RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF THE

Transcription

1 Public Disclosure Authorized Document of The World Bank Public Disclosure Authorized RESTRUCTURING PAPER ON A Report No: RES19152 Public Disclosure Authorized Public Disclosure Authorized PROPOSED PROJECT RESTRUCTURING OF THE CEARA REGIONAL ECONOMIC DEVELOPMENT PROJECT (CIDADES DO CEARÁ- CARIRI CENTRAL) LOAN 7654-BR Approved on February 24, 2009 TO THE STATE OF CEARA WITH THE GUARANTEE OF THE FEDERATIVE REPUBLIC OF BRAZIL June 11, 2015 SOCIAL URBAN RURAL AND RESILIENCE GLOBAL PRACTICE VPU: LCR This document has a restricted distribution and may be used by recipients only in the performance of their official duties Its contents may not otherwise be disclosed without World Bank authorization 1

2 ABBREVIATIONS AND ACRONYMS PAD PDO PMU Project Appraisal Document Project Development Objectives Project Management Unit Regional Vice President: Senior Director: Director: Country Director: Practice Manager: Task Team Leader: Jorge Familiar Calderon Ede Ijjasz-Vasquez Marisela Montoliu Muñoz Deborah Wetzel Anna Wellenstein Sylvie Debomy 2

3 BRAZIL CEARÁ REGIONAL ECONOMIC DEVELOPMENT PROJECT: CIDADES DO CEARÁ P CONTENTS DATA SHEET 4 A SUMMARY 9 B PROJECT STATUS 9 C PROPOSED CHANGES 10 ANNEX 1: RESULTS FRAMEWORK AND MONITORING 13 3

4 DATA SHEET Brazil Ceara Regional Economic Development: Cidades do Ceara (P099369) LATIN AMERICA AND CARIBBEAN Social, Urban, Rural and Resilience Global Practice Report No: RES19152 Basic Information Project ID: P Lending Instrument: Specific Investment Loan Regional Vice President: Jorge Familiar Calderon Original EA Category: Full Assessment (A) Country Director: Deborah L Wetzel Current EA Category: Full Assessment (A) Senior Global Practice Director: Practice Manager/Manager: Team Leader(s): Ede Jorge Ijjasz-Vasquez Original Approval Date: 24-Feb-2009 Anna Wellenstein Current Closing Date: 30-Nov-2016 Sylvie Debomy Borrower: Responsible Agency: State of Ceara Secretaria das Cidades do Estado do Ceará Restructuring Type Form Type: Full Restructuring Paper Decision Authority: Country Director Approval Restructuring Level: Level 2 Financing ( as of 24-Apr-2015 ) Key Dates Project Ln/Cr/TF Status Approval Date Signing Date Effectiveness Date Original Closing Date Revised Closing Date P IBRD Effective 24-Feb Dec Mar Dec Nov-2016 Disbursements (in Millions) Project Ln/Cr/TF Status Currency Original Revised Cancelle d Disburse d Undisbur sed % Disburse d P IBRD Effective USD Policy Waivers Does the project depart from the CAS/CPF in content or in other significant respects? Yes [ ] No [ X ] 4

