thus be estimated f rom the sample mean, given by:

-0.01 (-2.3 76)

where n i s the number o f individuals (i.e., heads o f household). Alternatively, a set of characteristics may wholly or partially aid in explaining the variation in the WTP across individuals in the population, which, when identified, can improve the precision o f the WTP obtained from equation (1). The basic regression model, as given by:

Individuals with Income (P22A)

Education (El)

See FREMA" I11 (1981) and MICHAEL and CARSON (1979) for extended details on this methodology (available in project files).

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1.02

1.43

0.19 (3.5 87)

0.07 (2.288)

0.25

can be estimated, where Yi i s the WTP observed f rom individual i , X , , X 2 , ... X k are explanatory variables, Po,P1, . . . ,Pk are the parameters to be estimated, and i s the random

error term for observation i , normally distributed E - N(0, 02) . Following estimation of (2), the conditional mean WTP can be calculated:

F = E ( Y \ X O ) = P 0 +p,xp + p i +...+p; ( 3 )

where X y i s the value for variable X , evaluated at the mean.

Explanatory variables were thus selected and incorporated in the WTP estimation, using Least Squares Estimation and drawing on (2) above:

where X , = 1 if the residence i s owned (0, otherwise), X , i s the number of persons living in the dwelling, , number o f household individuals that work, x,, education level o f head o f household, X 5 household income, and x6 aggregate household expenditures in electricity, telephone, transportation, education, LP gas, and health. Two models for WTP were estimated: using al l variables (Model 1) and eliminating those which were not statistically significant (Model 2). Results are presented in Table 3. Model 1 yields a WTP o f R $ 10.43 while R$ 10.46 i s estimated wi th only household income ( X , ):

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Table 3: Regression Estimates, Sanitary Drainage, Aguas Lindas and Vila Estrutural Model I Model I1 Sample Means Specification

Coeficiente t Coefficient t (unit) (natural log) 1. Dep. Variable

2. Expl. Variables Y

Constant

X1

x2 x3 x4

x5 x6

R2 F

# observations 4. Predicted Value Y E(Y/Xo) (natural log)

0.819 -0.003 0.023 -0.073 -0.039 0.224 0.022

0.058 9.759 855

2.3442

3.793 -0.072 0.5 18 -1.365 -0.913 5.795 0.721

1.032 5.756

0.204 7.363

0.058 54.220

858

2.3475 10.46

12.06 2.490

2.25 0.810 3.94 1.372 1.42 0.351 2.48 0.910

631.65 6.448 155.61 5.047

E(Y/Xo) (antilog) 10.43

Sanitary Sewerage in Vicente Pires: Based on field research conducted in other areas of the D.F. with similar physical and socioeconomic characteristics, the benefits from sanitary sewerage provision in Vicente Pires were estimated following a transfer of benefits methodology. Specifically, total economic benefits were estimated through adoption o f a WTP estimated in 1996 for Recanto das Emas and Vale do Amanhecer during the preparation o f the Basic Sanitation Program for the D.F., which i s now under implementation. The resulting revised WTP totaled R$36.06 per family per month.

Micro drainage and Street Paving: Under the Basic Sanitation Program for the D.F., 502 households were surveyed in three localities which, at the time of the research in 1996, shared economic and demographic characteristics with the proposed project area. The function estimated for the 1996 research i s given b y the following:

AV = a + p2P25-10 + P3RENTOT + p5LN VALOR, (4)

AV = Change in well-being, “with” and “without” project; a =constant P13 = public bus does not travel in unpaved streets (l=Yes, O=No); RENTOT = Monthly household income in R$; and LNVALOR = Ln Price (R$/month).

The WTP estimation updated the monetary value o f the constant, drawing on the variation in mean income for the D.F. population between 1996 and 2004, and applying this revised

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household income to the project area in the eq. (4), yielding a WTP o f R$25.05 per family per month.

Vicente Pires-Sanitary Sewerage Vila Estrutural-Sanitary Sewerage

Economic Costs

40.397 20.116 3.587 16.695 21.8%

6.149 4.684 850 615 13.8%

The direct economic costs o f the project includes initial investment costs, operation and maintenance, supervision, environmental costs, and acquisition o f land and equipment. Also included are costs associated with individual household hook-ups for sanitary sewerage and water supply. A project horizon o f 20 years i s assumed.

~~ ~

10.306 8.609 634 1.063 13.8% Vila Esturural-Microdrainage and Paving Tota l 486.009 229.048 88.065 168.898 21.2 %

Conversion factors for transforming financial costs into economic costs were extracted from “Metodologia para Avaliaqiio EconBmica e Financeira de Projetos: a exper ihc ia do PMSS”, as follows:

Unskilled labor ........................................ 0.46 Skilled Labor .......................................... .0.8 1 Construction materials ........................... .0.88 Equipment ................................................ 0.80 Chemical Products .................................. 0.83 Electricity ............................................... .0.97

Results of Economic Evaluation

Overall, the Economic Internal Rate o f Return (EIRR) o f the Program i s estimated at 21.296, and a net present value (NPV) o f R$168.9 million, confirming the viabi l i ty o f the proposed investments. The EIRR and NPV results for the seven investment subprojects assessed are presented in Table 4.

Table 4: Economic Internal Rate of Return and Net Present Value, Brasilia Sustainable Project Present Value(R% million)

Investment Components

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Sensitivity Analysis

Investment Components Water Source Preservation Parano6 Lake Preservation Aguas Lindas-Water Supply Aguas Lindas-Sanitary Sewerage

Vila Estrutural-Sanitary Sewerage

Vila Estutural-Microdrainage and Paving

Vicente Pires-Sanitary Sewerage

In order to assess the robustness o f the EIRRs to changes in both benefit and cost streams, a sensitivity analysis was conducted and results presented in Table 5. The proposed investments in the preservation o f water sources in the Descoberto and Paranoa areas are shown to be fairly robust, in that benefit streams would need to be reduced by 21 to 53% to force their net present value to zero. Conversely, cost overruns o f as much as 113% o f the original estimates would produce the same effect. S imi lar results are obtained for Sanitary Sewerage (in Vicente Pires and V i l a Estrutural) and Microdrainange and Paving in V i l a Estrutural. The proposed investments in Sanitary Sewerage in Aguas Lindas would only require (i) a 3% decrease in benefits or (ii) a 2% cost overrun, to yield a NPV equal to zero.

Switching Values Benefits Costs

-53% 113% -21% 126% -20% 125% -3% 102%

-41% 151% -20% 111%

-10% 112%

Financial Analysis

The financial analysis was conducted wi th the objective o f assessing project investments in terms o f their viability and to determine the need for subsidies for those components with less than full cost recovery as required for operation and maintenance over the project horizon o f 20 years.

Revenue generation f rom investments in water supply and sanitary sewerage were estimated using the actual tariff structure used b y CAESB, which wil l be responsible for the management o f these investments. Revenue from draining and pavement investments in V i l a Estrutural were estimated based on expected collection o f IPTU. In the case o f the restoration o f the sanitary Joquei Clube sanitary landfi l l and the construction o f the new sanitary landfill, carbon credits were factored into the estimation o f revenue.

Overall cost recovery i s estimated at 63.4% o f the total program cost, wi th a negative NPV o f R$182.8 million, as given in Table 5. As such, part of the investment costs wi l l require subsidy.

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Table 5: Financial Analysis: Brasilia Sustainable Project Present Value (R$ million)

Revenue

Services

Net INVESTMENT % cost Recovery

Aguas LindasNicente Pires-Water Supply Aguas Lindas-Sewerage Collection Amas Lindas-Sewerage Treatment

87.7 94.4 35.0 -41.7 67.8%

25.5 7*5 -93.3 21.2% 37.9 55.5 17.6

Vicente Pires-Sewerage Collection

Vicente Pires-Sewerage Transport

Fiscal Impact

26.1 4.4 4.8 3.9

21.2 -19.5 50.3%

The fiscal impact o f water supply results f rom the fees paid b y consumers for the services rendered, as well as the fees assessed for materials and equipment used. In estimating the fiscal impact, the following were considered: Income Tax (1.5%), Social Security Tax -1SS (2%), applicable for works undertaken; PI (10%) and ICMS (17%), assessed o n materials and equipment used in these works. Specifically for paving and drainage, the fiscal impact wi l l occur through the Tax on Urban Property - IPTU, assessed on the mean house value, estimated at R$7,000. Incremental fiscal revenue overall f rom the project i s estimated at R $ 30.4 million, against a required subsidy o f R$75.7 million, as given in Table 6.

Aguas Lindas-Water Supply Aguas Lindas-Sewerage Collection

Table 6: Fiscal Impact Analysis, Brasilia Sustainable Present Value (R$ million)

Net 1 Subsidies 1 Revenues Investment Revenue

18.0 29.4 -11.3 5.0 20.2 -15.2

Vi la Esturural-Microdrainage and Paving 2.9 Total 30.4

I Vicente Pires-Sewerage Collection I 3.7 I 10.8 I -7.1 I

12.4 -9.5 75.7 -45.3

F V i l a u r i - s e w e r a g e Collection I 0.8 I 2.9 I -2.2 I

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Annex 10: Fiscal Analysis BRAZIL: Brasilia Environmentally Sustainable Project

I. Introduction

The Federal District i s negotiating a loan from the World Bank to the value o f US$57 mi l l ion wi th a view to financing the Brasilia Sustenthvel (‘Sustainable Brasilia’) programme. The aim o f the present analysis i s to: (i) evaluate the fiscal situation o f the DF and (ii) to forecast and evaluate the impact o f the proposed credit operation on the future financial situation o f the DF.

The public accounts o f the DF are unusual:

(i) The DF receives regular funding from the Union (central government) through the Constitutional Fund ( ‘Fundo Constitucional’). This fund provides al l the financing for public security (personnel, current expenditure and investment) and provides a partial contribution to the costs o f employing personnel in the health and education areas. Up to 2002, revenue and expenditure in these funding categories were entered b y the DF as ‘own-resource’ income and expenditure. From 2003, however, such transfers were ascribed to the Constitutional Fund and the transactions entered under central government accounting procedures as receipts and expenditure within the domain o f the Federal Executive. As a result they no longer appeared in the accounts o f the DF.

(ii) The DF, in common with other states and municipalities in Brazil, i s eligible to receive the benefit o f a number o f taxes such as the ICMS, the ICTD, the IPVA and the ITDB in addition to the ISS and IPTU. Furthermore, the DF charges for policing and services rendered b y third party service providers.

(iii) There are no municipalities in the DF. Therefore, unlike the states, i t i s not obliged to pass on a percentage of the I C M S (25%) or o f the IPVA (50%) to municipal authorities.

(iv) The DF also receives financial transfers f rom the ‘States Participation Fund’ (FPM), the Rural Land Tax ( ITR) and the Tax on Industrialised Products (PI) and i s entitled to compensation under LC 87/96 (the Kandir Law), which exonerates exports f rom payment o f the ICMS.

(v) The DF possesses neither i t s own Judiciary nor Public Prosecution Service (‘MinistCrio Publico’) - both provided exclusively by the Union. The only off icial legal body financed exclusively from DF own resources i s the Legislative Branch. The latter embraces the Court o f Auditors (‘Tribunal de Contas’) o f the Federal District.

The atypical situation o f the DF is not restricted to public finances. The whole economy o f the area differs f rom that o f the other Federative Units (ie: states) in that income and employment in the DF are strongly influenced both directly and indirectly by the presence o f the Federal and Federal District public sectors. The fol lowing outline o f the economic situation o f the DF has to be viewed against (i) the macroeconomic adjustments introduced primarily between 2002 and

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2003 and (ii) the low levels o f economic growth experienced b y Brazi l as a whole over the same period.

II. Fiscal Balances

The Federal District (DF) emerged from the period 1995-1998 with a number o f fiscal problems resulting f rom hazardous public accounts management. In 1999, the government o f the Federal District (GDF) succeeded in reversing the primary deficit o f R $ 123 mi l l ion that was recorded in 1998, managing to achieve a primary surplus o f R $ 26 mi l l ion - equivalent to 1% o f Real Net Revenue (RLR). This was possible because receipts in Fiscal Year 1999 increased faster than expenditure, despite the surprisingly short-lived turmoil caused b y the exchange rate devaluation in January 1999. Nevertheless these improvements were not sufficient to cope wi th the financing requirements o f the DF. B y the end o f 1999 these registered a shortfall o f approximately R $ 47 million.

During the period 2000 to August 2004, the fiscal balances o f the GDF displayed a fair ly comfortable budgetary, financial and asset situation. The situation continued to improve throughout Fiscal 2004 (up to at least the month o f August). During this period, with the exception o f year 2000, the DF generated positive results on current account which enabled it to finance deficits on capital account and to generate sufficient resources to cover i ts gross financing requirements. The financial and budgetary balances also returned positive results, pointing to a favorable fiscal situation with l o w indebtedness. Most o f this healthy fiscal situation can be explained by the fact that the DF i s in receipt o f plentiful funding f rom the Union by way o f transfers for financing expenditure - particularly personnel costs - in key areas o f public expenditure such as security, education and health.

