document of the world bank for official use...

Document of

The World Bank

FOR OFFICIAL USE ONLY

Report No: 67705-BR

PROJECT PAPER

ON A

PROPOSED ADDITIONAL LOAN

IN THE AMOUNT OF US$ 100 MILLION

TO THE

STATE OF RIO DE JANEIRO, BRAZIL

WITH THE GUARANTEE OF

THE FEDERATIVE REPUBLIC OF BRAZIL

FOR THE ADDITIONAL FINANCING FOR THE

RIO DE JANEIRO SUSTAINABLE RURAL DEVELOPMENT PROJECT

October 1, 2012

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.

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

2

CURRENCY EQUIVALENTS

(Exchange Rate Effective March 18, 2012)

Currency Unit = Brazilian Real R$ 1.00 = US$ 0.549

US$ 1.00 = R$ 1.82

FISCAL YEAR January 1 – December 31

ABBREVIATIONS AND ACRONYMS

AF Additional Financing CPS Country Partnership Strategy COGEM Micro-catchment Management Committee (Comitê de Gestão da Microbacia) DA Designated Account DMR Department of Mineral Resources (State of Rio de Janeiro) DRM Disaster Risk Management EA Environmental Assessment EMATER State Rural Extension Agency (Empresa de Assistência Técnica e Extensão

Rural do Estado do Rio de Janeiro) EMF Environmental Management Framework ESS Economic Sustainability System FM Financial Management GAP Good Agricultural Practice GDP Gross Domestic Product GEF Global Environment Facility HDI Human Development Index IBRD International Bank for Reconstruction and Development INEA State Institute of Environment (Instituto Estadual do Ambiente) IRR Internal Rate of Return ISP Institutional Sustainability Plan MDC Micro-catchment Development Committee (Comitê Gestor da Microbacia) MDP Micro-catchment Development Plan (Plano Executivo da Microbacia) MIS Management Information System M&E Monitoring and Evaluation MuDC Municipal Development Council (Conselho Municipal de Desenvolvimento

Rural Sustentável) MuDP Municipal Development Plan (Plano Municipal de Desenvolvimento Rural

Sustentável) PAD Project Appraisal Document PDO Project Development Objective PESAGRO State Agricultural Research Enterprise (Empresa de Pesquisa Agropecuária do

Estado do Rio de Janeiro) POM Project Operational Manual PIU Project Implementation Unit RDC Regional Development Committee (Comitê Regional de Microbacias)

3

RDP Regional Development Plan (Plano Territorial de Desenvolvimento Rural Sustentável)

RNS Innovation, Technology, and Sustainable Services Research Network System SA Social Assessment SEAIN Secretariat of International Affairs, Ministry of Planning (Secretaria de Assuntos

Internacionais – Ministério do Planejamento) SEAPEC SEAPEC/SDS

State Secretariat of Agriculture and Livestock (Secretaria de Estado de Agricultura e Pecuária) Superintendence of Sustainable Development (Superintendência de Desenvolvimento Sustentável) within SEAPEC

SOE Statement of Expenditures SRD Sustainable Rural Development TA Technical Assistance TAL Technical Assistance Loan

Vice President: Hasan A. Tuluy Country Director: Deborah L. Wetzel

Sector Director: Ede Ijjasz-Vasquez Sector Manager: Laurent Msellati

Task Team Leader: Marianne Grosclaude

4

BRAZIL

ADDITIONAL FINANCING FOR THE

RIO DE JANEIRO SUSTAINABLE RURAL DEVELOPMENT PROJECT

CONTENTS

Additional Financing Data Sheet ................................................................................................................ 5

Project Paper ............................................................................................................................................. 11

I. Introduction .......................................................................................................................................... 11

II. Background and Rationale for Additional Financing ......................................................................... 11

III. Proposed Changes ............................................................................................................................... 15

IV. Appraisal Summary ........................................................................................................................... 19

Annex 1: Revised Results Framework and Monitoring Indicators .......................................................... 24

Annex 2: Detailed Description of New Project Activities ........................................................................ 32

Annex 3: Operational Risk Assessment Framework (ORAF) .................................................................. 42

5

BRAZIL

ADDITIONAL FINANCING FOR THE RIO DE JANEIRO SUSTAINABLE RURAL DEVELOPMENT PROJECT

ADDITIONAL FINANCING DATA SHEET

Basic Information - Additional Financing (AF) Country Director: Deborah L. Wetzel Sector Director: Ede Ijjasz-Vasquez Sector Manager: Laurent Msellati Team Leader: Marianne Grosclaude Project ID: P126684 Expected Effectiveness Date: February 6, 2013 Lending Instrument: Specific Investment Loan Additional Financing Type: Scale-up and completion of original activities

Sectors: General agriculture, fishing and forestry sector (80%); Other social services (20%) Themes: Participation and civic engagement (P); Other rural development (P) Environmental category: B Expected Closing Date: November 30, 2018 Joint IFC: Joint Level:

Basic Information - Original Project Project ID: P101508 Environmental category: B Project Name: Rio de Janeiro Sustainable Rural Development

Expected Closing Date: November 30, 2016

Lending Instrument: Specific Investment Loan

Joint IFC: Joint Level:

AF Project Financing Data [ X ] Loan [ ] Credit [ ] Grant [ ] Guarantee [ ] Other: Proposed terms: Variable Spread Loan in US Dollar with custom repayment and a schedule linked to commitments, with a front-end fee of 0.25% of the loan amount, payable in 24 years, including five and one-half years of grace, with all conversion options

AF Financing Plan (US$m) Source Total Amount (US $m)

Total Project Cost: Borrower: International Bank for Reconstruction and Development

140.50

40.50

100.00

Client Information Borrower: State of Rio de Janeiro, Brazil Responsible Agency: SEAPEC, State Secretariat of Agriculture and Livestock (Secretaria de Estado de Agricultura e Pecuária) Contact Person: State Secretariat of Agriculture and Livestock, Superintendência de Desenvolvimento Sustentável (SDS) Telephone No.: 55-21- 2601-6076 /3607-5599 /3607-5562 Fax No.: Email: [email protected]

6

AF Estimated Disbursements (Bank FY/US$m) FY 2013 2014 2015 2016 2017 2018 2019

Annual 19.4 18.7 20.6 17.5 11.6 6.7 5.5

Cumulative 19.4 38.1 58.7 76.2 87.8 94.5 100.0

Project Development Objective and Description Original project development objective (PDO): The project development objective is to increase the adoption of integrated and sustainable farming systems approaches in specific areas of the Borrower’s territory, thus contributing to the higher-order objective of increasing small-scale farming productivity and competitiveness in those areas. Current project development objective (formally revised on October 27, 2011): The objective of the project is to increase the adoption of integrated and sustainable farming systems approaches in specific areas of the Borrower’s territory and help re-establish an agricultural productive environment in areas of the Serrana region affected by the January 2011 natural disaster, thus contributing to the higher-order objective of increasing small-scale farming productivity and competitiveness in those areas.

Revised project development objective: The current project development objective would remain unchanged.