5 Does the project require any policy waiver(s)? Yes [ ] No [ X ] A Summary of Proposed Changes The proposed level 2 restructuring responds to the request of the State of Ceará to amend the Loan Agreement for the Ceará Regional Economic Development Project: Cidades do Ceará (7654-BR) to encompass the following changes: (i) revision of the project scope as part of the effort to better prioritize interventions toward high value-added activities essential to attaining project results; (ii) strengthening and revision of the results framework to improve measurement of results and reflect the proposed adjustments to the project; (iii) reallocation of loan proceeds; and (iv) adjustment to project financing limits by expenditure category Change in Implementing Agency Yes [ ] No [ X ] Change in Project's Development Objectives Yes [ ] No [ X ] Change in Results Framework Yes [ X ] No [ ] Change in Safeguard Policies Triggered Yes [ ] No [ X ] Change of EA category Yes [ ] No [ X ] Other Changes to Safeguards Yes [ ] No [ X ] Change in Legal Covenants Yes [ ] No [ X ] Change in Loan Closing Date(s) Yes [ ] No [ X ] Cancellations Proposed Yes [ ] No [ X ] Change to Financing Plan Yes [ X ] No [ ] Change in Disbursement Arrangements Yes [ ] No [ X ] Reallocation between Disbursement Categories Yes [ X ] No [ ] Change in Disbursement Estimates Yes [ X ] No [ ] Change to Components and Cost Yes [ X ] No [ ] Change in Institutional Arrangements Yes [ ] No [ X ] Change in Financial Management Yes [ ] No [ X ] Change in Procurement Yes [ ] No [ X ] Change in Implementation Schedule Yes [ ] No [ X ] Other Change(s) Yes [ ] No [ X ] Appraisal Summary Change in Economic and Financial Analysis Yes [ ] No [ X ] Appraisal Summary Change in Technical Analysis Yes [ ] No [ X ] Appraisal Summary Change in Social Analysis Yes [ ] No [ X ] Appraisal Summary Change in Environmental Analysis Yes [ ] No [ X ] Appraisal Summary Change in Risk Assessment Yes [ ] No [ X ] B Project Status The Project was approved on February 24, 2009 and became effective on March 19, 2010 Implementation began slowly across all components due to complex design, poor prioritization of investments, resettlement issues, institutional capacity constraints and high turnover at the Project Management Unit (PMU), as well as governance and technical risks that emerged during the course of project 5

6 implementation which led to temporary downgrading of performance ratings of the project (IP and three sub-ratings) However, the issues were identified and progressively addressed and the ratings were upgraded in June 2014 A consolidated effort since the Midterm Review in March, 2013, along with renewed focus on the part of the State Government, strengthening and stability in the PMU have led to progress on all components Implementation of project activities and project management have improved With stronger planning and prioritization in execution of activities focusing on those with greater impact, most of the planned works are being executed The two main large investments (urban upgrading of the Bairro Seminário neighborhood and the construction of the Ring Road in Juazeiro do Norte) are under construction, and activities across all three components are underway or completed The last supervision missions, carried out in November 2014 and may 2015, confirmed the overall improvement of the implementation rate and quality of key activities as well as the acceleration of the disbursement rate To date 60% of project funds have been disbursed The project is currently compliant with all fiduciary requirements and social and environmental safeguards It is rated Moderately Satisfactory for DO and IP and most sub-ratings (counterpart funding, FM and procurement) are rated Satisfactory C Proposed Changes Project Development Objectives Original PDO Development Objectives/Results The objective of the project is to promote economic development, improve urban infrastructure, and enhance regional management capacity in the Central Cariri Region of Ceará, which includes the nine municipalities of Barbalha, Caririaçu, Crato, Farias Brito, Jardim, Juazeiro do Norte, Missão Velha, Nova Olinda, and Santana do Cariri Change in Project's Development Objectives Explanation: No changes are proposed to the Project's Development Objectives Change in Results Framework Explanation: The proposed restructuring seeks to strengthen project results indicators and align them with the proposed adjusted project scope The revised indicators reflect: (i) removal of 2 indicators tied directly to activities related to the shoe cluster and to the regional landfill to be dropped; (ii) addition of core sector indicators (roads, access to sanitation); and (iii) Clarification or modification to the definition and targets of existing indicators to better capture results The adjusted results framework is included in Annex 1 Financing Change to Financing Plan Explanation: No changes are proposed to the Bank financing of the project The borrower has increased its financial commitment to the project from US$ 20 million to US$ 258 million to account for increases in construction costs in Brazil since project design Source(s) At Approval Current (from AUS) Proposed 6