Ill. Receipts and Expenditure Pe$orrnance

In view o f the situation applying to current and capital receipts, total revenue at constant prices tended to decline throughout the period 2000-2003. This could be partly attributed partly to accounting processes and partly to non-accounting causes. Among the latter, the fal l-off in “constitutional transfers” from the central government (eg: FPE and FPM) and the barely discernible increase in tax revenue, especially that derived from the ICMS were apparent. Tax revenue was not more depleted on account o f the fact that f rom 2003 onwards the IRRF was entered as a Federal District Government receipt.

Total expenditure fe l l in real terms over the period 2000-2003. This was true o f both current and capital expenditure. Expenditure on personnel and ‘social contributions’ increased nominally throughout the entire period and were roughly the same for both the working and retired public sector employees (the latter including family members - ‘pensionistas’ - normally in receipt o f pensions from deceased beneficiaries). The DF commits almost almost one third o f i t s personnel budget to payments for retired public employees and the ‘pensionistas’ for which i t i s responsible. The public sector pensions deficit i s growing, given that the DF has so far failed to implement reforms to the pensions/social welfare system supposed to benefit i t s employees. Furthermore, no reliable estimates exist o f the DF’s actuarial deficit in this respect. Expenditure on personnel as a proportion o f RCL remained stable during this period and was not a cause o f

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fiscal imbalance. This was largely due to transfers f rom the Union to defray such costs. On the other hand, GDF public sector employment crept slowly upwards over the same period and remained relatively high as a proportion o f the size o f the DF population. Debt repayment costs relative to R C L have been reasonable because indebtedness, apart from being relatively low, has not increased to a great extent. Over the period as a whole, other current expenditure actually increased, demonstrating the difficulty o f containing current expenditure. Capital expenditure was in l ine with the development of investment basically financed f rom current savings (‘poupanqa’). Government-related expenditure however showed an increase in the area o f public security together wi th a concomitant reduction on expenditure on infrastructure - while the other expenditure groups (administrative, social, economic, etc) remained stable during 2000-2002.

IV. Conformity with the Fiscal Responsibility Law (LRF)

The DF keeps within the limits laid down by the LRF. The ratio between Consolidated Net Debt (DCL) and R C L i s wel l under 2 - the upper limit imposed b y the Federal Senate when it approved the regulatory framework for the Law. In fact, during the period 2000-2003 the highest percentage o f D C L with respect to R C L was 42% (in 2002).Up to August 2004, this ratio was 0.27. The upper LRF limit imposed on expenditure on personnel was respected b y the GDF Executive as wel l as by the Legislative branch. In the case o f the Executive branch, the results are influenced b y transfers f rom the Constitutional Fund by the Union for payments to personnel. In Fiscal 2004 (up to August), personnel-related payments stood at around 32% o f RCL. The percentage o f credit operations and debt servicing as a proportion o f the RCL are wel l below the legally imposed limits. T o August 2004 credit operations represented only 74% o f the RCL.

V. Compliance with the Fiscal Adjustment Programme Targets

The DF subscribed to the 29 July 1999 contract governing the refinancing o f i t s debt wi th the Union. The ‘Contract o f Declaration and Undertaking to Assume, Consolidate and Refinance Debts’ was authorised by District Law Number 2.387 o f 24 M a y 1999. In accordance with i t s terms, the value o f the operation wi th regard to the DF amounted to R$642.3 million. In exchange, the DF undertook to carry out a Restructuring and Fiscal Adjustment Programme. The targets and results o f the programme over the period 2000-2003 are outlined as follows. The ratio between Financial Debt and Real Net Revenue (RLR) was met for each o f the years concerned. Moreover, the figures indicate that there was (and is ) a margin o f indebtedness. The highest level was reached in 2003 when the financial debt stock represented 39% o f RLR. The second target related to the primary result. This was achieved in al l the years, with the exception o f the f i rs t year in question. I t should be noted that in al l the years the primary result was positive. The personnel expenditure target refers only to Treasury sources and to expenditure on Direct Administration personnel and staff working for the ‘autarquias’ (semi-public bodies), foundations and firms in receipt o f funds f rom the District Treasury. The “Own Revenue Collection” target was achieved in al l the years except the last. I t should be noted that the target classification changed from ‘own revenue’ growth rate (year 2000) to achievement o f a determined value in nominal terms o f ‘own revenue’ collection (in the remaining years). The fifth target concerns the percentage o f RLR earmarked for investment. With the exception o f 2002, the final year o f the previous mandate - when investment i s usually heavier - this percentage remained below that defined in the annual fiscal adjustment reviews. Normally non-

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compliance wi th this particular target does not cause the government difficulties. Non- compliance generally means that governments are making special efforts to improve and broaden the economic and social infrastructure o f the areas for which they are responsible. It also means that fiscal adjustment has not led to expenditure on investments that remained relatively wel l protected.

Through the implementation o f i t s adjustment programme, the DF has demonstrated that i t genuinely seeks to continue i t s trajectory o f sustainability. There i s no real evidence o f fiscal imbalances during the entire period under analysis. Between 2000 and 2003, the DF improved i t s fiscal performance, eliminating the budget deficit evident in the first year o f the series. In 2002, however, the final year o f the previous mandate o f the current governor o f the DF, both expenditure and indebtedness increased. This reduced the budgetary and primary surplus vis-8- vis the average recorded for the immediately preceding years and increased the ratio between consolidated net debt and the RCL. Other current expenditure for example increased nominally b y almost R$400 mi l l ion f rom 2001 to 2002, which prompted the S T N to set down for PAF 2003-2005 a limitation on such expenditure for Fiscal Year 2003 (46% o f RLR). This commitment was not complied wi th b y the DF - as also in Fiscal 2002.

Finally, the fiscal adjustment programme for the period 2004-2006 sets out perfectly achievable targets, given the performance to date o f the DF, but draws especial attention to two commitments that have not been complied with: (i) reform o f the Public Sector Pension system and (ii) cutting back current running costs.

V I . Forecast of the Fiscal Situation

With the exception o f year 2000, the DF had during the period under analysis a negative net financing requirement - i t s primary result plus i t s financial receipts were easily able to finance i t s debt obligations. This allowed the DF to obtain a “B” STN classification in terms o f ‘ability to pay’. However, wi th the exception o f 2001, i t s gross financing requirement was positive, insofar as i t s primary results and financial receipts were not sufficient to cover amortizations.

Taking the performance o f 2000-2003 as a benchmark, positive (and increasing) primary results can be forecast up to year 2013. A forward view o f gross financing requirements up to 2013 suggests that additional resources w i l l be necessary - except during the last three years o f the period - to enable the DF to cover i t s net financing requirements and expenditure on debt amortization. Over the coming years, new financing sources -whether credit operations, asset reduction or renewed efforts to increase the primary result - w i l l be needed for the DF ful ly to meet i t s commitments.

Prospective indebtedness capacity i s nevertheless satisfactory. Projecting the RCL to year 2017, and multiplying i t s value b y a factor o f two in order to estimate the upper indebtedness limit for each year, the proportion o f debt stock vis-8-vis the RCL would be 10.58% at the end o f the period - effectively hal f o f that o f 2003.

Furthermore, the forecast indebtedness capacity for 2004-2008 indicates that on average the DF w i l l need to disburse annually R$217 mi l l ion on debt service, tying up an average o f only 4.46%

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o f the RCL. Debt servicing includes debts arising f rom new credit operations and includes service on the sum requested from the World Bank for financing the Brasilia Sustentdvel Project.

VII. Conclusions

The DF has met al l the relevant requirements under the Fiscal Responsibility L a w and has in essence fulf i l led the targets o f the fiscal adjustment program agreed wi th the STN. Analysis indicates that the net consolidated debt o f the DF i s l ow as a proportion o f RCLor RCR and has in fact increased very little in real terms. The DF has room to increase i t s indebtedness which i s wel l below the upper limits defined b y the Federal Senate when i t originally defined the rules for the LRF. I t s payment capacity i s solid and under the limits laid down in this legislation. Therefore a margin for indebtedness and payment capacity exists even when the parameters o f the projected loan requested from the World Bank to finance the Brasilia Sustentdvel project are taken into account. The requirements regarding credit operations and personnel expenditure limits were also met.

Despite the success o f the fiscal adjustment program, analysis o f the DF public accounts highlights a number o f difficulties and vulnerable areas. On the receipts side, the DF basically depends on intergovernmental transfers f rom the Union to guarantee i t s fiscal balance. Despite the fact that such transfers have declined in real terms over the period under analysis, they amount to around 50 % o f current receipts and financial expenditure on personnel in sectors that happen to be the biggest employers in the GDF system: security, health and education. Such dependency leads to a much depleted revenue collection effort - vi tal for increasing the proportion o f “own receipts” - within the context o f current revenue (especially relevant in terms o f the ICMS). I t can be observed that the relationship between the ICMS and GDP i s relatively l o w for the DF b y comparison with other federative units, including those in the centre west region and even with the average for Brazi l as a whole. The lower effective tax-take arises also from the award o f fiscal incentives b y the DF designed to attract private investment and f rom the frequently employed practice o f conceding fiscal amnesties and stretching repayment periods. Increases in the ICMS tend to be sluggish not because the tax base i s narrow but because relatively little effort i s put into tax collection itself.

On the expenditure side three questions arise. The first has to do with the high percentage o f expenditure on personnel in relation to the RCL when expenditure affected wi th resources f rom the Constitutional Fund i s taken into account. When resources on both the expenditure the receipts sides are subtracted, the percentages o f earmarked resources fa l l to artificially l ow levels. Moreover, the number o f public employees i s high in relation to the population o f the DF. On the other hand, the payroll has grown vegetatively on account o f the presence o f countless pecuniary benefits allowed by the legislation governing public service jobs. Initiatives to reduce these perquisites could be taken in the context o f other reforms such as those needed to deal wi th the public sector pensions deficit.

This leads on to the second question and relates to the above-mentioned shortfall in the GDF pension arrangements. The DF has not yet taken any steps to set in motion a reform o f i t s pensions system. The pension’s deficit has in fact ballooned over the period and i s now generating an actuarial deficit o f undisclosed size - which would certainly be even larger if the

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system were not partially financed by central government. Efforts to introduce pension contributions f rom retired public sector employees (a measure that now has constitutional backing) would help to reduce the overall pensions deficit and make substantial savings on payroll costs. The future sustainability o f the fiscal effort required to bring personnel expenditure under control w i l l depend upon the adoption o f a pensions reform which cuts back the resources currently f lowing out to retired public employees.

The third question relates to the current expenditure costs incurred by the DF government machine. Available figures show that running costs rose substantially between 2001 and 2002 and even more steeply between 2002 and 2003. The DF was unable to comply wi th i t s undertaking wi th the STN to reduce these costs to a predetermined percentage o f RCL in 2002 or 2003. This demonstrates that administrative and payroll costs would be responsible for fiscal imbalances unless they were financed in part by transfers f rom the Union. Reducing such expenditure would provide space to increase the investment capacity o f the DF and to consolidate i t s fiscal sustainability.

Continuation o f the fiscal effort and i t s prospects for success depends more on adjustments on the expenditure than on the receipts side. There i s s t i l l ample opportunity to progress on both fronts. In the case o f receipts, the significant dependency o f the DF on intergovernmental transfers o f funds from the Federal Government introduces a major element o f risk insofar as the availability o f such resources i s not subject to control by the DF itself. The way to reduce this risk i s for the DF to scale-up i t s tax collection efforts not only o f the I C M S but also o f other taxes to which the DF i s entitled - as well, o f course, to reduce the losses of revenue arising f rom fiscal incentives.

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Annex 11: Safeguard Policy Issues BRAZIL: Brasilia Environmentally Sustainable Project

This annex presents the Environmental Assessment and the Resettlement Framework summaries. The full reports can be found in the project documents.

I. ENVIRONMENTAL ASSESSMENT

Environmental Setting

With three mi l l ion inhabitants, Brasilia i s the tenth largest urban concentration in Brazil." Despite i t s well-known planned urban environment, Brasilia, l ike most o f the largest metropolitan areas in the country, shows high levels o f socioeconomic inequality, uncontrolled urban growth, and environmental degradation. The largely uncontrolled urban sprawl o f Brasilia undermines the natural capacity o f the Cerrado - the most stressed ecosystem in Brazi l - to provide key environmental services to support a sustainable metropolitan expansion. H igh population growth, rising water demand, and unabated pollution in the many unplanned settlements in and surrounding the DF and i t s Integrated Development Region (RIDE'l) adversely impact the quantity and quality o f the available water resources. I f left unchecked, these impacts could potentially impose high costs in terms o f the erosion o f the quality o f l i fe and health o f the most vulnerable sectors o f population, and could ultimately undermine the sustainable development o f the region. Brasilia i s also o f critical environmental importance for Brazil as a whole. I t i s located the headwaters o f three r iver basins o f national and regional importance (the Parani, Tocantins/ Araguaya and S8o Francisco basins); and within a biodiversity reserve in the Ceri-ado ecosystem. In addition, 43% o f the DF territory consists o f environmental conservation units1*. Thus, promoting socially and environmentally sustainable development in Brasilia forms part o f a continuing national strategy to foster sustainable economic growth in the mid-west region o f the country.

