Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Updated Project Information Document () Project Name BRAZIL - BR Maranhao Integrated: Rural Development Region Latin America and Caribbean Region Sector General agriculture, fishing and forestry sector (100%) Theme Other rural development (P); Participation and civic engagement (P) Project P080830 Borrower(s) STATE OF MARANHÃO Implementing Agency(ies) GEPLAN/NEPE Address: Rua do Giz, 249 - Centro, 65010-680 São Luis, MA Contact Person: Dr. Antônio Gualhardo Alvarez Prazeres Tel: 55-98-232-3699 Fax: 55-98-232-1567 Email: nepe@nepe.ma.gov.br Environment Category B (Partial Assessment) Date Prepared November 5, 2003 Auth Appr/Negs Date November 7, 2003 Bank Approval Date March 16, 2004 1. Country and Sector Background Report No: AB432 Rural Poverty and Social Exclusion: Brazil is characterized by extreme levels of income disparity, with poverty rates much higher than in other countries at a similar level of per-capita GDP. The Northeast region accounts for only 20 percent of Brazil s land area, yet is home to 30 percent of its total population and to 49% of all Brazilians living on less than US$1 per day. Within Brazil, Maranhão is the second poorest state, has the second lowest HDI, and is the country s most rural state. Rural areas of Maranhão show serious deficits in terms of minimal access to basic services: 84 percent without piped water, 80 percent without sanitation, and 53 percent without electricity. As discussed below, social indicators are also well below national averages. Notwithstanding these deficits relative to the rest of Brazil, Maranhão has actually experienced one of the strongest rates of improvement over the past decade. The HDI for Maranhão rose from 0.551 in 1991 to 0.647 in 2000, although this is still well below the national average of 0.764. The State s strategy for addressing rural poverty explicitly links interventions through the PPA to the desired increase in the HDI. It will target investments which have the greatest potential to raise the HDI, paying particular attention to the poorest municipalities and to the rural space generally. Municipal Councils established under the predecessor RPAP project in Maranhão (Ln. 4252-BR) will play an expanded role in investment prioritization and allocation decisions. The State government further proposes to introduce agreements with municipal governments (contratos de adesão) whereby each party commits to performance indicators relating to the expenditure program outlined in the PPA and the HDI objective. The State Management Unit for Planning and Budget (GEPLAN) has been tasked with integrating, monitoring and evaluating state, municipal and federal expenditures directed toward poverty reduction in Maranhão, using a results-based management information system (SIARI) which it will strengthen and integrate with existing control systems. Low Education and Health Attainments. In order to achieve its HDI goal, Maranhão needs to pay special attention to improving its extremely poor education and health indicators, and this, in turn, will require integrated action among social sector, infrastructure and income generation programs. The average educational attainment for the State is only 2.8 years the second lowest in Brazil and significantly below the Northeast average of about four years. Many school districts, especially in the rural interior, have no access to education beyond grade four and in those cases children s only recourse is to move or permanently drop out. Adult illiteracy is twice the national average.