7 BORR 20,000, ,000, ,838,50000 IBRD 46,000, ,000, ,000,00000 Reallocations Explanation: Total 66,000, ,000, ,838,50000 The proposed reallocation of loan proceeds assigns greater funds to the two core investments in Components: Bairro Seminario Urban and Environmental Upgrading, and the Ring Road in Juazeiro do Norte Loan funds are reallocated from non-priority investments in categories 1 and 2 including: (i) support to the footwear cluster, which has been evaluated by the client to be a low-priority intervention given both the current economic structure of the region and the lack of capacity in the PMU to successfully implement the activities; and (ii) the regional landfill (category 2), where governance and technical risks emerged during the course of project implementation Other activities where allocated funds are reduced are: (i) infrastructure investments for the Geopark that were undertaken in parallel to the Project by the Ministry of Tourism, and consultancies to market the Geopark that are perceived to duplicate effort of this same ministry; and (ii) narrowing of scope of the consultancies tied to improved metropolitan and regional management, as the PMU has independently developed training and other activities, as well as to focus on the development of a regional model for management of the Sanitary Landfill effectively replacing broad analysis for which the PMU had limited capacity to manage, with a concrete example of regional cooperation that could provide a solid basis for further cooperation in the future Recent improvements in coordination within the PMU have further lessened the need to dedicate resources to project management The proposed restructuring will increase the percentage of expenditures that can be financed by project funds to up to 100% for categories 3 and 4 to account for changes in the costs of those activities since the design of the project Counterpart funding, which has increased since the start of the project, has been reallocated to infrastructure investments in category 1 Ln/Cr/TF IBRD Currency USD Current Category of Expenditure CW,GO,CS,TRN & OP COSTS Allocation Disbursement % (Type Total) Current Proposed Current Proposed 34,161, ,557, CW & GO - PT I1(b) 4,000, CW PTS I1(a), I2(b)(ii), II1(a) 5,000, ,998, CW for PT I2(a) 2,724, ,328, PREMIUM FOR CAPS/COLLARS Disbursement Estimates Change in Disbursement Estimates Explanation: FRONT END FEE 115, , Total: 46,000, ,000,00000 Disbursement estimates have been revised to reflect the planning of works and activities completion until the end of the project 7

8 Fiscal Year Current (USD) Proposed (USD) , ,600, , ,000, ,390, ,000, ,688, ,200, ,821, ,000, ,500, ,550, ,293,20089 Total 46,000, ,000,00000 Change to Components and Cost Explanation: Components The proposed reallocation of funding by component, consistent with reallocation of disbursement categories, is summarized below The proposed reallocation moves funds from the Local Economic Development Component, which is no longer a priority for the client, to Infrastructure Improvements, which have increased in cost throughout Brazil since project design The proposed restructuring will increase the percentage of each category that can be financed by project funds to up to 100% for categories 3 and 4 to account for changes in the costs of those activities since the design of the project Counterpart funding, which has increased since the start of the project, has been reallocated to infrastructure investments in category 1 Current Component Name Infrastructure Improvements Cluster-based Local Economic Development Regional Management and Institutional Strengthening Proposed Component Name Current Cost (US$M) Proposed Cost (US$M) Action Revised Revised Revised Total:

