IMPLEMENTATION COMPLETION AND RESULTS REPORT (IBRD-76280) ON A LOAN IN THE AMOUNT OF US$20.9 MILLION TO THE STATE OF PARAIBA FOR A

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1 Public Disclosure Authorized Document of The World Bank Report No: ICR 2844 Public Disclosure Authorized IMPLEMENTATION COMPLETION AND RESULTS REPORT (IBRD-76280) ON A LOAN IN THE AMOUNT OF US$20.9 MILLION TO THE Public Disclosure Authorized STATE OF PARAIBA FOR A PARAIBA SECOND RURAL POVERTY REDUCTION PROJECT August 26, 2014 Public Disclosure Authorized Agriculture Global Practice Brazil Country Management Unit Latin America and Caribbean Region

2 CURRENCY EQUIVALENTS (Exchange Rate Effective February 28, 2014) Currency Unit = Real (R$) R$ 1.00 = US$ US$ 1.00 = R$ FISCAL YEAR January 1 December 31 ABBREVIATIONS AND ACRONYMS AESA : Executive Agency for Water Management, State of Paraiba BNDES : National Development Bank CA : Community Association CAGECE : Ceara Water and Drainage Company CAGEPA : Paraiba Water and Drainage Company CAS : Country Assistance Strategy CDD : Community-driven Development CEASA : Supply Center CMDRS : Municipal Councils for Sustainable Rural Development CONAB : National Food Supply Agency CPS : Country Partnership Strategy EA : Environmental Assessment EMATER-PB : State Technical Assistance and Rural Extension Agency of Paraiba EMPASA : Agricultural Supply and Services Company of Paraiba FUMAC : Municipal Community Scheme FUNAI : National Indian Foundation FUNASA : National Water and Sanitation Foundation FUNCEP : Paraiba Fund to Combat Poverty IBGE : Brazilian Institute of Geography and Statistics ICMS : Tax on the Circulation of Goods and Services IDB : Inter-American Development Bank IFC : International Finance Corporation IERR : Internal Economic Rate of Return ITOG : Investment, Technology, Organization and Management HDI : Human Development Index HDI-M : Municipal Human Development Index MC : Municipal Council MDS : Ministry of Social Development MIS : Management Information System NRDP : Northeast Rural Development Program O&M : Operation and Maintenance PAA : Federal Food Purchase Program

3 PAC PNAE POA PPA RPAP RPRP SEBRAE SENAR SISAR STU SUDEMA : State Community Scheme : Brazilian School Nutrition Program : Annual Operating Plan : State Multi-year Investment Plan : Rural Poverty Alleviation Program : Rural Poverty Reduction Program : Brazilian Service to Support Small Enterprise : National Rural Apprenticeship Service : Integrated Rural Sanitation System : State Technical Unit (known as Cooperar) : Superintendency for Environmental Administration Vice President: Jorge Familiar Country Director: Deborah Wetzel Senior Global Practice Director: Juergen Voegele Program Manager: Laurent Msellati Project Team Leader: David Tuchschneider ICR Team Leader: David Tuchschneider

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5 BRAZIL Paraiba Second Rural Poverty Reduction Project CONTENTS Data Sheet A. Basic Information B. Key Dates C. Ratings Summary D. Sector and Theme Codes E. Bank Staff F. Results Framework Analysis G. Ratings of Project Performance in ISRs H. Restructuring I. Disbursement Profile 1. Project Context, Development Objectives and Design Key Factors Affecting Implementation and Outcomes Assessment of Outcomes Assessment of Risk to Development Outcome Assessment of Bank and Borrower Performance Lessons Learned Comments on Issues Raised by Borrower/Implementing Agencies/Partners Annex 1. Project Costs and Financing Annex 2. Outputs by Component Annex 3. Economic and Financial Analysis Annex 4. Bank Lending and Implementation Support/Supervision Processes Annex 5. Beneficiary Survey Results Annex 6. Stakeholder Workshop Report and Results Annex 7. Summary of Borrower's ICR and/or Comments on Draft ICR Annex 8. Comments of Cofinanciers and Other Partners/Stakeholders Annex 9. List of Supporting Documents MAP: IBRD

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7 A. Basic Information Country: Brazil Project Name: Paraíba Second Rural Poverty Reduction Project ID: P L/C/TF Number(s): IBRD ICR Date: 08/26/2014 ICR Type: Core ICR Lending Instrument: SIL Borrower: Original Total Commitment: Revised Amount: USD 20.90M Environmental Category: B Implementing Agencies: Secretaria de Estado de Planejamento e Gestao Cofinanciers and Other External Partners: B. Key Dates STATE OF PARAIBA, BRAZIL USD 20.90M Disbursed Amount: USD 20.90M Process Date Process Original Date Revised / Actual Date(s) Concept Review: 06/25/2007 Effectiveness: 05/14/ /25/2010 Appraisal: 09/18/2007 Restructuring(s): 11/12/ /24/ /28/ /01/2013 Approval: 11/25/2008 Mid-term Review: 01/23/ /19/2012 Closing: 02/28/ /28/2014 C. Ratings Summary C.1 Performance Rating by ICR Outcomes: Risk to Development Outcome: Bank Performance: Borrower Performance: Moderately Satisfactory Substantial Moderately Satisfactory Moderately Satisfactory C.2 Detailed Ratings of Bank and Borrower Performance (by ICR) Bank Ratings Borrower Ratings Quality at Entry: Satisfactory Government: Moderately Satisfactory Quality of Supervision: Moderately Implementing Unsatisfactory Agency/Agencies: Moderately Satisfactory Overall Bank Overall Borrower Moderately Satisfactory Performance: Performance: Moderately Satisfactory i

8 C.3 Quality at Entry and Implementation Performance Indicators Implementation QAG Assessments Indicators Performance (if any) Potential Problem Project No at any time (Yes/No): Problem Project at any time (Yes/No): DO rating before Closing/Inactive status: Yes Moderately Satisfactory Quality at Entry (QEA): Quality of Supervision (QSA): None None Rating D. Sector and Theme Codes Original Actual Sector Code (as % of total Bank financing) General agriculture, fishing and forestry sector Sub-national government administration Transmission and Distribution of Electricity 10 2 Water supply Theme Code (as % of total Bank financing) Participation and civic engagement Rural non-farm income generation Rural policies and institutions Rural services and infrastructure E. Bank Staff Positions At ICR At Approval Vice President: Jorge Familiar Calderon Pamela Cox Country Director: Deborah L. Wetzel John Briscoe Practice Manager/Manager: Laurent Msellati Laura Tuck Project Team Leader: David Tuchschneider Jorge A. Munoz ICR Team Leader: ICR Primary Author: David Tuchschneider Anna F. Roumani ii

9 F. Results Framework Analysis Project Development Objectives (from Project Appraisal Document) The PDO as stated in the PAD and Loan Agreement was: "to support the efforts of the Government of Paraiba to reduce the incidence of rural poverty by improving access to small-scale socio-economic infrastructure and services; raising incomes and capital assets through investments in productive activities while facilitating linkages between small producers and national and international market; and, strengthening the capacity of Municipal Councils (MC) and Community Associations (CA) to raise funding and harmonize policies and institutional arrangements for delivery of public investments intended to benefit the rural poor." NOTE: (a) During the Mid-term Review (MTR) of March 2012, the Bank and Borrower informally agreed - and reflected the intention in the signed Aide Memoire - to restructure the Project by: (i) reallocating resources among categories of expenditure; and, (ii) reducing Results Indicator targets for subprojects financed and numbers of beneficiary families from 800 and 35,000 respectively (as per PAD) to 500 and 21,000. The reallocation was the subject of a formal restructuring dated September 24, 2012, but the reduction in targets was not included. While the proposed change in targets was mentioned in the signed Aide Memoire (in a footnote), the rationale for the proposed reduction was not noted. Subsequent project documents state the causes as inflation in the cost of labor, materials and equipment as well as exchange rate fluctuations reducing the amount of project resources available for subprojects. Therefore, due to the lack of a formal restructuring of the targets, the ICR measures progress against the original targets of 800 subprojects and 35,000 beneficiary families. However, it should be noted that the Borrower based all subsequent project planning and activities on the assumption that the targets had been changed via the signed MTR Aide Memoire. (b) The PAD Results Framework states the PDO as to "support the State of Paraiba to reduce the incidence of rural poverty" and lists the dependent clauses as Intermediate Outcomes with their own Intermediate Outcome Indicators. The ICR's use of the complete PDO as stated in the PAD Main Text and Loan Agreement implies that all indicators in the Results Framework are technically Results Indicators. However, one indicator, as noted in the PAD (page 43, footnote 31), "Types of productive subprojects financed by the project" was intended as feedback to ensure that types of productive subprojects were appropriate, and is included as an Intermediate Outcome Indicator in Section (b) below. Also, a Core Indicator was added by the Mid-term Review and is included in Section (a) below. See detailed presentation of Results Indicator Analysis in Annex 5 with background data in WBDocs. Revised Project Development Objectives (as approved by original approving authority) The PDO was not revised. iii

10 (a) PDO Indicator(s) Indicator Indicator 1 : Value quantitative or Qualitative) Baseline Value Original Target Values (from approval documents) Formally Revised Target Values Actual Value Achieved at Completion or Target Years 20% increase in assets held by beneficiary families with productive subprojects Zero (Baseline data was to be collected on 20% increase in producers prior to each 40% assets round of proposals for productive SPs) Date achieved 09/18/ /28/ /28/2014 Comments (incl. % achievement) Exceeded: 200% based on a random sample of 54 SP (34.6% of universe of productive SPs). Beneficiary communities were interviewed and assets registered post-sp (Exit Line). See Annex 5. Indicator 2 : Productive subprojects represent 25% of total investment subprojects Value At ICR of Cooperar I, 5% 25% are quantitative or of total SPs financed were productive Qualitative) productive. 32% Date achieved 09/18/ /28/ /28/2014 Comments (incl. % achievement) Indicator 3 : Value quantitative or Qualitative) Exceeded: 128% Data collected directly from MIS. Also, productive SPs represented 43.2% of total resources invested in SPs. See Annex 5. Ratio of project resources to resources leveraged from other State and Federal programs is 1:5 by end-project Under Cooperar I, CAs Ratio of US$5.00 and MCs decided the equivalent to each allocation of 88% of US$1.00 project funds and equivalent of leveraged project resources complementary, parallel invested in SPs funds in a 1:5 ratio. Ratio achieved by closing: 1:5.6 Date achieved 09/18/ /28/ /28/2014 Comments (incl. % achievement) Exceeded: Data collected Cooperar leveraged R$56.48 through partnerships with other programs. Separately, MCs leveraged R$ m. Total leveraged R$305.6 m, ratio of 1:5.5. See Annexes 2 and 5. Indicator 4 : 800 socio-economic and productive investments financed by end-project Value quantitative or Qualitative) 3,373 SPs financed under Cooperar I 800 SP 487 SP Date achieved 09/18/ /28/ /28/2014 Comments (incl. % achievement) Partially achieved: 61% As discussed in Section F NOTE (a), the Borrower understood that signed MTR Aide Memoire had reduced targeted 800 SPs to 500 on cost and resource availability grounds, and planned activities accordingly. Indicator 5 : 35,000 families benefit from project-financed subproject investments Value At ICR of Cooperar I 35,000 families 26,815 families iv

11 quantitative or project, 154,000 families Qualitative) Date achieved 09/18/ /28/ /28/2014 Comments Substantially achieved: 77% As noted above, 21,000 families was understood (incl. % by Borrower as agreed reduced target. ICR uses original PAD target of 35,000. achievement) Indicator 6 : 75% of productive SPs generating employment by end-project Value quantitative or Qualitative) Under Cooperar I, about 2/3 of productive SPs had market orientation (dairy, honey, handicrafts, fish and flowers). 75% 98% generated incremental employment Date achieved 09/18/ /28/ /28/2014 Comments (incl. % achievement) Exceeded: 131% Random sample of 54 productive SPs, 34.6% of universe (156 SPs). Data was consolidated by temporary and permanent family and contracted labor. Annex 5 Indicator 7 : 40% of productive subprojects with established commercial arrangements by end-project, Value quantitative or Qualitative) At ICR of Cooperar I, about 60% of productive SPs had market arrangements. 40% 32.1% Date achieved 09/18/ /28/ /28/2014 Comments (incl. % achievement) Partially achieved: 88.25% Of the commercial agreements established, 68% were formal (PAA, PNAE, CEASA, CONAB, Municipal Govts, local/regional markets). Annex 5. Indicator 8 : 50% of project-related community associations with women, or quilombola and/or indigenous people in leadership positions. Cooperar I ICR shows 222 MCs, of which 15% with female president, 30% with female Value quantitative or secretary. Of 3,360 CAs, 19% had female President 50% 39.2% Qualitative) and 70% had other female office-holders. Also, 15 assns with indigenous leaders and 4 with quilombola. Date achieved 09/18/ /28/ /28/2014 Comments Substantially achieved: 78.4% Target was unrealistically high. 39.2% CAs (incl. % female-led, 0.8% indigenous-led, 1.84% quilombola-led. Annex 5. achievement) Indicator 9 : Amount of additional resources leveraged by Municipal Councils from other State and Federal programs for infrastructure, productive or social investments. Value quantitative or Qualitative) Cooperar I, ratio of 1:5 No target R$ m Date achieved 09/18/ /28/ /28/2014 v

12 Comments (incl. % achievement) Indicator 10 : Achieved: Based on data from , MCs leveraged additional R$ m. 58% of which in 2013, reflecting Project's unification and training of MCs. Structured questionnaires, meetings with CMDRS. leaders. Annexes 2, 5 20% of community associations with productive subprojects gain access to other sources of financing by end-project Value quantitative or Qualitative) Zero 20% 19.9% Date achieved 09/18/ /28/ /28/2014 Comments (incl. % achievement) Indicator 11 : Value quantitative or Qualitative) Achieved: 100% Structured questionnaire of 156 beneficiary CAs. Responses showed 31 CAs had gained access. Institutions providing credit: Empreender-PB (29 assns), Bank of Brazil Foundation (2). Total financing R$1.36 m. Annex 5. Core Indicator: Number of people in rural areas with access to Improved Water Resources under the Project Cooperar I ICR shows 30,000 people 8,196 families with 247,000 people benefited (about 7,250 water supply from improved water families) investments resources Date achieved 09/18/ /28/ /28/2014 Comments Exceeded: 113% 8,196 families benefited from 245 water supply SPs (incl. % representing a total investment of R$ m and 75% of all infrastructure SPs. achievement) (b) Intermediate Outcome Indicator(s) Indicator Baseline Value Original Target Values (from approval documents) Formally Revised Target Values Actual Value Achieved at Completion or Target Years Indicator 1 : Types of productive subprojects financed by the Project Value Diverse investments (see (quantitative No target Cooperar I ICR) or Qualitative) 15 types Date achieved 09/18/ /28/ /28/2014 Comments (incl. % achievement) Achieved: 15 types of productive SPs financed: honey, tractors, rice, fruit processing, agro-ind marketing, clothing, handicrafts, mining, flowers, dairy, fruits, fish farming, irrig agric, poultry. G. Ratings of Project Performance in ISRs No. Date ISR Archived DO IP Actual Disbursements (USD millions) 1 12/14/2008 Satisfactory Satisfactory /16/2009 Satisfactory Satisfactory /24/2009 Moderately Satisfactory Moderately 0.00 vi

13 Unsatisfactory 4 05/27/2010 Moderately Satisfactory Moderately Unsatisfactory /24/2011 Moderately Satisfactory Moderately Satisfactory /13/2011 Moderately Satisfactory Moderately Satisfactory /20/2011 Moderately Satisfactory Moderately Satisfactory /18/2012 Moderately Satisfactory Moderately Satisfactory /29/2012 Moderately Satisfactory Moderately Satisfactory /16/2013 Moderately Satisfactory Satisfactory /17/2013 Moderately Satisfactory Satisfactory H. Restructuring (if any) Restructuring Date(s) Board Approved PDO Change ISR Ratings at Restructuring DO IP Amount Disbursed at Restructuring in USD millions 11/12/2010 MS MU /24/2012 MS MS /28/2013 MS MS /01/2013 N MS S Reason for Restructuring & Key Changes Made Loan Agreement, Schedule 2, Category 2, amended to include non-consultant services and goods US$497,500 reallocated from Category 6 Unallocated to Cat. 1 Community SPs (US$147,750), Cat. 3a Admin. Costs (US$100,000), and 3b Supervision and Monitoring (US$250,000). Purpose was to absorb unallocated Loan proceeds to finance SPs and admin. costs. Closing Date extended one year to 02/28/2014 to permit project completion and achievement of PDO. US$700,000 Loan proceeds reallocated from Cat. 1 SPs, to Cat. 2 Training and TA (US$400,000), and Cat. 3b Supervision and Monitoring (US$250,000). Reason was to strengthen CAs' administration of SP funds, support SP execution, and strengthen Cooperar's decentralized supervision activities. vii

14 I. Disbursement Profile viii

15 1. Project Context, Development Objectives and Design 1.1 Context at Appraisal Regional and sector background: At the time of project appraisal in 2008, despite sustained reductions in poverty and inequality driven by almost two decades of sound macroeconomic policies as well as innovative, pro-poor investment initiatives, Brazil still faced major challenges in reducing poverty, vulnerability and social exclusion. Nowhere was this more evident than in the Northeast region and in its rural areas in particular where some 52% of all Brazil s poor resided State of Paraiba: Paraiba is among the smallest Brazilian states both in terms of geographic area and population 56,000 km2 and 3.4 million people, respectively. The state is exceptionally poor, even by standards of the Northeast. At appraisal, some 55% of its population was poor with 40% living on less than one-half of the minimum wage (one minimum wage was R$380/month, equivalent to US$202) versus 22% nation-wide. About 29% of the state population was living in rural areas, of which 56% of households survived on under R$190/month. Rural indices of access to piped water (32%), sanitation (57%) and electricity (64%) remained well below rural Brazil as a whole and urban Paraiba in particular (88%, 95% and 99% respectively). This situation prevailed despite substantial contributions made by the Bank-supported Rural Poverty Reduction Project (RPRP, 4251-BR) known as Cooperar I which financed electricity access for 63,000 rural families, water supply for over 49,000 families and other, basic socio-economic infrastructure/services for another 29,000 families. About one-fourth of all rural families in Paraiba with electricity and one-third with water supply had received these services through the RPRP Rationale for Bank assistance: The Bank s support for this repeater project (Cooperar II) was based on the following: (i) continuous, long-term partnership/engagement with the Federal Government and Northeast State Governments including Paraiba - on rural poverty reduction through a series of participatory, community-driven projects which had garnered strong Borrower ownership as a result of their reach and achievements on the ground; (ii) the resulting credibility of Bank-supported operations in rural areas among community associations, municipal governments and Municipal Councils, as well as State and Federal agencies which to varying degrees were adopting similar, decentralized institutional arrangements, decision-making and/or delivery mechanisms; and, (iii) the Bank s repository of transferable global knowledge based on direct country experience in rural development combined with heavy investment in analytical and advisory work including in the Northeast region - directly relevant to rural poverty reduction Strategic contribution: The operation was aligned strategically with the FY04-07 Country Assistance Strategy (CAS) and with the new FY08-11 Country Partnership Strategy (CPS) approved in May The CAS clearly called for meeting basic needs in the rural Northeast through the provision of socio-economic infrastructure and services, with follow-on projects focusing increasingly on income-generating activities and on integrating the CDD investments and institutional arrangements with other government programs present in participating municipalities. The Project s intention to link small farmers to markets to leverage social inclusion gains reflected the CPS call for consolidating gains from the first generation operations. 1