A comprehensive analysis o f environmental issues at the regional level highlighted key issues l ikely to have the most serious impact on quality o f l i fe and the environment. I t identified two strategic urban watershed basins for the DF and the entorno (the Descoberto and Parano% Basins) as the most critical for long-term urban sustainability. These two watersheds, which drain into Lake Paranoi and the Descoberto Reservoir, also comprise the Brasilia National Park.

Lake Paranoi i s an artificial lake and a major urban landmark, wi th substantial economic and environmental value for the population o f Brasilia. In addition to being a feature o f outstanding natural beauty, the lake provides a range o f benefits, f rom leisure activities to electricity generation. Significant public investments have been made over the years to remove the pollution load discharged into the lake, with most o f the investment directed to the collection and treatment o f wastewater. At present, the entire formally occupied area draining into the lake has

lo About two mil l ion in the Federal District and one mil l ion in the neighboring municipalities in the states o f Goias and Minas Gerais. l1 The RIDE comprises the DF and 22 adjacent municipalities - 19 in Goitis and 3 in Minas Gerais l2 Does not include the Planalto Central protected area. Some o f the conservation units, such as the National Park, falls into the category o f 'strict protection', outlawing any type o f use except biological conservation.

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i t s wastewater collected and treated at tertiary level. Water quality in the lake i s good and in a number o f places the quality i s suitable for bathing.

The Brasilia National Park i s an important urban environmental conservation unit located within the metropolitan area o f Brasflia. Created in 1961, i t s main objective i s to protect the Cerrudo biome and the water bodies that supply water to the city

The Descoberto Reservoir provides 60% o f the water supply for the 2,000,000 inhabitants o f Brasilia. With the exception o f Aguas Lindas, al l wastewater produced in the Descoberto Basin i s properly collected and treated, and rural activities regulated through a land-use management plan. T o ensure protection of the water resources, the Environmental Protection Area (APA) o f the R i o Descoberto was introduced in 1986 as a sustainable conservation unit administered by the Brazilian Environmental Agency (IBAMA). The project includes actions to strengthen the environmental management o f this conservation unit.

Environmental Threats

The long-term sustainability o f the Parano6 Lake and Descoberto Reservoir i s being threatend b y pollution loads from untreated sewage o f low-income neighborhoods and f rom an open garbage landfill, as wel l as encroachment and poaching from low-income developments in close proximity to the Park. The main current source o f pollution comes . f rom two irregular settlements: V i l a Estrutural and Vicente Pires on the Paranoh Basin, and Aguas Lindas in the Descoberto Basin. Given that these are not connected to the city’s regular network o f basic services, the formulation and execution o f an integrated technical project i s needed for regularizing land tenure and providing urban environmental services in these areas.

The V i l a Estrutural, created b y waste pickers working the “Jockey” landfill, has a population o f about 6,500 families (approximately 30,000 people), making i t the largest and most critical slum in the DF from a social and environmental standpoint. The DF urban and environmental councils, together wi th the official environmental agencies, recognize that the best alternative i s to upgrade the urban infrastructure o f the V i l a Estrutural, mitigating i t s environmental impacts and at the same time improving the quality o f l i fe o f the inhabitants. The alternative o f relocating i t has been ruled out due to the high social and economic costs involved.

Adjacent to the National Park, V i l a Estrutural also exerts a series o f negative impacts on the flora and fauna o f the park. The city landfi l l (the “Jockey”) also borders the National Park and V i l a Estrutural, causing additional harmful effects on the park environment. Numerous studies indicate that the landfi l l i s also a serious threat to the groundwater.

Vicente Pires i s an irregular settlement wi th a high population density (around 3,000 families). Whi le many residents have evolved their own ‘individual solutions’ for water supply and sanitation, Lake Parano6 water quality studies point to the need to formally bring the settlement into the regular city water and sanitation network.

The ‘Jockey’ solid waste landfi l l was created at the time Brasilia was built, and i t s 200 hectares have provided a disposal site for the city’s solid waste for over 45 years. Disposal techniques

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have certainly improved over the years but s t i l l fal l far short o f the desirable. At present, the landfi l l receives about 60% (1.6 tons) o f the total solid waste generated by the city; part o f the remaining 40% i s recycled, and the rest processed into compost. The existing landfi l l w i l l remain operational, in i t s present form, for a further two years.

The 700 Waste pickers o f the ‘Jockev’ solid waste landfi l l are organized in cooperatives and maintain constant contact wi th the GDF regarding the implementation o f a program geared to meeting their demands, which i s part o f a wider initiative agreed with waste pickers and street garbage collector organizations nationwide (the Garbage and Citizenship Forum), wi th full support from the Ministry o f the Cities. This Program, funded b y local resources and the National bank for Social and Economic Development (BNDES), i s designed to address the needs o f al l the street waste-collector cooperatives in the DF, including those working at the ‘Jockey’ landfill. The GDF i s currently assigning areas where recycling units might be built and discussing the transfer o f relevant land titles to groups o f cooperatives.

Arzuas Lindas i s a sizeable low-income settlement located in the neighboring State o f GoiBs, with approximately 130,000 inhabitatnts. Wasatewater i s disacharded raw into the descoberto reservoir. The GDF regards abatement o f the pollution loads from Aguas Lindas as a top priority, given that the Descoberto reservoir i s a strategic water supply source for the city.

Addressing the Major Environmental Issues in the Paranoh and Descoberto Watersheds

Vi la Estrutural. The Project w i l l finance substantial social and environmental improvements in the V i l a Estrutural through integrated and multisectoral interventions. The main activities include: (i) Improving local governance; (ii) Improving social services, to include education, health, income generation activities, and youth development;(iii) Improving basic services, including water, sewerage, drainage, street layout, paving, solid waste collection, effective household sewerage connection and the closure o f sewer pits; (iv) Improving the urban design of the settlement, which w i l l involve introducing land-use and building regulations, and establishing recreational areas; (v) I n situ population resettlement to protect environmentally sensitive areas, wi th commensurate improvements to the urban design; and (vi) Rehabilitating and protecting environmentally sensitive areas b y means o f (i) expanding the riparian vegetation of the Vicente Pires stream, (ii) improving the land use regulations applying to the banks of the Val0 stream, (iii) creating an urban park and a buffer zone adjacent to the Brasilia National Park and the F L O N A boundaries, and (iv) creating biological corridors connecting the National Park and the Vicente Pires and Val0 water courses and riparian vegetation. The Project w i l l complement the required investments and w i l l provide social and technical support to the cooperatives working on the landfi l l to improve efficiency and working conditions.

Vicente Pires. The construction o f W&S collection networks connected to the city’s W&S systems w i l l be financed under the Project, wi th the wastewater produced being treated in the nearest treatment plant

Arzuas Lindas. Although i t i s located outside the boundaries of the DF, the GDF decided to invest in improving W&S services for i t s 130,000 inhabitants to eliminate the discharge o f raw

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wastewater in the Descoberto reservoir. Financed b y the Caixa Economica Federal, a national bank, these investments form an integral part o f the Project design.

Providing an appropriate solid waste disposal solution. The construction o f a solid waste sanitary landfi l l w i l l be financed by the Project. The location has not yet been defined, since a full EA of the suitability o f the area indicated b y the city master plan to host the new sanitary landfi l l concluded that the location was not suitable, given i t contained important environmental assets such as springs. Of the f ive alternative areas examined b y the EA, an area next to the largest ci ty wastewater treatment plant appears to be the most appropriate. Owned b y the GDF’s water company, this area possesses no major environmental assets and no population settlements exist nearby. The EA is being reviewed by the Federal and GDF’s environmental agencies, which w i l l joint ly decide which other area(s) should be assessed f rom an environmental standpoint and evaluated f rom a technical, economic, and social perspective

Policy and Institutional Development. The asymmetrical planning and management capacities between the DF - the economic engine for the entire region - and the surrounding municipalities have an adverse impact on the development o f the region. With the aim o f reducing inequalities and promoting more sustainable regional development, the GDF i s looking to the Bank to provide appropriate expertise in planning and management. T o meet this demand, the Project includes a strong policy and institutional development component, which w i l l carry out studies that w i l l enable more informed decision-making by the government on sustainable metropolitan development issues.

Legal and Institutional Framework for Environmental Assessment

Brazilian environmental legislation calls for detailed environmental assessment documents to be presented in accordance wi th the guidelines established b y this legislation. Environmental licenses are issued subject to the environmental assessments being approved for each intervention. T o comply wi th the legislation, environmental assessments have been prepared for: (i) Vi la Estrutural; (ii) the closure o f the ‘Joquei’ solid waste landfill; and (iii) five different potential areas for the new solid waste sanitary landfill. A fourth assessment covering the proposed investments in the Vicente Pires area currently under preparation and a simplified EA was prepared for the Aguas Lindas interventions.

Two environmental agencies are currently examining the above assessments: S E M A R H (the GDF environmental agency) and IBAMA/DF. Once the environmental assessments are approved, the first environmental license (LP - ‘preliminary license’) w i l l be issued. The f inal technical design for the intervention w i l l then be submitted for approval and award o f the second environmental license (LI - ‘installation license’), which allows the bidding for the c iv i l works. At the conclusion o f the c iv i l works, IBAMA issues the final environment license fol lowing a f ield review (LO - ‘license to operate’). In the case o f Aguas Lindas, the environmental agency o f the State o f Goi6s wi l l be responsible for analyzing the EA and issuing the proper environmental licenses. T o comply wi th Brazilian environmental legislation, the proposed Project investments w i l l comply with the environmental licensing process as detailed herein.

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The concept, design and specific activities of the Project have been developed in close partnership wi th IBAMADF, who has expressed full support for the Project both in a number of technical discussions and in the course o f public consultation. IBAMA’s involvement does not, however, preclude the need for environmental licenses for each Project intervention. The EAs prepared specifically for the Vi la Estrutural intervention, the solid waste sanitary landfill, and solid waste landfill closure have been submitted to lBAMA/DF. All Eas have also been reviewed by the Bank.

Compliance with the World Bank’s Safeguard Policies

The Project triggered and addressed the following Bank safeguard policies: Environmental Assessment (OP 4.01); Natural Habitats (OP 4.04); Involuntary Resettlement (OP4.12); and Safety of Dams (OP 4.37). The Project design incorporates the mitigation measures for each policy, as described below:

OP 4.0 1 Environmental Assessment (EA). In addition to the project spewcific environmental assessments required by Brazilian law, a comprehensive EA has been carried out in accordance with Bank policy for Category “A” projects. The EA assesses the existing conditions, identifies the potential direct and indirect environmental impacts and proposes adequate mitigation measures for each negative impact identified, along with measures for enhancing each identified positive impact. The mitigation and enhancement measures (including associated costs, responsibilities and schedule) are summarized in the Environmental Management Plan. A public consultation exercise has been carried out, supported by appropriate documentation allowing for a meaningful community participation in the decision-making process.

OP 4.04 Natural Habitats. The Project w i l l have a highly positive impact on biodiversity and natural habitats. The Brazilian Forest Code defines a Permanent Preservation Areas (APP) as an “area which provides the environmental function of preserving water resources, landscape, geological stability, biodiversity, gene flow of the flora and fauna, protecting soil and ensuring the well-being of the human population.” In accordance with Bank policy, these areas constitute “Critical Natural Habitats.” Two APPs exist within the project area - the Vicente Pires and Val0 streams - presenting different levels of environmental degradation. The Project w i l l finance the rehabilitation and protection of the riparian vegetation of these two streams, with measures covered in the EMP.

OP 4.12 - Involuntarv Resettlement. Two interventions, aimed at improving urban standards and quality of l i fe of populations living in low-income settlements, and at ensuring environmental protection of strategic ecological systems, w i l l require involuntary resettlement: (i) the Integrated Development Project to be carried out in Vi la Estrutural, which w i l l require the relocation of approximately 1,000 families, and (ii) the closure of the Joquei solid waste landfill, which w i l l affect 700 the waste pickers who work in the area. The other project investments proposed for Aguas Lindas and Vicente Pires w i l l not entail resettlement. The cost o f all resettlement activities i s estimated at US$9.5 million, and are 100 percent covered by the project budget.

OP 4.37 Safetv of Dams. The provision of improved water services in Aguas Lindas w i l l require raising the operating level of the Descoberto dam by 1.5 meters through the placement of additional gate infrastructure in the spillway, This wi l l increase the reservoir yield from 4.7 to

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5.1 liters per second. This reservoir, built in the 1970s, i s managed by the FD W&S company (CAESB), and i s regularly inspected for safety. As part of project implementation, a panel o f experts, following the guidelines of OP 4.37, wi l l evaluate the designs for the proposed expansion once they are completed.

OPN 11.3 Phvsical Cultural Property. To comply with the Bank’s safeguard policy on cultural property, ‘Chance Finding’ Procedures wi l l be included in all construction contracts.