9 CEARÁ REGIONAL ECONOMIC DEVELOPMENT PROJECT: CIDADES DO CEARÁ A SUMMARY RESTRUCTURING PAPER 1 This Restructuring Paper responds to the request of the State of Ceará to amend the Loan Agreement for the Ceará Regional Economic Development Project: Cidades do Ceará (7654-BR) to encompass the following changes: (i) revision of the project scope as part of an effort to better prioritize interventions toward high value-added activities essential to attaining project results; (ii) revision of the results framework to improve measurement of results and reflect the proposed adjustments to the project; (iii) reallocation of loan proceeds to support the prioritization of investments; and (iv) adjustment to project financing limits by expenditure category 2 The proposed restructuring is being processed as a Level II restructuring, as the suggested adjustments do not affect the Project Development Objective (PDO) The objective of the project is to promote economic development, improve urban infrastructure, and enhance regional management capacity in the Central Cariri Region of Ceará, which includes the nine municipalities of Barbalha, Caririaçu, Crato, Farias Brito, Jardim, Juazeiro do Norte, Missão Velha, Nova Olinda, and Santana do Cariri B PROJECT STATUS 3 The Project was approved by the Board on February 24, 2009 in the amount of US$46 million The Loan Agreement was signed on December 22, 2009, and the Project became effective on March 19, 2010 A 23 month extension of the project closing date was approved in November 2014 and the new closing date is November 30, Project implementation began slowly across all components due to complex design, poor prioritization of investments, resettlement issues, institutional capacity constraints and high turnover at the Project Management Unit (PMU), as well as governance and technical risks that emerged during the course of project implementation which led to temporary downgrading of performance ratings of the project (IP and three sub-ratings) However, the issues were identified and progressively addressed and the ratings were upgraded in June 2014 Progress towards achievement of the PDO and Implementation Progress are considered Moderately Satisfactory The project is currently compliant with all fiduciary requirements and social and environmental safeguards 5 A consolidated effort since the Midterm Review in March, 2013, along with renewed focus on the part of the State Government, strengthening and stability in the PMU have led to progress on all components Implementation of Project activities and project 9

10 management have improved With a stronger planning and prioritization in execution of activities focusing on the ones with the greater impact, most of the planned works are being executed The two main large investments (urban upgrading of the Bairro Seminário neighborhood and the construction of the Ring Road in Juazeiro do Norte) are under construction Activities are underway across all three components or completed 6 The two key investments under Component 1 faced initial delays due to issues related to a lengthy resettlement process and a need to revise engineering plans, though these have since been resolved and both are expected to be completed by the close of the project 1 Components 2 and 3 which support Local Economic Development and Regional Management and Institutional Strengthening, respectively initially suffered low disbursement and poor prioritization Under component 2, activities have advanced in the investment in a Multifunctional Center and support for development of the Geopark Component 3 progressed slowly due to lack of specialized capacity and high turnover in the PMU However, the PMU undertook several initiatives to promote municipal governance that have translated into improved implementation 7 The proposed restructuring is part of a package of initiatives designed to improve the implementation of this project and ensure achievement of the PDO A consolidated efforts has been made since the Midterm Review to overcome obstacles to the implementation of the two main investments under Component 1, 2 and to improve capacity for components 2 and 3 The proposed restructuring will consolidate and reinforce these efforts by improving the PMU s financial and technical capacity to implement the Project s priority activities C PROPOSED CHANGES (i) Modification of Project Scope 1 The proposed restructuring seeks to modify the scope of the project to reflect the need to: (i) prioritize key investments to focus implementation on activities that will contribute most to project results; and (ii) adjust to the realities of infrastructure investment costs in Brazil, where price increases since 2008 have materially impacted the resources needed to carry out the key investments anticipated The State has demonstrated a high level of commitment to this restructuring effort, reflected in the increased counterpart funding allocated (see Table 1) 1 These priority works are: (i) the Bairro Seminario Urban and Environmental Upgrading; and (ii) the Juazeiro do Norte Ring Road 2 Efforts to address political, technical, and financial obstacles include (i) supporting a meeting with the mayors of all nine municipalities in December 2012, which let to agreement on a site for the landfill (formally identified in a letter in January 2013); (ii) providing technical assistance for the design and governance of the landfill, through the addition of a local Solid Waste Management Specialist to the Bank team, the contracting of a Brazilian attorney with extensive experience in governance arrangements, and leveraging of a PPIAF grant; (iii) addressing financial and technical issues tied to resettlement associated with the Bairro Seminario work, through an agreement that the State Government would build housing for the resettled population, and the division of the work into three phases to facilitate immediate progress on the two phases that do not entail resettlement 10