Project description: The Project will support the following three components (which are the same as the three components of the original Project): Component 1: Supporting Rural Production and Competitiveness ( US$89.4 million from IBRD) would provide assistance to rural beneficiaries (Beneficiaries) by working with community groups across local, municipal and regional levels to increase organizational and participation skills for project implementation through capacity-building and planning activities; operate changes in rural production processes within a framework of market-driven agricultural development focused on sustainable and increased productivity of small farmers, value added and market linkages; and help re-establish the productive environment of small farmers affected by the January 2011 natural disaster in the Serrana Region, by supporting: a) Pre-investment activities; and b) Investments. Component 2: Strengthening Institutional Frameworks (US$3.4 million from IBRD) would improve the Borrower’s institutional frameworks supporting market-driven agricultural development by: a) Strengthening rural institutions and coordination mechanisms; b) Improving public and private financial support mechanisms; and c) Undertaking participatory research. Component 3: Project Coordination and Information Management (US$7.2 million from IBRD) would support the Borrower’s overall project management, coordination and implementation, monitoring and evaluation as well as dissemination of key sustainable rural development information under the project by financing: a) Project coordination; and b) Information management.

7

Safeguard and Exception to Policies Safeguard policies triggered: Environmental Assessment (OP/BP 4.01) Natural Habitats (OP/BP 4.04) Forests (OP/BP 4.36) Pest Management (OP 4.09) Physical Cultural Resources (OP/BP 4.11) Indigenous Peoples (OP/BP 4.10) Involuntary Resettlement (OP/BP 4.12) Safety of Dams (OP/BP 4.37) Projects on International Waterways (OP/BP 7.50) Projects in Disputed Areas (OP/BP 7.60)

[X]Yes [ ] No [X]Yes [ ] No [X]Yes [ ] No [X]Yes [ ] No [X]Yes [ ] No [ ]Yes [X] No [X]Yes [ ] No [ ]Yes [X] No [ ]Yes [X] No [ ]Yes [X] No

Does the project require any waivers of Bank policies? Have these been endorsed or approved by Bank management?

[ ]Yes [X] No [ ]Yes [ ] No

Conditions and Legal Covenants: Financing Agreement

Reference Description of

Condition/Covenant Date Due

Article 5.01

Schedule 2, Section I. A. 10

The Project Operational Manual (POM) has been duly amended by the Borrower to enable the carrying out of the Project.

The Borrower shall amend the POM on terms and conditions acceptable to the Bank, and, thereafter shall maintain said manual in full force and effect, until completion of the Project

Condition of Effectiveness

8

Schedule 2, Section I. A.7 The Borrower shall, through SEAPEC, prior to the carrying out of any Project activities with partners which will provide SEAPEC assistance in the implementation of the Project, finalize the institutional arrangements containing terms and conditions approved by the Bank as further specified in the model form included in the POM for the implementation of the respective Project Components or subcomponents. Said arrangements will be incorporated in the POM

During implementation, prior to the start of the respective project activities

Schedule 2, Section I. A. 8 The Borrower shall, at least once a year during Project implementation on or about December 1, prepare and furnish to the Bank a plan (Annual Operating Plan) for the Project operation during the following twelve months.

December 1 of each calendar year, commencing on the first such date after the Effective Date

Schedule 2, Section I. A. 9 The Borrower shall have all the procurement records and documentation for the Subprojects for each fiscal year of the Project audited, and furnish to the Bank, not later than six months after the end of each such fiscal year, the procurement audit report, of such scope and such details as the Bank shall have reasonably requested.

As soon as available, but in any case no later than six months after the end of each fiscal year

9

Schedule 2, Section II. A The Borrower, through the PIU, shall monitor and evaluate the progress of the Project and prepare Project Reports in accordance with the provisions of Section 5.08 of the General Conditions and on the basis of the performance indicators set forth in the POM. Each Project Report shall cover a period of one semester, and shall be furnished to the Bank no later than one month after the end of the period covered by such Report

No later than one month after the end of each calendar semester

Schedule 2, Section II. B. 3 The Borrower shall have its Financial Statements audited in accordance with the provisions of Section 5.09(b) of the General Conditions. Each audit of the Financial Statements shall cover the period of one fiscal year of the Borrower. The audited Financial Statements for each such period shall be furnished to the Bank not later than six months after the end of each period.

No later than six months after the end of each fiscal year of the Borrower, commencing with the fiscal year in which the first withdrawal is made for the Project

Schedule 2, Section V. 2 The Borrower shall by November 30, 2015, or such other date as the Bank shall agree upon, carry out jointly with the Bank a mid-term review of the implementation of operations under the Project (Mid-term Review).

November 30, 2015

10

Schedule 2, Section V. 3(a) The Borrower shall, through SEAPEC, finalize in form and substance satisfactory to the Bank, by December 31, 2013, the establishment of at least two consortia of municipalities participating in the Project to jointly prepare and implement rural roads rehabilitation and maintenance plans in the terms and conditions specified in the POM

December 31, 2013

Schedule 2, Section V. 3(b) The Borrower shall, through SEAPEC, finalize in form and substance satisfactory to the Bank, by June 30, 2014, the transfer of road equipment and machinery acquired under the Project to such consortia

June 30, 2014

11

PROJECT PAPER I. INTRODUCTION 1. This Project Paper seeks the approval of the Executive Directors to provide an additional

loan in an amount of US$100 million to the State of Rio de Janeiro, with the sovereign guarantee from the Federative Republic of Brazil, for the Rio de Janeiro Sustainable Rural Development Project (P126684, Loan 8200-BR).

2. The proposed additional financing would be used for: (a) enabling the completion of original

project activities (19 percent of the proposed additional loan amount) by restoring the portion of the original loan amount that has been used for the emergency rehabilitation activities associated with the natural disaster of January 2011 in the Serrana Region; and (b) scaling up the project’s impact and development effectiveness (81 percent of proposed additional loan amount). These aims would be targeted through the financing of additional and expanded activities under Component 1 (Supporting Rural Production and Competitiveness) and Component 2 (Strengthening Institutional Frameworks), and the related incremental management and coordination support under Component 3 (Project Coordination and Information Management).

3. The proposed additional financing would not result in any change in the project’s

development objective. It is proposed to adjust the outcome indicators and the revised Results Framework and Monitoring Indicators as attached in Annex 1.

4. There is no change in the project’s safeguards category (B) and no new safeguards are

triggered.

5. Project implementation performance has consistently been rated as moderately satisfactory or better since effectiveness in March 2010. As requested by the Borrower, the closing date of the original loan (Loan 7773-BR) would be extended from November 30, 2016 to November 30, 2018, to close on the same date as the Additional Financing (Loan 8200-BR).

II. BACKGROUND AND RATIONALE FOR ADDITIONAL FINANCING 6. Background. The Rio de Janeiro Sustainable Rural Development Project (Rio Rural Project,

P101508, Loan 7773-BR) was designed to address the critical challenges faced by small rural producers in the main agricultural regions of the State of Rio de Janeiro (SoRJ), including the North and Northwest administrative regions and the Serrana region: low productivity resulting from the widespread use of inefficient and unsustainable agricultural practices and a degraded natural resources base, poor linkages with markets (despite the proximity of the second largest consumer market in Brazil) and the need to revisit the role and approach of public institutions supporting the sector.