2 The State strategy for addressing these challenges involves (a) increasing access and quality in the first four grades of basic education, (b) raising literacy levels by closely linking literacy programs with productive activities to maintain motivation of youths and adults to participate, and (c) reducing infant and maternal mortality. Although social subprojects were eligible for support under the RPAP, communities tended to prioritize other kinds of investments. Over the next few years, the State will make a major effort to inform Municipal Councils and communities and motivate them to participate in several programs with proven effectiveness, including Vamos Ler (Let s Read), PRONERA, and Escola Ativa (Active School, modeled on Colombia s Escuela Nueva program). At the same time, they will also be encouraged to identify any interventions in other sectors which may also be crtical for achieving education and health objectives, such as rural electrification, water supply, local transport, etc. Environmental Sustainability. Maranhão faces a number of important environmental issues, the solutions to which will play a crticial role in underpinning the long-term sustainability of the State s development efforts. Among the most pressing: improper treatment of liquid and solid wastes, high rates of deforestation, inadequate agricultural and livestock technologies, occupation of protected areas and legal reserves, and watershed degradation. As in the case of the social sectors, addressing these problems will require an integrated approach, at both state and local levels, and often across sectors. An important part of the State s strategy will be to work with local communities and Municipal Councils to sensitize them to the causes and impacts of environmental problems, encourage them to identify the key issues in their respective geographic locations and seek financing to address them (e.g., production and planting of native mudas for reforestation, including species with good commercial marketing prospects, forestation or reforestation of areas of particular value to the community, development of opportunities to sell environmental services, establishment of demonstration units for environmentally sustainable agricultural technologies, development of efficient fuelwood alternatives). The State will also pilot coordinated action across municipalities/communities to address common sub-regional environmental problems (eg., micro-basin management in the Vale de Magu). Integration of Policies and Investments. The State Government of Maranhão seeks to unite its investment program under a common results-based framework aimed at reducing poverty by raising the HDI, and to upgrade its management capacity to plan, integrate, monitor and evaluate its efforts towards achieving that goal. Effective integration of development efforts has both spatial and cross-sectoral dimensions. The State s strategy includes the recent adoption of a new state government structure at the level of its 18 regions. GEPLAN is developing a computerized system to integrate planning and budgeting functions (SEPOC). Also within GEPLAN, an existing system tracks the planning and execution of government programs at the municipal level (SISPCA). A new institute has been established (IEASE) to help strengthen the links between statistical data collection and analysis and policy formulation. A further information system is planned (SIARI) to track links between execution of programs and their impact on the state s overall HDI goals. Finally, the State plans to develop individual performance agreements with municipalities, indicating the spending programs on which the two levels of government will collaborate and setting specific performance targets; impact will be measured through SIARI. Sustained cross-sectoral dialogue among the various State Management Units and with local and municipal actors will be vital to build consensus on the merits of pursuing an integrated approach to poverty reduction. Decentralization: Since ratification of the Brazilian Federal Constitution of 1988, there has been a trend towards increasing decentralization of fiscal resources, public investment, priority-setting and program implementation, from the Federal Government to the state, municipal and local levels. The current State administration in Maranhão has adopted the new governmental structure referred to above. It also intends to strengthen local and municipal capacity to participate effectively in priority-setting, decision-making over resource allocations and program/project implementation and maintenance. At present, there are 216 Municipal Councils developed under the RPAP (in all municipalities except São Luis, the State capital), but there are also other councils PRONAF, DLIS, etc. present in many of these municipalities. The State plans to consolidate these entities under a unified Municipal Council for Integrated Development (CMDI), whose mandate would include all the principal challenges to improving the HDI at municipal level. The composition of the CMDI may vary among municipalities, provided the majority are representatives from community associations and other organized civil society, following the procedures established under the RPAP. State and municipal governments will play a vital role in the functioning of the CMDI, in terms of logistical support and partnering in the execution of project activities.