11 (ii) Revision of the Results Framework 2 The proposed restructuring seeks to strengthen project results indicators and align them to the proposed adjusted project scope The revised indicators reflect: (i) removal of indicators tied directly to activities related to the shoe cluster and to the regional landfill; (ii) addition of core sector indicators; and (iii) modifications to the definition and targets of existing indicators The adjusted results framework is included in Annex 1 (iii) Reallocation of Loan Proceeds 3 The proposed reallocation of loan proceeds assigns greater funds to the two core Component 1 investments: the Bairro Seminario Urban and Environmental Upgrading, and the Ring Road in Juazeiro do Norte Loan funds are reallocated from non-priority investments in all Components including (i) support to the footwear cluster, which has been evaluated by the client to be a low-priority intervention, given both the evolving economic structure of the region and the lack of capacity in the PMU to successfully implement the activities; and (ii) the regional landfill, where governance and technical risks emerged during the course of project implementation Other activities where allocated funds are reduced are: (i) infrastructure investments for the Geopark that were undertaken in parallel to the Project by the Ministry of Tourism, and consultancies to market the Geopark that are perceived to duplicate effort of this same ministry; and (ii) narrowing of scope of the consultancies tied to improved metropolitan and regional management, as the PMU has independently developed training and other activities, as well as to focus on the development of a regional model for management of the Sanitary Landfill effectively replacing broad analysis for which the PMU had limited capacity to manage, with a concrete example of regional cooperation that could provide a solid basis for further cooperation in the future Improvements in coordination and capacity within the PMU have further lessened the need to dedicate resources to project management Table 1: Expenditure Allocation by Component Original and Proposed Comp Original Allocation Proposed Allocation Difference Total Loan Counterpart Total Loan Counterpart Loan Counterpart 1 $33,10 $19,50 $13,60 $45,26 $37,04 $8,22 $17,54 ($5,38) 2 $23,70 $17,30 $ 6,40 $17,33 $ 6,02 $11,31 ($11,28) $ 4,92 3 $ 9,10 $ 9,10 $ 0 $ 9,23 $ 2,93 $ 6,30 ($ 6,26) $ 6,30 Total $66,90 $46,00 $20,00 $71,83 $46,00 $25,83 $ 0,00 $ 5,83 11

12 These efforts to consolidate project funds on core activities are reflected in a reallocation of expenditure by disbursement category As shown in 4 Table 2, the proposed restructuring would reallocate loan funds from Categories 1, 2 and 4 to Category 3 Table 2: Percentage of Expenditure by Category Original and Proposed Category Original Allocation Proposed Allocation % Loan Counterpart Total % Loan Counterpart Total 1 100% $34,161,000 $6,021,000 $40,182, % $29,557,000 $13,512,800 $43,069, % $ 4,000,000 $0 $ 4,000,000 0% $0 $0 $0 3 30% $ 5,000,000 $11,750,300 $16,750, % $15,000,000 $11,238,700 $26,238, % $ 2,724,000 $2,228,700 $ 4,952, % $ 1,328,000 $ 1,087,000 $ 2,415, % $ 115,000 $0 $ 115, % $ 115,000 $0 $115,000 Total $46,000,000 $20,000,000 $66,000,000 $46,000,000 $25,838,500 $71,838,500 Category 1 Category 2 Category 3 Category 4 Category 5 Works, goods, consultants services, Training and Operating Costs of the Project (other than goods and works for Parts I1 (b) and II3 and works for Part I1(a), Part I2 (a), Part I2 (b)(ii), and Part II1(a) of the Project) Goods and works for Part I1(b) of the Project Works for Part I1(a), Part I2(b)(ii), and Part II1(a) of the Project Works for Part I2(a) of the Project Front-end Fee (iv) Modification of the Percentage of Expenditure 5 The proposed restructuring will increase the percentage of each category that can be financed by project funds to up to 100% for categories 3 and 4 to account for changes in the costs of those activities since the design of the project Counterpart funding, which has increased since the start of the project, has been reallocated to infrastructure investments in category 1 12