Overall Environmental Impacts

The proposed Project i s expected to be highly positive from an environmental perspective, given that i t s objectives include environmental improvements, particularly related to the quality and quantity of water resources, as well as policy improvements and institutional strengthening over a broad range of environmental management issues. The Project i s o f itself an environmental protection initiative. I t s objectives and design aim at the abatement o f strategic pollution loads that contaminate critical water bodies and an environmental conservation unit. In addition to the environmental interventions, the Project w i l l also improve the quality o f l i fe in specific low- income settlements, support policy and institutional development, and strengthen the DF environmental agencies, in order to promote more sustainable metropolitan development.

Water Oualitv and Ouantitv Issues. Implementation of the environmental sanitation system of Aguas Lindas, particularly of the wastewater collection and treatment system, w i l l contribute to the improvement o f water quality of the Lake Descoberto, given it w i l l reduce the pollution loads draining into the lake.

Diverting the treated wastewaters currently produced in Aguas Lindas to the Rio Verde Basin w i l l significantly reduce the organic and phosphate loads flowing into the future Lake Corumbii IV, thereby contributing to averting the future risk o f euthrophysation. Furthermore, the arm of the Areias River - the future headwater supplying water to the DF in accordance with the 2000 W&S Master Plan - w i l l benefit from improved water quality for the local population;

The water resources pollution control measures planned for the Vi la Estrutural, consisting o f drainage, street paving, and sewage collection improvements, along with the provision of water supply and sanitation arrangements for Vicente Pires and the closure and rehabilitation of the “Jockey” sanitary landfill site, w i l l benefit Lake Parano6 environmentally, maintaining i t s aquatic ecosystem and i t s different tourism and leisure attractions, wi th a corresponding economic spinoff for the DF. At present, the worst water quality exists in the Riacho Fundo and Banana1 arms, precisely those that are most susceptible to renewed degradation in the absence of sanitation interventions in the Vi la Estrutural and the Vicente Pires neighborhood.

Appropriate Solid Waste Disposal. Foreclosing the activities at the ‘Jockey’ landfill w i l l bring direct benefits to the resident population of the Vi la Estrutural, through the recovery of a degraded area, rehabilitation of sources of contamination of both surface and underground water and the reduction of the numbers of infectious and contagious waterborn disease-carrying vectors. A further benefit to the population wi l l derive from the conservation of the biodiversity and water quality of the Brasilia National Park. The construction o f the new Sanitary Sanitary

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landfi l l w i l l meet the long-held demands o f c iv i l society and the Federal Public Prosecutors Office.

Rehabilitation of Environmentallv Degraded Areas. The rehabilitation o f degraded areas, especially those from which gravel is dredged in the two basins targeted b y the Project i s a complementary measure designed to ensure good water quality b y minimizing the effects o f erosion and preserving the biodiversity o f the areas.

Policy and Institutional Strengthening. Institutional strengthening w i l l produce important benefits in terms o f averting environmental risks to the Brasilia National Park and preserving Lake Paranoii and the Descoberto and Corumbii reservoirs. These r isks arise mainly f rom weaknesses detected in present land administration, involving urban, environmental, and solid waste management. Solutions include: training appropriate technical personnel, introducing the technical apparatus, making information available, and above all, instituting new management instruments able to reflect the competences and interests o f institutional agents, both in the public and private sectors.

Construction Impacts. Infrastructure construction could result in localized short-term environmental impacts, including dusthoise pollution and erosion. Potential air and water quality impacts could result from the extraction and transport o f dredged sediments f rom the drainage improvement work, and unless well-managed, their disposal might also result in long- term water quality degradation. Some o f these issues would be addressed through mitigation measures.

Involuntary Resettlement. Implementation o f project activities wi l l require the resettlement o f about 1,000 families that built their houses on the ‘Jockey’ solid waste landfi l l and in an area where a buffer zone w i l l need to be created to protect the Brasilia National Park. A Resettlement Framework to comply wi th the Bank’s OP 4.12 has been prepared, and a Resettlement Act ion Plan w i l l be drafted as part o f the technical project for the area. This plan w i l l be submitted to the Bank for review and approval prior to the bidding process for c iv i l works.

Environmental Management Plan

Since the type, objectives, and activities o f this Project respond to the need to rehabilitate and protect key environmental assets, the EMP activities form as an integral part o f the tasks to be undertaken b y the project, and their costs are already included in the project budget. The main features o f the EMP are:

Environmental Management System. Aimed at streengthenienfg the environmentral managementy capacity in al l agencies involved withthe project. SEMARH i s the agency responsible for this task, in partnership wi th IBAMA/DF. The cost i s estimated at US$560,000.

Social Communication Program. The preparation and execution o f a Social Communication Program i s included in the tasks of the consultancy firm that w i l l provide support to the Project Implementation Unit. The contract w i l l last five years and provide an appropriate umbrella for the Social Communication Program that entails carrying out ad hoc activities at appropriate

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times, while ensuring consistency in approach, and cost efficiency. A D A S N P M U w i l l undertake institutional responsibility for this activity. The estimated cost i s estimated at US$70,000.

Institutional Strengthening. The institutional strengthening o f regional, environmental, water resources, and sanitation management recommended b y the EMP, constitutes Component 1 o f the Project. The institutions responsible for implementing the activities under this component are SEDUH, SEMARH, IBAMA, BELACAP and CAESB. The amount i s estimated at US$10 mil l ion.

Preventing Encroachment of the Brasilia National Park, involving a series os structural and non- structural measures to sterngthen the protection o f this natural habitat. IBAMADF i s the agency responsible for i t s implementation. The estimated cost i s o f US$ 300,000.

Social Assistance to the ‘Jockey’ Landfi l l Waste pickers. The waste pickers already receive assistance f rom the GDF through a program that involves solid waste pick-up cooperatives at national level and the Ministry o f the Cities. In the DF, the government i s donating areas for the associations where recycling units w i l l be built. The Project w i l l complement this budget and develop additional activities to support the cooperatives working at the landfill. The cost o f this activity i s US$2 million.

Water quality monitoring in the Parano6 and Descoberto Basins, w i l l strengthen and build capacity to monitor water quality issues in these key basins. CAESB, SEMARH, IBAMADF and A D A S A are the responsible agencies, wi th the estimated cost included in the sub- components’ budget.

Rehabilitating Environmentally Degraded Area. This program w i l l include activities such as the restoration the to-be-closed dum site, restoration o f o f degraded areas in the watersheds, reforestation and erosion control. I t w i l l be executed b y SEMARH, wi th an estimated cost o f US$2 mi l l ion .

Monitoring Execution o f the Sanitary landfi l l Works. Monitoring the quality o f the Project activities w i l l form part o f the functions to be performed b y the firm o f consultants providing support to the PIU. A D A S N P M U w i l l be the responsible agency, wi th an estimated cost o f U S $50,000.

Environmental Education. I t w i l l include key comunities in the ewastershed and wil l address solid waste, park encroachment, water quality protection. The responsible agencies are SEMARH and IBAMADF. The estimated cost i s US$400,000.

Population Resettlement in V i l a Estrutural. Resettlement o f people l iv ing in risk-prone areas i s an integral part o f the social, urban, and environmental improvements that wi l l take place in V i l a Estrutural. SEDUH i s the institution responsible for implementing the resettlement activity, estimated at US$8 million.

Environmental Construction Manual. This manual has been prepared as part o f the EA and wil l be included in all c iv i l works bidding documents, as appropriate.

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Stakeholder Consultation

As part o f Project preparation, a well-attended Public Consultation Meeting was held on 11 February, 2005, to discuss the final EA, which was also made available for public review at the Federal District Water Agency (ADASA). The key issues raised at the meeting are summarized in the EA. The documents also include the l i s t o f participants, key issues and recommendations. The terms o f reference’of the EA have also been subject to a consultation process and a number o f highly relevant recommendations made b y IBAMA/DF have been incorporated.

1. Project compliance with Bank’s safeguard policies and Brazilian environmental licensing policies

The table below summarizes the Project’s responses to comply wi th the Bank’s safeguards and the Brazilian environmental policies.

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Is I

I-

11. INVOLUNTARY RESETTLEMENT

Two interventions, aimed at improving urban standards and quality o f l i fe o f populations l iv ing in low-income settlements, and at ensuring environmental protection o f strategic ecological systems, w i l l require involuntary resettlement: (i) the Integrated Development Project to be carried out in V i l a Estrutural, which w i l l require the relocation o f approximately 1,000 families, and (ii) the closure of the Joquei solid waste landfill, which w i l l affect 700 the waste pickers who work in the area. The other project investments proposed for Aguas Lindas and Vicente Pires w i l l not entail resettlement. The cost o f al l resettlement activities i s estimated at US$9.5 million, and are 100 percent covered b y the project budget.

The Resettlement Framework for Vila Estrutural

According to the EA for V i l a Estrutural, approximately 20% o f i t s families are l iv ing in at-risk or inappropriate areas f rom an urban and/or environmental perspective. Complying with the EA recommendation for the most appropriate alternative f rom a social standpoint, and in consultation wi th the community, the GDF opted for an in situ resettlement, where families w i l l be relocated within the perimeter of V i l a Estrutural, while observing the appropriate urban and environmental criteria.

Since the technical project w i l l be prepared only after the environmental agency has awarded the first o f three required environmental licenses, the Borrower has prepared a Resettlement Framework for the V i l a Estrutural intervention, in accordance wi th Bank policy. The Resettlement Action Plan w i l l be developed in the f i rs t year o f project implementation, based on a fully participatory and consultative process, and w i l l include compensation mechanisms for physical and social losses, as wel l as offer full social and legal assistance and grievance mechanisms to the population affected.

Image 1: Vila Estrutural Community, Joquei Landfill and the Brasilia National Park

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Resettlement Approach

According to the thorough Environmental Assessment (EA) prepared to evaluate V i l a Estrutural social and environmental needs, approximately 20 percent o f i t s families are living in inappropriate areas f rom an urban and/or environmental perspective. The EA findings and recommendations were discussed at several consultations wi th the V i l a Estrutural community members and with c iv i l society organizations involved in the conservation o f the Brasilia National Park.

T o comply wi th the EA recommendation, the GDF chose the alternative o f proposing to resettle the families within the perimeter o f the Vi la Estrutural, observing appropriate urban and environmental criteria since this constitutes the best alternative f rom a social standpoint. Those families have strongly rejected the alternative of being removed to another area. In addition, the DF does not have a legally-titled area to accommodate this population, as recommended b y i t s policy for unregulated l o w income settlement. Annex 16 presents a brief overview o f the primary socio-economic characteristics o f i t s residents.

Resettlement Principles

The ultimate objective o f the project resettlement framework i s to improve the quality o f l i fe o f those families to be resettled. To achieve this objective, the framework comprises 7 principles: (i) minimize the number o f households to be resettled; (ii) provide a set o f compensation alternatives for those affected families; (iii) preserve or improve the current l iv ing conditions standard o f those affected; (iv) ensure the possibility o f income recovery; (v) fair compensation to the housing unit; and, (vi) guarantee the provision o f social services to those affected.

In addition, the GDF i s also committed to: (i) initiate the negotiations with the families to be resettled only when al l compensation alternatives are available; (ii) ensure an optimal timing for the population to choose the most suitable compensation alternative among those offered b y the project; (iii) address the claims raised b y the families; (iv) conduct the c iv i l works according to an appropriate resettlement implementation timetable; (v) provide legal and social support to the population; and, (vi) ensure smooth cooperation between the resettlement and c iv i l works teams.

Eligibility Criteria

The families entitled to the project resettlement compensation alternatives include those covered b y the cadastre to be undertaken b y the SEDUH for the entire population l iv ing in V i l a Estrutural. This cadastre constitutes the first activity comprised b y the ‘Integrated Development Project’ that w i l l be prepared for V i l a Estrutural in the project’s f i r s t implementation year. The degree o f people affectation w i l l be classified as total or partial and direct or indirect while the property ownership w i l l be defined as owner or tenant.

Compensation Policy

The project resettlement framework seeks compensation for physical and social losses and also provides a full social and legal assistance during the resettlement process.

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Alternatives: The affected population wi l l benefit from two major alternatives: (i) move to new housing to be constructed within the Vila Estrutural; and (ii) social and financial assistance to move to another neighborhood or city chosen by the family. Tenants wi l l be informed 6 months prior to the c iv i l works commence and wi l l receive social assistance to reintegrate in the new area.

Land Titles: Resettlement housing units wi l l be provided with regular land titles, which w i l l be also provided to the entire Vila Estrutural housing units.

Housing Model: New housing wi l l be designed in accordance with technical standards and current legislation, and constructed within the Vi la Estrutural.

Housing mixed-use purposes: In case of impact upon affected properties used for commercial, industrial or mixed-use purposes, the following compensatory measures w i l l apply: (i) access to a housing model allowing the family to continue the activity; (ii) removal assistance; and (iii) social assistance.

Removal Assistance: All affected families w i l l receive removal assistance to transfer their movable assets.

Legal and Social Assistance

The project w i l l provide legal and social assistance to facilitate the resettlement process. The social assistance includes support to the families in the new housing environment aimed at creating the appropriate conditions for social interaction.