3 2. Objectives Background: In 2001, the most recent year for which household data exist, Maranhão was Brazil s second poorest state on a per capita income basis. Using a poverty line of about a dollar a day, nearly 60 percent of Maranhenses are living in poverty. Maranhão also has the second lowest Human Development Index (HDI), The Human Development Index (HDI) is a summary measure of three dimensions of the human development concept: living a long and healthy life, being educated and having a decent standard of living. It combines measures of life expectancy, school enrollment, literacy and income. There are strong links between the HDI and the Millennium Development Goals (MDGs). The three dimensions of human development captured in the HDI are very similar to goals 1-7 of the MDGs. a combined measure of income and equality, educational and health indicators, among all of Brazil s states. The lag in education is particularly severe, with the average educational attainment (2.8 years) well below that of both the country and neighboring Northeast states. Finally, Maranhao is Brazil s most rural state, and it is in the rural space where HDIs are the lowest. The State s needs in terms of socio-economic infrastructure and services, and institutional capacity, are commensurate with these indicative statistics. The State Government of Maranhão has set a goal of increasing its HDI from 0.647 (in 2000) to 0.700 by the year 2007, and this provides the unifying theme for its multi-year investment plan (PPA 2004-07). Although ambitious, this goal is feasible based on the State s track record over the past decade. Since the 1990s Maranhão has had a series of competent State Governments, and social indicators have increased faster than in most Northeast states. The State has launched an innovative, decentralized form of government, dividing itself into 18 regional management units, and has been very active in attempting to change the culture of Brazil s state and local governments away from clientelism and patronage, toward responsible service delivery to the population. The proposed project seeks to support the State Government in its effort to reduce poverty by increasing its HDI, using a community-driven development (CDD) approach that has already proven successful in Maranhão under the Bank-financed Rural Poverty Alleviation Program (RPAP, Ln. 4252-BR). While building on the institutional foundations of the RPAP, the proposed project will significantly improve on the experience by: strengthening the cross-sectoral integration, monitoring, evaluation and results-based management of development efforts within Maranhão at the state, municipal and local levels; better aligning the State s public expenditures with the PPA development priorities, while improving the effectiveness and targeting of expenditures; introducing performance agreements between the State Government and municipalities, with special emphasis on targets for improving the various components of the HDI, and encouraging subproject identification and selection by beneficiaries according to the criterion of impact on municipal HDIs; providing significantly more emphasis on education, health, culture, natural resource management and environmental sustainability than under the RPAP; taking advantage of opportunities to achieve stronger results through coordinated action than may be possible with isolated community subprojects, including piloting regional subprojects (involving several municipalities) to address environmental issues, and supporting productive subprojects which tackle critical gaps within a broader concept of local supply chains (arranjos produtivos locais); and leveraging the skills and institutional arrangements developed under the RPAP project at the local and municipal levels to improve also the relevance, efficiency, targeting and outcomes of non-project investments in rural areas of Maranhão. Project development objective:
4 The proposed project will help Maranhão to achieve the goal of reducing poverty by increasing its HDI from 0.647 to 0.700 by the year 2007, through: (a) strengthening the results-based management capacity at the State level for planning, cross-sectoral integration, monitoring and evaluation of public policies and investments under Maranhão s PPA; (b) supporting cross-sectoral integration of development actions at the municipal and local levels through the design and implementation of integrated municipal development plans and the introduction of State-municipal performance agreements; (c) financing demand-driven community investments for income-generation, health and sanitation, education, culture, the environment and other investments impacting the HDI; and (d) strengthening municipal governance through the participation of community associations and municipal councils in decisions that are directly related to improvements in the living conditions of the rural poor. 3. Rationale for Bank's Involvement For nearly three decades, the Bank has partnered with the Northeast States to address rural poverty through a variety of programs and projects. Under the predecessor project (RPAP-MA, Ln. 4152-BR), using a CDD approach some 187,000 families benefited from more than 4,000 community investment subprojects. Bank participation will ensure that international best-practice in CDD (both in Brazil and elsewhere) is incorporated into project design and that sound international quality standards of monitoring, evaluation and impact assessment are applied. An especially important feature of Bank value-added under the proposed project will be its ability to facilitate closer local integration on the part of project Municipal Councils with the wide spectrum of programs aimed at rural poverty reduction. The Bank is well-positioned to help forge these linkages, not only because of its direct role in financing the RPAP and developing the Municipal Council mechanism, but also because of its involvement in other important sectoral programs relevant to rural poverty reduction (e.g., irrigation, agricultural research, land reform, education, rural health, environmental sustainability) and the many opportunities for policy dialogue and consensus building in the context of its fairly active program of collaborative research and analytical work on poverty and rural development issues in Brazil. The Bank will also provide technical value-added in the development of results-based management methods within the State Government through the Horizontal Component of the project, strengthening the planning, coordination, monitoring and evaluation of the Government s investment program. Finally, the Bank will undertake, as part of its strategic updating of all work in Northeast Brazil, a yearly review of how the implementation of the Bank s Northeast program is contributing to integrate broader issues of poverty reduction in the region. 