13 ANNEX 1: Results Framework and Monitoring CEARÁ REGIONAL ECONOMIC DEVELOPMENT PROJECT: CIDADES DO CEARÁ Project Outcome Indicators Core D=Dropped C=Continue N=New R=Revised Baseline Current Measure Target Percentage reduction of average morning peak hour travel time between defined action points in central Juazeiro Percentage of solid waste disposed properly in the regional sanitary landfill D 0% Not available 85% Comments/Rationale for Change R Not available 30% Modify target from 15% to 30% Percentage increase of annual footwear pairs produced in Cariri D 70 million Not available 11% This indicator will be removed from the results framework as the project will no longer finance the landfill This indicator will be removed from the results framework Percentage increase in annual number of tourists that visit Cariri Central R 1,173, % 20% Baseline changed to 1,173,342 (2010) Operationalization of a regional management model for the Central Cariri Region R Regional management model not developed Consultative Committee established, with irregular meetings Regional management model operational The definition of the management model (established in the PAD) will be modified as follows: (i) Consultative Committee established and roles defined; (ii) regular meetings of the Consultative Committee (every four months); (ii) Metropolitan Master Plan developed and ratified by the Committee 13

14 Roads constructed, non-rural Indicator to be included in the results framework X N Roads rehabilitated, non-rural Indicator to be included in the results framework X N People in urban areas provided with access to Improved Sanitation under the project (number) X N ,500 Indicator to be included in the results framework as a core indicator Intermediate Outcome Indicators Baseline Current Measure Target Construction and paving of Bypass Road in Juazeiro do Norte D 0% 0% 100% Implementation of sanitary landfill according to design D No No Yes Completion of infrastructure for the Tupinambá Mill D 0% 0% 100% Completion of Sao Jose Seminary area improvement C 0% 13% 100% No change Number of courses focusing on footwear cluster offered by Project D Comments This indicator will be removed from the results framework This indicator will be removed from the results framework as the project will no longer finance the landfill This indicator will be removed from the results framework This indicator will be removed from the results framework 14

15 Number of courses focusing on tourism cluster offered by Project Percentage of actions from the Integrated Sustainable Tourism Development Plan specified in the Annual Budget Law of the State or Municipalities Implementation of Geopark Initiatives Adoption of a new management model based on the Geopark Business Plan Number of activities related to Regional environmental protection strategy completed and being implemented R 0% 0 30% N 0% 0% 30% R No No Yes N No No Yes D Replace this indicator with Percentage of actions from the Integrated Sustainable Tourism Development Plan specified in the Annual Budget Law of the State or Municipalities This indicator replaces the indicator Number of courses focusing on tourism cluster offered by Project Replace this indicator with Adoption of a new management model based on the Geopark Business Plan This indicator replaces the indicator Implementation of Geopark Initiatives This indicator will be removed from the results framework Number of courses on public management offered by Project to municipal officials D Number of municipal officials in the Cariri region benefiting from training financed by the project UGP remaining adequately staffed N R No Yes Yes Project monitoring reports being generated and analyzed quarterly C No Yes Yes No change Number of meetings held by the Project Consultative Committee C No change Replace this indicator with Number of municipal officials in the Cariri region benefiting from training financed by the project This indicator replaces the indicator Number of courses on public management offered by Project to municipal officials to more precisely document the scope of training activities carried out The measurement of this indicator has changed from percentage-based to binary to more closely reflect the idea of the use of the indicator in the context of the evolving needs of the PMU 15

16 Establishment of regional consortium for landfill C No No Yes No change Number of families removed from risk areas in Bairro Seminário N 0 80 Indicator to be included in the results framework 16