Grievance Mechanisms

The project w i l l create units for facilitating the assistance and grievance mechanisms close to the area from where the families w i l l be removed. These units w i l l constitute an office and a multidisciplinary team. The assistance as well as the Q&A provided w i l l be registered and follow-up w i l l be ensured through a monitoring system to be enforced by the SEDUH.

Institutional Responsibilities

The SEDUH wi l l be in charge of coordinating all project resettlement actions, facilitating and consolidating the necessary partnerships with all concerned organizations, including community- based, governmental and business.

Monitoring

The monitoring of resettlement wi l l include participatory surveys at three stages: (i) immediately following the cadastral survey, to select a group of affected families that would be monitored throughout the resettlement process; (ii) after the negotiation process, following the transfer of housing or payment, and; (iii) between 6-18 months following resettlement.

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Resettlement Plan Methodology

Vila Estrutural Resettlement Activities Total Cost (US$ million)

Resettlement Action Plan preparation 0.5 Resettlement housing units 8.0 Social and legal assistance 1 .o

Total 9.5

The framework discusses the following methodology for the preparation o f the V i l a Estrutural resettlement plan:

Bank loan amount % Bank (US$ million) financing

0.5 100% 8.0 100% 1 .o 100% 9.5 l O O % l

Part 1 -Data Collection for Planning a. b.

d. e. f. g. h.

C.

Definition o f intervention area and resettlement polygonal Decree o f public use for property expropriations Resettlement and property cadastres Notification Scio-economic profile o f the affected population Land property study and population assessment Resettlement location model Community participation

Part 2 - Elaboration of the Resettlement Plan a. Analysis o f the socio-economic profile o f the affected population b. Analysis o f the affected property c. Quantitative and qualitative classification o f the affected population d. Detailed compensation policy e. Detailed legal and social assistance f. Institutional arrangements and responsibilities g. Detailed costs and monitoring plan

Institutional responsibilitv

The resettlement activities w i l l be coordinated by SEDUH and executed b y a team o f social workers wi th expertise in implementing resettlement operations based o n the BIRD safeguard policies. These specialists w i l l be hired through the consulting services that w i l l be contracted to assist the P M U in managing the project implementation.

Social and Technical Assistance Program for the Joquei Landfill Waste pickers

T o address the situation o f the approximately 750 waste pickers who work in the landfi l l collecting recyclable material, a resettlement program that aims at improving their social and economic conditions w i l l be developed. Extensive dialogues were carried out between the GDF and ten local scavenger cooperatives and the national ‘Solid Waste and Citizenship Forum’ of which they form part. As a result, agreement was reached that the GDF would provide nine areas for the construction o f an appropriate place to improve the waste collector’s activities that

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would allow them to continue exercising their current occupation under better conditions, both in terms of health standards and revenue generation. A preliminary proposal was prepared in consultation with representatives of the organizations and the national organization, and a definite proposal w i l l be developed during the first year of project implementation.

The dialogue promoted by the GDF involves all the waste collector cooperatives in the DF, which are organized in 10 cooperatives. There approximately 1,800 waste collectors in the DF and 80% participate in these cooperatives. These entities have agreed upon a project with the GDF that would allow them to continue with their current job but under better conditions, both in terms o f health protection and revenue generation. Three of these cooperatives (450 participants) work in existent recycling centers. The other collect from specific neighborhoods such as the public building, which waste have a high value due to the large amount of paper. In other neighborhoods, the households undertake recycle. The dialogue with the Joquei’ waste pickers are carried out as part of broad dialogue with the all waste collector cooperatives in the DF.

As a result o f this dialogue, i t was agreed that the GDF would provide 9 areas for the construction of an appropriate place to improve the waste collector’s activities. These areas are already being assigned to the cooperatives and resources for the building and equipments w i l l be financed by BNDES (US$2.5 million). The alternative offered to the waste pickers working at the Joquei Club landfill includes a construction and appropriate equipments to allow them to continue their activity after the landfill closure, but under more adequate social and technical conditions. A more profound and definitive discussion w i l l take place once two strategic steps are achieved: a. the solid waste master plan under preparation presents alternatives for improving the sector efficiency and solutions for the population living from the solid waste; b. the studies being carried out identify the appropriate location for the sanitary landfill. The cooperatives involved in the dialogue already expressed their desire of continuing to carry out their existent job under better conditions. The positive aspects raised are: personal independency provided by this type of activity and possibility of reaching average revenue far superior to what the formal job market would offer.

Development and Implementation of the Social Inclusion Project

The Assistance Program entails the provision of social and technical assistance, execution of civil works, and provision of equipment, needed to improve the working and social conditions o f the waste pickers of the Joquei Club solid waste landfill.

Image 2: Waste pickers of Recycled Material at the Joquei Landfill

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The main technical activities to be developed include: Update thorough assessment o f the waste pickers social and economic conditions; Provide social .works to support the waste pickers in their dialogue for an appropriate solution and development o f a working plan; Assessment o f the capacity o f existent recicling units to receive some waste pickers coming f rom the Joquei Club (JC); Interaction with the techcnical staff preparing the solid waste master plan under to discuss recycling programs being proposed and possibilities o f involving the JC waste pickers; Assessment o f other opportunities offered b y the solid waste collection and disposal services (reciclying centers, street cleaning, solid waste transportation);

The main social support activities include: Improving self-esteem; Improving confident in the dialogue with the public sector and the project; Reducing the number o f guns; Providing formal personal documents; Improve cooperative organization; Job sk i l l s training; Support informed decision making wi th respect to selling prices; Support to higiene education programs; Support to the families involving them in social development programs, school, health assistance; Support to youth development programs;

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Annex 12: Project Solid Waste Disposal and Clean Development Mechanism - CDM

BRAZIL: Brasilia Environmentally Sustainable Project

1. The Joquei Clube solid waste landfill

The Federal District collects 3,000 to 3,500 tons o f solid waste per day. About 50 percent o f these amounts (1,600 tons) are disposed at the sanitary landfi l l “Jockey”, the official DF’s land disposal site for the past 35 years. The remaining 50 percent comprise construction debris disposed in specific land fill sites, recycle material and organics processed in the composting units. The Joquei landfi l l (200 hectares) receives mixed municipal solid waste, excluding construction debris. The landfi l l i s located between the Brasilia National Park and the large slum V i la Estrutural.

Most 200 hectares has already been used and covered with soil and vegetation, showing no compliance wi th rigorous technical criteria. The open waste cells (about 50 hectares) suffer f rom poor construction solutions and operational procedures. The dump only receives periodic soil cover, which i s undertaken after spreading and compaction o f the waste. The site i s not graded to minimize percolation o f rain water, drainage i s not well managed, leachate i s not appropriately collected or treated, and gas i s insufficiently managed. The poor design and management resulted in shortening the site operation time life. Studies carried out estimated that the site would continue to be operational for 2 more years.

The technical alternatives being considered for closing the sanitary landf i l l include: a. amplification o f the existing leachate collection basin and drainage system; b. implementation ground water quality monitoring systems; c. drilling and implementation o f a sanitary landfi l l gas venting system; d. complete sealing o f the sanitary landfills; e. greening and reforestation o f the area; f. superficial drainage system and other investments to ensure a proper closure to avoid any further environmental impacts. An environmental assessment has been prepared for the sanitary landfi l l closure. This EA i s under review by IbamaDF, the environmental agency responsible for issuing the licensing for closing the area. Once the environmental licensing i s issued, along with usual additional environmental recommendations, the technical designs wi l l be concluded. In addition, the closure wi l l be properly integrated to the provision o f better alternatives for the waste pickers working in the area, as described above. The estimated costs for the closure o f the sanitary landfi l l are estimated at U S $ 4,5 million. These costs would increase to U S $ 5,4 mi l l ion if forced sanitary landfi l l gas collection system, including flares, are added.

2. Brasilia CDM sanitary landfill projects:

Both Brasilia sanitary landfills, the open dump Jockey and the future sanitary sanitary landfi l l to be financed by the Brasilia loan, are planned to qualify for this innovative global Greenhouse gas emission trading market. The Project components include investments in a gas collection system and flares at both sites.

The main Project components for both sites include: 0 Gas collection system a Flares

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/,--'----

The gas collection system wi l l use state-of-the-art technology. The sanitary landfill uses cells coated with an impermeable high-density polyethylene membrane; water residues w i l l be channeled and treated in a waste water treatment plant. Sanitary landfill gas wi l l be collected and channeled to the power generation units; excess gas w i l l be flared. Vertical wells w i l l be used to extract gas, and their spacing i s optimized, aiming at maximizing gas collection and minimizing costs. Gas headers wi l l be designed as a looping system in order to allow for partial or total loss of header function in one direction without losing gas system functionality. Condensate extraction and storage systems wi l l be designed at strategic low points throughout the gas system. Efforts w i l l be made to minimize condensate handling.

The flares, to be installed in parallel with the generator sets, wi l l be 2000 m3/hour Modular Ground Gas Flares. The flares employ a biogas technology design and w i l l be skid or base frame mounted ground flares. Ground flare stacks enable higher burning temperature to ensure low emissions. The burner unit i s fully adjustable to enable high temperature flaring of the sanitary landfill gas, which w i l l vary in both quality and quantity from site to site, and over time. The unit i s comprised of multiple stainless steel burner nozzles mounted onto a pedestal which supports the flare stack and houses the primary and secondary air supply ductwork. Manual and actuated

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louvers are provided to control the air supply and manual valves in the pipe work to control the gas supply.

A very conservative estimation for the overall potential o f Emission Reductions to be generated at the Jockey sanitary landfill i s 2.3Mio tons o f C 0 2 within the next 20 years and the new sanitary landf i l l would be able to capture 1.6 M i o tons o f C 0 2 in the same period. As international purchaser would normally purchase ERs only ,until the year 2012, when the first commitment period o f the Kyoto Protocol ends, the total o f emission reductions could sum up to 2,6 M i o tons o f C02, considering that the Jockey sanitary landfi l l start to be closed by end o f 2005.

The international emission market i s currently paying around US$ 5 per ton o f C02e. Therefore, the expected revenue from a potential C D M project would be U S 13 M io . When considering the overall costs o f U S $ 9.5 Mio. for the closure o f the open dump and the construction o f the new sanitary landfill, including the investment in the appropriate collection o f methane and flaring, carbon finance w i l l be able to essentially cover the entire investment costs. Payment for emission reductions w i l l occur only after the verification o f the performance, Le. during the implementation o f the projects and not as upfront payment.

3. Construction of the DF solid waste sanitary landfill

The construction o f a new sanitary sanitary landfi l l i s considered the most appropriate solution for a large quantity o f the solid waste in Brasilia. A sitting study for the new sanitary landf i l l i s being finalized, analyzing environmental impacts o f 3 different sites close to Ceilandia and one in Gama (all within the Federal District). This study evaluates the four options and rates the criteria. I t i s currently being analyzed b y the relevant agencies in the Federal District (SEMARH and Belacap) and IBAMA.

The new sanitary sanitary landfi l l to be constructed and operated b y a private concessionaire should include several items to be elaborated in subsequent studies, such as geotechnical studies, superficial drainage systems, liners, leachate treatment systems, internal leachate and gas drainage systems, protection belt around the sanitary landfill, flares, gate control and weighbridge etc. The gas collection system wil l use state-of-the-art technology. The sanitary landfi l l uses cells coated with an impermeable high-density polyethylene membrane; water residues w i l l be channeled and treated in a waste water treatment plant. Sanitary landf i l l gas w i l l be collected and channeled to the flares, Vertical wells w i l l be used to extract gas, and their spacing i s optimized, aiming at maximizing gas collection and minimizing costs. Gas headers w i l l be designed as a looping system in order to allow for partial or total loss o f header function in one direction without losing gas system functionality.

The costs for the construction o f the sanitary sanitary landfi l l are estimated to be US$ 3Mio. I f an efficient sanitary landfi l l gas collection system including flares w i l l be installed, the investment cost w i l l increase to U S $ 4 Mio. The Wor ld Bank i s sought to finance only the construction and the sanitary landfi l l gas collection, but not the maintenance of the operation.

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4. The Kyoto Protocol and Carbon Trading Mechanisms

The Kyoto Protocol (KP) aims to reduce the global greenhouse gas emissions and defines that OECD countries and Economies in Transition (EIT) w i l l have to reduce their emissions b y 5,2% below the 1990 level in 2008 - 2012. The Kyoto Protocol defines furthermore, that OECD countries w i l l be able to purchase part o f the emission reduction commitment through specified trading mechanisms, namely (i) Joint Implementation, which i s a trading mechanism between OECD countries and Economies in Transition and (ii) the Clean Development Mechanism (CDM), which sets up an “Certified Emission Reduction” trade between industrialized countries and developing countries. CDM transactions foresee that OECD countries can purchase “Certified Emission Reductions” - CERs - from projects in development countries to contribute to their reduction commitment. The Kyoto Protocol entered into force February 16, 2005. .