16 1.2 Original Project Development Objectives (PDO) and Key Indicators (as approved) The Project Development Objective as stated in the PAD and Loan Agreement was: to support the Borrower to reduce the incidence of rural poverty in the Borrower s territory by improving access to small-scale socioeconomic infrastructure and services, raising incomes and capital assets through investments in productive activities while facilitating linkages between small producers and national and international markets, and strengthening the capacity of Municipal Councils (MC) and Community Associations (CA) to raise funding and harmonize policies and institutional arrangements for delivery of public investments intended to benefit the rural poor Results indicators (RI) as expressed in the PAD (Main Text) were as follows: 1 Assets held by beneficiary families increase by 20% 2 Productive subprojects represent 25% of total investment subprojects Ratio of project resources leveraged from other programs is 1:5 800 socio-economic and productive investments financed 35,000 families benefit from project-financed subproject investments 1.3 Revised PDO (as approved by original approving authority) and Key Indicators, and reasons/justification The PDO was not revised. However, the following indicators were upgraded to RI from Intermediate Outcome Indicators (IOI) in the Results Framework (RF) by the Mid-term Review in order to align with the PDO as stated in the Loan Agreement (see footnote 3 and Data Sheet): 75% of productive investments generating employment by end-project 20% increase in value of assets of families benefiting from productive subprojects 40% of productive investments with established commercial arrangements 50% of project-related community associations with women, quilombola and/or indigenous people in leadership roles Proportion of resources applied by the Project in relation to additional resources leveraged by Municipal Councils from other state and federal programs for infrastructure, productive or social investments is 1:5 20% of community associations with productive subprojects gain access to mainstream/other credit resources 1.4 Main Beneficiaries The primary target group was about 35,000 poor rural families (approximately 175,000 people) in 222 municipalities with a Municipal Human Development Index ranging from to Most were smallholders, tenants, sharecroppers and landless laborers with income 1 As noted in the Data Sheet, the ICR uses the PDO as stated in the PAD Main Text and Loan Agreement, whereas the RF shows the PDO as the opening statement only and all dependent clauses as Intermediate Outcomes, each with its own indicators. Based on the PDO in the PAD Main Text and Loan Agreement, all indicators in the RF are treated technically as Results Indicators (with one exception) and measured accordingly. See Data Sheet and Annex 5. 2 Two similar results indicators pertained to increased value of assets following MTR adjustments: (i) for beneficiaries of productive investments and (ii) total beneficiaries (regardless of investment). As noted in the Data Sheet, the project team focused on measuring the assets of the former. See para

17 primarily from farming, wage labor, pensions and remittances. The inclusion of women, quilombola and indigenous groups was specified although no investment targets were set for such groups. Secondary beneficiaries through training were to be the participatory Municipal Councils and the State Technical Unit (known as Cooperar, with the Project known as Cooperar II). 1.5 Original Components (as approved) Component 1: Community Subprojects (US$23.96 m, about 85% of total project cost, with Bank contribution of US$18.0 m, 75%) would finance through matching grants to community associations (CA) about 800 SPs for small-scale socioeconomic infrastructure and services (water supply, sanitation, electricity, education and health, cultural and environmental activities), as well as productive and market-oriented activities. The goal was to support both the income and non-income dimensions of rural poverty, improving livelihoods and wellbeing of about 175,000 people (35,000 families) in 800 rural communities and 222 municipalities. Funds for approved SPs would be transferred directly to beneficiary associations Component 2: Institutional Development (US$1.95 m, about 7% of total project cost, with Bank contribution of US$1.6 m, 82%) was to be executed by Cooperar and financed technical assistance, training and/or capacity building for the following: (i) mobilization and strengthening of the CAs to identify, prepare, operate and maintain SPs; (ii) enabling the Municipal Councils (MC) to manage their responsibilities as defined in the Operational Manual including assessment and supervision of CAs, participatory planning and allocation of resources, and environmental oversight of SPs; (iii) the STU s Regional Management Units (RMU). Also, workshops and seminars would enable MCs and CAs to exchange experiences and facilitate planned integration activities (leveraging from other Federal and State poverty programs) Component 3: Project Administration, Supervision, Monitoring and Evaluation (US$2.25 m, about 8% of total project cost, with Bank contribution of US$1.3 m, 57.8%) financed operational costs (excluding salaries) of project administration, supervision, monitoring and impact evaluation. 1.6 Revised Components It was clear during the MTR that the target of 800 subprojects could not be fully implemented due primarily to unforeseen escalation in average SP cost resulting from inflation and exchange rate movements. There were indications to this effect in the MTR Aide Memoire (as a footnote) and in the Implementation Supervision Report (ISR) following the mission. 3 However, the Bank neglected to formalize the target reductions in the restructuring dated September 24, which was limited to the reallocation of Loan funds and only the ISR of December 2013 compared actual achievement against these revised targets. 4 Even so, the Borrower viewed the informal agreement in the signed MTR Aide Memoire as binding/valid and based all subsequent project planning and activities on the reduced targets. 3 The MTR proposed to reallocate Loan funds via restructuring. The signed Aide Memoire of March 23, 2012, footnote 1, states: This restructuring will also effect a reduction in the values of the following performance indicators: (i) number of subprojects executed (500); and (ii) number of families benefited (21,000). 4 The Key Issues and Actions for Management Attention section of the ISR mentioned that no more than 500 SPs would be implemented by end

18 1.6.2 Other changes were as follows: (i) Loan Agreement, Schedule 2, Category 2 was amended to include non-consultant services and goods primarily to provide flexibility to SPs to lease vehicles for transportation. Date: November 12, 2010; (ii) US$497,500 of Loan proceeds was reallocated from Category 6 Unallocated to Category 1 Community Subprojects (US$147,750), Category 3a Administrative Costs (US$100,000), and 3b Supervision and Monitoring (US$250,000). Unallocated Loan proceeds were used to finance escalating community SP costs and incremental administrative expenses. Date: February 28, 2012; (iii) Project closing date was extended one year to February 28, 2014 to enable completion of a large number of SPs initiated late in the project implementation period but at various stages of execution. Date: February 28, 2013; and (iv) US$700,000 of Loan proceeds was reallocated from Category 1 Community Subprojects to Category 2 Training and TA (US$450,000), and Category 3b Supervision and Monitoring (US$250,000) to strengthen CAs administration of SP funds, support SP execution and, strengthen the Borrower s decentralized supervision. Date: August 1, Key Factors Affecting Implementation and Outcomes 2.1 Project Preparation, Design and Quality at Entry Background analysis and lessons learned: The Project was a repeater operation which took its lead technically and operationally from 15 years of innovative, successful Banksupported CDD in the Northeast region and its predecessor project, Cooperar I. Cooperar I financed electricity access, water supply, and other basic socioeconomic infrastructure and services, including productive activities. Lessons from direct experience shaped project design. First, since organized productive activities (dairy, handicrafts, honey and fruits) had a modest but promising track record under the predecessor project, the design continued support to these activities but premised on a lessons-based strategy. Second, mechanisms for scaling up poverty impacts, attention to vulnerable groups, and social capital formation were incorporated. Third, experience validated the Project s technical strategy and viability: the use of standard subproject designs for commonly-demanded investments had been shown to improve subproject quality, sustainability and cost-effectiveness; training programs were included to familiarize communities with inter alia, operation and maintenance (O&M) and environmental regulations; and, the participation of women, indigenous and ethnic groups was built on social inclusion and respect for cultural identity, while taking into account their legal status. Project design also reflected evaluation studies of similar projects in the States of Bahia, Pernambuco, Ceara and Piaui and ongoing research on social capital formation under the CDD model Quality at entry: Building on an already successful predecessor project, and incorporating lessons from similar projects in other states, the Project focused specifically on the two additional features embodied in the CAS: (i) productive SPs; and (ii) integration/leveraging of resources from other government/non-government programs Productive SPs: It was assumed that communities which had acquired water supply and electricity would be well-positioned to conduct more complex productive activities. The PAD provided a sound framework, aggregating experiences and lessons from other Northeast states with a track record, as well as wider Bank experiences, and adopted a strategic, supply-driven approach. This may have been premature in Paraiba where 80% of all small farmers in Paraiba were not, realistically, capable of engaging with such strategy, especially in agriculture, due to resource endowment constraints. Project design could have adopted a two-pronged approach reaching both the poorest and those with potential. Also, given such productive goals, more 4

19 thought was needed ex-ante regarding capacity in the STU, i.e., adequate technical, economic and financial skills for feasibility and market analysis, as well as sources of appropriate and continuous technical assistance The proposed targeting strategy by which 80% of Component 1 resources were to be focused on the 150 poorest municipalities (out of the total eligible 222) as defined by the Municipal Human Development Index (HDI-M), as well as rainfall and population density, was also counter-intuitive to promoting a larger portfolio of productive SPs. Given the ex-ante profile of the rural poor and high level of unsatisfied demand for basic infrastructure in these municipalities, it should have been apparent that the focus on providing basic services would continue to be dominant Integration/resource leveraging: The Project anticipated leveraging complementary resources from outside programs primarily through the Municipal Councils which were expected to influence those programs to adopt the Councils democratic processes. However, most government programs had their own distinct rules, targeting and operating criteria and were unlikely to align their modus operandi. That said, several larger public poverty programs - Credito Fundiario (land reform), Luz para Todos (electricity) and the Federal Family Agriculture Program (PRONAF, subsidized micro-credit) - were already operating in participatory ways. Also, a process of unifying/consolidating the project Municipal Councils with existing PRONAF/other Municipal Councils into Municipal Councils for Sustainable Rural Development (CMDRS) was already underway to strengthen their capacity and reach, and thus the prospects for substantial additional/complementary funding flowing through the Councils were good Risk analysis: The risk analysis was adequate but partial and mitigation measures were generic. Ratings in some cases were understated. In retrospect, and despite the lessons and strategy mapped out in the PAD, the risk in regard to productive SPs was high. Elements such as the technical and operational leadership and organization of this process, the multi-pronged effort involved and the time which experience shows is needed in poor rural areas to develop, consolidate and sustain such activities, were not well-considered. Further, given the pattern of demand under the predecessor project and semi-arid conditions of the state, it was likely that water supply investments would remain in high demand and that their O&M and overall management as shown in other Northeast states - posed moderate to high risk, especially in dispersed rural areas. Despite this, water supply management was not mentioned in the risk assessment. 5 A risk not foreseeable at appraisal was the impact of delayed project effectiveness on project cost estimates which, following through on the project s repeater role, were based on state-specific historical cost data. It would have been prudent at appraisal to compare historical costs with market trends for the labor, materials and equipment typical of such projects Participatory processes: Consultative, participatory processes are the cornerstone of the CDD methodology in the Northeast states, the project brand is well-publicized and demand is strong. Communities were afforded an opportunity to express their priorities through their associations and in the open forum of the MCs. Consultations during preparation focused on ensuring, through culturally sensitive messages, that indigenous and quilombola groups understood project objectives and that the CDD subproject selection mechanisms allowed them to participate in the Project. 5 As it turned out, this risk was perceived during project implementation and Cooperar was, during the final stages of the project, moving forward on introducing - in collaboration with state water resources agencies/firms, and the State of Ceara - SISAR-PB (see 2.5.3), a positive development which the proposed new operation in Paraiba will support. 5

20 2.2 Implementation Factors affecting project implementation and outcomes: The long hiatus between Cooperar I and II caused a de-mobilization of the Cooperar team and eroded the momentum generated by Cooperar I. Due to delayed approvals at the Federal and State levels beyond Cooperar s control, the hiatus between the closing of Cooperar I and Effectiveness of Cooperar II was almost three years. Even then, despite effectiveness in April 2010, project activities did not start until a new State Government was installed in 2011, reducing the available execution period by an additional year. Further, Cooperar, unlike other Northeast State Technical Units such as Bahia, was not coordinating any other programs and was thus dependent on the Bank loan to remain active. Added to this, Cooperar had four different Project Coordinators from preparation through the end of its first year of execution - further affecting the unit s esprit de corps and sense of direction. The most recent proved engaged, effective and galvanized project execution Cooperar operated under a series of internal constraints. Its status as a project, without its own cadre of staff governed by regular public service policies, entailed repeated staff rotation especially within the technical team, and consequent discontinuity of activities. This was exacerbated by the incoming State Government s urgent need to impose fiscal restraint on public service expansion, affecting Cooperar s access to sufficient technical professionals to lead a systematic effort on more sophisticated productive activities, as well as consistent, continuous TA and training to small-scale productive ventures and infrastructure SPs. Cooperar also tended to be bureaucratic in its general approach to subproject processing and approvals, slowing the subproject implementation pipeline (see footnote 9). Further, while Cooperar had the institutional experience to manage the established environmental clearance processes required for all proposed subprojects, the more formal environmental licensing needed for certain SP types imposed bureaucratic, financial and/or temporal burdens on the CAs, which Cooperar was unable to fully resolve on their behalf Delayed effectiveness and implementation affected SP cost and resources availability. The Project was appraised in 2007 and by the time of effective execution in 2011, cost estimates which were based on historical (Cooperar I) costs - were no longer valid. There were insufficient funds to finance the planned 800 investments. Cost inflation for construction materials, equipment and labor in the Northeast region increased some 47% over the course of the Project. Other factors impacted on costs. The integration of productive investments with the State s Aranjos Produtivos Locais (Local Productive Arrangements) program increased costs due to the larger numbers of beneficiary families/sp, and the higher cost per beneficiary family. 6 In some cases, bureaucratic delays associated with the CAs local procurement of goods and services saw prices rise before the goods had been acquired and thus agreed resources fell short. And, service charges levied by some banks holding the accounts of beneficiary CAs (funds transferred for approved SPs) created difficulties for the CAs and Cooperar, suggesting the need for special arrangements discussed with banks ex-ante. 6 Involving the APL program - a financial collaboration between the BNDES Social Fund (National Bank for Sustainable Economic Development) and Northeast State Governments - was a direct result of the Project s late effectiveness and inadequate budget resources given rising subproject costs. APL subprojects were generally higher cost due to their regional reach, and characterization as production units expected over time and with maturation, to attend an increasing number of beneficiaries. 6

21 2.2.4 Despite an intensive training program, many CAs encountered difficulties at various stages of the subproject cycle. CAs were required to contribute a minimum 10% counterpart contribution to their SP, usually provided in labor and/or materials. In some cases, associations needed to borrow to fulfill this obligation (i.e., purchase materials) and were unable to obtain credit in time to facilitate execution of their SP. CAs also had difficulty conducting local procurement as provided for under Bank rules (usually three bids) due to remoteness, and/or to submit their accounts for amounts spent in a timely manner. The accounts of a significant portion of beneficiary CAs remained outstanding at project closing but were completed at the time of ICR delivery (the Bank approved a two-month extension to August 28, 2914 to accommodate this process) The uneven capacity of the Municipal Councils became evident. This is attributed primarily to the three-year hiatus between the two operations and was demonstrated in lack of organization, the duplication of Councils at the local level and uneven capacity to fulfill their role. This was resolved through a formal, planned process of unification designed to blend the project Municipal Councils with the Municipal Sustainable Rural Development Councils (CMDRS) to reduce duplication and consolidate public programs under one roof. Some 178 Municipal Councils were unified over the course of the Project of which 156 were directly engaged with the Project - via a successful collaboration between Cooperar and the State Rural Extension Service (EMATER), improving their performance and expanding the scope and scale of their activities. This same process has been occurring in all states of the Northeast The worst drought in 45 years afflicted the Northeast region of Brazil, including Paraiba, from This had profound effects on productive subprojects in general given the marked dependence on agriculture-based raw materials in many small-scale productive/processing ventures, but particularly SPs directly related to agriculture. As most productive SPs under Cooperar II started execution in that period, the performance of many of them suffered a severe setback compared to years with a normal cycle of precipitation. The drought also revealed yet again, the more general precariousness of much small-scale agriculture in Paraiba Implementation of signed SP agreements did not start until 2011, and 65% of SP agreements were signed in 2012 and 2013, requiring extension of the closing date. With the Project finally gaining momentum and the pace of disbursements accelerating, the Bank agreed to a one-year extension of the closing date to end-february The immense pressure to physically complete SPs had repercussions: ex ante analysis was rushed, and the time available to complete SPs and deliver TA/training was tight, extending well into the grace period; establishing O&M practices, especially important for water supply, was also challenging; more importantly, few SPs especially productive - had adequate time to demonstrate measurable results. Extension was merited and achieved its goals, but given the length of initial delays, and marked acceleration of execution already underway, an extension of months should have been considered Project changes/restructuring: Project restructuring dealt mainly with administrative aspects and reallocation of funds Mid-term Review (MTR): The March 2012 MTR assessed progress across a range of aspects: physical performance in relation to targets, fiduciary including Safeguards, and issues affecting the pace of implementation and disbursements. The Bank team included social and environmental specialists and visited associations with productive investments under the APL program to which the Project was linked. The MTR found that: (i) disbursements were just 15%, 7

22 explained by the complexity of the Project s productive inclusion strategy and deficits in essential technical skills; (ii) bureaucracy was affecting the flow of financing, e.g., releasing subproject resources to associations in multiple instalments, although the underlying rationale in that case was sound; 7 (iii) about 75% of all Municipal Councils had been unified (75%) and trained, boosting their capacity and potential leveraging opportunities; and (iv) about 60 of the CAs with productive subprojects had done the three-day immersion training under the ITOG methodology whereby current and future income, asset and wellbeing goals are incorporated in an action plan to be monitored online and to support impact evaluation. These business plans were highlyvalued by associations The key MTR recommendations were: (i) focus on pending infrastructure proposals and to prioritize water supply and related investments because they already had standard designs; (ii) based on revised cost estimates, reduce targeted subprojects from 800 to 500; (iii) contract additional engineers to attend the many pending proposals; and (iv) restructure the relationship between Cooperar headquarters technical staff and regional offices to improve the latter s capacity and leadership in field level monitoring. An MTR Action Plan incorporated these points and was monitored by Bank supervision missions with satisfactory outcomes. Although it had become clear that the SP target would have to be reduced to match available funding under Component 1, this was not formally recommended or restructured. 2.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization Design: Analysis of the implementation of Cooperar II was to rely on an updated Management Information System (MIS) already established under the earlier operation. It included community entry (baseline) profiles and quantitative variables, and was considered satisfactory for internal controls, monitoring and financial management. It had already been migrated to an online format to permit real-time data entry and monitoring by the STU s regional offices. The PAD outlined an ambitious evaluation plan: (i) annual physical performance reviews to assess the quality and sustainability of commonly-financed SPs, including reviews of community-based procurement; (ii) implementation review at mid-term using beneficiary surveys of project performance and impact; and, (iii) two comprehensive impact evaluations, one during implementation and a repeat at completion. The design of the impact evaluation program was already advanced at appraisal with TORs agreed with Cooperar for a quasi-experimental methodology using control groups of non-beneficiary households. 8 Given Cooperar s comparatively weak track record on evaluation, this agenda was challenging and became more so as the available implementation period was compressed by initial delays Implementation: The MIS, once operational and with adequate dedicated skills, tracked quantitative variables and financial management. Performance of the evaluation agenda however, was weak. Cooperar did not produce the planned MTR study or impact evaluation, but delivered a Borrower Completion Report and several small studies (see Annex 2). The reasons are largely 7 Phased release enabled better fiduciary control and has been used in similar Bank-supported projects. Flow was improved without prejudicing oversight, by working with the Bank of Brazil under the following Action Plan: each community association would have two accounts: one blocked (where the full value of the approved SP would be deposited and released by authorization of Cooperar); and, the other operational to access the released instalments via technical opinions (laudos) reflecting works and services contracted/completed. 8 Evaluations were to study: poverty impact of productive SPs and integration activities; impact on household welfare; cost-effectiveness of infrastructure investments compared to traditional delivery mechanisms; and, cost-benefit of productive investments. Also, community and municipal leaders would be surveyed for an analysis of project impact on social capital and governance. No provision was made to measure the beneficiaries/benefits of MCs leveraging. 8

23 associated with pressured implementation but Cooperar had little experience with evaluation and needed more consistent support. The Bank did not systematically inculcate the importance of evaluation and Aide Memoires for this project do not mention evaluation until mid The new operation in Paraiba described further below - intends to focus on M&E and monitor progress throughout To make up for lack of formal evaluation data, the Bank project team working with Cooperar in the semester before closing, did the following: (i) designed and executed a Results Framework Analysis using structured questionnaires, focus group discussions with randomlyselected community associations, and meetings with randomly-sampled Municipal Councils. Results were organized by indicator and include description of the methodology in each case with background tables (see Data Sheet, Annex 5, and WBDocs for Excel sheets); and (ii) conducted a structured evaluation workshop with report (see Annex 6) Dissemination: The primary dissemination event was the participatory workshop (Annex 6). Dissemination as a discrete, ongoing activity was intermittent due to operational and time pressures noted above. More recently, discussions between the Bank team and Cooperar on the framework for a new operation have provided opportunity to review experiences, successes and areas needing renewed effort and/or strategy. 2.4 Safeguard and Fiduciary Compliance Safeguards performance: The Project was a Category B, and triggered Environmental Assessment (OP/BP 4.01), Natural Habitats (OP/BP 4.04), Pest Management (OP 4.09), Physical Cultural Resources (OP/BP 4.11) and Indigenous Peoples (OP/BP 4.10). An Environmental Management Plan (EMP) and Indigenous Peoples Participation Plan (IP) were prepared. Cooperar contracted two environmental specialists to ensure that the EMP remained current and to monitor compliance through the MIS up to completion. Safeguards compliance was rated Satisfactory throughout for environmental and social/other safeguards. Social safeguards supervision found that SPs delivered economic and social benefits to relevant communities/groups. However, an environmental safeguards assessment post-closing (conducted as the basis for the proposed new operation) downgraded environmental performance to Unsatisfactory based on shortcomings in SP management Environment: Of the total 487 SPs implemented, about 83% technically required an environmental license (EL). Subprojects involving water (e.g., household water supply systems, fish farming and irrigation) also needed an official grant/permit of water usage before they could apply for the EL. However, due to severe drought conditions, the State Government decreed a state of emergency which inter alia, exempted or dispensed with the need for environmental licensing for over 80% of Cooperar II subprojects. Cooperar s opinion following analysis of environmental risk was considered sufficient, although specific dispensations still had to be requested. Under pressure to recover lost time, Cooperar moved ahead with financing SPs not all of which were properly assessed or had obtained environmental licenses. Environmental 9 Significant effort is involved in such exercises.the Results Framework Analysis took several months, involving an intensive dialogue between the Bank and Cooperar to prepare a strategy, a methodology for each indicator, questionnaires, and time-bound action plans reported in Aide Memoires. The experience was valuable for the Bank team but especially so for Cooperar, building a platform for improved M&E under the new operation. 9