7. The original loan in the amount of US$39.5 million was approved by the Board of Executive

Directors on September 10, 2009, and became effective on March 8, 2010. The original project development objective was to increase the adoption of integrated and sustainable

12

farming systems approaches in specific areas of the Borrower’s territory, thus contributing to the higher-order objective of increasing small-scale farming productivity and competitiveness in those areas. The original project includes three components:

Component 1: Supporting Rural Production and Competitiveness (US$34.4 million from IBRD). This component provides assistance to rural beneficiaries (Beneficiaries) by working with community groups across local, municipal and regional levels to increase organizational and participation skills for project implementation through capacity-building and planning activities; operate changes in rural production processes within a framework of market-driven agricultural development focused on sustainable and increased productivity of small farmers, value added and market linkages; and help re-establish the productive environment of small farmers affected by the January 2011 natural disaster in the Serrana Region, by supporting: a) Pre-investment activities; and b) Investments; Component 2: Strengthening Institutional Frameworks (US$1.9 million from IBRD). This component improves the Borrower’s institutional frameworks supporting market-driven agricultural development by: a) Strengthening rural institutions and coordination mechanisms; b) Improving public and private financial support mechanisms; and c) Undertaking participatory research; Component 3: Project Coordination and Information Management (US$3.1 million from IBRD). This component supports the Borrower’s overall project management, coordination and implementation, monitoring and evaluation as well as dissemination of key sustainable rural development information under the project by financing: a) Project coordination; and b) Information management.

8. The project achieved early results in its first year of implementation in particular with regards

to institutional strengthening under Component 2 and with the identification and preparation of specific investments under Component 1. In January 2011, unusually heavy rains occurred in the Serrana Region of the State of Rio de Janeiro, the most important pole of agricultural production in the State for horticulture, floriculture and aviculture. Extensive flooding and mudslides caused by the rains resulted in over 850 deaths, hundreds of missing people, close to 20,000 homeless, extensive damage to rural infrastructure (roads, bridges, rural buildings and homesteads), crops, loss of livestock and other productive assets, and disease outbreaks. SEAPEC estimated that a total of 17,000 families depending on agriculture for their livelihoods were affected to various extents, with approximately 3,400 families experimenting direct losses of assets and income. Most of the affected households in rural areas were small farmers using family production systems, with little access to credit and to agricultural insurance1. The total economic cost of the disaster in rural areas was estimated by SEAPEC at R$269 million (US$163 million).

9. In the aftermath of the disaster, the State Government’s immediate response included a

request to restructure the Sustainable Rural Development Project under implementation, in order to contribute to emergency rehabilitation activities in affected rural areas. A Level I

1 SEAPEC estimates that only 1,500 of the 17,000 households in the affected areas have access to agricultural insurance.

13

restructuring of the project was approved by the Board on October 27, 2011. The project development objective was revised to: “The objective of the Project is to increase the adoption of integrated and sustainable farming systems approaches in specific areas of the Borrower’s territory and help re-establish an agricultural productive environment in areas of the Serrana Region affected by the January 2011 natural disaster, thus contributing to the higher-order objective of increasing small-scale farming productivity and competitiveness in those areas”. This restructuring involved the reallocation of US$18.77 million (47.5 percent of the loan proceeds) to emergency recovery activities in the Serrana Region under the project’s first component (Supporting Rural Production and Competitiveness). The project’s original targets were substantially scaled down and the results framework adjusted to reflect the reallocation of resources to emergency activities.

10. Rationale for the additional financing. As a result of the natural disaster, the State

Government has recognized the need to adopt a more integrated and comprehensive approach to disaster risk management (see Annex 2, Box 1) and it has started the preparation of an integrated natural disaster risk management strategy. With regards to rural areas, the State Government is considering a scaled-up and longer-term intervention focusing on sustainable land and soil management practices in the State’s rural areas to mitigate natural hazard risks and maximize positive externalities in riparian zones, while also increasing incomes of rural producers through improved production practices and better access to markets. In addition, unprecedented investment levels are expected in the coming decade in the State of Rio de Janeiro, an estimated US$130 billion principally in the energy, construction and transport sectors and those related to the major international sports events planned in the coming years (such as the World Cup in 2014 and the Olympic Games in 2016). These developments will generate increased demand for agricultural products, often associated with specific requirements in terms of sustainability practices and food safety. Small producers are currently ill-equipped to take advantage of these new opportunities, and the State Government intends to scale up and deepen its support to the agriculture sector to enable them to take advantage of those new market opportunities and to ensure that the benefits of the planned large-scale investments in other sectors trickle down to rural areas.

11. In the Serrana region, the emergency response, which supported the immediate resumption of

production, needs to be complemented with longer-term investments to restore the productive capacity of the region, restore physical market access where rural roads have been affected, integrate natural hazard risk reduction considerations, and address other critical factors affecting the competitiveness of small farmers, such as extensive food safety issues in the horticulture subsector. In the North and Northwest regions and in other agricultural production areas of the State, additional investments are needed to enable small producers to organize themselves to meet the requirements of rapidly emerging new markets, while minimizing the impact on the fragile natural resource base and restoring already degraded production landscapes.

12. To that end, the State Government has requested the proposed additional loan in the amount

of US$100 million, which would be complemented by additional counterpart financing in the amount of US$40.5 million equivalent. A Carta Consulta has been prepared along the lines

14

described in this memorandum and approved by SEAIN/Cofiex on December 20, 2011. The proposed additional financing would:

(a) Restore the original loan amount and activities (19 percent of the proposed additional loan

amount). The proposed additional financing would fill the financing gap which resulted from the reallocation of loan resources to emergency activities, thereby ensuring the continuity of the activities initiated in the first year of project implementation and enabling the completion of original project activities; and,

(b) Expand and deepen the range of activities to scale up the Project’s impact and development effectiveness (81 percent of the proposed additional loan amount). The proposed additional financing would allow the engagement of the State Government in a longer-term intervention to deepen and expand coordinated agricultural and environmental management in the State of Rio de Janeiro. This would be implemented by (i) scaling up existing activities through the expansion of the Project to new micro-catchments and (ii) complementing those micro-level investments with investments at the landscape-level2, designed to ensure the integrity of fragile ecosystems and their continued provision of environmental “goods and services”, including providing a buffer to the effects of natural disasters and the reduction of risk to human populations. The scaled-up activities would also strengthen support for small farmers’ competitiveness so that they are able to seize the new market opportunities emerging in the lead-up period to the large investments planned in the State.

13. Overall Project Performance. Project implementation performance has consistently been

moderately satisfactory or satisfactory since project effectiveness in March 2010. Progress with project implementation is currently considered as moderately satisfactory given the delays incurred in the first year of implementation. To improve implementation capacity in the field and address those delays, the State’s extension agency, EMATER, has been restructured and its regional coordination and staffing strengthened. Implementation has accelerated in 2011 and most of the emergency rehabilitation activities have been completed as scheduled. As of October 2012, 48 percent of the original loan proceeds have been disbursed. Overall, the project is in compliance with its legal covenants.