4. Description The total project cost is US$40 million, of which the Bank will finance US$30 million; the State of Maranhão, US$6.4 million; and beneficiary communities, US$3.6 million, in cash or in-kind. Component 1 Community Subprojects (US$36 million or 90% of total project cost) will support community matching grants for approximately 1,700 small-scale socio-economic infrastructure, education, health, culture, productive, environmental and other investments aimed at raising HDIs. All 216 municipalities in Maranhão (other than Saõ Luis) will be covered by this component, because of the importance of encouraging cross-sectoral integration throughout the State, getting all municipalities to focus on the HDIs, and strengthening local and municipal institutional arrangements. However about 60% of total component cost will be concentrated in the 80 municipalities with the lowest HDIs. Component 2 - Institutional Development (US$2 million) will finance technical assistance and training to increase the capacity of implementing entities including the CMDIs, community associations, GEAGRO and GEPLAN. Component 3 - Horizontal Integration (US$1 million) will finance technical assistance to strengthen the results-based management capacity of the State Government to plan, integrate, monitor and evaluate public policies and investments for poverty reduction, and to improve the alignment of public expenditures with the State s development priorities. Component 4 - Project Administration, Supervision, Monitoring and Evaluation (US$1 million) will finance
5 costs (excluding salaries) of project administration and coordination, including supervision, monitoring and impact evaluation. 5. Financing Source (Total ( US$m)) BORROWER ($10.00) IBRD ($30.00) Total Project Cost: $40.00 6. Implementation Implementation period: Four years Executing Entities: Community Associations are groups of rural citizens with a common interest who organize into legally-constituted civil associations. They identify, prepare, implement, supervise, operate and maintain their subprojects, assisted both by technical specialists whom they contract directly and by technical assistance and training made available by project Municipal Councils and the State Technical Unit. Once subprojects are approved for financing, Community Associations can access a share of the costs for design and implementation assistance. Municipal Councils (CMDIs) include representatives of beneficiaries and civil society, as well as local government. A majority of voting CMDI members (at least 60%) would represent potential beneficiary communities while the remaining 40% representation would be from other organized civil society (e.g., STR, ONGs), and public sector entities. CMDIs are the key organization for targeting of benefits and allocating project resources; they also provide a critical link to local government and have the potential to engage in other non-project activities. The CMDIs play a fundamental role in mobilizing communities and promoting their participation in local decision-making. During regularly scheduled and widely publicized meetings that the public is encouraged to attend, the CMDIs receive, prioritize and approve subproject proposals from the Community Associations, within the ceiling of an indicative resource envelope received from NEPE, and in line with their Municipal Plan for Integrated Development (PMDI). The State Technical Unit. The Núcleo Estadual de Projetos Especiais (NEPE), within the State Management Unit of Agriculture and Rural Development (GEAGRO), will function as the State Technical Unit (STU), responsible for overall project coordination, with the support of GEAGRO s 18 regional units (Casas de Agricultura Familiar CAFs). NEPE will gradually delegate supervision of community associations and subprojects to the CMDIs and concentrate on oversight of the Municipal Councils themselves, as well as general project coordination and promotion. The latter duties include continuous execution of information campaigns, project reporting, impact evaluation, Management Information System (MIS) updating, and design and provision of tailored training modules for CMDIs and Community Associations on key project issues. The State Management Unit for Planning, Budget and Management (GEPLAN) will, through Component 3 of the project, promote the integration of public policies and investments oriented toward poverty reduction, monitor the activities associated with these policies including, inter alia, the subproject investments financed under Component 1 and evaluate the outcomes and impacts as they relate to an increase in Maranhão s HDI. Subproject Cycle: A statewide information campaign will increase public awareness about the project, and Municipal Councils and community associations will receive explanations about the situation of their municipality with respect to the HDI and its various components, to help them in considering sub-project alternatives and understanding the HDI criterion which will be used in the selection process. Community associations determine their local investment priorities, based on their own choices and information provided concerning the State s HDI objective and the proirities under the PPA, and will prepare subproject proposals for investment financing.