24 monitoring of SP investments was not systematic. At project closing, while Cooperar had made significant advances in ex-post regularization of completed SPs, 53 SPs remained unlicensed and an additional 36 were awaiting dispensation. At the time of ICR finalization, the Bank team had drafted and was discussing an Action Plan with Cooperar to resolve outstanding issues. This Plan would be monitored throughout preparation of the new project Social Safeguards/Indigenous peoples: No significant issues were found by Bank social safeguards specialists during normal supervision. However, some moderate deficiencies mostly in documentation of consultations were detected during preparation of the new Paraiba project but were not considered to have an impact on compliance with policy requirements. Four productive SPs were implemented reviewed in the field by the Bank specialist before approval to ensure that local culture was preserved/recovered and that SPs were implemented in a manner which preserved groups local environment and rights as determined by FUNAI Other: Bank Safeguards supervision encountered no issues associated with pesticide use or contamination. No sites were adversely affected under the Natural Habitat or Physical Cultural Resources Safeguards. In regard to Involuntary Resettlement, minor issues were detected related to Cooperar follow-up of Bank requests for updated information on SPs demand for the use of additional property areas. Fiduciary performance: Financial management and audit: There were seven formal Financial Management supervision missions. Inherent, control and project risk was rated low until the final two supervisions when the risk was rated moderate. ISRs accordingly rated FM Satisfactory or Moderately Satisfactory throughout. The final FM mission post-closing identified minor deficiencies but insufficient to compromise the quality of the management and monitoring of project financial resources. Deficiencies noted by FM missions were adequately addressed. The one issue continuing to reflect on FM performance was the slow submission of accounts (prestacao de contas) by beneficiary CAs. The grace period was extended two months to end- August 2014 to permit the finalization of all outstanding cases Audit performance on balance was Moderately Satisfactory, although the 2010 audit was delivered late. All audit opinions were Unqualified and Cooperar responded promptly to all issues raised by auditors. It was agreed that the final audit would cover 2013 and 2014 to the end of the grace period (end-august) Procurement: The Project received two ex-post Procurement Reviews, the first rated Satisfactory and the second (conducted in preparation for the new project) Moderately Satisfactory with a risk rating of Moderate. Procurement was found to be conducted with due consideration of economy, efficiency and transparency. As guidance to the proposed follow-on, the mission stressed the importance of building stronger capacity to efficiently manage selection procedures for consulting services. It was noted in regard to community SPs, that associations had innovated by using local radio to advertise procurement opportunities but that this had not eliminated certain issues: difficulty in obtaining the required three price quotations, not uncommon in more isolated rural settings, and some cases of local monopolies submitting quotes and of conflicts of interest. Cooperar was also tardy in implementing some 10 The Project Team was informed by the Borrower immediately prior to ICR delivery that all SPs have an environmental license or dispensation based on ex-post regularization of environmental status/compliance. 10

25 recommendations of previous procurement supervision including selection procedures and risk reduction. The Ex-Post Review reinstated these two issues as pending and their resolution is being supervised by the Bank Project cost: Planned project financing comprised the Bank Loan (US$20.9 m), Borrower counterpart (est. US$5.66 m) and beneficiary contribution (labor and/or materials, est. US$2.32 m), totaling US$28.16 m. Actual project cost was US$28.88 m, about 102.5% of the appraisal estimate of US$28.16 m. The Economic and Financial Analysis (EFA, Annex 3) shows that the ex-ante estimate of subproject cost ranged from R$7,000 to R$65,000 with an average of R$39,000, while ex-post actual data shows costs ranging from R$60,000 to R$286,000 with an average of R$150,000 (about US$75,000). This is consistent with similar projects in other Northeast states in the period and was the direct result of persistent inflation over the course of the Project on the costs of construction materials, labor and equipment, as well as larger SPs with higher numbers of families/sp and higher than estimated cost per family. 2.5 Post-completion Operation/Next Phase All SP investments with few exceptions are formally under the control of the beneficiary community associations, which are responsible for their operation and maintenance (O&M). The status of O&M is as follows for the most commonly-demanded investments Water supply: Household water supply represented 50% of total SPs and 36% of the total amount invested in SPs. O&M is managed by the CA which collects a monthly user fee. While the installation of hydrometers was expanding rapidly, they were not uniformly included as part of a SP s design and thus the amounts collected in some communities did not necessarily reflect the real cost of water used. Further, the dispersion of water supply investments under the demandbased CDD approach created challenges to establishing a comprehensive, efficient management system to ensure the sustainability of these systems. In the case of household systems with hydrometer, families pay a progressive monthly tariff of R$10.00 for up to five cubic meters consumed. If consumption exceeds this level, users pay another R$1.00 for each additional cubic meter. The operator receives compensation in the form of a water bonus, i.e. is exempt from the monthly tariff. In the case of a chafariz (large tank with communal standpipe), the values charged, form of payment and operation of the system are generally not regulated. Contributions are voluntary with no formal relationship to the amount of water used or its real cost. Water system management is a priority for the proposed new operation The water management regime/model proposed by the State Government is that introduced in the Northeast State of Ceara: Integrated Rural Sanitation System (SISAR), already being piloted in three communities of the Itaporanga Municipality of Paraiba, and involving a network of partnerships to upgrade existing systems: (i) CAGECE: Companhia de Agua e Esgoto do Ceara (Ceara Water and Drainage Company) is coaching Paraiba authorities/agencies in the model and methodology and supporting its implementation in areas under Cooperar s jurisdiction, with basic costs financed by the State Government; (ii) CAGEPA: Companhia de Agua e Esgoto do Paraiba (Paraiba Water and Drainage Company) is developing O&M policies based on the Ceara model, upgrading water supply systems implemented by the Project with installation of hydrometers and water treatment regimes, has designated a specialized team, and is providing training to beneficiary communities; (iii) Cooperar has initiated awareness campaigns, and will provide technical and other support, and monitor implementation; (iv) Sao Jose III Project: has designated professionals with experience in rural water supply; and (v) AESA: Executive Agency for Water Management in the State of Paraiba is supporting the mobilization of water users, and 11

26 providing technical support to implement SISAR-PB. The goal is to replicate the model in all beneficiary communities and the longer-term goal is universal coverage of rural water supply in Paraiba run on the SISAR model. The proposed new project will support this effort All-weather viaducts and improved access routes: In practice, the beneficiary community either calls on the mayor to provide repairs or handles such jointly as a group using local labor Tractors and equipment: Cooperar financed 25 agricultural mechanization subprojects, mostly on land reform settlements, partnering with SENAR to provide O&M training and materials. 11 Technical assistance to ensure organized management was also delivered by publiclycontracted extension workers. Generally, CAs use a differentiated set of charges depending on whether the user is an association member/not, but always using rates which benefit the members. Drought conditions can depress the usage of tractors but even then, usage is usually sufficient to cover O&M and depreciation but not necessarily replacement of the investment. Under nondrought conditions, tractors have repeatedly proven to be fully viable Productive subprojects: Cooperar financed an additional 131 subprojects (apart from tractors) supporting a variety of mostly agricultural initiatives. Recurrent costs of these SPs fall on the CAs or producer associations who manage them and their sustainability depends on generating a positive cash flow once operating and replacement costs are covered. Field evaluation of these SPs shows that most are likely to be successful though continued technical assistance (including for access to finance) is required by most beneficiaries. Productive SPs are vulnerable to price fluctuations, rainfall variability and drought Follow-on operation: Cooperar has submitted a Carta Consulta to SEAIN for a new operation Paraiba Rural Sustentavel - with a proposed Bank loan of around US$50.0 million. The project would mark a shift away from the classic Northeast CDD approach, i.e., not exclusively demand-driven, although it would still work with organized groups (cooperatives, associations) and is likely to include a role for the Municipal Councils (CMDRS). The proposed project is intended to support rural families currently below the radar of conventional financing and would have two principal streams : (i) Productive Inclusion; and (ii) Water Resource Security. Productive Inclusion means initiatives (agricultural and non-agricultural) defined on the basis of market opportunities; use of financial and technical partnerships to leverage additional resources and specialized skills; mapping of producers with possible buyers; prior analysis of financial sustainability and competitiveness to assess feasibility; possibly out-sourcing management; and, complementarity between Cooperar resources and those of participating producers/partners. In the case of Water Resources Security, the project would fill significant gaps in water supply coverage, focus on O&M and sustainability, consider retro-fitting existing Bank-financed water systems, and explore the use and recycling of water to build resilience, especially for existing ecological conditions. Cooperar would continue to finance investments in small communities beyond the purview/responsibility of CAGEPE, using the SISAR management model described earlier, and focus on rural sanitation (water, drainage, sewage systems, solid waste management/recycling and water re-utilization) and on the recuperation of water catchment areas Tratores na Agricultural Familiar: Cartilha de Gestao (Operating Manual), Cooperar At the time of ICR preparation the focus was on systematic and consultative development of a Results Framework. 12

27 2.6 Sustaining reforms and institutional capacity: See Section 3.5 (b) 3. Assessment of Outcomes 3.1 Relevance of Objectives, Design and Implementation Relevance of objectives: The overall relevance of the project objective is rated as high based on the current Country Partnership Strategy (CPS), (63731-BR). The support for improved socio-economic infrastructure and services remains aligned with the CPS objective to: improve the quality of public services for low income households and expand their provision through public and private channels. The CPS objective accords with the Project s training of the MCs and CAs to build their resource leveraging capacity for further expansion of public services beyond the Project. By supporting subprojects to foster improved incomes and capital assets in a very poor Northeast state, the objective remains broadly consistent with the CPS objective of: boosting growth capacity with job and income generation, especially in Brazil s poorer regions, with special emphasis on the Northeast. Fostering linkages between small producers and national/international markets also remains highly relevant to this CPS objective Relevance of design and implementation: Relevance of design and implementation is also rated high. CDD mechanisms continue to be relevant in delivering socio-economic services especially those supporting household wellbeing - to the poorest groups in a cost-effective manner. The approach has proven able to serve populations bypassed by mainstream water programs, some of which have size criterion limitations. In regard to organized, market-driven economic activities, as currently designed and implemented the methodology can be effective, and indeed there are numerous examples region-wide of local productive activities linked to national and even international markets, but these are emblematic cases and not necessarily easily replicated. The participatory, community demand-driven model needs thoughtful adaptation to markedly influence local economic development. This does not imply that localized benefits are unimportant to poor families quite the contrary - but more systematic employment and income generation needs a shift to a market-driven approach and segmentation of the target population. This is the direction of new rural operations. 3.2 Achievement of Project Development Objectives In presenting project results, the ICR acknowledges that the Project was not formally evaluated - there is no before/after or with/without analysis. In terms of achievements under the Results Framework, despite barely three years of effective implementation and a lower scale and coverage of investments than estimated at appraisal, primarily due to cost escalation, 487 subprojects provided benefits to 26,815 families. These investments were crucial for those families, supporting and helping build upon Government s broader rural poverty efforts as well as the achievements under Cooperar I. The Bank team organized a workshop (see Annex 6) and a structured analysis of achievements under the Results Framework (Annex 5) which are the main sources of information for this section, along with the Borrower Completion Report Theme: Support the efforts of the Government of Paraiba to reduce the incidence of rural poverty. Moderately Satisfactory 13

28 Through priority investments in poor rural communities, the Project supported the State Government s wider rural policy agenda, as follows: 13 The Project reached out to 26,815 poor rural families (77% of target) via 487 investments providing basic rural infrastructure and productive facilities essential to reducing poverty. 43.2% of total SP resources were invested in productive ventures intended to reduce poverty of income and assets, benefiting 8,418 families, 96% of an estimated 8,750 families expected at appraisal to be productive beneficiaries. 331 household water supply, sanitation and other basic infrastructure SPs (including five trash recycling) were financed, reducing poverty of basic social services by benefiting 18,397 families (about 70% of the appraisal estimate for this type). Global analyses show that water supply and sanitation investments have immediate impacts on the health and wellbeing (and in the Northeast, drought resilience) of families with low/no ex-ante access. R$306.0 m of complementary resources were leveraged by Cooperar and the Projecttrained MCs from other Federal, State and local programs, further supporting Government s efforts over and above the Project to reduce rural poverty. 14 Vulnerable populations were successfully included: women, quilombola and indigenous groups all obtained investments infrastructure, productive and social Theme: Improving access to small-scale socioeconomic infrastructure and services Moderately Satisfactory Access to small-scale socio-economic infrastructure and services consisted of: 326 basic infrastructure (mostly water supply/sanitation) benefiting 17,729 families; 156 productive (mostly fruit processing, fish farming, goat and sheep husbandry, handicrafts, cashew nut, honey) benefiting 8,418 families; and, five social SPs (mostly trash recycling, a hybrid social/economic venture) benefiting 668 families. See Annex 2 tables. Despite the reduced scale of investments - cost-related and not resolvable through direct project financing - the numbers of families reached in social service infrastructure and productive ventures were 70% and 96% respectively of inferred appraisal targets. Access to water supply (household piped, community tank with standpipe, and cisterns) exceeded the Core Indicator target: 245 SPs benefited 8,196 families (113%). The Project s leveraging activities on behalf of the project s eligible population of poor rural communities financed water resources, improved housing, product purchasing for the Federal Food Acquisition and related programs, and general agricultural development Theme: Raising incomes and capital assets through investments in productive activities while facilitating linkages between small producers and national and international markets. Moderately Satisfactory 156 productive SPs (78% of inferred target of 200) benefited 8,148 families. Average families per SP was generally higher than estimated at appraisal, especially for productive ventures which were closely linked to Government s APL program (ff #7). 13 All stakeholders understood it was implicit in the Project s leveraging goals - that the Project was one of diverse sources of financing for rural poverty reduction 14 The number of beneficiary associations assisted by leveraging was not measured. No indicators were included. 14

29 Financing for productive ventures increased from 5% utilizing 7% of total SP resources under Cooperar I, to 32% of the total absorbing over 43% of total SP resources under Cooperar II. A random sample of 54 productive SPs (34.6% of the universe) shows that 98% generated incremental employment by end-project vs. the targeted 75%. Capital and productive assets increased by 40% (target 20%), and analysis suggests on average, the investment would be recovered in 5.5 years (see Annex 3). Income data is preliminary: the Economic and Financial Analysis (EFA) estimates the average Net Present Value (NPV) per beneficiary family of a productive investment was R$3,138, and R$4,858 when including only those SPs indicating financial viability. 15 Headway was made, primarily via individual SPs, in facilitating linkages between rural associations and regional markets (but not international). See Annex 2. An estimated 32% of all productive SPs had established commercial arrangements by end-project (target 40%) of which two thirds were formal (Federal Food Acquisition Program, Brazilian School Nutrition Program, State Supply Center, National Food Supply Agency, Mayors and prefectures, local and regional markets) The Project s productive strategy was ambitious. Realistically, an estimated 10-20% of small rural producers in Paraiba may have the potential to engage with more sophisticated markets. The Project needed more human resources, time, and above all, the analytical foundation and network-building needed to launch such activities. More innovative units such as trash recycling showed clear advantages with the right support (see Boxes, Annex 2, illustrating such cases, few of which are traditional, small agriculture products), but the viability of agroprocessing at small-scale for example, is hampered by competitive factors and the likely need for ongoing public support. The determining factor should be market demand, and those with water, electricity and a reasonable parcel of land potentially have the profile to succeed Theme: Strengthening the capacity of Municipal Councils (MC) and Community Associations (CA) to raise funding and harmonize policies and institutional arrangements for delivery of public investments intended to benefit the rural poor. Satisfactory MCs and CAs inter alia, received training in the concepts/practices of leveraging resources from other State and Federal programs, garnering through the participatory MCs a total R$249.0 m for complementary/parallel investments; Cooperar (in common with State Technical Units across the Northeast states), separately leveraged R$56.5 m. Cooperar II helped to harmonize policies and institutional arrangements by overseeing the unification of 178 Municipal Councils as CMDRS (156 of which directly involved in the Project), mainstreaming and standardizing their role and procedures, improving efficiency and broadening the range of programs coming within their purview. 16 Field research showed Cooperar II was an effective catalyst in attracting complementary funding: beneficiaries of Project-financed water supply were more likely to obtain additional benefits from other programs such as school buildings and health posts, as well as credit from AgroAmigo/Bank of the Northeast (BCR, 2014). 15 These values represent the present net income by family after family labor used for subproject execution was compensated at the local daily rate for unskilled labor. 16 The transparency/otherwise of their operating rules, and their actual role - whether implementing socio-economic equalization policies and/or ensuring access to basic resources - is still evolving but their performance clearly improved with unification. Their relationship with municipal governments is still consolidating in some cases. 15

30 Social capital/capacity of CAs showed growth, e.g., 20% of associations with productive investments independently accessed other sources of financing afterwards totaling R$1.363 million (Bank of Brazil Foundation, Empreender/PB). Participating CAs testified to specific capacity gains from Cooperar II at the Workshop (Annex 6). 3.3 Efficiency The ex-post Economic and Financial Analysis (EFA) conducted by FAO presents the main financial/economic viability indicators (Net Present Value, Internal Rate of Return, and Benefit Cost Ratio) for infrastructure and productive SPs, comparing them to the ex-ante analysis at appraisal. Two factors affected the definition of the methodology/sampling universe and its results: (i) delayed project execution which meant that many SPs started their implementation in near the closing date; and, (ii) climatic events, i.e., the acute drought in affecting the entire Northeast region. Efficiency is rated Moderately Satisfactory Methodology: For infrastructure SPs, 34 SPs (22.5%) were randomly selected from a universe of 151 with at least one year of effective operation. The productive SPs universe comprised 57 SPs with a minimum of one production/marketing cycle, from which 17 were randomly-selected (30%). Overall, the sampling universe represented 43% of all financed SPs and the actual sample, about 10%. Participatory workshops conducted by the EFA team with sampled beneficiary communities assessed O&M status as part of the analysis Results: (i) Infrastructure: For Cisterns, the aggregated average economic NPV was R$143,000, the weighted average E-IRR was 46% and the benefit cost ratio Further, comparing the cost-effectiveness of Cooperar II-financed household cisterns with other public programs, the cost of the former was substantially lower in two of three cases for same volume and similar or higher quality: (Cooperar II R$2,650 vs. Agua para Todos R$5,499 and INCRA R$3,945). For Water Supply Systems, the average NPV was about R$46,000, aggregated E-IRR 30% and B/C ratio For All-weather Viaducts and Rural Access SPs, all were economically viable with E-IRRs ranging from 18% to 202%, due to the economic benefits accruing to other, surrounding communities which also used this infrastructure; (ii) Productive investments: Comprising 10 types of productive chains or investment types, of the 17 evaluated investments were financially viable, with an F-IRR higher than the discount rate of 10% and NPV lower than zero. F-IRRs for the financially viable SPs ranged from 15% to over 50%, an average of 17% compared to the appraisal estimate of 25%. The average NPV/family was R$3,138 when including all 17 samples SPs and R$4,858 when only the 13 financially viable investments were included. The weighted, average ERR for the cisterns and water supply SPs exceeded the appraisal estimate. There was no assessment of rural access SPs (viaducts and access roads) at appraisal; the inclusion of this type boosted the actual ERR considerably. Although the overall project ERR was not computed, this is likely to exceed the appraisal estimate of 30%. Sensitivity analysis demonstrated that SPs are fairly vulnerable to variations in costs and revenues (prices and/or sales). See Annex Justification of Overall Outcome Rating Rating: Moderately Satisfactory 17 Irrigated agriculture, beekeeping/honey, handicrafts, poultry-raising, goats, tractors, small-scale sewing, fish farming, solid waste recycling, fruit pulp processing. 16