The Latin America region generally, and Brazi l specifically, have been among the most aggressive countries globally in pursuing the C D M opportunity. Private sector and c iv i l society see carbon finance as a natural extension o f their desire to attract foreign investment flows and technology transfer. Brazi l was an early advocate o f including the C D M within the Kyoto Protocol structure, and i s basing a significant part o f their national sustainable development strategy on the country’s ability to attract external financing through the provision o f global environmental services for biodiversity protection and climate change mitigation. The Wor ld Bank, through the Prototype Carbon Fund (PCF) and related carbon finance vehicles, has taken a leading role in the early implementation o f the Kyoto Protocol and can be an important partner in efforts to develop Brazil’s world-scale market..

5. The Role of the World Bank in the Carbon Finance Business,:

Today the World Bank Carbon Finance Unit unites already 9 Carbon Funds, summing up more than U S $ +350 Mio . Current carbon finance projects in the Bank’s Brazi l portfolio include: Plantar ProjecVMG, replacement o f coal/coke with sustainably produced charcoal in the pig i ron sector and Nova (sanitary landfi l l gas for power generation) in Nova Iguacu, which was the f i rs t ever C D M project registered worldwide. Three cogeneration projects (wood residues and bagasse) are being approved right now and several other projects are under development and are screened.

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After having developed first-of-a kind projects in the first phase o f the market development to pave the road for other project developers, The World Bank i s now very interested in increase the dialog with other buyers o f Emission Reductions and to promote as much as possible the crowding-in o f the private sector. Carbon Finance has to be seen as a tool to reach the objectives o f the CAS and has to fit harmoniously into the Bank’s strategy. Therefore, the Wor ld Bank wil l only intend to purchase Emission Reductions (ERs) f rom projects where the Bank has a direct interest (underlying loan, direct link to Bank operations). In al l other cases, the Bank w i l l contribute to capacity building and technical advice on how to set up projects but w i l l not engage as the purchaser

6. Solid Waste Management and Clean Development Mechanism:

Capture o f methane in the solid waste management sector, specifically f rom sanitary sanitary landfills represents one o f the most attractive options for Clean Development Mechanism projects. Methane i s a very powerful greenhouse gas which has a 21 times higher impact than Carbon dioxide. As the capture o f methane i s not mandatory by law, this kind o f project i s seen as “additional” as defined in the Kyoto Protocol and therefore qualify as C D M project. From a country perspective, i t appears that currently the most attractive tool to improve waste management practices on the short run i s the use of carbon finance (CF). Although, CF i s demand driven and as a rule o f thumb only financially feasible for municipalities above 100,000 inhabitants, there are roughly more than two hundred sites that have potential to receive carbon finance b y reducing methane emissions in Brazil, 50% involve open dumps. Generally carbon finance payments can easily cover an appropriate closure o f open dumps and construct a new sanitary sanitary landfi l l or appropriately upgrade existing sanitary landfills including the reintegration o f waste pickers and find recycling solutions. Power generation under current energy prices and taxation proves to be less profitable even with the subsidy o f carbon finance.

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Annex 13: Social Analysis BRAZIL: Brasilia Environmentally Sustainable Project

This Annex brief ly describes the socioeconomic context o f the DF, RIDE, and particularly o f the Aguas Lindas de Goiiis and the Vi la Estrutural. The evaluation o f those issues has been critical to the design o f Component 2 - Social Inclusion and Poverty Reduction, presented in Section B o f the present document.

1. Demographic Context in the DF and the RIDE

The DF’s population has grown vigorously since Brasilia’s construction, rising f rom 15,000 in the late 1950s to more than 2 mi l l ion in 2000. Such demographic growth has, by large, challenged the premise that the DF should not exceed 500,000 inhabitants to guarantee i t s social and environmental quality.

With 95 percent o f i t s territory urbanized, the DF has been gradually divided into 19 administrative regions (RA), including Brasilia. The DF density i s unequally distributed with 63 percent o f the population l iv ing in i t s southwest quadrant. Ceiliindia, Taguatinga, Brasilia and Samambaia alone concentrate 46 percent o f i t s population. In terms o f demographic growth, Brasilia decreased -0.5 percent f rom mid-1990s to 2000, while all other RAs had an average 3.0 percent increase, ranching from 0.08 percent in Ceilandia to 17.98 percent in Riacho Fundo.

The DF i s part o f the DF Integrated Development Region (RIDE), which comprises 22 municipalities, 19 from the State o f Goiiis and 3 f rom the State o f Minas Gerais, and concentrates almost 3 mi l l ion inhabitants. The RIDE has a demographic growth three times higher than al l other Brazilian ‘metropolitan regions’. For instance, in 1997, the DF grew 2,s percent and the RIDE 5,7 percent in comparison to 0,4 percent in the Port0 Alegre Metropolitan Region. The RIDE most populated cities are Aguas Lindas, Valparaizo and Luziiinia.

2. The Socio-spatial Poverty of the DF

Paradoxically, while the construction o f the world’s first modern city attracted tens o f thousands o f migrants in search o f jobs, the lack o f basic infrastructure to accommodate those incomers resulted in an unplanned occupation (‘invasions’) o f i t s larger territory. Urban and environmental restrictive measures were established to control the occupation and access to Brasilia’s Plano Piloto, such as the Paranoii ‘sanitary ring’ implemented in the late 1960s and the two water reservoir created in the 1970s. Earlier ‘invasions’ were also eradicated and their population settled in ‘satellite cities’ 20km away the Plano Piloto. Lately, the Plano Piloto unaffordable land and housing prices has contributed to expel the poor, and driven the establishment o f innumerous low-income parcels in nearby municipalities, such as Aguas Lindas in the State of GoiBs.

Such restrictive urban code has resulted in layers o f socio-spatial polarity in which the closer to the Plano Piloto the better the quality o f life, particularly in terms o f services and infrastructure. In terms o f employment, 53 percent o f the total DF’s population are economically active while 83 percent occupied (IBGE 2000). In the RIDE, according to the National System o f Urban

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83 percent occupied (IBGE 2000). In the RIDE, according to the National System o f Urban Indicators (SNIU), besides the DF, only 6 percent o f i t s total population had a formal j o b in 2000. Adding the informal market, this percent double, showing that only 12 percent o f the RIDE total population i s economically active and/or occupied.

I- -____ _ _ ---AS

Longevity (IDHM-L) 0,756 0,723 0,764 Literacy (IDHM-E) 0,935 0,802 0,854 Income (IDHM-R) 0,842 0,624 0,686

2.1 Index of Municipal Human Development (IDH-M) for the RIDE

State of Minas 0,736 0,850 0,711

The I D H - M was calculated in 2000 for the DF, RIDE, the States o f Goi is and o f Minas Gerais. The DF presents the country’s higher I D H - M ranking, specially wi th regard to income, followed b y the State o f Goias (7) and Minas (1 1).

-

Table 1: Index of MuniciDal Human DeveloDment

IDHM 1 0.845 I 0.717 I 0.768 I 0.766 I Source: IBGE/IPEA/FJP (2000)

The I D H - M was combined with the Index o f Development (IDD) in order to realize the internal contradictions and achievements within the DF, as follows.

2.2 Index of Development (IDD) for the DF

The IDD comprises other three indices, GINI, Education, and Income per Capita, and presents the sum o f a set o f indicators for the DF socioeconomic status. The Index was calculated in 1996 and 2000 for all 19 RAs due to the absence o f a desegregated IDH per RA.

The GINI index showed an increase o f 5,2 percent in income concentration within the DF in the period. Interestingly, the index revealed that the richer the RA the better the distribution o f income while the poorer the worst.

The education index focused on the relationship between real and ideal years o f school attendance, On average, there was a move up to 5,2 percent in the DF, ranging f rom 21 percent in Siio Sebastiiio to - 8,5 percent in Planaltina.

Despite concentrating the country’s higher income, US$ 5,000.00, which represents more than the double of the national average (BGE 2000), the income i s unevenly distributed in the DF. As expected, the R A s ‘within’ the limits o f the Plano Piloto (Brasilia, Lago Sul, Lago Norte and Cruzeiro) have the higher domiciliary income (average US$ 700) while those ‘outside’ have the lowest from US$ 150 to US$50 (Paranoi, Riacho Fundo, Samambaia).

Combining all three indexes, the IDD reveals an overall 4,5 percent lower socioeconomic status in the DF from 1996 to 2000, due to loss and concentration o f income. Four RAs showed a move up in their IDD due to improvements in education.

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3. Aguas Lindas de Goihs

Aguas Lindas de Goi is i s a visible result o f the DF lack o f public investments in adequate services and basic infrastructure in the RIDE municipalities. I t also illustrates the impact o f the DF restrictive urban occupation code upon the poor, who either cannot afford or i s expelled f rom well provided areas in terms o f services, infrastructure and employment opportunities to l ive in informal parcels outside the DF limits.

Dismembered f rom the Municipality o f Santo Antonio do Descoberto in 1997, Aguas Lindas i s located besides the Lake Descoberto, which supplies 60 percent o f potable water to the DF. The absence o f a sewerage and water supply systems, and consequent perforation o f irregular artesian wells in the municipality have been seem as the major sources o f contamination o f the ground waters that supply the Lake Descoberto. Such lack o f basic services in general and subnormal occupation has not only disrupted the environment, but the social frame. In 1998, Aguas Lindas presented an infantile mortality rate o f 30 percent.

This situation has been aggravated b y an explosive demographic growth (50 percent a year), which has given to Aguas Lindas the status o f the municipality wi th the highest demographic growth rate o f the country. In only three years, Aguas Lindas tripled i t s population f rom 30,000 in 1997 to 120,000 in 2000.

T o address that, the governments o f DF and o f Goi is recently set up a joint action plan in which the Lake Descoberto dam would be raised in 8 percent while the irregular artesian wells substituted by an adequate water supply system. The plan has a twofold objective: to increase the Lake water supply capacity while eradication those existing sources o f ground water contamination.

4. Vila Estrutural

The V i l a Estrutural has i t s origins in the early 1960s b y a small group o f waste pickers who used to work in the Joquei Clube open waste landfill. Located 7 km from the Plano Piloto at the RA Guara, the V i l a i s within the l i m i t s o f the Brasilia National Park, the Joquei Club and the Petrobrds pipeline.

The V i l a illustrates a typical ‘invasion’ f rom the time o f Brasilia’s construction, but one of the very few that was not eradicated probably due to i t s incipient size in i t s auspices. The V i l a grew vigorously in the last decade, rising from 90 families in 1991 to 30,000 residents and a density o f 285 inhabitantdKm2 in 2003. I t i s worth noticing that such explosive growth was largely stimulated b y candidates who supported poor peoples migration to the V i l a in exchange o f their votes during recent political campaigns. This represents a change in the characterization o f the Vila’s occupation f rom spontaneous to an inducted process due to economic and political reasons.

As most spontaneous settlements, public services are almost inexistent and the l iv ing conditions are very precarious in the Vila. Comprising 17 residential blocks and 1 working sector, the V i l a has few kinder gardens, and 1 ill-equipped police post at i t s entrance. There are no paved streets,

96

no sidewalks, n o drainage system, and no cultural places. 90 percent o f the houses are supplied with energy, but inconsistently. Many electrical connections are inadequate, a potential source o f fires. There are no telephone lines. Many houses are made o f carbon paper, and most lack the necessary sanitary conditions. The domestic sewer i s collected in fosses at the back o f the houses, leading to contamination o f the subterranean waters and associated health problems. The t iny streets do not allow the access o f cars and o f public services, such as the waste collection truck and the f ire brigade. In 2003, after ten years o f struggle, CAESB implemented a potable water system with hydrometers in al l existing houses.

91 percent o f i t s residents settled in the V i l a more than 5 years ago. The great majority i s original f rom the Northeast region, specially Bahia, Piaui and Maranhiio while 14 percent migrated f rom within the DF. Approximately 40 percent o f i t s residents are between 20 and 40 years o f age, and 28 percent between 0 and 6. 86 percent o f the children between 7 and 14 as wel l as 84 percent of the population above 15 years o f age are literate. 14 percent of children at school age are out o f the educational system.

40 percent o f the population economically active has no formal j ob (‘autonomous’), including many street vendors and sub-employers. Around 800 people between 18 and 7 0 years of age work in the Joquei Clube open waste landfill. The Joquei Clube was set up during the construction o f Brasilia in the early 1960s, and were the main destiny of i t s waste till 2000, when the governments inaugurated the waste treatment plants in Asa Sul, C e i l h d i a and Braz lhd ia. Today 500 tons or 20 percent o f the total waste produced in the DF i s s t i l l dumped in the Joquei Clube, and sorted by those waste pickers as their main source o f livelihood. Despite al l their exposure to heavy metals and associated problems, such as intoxication and cancer, the work autonomy and income (which i s diminishing every year) are s t i l l the major motivations keeping those waste pickers working in the Joquei Clube landfill. .

V i l a Estrutural i s considered one o f the most violent places in the DF. In 2000, 84 homicides per 100,000 inhabitants were registered. According to residents’ interview to the newspaper Jornul do Brusil in 2002, deaths and shots at night are usual. Cars are broken while household appliances, bicycles and gas cylinders are robbed at day light. Drugs are openly trafficked., More recently, a new modality o f crime has emerged in which gangs expel residents f rom their houses, and later sell them to buy drugs.