14. Consistency with the CPS for Brazil. The project’s objective as well as the Government’s

request for additional financing are fully consistent with the World Bank Group’s Country Partnership Strategy (CPS) 2012-2015 (Report # 63731-BR, discussed by the Board of Executive Directors on November 1, 2011), which focuses on four strategic objectives: (i) to increase the volume and productivity of public and private investments; (ii) to improve the quality and expand the provision of public services for low income households; (iii) to promote regional economic development through improved policies, strategic infrastructure investments, and support for the private sector in frontier areas; and (iv) to further improve sustainable natural resource management and enhance climatic resilience while contributing to local economic development and helping to meet rising global food demand. While the proposed additional financing contributes to all four CPS pillars, the proposed scaled-up

2 Those investments would generally cover two or more micro-catchments and a combination of various ecosystems and land uses

15

project would support mainly the fourth objective of the CPS. The proposed additional financing (AF) would also support the State’s integrated territorial development policies and strengthen its disaster risk management capacity, complementing the support provided as part of the Bank’s Rio de Janeiro program under the Additional Financing for the Strengthening Public Sector Management and Territorial Development TAL (P126735).

III. PROPOSED CHANGES 15. The Project Development Objective would remain unchanged: to increase the adoption of

integrated and sustainable farming systems approaches in specific areas of the Borrower’s territory and help re-establish an agricultural productive environment in areas of the Serrana Region affected by the January 2011 natural disaster, thus contributing to the higher-order objective of increasing small-scale farming productivity and competitiveness in those areas.

16. With regards to small-scale farming competitiveness, the project focus would be on

improved risk management in key value-chains and promoting access to markets. 17. Beneficiaries and Project Area. The project area would expand to 366 micro-catchments in

72 municipalities (Table 1 below). The scaled-up project would target a total of 47,000 small rural producers directly and 78,000 beneficiaries indirectly. The selection and prioritization of municipalities, as well as participating communities within those municipalities, will be based on production potential, along with environmental and social criteria.

Table 1 – Beneficiaries

Beneficiaries (no.) Original Loan

Restructured Loan

Additional Financing

TOTAL

Municipalities 59 59 13 72 Micro-catchments 270 200 166 366 Population (Indirectly) 37,000 28,000 50,000 78,000 Population (Directly) 24,400 19,300 27,700 47,000

18. The project intermediate outcomes have been adjusted to reflect the proposed new activities. Project outcome indicators at PDO level and specific targets have also been updated to reflect the expansion of the original activities and the revised implementation schedule. Annex 1 shows the revised Results Framework and Monitoring Indicators.

Table 2 – Expected Outcomes

Outcome indicators (PDO level) Parent Project (Restructured)

Additional Financing

Total

Number of small farmers transitioned towards more productive and sustainable farming systems3

19,300 27,700 47,000

3 The original Project has defined a long list of improved farming systems to be promoted under the Project through the various types of subprojects under Component 1. This indicator will be measured on that basis, through regular monitoring of the implementation of subprojects under Component 1.

16

Number of small farmers included in at least one value chain4

1,000 1,600 2,600

Hectares of agricultural lands under improved production systems

77,2005 110,800 185,000

19. Components and Activities. The structure and components of the project would remain

unchanged and the proposed new activities would be implemented under the existing components and subcomponents, as follows:

(a) Component 1 (Supporting Rural Production and Competitiveness): the additional loan

would finance (i) the expansion of the original project activities under this component from 200 to 366 micro-catchments in 72 municipalities, including longer-term rehabilitation activities in areas of the Serrana region affected by the January 2011 disaster, and (ii) the identification, preparation and implementation of new investments (“Structuring Subprojects”) by small producers organized in groups, associations or cooperatives across several micro-catchments and/or municipalities. While these subprojects would remain in nature the same as those currently included in the project (Productive Subprojects and Environment Subprojects), the new activities would be implemented on a larger scale (across several micro-catchments and/or municipalities) than the current ones (which remain at farm or micro-catchment level);

(b) Component 2 (Strengthening Institutional Frameworks): the additional loan would

finance (i) under Subcomponent 2. 1 (Strengthening Rural Institutions and Coordination Mechanisms), new partnerships to further enhance the cohesion of public policies and institutions operating in rural areas, with a focus on disaster risk management in rural areas and on support to market access for small producers, (ii) under Subcomponent 2.2 (Improving Public and Private Financial Support Mechanisms), an evaluation of the economic sustainability system (ESS) being established under the original loan and, subject to a positive evaluation, provide additional seed capital for the proposed mechanism, and (iii) under Subcomponent 2.3 (Undertaking Participatory Research), additional value-chain studies and participatory research in support of investments under Component 1;

(c) Component 3 (Project Coordination and Information Management): the additional loan

would finance (i) under Subcomponent 3.1 (Project Coordination), the incremental management and coordination functions required to support the implementation of the scaled-up project, and (ii) under Subcomponent 3.2 (Information Management), additional information and outreach activities, with a specific focus on access to market information, and the strengthening of the project’s monitoring and evaluation activities, including through the expansion of participatory monitoring and evaluation at micro-catchment level, and monitoring and evaluation of the outcomes of the new activities under Component 1 (Structuring Subprojects).

4 Defined as sustained increase in the added –value of products sold above 2 percent per year. 5 This target was reduced at the time of the appraisal of the additional financing taking into consideration the average cultivated area per household in the project area.

17

20. Annex 2 presents a detailed description of the new activities under the Project and Table 3 below a summary of revised project costs.

Table 3- Revised Detailed Project Costs (IBRD)

Project Costs (US$m.) Components/Activities Original

Restructured AF Total

(restructured+AF)1. Support to Small Farmer

Production and Competitiveness 1.1.Pre-investment 1.2.Investments

Emergency Subprojects Productive, Environment and Rural Roads Subprojects Structuring Subprojects

2. Institutional Frameworks 2.1.Strengthening Rural

Institutions and Coordination Mechanisms

2.2.Improving Financial Support Mechanisms

2.3.Participatory Research

3. Project Coordination and Information Management 3.1 Project Coordination 3.2 Information Management

Total Project Costs

Front-end Fee Total Financing Required

32.6

9.2 23.4

-

23.4 -

3.0

1.6

0.5 0.9

3.8 2.6 1.2

39.4 0.1 39.5

34.4

7.8 26.6 18.8

7.8 -

1.9

0.6

0.5 0.8

3.1 2.4 0.7

39.4 0.1 39.5

89.4

14.5 74.9

-

59.9 15.0

3.4

1.1

0.1 2.2

7.2 4.2 3.0

100.0

- 100.0

123.8

22.3 101.5 18.8

67.7 15.0

5.3

1.7

0.6 3.0

10.3 6.6 3.7

139.4 0.1

139.5

21. Financing Plan. The proposed additional financing would include a US$100 million loan and a counterpart contribution of US$40.5 million. Existing disbursement projections indicate that additional financing would be required starting in calendar year 2012, to ensure continuity of activities initiated under the original Project and to enable delivery on original targets. New activities would be initiated in 2012 to enable small producers to seize new market opportunities already emerging as a result of new investments in other sectors of the State economy (World Cup 2014, Olympic Games in 2016, port complex development in the Northeast, etc). The project is expected to gradually expand to new areas from calendar year

18

2012 to 2016. Table 4 below presents the expected revised cost breakdown by component and financer.