6 Subproject proposals from community associations are submitted to the respective CMDI, where they are prioritized and approved, based on indicative municipal resource envelopes, their expected contribution toward improvement of HDI-M, and their compatibility with the Municipal Plan for Integrated Development (PMDI). The STU technically evaluates approved subprojects and confirms compliance with subproject technical, social and environmental guidelines established in the Operational Manual before releasing funds. Subproject agreements are signed between NEPE and community associations. These agreements spell out the terms and conditions for the funding, execution, ownership, operation and maintenance of the approved subprojects. Resources for subproject implementation are then transferred directly from the project to the community association s bank account. Community associations contract goods, works and technical assistance for subproject execution, bear responsibility for operation and maintenance of all investments, and may request technical assistance to develop operation and maintenance arrangements for subproject investments. Project Oversight: GEPLAN is responsible for project oversight and the Secretary of GEPLAN represents the Borrower vis-à-vis the Bank. The Secretary delegates day-to-day execution of Component 1, 2 and 4 to NEPE, which is housed within GEAGRO and will operate as the STU. Component 3 (Horizontal Integration) will be executed by GEPLAN. Project Coordination: NEPE, supported by the 18 regional CAFs, will (a) review community subproject proposals for compliance with project guidelines and eligibility criteria in the Project Operational Manual; (b) assess the degree of community participation in identifying, preparing and executing subprojects and quality of technical assistance; (c) supervise the project Municipal Councils to ensure they adequately manage quality of subproject implementation and provide sufficient training support to communities; (d) implement introductory training and technical assistance programs for all project Municipal Councils and community associations with approved subprojects (including training on subproject implementation, contracting, O&M and financial management); (e) monitor and apply performance incentives to reward efficiency, transparency and inclusiveness of community associations and project Municipal Councils, and to penalize poor performance/misappropriation (e.g., legal action for fund misallocation); (f) monitor performance through the project MIS and periodically report progress; (g) prepare annual implementation, physical performance reviews, and impact evaluation studies; and (h) submit project yearly operating plans (POAs) to the Bank for approval. For the most common types of subprojects, NEPE would develop standardized designs and cost indicators for use by community associations to ensure reasonable quality and costing for subproject implementation. Departures from these standard designs would have to be fully justified in the subproject proposal, as would proposed investments which fall outside the range of standardized costs. Finally, NEPE will a conduct statewide information campaign to continuously disseminate information about the project and its guidelines to all potential beneficiary communities, thereby increasing awareness, transparency and participation in the program. The preparation of a proposal for the statewide information campaign, satisfactory to the Bank, would be a condition of loan effectiveness. GEPLAN will coordinate Component 3 of the project (Horizontal Integration) and will (a) monitor the specific contribution of the subprojects financed under the project to the goal of increasing Maranhão s HDI, (b) assure that the activities under the proposed project are consistent with the overall strategy of the State, regarding progress toward improvements in HDI, and (c) maintain detailed information concerning investment programs at the Federal, State and Municipal levels. Project operational procedures: The project will be implemented according to detailed procedures defined in its Project Operational Manual. This Manual will be based on that used for the predecessor project (RPAP-MA, Ln. 4252-BR), and is being revised and updated to reflect lessons learned during its implementation and for consistency with the state s mobilizing goal of achieving an increase in the HDI by 2007 and the integrated nature of the proposed project. A user-friendly synthesis of this document will also be available to project Municipal Councils and community associations. The adoption by the State of the Project Operational Manual, in a form
7 satisfactory to the Bank, would be a condition of loan effectiveness. Monitoring arrangements: Monitoring of project implementation will rely on a database of subproject information from the project MIS operated and maintained by NEPE. This database will be integrated with statewide information systems (SEPOC, SISPCA, SIARI) to facilitate monitoring by GEPLAN of the overall PPA and impact assessment of the project and broader State development efforts. The database is currently organized in three general levels: (a) a subproject information module contains pertinent physical and financial information for each subproject; (b) a financial management module, from which Statements of Expenditure (SOEs) and Financial Statements in FMR format are generated; and (c) a project management module, from which all project reports are generated. The database includes community profiles, which will also aid in evaluating project impact. The Institutional Development component will be monitored through tracking of training events, workshops and achievement of POAs by the project Municipal Councils. The Horizontal Integration component will be monitored by GEPLAN via indicators which link both project and non-project expenditures to reduction in poverty in the rural space and statewide, measured by improvement in the HDI. The Bank s Recife Office will monitor project