31 3.4.1 The overall outcome rating balances the following factors. First, the relevance of the PDO remains High when assessed against specific strategic elements of the current CPS. Similarly, project design and implementation using CDD approaches remain highly relevant for satisfying the basic socio-economic needs of poor and dispersed rural communities, including vulnerable groups. Incremental income generation is a proven strength of this approach but some adaptation may be needed to address more sophisticated, market-driven income generation. Second, achievements under the PDO s component themes were strong - with the reservations noted - and in aggregate are rated Moderately Satisfactory. The Project both directly and indirectly supported Government s rural poverty reduction efforts providing infrastructure, services, income and asset generation opportunities and training, as well as upgrading institutional forums for voicing demand and expanding access to programs, in 156 municipalities. Third, efficiency is rated Moderately Satisfactory based on solid economic and financial rates of return for most of the infrastructure and productive investments sampled. Even though the ERR for the overall Project is likely to have exceeded the appraisal estimate, over half of all SPs (at the time of the EFA) had not yet completed one year of the production/marketing cycle or operational stage, justifying a more conservative rating. Ex-post efforts planned or already underway by the Bank and Government to boost the sustainability of productive and water supply investments, have been taken into account. Extension of the closing date by one year was critical to project completion/achievements and is not considered a negative factor in the outcome rating given that the aggregate project period was still barely three years. 3.5 Overarching Themes, Other Outcomes and Impacts (a) Poverty Impacts, Gender Aspects, and Social Development Gender: Of the 487 SPs, 178 were led by women. Some 205 women occupied leadership positions as presidents of associations, Cooperatives and Municipal Councils. Of these, 178 were presidents of associations (36.5% of total) and 33 were presidents or held other positions on the boards of Municipal Councils (21.20%); six female presidents of associations were also presidents of Councils. Some 130 associations with infrastructure subprojects were female-led, a participation rate of 40% based on 326 subprojects of this type. Further, 30% of all productive investments were female-led and 40% of social. (See experiences with female-led subprojects, Boxes, Annex 2) Quilombolas: Quilombola communities obtained nine SPs, primarily water supply and productive, in eight municipalities with a value of about R$1.030 m. Cooperar also trained quilombola communities using the ITOG methodology, as well as how to manage procurement and submission of accounts. Female-headed households were quite common among the quilombola beneficiaries due to male members emigrating to find work. The Project also financed a census of the quilombola population in Paraiba to support public policy-making, under contract to the Association of Afro-descendent Communities and Settlements (AACADE). The study sought to determine family income, food production and nutritional status of children under five years, and communities access to social services. The defined population is 7,095 individuals of which about 15% are urban and 85% rural. Poverty rates are high about 25% live in extreme poverty - as is illiteracy. Average monthly income per capita is R$70.0 (about US$35.00) Indigenous peoples: Cooperar financed four productive SPs for indigenous groups - poultry-raising, beekeeping/honey production and irrigated agriculture benefiting 65 families. Training in agricultural practices and accounts was provided by SEBRAE. See also Section

32 (b) Institutional Change/Strengthening Assessment of the Project s three core institutions shows the following: (a) Cooperar: Cooperar is an experienced, committed coordination unit but its ability to evolve and prevail was hampered by institutional/other factors over which it had little control, along with specific capacity gaps which need modernization and mentoring. Important factors affecting its evolution are outlined in Section 2.2. Evaluation capacity remains limited for which the Bank must accept partial responsibility as a knowledge leader. But, Cooperar s latent capacity to handle sound evaluation was demonstrated by its successful work under Bank guidance - to analyze and document achievement of the Results Indicators. The take-away messages are that: (i) the Bank can and should systematically mentor Cooperar in M&E; and, (ii) even in the final stages of a project or post-closing, stronger evaluation can be promoted and dialogue established. (b) Municipal Councils: Duplication and inefficiencies resulting from the existence of diverse/multiple MCs in each municipality were eliminated through a formal process of unification to strengthen the representation of the rural communities in the Councils, and overall decision-making processes. Municipal authorities are represented in these Councils which have been mainstreamed and are no longer viewed as parallel structures. Unification was a major effort and Cooperar recruited the support of EMATER and other agencies. By closing, some 178 of a total 222 Councils had become CMDRS, with 156 engaged with the Project. (c) Community Associations: The Project sought to strengthen diverse community organizations: associations, cooperatives, rural integration groups, fishing colonies, indigenous peoples villages, quilombola associations, and land reform settlements, all of which fall within its rural poverty purview. Technical assistance was provided by Cooperar s Regional Offices and by contracted specialists to support productive activities. The associations showed variable capacity to handle specific aspects of their SP cycle including procurement, financial management and/or meeting their required counterpart contribution. Some obstacles encountered were beyond their control and are outlined in Section 2.2. However, institutional growth is suggested by CAs success in accessing other sources of funding after their subproject, amounting to around R$1.4 million. The ex-post Workshop (see Annex 6) illustrates associations own perceptions of their growth and potential. (c) Other Unintended Outcomes and Impacts (positive or negative) Recycling ventures: The pilot project working with local catadores who sort and recycle trash/waste in the town of Bonito de Santa Fe in the far western corner of Paraiba, to strengthen their public-private partnership in waste management with the Municipal Government, was a valuable, relevant and replicable experience. The Cooperar-supported pilot won a national prize awarded by the General Secretariat of the Office of the President of Brazil, in recognition of its achievements in establishing good practices for inclusive recycling. The process, outcomes and lessons are described in the Annex 2 Box. 3.6 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops A Stakeholder Workshop in April 2014 defined strengths and challenges associated with the Project (detailed in Annex 6). Key findings included: (i) organization, cohesion and leadership of beneficiaries are key determinants of strong outcomes, enabling them to leverage other resources and partnerships beyond Cooperar; (ii) subprojects permit CAs to learn new skills 18

33 and their capacity has grown, despite difficulties; (iii) partnerships - both public and private - were a factor in the Project s success and allowed communities to satisfy needs beyond what Cooperar was able to deliver; (iv) technical assistance and training are crucial and must be systematic and sustained beyond the completion of the investment; (v) market and/or feasibility studies are essential for all types of subprojects; (vi) diversification of productive activities is essential in rural Paraiba to increase sources of income, improve economic viability, and generate new types of jobs; and, (vii) SPs must take into account the specific social nature and culture of targeted groups, e.g. quilombola communities, trash recycling associations. 4. Assessment of Risk to Development Outcome Rating: Substantial 4.1 Among the main concerns affecting risk to development outcome are the following: (i) late-stage completion of about 25% of all SPs due to extremely pressured implementation in the final year; (ii) management issues affecting some household water supply and sanitation systems; and (iii) uneven quality and supply of technical assistance and training, noted by Cooperar itself, and which could affect O&M. However, the proposed new and much larger project will have a large water supply component and this is likely to provide the needed impetus to implement and rapidly expand the coverage of SISAR-PB, as well as retrofit Cooperar II water supply investments (hydrometers, TA and management). Technical assistance for viable productive initiatives may also be reinforced in the new operation. 4.2 Critical sustainability issues arising from this project which will be taken up by the new operation include: (i) institutional development as the essential partner to water supply investments, and established up-front (before the investment): creation of water user associations, definition of tariffs (including surveys of willingness to pay), and O&M orientation; and (ii) critical considerations for productive ventures include the size of the capital investment in relation to market demand and producer endowments, and access to financing beyond the project to sustain operational and reserve requirements. The key questions of sustainability include whether the productive system itself is sustainable in terms of resource use, drought resilience, and access to needed inputs and machinery; whether the collective arrangements for production and marketing are appropriate; and, whether there is demonstrated market demand, i.e. there are dynamic buyers for the product. 5. Assessment of Bank and Borrower Performance 5.1 Bank Performance (a) Bank Performance in Ensuring Quality at Entry Rating: Satisfactory Positive aspects: (i) soundly-designed project with rational PDO and linked, measurable indicators; (ii) experience-based roadmap for market-driven productive SPs; (iii) attention to vulnerable groups; (iv) effort to ensure that a relatively modest loan was complemented by other sources of funding to increase impact; (v) design based closely on results and lessons learned from the previous project; and (vi) design in accordance with Bank and State Government policies and strategy for the sector. Minor shortcomings include over-estimation of Cooperar s institutional capacity, including for more advanced productive activities (but acknowledging that Cooperar s strong overall performance under the previous operation boded well for such assumptions/approach and the Bank team had little reason at that time to doubt Cooperar s ability 19

34 to build on that experience). Also, a fresh analysis/estimate of costs would have been prudent rather than using historical costs under a repeater model. (b) Quality of Supervision Rating: Moderately Unsatisfactory Positive aspects: (i) regular supervision and clear reporting; (ii) regular FM supervision and strong follow-up; (iii) support to innovative productive activities which showed potential and replicability; (iv) effort to ensure that results were measured even in the final stages and using less than full evaluation - and that Cooperar was prepared methodologically to conduct this; (iv) well-designed/managed ex-post stakeholder workshop to support the overall results assessment; and (v) action by Bank management to allow a project with multiple difficulties the additional time to complete its activities and disburse the Loan; balanced by, (vi) loss of the opportunity to formally restructure subproject/beneficiary targets, obligating the ICR to use the PAD originals for performance comparators despite the Borrower s understanding that such reductions had been effected; (vii) inadequate focus until the final months on how Cooperar would manage M&E; (viii) weakness of Safeguards oversight/supervision the latter prompting a downgrade of the rating to Unsatisfactory, mitigated by an Action Plan under discussion and to be closely supervised by the Bank; (ix) two ex-post Procurement reviews following effectiveness, one of which in the grace period supporting preparation of the new project; (x) lack of a Water Specialist on the Bank team when 66% of all investments were water-related; and (xi) correct decision to extend the project closing date but a longer extension was justified. (c) Justification of Rating for Overall Bank Performance Rating: Moderately Satisfactory This rating reflects the Bank s role in designing a rational, experience-based project which was initially de-railed by events not easily controlled. The supervision shortcomings - especially where the Bank has a leadership role and responsibility are important, and downgraded the rating accordingly, but the quality at entry rating sustains the overall performance rating in the positive range. 5.2 Borrower Performance (a) Government Performance Rating: Moderately Satisfactory The State Government s provision of counterpart funding was satisfactory but repeatedly changing the Project Coordinator position in the initial period was disruptive and caused delays. Rules governing Cooperar s status as a project execution unit, i.e., not in the institutional/public service mainstream, caused it to have difficulty retaining adequate technical staff but this was/is a wider policy issue not likely to be resolved at the project level. State environmental licensing requirements were burdensome and costly, creating hardship for beneficiary CAs, but Government recognized this through its drought-related state of emergency ruling granting exemptions from and easing of environmental licensing on cost and timing grounds. Government supported the restructuring of the MCs - acknowledging their important role in decentralized governance - and is supporting the state-wide introduction of the SISAR-PB framework for water supply management. Government has shown strong support for the proposed new operation. (b) Implementing Agency or Agencies Performance Rating: Moderately Satisfactory 20

35 5.2.2 Cooperar had just three years to implement the Project due to circumstances beyond its control and many constraints. An institutional analysis was merited after effectiveness when an agreed dialogue and action plan could have provided greater support. The pressure to gain momentum sidelined such issues. Similarly, project evaluation was overshadowed by the intense completion effort still ongoing through the extended grace period. Cooperar s performance is rated Moderately Satisfactory for the following reasons: receptiveness to the closing stage evaluation framework/activities and good performance in their completion, laying a framework for the new project; consistent promotion of the Project s objectives and benefits to stakeholders and, despite constraints, diligent efforts to deliver training and technical assistance; and, strong performance in unification and training of the MCs, equipping them to independently leverage significant complementary resources. Cooperar needs modernization institutionally and technically. Bank proactivity on Cooperar s strengthening is essential and will have a major payoff for the proposed new project. (c) Justification of Rating for Overall Borrower Performance Rating: Moderately Satisfactory This rating reflects moderate shortcomings on the part of Government and Cooperar respectively, balanced by specific, demonstrated strengths which enabled a troubled project to conclude with many achievements, and build a positive foundation for the new operation. 6. Lessons Learned 6.1 The following lessons are among the more important: The Bank needs to be alert to the potentially de-mobilizing impacts of prolonged delay between operations and disruptive changes in leadership and staffing, especially technical. Restructuring and intensive training of a coordination unit should be considered and pursued proactively through dialogue and, if necessary, higher level consultations. An increase in the supervision quotient may be needed. The Bank needs to ensure that new leadership and personnel are swiftly inducted into the Project s objectives and methodology. The repercussions of protracted delay should be taken into account when justifying extension of the closing date Related to the above, Cooperar is an experienced and committed project unit which needs specific forms of institutional support to enable it to perform to potential. The Bank can help in various ways: establishing a dialogue with its parent secretariat and an action plan to consolidate and strengthen Cooperar s role, political standing and autonomy within SEPLAN and among sector agencies; establish a roadmap for strengthening its technical capacity including at the regional level, which could include outsourcing and/or contracting specialized entities for, inter alia, ex ante evaluation of productive subprojects, institution building for water resources management, and systematic M&E. The institutionalization of M&E is essential and successive projects should update and reinforce M&E capacity and utilization. The fact that a project is focused on making headway should not preclude its systematic measurement/evaluation. As demonstrated, the Bank can work effectively with the counterpart, using various analytical tools, to establish a dialogue and measure results. The evaluation of household water supply and productive investments needs differentiated evaluation methodologies/streams. With productive SPs, profitability is the basis of sustainability; but a range of factors are also essential, including organizational quality and market relationships. With household water supply, the criteria are social and environmental and these can, and should, be quantified. It is essential that adequate baselines be in place opportunely. 21

36 The CDD methodology remains a cost-effective avenue to basic social infrastructure acquisition and to social capital formation but more systematic employment and income generation requires significant changes. Differentiation of targeted groups by capacity and potential, i.e., intensifying focus on market opportunities and demand are essential. Such choices go beyond CDD by focusing on opportunity rather than need, and informed market demand rather than equalization of access to basic services. CAs require training in phytosanitary, licensing and certification requirements per market requirements. The public sector s potential role needs analysis and should be focused on compensating for market failures due to scale, dispersion, distance and information. The institutional end-points for productive and infrastructure subprojects diverge, requiring different expertise and selection criteria, and entailing different risks for governance and sustainability. Productive activities in semi-arid zones with water difficulties are increasingly unsustainable: The combination of scarce water, poor soils, land fragmentation and overexploitation is unsustainable. Bank teams need to acknowledge this and find alternative avenues for income generation combined with a strategy for improving land management and resilience. Global experiences in land and water conservation are readily available, adaptable and critical for semi-arid regions. Rural water supply requires an institutional intervention to help sustain the physical intervention. The management, operation and maintenence of dispersed water supply systems in rural areas are challenging. As a general principle, the framework for water payment and management of systems needs upstream attention. For future operations involving water supply (and other O&M-intensive subprojects), municipalities/associations seeking additional subprojects should have to demonstrate sustained O&M of the investments they already have, even if not Bank-financed. The Project showed that institutional development is the essential partner to water supply investments and should be conducted in advance: creation of water user associations, definition of tariffs, and O&M orientation. 7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners (a) Borrower/implementing agencies: The Borrower sent a letter acknowledging receipt of and agreement with, the Bank s draft ICR. No substantive comment was included. See Annex 7 (B). (b) Cofinanciers N/A (c) Other partners and stakeholders N/A 22

37 Annex 1. Project Costs and Financing (a) Project Cost by Component (in USD Million equivalent) Components Appraisal Estimate (USD millions) Actual/Latest Estimate (USD millions) Percentage of Appraisal 1. Community Subprojects Institutional Development Project Administration, Supervision, Monitoring and Evaluation Physical Contingencies Total Baseline Cost Price Contingencies Total Project Costs Front-end fee PPF Front-end fee IBRD Total Financing Required (b) Financing Source of Funds Type of Cofinancing Appraisal Estimate (USD millions) Actual/Latest Estimate (USD millions) Percentage of Appraisal Borrower Counterpart Local Communities Counterpart International Bank for Reconstruction Loan and Development 18 Disbursements in Bank s system as at August 5,

38 Annex 2. Outputs by Component 2.1 Component 1: Community Subprojects (US$23.96 m, about 85% of total project cost, with Bank contribution of US$18.0 m, 75%) would support through matching grants to community associations (CA) the financing of about 800 SPs for small-scale socioeconomic infrastructure and services (water supply, sanitation, electricity, education and health, cultural and environmental activities), as well as productive and market-oriented activities. The goal was to support both the income and non-income dimensions of rural poverty, improving livelihoods and wellbeing of about 175,000 people in 900 communities and 222 municipalities. A detailed strategy for linking small producers to markets was included in the PAD. 2.2 Outputs: The Project financed 487 subprojects, 61% of the original target, benefiting 26,815 rural families, 76% the original target. Out of demand totaling 985 proposals, the project financed 52% of infrastructure, 44% of productive and 27% of social demand. Subprojects not financed by Cooperar have been passed to other programs. Of total SPs financed, 326 (67.6%) were basic socioeconomic infrastructure, 156 (31.3%) were productive, and 5 (1.0%) were in the social typology (although trash recycling for example, has commercial goals as well). SP cost averaged R$76,482 (around US$38,000) with an average cost per family of around R$1,750. Demand was heterogeneous reflecting both basic needs and diversification. Infrastructure: Household water supply including piped systems and cisterns represented over 50% of all infrastructure investments. 19 Productive: Among the 156 productive investments (32% of total) were 26 beekeeping/hone (17.2%), 26 agricultural mechanization (17.2%), 17 goat-raising (11.2%) and 14 fish farming (9.3%) corresponding to about 55% of total productive investments, which were overall, quite diverse. 19 Note in the graph above on infrastructure that the bar for passagem molhada or all-weather viaducts indicates the number of families benefited, not relative number of subprojects. The red line signifies number of investments. 24

39 Government s emphasis on productive activities saw their percentage of total investments increase from 5% utilizing just 7% of total resources under Cooperar I, to 32% of the total absorbing 43% of resources under Cooperar II. Average cost of productive subprojects was R$131,533 (about US$65,766) and average cost per beneficiary family was R$2,437 (about US$1,218). Social: This type represented a small slice of total investments, with a comparatively high average cost of R$285,496 (about US$142,750) and average cost per beneficiary family of R$2,136 (US$1,068). This typology included the three successful catadores or solid waste recycling investments which represented 60% of total social investments, although an important lesson is that for success they need to be treated as business not overtly social ventures. 25

40 Summary of Cooperar II Investments: Type of Subproject % Total # Ben. Value Aver. Cost per Aver. Cost per # SPs SPs (all types) Families (R$ 000) Family R$ SP R$ Infrastructure , , Water Supply (Singelo) ADS , , , Water Cistern (Tela de , , , Alambrado) All-weather viaduct , , Water Cistern (de Placas) , , , Household Sanitation , , Complex Water Supply (Complete) , , ADC Other Subprojects , Productive , , , Beekeeping/Honey , , Tractor/Equipment , , , Goat Husbandry , , Fish Farming , , Irrigated Agriculture , , Red Rice Cropping , , Small-scale Clothing , , Manufacture Chicken Raising , , Handicrafts , , Mining , , Fruit Pulp Unit , , Other Subprojects , , Social , , Solid Waste Recycling , , Multiple Use and Social , Center TOTAL: , , , Source: Cooperar/MIS Partnerships, integration and leveraging: Combined resources leveraged from State, Federal and other programs by Cooperar and the Municipal Councils were R$306.0 m (See Annex 5), resulting in a ratio of 1 : 6.5. Leveraging by Cooperar through formal partnerships was about R$56.5 m, more than doubling the amount of funds available to the Project under Component 1. The number of associations/families benefited was not measured; no indicators were included. Cooperar s main financial partners were: Ministry of Integration; Paraiba Fund to Combat Poverty (FUNCEP); EMPREENDER-PB; and the National Development Bank (BNDES). Technical partnerships also played an important role: SEBRAE (Brazilian Service for Support to Small Business); SENAR (National Apprenticeship Service); and the Federal University of Campina Grande were fundamental in providing technical assistance, principally to the beneficiaries of productive investments (see 2.5 below). 2.4 The table below (and its ratio calculation) is based on a random sample of 32 out of 156 unified Municipal Councils (CMDRSs) through which funds were leveraged by Cooperar itself (as distinct from independent leveraging by the full 156 Councils trained by the Project under 26