Table 4 – Project Costs by Component and Financer

Additional Financing (AF) Additional Financing +Original Loan (Millions of US Dollars)

IBRD Counterpart Funds

Total AF

IBRD Counterpart Funds Total

Component 1 89.4 31.7 121.1 123.8 65.6 189.4Component 2 3.4 2.5 5.9 5.3 4.7 10.0Component 3 7.2 6.1 13.3 10.3 9.5 19.8Front-end fee

0.2 0.2 0.1 0.2 0.3

Total 100.0 40.5 140.5 139.5 80.0 219.5 22. Extension of the Project Closing Date. The proposed additional financing would be

accompanied by an extension of the closing date of the project from November 30, 2016 to November 30, 2018. This two-year extension would be necessary to complete the activities to be initiated between 2012 and 2016, as the project gradually expands to new areas. In particular, the implementation of larger-scale investments at landscape level, such as those envisaged in the Serrana Region for the rehabilitation of areas affected by the January 2011 natural disaster, will require a longer time frame.

23. Implementation Arrangements. Implementation arrangements would remain similar to the

existing ones. SEAPEC would coordinate the implementation of all project activities, through its Sustainable Development Superintendence (Superintendência de Desenvolvimento Sustentável), with the assistance of the network of EMATER and PESAGRO staff in the field, respectively for extension and research activities. The project management team would be strengthened at central and regional level given the need for increased coordination of a larger field team in the expanded geographical area covered by the project, and given the need for additional expertise to assist with the implementation of the new activities (“Structuring Subprojects”). Additional expertise would be recruited at regional and central level, including in the field of restoration of degraded areas as well as agribusiness. In the Serrana region, the temporary Emergency Rehabilitation Committees, which were established under the original loan for the implementation of emergency rehabilitation activities, would be discontinued in calendar year 2012 and replaced with Micro-catchment Development Committees. At State level, the State Sustainable Rural Development Council would continue in its advisory function and meet as needed to address issues affecting project implementation.

24. The Project Operational Manual has been amended to reflect the proposed changes, including

the detailed implementation arrangements for new activities.

19

IV. APPRAISAL SUMMARY 25. Economic and Financial Analyses. Similar to the original project, the proposed additional

financing would provide one-time incentives (matching grants) to producers aiming at reducing the up-front transaction costs and risks associated with the adoption of new technologies and marketing practices, with higher incentives provided to poorer producers who tend to have higher barriers to entry when adopting new technologies, assuming risks, organizing in groups or providing environmental services or other public goods. An updated economic and financial analysis has been carried out to assess on an ex-ante basis the costs and benefits of the scaled-up project. The 33 farm models and value-chain activity models have been updated to assess the financial and economic viability of the types of investments likely to be supported under Component 1. At project level, the aggregate Financial and Economic IRR when all investments costs are included (farm investment, rural infrastructure and pre-investment activities) are 9 percent and 16 percent, respectively. Such IRRs shall be interpreted as conservative minima, since the analysis did not include the benefits to be derived from emergency rehabilitation activities, from rural infrastructure nor those to be derived from capacity building for future investments. The sensitivity analysis showed that the project is robust to adverse conditions and remains economically viable under moderate price reductions (12 percent overall price reduction if all investment costs are considered) and moderate input/investment costs increase scenarios (30 percent increase in input prices and 15 percent increase in total input and investment costs). At farm level, key activities such as improved dairy, sugarcane, pineapple and vegetable production show financial IRRs ranging from 20 percent to 111 percent. Small-scale agribusiness activities such as storing, processing and packing of milk, vegetable and meat products also show IRRs ranging between 36 and 136 percent.

26. Technical. The technical assessment carried out at appraisal of the original project remains

valid. The project’s technical approach for participatory planning and investments, combining agricultural and environmental management at the micro-catchment level, which was developed and tested under the previously implemented GEF-financed Rio de Janeiro Sustainable Integrated Ecosystem Management in Productive Landscapes of the North-Northwestern Fluminense Project (P075379), will be expanded to new micro-catchments, and the methodology will continue to be further refined and lessons learned will be regularly incorporated. Based on the lessons learned in the first year of project implementation, those micro-level investments will be complemented by larger-scale investments to accelerate and to deepen the impact of the project, both with regards to its environmental management goals and with regards to market access for small rural producers. With regards to risk management and environment management, SEAPEC will collaborate with and benefit from the expertise, mapping and diagnostics already carried out by INEA, the DMR, Civil Defense, and other relevant agencies. Additional technical assistance would also be recruited to support those new investments (in particular expertise on natural hazard risk management and on restoration of degraded areas). Finally, a team of agribusiness specialists will be recruited at central level to provide the necessary technical expertise on agricultural value-chains and market access, and new participatory research activities included to support innovation in those specific areas. The need for greater coordination and supervision of the

20

scaled-up project will be addressed through the consolidation of the project management team at central and regional level. SEAPEC has also recruited a specialized firm to carry out an institutional assessment in calendar year 2012 and to provide further recommendations on possible improvements to the project implementation structure.

27. Fiduciary. The project has satisfactory financial management arrangements to meet the

Bank’s minimum requirements. The main risks include the multiple agencies involved in project implementation, the low reporting capacity of subproject beneficiaries and the use of non-integrated IT systems. An action plan was discussed and agreed with SEAPEC to address identified areas of improvement, including: strengthening internal controls, additional financial management support to the co-executing agencies, and the improvement of the MIS for the project. The overall residual financial management risk associated with the project is rated as Moderate.

28. There are no overdue audit reports for the project at the time of preparation of this additional

financing. The accounts of the additional financing will be audited on an annual basis and the external audit report including the management letter will be submitted to the Bank within six months after the end of each fiscal year. The terms of reference of the external auditing firm will be revised to reflect the additional financing. The project will comply with the Bank disclosure policy of audit reports and place the information provided on the official website within one month of the report being accepted as final by the Bank team.

29. There is no change foreseen in the disbursement arrangements. The following disbursement methods will be used: Reimbursement, Direct Payment and Advance. A Designated Account (DA, segregated in Brazilian Real (R$) at the Banco Bradesco S.A.) will be used for the additional financing with a Fixed Ceiling of R$20,000,000. Subsequent advances will be made against submission of Summary Sheets with Records and/or Statements of Expenditures (SOE) reporting on the use of the previous advances. The frequency for reporting eligible expenditures paid from the DA will be quarterly. Summary Sheets with Records and SOE will also be used for Reimbursements. Direct Payments will be documented by Records. The project will have a Disbursement Deadline Date four months after the Closing Date. This "Grace Period" is granted in order to permit the orderly project completion and closure of the Loan Account via the submission of applications and supporting documentation for expenditures incurred on or before the Closing Date. Expenditures incurred between the Closing Date and the Disbursement Deadline Date are not eligible for disbursement, except as otherwise agreed with the Bank. The Minimum Application Size will be US$1,000,000 equivalent.

21

Table 5 – Loan Allocations by Expenditure Category (Additional Financing)

Category

Amount of the Loan Allocated (expressed in USD)

Percentage of Expenditures to be financed (inclusive of Taxes)

(1) Goods, works, non-consultant services, consultant services and training under the Project (except as covered by Category (3) below)

24,100,000

100%

(2) Grants for Subprojects in respect of Components 1.2 (a) and 2.1 of the Project

65,900,000 100% of the amounts disbursed for Grants for

Components 1.2 (a) and 2.1 of the Project

(3) Goods, works, non consulting services and consultants’ services for Subprojects under Component 1.2 (b) of the Project

10,000,000

100%

TOTAL AMOUNT 100,000,000

30. Procurement for the proposed project would be carried out in accordance with the Bank’s

Guidelines: Procurement of Goods, Works and Non-consulting Services under IBRD Loans and IDA Credits and Grants by World Bank Borrowers, dated January 2011. A recent procurement mission assessed the procurement performance of the implementing agency as Moderately Satisfactory, mainly due to the heavier workload caused by a larger project than the previous GEF operation. SEAPEC and the Bank agreed on an action plan to improve SEAPEC’s procurement capacity, including the following measures: (i) hiring of additional procurement support staff; (ii) developing a procurement planning and monitoring module in the information management system; and (iii) elaborating a checklist to verify compliance with all required procedures under each procurement process. With regards to the Subprojects implemented by beneficiaries under Component 1, the project will continue to use Community Participation Procedures. Those procedures are described in the project’s Procurement Plan, dated February 24, 2012, and have been reviewed and found acceptable by the Bank. The overall residual procurement risk associated with the project is rated as Moderate.