The V i l a comprises 29 c iv i l society organizations, and 19 sub-governments, one per block, meaning 1 representative per 520 residents. In addition, 1 community radio, 1 catholic and more than 60 evangelic churches, and 21 3 small business, including supermarket, hairdressers, bars, restaurants, and a car repair shop.

People expectations evolve particularly around the importance for them to have a regularized address and all necessary services and infrastructure. As important as providing the residents a better quality o f life through those benefits, i s the need for creating a sense o f inclusion o f the community into the DF social frame. That i s precisely what the Brasilia Sustentivel Project aims at through an integrated development approach toward the V i l a and i t s residents.

97

Annex 14: Project Preparation and Supervision BRAZIL: Brasilia Environmentally Sustainable Project

Planned Actual PCN review 06/29/04 07/15/04 Init ial PID to PIC 06/29/04 071 15/04 Init ial ISDS to PIC 06/29/04 0711 5/04 Appraisal 0 1/27/05 04/06/05

BoardRVP approval 061 16/05 061 1 6/05 Planned date o f effectiveness Planned date of mid-term review

Negotiations 04/29/05 04/29/05

Key institutions responsible for preparation of the project: The Government o f the Federal District o f Brasflia (GDF), ADASA, CAESB, SEPURB, SEMARH, Regional Ibama,

Bank staff and consultants who worked on the project included:

Name Tit le Unit Paula Pini TTL - Senior Social Develp. Specialist LCSEN Martin Gambrill Dean Cira Werner Kornexl Stefania Abakerli Edward Bresnyan Li l ian Pena Pereira Horacio Terraza Ma. Madalena dos Santos Fernando Blanco Alexandre Borges Jos6 C. Janeiro Barbara Brakarz M. Margarita Montiel Alexandre Fortes Luis Noronha

~~

Senior Water Engineer Senior Urban Specialist

Senior Environmental Specialist Social Development Specialist

Senior Rural Development Specialist Urban Engineer

Environmental Specialist HD Lead Specialist

Economist Procurement Specialist

Financial Management Specialist Social Development JPA

Senior Council Environmental Specialist Public Sector Specialist

LCSFW LCSFU LCSEN LCSEO LCSER LCSEN LCSEN LCSHE PREM LCOPR L C O A A LCSEO LEGLA

Consultant Consultant

Bank funds expended to date on project preparation: 1. Bank resources: US$130,000 2. Trust funds: 3. Total: US$130,000

1. Remaining costs to approval: US$50,000 2. Estimated annual supervision cost: US$80,0000

Estimated Approval and Supervision costs:

98

Annex 15: Documents in the Project File

BRAZIL: Brasilia Environmentally Sustainable Project

e

e

e

e

e

Avaliaqbo Econ8mica e Financeira - Programa Brasilia Sustentdvel (March 2005) Carta Consulta 13 COFIEX - Governo do Distrito Federal - Programa Brasilia Sustentcivel (December 2003) Diagndstico da Situaqbo Atual do Saneamento e Recursos Hidricos do Distrito Federal (October 2003) Financial Management Assessment (February 2005) Integrated Safeguards Sheet (March 2005) Marc0 de Reassentamento de Populaqfio - Programa Brasilia Sustentdvel (February 2005) Parcelamento Urbano da Vila Estrutural - Programa Brasilia Sustentdvel (September 2004) Plano de Aquisiq6es do Primeiro Ano do Projeto (March 2005) Procurement Capacity Assessment (February 2005) Project Concept Note (June 2004) Project Informaion Document (March 2005) Relato'rio Conceitual: Projeto de Apoio aos Catadores do Aterro do Joquei - Programa Brasilia Sustentdvel (March 2005) Relato'rio de Avaliagbo Ambiental - Programa Brasilia Sustentdvel (March 2005) Relato'rio de Diagno'stico do Lixbo da Vila Estrutural e Alternativas para Novo Aterro - Programa Brasilia Sustentdvel (February 2005) Relato'rio de Impacto Ambiental EIA-RIMA (November 2004) Relato'rios de Viabilidae Tecnica e Ambiental - Programa Brasilia Sustentdvel (January 2005) Social Assessment Report Urban Land Markets and Land Development and Urban Land Development: An Examination of Three Brazilian Cities: Brasilia, Curitiba and Recife (June 2004)

99

Annex 16: Statement of Loans and Credits BRAZIL: Brasilia Environmentally Sustainable Project

~~

Difference between expected and actual

disbursements Original Amount in US$ Millions

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

BR-Integ.Munic.Proj.-Betim Municipality 24.00 0.00 0.00 0.00 0.00 24.08 0.00 0.00 ~~

PO82328

PO80829

PO83533

PO877 11

PO60573

PO80830

PO83013

PO87713

PO541 19

PO70827

PO58503

PO49265

PO80400

PO76977

PO74777

PO57665

PO57653

PO51696

PO55954

PO60221

PO74085

PO73192

PO43869

PO70552

PO66170

PO73294

PO59566

PO57649

PO50881

PO50880 PO50875

PO50772

2005

2005

2005

2005

2004

2004

2004

2004

2003

2003

2003

2003

2003

2003

2003

2002

2002

2002

2002

2002

2002

2002

2002

2002

2002

2001

2001

2001

2001

2001 2001

2001

BR 1st. PRL for Environmental Sustainab.

BR TA-Sustain. & Equit Growth

BR Espirito Santo Wtr & Coastal Pollu

BR Tocantins Sustainable Regional Dev

BR Maranhao Integrated: Rural Dev

BR Disease Surveillance & Control APL 2 BR-Bolsa Familia 1st APL

BR BAHIA DEVT (HEALTH )

BR-2nd APL BAHIA DEV. EDUCATION PROJECT

GEF BR Amazon Region Prot Areas (ARPA) BR-RECIFE URBAN UPGRADING PROJECT BR-AIDS & STD Control 3

BR-Energy Sector TA Project

BR-Municipal Pension Reform TAL

BR-FAMILY HEALTH EXTENSION PROJECT

BR- FUNDESCOLA I I IA SA0 PAUL0 METRO LINE 4 PROJECT

GOIAS STATE HIGHWAY MANAGEMENT

FORTALEZA METROPOLITAN TRANSPORT PROJECT BR Sergipe Rural Poverty Reduction

BR TA Financial Sector

BR SANTA CATARINA NATURAL RESOURC & POV.

GEF BR PARANA BIODIVERSITY PROJECT BR-RGN 2ND Rural Poverty Reduction

BR Fiscal &Fin. Mgmt. TAL

BR- CEARA BASIC EDUCATION

BR Bahia Rural Poverty Reduction Project

BR PIAUI RURAL POVERTY REDUCTION PROJECT

BR Pemambuco Rural Poverty Reduction

BR Ceara Rural Poverty Reduction Project

BR LAND-BASED POVRTY' ALLEVIATION I (SIM)

502.52

12.12

36.00

60.00

30.00

100.00

572.20

30.00

60.00

0.00

46.00

100.00 12.12

5.00

68.00

160.00

209.00

65.00

85.00

20.80

14.50

62.80

0.00

22.50

8.88

90.00

54.35

22.50

30.10 37.50

202.10

0.00

0.00 0.00

0.00

0.00 0.00

0.00

0.00 0.00

0.00

0.00

0.00 0.00 0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00 0.00

0.00

0.00 0.00

0.00

0.00

0.00 0.00

0.00

0.00

0.00

0.00 0.00 0.00

0.00

0.00

0.00 0.00 0.00 0.00

0.00 0.00

0.00

0.00

0.00 0.00

0.00

0.00

0.00

0.00

0.00 0.00

0.00

0.00

0.00

0.00

0.00 0.00 0.00

0.00

0.00

0.00

0.00 0.00 0.00

30.00

0.00

0.00

0.00

0.00 0.00

0.00 0.00

0.00

0.00

0.00

0.00 0.00

8.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00 0.00

0.00

0.00 0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00 0.00

0.00

0.00

0.00 0.00 0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00 0.00

58.13

502.52

12.12

36.00

60.00

30.00

100.00

572.20

28.67

44.19

26.56

45.14

91.85

12.12

4.90

50.81

205.51

164.41

36.80

111.47

7.13

9.30

60.07

8.28

14.98

6.74

73.50

11.60

9.98

18.58 12.34

149.75

0.00

0.00

0.00

4.00

0.77

0.00

0.00

3.67

17.61

0.00

4.44

8.15 3.12

3.70

35.87

-22.78 115.51

34.96

52.35

0.71

4.64

16.57

5.60

5.93

5.78

-16.50

1.89

7.65

13.25

4.84

152.74

0.00

0.00 0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00 0.00 0.00

0.00

0.00 0.00 0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00 0.00

0.00

100

PO39199

PO47309

PO06449

PO35741

PO62619

PO50776

PO58129

PO48869 PO50763

PO42565

PO57910

PO35728

PO06559

PO38895

PO06474

PO43421

PO43420

PO06532

PO34578

PO43873

PO43868

PO062 10

PO37828

2000

2000 2000

2000

2000

2000

1999

1999

1999

1998

1998

1998

1998

1998

1998

1998

1998

1997

1997

1997

1997

1996

1996

BR PROSANEAR 2

BR ENERGY EFFICIENCY (GEF)

BR CEARA WTR MGT PROGERIRH S I M

BR N A T L ENV 2

BR INSS REF LIL BR NE Microfinance Development

BR EMER. FIRE PREVENTION (ERL)

BR SALVADOR URBAN TRANS

BR- Fundescola 2 BR PARAIBA R.POVERTY

BR PENSION REFORM LIL

BR BAHIA WTR RESOURCES

(BF-R)SP.TSP

BR FED.WTR MGT

BR LAND MGT 3 (SA0 PAULO)

BR RJ M.TRANSIT PRJ.

BR WATER S.MOD.2

FED H W Y DECENTR

BR RGS Highway MGT

BR AG TECH DEV.

BR RGS LAND MGTIPOVERTY

GEF BR-NAT'L BIODIVERSITY

BR (PR)R.POVERTY

30.30

0.00

136.00

15.00

5.05 50.00

15.00

150.00

202.00

60.00

5.00

51.00

45.00

198.00

55.00

186.00

150.00

300.00

70.00

60.00

100.00

0.00

175.00

0.00 0.00 0.00

0.00 0.00 0.00 0.00

0.00

0.00 0.00 0.00

0.00

0.00

0.00 0.00

0.00

0.00

0.00

0.00 0.00 0.00 0.00 0.00

0.00

0.00 0.00

0.00

0.00 0.00 0.00 0.00 0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00 0.00

0.00 0.00 0.00

0.00

0.00

0.00

0.00 15.00

0.00

0.00

0.00

0.00 0.00

0.00

0.00 0.00 0.00

0.00

0.00 0.00

0.00

0.00

0.00

0.00

0.00 0.00

0.00 10.00

6.40

3.29

0.00

2.32

0.00 0.00 0.00

0.00

0.00

0.00

0.50

0.00

0.00 40.00

10.00

27.78

125.00

50.00

0.00

0.00

0.00 0.00

0.00 0.00

22.29

9.91 72.51

5.61

0.36

30.15

5.46

90.35 17.29

13.55 1.48

5.84

3.88

54.67

37.32

92.74

19.33

63.46

35.07 16.44

12.95

1.78

5 1.89

28.69

12.13

43.76

7.93 -0.14

-19.85

5.46

90.35

17.29

13.55

1.98

5.84

3.88

94.67

47.32

120.52

144.30 113.46

35.07

16.44

12.95

2.59

51.89

22.29

2.05

0.35

7.93 0.67

0.00

-0.32

0.00

0.00

0.00

0.68 -1.16

0.00 11.41

16.77

0.00

2.36

110.23

35.07 16.44

12.95

0.70

51.89

Total: 4,801.34 0.00 0.00 63.00 323.42 3,205.93 1,314.55 290.31

BRAZIL STATEMENT OF IFC's

Held and Disbursed Portfolio In Millions of U S Dollars

Committed Disbursed

IFC IFC

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

2001 '