41 Component 2). Resources leveraged on behalf of poor rural families with the same eligibility profile by the project-trained MCs totaled R$249.0 m (see Appendix B). Table: Leveraging of Resources by Cooperar from Formal Partnerships (R$) Counterpart/Period Cooperar (1) Partner (2) Other Programs (3) Counterpart Total (2011/13) Total (4) = (2) + (3) Initial , , , ,07 Actual , , , ,47 Requested , , , ,50 Approved , , , ,35 Requested , , , ,27 Approved , , , ,27 Requested , , , ,01 Approved , , , ,01 Requested , , , ,78 Approved 16,480, ,598, ,881, ,480, Resources Leveraged: (4) : (1) 1 : 3.4 Source: Field Research (Cooperar 2014). 2.5 The following partnerships were established by Cooperar for diverse forms of project support using Termos de Cooperacao: Partner SENAR UFPB UFCG BNB EMBRAPA EMATER EMPASA SEBRAE FUNAI Types of Activities Conducted under Partnership Training in O&M of agricultural machinery and equipment Preparation and training of beneficiaries in poultry-raising Technical assistance, training and management of fish farming subprojects Financing to strengthen production systems linked to subprojects Technology transfer to construct cisterns and support to preparation of solid waste recycling subprojects Preparation of productive subprojects, and TA for productive subprojects and Municipal Councils Technology transfer for new methods of fish farming and production of fingerlings; training for fish farming beneficiaries TA and training in beekeeping/honey production and poultry-raising. Preparation of business plans for Alternative Poultry subprojects Support for implementation of subprojects in indigenous areas; logistical support for poultry subprojects in indigenous areas. 2.6 Productive Subprojects: The Project financed 156 productive subprojects, just over 31% of the total. Protracted drought affected many of them, especially those directly concerned with agriculture, except for those located in the Litoral (coastal) region. Drought resulted in the inclusion of investment with technical specifications related to drought resistance. Market studies were conducted in the following: rustic/informal poultry production; red rice; beekeeping/honey 27

42 production; fish farming; dairying and milk processing. Business plans were prepared for poultryraising. An important experience with solid waste recycling is detailed in the Box below. Box: Os Catadores de Bonito de Santa Fe - Good Practice Investments in Solid Waste Recycling The term catador de lixo means trash scavenger, of which there are about 1.0 million in Brazil with 30,000 organized. About 90% of all recycling in Brazil is handled by catadores. It is mostly an undercapitalized, subsistence activity, but each catador collects about three tons per month. Federal, State and local laws (Federal Sanitation Policy, National Solid Waste Management Policy) introduced since 2005 support such activities. Solid waste management is a municipal responsibility and priority is given to the selective collection and economic inclusion of catadores within inter-municipal management plans. The Project worked with local catadores who sort and recycle waste in the town of Bonito de Santa Fe in the far western corner of Paraiba, to strengthen their public-private partnership in waste management with the Municipal Government. The Associacao dos Catadores de Material Reciclado (ASCAMAR), comprises 112 families and manages recycling in the municipality as well as having a contract with the Municipal Government for street sweeping and cleaning of public buildings valued at $27,000/month. Some 33 families work with selective collection and recycling. The project formalized the work of ASCAMAR, improving working conditions and creating sustainable livelihood opportunities. The project won a national prize awarded by the General Secretariat of the Office of the President of Brazil, in recognition of its achievements in establishing good practices for inclusive recycling in Brazil. The process: Catadores were organized and trained (market analysis, business plan/subproject design) Definition of infrastructure needed for the selective collection (land, sorting facility, other plant and equipment (capital Public awareness campaign (collection schedule, voluntary collection points) Follow-up, monitoring and evaluation FUNASA financed a Sanitary Landfill area (investment R$600,000) Cooperar (project) financed the Collection and Sorting Center, Equipment (press, scale, truck and packaging investment R$400,000) Partnerships: Municipal Government Contract (R$27,000 or US$13,500/month); Federal Fovernment (FUNASA and MDS/ProCatador); State Government (Cooperar, universities, technical service providers) Impact is assessed via ITOG: Investment, Technology, Organization, Management (Gerenciamento) using an income-based approach whch looks at actual vs desired income. Built on consumption Clear path to attribution of interventions Results: Recycling system operational with about seven tons per month recycled Formalization and livelihood development for 112 families Education campaigns, street sweeping and housekeeping services Actual income: total R$22,744 and average per beneficiary (33) R$668 Target income: total R$36,510 and average $1,073 Lessons: Public policy can promote economic inclusion and sound environmental stewardship Organization and skills training: fundamental for success Business, not charity Source: E. Bresnyan (SASDA),

43 2.7 Targeting: Targeting applied a hybrid version of the HDI-M-based approach used in many Northeast states, using pre-established criteria, classifying municipalities via a weighted average based on low HDI-M, level of annual rainfall, and number of rural residents. Targeting was successfully applied and there is no evidence that subproject investments leaked to the non-poor. Targeting of vulnerable groups primarily women, quilombola and indigenous groups - was well-managed and documented. The planned system of bidding events to obtain proposals was not adopted. Rather, project objectives and procedures were widely promoted and publicized in all 222 municipalities, starting with the poorest 50 of which 49 obtained a subproject, then moving on to the remaining municipalities in a more general push to obtain proposals. 2.8 Component 2: Institutional Development (US$1.95 m, about 7% of total project cost, with Bank contribution of US$1.6 m, 82%) was to be executed by Cooperar and financed: (i) technical assistance (TA) and training to mobilize and strengthen the CAs for their role in identifying, preparing, operating and maintaining SPs; (ii) capacity-building for the participatory Municipal Councils (MC) to manage their responsibilities as defined in the Operational Manual including assessment and supervision of CAs, participatory planning, financial management of community SPs, and environmental management of SPs; (iii) training and TA for the STU s Regional Management Units (RMU); and (iv) workshops and seminars allowing MCs and CAs to exchange experiences and facilitate planned integration activities involving other federal and state poverty programs. 2.9 Outputs: This component financed the following: Systematic training throughout project execution to unify, restructure and supervise the Municipal Councils (MC) and specialized technical assistance to improve their overall performance; Technical assistance and training for the community associations (CA): mobilization, organization, SP preparation, environmental and social aspects, and management, operation and maintenance of investments; Training for the STU to improve technical and managerial skills; and, Seminars, workshops and fairs to permit the exchange of experiences between the MCs, CAs and stakeholders; Numerous thematic seminars were conducted for technical staff, partner agencies and community leaders including on desertification, agro-ecology and sustainability; Launched an annual Ana Primavesi Agro-ecology Prize for internationally recognized leaders in this field; Cooperar also signed cooperative partnerships with EMBRAPA Petrolina, the Federal University of Paraiba (UFPB), Federal University of Campina Grande (UFCG), Bank of the Northeast, EMATER, SENAR, IBAMA, SEBRAE and the Federal Ministry of Agriculture, Fisheries and Livestock (MAPA). Beneficiaries of Agricultural Mechanization subprojects were trained by SENAR Multi-media folders and other publicity instruments were developed and distributed. Year Training Events* Producers , , ,255 Total 333 7,432 *Workshops, training, seminars, fairs, exhibitions, Field Days, meetings 29

44 2.10 ITOG: Cooperar introduced the Investment, Technology, Organization and Management (ITOG) methodology starting in 2011 as a mechanism for joint planning of productive subprojects under which beneficiaries analyzed the behaviors they needed to adopt to reach their income objectives, i.e., what they needed to do to ensure that their subproject was viable. Numerous local workshops were conducted with the help of contracted specialists both to transmit the methodology and train 60 of Cooperar s regional technicians. Some 195 workshops also engaged about 3,700 small producers in subproject management with a focus on financial growth and measurement. The participatory ITOG methodology also demonstrated promise in recruiting talented young leaders, many of them women Municipal Councils: In order to reduce the duplication and inefficiencies of having multiple Municipal Councils, a formal process of unification was conducted to strengthen the representation of the rural communities in the Councils, and overall decision-making processes. Unification was a major effort which encountered some resistance, and Cooperar recruited the support of EMATER. By closing some 196 Councils had been unified as CMDRS out of an existing 222, of which 178 were oriented to the Cooperar project. Events/Municipal Councils Objective 222 Meetings Mobilize and sensitize/build awareness of the actors involved to define strategies for unifying the MCs 196 Workshops Unify existing Councils into CMDRS. Result: 178 Councils unified 50 Meetings Define criteria for setting demand priorities for the community associations, and their transmittal to Cooperar for approval/financing 2.12 Community associations: The Project targeted diverse community organizations: associations, cooperatives, rural integration groups, fishing colonies, indigenous peoples villages, quilombola associations, and land reform settlements with training and technical assistance. Cooperar sought to supply TA principally from its Regional Offices but also contracted specialists to support productive activities. Evidence suggests quality and supply were not consistent, although Cooperar fully understood the importance of training and made a mjor effort. This was complicated by the variable/evolving capacity of the community associations to handle specific aspects of their subproject cycle including procurement and financial anagement, and meeting their required counterpart contribution. Some obstacles encountered were beyond their control, e.g., environmental licensing and water usage grants, and are mentioned in Main Text Section Component 3: Project Administration, Supervision, Monitoring and Evaluation (US$2.25 m, about 8% of total project cost, with Bank contribution of US$1.3 m, 57.8%) financed operational costs (excluding salaries) of project administration, supervision, monitoring and impact evaluation 2.14 Outputs: This component financed the operational costs of project coordination and management, which included: organizational restructuring of Cooperar at its headquarters and Regional Offices; implementation, updating and operationof the MIS; supervision/field oversight and technical support to beneficiaries, associations and Municipal Councils 30

45 research for and production of the Results Framework Analysis; organization and implementation of the Evaluation Workshop financial management of the Project procurement of goods, works and services 2.15 Cooperar prepared a Borrower Completion Report, and seven studies (e.g., market identification, census of quilombola populations in the State of Paraiba, agro-ecological technologies for family agriculture, and ITOG), but was unable to prepare the planned MTR study or impact evaluation. The reasons are associated above all with pressured implementation but issues of efficiency, bureaucracy, and lack of understanding of the importance of evaluation were also relevant. Fault lies partially with the Bank for not inculcating its importance over the course of several projects. Aide Memoires for this project do not mention evaluation until mid The new operation in Paraiba intends to focus on M&E and monitor progress throughout. Appendix A: Experiences with Productive Investments led by Women 2.15 The following box summarizes five promising productive investments implemented and managed by women s associations and cooperatives under Cooperar II. 1: Floriculture: Cooperativa dos Floricultores do Estado de Paraiba, Piloes Municipality Failure of a local sugar mill in 1999 saw many local families unemployed. At the suggestion of a new community resident, and based on the suitability of the local climate, a group of women approached the Bank of the Northeast and Bank of Brazil for financing to produce flowers, to no avail. But Cooperar I granted the association R$65,000 to start a floriculture venture which has seen much success. Starting with wooden greenhouses, an irrigation kit, inputs and seedlings, the group then brought in partners: SEBRAE, the Bank of Brazil Foundation, Bank of Northeast Brazil and Municipal authorities which provided training, technical assistance, support for travel, publicity and events. Under Cooperar II, the cooperative doubled the number of greenhouses to 116 and diversified production by purchasing with their own resources another four hectares of land to cultivate roses. This expansion enabled the cooperative to increase membership to 16. Floriculture has become a primary source of income in this municipality and five additional associations are now exploiting this activity producing native flowers, tropical flowers, vased flowers and foliage plants. Several have expanded into a neighboring municipality. The cooperative has a store in the city of Guarabira and sells to 16 municipalities in the State of Paraiba, 7 municipalities in the State of Rio Grande do Norte, and one in Pernambuco. The average income ranges between R$680 to R$800 per month/member, depending on demand. Piloes has become known as the City of Flowers and the women are recognized widely for their success. 2: Artesanal Coconut Confectionary: Associacao Maos que se Ajudam, Lucena Municipality The Municipality of Lucena on the north coast of Paraiba is known both for its wonderful beaches which attract tourism, and high rates of poverty due to the seasonal nature of the local 31

46 economy. Driven by the need to generate income, a group of 20 women in 2003 decided to produce artisanal coconut candy, based on the region s natural advantage in coconut production. The candy is packaged in the shell, an innovation which has been a market success and won the association prizes, extensive publicity and sales. The association obtained R$176,600 in Cooperar II funding to improve their physical production facilities and to support their social activities with children and youth. The support of Cooperar II and BNDES has helped the women produce over 8,000 cocadas per month, as well as bonbons and coconut fiber handicrafts. The association benefited from ITOG training and is determined to grow and improve the living conditions of members. Sales remain vigorous. 3: Clothes-making: Associacao de Costureiras de Santa Luzia, Santa Luzia Municipality, and Associacao dos Moradores Rurais do Sitio Pai Domingos e Adjacencias, Puxinana Municipality. (a) The Santa Luzia Association of Seamstresses started a small-scale clothes-making enterprise benefiting 16 members comprising 13 who sew and 3 young members responsible for design and graphics. Prior to their investment, members performed similar work but in a precarious manner, without organization or relationships among themselves. Today, the group is well-known and sells both in Paraiba and Rio Grande do Norte. Their production has been modernized and standardized, and demand is strong. Clients work with the association on design, pricing and delivery dates. Payment is 50% upon order and 50% on delivery. Each member receives on average R$800 to R$1,000/month. Members also provide free sewing classes to needy members of their municipality. (b) The Puxinana association comprises 20 women who, with Cooperar I and II financing, are producing dish and floor cloths, increasingly more standardized for markets and using updated production techniques. Beneficiaries are paid by the day worked and production. A portion of the gross income is deducted for production costs and part goes into a Reserve Fund. The balance is divided among members. Working on average 3 hours per day, monthly income per member averages R$220 depending on sales. 4. Fruit Pulp Production: Associacao de Agropecuaristas do Assentamento Sao Joao, Municipality of Pombal The land reform settlement of Sao Joao consists of 15 families, 13 of which are actively involved in producing fruit pulp which has created 13 full-time jobs and other indirect employment. Agro-industrial activity emerged as a potentially strong alternative taking into account the settlement s proximity to the municipal capital and access to water. Activities started in 2006 with a grant of R$79,000 from Cooperar I to establish the processing unit, and a second subproject under Cooperar II for equipment and a truck to transport product. The association has all relevant certification (SIM, SIE, SIF) and is registered under the brand name Fonte de Sabor (Flavor Source) with INPI. With an installed capacity of 2,500 kg/hour, the unit is absorbing total production of members and local non-members, processing 60,864 kg/year and selling via formal contract to the National School Food Program (PAA), and to the Pombal and other municipalities. The association needed an appropriate location to store the pulp of native fruits which have one annual harvest (mango, cashew etc), and a vehicle, both of which were acquired from Cooperar II in The association has plans to diversify 32

47 production and develop new lines, and demand for its products is strong. Box 5: Handicrafts: Associacao of Artesaos e Urbanos do Municipios de Lagoa Seca, Municipality of Lagoa Seca The association of 40 members was established in 2009 and received Cooperar support to design, manufacture and sell pillows, towels, bed and table linens, as well as figurines and dolls typical of the Northeast region. Prior to organizing, members produced and sold similar items individually and lacked any capital to invest. Most were dependent on federal support payments and the income of family members. Today, the women have taken many specialized courses including design, production and business management. Cooperar II funds enabled the association to acquire sewing machines, storage units, a computer, printer, refrigerator, and production-related furniture permitting members to produce high quality items and diversify production. They also provide classes for persons interested in taking up the same activities. They now have a marketing unit centrally located in the city of Lagoa Seca. Each member is making an income of around R$ /month through sales at the association s marketing center. Some 20% of the total monthly revenue is deposited in a rotating reserve fund to pay for raw materials, operating costs and maintenance. 33

48 Appendix B Table: Resources leveraged by the Project-trained Municipal Councils, Year and Total (R$ 000) Program/Administrative Entity Total 1. AgroAmigo (National Bank of Brasil - BNB) Agua para Todos (Federal Government) Apoio ao Desenvolvimento Agropecuario (MAPA, Fed Govt) Arranjo Produtivo Local APL (BNDES) Subterranean dam P1MC Barreiros de Trincheira P1MC Bolsa Estiagem (Fed. Govt drought relief) Cisternas INTERPA Cisternas Petrobras Cisternas de Polietilino (Fed Govt) Compra de Terra - INTERPA CONAB Conscientizacao Ambiental - BNB Consorcio Interm. de Saude do Cariri (CISCO) Credito Fundiario (land reform - BNB) Corte de Terras Municipal Prefecture Credito Fundiaro (land reform Fed. Govt) Desenvolvimento Regional Sustentavel (DRS Bank of Brasil) Credito Fundiario - INTERPA Distribuicao de Sementes (seeds State Govt) Credito Mulher - INCRA Distribuicao de Sementes (seeds - Fed. Govt) Custeio Pecuario (Fed. Govt) Distribuicaoa de Palmas (State Govt) EMPREENDER - PB FUNASA (Sanitation Complex) FUNASA (well and cisterns)

49 16. Fundacao de Apoio a Crianca e ao Adolescentes (BNDES) Gabinete de Palma (INSA Fed Govt) Garantia Safra (Crop Insurance Fed. Govt) Habitacao (INCRA) Habitacao - INTERPA Agricultural Mechanization (Fed. Govt) Agricultural Mechanization (Municipal Prefecture) Implementation of ADS (State Govt) Tourism Incentives (Municipal Prefecture) Wells Installation (State Govt) Operacao Pipa (trucked water State Govt) Operacao Pipa (trucked water Fed. Govt) Operacao Pipa (Fed. Govt) Operacao Pipa (trucked water - Municipalities) Breeding cattle (INTERPA) Breeding goats (INTERPA) My House, My Life (Fed. Govt) Public Slaughterhouse (Fed. Govt) Pacto Social (social assistance State Govt) PAIS (SEBRAE) All-weather Viaduct (State Govt) All-weather Viaduct (Fed. Govt) Patrulha Mecanizada (PAC2 Fed. Govt) Well drilling (Fed Govt) Well drilling (CDRM) Poco Catavento (CDRM) Well drilling (Municipal Prefecture) Polo Avancado de Milho (Fed. Govt/Municipalities) PPA (Fed Govt) PROCASE (IFAD/State Govt) Programa 1 Milhao Cisternas (P1MC) Programa 1 Milhao Cisternas (P1MC+2)

50 28. Programa Brasil Sem Miseria (Fed. Govt) Programa Aceleracao do Crescimento (PAC2 Fed. Govt) Programa de Aquisicao de Alimentos (PAA food acquisition Fed. Govt) Programa Nacional de Tecnologia Educacional (PROINFO Fed. Govt) PNAE (Fed. Govt) PRONAF (National Family Agriculture Program Fed. Govt) Programa Nacional de Habitacao Rural (rural housing PNHR Fed. Govt) Projeto Dom Helder Projeto Semiarido (BNB/Fed. Govt) Quadra de Esporte (State Govt) Racao Animal (animal feed State Govt) Racao Animal (animal feed - Municipal Govts) Recuperacao de Acudes (dam restoration Fed Govt) Recuperacao de Barrieras (dam restoration Municipal Prefectures) Recuperacao de Pocos (well restoration State Govt) Recuperacao de Estradas (Municipal Prefectures) Rio Mamanguape - Petrobras SEDH (State Govt) SELO INSPECAO (Seal of Inspection Fed Govt) Dam reform (INTERPA) Sistema de Abastecimento de Agua (water supply State Govt) Sistema de Abastecimento de Agua (water supply Fed. Govt) Sistema de Abastecimento de Agua (water supply Municipal Govts) Territorio de Cidadania (Fed Govt) Unidade de Beneficiamento de Leite (Fed Govt) TOTAL: Source: Cooperar/Municipal Councils/MIS

51 Annex 3. Economic and Financial Analysis 1. The Paraiba Second Rural Poverty Reduction Project (COOPERAR II) aimed to support the Government of the State of Paraiba in its efforts to reduce rural poverty and its consequences, by co-financing small-scale infrastructure productive and social investments (i.e. subprojects). The operating strategy of the Project sought to: (a) expand access to smallscale socioeconomic infrastructure and services; (b) increase income and capital assets through investment in productive activities and facilitate the link between small-scale producers and markets; and (c) strengthen the capacity of the Municipal Councils for Sustainable Rural Development (CMDRS) and Community Membership Organizations to raise funding and harmonize policies and institutional arrangements for receiving public investments to benefit poor rural families. 2. This Annex provides the context and methodological framework for the ex-post financial and economic evaluation, and presents and discusses the main financial/economic feasibility indicators 20, comparing them to those obtained at project appraisal. The Annex focuses on the evaluation of small-infrastructure investments at the community level (e.g. water access systems and cisterns for water supply, and all-weather viaducts), and of productive investments supporting market-driven productive activities through matching grants for capital goods, working capital, technical assistance and training, to organizations of small-scale rural producers. In the case of the small infrastructure investments, an economic cost-benefit analysis was undertaken, while in the case of the productive investments the cost-benefit analysis was of a financial nature. In the particular case of cistern subprojects their cost-effectiveness was also evaluated. 3. In essence, the methodology and the assumptions used for this ex post economic and financial evaluation are fundamentally the same ones used for the ex-ante analysis presented in the Project Appraisal Document (PAD). Some minor exceptions are explicitly stated and explained in this Annex. I. Methodological Approach to the Financial/Economic Cost-Benefit Analysis 4. There are two important elements which must be highlighted before describing the methodology used and presenting the results of the economic/financial analysis, as they had an impact on the definition of the methodology itself and the results thereof. These are: (i) Delayed project implementation. Due to: (i) delays in Project effectiveness at the State and Federal levels that were beyond the control of the project; and (ii) early, frequent turnover in project management by the State of Paraiba, initial subproject agreements were signed and began implementation as of 2011, with most of them (65%) signed in 2012 and 20 Net Present Value (NPV), Internal Rate of Return (IRR), Benefit cost Ratio (B/C). 37