31. Environment. The project would remain classified as Environmental Category B and no

additional safeguards policies are triggered. A Bank review of potential additional financing environmental impacts, in terms of their identification, measurement, interpretation, information and dissemination, was conducted during two Bank missions (in September and

22

December 2011). The additional financing is expected to produce significant positive environmental impacts. According to the final Environmental Assessment (EA), the most significant positive impacts foreseen include improved soil management and conservation, watershed and biodiversity protection, improved water quality and the restoration of degraded lands.

32. While some changes are proposed in the size of certain types of subprojects in selected areas

- from small to medium-sized investments - possibly involving clusters of producer/micro-catchment associations, the type of subprojects will remain the same and no large-scale, significant, and/or irreversible impacts are foreseen. However, certain subprojects supported (on-farm and off-farm investments) could generate small negative impacts at the local level. In accordance, with Bank policies, an updated Environmental Management Framework (EMF) was prepared and submitted to the Bank on December 20, 2011. The EMF was disclosed on the project’s website (www.microbacias.rj.gov.br) on January 30, 2012, and in the Bank’s Infoshop on February 1, 2012. The final EMF was reviewed by the Bank and found to be satisfactory. The EMF specifies the criteria and procedures (including operating rules) that will be used during implementation to avoid or minimize adverse environmental impacts. Additional training and resources have been included as part of the proposed AF to support the implementation of the EMF.

33. Social. The Social Assessment (SA) carried out during the preparation of the original project

included the geographical area to be covered under the proposed scaled-up project. The SA concluded that the project would have a highly positive social impact due to its decentralized, participatory approach and its focus on strengthening social capital and rural institutions at all levels. The SA further concluded that there is great interest and receptivity among the beneficiary population in strengthening local organizations and for the adoption of improved and sustainable agricultural practices. Specific attention was given to vulnerable groups such as youth or women, and SEAPEC has been monitoring key indicators such as the number of women attending training activities and the number of investment proposals from women financed by the project. The complementary assessment carried out by EMATER in the Serrana region indicated the interest of affected producers in receiving support from the project beyond the initial recovery period, through a longer-term intervention. With regards to the Banks’ social safeguards, the project triggers OP/BP 4.12 Involuntary Resettlement. While it is not anticipated that the project will cause physical resettlement or nonphysical displacement, small-scale land acquisition may occur from planned activities for rural road rehabilitation and maintenance. Small works for rural roads will include improving drainage and paving of critical parts of rural roads in the Serrana region to support natural disaster risk reduction and improved access to markets. The project’s Involuntary Resettlement Framework has been updated and the Bank found it to be satisfactory. It was disclosed on the project website on January 12, 2012 and in the Infoshop on February 1, 2012.

34. Risks. The overall risk rating at implementation is Moderate. As detailed above, the current safeguards framework is adequate for the additional activities and safeguard risks are assessed as Low. With regards to fiduciary aspects, there is a Moderate risk that counterpart funds fail to be available on time or in a sufficient amount. Close supervision both by the State Government and by the Bank will continue to be carried out to ensure that disbursement targets are met and to adopt mitigation measures to recover delays. A financial

23

management assessment has also been carried out and mitigation measures identified, as summarized in the ORAF. To mitigate the implementation capacity risks associated with the scaling-up of the project, in addition to careful phasing of activities and of their geographical expansion, an institutional analysis will be carried out by the Borrower in the first half of calendar year 2012. Monitoring activities, including independent monitoring of the project, will be strengthened to mitigate the increased risk of elite capture as the project scales-up and supports larger scale investments. Finally, the design of the new activities under the project specifically addresses some of the risks identified during implementation, such as vulnerability to natural disasters (through improved disaster risk management and landscape management) and risks associated with specific value-chains (improved food safety management and better understanding of other market risks through value-chain analysis).

35. Exceptions to Bank Policy. There are no exceptions to Bank policies.

24

ANNEX 1: REVISED RESULTS FRAMEWORK AND MONITORING INDICATORS

BRAZIL: Additional Financing for the Rio de Janeiro Sustainable Rural Development Project

Results Framework

Revisions to the Results Framework Comments/ Rationale for Change

PDO

Current Proposed The project development objective (PDO) is to increase the adoption of integrated and sustainable farming systems approaches in specific areas of the Borrower’s territory and help re-establish an agricultural productive environment in areas of the Serrana Region affected by the January 2011 natural disaster, thus contributing to the higher -order objective of increasing small-scale farming productivity and competitiveness in those areas.

Continued.

PDO indicators

Current (PAD) Proposed change Number of small farmers (at least 50% in targeted areas) transitioned towards more productive farming systems

Number of small farmers (at least 50% in targeted areas) transitioned towards more productive and sustainable farming systems

Reflects the type of improved farming systems promoted by the project. Targets updated to reflect project scale-up

Improved product quality measured by: - 9,500 farmers adopting GAPs - 130 small farmers or enterprises certified - 280 agro-processing and artisanal enterprises

Moved to intermediate outcomes under Component 1.

25


adding value Number of small farmers included in (or with improved links to) at least one value-chain

Continued. Targets updated to reflect project scale-up

Area of agricultural lands under improved production systems

Continued. Targets updated to reflect project scale-up

Extent of tertiary roads restored and maintained

Moved to intermediate outcomes under Component 1

Intermediate Results indicators

Current Proposed change Intermediate Outcome 1: Capacities built and investments implemented across individual, community, municipal, and regional levels to improve production systems and rural livelihoods, and restore the productive environment in areas of the Serrana region affected by the natural disaster

Continued

Number of investment proposals elaborated

Dropped, except for Structuring Subprojects: Number of investment proposals elaborated (Structuring subprojects), of which (a) productive and (b) environment.

Substantially the same indicator as the following one, except for Structuring Subprojects

Number of investment proposals financed

Number of investment proposals financed (Productive and environment subprojects). Number of investment proposals financed (Structuring subprojects), of which (a) productive and (b) environment. Number of emergency investment

Indicator has been disaggregated by type of subprojects, and by gender. Targets updated to reflect project scale-up.

26


proposals financed. Improved product quality measured by: - No. of farmers adopting GAPs - No. of small farmers or enterprises certified - No. of agro-processing and artisanal enterprises adding value

Adjusted from PDO indicators. Improved product quality measured by number of: - small farmers or enterprises certified - agro-processing and artisanal enterprises adding value

Reflects intermediate outcomes under Component 1.

Number of project implementers and technicians trained in key project concepts

Continued.