performance indicators through the online MIS, and with inputs from the State, review monthly disbursement summaries and supervise subproject implementation progress on a sample basis in the field. The establishment and operation of a revised MIS, acceptable to the Bank, would be a condition of loan effectiveness. Impact assessment. Project-financed evaluation studies will assess the impact of the subprojects and provide feedback to improve project operations. These studies will include: (a) annual physical performance reviews to assess the quality and sustainability of common types of financed subprojects, including reviews of community-based procurement; (b) a mid-term evaluation/implementation review, to include consultations on project performance and impact as perceived by its beneficiaries; (c) assessment of the activities under the Horizontal Integration component on achieving cross-sectoral integration of public policies and investments to reduce poverty ; and (d) a rigorous and comprehensive evaluation of the impact of the project in raising Maranhão s HDI. The impact evaluation will use repeated surveys of project beneficiaries, non-beneficiary households, and beneficiaries of similar projects with centralized delivery mechanisms to assess (i) poverty targeting of beneficiaries relative to the income distribution of the population at large; (ii) household welfare; (iii) social capital formation at the community level; (iv) improved governance at the municipal level; (v) cost-effectiveness of infrastructure investments compared with traditional delivery mechanisms, and (vi) cost-benefit of productive investments. In addition, community leaders and municipal leaders will be surveyed for the analysis of social capital and governance impacts. The first baseline field survey will be conducted within six months of project effectiveness. A survey update, to be contracted at the same time as the baseline study, will be conducted two years later, followed by further survey updates after four and six years, depending on interim results.presentation of Terms of Reference for the project baseline study and for the overall evaluation framework, both acceptable to the Bank, would be a condition of loan effectiveness. Accounting, financial reporting and auditing arrangements: The financial management systems to be used by NEPE were reviewed by a Bank financial management specialist during project preparation for compliance with OP/BP 10.02. The Guidelines of Fiduciary Management for Community Driven Development Projects (CDD Guidelines) were taken into consideration where applicable. Based on this review, the financial management arrangements were considered satisfactory, indicating that the project complies with the Bank's minimum financial management requirements. The final format of the Financial Monitoring Reports FMR -- and their periodicity will be agreed by negotiations. Under the new project, NEPE will implement an action plan within the first six months of project implementation (agreed with the Bank, and attached in the financial management assessment report, Annex 6B) to allow FMR reporting, and to adjust project accounting and reporting procedures to fully comply with Bank requirements. According to arrangements for Bank-financed projects in Brazil, the annual financial audit of the project accounts for the period January 1 to December 31 of the year will be carried out by an Independent Auditor acceptable to the Bank. The audit report will be submitted to the Bank no later than June 30 in the year following that for which the project accounts are audited. The year-end FMR will also serve as the Financial Statement of the Project, on which the independent auditors will express their opinion. The annual audit will also include a separate opinion on the eligibility of expenditures disbursed on the basis of SOEs, as well as on the Special Account, compliance with all financial covenants and a Management Letter on internal controls and
8 recommendations. 7. Sustainability Institutional sustainability: Both the R-NRDP and the RPAP indicate that, by delegating greater responsibility and influence to local-level organizations and municipal governments, the proposed project can successfully support decentralized resource allocation and social capital creation in rural Maranhão. The new project will link the project councils to local municipal planning and budgeting processes and programs, as well as alternative credit and financial services. The sustainability of NEPE is quite strong, given the experience that its core technical team already brings to rural development activities and its broad involvement in other State and Federal supported programs, and because of the technical and administrative capacity and autonomy with which it has been formally established as the State Technical Unit for the project. The project s horizontal component will also contribute to the long-term institutional sustainability of project interventions by supporting the Maranhão s efforts to introduce results-based management and integration of development efforts and State and municipal levels. Financial sustainability: Financial analysis and field investigation confirm the sustainability of the investment subprojects funded by the R-NRDP and RPAP programs. A sample of over 8,000 community subprojects in those Northeast States which executed RPAP projects as of 1995 (under the R-NRDP) and 1997/98 (under RPAP) was reviewed in 2000. Eighty-nine percent of these subprojects were fully operational. Analysis of productive subprojects revealed that cost recovery through user fees by beneficiary associations was adequate to cover both operation and maintenance and replacement of the original investment long before the end of its useful economic life. The preparation mission observed that the investments carried out under the RPAP in Maranhão continued to be operated and managed in a satisfactory manner by the beneficiary communities with their own contributions, and continued satisfying community needs. Physical sustainability: Beneficiary participation at all stages of the subproject cycle, together with significant levels of community counterpart contribution, help to ensure subprojects are maintained. Further, the democratic process intrinsic to FUMAC ensures better selection and prioritization of subprojects by beneficiaries, enhancing long-term sustainability. The proposed project requires the establishment of community-funded O&M plans and subproject maintenance would be monitored by Municipal Councils and NEPE during implementation. Performance incentives for proper O&M are included in project design. 