52 2013 (see Table 1 below), the last two years of project implementation. Delayed project implementation and its consequences in the subproject cycle, postponed the effective start of implementation of most subprojects to close to the closing date of COOPERAR II; and, (ii) Climatic events. During 2012 and 2013, the last two years of project implementation, the worst drought in 45 years affected the entire Northeast region of Brazil, including Paraiba. This event had a profound negative effect on the implementation of most productive subprojects, particularly those related directly to agriculture. Therefore, as most productive subprojects initiated their implementation in that period, the performance of many of them suffered a setback compared to years with a normal cycle of precipitation. Table 1: Subprojects by Year of Signing of Subproject Agreement Year Subprojects Value Number % R$ Million % % % % % % % Total % % Sample Selection for Analysis 5. Few subprojects had more than one year of effective operation at the time of this evaluation, due to the aforementioned delays in project implementation, coupled with the impact of the drought on agricultural activities. This situation had to be taken into account during the definition of the methodology to be used, particularly with respect to the sampling universe. As such, the analysis focused on those subprojects that had completed at least one production/marketing cycle or had at least one year of implementation, thereby reducing the universe for the analysis to 208 subprojects. 6. Most of the data required to undertake incremental financial and economic costbenefit analyses were unavailable at the central level during the ex-post evaluation, and thus collection of primary data at the subproject site was required. Given time and other resource constraints it was not considered feasible to collect, systematize and analyze information for a sample large enough to yield a high degree of statistical confidence. The sample size decision became a matter of what was considered feasible to achieve, given the aforementioned constraints. 7. The approach followed separated the infrastructure subprojects and the productive subprojects into distinct sub-universes. The sample in each sub-universe was stratified according to subproject type, and the observations were selected randomly. 38

53 8. In the case of infrastructure subprojects, the sampling sub-universe included 151 subprojects. The sample consisted of 22.5 percent from this sub-universe (i.e. 34 subprojects). For productive subprojects, the sampling sub-universe included 57 subprojects, and a random sample of 30 percent of the universe (i.e. 17 subprojects) was selected. Taking into account both infrastructure and productive subprojects, the sampling universe represented 43 percent of all financed subprojects, and the overall sample represented nearly 10 percent of the all financed subprojects. Information Gathering and Systematization 9. To fill the aforementioned information gaps, participatory workshops were held with beneficiary communities and producer groups. For this purpose, project staff were trained and guided to obtain the missing information through participatory methods. A guide and a model questionnaire were prepared for each type of subproject. All 51 subprojects from both samples were visited, and workshops were held with participation of members of the community and/or the producer organizations, and their corresponding directorates. 10. As mentioned before, most subprojects did not have much more than one year of implementation. Thus, the data collected in the participatory workshops were not sufficient to undertake the financial and economic cost-benefit analyses without defining a set of working assumptions. 11. For most years of the analysis, it was necessary to make projections of costs and revenues and their underlying factors. These were made using a most-likely approach, based on the perceived likelihood of improvements in productivity, added value, marketing/other, taking into account the situation found during the workshops and field visits. The projections also benefited from local technical advice, and took into account information available at COOPERAR II, and other State agencies and partners. The projections assume regular weather conditions and factors of production, leaving aside overly optimistic or pessimistic forecasts or events of an exceptional occurrence (e.g., the persistent drought mentioned earlier). II. Financial Analysis of Productive Subprojects 12. Productive subprojects originated from a demand-driven process during project implementation, and thus they are different in nature and scope than the likely subprojecttypes that were evaluated during the project s ex-ante cost-benefit analysis at appraisal. As in the case of the ex-ante analysis, productive subprojects were subjected to a financial costbenefit analysis from the perspective of the whole business venture. As such, the results show whether the ventures were financially feasible as a standalone investments. 13. The randomly selected subprojects were geographically dispersed throughout the State of Paraiba, as shown on Table There were 10 types of productive chains or investments types represented in the sample. Table 3 shows the types of productive subprojects, the total number of beneficiary families per type, and the number and share of families represented by the sample. 39

54 Table 2: Location of Sampled and Total Productive Subprojects by Region Region Number of sampled subprojects % Number of total subprojects Areia 2 12% 22 14% Cajazeiras 1 6% 9 6% Campinade 2 12% 18 11% Cuité 1 6% 12 8% Itaporanga 2 12% 18 11% Litoral 4 24% 27 17% Monteiro 2 12% 13 8% Patos 2 12% 35 22% Pombal 1 6% 6 4% Total % % Table 3: Productive Subprojects by Type, for Universe and Sample % Types of Productive Investments Total families per Subproject type (Universe) Families reached by Sampled Ssubprojects No. No. % Irrigated Agriculture % Apiculture % Handcrafts % Aviculture % Livestock - Goats % Farm mechanization 2, % Small-scale sewing % Aquaculture % Solid waste recycling % Fruit pulp processing % 0 6, % 15. Financial models were constructed for the sampled productive subprojects by type. As in the ex ante analysis, the period of analysis used was 10 years from beginning of implementation, and a 10% discount rate. Using the flows of incremental net revenues, the Net Present Value (NPV), Internal Rate of Return (IRR), Benefit-Cost Ratio (B/C) were calculated and are presented in Table 4. 40

55 Investment Type Irrigated Agriculture Livestock- Goat Table 4: Financial Feasibility Indicators of Productive Subprojects Community Total Investment (R.$) IRR NPV (R.$) NPV/Family (R.$) B/C Investment Repayment Period Nova vida 182,597 23% 110,579 5, Lagoa e outras 105,960 20% 51,087 1, Apiculture Espinheiro 96,311 32% 113,997 6, Poultry Pedra Grande 215,525 24% 156,487 7, Handcrafts Ipuarana 60,371 0% -21,627-1, Small-scale sewing Apiculture Barra 114,152 25% 84,087 5, Nova Conquista 74,441 25% 56,899 4, Aquaculture Melancia 100,200 5% -18,395-1, Apiculture Cacimba velha 186,952 33% 238,006 5, Poultry Senhor do Bonfim 134,758 11% 4, Aquaculture Cordeiro 286,395 20% 130,355 10, Livestock- Goat Irrigated Agriculture Solid waste recycling 21 Fruit pulp processing Mechanization Cacimba de pedra Cacimba Nova Asso. dos catadores 107,211 1% -40,102-3, ,844 31% 92,021 10, ,755 1% - 143,593-3, São João 163,068 19% 62,397 4, Campo Verde 122,444 14% 21, Mechanization Nova Vida 154,200 19% 64, Average 149, % 22 56,640 3, Total investments for subprojects evaluated in the ex ante analysis at project appraisal ranged from R$ 7,000 to R$ 65,000, with an average of R$ 39,000. On the other hand, as seen on Table 4, total investment for ex-post subprojects ranged from R$ 60,000 to R$ 286,000, with an average of R$ 150,000. Although average investment of ex-post 21 This subproject may warrant an economic cost-benefit analysis in addition to the financial cost-benefit analysis. However, the information available did not allow for identifying and quantifying its economic benefits and thus only financial feasibility indicators are presented. 22 Weighted average, using total investment as weight parameter. 41

56 subprojects is close to three times the average for the ex-ante subprojects, the average ex-post NPV is significantly lower (about 23%) than the NPV for the ex-ante subprojects. 17. As shown in Table 4, all but 4 of the 17 evaluated subprojects of the ex-post analysis were financially viable (i.e. they had an IRR higher than the discount rate of 10%, and a NPV greater than zero). The IRR for the financially viable subprojects ranged from 11% to 33%, while that for the subprojects used for the ex-ante analysis, ranged from 15% to 50%. The NPV for ex post subprojects ranged from R$ 4,400 to R$ 238,000. In comparison, the exante NPV ranged from R$. 1,800 to R$. 328, The average NPV per family was estimated at R$ 3,138 when including all subprojects from the ex-post sample, and R$ 4,858, when including only those which returned financially feasible indicators. These values represent the present net income by a family, after family labor used for project implementation was compensated at the local daily rate for unskilled labor. 19. On average, subprojects of the ex post evaluation would recuperate their investments in around 5.5 years. Only in one case (i.e., handicrafts) would the period to recuperate the investment be longer than the 10-year period used for analysis purposes. The repayment period for the financially viable subprojects ranged from around 3-6 years. 20. The above differences in subproject size and indicators between the COOPERAR I subprojects used as reference for the ex- ante analysis at appraisal, and the sample of ex-post subprojects of COOPERAR II, is largely explained by the difference in nature and scope of subprojects financed by the two projects. COOPERAR I responded with smaller-size investments to community needs through a Community Driven Development approach, while COOPERAR II initiated a gradual transition towards responding to market opportunities, and this implied a significant increase in subproject size and type of subproject. Also, there is no doubt that subproject maturity was lower under COOPERAR II, due to the short time of subproject implementation at the time of analysis; only 6 of the 17 sampled subprojects were fully functioning and had completed a full production-to-marketing cycle. Also the severe drought conditions generally experienced during early subproject implementation had a negative impact in subproject performance at an early stage. 21. When subjected to a sensitivity analysis, by simultaneously increasing incremental costs and decreasing incremental revenues, by 20% 23 each, the financial feasibility indicators were affected as shown in Table 5. The results show that only the two beekeeping subprojects were able to withstand the combined effect of reducing revenues and increasing costs by 20%. Also shown in Table 5 are the estimated switching values, or equilibrium points, with respect to increases in recurring costs or reductions in revenue, independently, for each subproject. The values represent the maximum percentage increase in recurrent costs, or the maximum decrease in revenue, that the subprojects can withstand to remain viable. The sensitivity analysis demonstrated that subprojects are susceptible to variations in costs and revenues (i.e. prices and/or sales). This is expected to certain extent, as these are business ventures and market dynamics play a major role in their continued success. 23 This is the same sensitivity analysis conducted in the ex ante financial feasibility analysis. 42

57 Table 5: Sensitivity Analysis - 20% Increase in Recurrent Costs and 20% Decrease in Revenues Subproject Type Irrigated Agriculture Livestock- Goat Community IRR NPV (R.$) B/C Investment Repayment Period (years) Switching Value 24 Increment in Costs Switching Value 25 Reduction in Revenue Nova vida - -28, % -16% Lagoa e outras - -92, % -12% Apiculture Espinheiro 15% 23, % -35% Poultry Pedra Grande , % -15% Handcrafts Ipuarana , Small-scale sewing Barra , % -11% Apiculture Nova Conquista 14% 13, % -34% Aquaculture Melancia , Apiculture Cacimba velha 6% -33, % -27% Poultry Senhor do Bonfim , % -1% Aquaculture Cordeiro , % -9% Livestock- Cacimba de Goat pedra , Irrigated Agriculture Cacimba Nova , % -4% Solid waste Asso. dos recycling catadores , Fruit pulp processing São João , % -5% Mechanization Campo Verde 2% -38, % -10% Mechanization Nova Vida 6% -29, % -20% III. Economic Analysis of Infrastructure Subprojects 22. Infrastructure subprojects were also demand driven; as such the location-specific investment requirements and operational costs could not be determined at project appraisal. Hence, the sampled subprojects of the ex post evaluation do not strictly reflect the subprojects evaluated at the time of appraisal. 23. Investment cost information for the analysis came from the Project s MIS and maintenance and operation costs from the participatory workshops held with beneficiary 24 With respect to base scenario shown in Table With respect to base scenario shown in Table 4. 43

58 communities. With respect to the economic benefits, only the main benefits identified and quantified during the participatory workshops, as corresponding to each evaluated subproject, were accounted for in the economic analysis The types of benefits included were: a. For water supply systems and cisterns: (i) family-time saved in water collection; (ii) savings for the non-use of water tanker-trucks (carros-pipa) to complement water supply in the dry season; (iii) time savings and reductions in costs related to medical attention, transport to medical facilities and savings in medications as a result of reduced incidence of water-borne diseases, due to improved water quality; (iv) water consumption fees; and (v) association fees for maintenance and operation; b. For all-weather viaducts: (i) foregone household travel time; (ii) increased sales derived from reduction in post-harvest to market losses of perishable products; and (iii) increase in price due to better access to market places. These benefits were included in the analysis accruing to all communities benefiting from (i.e. using) the all-weather viaducts, and not only the one community that implemented the subproject. 24. As in the ex-ante analysis at appraisal, the ex-post analysis assumed that foregone household travel time was allocated to productive activities using the local daily wage for unskilled labor as a measure of the opportunity cost of labor. The analysis also excluded the Tax of Circulation of Goods and Services- ICMS (18%) as smallholders are typically exempt from this tax - and used a 10% discount rate and a 10-year horizon of analysis. Furthermore, also as in the case of the ex ante analysis, market prices were used in the expost analysis, considering that references of analyses of previous water access investments in Northeastern Brazil used shadow price conversion factors below 1.0. Region Table 6: Infrastructure Subprojects by Region Number of evaluated subprojects % Number of total subprojects Areia 4 12% 21 6% Cajazeiras 2 6% 20 6% Campina 8 24% Grande 75 23% Cuité 1 3% 41 13% Itaporanga 6 18% 61 19% Litoral 4 12% 42 13% Monteiro 3 9% 26 8% Patos 4 12% 26 8% Pombal 2 6% 15 5% Total % % 25. The overall sample represented around 10.4 percent of the Infrastructure subprojects sub-universe. Sample subprojects were located throughout nine regions within the State in the proportions shown on Table 6 above. % 44

59 26. The six types of infrastructure subprojects financed by COOPERAR II are presented in Table 7. The sample was stratified with respect to the various Investment types. On average, infrastructure subprojects benefited some 55 families each, and the total investment per family was around R$ 1,450. Table 7: Family coverage and value for evaluated Infrastructure Subprojects Type of Investment Evaluated Subprojects N o. of families Subproject Agreement Value N o. % N o. % R.$ % Water Supply System- Type A % 47 3% % Water Supply System Type B % % % Plate Cisterns 7 21% % % Wire mesh Cisterns 8 24% % % Household Sanitary Module 2 6% 39 2% % All-weather viaducts 7 21% % % Total % % % Table 8: Investments in Cisterns Economic Feasibility Indicators Type of Investment Community Total Investment E-IRR E-NPV B/C Plate-cisterns (1) Sítio Lagoa do Meio 89, % 467, Plate-cisterns (2) Sítio Cardeiro 37,004 50% 75, Pau D'arco, Plate-cisterns (3) Sorocaba, Fazenda Nova e 71,951 30% 68, Caiçara Plate-cisterns (4) Sítio Feijão 43,848 70% 136, Plate cisterns (5) Sítio Macacos 47,151 21% 24, Plate cisterns (6) Sítio Tapera 42,000 38% 57, Plate cisterns (7) Distrito de Nazaré 68,400 36% 89, Wire-mesh cistern (1) Pocinhos 92,416 42% 146, Wire mesh cistern (2) Cruz da Menina - Dona Inês 108,954 45% 193, Wire-mesh cistern (3) Itapororoca 39,492 51% 82, Wire-mesh cistern (4) Gurinhém 172,620 50% 348, Wire-mesh cistern (5) Sítio Santa Cruz 133,500 14% 26, Complete Water Supply System (piped to households). 27 Water Supply System using large tank and communal standpipe. 45

60 Wire-mesh cistern (6) Sítio Caracol 42,400 51% 88, Wire-mesh cistern (7) Fazenda Icó - Pocinhos 96,788 65% 275, Wire-mesh cistern (8) Lambedor do Exu - Juru/PB 84,563 25% 60, Total 1,170,859 2,140,847 Average 78,057 46% 142, As shown in Table 8, investments in Cistern subprojects averaged around R$ 78,000 each. Although with an ample range of results between individual subprojects, all observations in the sample proved economically viable. In other words, their benefits to society as a whole outweigh their costs. When aggregated, the average Economic NPV per subproject was around R$ 143,000, the weighted average of the IRR was estimated at 46%, and the Benefit Cost Ratio at 2.43, meaning that for every R$ spent, the net benefits for society were equivalent to R$ In addition to the cost-benefit analysis, the cost-effectiveness of the cistern subprojects was tested by comparing the cost of those financed by COOPERAR II to similar investments by other programs in Paraiba. In essence, as shown on Table 9, COOPERAR II costs were amongst the lowest, with similar or possibly higher quality standards. COOPERAR II Table 9: Cost comparison of Cisterns by Program Relative cost difference to Cooperar II Cistern/cement and galvanized wire-mesh. Capacity of 16,000 liters. Constructed in-site with local labor. Training on operation and 2,650 - maintenance Cistern/ polyethylene. Capacity of 16,000 liters. Transport from factory to household. 5, % Training on operation and maintenance. Cistern / Pre-fabricated cement plates. Capacity of 16,000 liters. Constructed in-site with local labor. Training on operation and 2,200-17% maintenance Cistern / Pre-fabricated cement plates. Capacity of 15,000 liters. 3, % Program Type of Investment Cost (R.$) AGUA PARA TODOS (Ministério da Integração Nacional) ASA (Articulação Semiárido Brasileiro) INCRA (Instituto Nacional de Colonização e Reforma Agraria) Source: Adapted from Aide Memoire COOPERAR II, Supervision Mission, August, In the case of both types of Water Supply Systems, the average investment was around R$ 46,500. Of the 10 evaluated subprojects all but 2 proved to be economically viable. On average, their NPV was close to R$ 46,000, their aggregated IRR was 30% and 28 16,000- liters-capacity-equivalent, based on a cost of R$ 3,700 for 15,000 liters capacity. 46

61 their B/C Table 10 presents a list of the evaluated water supply system subprojects and their respective and aggregated economic indicators. Table 10: Investments in Water Supply Systems Economic Feasibility Indicators Type of Investment Community Total Investment (R.$) E-IRR E-NPV (R.$) Water supply Complete Umbuzeiro doce 88,139 16% 23, Water supply Complete Sítio Deserto 121,986 6% -20, Water supply Single Riacho Saco 27,193 66% 79, Water supply Single Riacho Saco dos grossos 30,428 70% 95, Water supply Single Sítio Cruz 33, , Water supply Single Buenos Aires 33,829 52% 72, Water supply Single Una de São José 27,938 45% 49, Water supply Single São Pedro 34,092 41% 52, Water supply Single Barra do Salgado 33,433 36% 42, Water supply Single São João de Baixo 33,829 61% 88, Total 464, ,527 Average 46,470 30% 45, B/C 30. In the case of all-weather viaducts, all subprojects proved to be economically viable. The relatively stronger economic indicators with respect to other infrastructure subprojects are explained by the composition of the direct beneficiaries taken into account for the analysis. While for the cisterns and the water supply systems the direct beneficiaries were families from those communities that implemented the subproject, for the all-weather viaducts, due to their public-good nature, their economic benefits also extend to surrounding communities. Table 11: Investments in All-weather Viaducts / Improved Access Economic Feasibility Indicators Type of Investment Community Total Investment (R.$) E-IRR E-NPV (R.$) All-weather viaduct Salgadinho 92,431 18% 31, All-weather viaduct Cabaceiras 98, % 582, All-weather viaduct Aroeira de Baixo 124, % 751, All-weather viaduct Açude Novo e Bananeira 70, % 707, All-weather viaduct Riachão 146, % 1,516, All-weather viaduct Passagem/Pb 96,780 57% 226, Improved Access Fazenda Nova / Sitio Paraguai 55,551 80% 199, Total 684,349 4,014,174 Average 97, % 573, B/C IV. Final Remarks and Conclusions 31. Conventional ex-post financial and economic cost-benefit analyses were undertaken for a randomly selected sample of productive and infrastructure investments, respectively. Given data availability limitations at the time of the analyses, and the resource-intensive and 47