Targets updated to reflect project scale-up

Number of beneficiaries trained in key project concepts

Continued.


Number of stakeholders participating in development committees across local, municipal, and regional levels

Continued.


Number of new MDCs and RDCs established and number of existing MDCs, MuDCs, and RDCs strengthened

Number of MDCs, MuDCs and RDCs established and strengthened:

- MDCs - RDCs - MuDCs

Targets updated to reflect project scale-up.

Number of MDPs, MuDPs, and RDPs formulated (or updated) and negotiated with stakeholders across all relevant levels

Continued.


Inter-municipal Road Consortia established by clusters of municipalities

Continued.

Extent of tertiary roads restored and maintained

Continued. Moved from PDO indicator (reflects intermediate indicator). Description adjusted. Target updated.

Intermediate Outcome Continued.

27


2: More effective institutional arrangements and capacities at State and decentralized levels to support sustained agricultural development and disaster risk management throughout the SoRJ A strategy and action plan (ISP) formulated to strengthen rural institutions in the SoRJ

Continued.

Number of institutional strengthening subprojects implemented within SEAPEC

Number of institutional strengthening subprojects from the ISP implemented

Targets updated to reflect scaled-up projects.

Number of cooperation arrangements established between relevant municipal, State, and federal rural development entities to implement joint activities

Continued.

Number of multi-sectoral interventions carried out in support of SRD (i.e., productive alliances, digital technology, and water cadastres)

Dropped. Repeats previous indicator.

An ESS established Continued. Number of small farmer investment proposals financed (and amount of financial resources supplied) with the participation of the ESS

Continued.

Number of participatory research projects carried out under the RNS

Continued. Target updated to reflect scaled-up project

28


Intermediate Outcome 3: Project management functioning and able to effectively implement and monitor project activities across all territorial levels, as well as to disseminate and share SRD knowledge and information to influence decision-making processes of key stakeholders

Continued.

PIU structure implemented and effectively functioning across local, municipal, regional, and central levels

Continued.

M&E system established and effectively collecting and analyzing relevant project information

Continued.

A MIS established to facilitate the collection, storage, analysis, and dissemination of SRD-related information

Continued.

Environment Management Framework effectively implemented

New. Strengthen monitoring of safeguards policies.

29

REVISED PROJECT RESULTS FRAMEWORK

PDO Level Results Indicators* C

ore Unit of

Measure Baseli

ne

Cumulative Target Values** Frequency

Data Source/ Method

ology

Responsibility for Data Collection

YR 1 (2010)

YR 2 YR3 YR 4 YR5 YR6 YR7 YR8 YR9

Number of small farmers (at least 50% in targeted areas) transitioned towards more productive and sustainable farming systems g

Number of

farmers

0 0 760 9,170 18,340 29,800 38,980 43,560 45,850 47,000

Annual

MIS

SEAPEC

Number of small farmers included in (or with improved links to) at least one value chain6

Number of

farmers

0 10 520 1,450 2,000 2,100 2,200 2,350 2,500 2,600

Annual

MIS

SEAPEC

Area of agricultural lands under improved production systems

Ha

0 0 2,600 27,500 62,000 103,000 117,000 152,000 165,000 185,000

Annual

MIS

SEAPEC

Intermediate Results (Component 1):

Number of investment proposals financed (productive and environment subprojects)g

Number of pro-posals

0

15 1,172 8,207 16,486 25,059 32,423 35,904 38,175 40,300

Annual

MIS

SEAPEC

Number of investment proposals elaborated (Structuring Subprojects) g Of which: - Productive - Environment


0 0 0

0

0 0

0 0 0

6

4 2

17

10 7

28

17 11

39

24 15

44

26 18

50

30 20

55

33 22

Annual MIS SEAPEC

Number of investment proposals financed (Structuring Subprojects) g Of which: - Environment - Productive


0 0 0

0

0 0

0 0 0

5

3 2

15

9 6

25

15 10

35

21 14

40

24 16

45

27 18

50

30 20

Annual MIS SEAPEC

Number of emergency investment proposals financed


0 2,300 2,300 2,300 2,300 2,300 2,300 2,300 2,300

Annual MIS SEAPEC

Improved product quality measured by number of : - small farmers or enterprises certified

Number of

farmers or

5

25

75

100

300

400

600

800

1,000

1,000

Annual

MIS

SEAPEC

6 Inclusion or improved links to a value chain will be defined as a sustained increase in the added value of products sold above 2% per year.

30

- agro-processing and artisanal enterprises adding value

enter-prises

0

5

15

30

45

60

80

100

110

120

Inter-municipal road consortia established by clusters of municipalities

Number of con-sortia

0 0 0 0 2 2 2 2 2 2 Annual MIS SEAPEC

Extent of tertiary roads restored and maintained (kilometers)

Km 0 0 280 400 950 1,500 1,900 2,200 2,400 2,500 Annual MIS SEAPEC

Number of project implementers and technicians trained in key project concepts g

Number 0 100 150 320 400 480 510 540 540 540 Annual MIS/ Project Reports

SEAPEC

Number of beneficiaries trained in key project concepts g

Number 0 6,900 13,350 31,825 44,065 55,565 67,345 78,345 83,645 87,240 Annual MIS/

Project Reports

SEAPEC

Number of stakeholders participating in development committees across local, municipal and regional levels g

Number 0 2,080 3,200 4,000 4,800 6,000 6,720 7,200 7,840 8,000 Annual MIS/ Project Reports

SEAPEC

Number of MDCs, MuDCs and RDCs established and strengthened - MDCs - RDCs - MuDCs

Number

48 1 24

70 1 40

145 2 59

200 2 65

266 3 72

316 3 72

366 5 72

366 5 72

366 5 72

366 5 72

Annual MIS SEAPEC

Number of MDPs, MuDPs and RDPs formulated (or updated) and negotiated with stakeholders across all relevant levels: - MDPs, - MuDPs, - RDPs

Number

48 24 1

51 24 1

145 28 2

200 36 3

266 54 3

316 62 3

366 72 3

366 72 3

366 72 3

366 72 3

Annual MIS SEAPEC


A strategy and action plan (ISP) formulated to strengthen rural institutions in the SoRJ

Number

0 0 1 1 1 1 1 1 1 1

Annual MIS SEAPEC

Number of institutional strengthening subprojects from the ISP implemented

Number

0 0 0 6 14 18 20 20 20 20 Annual MIS SEAPEC

31

Number of cooperation arrangements established between relevant municipal, State, and federal rural development entities to implement joint activities

0

1 4 4 4 4 4 4 4 4

Annual MIS SEAPEC

An ESS established

Text None 0 0 1 1 1 1 1 1 1

Annual MIS SEAPEC

Number of small farmer investment proposals financed (and amount of financial resources supplied) with the participation of the ESS:

- Number of proposal - Value of proposals

Number and value

(USS)

0 0

0 0

0 0

5 100,000

15 400,000

30 600,000

45 850,000

60 1,000,000

60 1,000,000

60 1,000,000

Annual MIS SEAPEC

Number of participatory research projects carried out under the RNS

Number

of projects

23 23 23 30 37 40 42 45 48 50 Annual MIS SEAPEC/

PESAGRO


PIU structure implemented and effectively functioning across local, municipal, regional, and central levels

Text None PIU Structured

Yes Yes Yes Yes Yes Yes Yes Yes

Annual MIS/ Project Reports

SEAPEC

M&E system established and effectively collecting and analyzing relevant project information

Text None M&E system

established

Yes Yes Yes Yes Yes Yes Yes Yes Annual MIS/ Project Reports

SEAPEC

A MIS established and facilitating the collection, storage, analysis, and dissemination of SRD-related information

Text None MIS established

Yes Yes Yes Yes Yes Yes Yes Yes Annual MIS/ Project Reports

SEAPEC

Environment Management Framework effectively implemented

Text EMF

approved

Yes Yes Yes Yes Yes Yes Yes Yes Yes Annual MIS/ Project Reports

SEAPEC

g All the indicators marked “g” will be disaggregated by gender in the Project’s monitoring system.