8. Lessons learned from past operations in the country/sector Decentralization of fiscal and investment decision-making and implementation from federal to state and local governments and to community organizations, improves program administration and outcomes. Experience in Northeast Brazil shows that decentralized CDD approaches can reduce bureaucracy and eliminate administrative bottleneck,s and reinforce accountability for project outcomes by placing decision-making near beneficiaries. The project will further what has already been achieved under the RPAP, delegating additional duties to Municipal Councils and utilizing STU central and regional offices to promote more responsive and local-level monitoring, data collection, coordination, and supervision. Participation by beneficiaries under the RPAP in the selection, financing, execution, and O&M of subprojects in Northeast Brazil has helped to ensure that investments meet genuine community needs, generate cost savings, and increase community ownership, thus improving sustainability of investments. This methodology will be extended under the new project to both project and non-project investments critical to achieving Maranhão s HDI objectives. Poverty targeting mechanisms that are simple, verifiable and based on objective criteria, can foster transparency and minimize political interference in project resource allocation. Poverty targeting mechanisms under the RPAP have been effective to date in reaching the poorest rural populations in the Northeast. About 84 percent of the program s beneficiary population are comprised of small farmers and rural laborers living in remote, low density areas with acute deficiencies in access to basic infrastructure and services. A significant additional population resides in rural areas directly adjacent to the urban periphery of municipal centers. Experience with project
9 Municipal Councils demonstrates that communities themselves are the best-positioned and informed to target effectively. Under the new project, broad targeting will be undertaken (a) at the municipal level, by prioritizing subproject resources according to poverty indices (i.e., municipal HDIs) and (b) at the community level, by the Municipal Councils themselves, which will be encouraged and technically assisted to undertake a poverty ranking of the communities in their municipalities and to use this in prioritizing subproject proposals. Intensive supervision of CDD projects has been found to be an indispensable determinant of success and sustainability. It needs to be reinforced at all levels and involve local entities closest to the communities, particularly Municipal Councils and NGOs. Under the new project, supervision responsibilities will be increasingly devolved to Municipal Councils, which will be supported with training and technical assistance. Measures will also be taken to provide computers and information technology to the Councils to allow them to receive and exchange information through the Internet and to modernize management. A user-friendly monitoring and evaluation system facilitates the subproject evaluation process, provides feedback and necessary information to improve targeting and efficiency, and is an essential management and planning tool. The project MIS will be enhanced to more effectively link physical implementation data with financial information on the project, and will be integrated with State information systems to facilitate overall monitoring and evaluation of the PPA. A comprehensive impact evaluation component will also be introduced to measure income, welfare and social capital gains. Dissemination of best practices, such as experiences with NGOs in Rio Grande do Norte, EMATERCE in Ceará, social inclusion in Maranhão and FUMAC Councils in Bahia and Sergipe can hasten learning and reward innovation. Under the new project, exchanges among states, municipalities and communities will be expanded further using more frequent regional training seminars, and workshops and videoconferencing, where available. Standardization of subproject documents, technical designs and unit costs simplifies subproject preparation and evaluation, improves the quality of subprojects, facilitates the procurement process, prevents over-design and enables participation by poorer communities. The existing database of standard designs will be reviewed at appraisal and technically updated and expanded where necessary. Environmental protection criteria: Proactive attention to natural resource management and sustainability issues is essential in the environmentally fragile Northeast. The project will offer an expanded option of environmental subprojects which community associations can propose, as well as piloting of regional or territorial subprojects which may cut across several municipalities (eg. watershed management). Demonstration projects will also be undertaken in selected regions throughout the state to stimulate interest in the adoption of sustainable resource management technologies and techniques. Municipal Councils will serve as focal points for channeling information from the State and NGOs (e.g., AMAVIDA) on environmental issues relevant to the specific municipality. The re-designed and enhanced environmental checklist developed under RPAP will be used to improve the criteria and procedures, and their application for evaluating environmental impact of