62 time-consuming nature of the effort required for data reconstruction, the sample size for both the productive and infrastructure subprojects could not be large enough to assert with a high degree of statistical confidence that the observations are representative of the sampling universe. Table 12 presents aggregate financial or economic feasibility indicators for productive or infrastructure subproject types, respectively. Table 12: Aggregate Financial/Economic Feasibility Indicators for Sample, by Subproject Type Subproject Type IRR NPV (R.$) B/C Productive 29 17% 1,186, Infrastructure 31 65% 6,614, Aggregate indicators for the infrastructure subprojects were all positive, implying that their contribution to society as a whole outweighs the investment and operating costs borne by the State of Paraiba through COOPERAR II, the beneficiary communities through their counterpart contributions, and other partners. This is not surprising, as the cost-benefit relationship for these types of infrastructure investments is well documented and understood. Moreover, though, when comparing the average costs of similar investments financed by Federal Programs in Paraiba, particularly in the case of cisterns, those financed by COOPERAR II were amongst the lowest, with equal or superior quality. In other words, the decision to finance these investments appears to have been sound from an economic efficiency perspective Similarly in the case of productive subprojects, aggregate financial indicators were positive and thus conveyed a message of sound investing in this type of subproject. Actual business data to conduct the financial feasibility analysis were scarce, largely due to the short period of actual subproject implementation. This makes the financial cost-benefit analysis of the productive investments a hybrid between an ex ante and an ex-post analysis. As such, the conclusion that could be reached at this stage, is that productive investments of the nature of those evaluated have the potential to develop and consolidate into financially feasible ventures in their own right, if they were to continue to receive capacity strengthening, technical assistance and other related support. The State of Paraiba may want to consider providing support to these ventures during their consolidation phase to improve their sustainability Financial Feasibility Analysis sample of 17 subprojects Eliminating subprojects with NPV < 0 Economic Feasibility Analysis sample of 34 subprojects Expected benefits for actual infrastructure investments are projected to be larger than for the subproject types originally accounted for at appraisal. This is largely due to the increased number of beneficiaries projected to accrue the economic benefits of all-weather viaducts and improved rural access roads, compared to subproject types included in the ex-ante analysis. Therefore, the larger expected benefits reflects to a certain extent the type of subproject demanded and is not necessarily limited to whether the project was more efficient per se (compared to ex-ante calculation). 48

63 Annex 4. Bank Lending and Implementation Support/Supervision Processes (a) Task Team members Names Title Unit Responsibility/ Specialty Lending Jorge Munoz Task Team Leader LCSFM Land Specialist Tulio Barbosa Consultant LCSAR Ag. Economist Joao Barbosa-De Lucena Consultant LCSAR Agriculture Spec. Cidalia Brocca Finance Analyst CTRLN Disbursement Cary Anne Cadman Sr. Forestry Specialist AFTSG Environment Raimundo N. Caminha Consultant LCSAR Agriculture Spec. Senior Social Development Alberto Coelho Gomes Costa Specialist LCSSO Social Specialist Isabella Micali Drossos Senior Counsel LEGES Legal Susana Amaral Financial Management Specialist AES Financial Management Anna F. Roumani Consultant SASDA Rural Development Luciano Wuerzius Procurement Specialist LCSPT Procurement Maria de Fatima de Sousa Amazonas Supervision/ICR Senior Rural Development Specialist LCSAR Rural Development Edward Bresnyan Task Team Leader LCSAR Agricultural Economist David Tuchschneider Task Team Leader LCSAR Agricultural Economist Susana Amaral Financial Management Specialist AES Financial Management Tulio Barbosa Consultant LCSAR Ag. Economist Raimundo N. Caminha Consultant LCSAR Ag. Specialist Luis O. Coirolo Consultant AFTA1 CDD Specialist Alberto Coelho Gomes Costa Senior Social Development Spec. LCSSO Social Development Eduardo Franca De Souza Financial Management Analyst LCSFM Financial Manag. Daniella Ziller Arruda Karagiannis Program Assistant LCC5C Project Support Anna F. Roumani Consultant LCSAR Rural Development Luciano Wuerzius Procurement Specialist LCSPT Procurement Maria de Fatima de Sousa Amazonas Senior Rural Development Special. LCSAR Rural Development 49

64 (b) Staff Time and Cost Staff Time and Cost (Bank Budget Only) Stage of Project Cycle USD Thousands (including No. of staff weeks travel and consultant costs) Lending FY FY FY Total: Supervision/ICR FY FY FY FY FY FY Total:

65 Annex 5. Beneficiary Survey Results 5.1 The Project did not finance a formal impact evaluation. To improve data available for project assessment, the Bank team agreed with Cooperar on a methodology for analyzing achievements of each of the indicators in the Results Framework. The methodology included random sampling, field interviews and focus groups to drill down into each indicator (with some exceptions where the indicator represents a simple output). The work was conducted post-closing and results are summarized in the Data Sheet and presented as received, below. The background Excel files and a series of Annexes associated with each indicator are archived in WB Docs. Indicator 1 Universe Sample Data Collection Instrument Field Work Tabulation of Data Increase of 20% in assets held by beneficiaries of productive subprojects 156 Productive subprojects Random sample of 54 productive subprojects, representing 34.6% of the universe. The target population interviewed was beneficiary families which participated in Immersion Training/ITOG 33 Structured Questionnaire Meetings were conducted in communities benefiting from productive subprojects, registering/recording the final status of assets held at endproject (Exit Profile) for those beneficiaries who participated in the Immersion Training/ITOG and who had filled out the Entry Profile (Initial Assets). An individualized analysis was conducted for each asset category (Land, Construction/Structures, Equipment and Animal Herds/Livestock). Initial assets were consolidated via the ITOG system 34, with values transferred to Excel tables for data analysis. The following procedures were applied: 1) For each beneficiary family, incremental increase in their assets was calculated determined by the difference between final and initial assets (%). 2) Then, the average of the incremental increases in assets of families benefited by each subproject were obtained 3) Then, an average was calculated of the increases in assets of subprojects in each typology covered by the study 33 This is a methodology developed by the Pedagogue JOCAFI - João Carlos Filho, with the support of ASSOCENE, and constitutes an immersion of all interlocutors within the socio-economic universe of the beneficiaries, and which was adapted by the Cinturão Verde team (Mayor s Office of João Pessoa Municipality PB) for the circumstances within which the Project was executed. 34 The ITOG System was developed with the objective of generating, among other indicators, the monitoring of the evolution of assets (patrimony) based on data collected by/in the Entry Profiles or Baseline (Immersion Training/ITOG). 51

66 Result 4) Lastly, the increase in assets of beneficiary families was measured using the average of the typologies considered Average incremental increase in assets by category and typology = 40% NOTE: The PAD Results Framework (RF) shows two indicators for assets held: one referring specifically to beneficiaries of productive SPs (Intermediate Outcome Indicator - IOI) and the other to all beneficiaries (Results Indicator - RI). The Project MTR upgraded the IOI (productive) to an RI and measured only that version. Indicator 2 Productive subprojects represent 25% of total investments 35 Universe Sample Data Collection Instrument Field Work Tabulation of Data Result 156 Productive subprojects Data collected directly from the MIS Percentage based on the number and amount of resources and subprojects, respectively Resources applied to productive subprojects represented 43.21% of total resources invested in subprojects (Table 1) Percentage achieved of productive subprojects to total subprojects was 32.03%. TABLE 1 Percentage of Agreements and Resources applied to Productive Subprojects Typology Agreements % Value Approved (R$) % Infrastructure , , Productive , , Social 5 1, , Total ,936, The Results Framework evaluation exercise looks at this indicator in two ways: productive subprojects as a percentage of total subprojects; and, investments in productive subprojects as a percentage of total investments in subprojects. 52

67 Indicator 3 Universe Sample Data Collection Instrument Field Work Data Tabulation Result Ratio of project resources to resources leveraged from other State and Federal programs is 1 : 5 by end-project 156 Unified Councils (associated directly with the Project) Random sample of 32 Councils representing 20.5% of the universe Structured Questionnaire Meetings were held with the Municipal Councils for Sustainable Rural Development (CMDRS) with the participation of Council Presidents, members of their boards, and representatives of community associations participating in the research sample. Data were consolidated by year ( ), considering 3 typologies (resources of Cooperar, its partners, and resources from other programs). Table 2 presents a synthesis of data collected and recorded in the Archive Alavancagem_Recursos.xlsx. The proportion of resources applied by the Project in relation to those leveraged from other programs was 1 : 3.4. NOTE: (a) Cooperar used a sampling methodology based on 32 MCs out of 156 unified MCs directly associated with the Project (total unified MCs at the time were 178), and Project funds/partnerships related directly to these 32 MCs. (b) Project resources in this case means only those related directly to the SP activities of the 32 sampled MCs, not total SP activities processed by the 156 unified MCs associated directly with the Project. (c) As estimated by Cooperar and shown in Table 2 below: Cooperar (1) (R$16.48 m) represents project resources (Bank loan, Borrower counterpart); Partner (2) (R$2.598 m) represents the counterpart contribution of beneficiaries as required under the Project, for SPs processed through the sampled 32 MCs; and Other Programs (3) (R$ m) represents resources leveraged by Community Associations related directly to the activity financed, and processed through the 32 sampled MCs. (d) However, as designed at appraisal, total project cost for SPs under Component 1 (see Annex 1) would be the numerator and total resources leveraged (via Cooperar s partnerships plus direct leveraging by the MCs) the denominator. 53

68 Estimated in this manner, the numerator of the ratio would be total resources invested in Component 1 Community Subprojects (US$23.22 m or about R$ 47.0 m) and the denominator R$306.0 m (Cooperar and MC leveraging). (e) R$47.0 as a ratio of R$306.0 m = 1 : 6.5 TABLE 2 Leveraging of Resources Cooperar/Partners and Other Programs Counterpart/Period Cooperar (1) Partner (2) Other Programs (3) Counterpart Total (4) = (2) + (3) Initial , , , ,07 Actual , , , ,47 Aprovado , , , ,35 Aprovado , , , ,27 Aprovado , , , ,01 Aprovado , , , ,63 Proporção de Recursos Alavancados: (4) : (1) 1 : 3.4 Source: Field Research (Cooperar 2014). Indicator 4 35,000 famílies benefited with at least one community subprojects by end-project Universe 478 Subprojects with agreements Sample Data Collection Instrument Data collected directly from the MIS Field Work Data Tabulation Result 26,815 families with subprojects financed by the Project (77%) Indicator 5 Universe Sample Data Collection 75% of productive subprojects generate employment by endproject 156 Productive Subprojects Random sample of 54 productive subprojects, representing 34.6% of the universe. The target population interviewed comprised beneficiary families who had/had not participated in the Immersion Training/ITOG. Structured Questionnaire 54

69 Instrument Field Work Data Tabulation Result Meetings were held in communities which had benefited from productive subprojects, to record incremental occupations/jobs created among all the families present at the meetings (Information was selfdeclared during interviews with beneficiaries). Data was consolidated based on whether it was family labor (temporary and permanent) and contracted labor (temporary and permanent). The archive Ocupacoes_Incrementais.xlsx presents the quantity of incremental jobs for each productive subproject and for each associative entity researched. 98.0% of the productive investments generated incremental employment, by end-project.. Indicador 6 Universe Sample Data Collection Instrument Field Work Data Tabulation Result 800 socio-economic and productive investments financed by endproject Data collected directly from the MIS 487 community subprojects socio-economic and productive - were financed (61%) Indicator 7 Universe Sample Data Collection Instrument Field Work Data Tabulation Result Types of productive subprojects financed by the Project Data collected directly from the MIS 15 types of subprojects were financed (beekeeping/honey, (apicultura, 55

70 irrigated agriculture, poultry production, goat-raising, fish farming, agricultural mechanization kits (tractors and equipment), red rice, processing units, agro-industrial marketing, clothes-making, handicrafts, mining, flower production, dairying, fruit production) Indicator 8 40% of productive subprojects have established commercial arrangements by end-project Universe Sample Data Collection Instrument Field Work Data Tabulation Result 156 productive subprojects financed Structured questionnaire Meetings were held with Presidents and members of the beneficiary community associations with productive subprojects. Table 3 presents a synthesis of the data collected and recorded in the archive Acordos_Comerciais.xlsx. 32.1% of productive subprojects have commercial arrangements Of the commercial agreements established, over two thirds (68%) are formal (PAA, PNAE, CEASA, CONAB, Municipalities, local and regional markets). TABLE 3 Commercial Agreements established by Beneficiary Associations with Productive Subprojects COMMERCIAL AGREEMENTS No. % Do you have a commercial agreement? YES NO TOTAL SUBPROJECTS Type of commercial agreement FORMAL FORMAL/INFORMAL INFORMAL TOTAL SUBPROJECTS Source: Field Research (Cooperar 2014). 56

71 Indicator 9 Universe Sample Data Collection Instrument Field Work Data Tabulation Result 50% of project-related community associations with women, Quilombola and/or Indígenous people in leadership positions Data collected directly from MIS Of the 487 subprojects, 36.55% have women in leadership positions; Of the 487 subprojects, 0.8% were led by indigenous people, corresponding to 04 financed subprojects benefiting 65 families; Of the 487 subprojects, 1.84% were led by quilombolas, corresponding to 09 financed subprojects benefiting 602 families in 23.68% of the quilombola communities State-wide It was verified that 39.19% of community associations have women, quilombola and/or indigenous leadership vs targeted 50%. Result is 78.4% of target. Indicator 10 Universe Sample Data Collection Instrument Field Work Data Tabulation Result Amount of additional resources leveraged by Municipal Councils from other State and Federal programs for infrastructure, productive or social investments 156 Unified Councils (those associated directly with the Project) Structured questionnaire Meetings were held with Municipal Councils for Sustainable Rural Development (CMDRS) with the participation of the Council Presidents and board members. Data were consolidated by year (2011, 2012 and 2013 subprojects demanded and approved), considering the resources leveraged by the Councils. Table 4 presents a synthesis of the data collected and recorded in the archive Outros_Programas.xlsx. The portion of resources applied to the project and leveraged by the Municipal Councils was about R$ million. A majority (59.0%) of these resources were approved in 2013 while in 2011 the proportion of total leveraged was about 12.6%. 57

72 TABLE 4 AMOUNT OF ADDITIONAL RESOURCES LEVERAGED BY MUNICIPAL COUNCILS IN THE PERIOD 2011 TO 2013 Counterpart Initial ,06 Actual , Approved 31,278, Approved 79,741, Approved , Total Approved 249,129, Source: Field Research (Cooperar 2014). Indicator 11 Universe Sample Data Collection Instrument Field Work Data Tabulation Result 20.0% of community associations with productive subprojects gain access to other sources of financing by end-project 156 Productive Subprojects Structured Questionnaire Meetings were held with associations and related groups, with participation of their Presidents and directors/boards. Data was consolidated initially based on the existence/otherwise of subprojects which gained access to credit/financing and then, the identification of the institutions which provided this financing. Tables 5 and 6 present a synthesis of the data collected and recoded in the file Acesso_ao_Credito.xlsx. 19.9% of community associations with productive subprojects gained access to primary/other sources of financing by end-project. Of these associations, all had access to credit during the execution of their subproject via Empreender/PB (29 associations 93.5%) and Fundação Banco do Brasil (2 associations 6.5%). The total amount of financial support to these associations which gained access was R$ 1,362, TABLE 5 COMMUNITY ASSOCIATIONS WITH PRODUCTIVE SUBPROJECTS WHICH GAINED ACCESS TO PRIMARY/OTHER FINANCING SOURCES BY END-PROJECT DID YOU HAVE ACCESS TO FINANCING? No. % YES NO TOTAL SUBPROJECTS ,0 Source: Field Research (Cooperar 2014). 58

73 TABLE 6 INSTITUTIONS WHICH PROVIDED FINANCING TO COMMUNITY ASSOCIATIONS WITH PRODUCTIVE SUBPROJECTS INSTITUIÇÃO No. % EMPREENDER/PB FUNDAÇÃO BB TOTAL SUBPROJECTS Source: Field Research (Cooperar 2014). 59

74 Annex 6. Stakeholder Workshop Report and Results INTRODUCTION As part of the process of project closure, an evaluation seminar was organized to evaluate/analyze activities under the Cooperar operation. Around 30 participants representing beneficiary associations, Municipal Councils for Sustainable Rural Development, partner agencies, the Cooperar team and World Bank representatives participated. SYNTHESIS OF PRESENTATIONS AND COMMENTS: Important points and achievements revealed in the presentations: In all cases presented it was evident that the issue of the organization of beneficiaries, and degree of cohesion within groups and with their leaders was a determining factor and indispensable to achieving results. These factors allowed communities to confront challenges to implementation and management and in many cases to go beyond Cooperar support, leveraging other partnerships and resources. Subproject implementation promoted learning of various skills/subjects up till then unknown to beneficiaries. In particular, presenting final accounts, procurement and the management of a relatively large amount of funds compared to what these associations generally utilize/manage. Consequently, despite the difficulties mentioned, associations strengthened their capacity and felt that they were more able to act independently and get results. The issue of partnerships was something mentioned frequently as a success factor which expanded the results of Cooperar. As much with public entities and projects, as well as private organizations, the leveraging of new partnerships, in many cases with Cooperar support, was highly relevant in enabling beneficiary associations to increase the provision of necessities which were not/could not be provided by the Cooperar project. Support and technical assistance (including training) were stated as a key element in achieving positive results. Many participants discussed the need for this support and TA to not be once-off but be accessed/supplied continuously including after the subprojects were completed. It was unanimously recommended that future support and TA activities be strengthened and more systematic. Also noted by participants was the theme of identification and preparation of subprojects. It was evident that the feasibility and market studies conducted were highly pertinent and necessary. It was suggested that in future these tools for identification and management be generalized to all types of subprojects. Some presentations showed that the diversification of productive activities is important in the rural context in Paraíba, to diversify sources of income and improve economic viability, as well as to generate new types of occupations. Finally, social themes such as quilombola communities, or trash recyclers showed the importance and relevance of implementing subprojects which took into account the specific circumstances of these groups. Weaknesses and challenges noted by participants: In various cases, but not in all, the issue of the weight/burden and the complexity of administrative procedures (bureaucracy involved in procurement, obtaining licenses, presentation of final accounts) were mentioned as elements slowing things down and having a high cost for beneficiaries: financial and logistical costs in handling all these 60

75 matters/steps. Support from the project team was mentioned favorably but it was not sufficient. Support directed to specific beneficiaries would be a positive advance. In the case of processing units (fruit pulp, honey, chicken slaughter units), the increasing difficulty of addressing legal aspects/laws pertaining to construction/infrastructure were mentioned. Information and guidance provided to beneficiaries were sometimes unclear and above all, depended a lot on the persons responsible for supervising the works. On the other hand, access to markets is increasingly based on requirements for certificates of inspection (municipal, state and/or federal). Based on the testimony from project beneficiaries, it was clear that these aspects need to be considered with greater care, and support and assistance strengthened. The functioning of the CMDRSs was greatly improved and is providing space in which the processes of identifying and selecting subprojects are being upgraded, improving transparency and the degree of participation. The functioning, rules and criteria for selection and prioritization of subprojects need further strengthening. In the cases of productive subprojects, many of which have had little time to function since completion, the main challenges are still to come: guaranteeing sustainability and good management, and ensuring that these investments really become productive and are within the parameters initially defined. Group 1 - Relevance: Concept of the Project 1. What should be done differently, during the concept phase, in a similar, future project? Establish clearer eligibility criteria to select beneficiaries; Ensure the participation of beneficiaries in the concept stage of the project; Recommend under the productive component, the identification of productive chains with potential and with economic occupations which can be supported, including preparation of business plans with participation of beneficiaries; Mobilize, build awareness and train beneficiaries from the concept stage of the community subprojects; Provide support, assist and conduct periodic evaluations of subprojects implemented previously by Cooperar, in order to give continuity and ensure the sustainability of activities conducted. 2. Was there awareness of and flexibility to make changes during execution? Expansion of the types of subprojects to include certain types of mining activities and solid waste management; Strengthening of water resources activities (cisterns and water supply) to confront the major drought which assailed the semi-arid region; Expansion of the value financed for beneficiaries of productive subprojects; Direct administration of the execution of medium-sized subprojects. 4. Could the scope, governance and monitoring and evaluation system be improved? Create a multi-disciplinary group to monitor, evaluate and guide activities; Keep strengthening the CMDRSs, creating instruments which further increase their autonomy and establish greater flow of information and interactions, including with project actors; Create a communication channel between the Cooperar Project and Society through a system of listening/hearing; 61

76 Improve the MIS, incorporating new tools for M&E including providing the conditions for mass-use of the system by Cooperar technicians, as well as for beneficiary access; Promote training in information technology for the Cooperar team, mainly Regional Management Offices, in respect to the utilization of the tool available in the MIS. 5. Could the project s documentation system be modified? Use Information Technology to the extent possible, minimizing the utilization of printed documents; Physical processes should remain at Head Office and be computerized, speeding up processes and reducing the stages involved in handling documents, with resulting acceleration of subproject implementation. 6. What were the contributions of the principal actors during the Concept Phase? Could they be improved? a) Implementing Agencies (COOPERAR Secretariat of Planning and Management): Providing data and information and contributing to and approving proposals presented by Cooperar. Territorial actors and their organizations (Municipal Governments, Municipal Councils, and Community Associations): Restructuring the Municipal Councils and attending to different types of subprojects; Improvement could be made, better identifying the real problems whch need to be addressed and indicating technologies already known and utilized by some and which could be disseminated widely. World Bank: Providing data on the evaluation of the previous project; Providing support to the contracting of specialized consultants; Expanding the margin of State autonomy in the definition of project norms and operational procedures; Supporting policies and activities to add value to human resources in operationalizing the Project; Maintaining direct contact with beneficiaries, and getting to know their socio-economic reality; Identifying success stories in similar projects in other states and/or countries and which could be incorporated into Cooperar projects. Group 2 - Implementation: Benefts and Sustainability 1. What were the principal benefits obtained from the Project? Changes: Quality of life improved, sociability/companionship, and strengthening of family links/ties, restoring the self-esteem of project participants. Confidence in the capacity to manage on the part of association members and in acquiring and maintaining the investments. 62