1996197

2002

2002

200 1

1998

1999

1998

1993196 1996

1994196

2002104

A G Concession

A l g a Telecom

Amaggi Andrade G. SA

Apolo

Arteb

AutoBAn

BSC BUNGE CEVAL Banco Bradesco

CHAPECO

CN Odebrecht

0.00 0.00 25.71

30.00

7.61

20.00

24.35

6.07

0.00 1.69

1.78

25.00

15.00

8.17

0.00

0.00

0.00

7.00

0.00 0.00

2.31 0.00

0.00

0.00

15.00

0.00 0.00

10.00

0.00

0.00

0.00 0.00

0.00 0.00

0.00 0.00

0.00 0.00

0.00

20.00

0.00

18.33

19.41

3.09

0.00 2.50

5.26

0.00

0.00 0.00

25.71

30.00

5.11

20.00

24.35

6.00

0.00 1.69

1.78

25.00

14.07

8.17

0.00

0.00

0.00

7.00

0.00

0.00

2.31 0.00

0.00

0.00

0.00

0.00 0.00

10.00

0.00

0.00

0.00

0.00

0.00 0.00

0.00

0.00

0.00 0.00 0.00

20.00

0.00

18.33

19.41

3.09

0.00 2.50

5.26

0.00

101

2003

1992

2004

1997

1997/00

1980/92

1998

1997

1999

1998

2001/02

2000104

1998

1998

1994

2001

1997

1998

1999

1980/87/97

1999

2000/02

1999

1995

1992/99

2002

2002

2002

1994

1996

1994/00/02

2000

2003/04

1997/03

1994197

2002/04

1997

1998

2003

2000

1999

1990/91 2001

1996

1998/04

2001103

CPFL Energia

CRP-Caderi

Comgas

Copesul

Coteminas DENPASA

Dixie Toga

Duratex Eliane

Empesca

Escola

Fleury

Fosfertil

Fras-le

GAVEA

GP Cptl Rstrctd

GPC

Guilman- Amorim

Icatu Equity

Innova SA

Ipiranga

Itaberaba

Itau-BBA

JOSAPAR

Lojas Americana

M B R

Macae

Macedo Nordeste

Microinvest

Net Servicos

Para Pigmentos

Perdigao

Portobello

Puras Queiroz Galvao

Randon Imp1 Part

SP Alpargatas

Sadia

Salutia

Samarco

Saraiva

Satipel

Sepetiba

Sudamerica Suzano Bahia Sul

Synteko

TIGRE

Tecon Rio Grande

Tecon Salvador

0.00

0.00

45.00

12.50

0.00

0.00

0.00 7.29

21.33

5.00

0.00

20.00

6.06

6.67

1.88

0.00

9.00

21.88

0.00

13.75

23.62

0.00 103.63

7.57

4.00

15.00

52.03

0.00 0.00 0.00

10.75

4.38

0.00

3.00

0.60

4.20

30.00

6.91

0.00

7.20 4.62

13.93

26.93

0.00 0.00 16.71

3.85 8.10

0.00

0.00

0.32

0.00

0.00

0.48

0.12

15.00

0.00

0.00

0.00

0.25

0.00 0.00 0.00 0.00

8.70

0.00 0.00

14.00

5.00

0.00

5.34

0.00 0.00

0.00

0.00

0.00

0.00

1.25

3 1.74

0.00

0.00 1.15

0.00

0.00

0.00

0.00

0.00 0.08

0.00

3.00

0.00 0.00

15.00

1.60 0.00

0.00

0.00 0.56

40.00

0.00

0.00

0.00

0.00

0.00 0.00

0.00

13.00

10.00

0.00 0.00

0.00 10.00

5.50

0.00

0.00

0.00

0.00

0.00

0.00

0.00 0.00 7.00

0.00

0.00

10.00

2.50

0.00

0.00

9.00

0.00

0.00 0.00 0.00 3.00

0.00

4.33

0.00 0.00

0.00

10.00

5.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

38.57

0.00

0.00 0.00

11.19

0.00

0.00

0.00

0.00

26.02

0.00 0.00

0.00

0.00

33.53

0.00

35.00

39.75

0.00

0.00 0.00

0.00

0.00

43.75

0.00

0.00

0.00

0.00 0.00

0.00

0.00

0.00 0.00

0.00

43.79

0.00

0.00 0.00 0.00

0.00

0.00

0.00 0.00

0.00 8.10

0.00

0.00

0.00

0.00

12.50

0.00

0.00 0.00

7.29

21.33

5.00

0.00

0.00

6.06

6.67

1.88

0.00

9.00

21.88

0.00

13.75

23.62

0.00

64.08

2.57

4.00

15.00

52.03

0.00 0.00 0.00

10.75

4.38

0.00

3.00

0.08

4.20

5.00

6.91

0.00

7.20

4.62

13.93 11.93

0.00 0.00

16.71

3.85

0.00

0.00

0.00 0.32 0.00

0.00 0.48

0.12

15.00

0.00

0.00

0.00

0.25

0.00 0.00 0.00 0.00

8.59

0.00

0.00

12.60

5.00

0.00

5.34

0.00 0.00

0.00 0.00

0.00 0.00

0.12

31.74

0.00

0.00 1.15

0.00

0.00

0.00

0.00

0.00 0.08 0.00

3 .oo 0.00

0.00

15.00 1.60 0.00

0.00 0.00

0.55

40.00

0.00

0.00 0.00

0.00

0.00

0.00

0.00

13.00

10.00

0.00 0.00 0.00 6.70

5.50

0.00

0.00

0.00

0.00

0.00 0.00

0.00

0.00

7.00

0.00 0.00

10.00

2.50

0.00

0.00 9.00

0.00 0.00 0.00

0.00

3.00

0.00

4.33

0.00 0.00 0.00

10.00

5.00

0.00

0.00 0.00

0.00 0.00

0.00

0.00

0.00 0.00

38.57

0.00

0.00

0.00

11.19

0.00

0.00

0.00

0.00

26.02

0.00 0.00

0.00

0.00

33.53 0.00

35.00

39.75

0.00

0.00

0.00

0.00

0.00

43.75

0.00

0.00

0.00

0.00

0.00

0.00

0.00 0.00

0.00

0.00

43.79

0.00

0.00

0.00

0.00

0.00

0.00

0.00 0.00

0.00

0.00 0.00

102

2002 UP Offshore 11.60 10.00 0.00 30.00 0.00 3 .OO 0.00 0.00

2002/04 Unibanco 20.00 0.00 0.00 0.00 14.80 0.00 0.00 0.00

1999 Vulcabras 8.33 0.00 0.00 0.00 8.33 0.00 0.00 0.00

1999 Wiest 0.00 0.00 8.00 0.00 0.00 0.00 8.00 0.00

Total portfolio: 699.53 146.07 162.33 378.29 521.99 135.49 144.03 340.19

Approvals Pending Commitment

FY Approval Company Loan Equity Quasi Paxtic.

2002 Andrade 0.00 0.00 0.00 0.10

2000 BBA 0.01 0.00 0.00 0.00

2002 Banco Itau-BBA 0.00 0.00 0.00 0.10

2001 Brazil CGFund 0.00 0.02 0.00 0.00

1999 Cibrasec 0.00 0.01 0.00 0.00

2004 Comgas 0.00 0.00 0.00 0.05

2002 Net Servicos 2 0.05 0.00 0.00 0.00

2002 Suape ICT 0.01 0.00 0.00 0.00

2004 TermoFortaleza 0.06 0.00 0.01 0.11

2004 TriBanco Brazil

2002 Unibanco-CL

0.01

0.00

0.00 0.00 0.00 0.00 0.00 0.15

Total uendine commitment: 0.14 0.03 0.01 0.51

103

Annex 17: Country at a Glance BRAZIL: Brasilia Environmentally Sustainable Project

POVERTY and SOCIAL Lat in Lower-

America middle- Brazi l & Carib. income

2003 Population, m id-year (millions) GNI per capita (Atlas method, US$)

I76 6 2,720 479 5 GNI (Atlas method, US5 billions)

Average annual growth, 1997-03

Population (4 13 Laborforce (“A) 16

M o s t recent es t imate ( la tes t year available, 1997-03)

Poverty (%of population belo wnationalpovertyline) Urban population (%of to talpopulation)

Infant mortality (per 10001ive birlhs)

Access to an improved water source (%of population) Illiteracy (%ofpopulation age 156 14 Gross pnmary enro llment (“A o f school-age population)

22 83

Life expectancyat birth (years) 69 33

Child malnutrition (%of children under5) 6 87

148 Male 153 Female 144

KEY ECONOMIC RATIOS and LONG-TERM TRENDS

1983 1993

GDP (US$ billions) 2033 4383 Gross domestic investmentiGDP E 7 208 Exports of goods and sewicesiGDP 114 105 Gross domestic savings/GDP 8 1 223 Gross national savingsiGDP 20 2

Current account balanceiGDP -34 -0 1 Interest paymentsiGDP 3 9 0 6 Total debt/GDP 485 329 Total debt sewicelexports 547 244 Present value of debt/GDP Present value of debt/exports

1983-93 1993-03 2002 (average annual gro wth) GDP 2 4 2 3 19 GDP DercaDita 0 6 10 0 7

534 3260 1,741

1.5 2.1

77 71 28

86 11

129 t3l P 6

2002

460.8 19.8 15.5 21.8 18.5

-1.6 2.9

49.6 70.3 52.6

329.6

2,655 1,480

3,934

0.9 12

50 69 32 11

81 13

112 153 111

2003

492.3 20.1 B .9

23.8 20.7

0.8 2.7

48.0 65.1

2003 2003-07

-0.2 3.6 -1.4 2.9

1 Deve lopment diamond*

~

Life expectancy

T 1 I

Gross + primary

enrollment

I

Access to improved water source

i Lo wer-middle-income group

, .

STRUCTURE o f the ECONOMY

(%OfGDP) Agriculture Industry

Services

Private consumption General government consumption imports of goods and Sewices

Manufacturing

(average annualgrowth) Agriculture Industry

Services

Private co nsum pt ion General government consumption Gross domestic investment Imports of goods and sewices

Manufacturing

1983 1993

13.9 7.6 44.0 41.6 332 25.0 45.1 50.8

712 60.1 9.7 17.7 9.0 9.1

1983-93 1993-03

2.4 3.9 12 1.8 0 .o 1.4 3.0 2.5

0.8 1.9 6.4 2.0 4.9 1.2 5.9 4.0

2002 2003

5.8 5.8 20.6 8 . 1 P.4 11.4 73.5 75.1

58.1 56.9 20.1 19.3 53.4 53.1

2002 2003

5.0 5.5 2.6 -1.0 1.4 2.7 1.6 -02

-0.4 -3.3 1.0 11.6

-4.3 -4.5 -12.3 -1.9

Economic rat ios‘

Trade

Indebtedness

Braal

Lo wer-middle-income o r o u ~

Growth of i nves tment and GDP ( O h )

0

10

x GDI -GDP

Growth of expor ts and impor t s ( O h )

x Exports &Imports

E

104

Brazil ~

P R I C E S and GOVERNMENT FINANCE

D o m e s t i c p r i c e s (%change) Consumer prices 135.0

1983

Implicit GDP deflator 1402

Government f inance (%of GDP, includes current grants) Current revenue Current budget balance Overall surplusideficit

T R A D E

(US$ millions) Total exports (fob)

Coffee Soybeans Manufactures

Total imports (cif) Food Fuel and energy Capital goods

Export price index (1995=WO) Import price index (?395=WO) Terms of trade ( 8 9 5 = W O )

B A L A N C E o f P A Y M E N T S

(US$ millions) Exports of goods and services Imports of goods and Services Resource balance

Net income Net current transfers

1983

60 57 I40

1983

23,611 8,534 4,077

-11,022 106

Current account balance -6,837

Financing items (net) Changes in net reselves

4,946 1,691

M e m o : Reserves including gold (US$ mil/iOnS) 4,563 Conversion rate (DEC, loca//US$) 2.’0E-10

E X T E R N A L D E B T and RESOURCE FLOWS

(US$ millions) Total debt outstanding and disbursed

1983

98,525 IBRD 3,628 ID A 0

Total debt sefvice IBRD IDA

0,304 507

0

Composition of net resource flows Official grants 16 Official creditors 1,576 Private creditors 2,659 Foreign direct investment 1,609 Portfolio equity 0

World Bank program Commitments Disbursements Principal repayments

2,067 1,204 270

1993

1,928.0 1,996.6

1993

36,563 2,466 3,074

25,935 25256

1,089 2,139 8,369

91 67 136

1993

4 1,6 16 31,795 9,821

-P,099 1,666

-592

9,605 -9,213

32,211 322E-2

1993

144,a4 6,575

0

‘0,683 1,856

0

59 -1,033 ‘0,073 1292 6,570

636 471

1279

2002

12.5 10.2

23.9 2.8

2002

60,362 3,049 3,032

33,000 47237

1,065 6240 11,643

68 91 97

2002

69,913 61,709 8204

-18,191 2,390

-7,597

-6,003 13,600

37,623 2.9

2002

226,662 8,585

0

51,636 1,518

0

0 916

-9,541 0 0

1,276 1,364 1,063

2003

9.3 P.8

23.7 3.0

2003

73,064 3,456 4,290

39,653 46,260

924 6,577

95 90 a 5

2003

83,567 63,819 19,746

-18,552 2,667

4,063

-963 -3,100

49,296 3.1

2003

236,245 6,566

0

56,793 2,010

0

233

1,2v 1,291 1,633

In f la t ion ( O h )

15 T I I

1: I I 98 99 00 01 02 0

, “GDPdeflator - 9 - C P I

I I Expor t and impor t leve ls (US$ mill.)

Exports Imports O2 O3 I 97 98 99 00 01

Cur ren t a c c o u n t balance t o G D P ( O h )

’T

C o m p o s i t i o n o f 2003 debt (US$ mill.)

A 8,588 G 22,103

, 4 0 4

I A - IBRD E- Bilateral 6 - I D A D-Othermultilateral F-Private C - I M F G. Short-term

105