subprojects. An environmental specialist at NEPE will provide additional technical assistance on environmental matters and training to increase environmental awareness of Municipal Councils and community groups. Partnerships will be fostered with State and municipal environmental agencies and NGOs to develop a culture of environmental awareness in the communities and Councils through training and education. Technical assistance enhances the ability of community associations and Municipal Councils to identify, prepare and implement subprojects, thereby augmenting their capacity to compete for investment funds. Technical assistance needs to be targeted to weaker municipalities to improve their planning, management and financial capacity to participate in the project. Locating and/or developing sources of technical assistance in rural areas requires significant attention and needs to be monitored at the local level. Under the new project, attention will be placed on training at the community level. To this effect, funds will be made available for the appointment of technical advisors to be recruited by each Municipal Council. These advisors will be responsible for managing and coordinating local technical and training needs. Increasing efforts will also be placed on deeper involvement of civil society (e.g., NGOs and other civil and church groups) - particularly with respect to increasing the flow of
10 information, mobilizing the poorest groups and supporting training activities at the community level. A system of checks and balances, clearly-defined and well-disseminated, is essential to ensure proper use of funds and sound targeting of resources. Guidelines for performance incentives and penalties will be detailed in the Project Operational Manual. Incentives may include increasing Councils indicative budget envelopes, increasing the number of investments or investment volume permitted to a community association, or incentives for environmental or technologically innovative investments. Penalties would attach to cases of mis-management and diversion of funds and include removal from eligibility to participate, reduced availability of funds, and/or judicial action. As important as penalties per se is the free and transparent flow of information. Municipal Councils include participation of local civil society (e.g., NGOs, Rural Workers Union, the Church), representatives of public ministries and municipal officials, and their meetings are publicly announced and open to broad participation. Project-financed computers in the Councils will enable Council decisions to be publicized on their own and on NEPE s webpages. All of the above are designed to institutionalize transparency. Productive subprojects should be subjected to rigorous selection, preparation, technical assistance and supervision criteria. Under the new project, a one-shot matching grant will be provided to eligible productive investments that (a) provide services for a large number of community members; (b) whose collective use is regulated by strict operational guidelines (regulamento de uso); (c) for which O & M is assured by charging adequate user fees to both association members and non-members; (d) meet the criterion of impact on HDI; and (e) include technical assistance to ensure the sustainability of the investment. Revised procedures for productive subprojects are outlined in the Project Operational Manual, as are arrangements to facilitate access to formal credit by eligible communities (Annex 2). Efforts will also be taken to expand the participation of communities in the ongoing Fair Trade initiative (Comércio Ético e Solidário). 9. Environment Aspects (including any public consultation) Issues : The preparation of the EMP was based on a series of meetings with current and former personnel from the State Management Unit for the Environment (GEMA), extensive discussions with NEPE staff, the analysis of technical documents regarding the environment in Maranhão, and field visits to potential beneficiary communities. The proposed project has been assigned a "B" environmental classification. An Integrated Safeguard Data Sheet has been prepared and will be reviewed by the LCSES Quality Assurance Team prior to appraisal. Environmental Checklists incorporated into the Project Operational Manual under the predecessor project RPAP have been adapted and updated for the proposed project, for use in subproject preparation by potential beneficiary community associations. These checklists would be completed by community associations to identify potentially adverse environmental impacts from subproject investments and methods to mitigate them. The EMP reviewed a representative sample of RPAP subprojects and concluded that, due to their small scale, adverse environmental impact would be negligible. In the few cases where subproject investments could generate a localized negative impact, these would be detected in the Environmental Checklist and actions taken to address such impacts and thereby minimize the need for environmental licensing. The project will also promote improved management of the environment by financing subproject investments in natural resource management and environmental recuperation, as well as advocating the adoption of technologies by small-scale producers which also seek to minimize environmental impact. As stated earlier, the Municipal Councils will serve as conduits for information-sharing (from both the State and NGOs) on environmental issues of interest to the municipality and region. 10. List of factual technical documents:
11 11. Contact Point: Task Manager Luis O. Coirolo The World Bank 1818 H Street, NW Washington D.C. 20433 Telephone: Fax: 12. For information on other project related documents contact: The InfoShop The World Bank 1818 H Street, NW Washington, D.C. 20433 Telephone: (202) 458-5454 Fax: (202) 522-1500 Web: http:// www.worldbank.org/infoshop Note: This is information on an evolving project. Certain components may not be necessarily included in the final project.