77 Strengthening the CMDRS and continuity in the actual management model of COOPERAR. Stimulating and/or strengthening new partnerships, management capacity and socialization of people. Generated among direct and indirect beneficiaries of the organizations, a more critical conscience/awareness and planning by members. Increase and continuity in the production cycle (in productive subprojects, employment and income). Capacity to participate politically, socially and economically in these ventures based on the activity developed. Improved capacity of the public to demand and complain, and new leaders have sprung up, notably the effective participation of women in various types of subprojects. See Link with testimony of Luciana Balbino, leader of the Chã de Jardim sommunity: Contributing Factors: Courage, determination, perseverance, vision of the future, unity, solidarity Participation in meetings, conferences, seminars. Linkages made to find new partners; Training for the agents involved. The posture of government people and managers which ensured that the CMDRSs prioritize the demands of associative entities. 2. What were the critical factors and problems which affected project implementation? Bureaucracy in Procurement when its execution is decentralized and then the submission of accounts. Fragility of some CMDRS and organizations Problems in land administration/ownership Difficulties with environmental licensing Individualism in the management of subprojects/ventures Difficulty accessing certification required by enforcement agencies, for marketing the products of ventures financed by COOPERAR; Low educational level of some communities which complicates the management of their subprojects Party political intervention/interference. Fragility in the ability of some partners to carry out their signed commitments. Measures taken to mitigate and/or correct the above criticisms: Technical assistance and training is continuing, aimed at improving the performance in executing subprojects and submitting accounts. Future Mitigation: Organization and strengthening of associations, cooperatives and CMDRSs. Democratization and flexibility in the Laws governing these projects/subprojects. 63

78 Agrarian reform and accelerating the process of land reform/regularization. Technical, legal and financial support of partners such as: SUDEMA, INCRA, INTERPA and others to ensure that benefits are delivered faster. Awareness-building about the importance of education of beneficiaries, which will influence the development of a critical and political vision as a full citizen of their own community, and respecting the autonomy of partner institutions. 3. Is it likely that the benefits obtained will be maintained beyond project conclusion? Risks: Lack of planning for the management and sustainability of the project; Lack of management training; Difficulty in accessing new investments; Lack of markets/consumers for productive subprojects. Political influences generated by leaders of companies; Internal conflict within social institutions; Mechanisms for ensuring sustainability: Continuous training of beneficiaries and new leaders, including young people, in the dynamics of processes, preservation and conservation of these ventures, and financial management. Market studies, strategic planning, maintaining quality standards so that the client is always satisfied. Sign and carry out agreements and commitments, respect the rules and regulation for using the subprojects. To have a financial return for producers. To have clarity concerning the importance of COOPERAR in accompanying future works. To anticipate/foresee the maintenance and replacement of parts and equipment for these ventures. Maintain good, permanent relationships with partners. Success with these projects with mean the continuity of the process and future agreements. Build awareness in agents involved in the entire process about the preservation and conservation of the environment. COOPERAR to continue providing support and guidance for the management of productive subprojects and those types of infrastructure which require this action to ensure their sustainability. Strengthen the associations, cooperatives and partners through their members to provide continuity of these ventures now and in the future. Group 3: Institutional Development and Collaboration 1. What were the improvements in the institutions benefited (Municipal Councils and Associations), in terms of their capacity to obtain financing, carry out activities for the benefit of the poor rural population (investment and O&M), and present accounts? 64

79 Institutional Improvements: Fewer fragile Councils, because with unification now done a majority of the Councils are able to exercise their real role in prioritizing subproject proposals brought by the associations, as well as monitoring the implementation of subprojects. Subprojects previously little known have gained transparency and speed. Groups formerly excluded are not only not excluded but now have priority (quilombolas, women and indigenous groups etc). The unified Councils (CMDRS) which are able to remain independent of some local political influences have come to develop more activities beneficial to their target population, acquiring greater credibility in public opinion. Accounting to stakeholders: In presenting an account of actions and activities of Councils and associations to the people, some experiences are creative, with greater participation in Council meetings and inviting more civil society institutions. There are publications on social networks, local radio broadcasts/programs, religious events, official sites, but we still lack systematic information from COOPERAR. The Fruit Pulp Project in Chã do Jardim could not expand its production due to lack of cold storage capacity. With the Cooperar II subproject, production increased, absorbing idle manual labor in its production unit and expanding the range for fruit purchasing in the localities, increasing the amount of labor used in the fruit production activity. The all-weather viaduct (ford) of Pedra D'água - Ingá provided mobility year-round, not just for the beneficiary community, but also for all surrounding communities, increasing their selfesteem and reducing the time expended to access the municipal capital. Factors which contributed to obtaining benefits: Credibility and visibility pf social works, events, fairs etc Technical knowledge of the Manager in relation to potential state projects. Permanent participation of the communities in the Municipal Councils A majority of CMDRS are now de-linked from party politics that is, they act independently. 2. What was most notable (positive or otherwise) about the performance of the principal actors involved in the Project and how can it be improved for a similar Project in the future? a) Implementing agencies: (COOPERAR Secretariat of Planning and Management) Mobilization for inclusion of other segments of society: indígenous peoples, trash recyclers, quilombolas, women, land reform settlements Posture of the Manager in respecting the priorities of the Councils in order to formalize agreements. Visibility of the State of Paraíba within the country. Revitalization of COOPERAR in the past four years; The guidance provided by COOPERAR in productive chains. 65

80 Partnerships with other institutions: SEBRAE, BNB, Embrapa, UFCG, UFPB, SENAR, EMATER. Training as an instrument whch permeates COOPERAR s activities at every stage. Problems: Reduced cadre of personnel and lack of permanent staff dedicated to the project Insufficient capillarity; Institutional disarticulation need for restructuring; Deficient technical assistance for some categories of productive investments; Numerous cases of subprojects with less than desirable technical quality. Suggestions: Train Council members. Systematically monitor subprojects; The personnel team needs strengthening by contracting trained technicians and/or outsourcing these services. Ensure the provision of permanent, good quality technical assistance. Etsablish strong linkages between firms in the agro-livestock sector of the State with the COOPERAR projects (EMATER, EMEPA, EMPASA and INTERPA); Promote exchanges so that beneficiaries can learn about successful experiences. b) Territorial actors and their organizations (municipal governments, Municipal Councils, community associations). Noteworthy: 178 Municipal Councils unified; Emergence of an appropriate space to discuss problems and advances in the municipalities. Emergence of new leaders in the rural communities committed to seeking activities which will improve living conditions. Problems: Interference in the Councils by some municipal managers and other political entities. Lack of interest and/or lack of information of associations regarding the activities of the Municipal Councils and the benefits they can deliver. Weak linkages between local actors in municipal development. Suggestions: Strengthen the Councils and associations by training their members Build awareness in the Councils about the importance of their presence in discussions of the associations; Provide the Councils with functionality and operational capacity, for example, intervening in and monitoring the execution of public policies. 66

81 c) World Bank Noteworthy: The interest of the World Bank in signing a new Loan with the State. Problems: The role of the World Bank is not visible to the beneficiaries as financier of these subprojects, and as regulator of activities (FM, Procurement etc). Unification of the 10% counterpart contribution Lack of discussion on the Operational Manual with the Municipal Councils and associations. Suggestions: Provide information to beneficiaries on the World Bank as financier of subprojects. Flexibility in the percentage share of counterpart. Discussions about the viability/feasibility and full analysis of the subproject should start at the base with the associations and Municipal Councils. Financial resources should be allocated for implemented subprojects until they reach their full sustainability. 67

82 Annex 7. Summary of Borrower's ICR and/or Comments on Draft ICR A. Executive Summary of Borrower Completion Report: 7.1 The Paraíba Second Rural Poverty Reduction Project, known as COOPERAR II, is part of a broader program executed in eight northeastern states since the early nineties, in partnership with the World Bank. The main feature of this program is the adoption of a decentralized and participatory approach to development, with decisions made by poor rural communities. The methodology is known as "CDD - Community-Driven Development". The adoption of this approach was a very profound change in relation to what had been utilized until then, in which investments were defined, prioritized and executed by government agencies ("Supply-Driven Development"), with little or no participation of local actors. 7.2 In the other states of the Northeast region of Brazil, the program began in 1993, but in the state of Paraíba the first operation with the World Bank occurred in 1998, with the signing of the Loan Agreement 4252-BR to finance the "Project Rural Poverty Alleviation ", known as Project COOPERAR I". At the same time it adopted the CDD approach, COOPERAR I also represented the first step in a comprehensive program of the State Government aimed at reducing poverty indicators in rural areas, which would be continued with the implementation of the Second Rural Poverty Reduction Project ( COOPERAR II), the subject of this report. 7.3 In strategic terms COOPERAR II was intended to contribute to Government s overarching goal, expressed in the Pluriannual Investment Plan (PPA ), of raising the HDI of to by 2020, with productive investments for income and employment generation in rural areas and to promote access of smallholders to markets. Additionally, continuity was to be given to funding socioeconomic infrastructure, as funded by the previous operation, mainly in water supply. To broaden the impact on economic development in general, the new project was to integrate its investments with those of other public policies, to attract additional resources for beneficiary communities and thereby achieve positive synergies. 7.4 In addition to the above guidelines, the future project was to incorporate and refine the CDD methodology, through the implementation of strategies of self-selection of beneficiaries, prioritization of investments and execution by communities and their associations, having as the central focus motivatiing producers to increase their demands for productive, market-oriented activities, and supporting vulnerable groups including women, indigenous and quilombolas. Results: 7.5 Demand: In the early years, the priority actions were Institutional Development, with a wide dissemination of the project and community mobilization activities working with the community associations and representative Municipal Councils. 7.6 In the projected period for the implementation of COOPERAR II, 985 proposals were submitted, a distribution averaging close to 200 proposals per year. With the application of the total funds provided for the period and other resources committed by partners, 487 subprojects were approved, comprising 53% of all infrastructure proposals received, 45% of productive and 28% of social. 7.7 Cost increase: During the execution of COOPERAR II there was an increase in the costs of materials, equipment, supplies and labor, resulting in a substantial increase in the average cost of subprojects in relation to what was estimated at the time of project design. The original 68

83 average estimated value of a subproject was around R$ 52,000 but actual cost reached R$ 96,000 during execution, a percentage increase of over 83%. Given available financing, this increase implied a reduction in the number of approved COOPERAR II subprojects, which was 487 subprojects, or 60% of the 800 planned. 7.8 Productive subprojects had an average value of R$130,000, pushing up the average; while the average cost of an infrastructure subproject reached R$ 77,000. Social subprojects were on average R$ 216,000 due to the high value of subprojects for solid waste recycling financed in three municipalities. The processing units of various products, such as fruit pulp, manioc flour, dairy and pasta cost on average R$128,000. About one-third of all proposals for support centers, processing, handicraft production and marketing were financed, with an average value of R$102, The implementation of 487 subprojects, even though less than the 800 planned at appraisal, does not imply low performance. It was due to the increase in the average cost of investments approved in relation to what was estimated during the project design, which prevented the approval and financing of a higher number given the limit on available resources. If on one hand the number of subprojects, benefited families and municipalities was lower than planned, the goals were exceeded or satisfactory in terms of the number of associations and assisted communities, and in the number of monitoring visits to subprojects and Municipal Councils, among others Resources utilized/mobilized: Loan funds were fully disbursed and taking into account two reallocations among categories/components. However, the amount invested in the project was $28.89 million, slightly higher than the UC$28.16 million planned at appraisal. This small difference, apparently, is represented by the slightly higher counterpart contributions of the State and beneficiaries. It is important to highlight that the Government of Paraíba mobilized additional resources in the amount of R$ 13 million. These funds were invested in staff costs (77%); operating costs of the Technical Unit (9%); additional funding for Community Subprojects (8%); and the Institutional Development component (6%) Vulnerable populations: The participation of women in the organizations and Municipal Councils was significant. About 205 women held prominent positions, including as Presidents of associations, cooperatives and Municipal Councils: and 178 presided or held positions of influence on the board of Associations and 33 are Presidents of Municipal Councils. Most associations tended to elect women as treasurers on the basis of their trustworthiness in the custody of the resources. In six municipalities, six female presidents of associations are also chairmen of the Municipal Council boards. Women also have the lead management role for a significant part of the infrastructure and social subprojects. With regard to productive subprojects, female participation in the management of investments is approximately 30% of all productive subproject agreements Quilombolas: The COOPERAR II Project supported the implementation of a Quilombo Population Census Study of the State of Paraíba, intended to support public policies for this segment of society. The work was done in partnership with the Association for the Support of African Descent Communities and Settlements - AACADE. The survey was conducted in quilombola communities, regardless of whether they had had collective ownership of land issued by INCRA official or state agencies. Altogether there are 38 quilombola communities, with 36 formally recognized and 2 in the process of obtaining formal recognition process from the Palmares Cultural Foundation. The census showed that their population had reached 7,095 people, of which 1,075 (15.2%) with households situated in urban areas and 6,020 (84.8%) in 69

84 situated in rural areas. The population distribution between the regions occurs predominantly in the sertao (semi-arid hinterland), with 2,112 inhabitants, representing 29.8% of the population defined by this census Indigenous groups: COOPERAR II allocated resources for 4 productive subprojects in indigenous areas, two of which were for poultry raising and one for beekeeping/honey production in the Municipality of Baía de Traição, and one irrigated agriculture investment in Rio Tinto. These investments benefited in the villages Forte, Cumaru, Galego, São Francisco, São Miguel, Tracoeira, Forte, Lagoa do Mato and Silva de Belém. All financed subprojects received training through the ITOG Office of Equalization where re the management of subproject was discussed and an Action Plan drafted for each investment, including income generation projections. Lessons Learned Operational Arrangements: The decentralized and participatory work of COOPERAR II, through the active participation of beneficiaries in decision-making and project control activities, promotes a sense of ownership that ensures sustainability and commitment to project results. The unification of the Municipal Councils (into CMDRS), by merging similar programs, decision-making processes and standards in the same Municipality, promoted an expansion of the capacity to mobilize resources and strengthened the unified Councils themselves, to the extent that they began to discuss various public policies and seek complementarities among them, avoiding waste and duplication. The Management Committees set up to monitor the implementation of each subproject had a significant role in the efficiency of resource use by the community associations and cooperatives and monitoring of the implementation of subprojects. The modern technological resources currently available (GPS, tablets, laptops) proved to be essential tools in supervision and monitoring activities enabling instant communication with beneficiaries and those with COOPERAR, and thus facilitating social control of actions. The identification and activities of partner organizations to support service areas in which COOPERAR does not have in-house expertise, helped to generate greater effectiveness of programmed activities. However, partnerships should no longer be informal but rather be formal contracts, including he definition of responsibilities and resources to be contributed by the participating partners. Investments in the Training subcomponent resulted in effective empowerment of beneficiaries and increase of the "sense of ownership" in the case of subprojects implemented. 70

85 Environment: It is important to continue expanding the focus on environmental issues for all types of subprojects financed, with an emphasis on agro-ecology, and a committment to provide healthier living standards to beneficiaries and consumers, in addition to preserving natural resources. The fact that the release of resources is conditioned on the presentation of environmental permits - as was the case - contributed to the building awareness of the need for environmental preservation. The institutionalization of the Ana Primavesi Agro-ecology Award, sponsored by COOPERAR, will involve publicly calling for annual proposals. The Award is intended for farmers and professionals who excel in activities related to environmental conservation and impacts on improving the quality of life of the communities, in addition to providing greater visibility to the project, and could contribute to the dissemination of agro-ecological practices. Social aspects: Compliance with productive subprojects and infrastructure to the segments of gender and ethnic groups historically disenfranchised from the strategies for promoting rural development was a successful and relevant activity that deserves to be expanded and enhanced in any new operation. Productive investments: The occurrence of prolonged drought adversely affected a majority of the productive subprojects, except those located in the coastal region. Hence the need to include in any future project financing for subprojects designed to increase water security through the use of technology (available) for dealing with drought in the sem-iarid region. Conducting market research for products that are relevant to small producers (rustic chicken, red rice, honey, fish, dairy products), was of fundamental importance to ensuring that subprojects were consistent with market requirements and disseminate this policy to beneficiaries. Pecialist advice to beneficiaries in marketing was crucial for a successful outcome of productive subprojects. Safe, potable drinking water and improvement in the health/sanitary conditions of households/residences are crucial so that they can commercialize the production of foods for supermarkets (milk products, sweets etc.) due to the hygiene an dpackaging requirements for such products. The formal preparation of business plans, following the standards of the micro-businesses assisted by SEBRAE, is an indispensable tool for the good management and success of productive subprojects, being an integral part of the participatory ITOG methodology, widely and successfully adopted by COOPERAR II. 71

86 B. Borrower Letter commenting on the Bank s Draft ICR: GOVERNO DO ESTADO DA PARAÍBA SECRETARIA DE PLANEJAMENTO E GESTÃO PROJETO COOPERAR Ofício n o 643/14-CG Cabedelo (PB), 25 de Agosto de Prezado David, With cordial greeting, I come across this inform you of the followinpoints: After analyzing the content of the preliminary ICR that was forwarded to us and carrying out a reading with our team, the document has been fully understood. We identified the following positive points: Recognition by the Bank of the adjustments made to the results indicators and the intermediate indicators of the MOP; Understanding of the problems faced by the state of Paraíba that influenced project implementation, especially with respect to the sociopolitical-economic context. A bilateral relationship that provides a space for shared construction of the RCM content; Recognition of the Cooperar team effort and commitment to obtaining the achieved results; The negative points we identified are as follows: Insufficient internalizing of the PAD content; Changes in Project Managers (3) and to the State Coordination (4) from the period between signing the contract, and the start and ending of implementation, the execution period was shortened, which led to complications in the project s governance. Insufficient deadline to conclude and close the expense report; 72

87 The state government, which was sworn in on 01/01/2011, encountered the contract/project in a completely paralyzed state, due to a complete lack of proactivity related assumptions of financial management of the contract. For that reason formal strategies were implemented within Cooperar to implement the actions within the previously established timeframes. This allowed Cooperar to unclog historical bottlenecks and present the present evaluated results. However, we expect a better evaluation from the financial sector. In the last 44 months, the government of Paraíba has invested R$6.6 billion in social and economic infrastructure in the state, while maintaining a strong and powerful structural apparatus for sustainable development, and creating a highly favourable ambiance for obtaining resources and investments for activities that focuss on sustainability in a way that minimizes vulnerability and risks to agriculture. This new proposed operation, which differentiates from the PCPRs that adopted primarily demand driven strategies, will be guided by a more supply driven strategy. In this regard, the project will offer potential beneficiaries a group of goods and services with a focus on supporting agricultural and non-agricultural productive chains previously given priority by COOPERAR, using local potentiality and vocational analyses, in addition to the identified economic opportunities, as a baseline. Nevertheless, the demand driven strategy will be adopted at a smaller scale, to attend to the beneficiary needs expressed in the individual or association investment management plans that were identified in meetings and discussions with producers. Demands may include the types of necessary productive assets, types of technical assistance, and schedules and flows of financial resources among other important needs such as infrastructure projects (water supply and sanitation) required for successful investments requested by beneficiaries and their organizations. Cordially, Roberto da Costa Vital Coordenador Geral Projeto Cooperar 73

88 Annex 8. Comments of Cofinanciers and Other Partners/Stakeholders N/A 74

89 Annex 9. List of Supporting Documents Project Appraisal Document Report No BR of October 24, 2008 Loan Agreement, dated April 28, 2010 Restructuring Documents Operational Manual including revisions Implementation Supervision Reports (ISR) Supervision Aide Memoires Stakeholder Workshop Report (Cooperar 2014) Results Monitoring Document (Cooperar 2014) Procurement Supervision Reports Financial Management Supervision Reports Tratores na Agricultura Familiar: Cartilha de Gestao (Cooperar/SEPLAN 2012) Support Document for Borrower Completion Report (Cooperar 2014) Borrower Completion Report (Cooperar, August 2014) 75

90 76