32

ANNEX 2: DETAILED DESCRIPTION OF NEW PROJECT ACTIVITIES

BRAZIL: Additional Financing for the Rio de Janeiro Sustainable Rural Development Project

1. This Annex presents a detailed description of the new activities to be introduced under the proposed Additional Financing for the Rio de Janeiro Sustainable Rural Development Project (Rio Rural Project). The detailed description of original project activities can be found in the Project Appraisal Document (PAD) for the Rio Rural Project (Report No. 46397-BR) and it is not repeated in the present document. The components and structure of the project would remain unchanged and the new activities would be implemented under the existing components and subcomponents.

Component 1 (Supporting Rural Production and Competitiveness, US$89.4 million from IBRD) 2. The objective of this component is to provide assistance to rural beneficiaries by working

with community groups across local, municipal and regional levels to increase organizational and participation skills for project implementation through capacity building and planning activities; to operate changes in rural production processes within a framework of market-driven agricultural development focused on sustainable and increased productivity for small farmers, value added and market linkages; and to help re-establish the productive environment of small farmers affected by the January 2011 natural disaster in the Serrana region.

3. Subcomponent 1.1 (Pre-investment) aims to strengthen organization and capacity for

agricultural productivity through training, planning and TA activities, and elaborate investment proposals with special emphasis on production and competitiveness. Subcomponent 1.2 (Investments) supports the implementation of demand-driven activities (Subprojects) through the provision of grants aimed at improving sustainable and productive farming systems (Productive Subprojects) and compliance with environmental regulation and adoption of environmentally sound practices (Environment Subprojects), as well as erosion control and rehabilitation and maintenance of rural roads (Rural Roads Subprojects). In addition, Emergency Subprojects were introduced under this subcomponent through project restructuring in October 2011 in order to support emergency rehabilitation efforts in rural areas of the Serrana Region affected by the January 2011 natural disaster. Emergency Subprojects are expected to be fully completed in calendar year 2012 and financed exclusively under the restructured original loan for the project.

4. The proposed additional financing would fill the financing gap which resulted from the

reallocation of original loan resources to emergency activities, thereby restoring the original loan amount and activities, and it would expand and deepen the range of activities to scale up the project’s development impact. Those new activities would include:

a. Expansion of current project activities: The additional financing would continue

project support for the identification, preparation and implementation, at the micro-catchment level, of: (a) Productive Subprojects, (b) Environment Subprojects, and (c)

33

Rural Roads Subprojects. The geographical coverage of those activities would expand from 270 micro-catchments in 59 municipalities (original loan) to 366 micro-catchments in 72 municipalities. All municipalities in the Serrana region, in the North and in the Northwest regions of the State would be covered under the project, as well as selected municipalities in the South, Coastal Floodplains, Metropolitan and Paraiba River Middle Valley regions. With regards to the selection of new municipalities and micro-catchments for the scaling up of original activities, the same criteria which have been used under the original project would be used (at municipality level: number of family farmers, number of low-income family farmers, municipal HDI, concentration of rural population, participation of agricultural sector in municipal GDP, and Municipal Environmental Quality Index; and at micro-catchment level: concentration of family agriculture, level of community organization, biodiversity prevalence, and presence of water resources).

b. New lines of support: Building on the lessons learned from early project

implementation, two new types of Subprojects would be introduced under the proposed additional financing. These two new lines of support would finance larger investment proposals by groups of producers organized in associations, cooperatives, or other legally registered groups, for two types of “Structuring Subprojects”:

i. Structuring Environment Subprojects aiming at integrated landscape

management, improved disaster risk management, conservation of natural resources and the rehabilitation of degraded areas across several micro-catchments and/or municipalities; and

ii. Structuring Productive Subprojects aiming at increasing market access for groups of formally organized small producers.

Similar to the original project activities, those larger investments would be supported through matching grants following the principles described below and further detailed in the Project Operational Manual.

5. Table 1 below summarizes the five lines of support available under the proposed additional

financing:

34

Table 1 – Lines of Support under the Proposed Additional Financing

Line of Support Type of activities 1. Productive Subprojects

Activities identified through the preparation of Micro-catchment Development Plans (MDP), including: (a) Sustainable increased productivity on farm (improved agricultural practices, adoption of new technologies, improved plant and animal health practices, etc); (b) Value-added promotion (drying and storage equipment, coffee classification labs, certification of products, etc); (c) Value-chain development (off-farm), such as transport vehicles, agro-processing, etc.

2. Environment Subprojects

Activities identified through the preparation of Micro-catchment Development Plans (MDP), including: (a) Environmental compliance of agricultural holdings (environmental licensing, protecting spring, rehabilitation of riparian reserve, etc); (b) Adoption of agro-ecological practices (organic fertilizer use, IPM, effluent treatment systems, etc); (c) Rural sanitation.

3. Structuring Productive Subprojects

Joint activities identified by groups of producers, including: (a) Development of new markets (certification, grading, product diversification, agro-processing, transport, etc); (b) Food safety management along the value-chain; (c) Economic diversification (rural tourism, handicrafts, etc).

4. Structuring Environment Subprojects

Joint activities identified by groups of producers, including: (a) Disaster risk management (reforestation, slope stabilization, water management, terracing, etc); (b) Integrated landscape management (restoration of degraded areas, reforestation, connection of forest fragments, etc); (c) Conservation (biodiversity corridors, water management and conservation, etc).

5. Rural Roads Subprojects

Drainage, paving and erosion control for rural roads (critical stretches)

6. The main differences between the two new lines of support and the original lines of support

under the project would be: (a) the scale of those investments, spanning across several micro-catchments and/or municipalities, (b) their specific objectives, and (c) the process through which they would be identified, prepared and selected. The Structuring Environment Subprojects would focus on disaster risk management in rural areas, integrated landscape management (see Box 1 below) and conservation. The Structuring Productive Subprojects would focus on the development of and access to new markets for producers groups, addressing specific barriers to market access such as food safety and quality management along the value-chain, and economic diversification in rural areas. Both types of Structuring Subprojects are expected to be technically more complex than the original subprojects and to require the provision of specialized technical assistance, both for their preparation and for their evaluation. The planning and implementation process for those new Subprojects is

35

described below, and further details of implementation arrangements are being incorporated into the updated Project Operational Manual.

Box 1- Integrated Landscape Management and Disaster Risk Management

Recent disasters in the State of Rio de Janeiro have exposed the vulnerability of several regions of the State, and more recently the mountainous Região Serrana. In January 2011, summer storms in the Serrana Region resulted in large mudslides and floods that caused significant physical destruction and human losses. The landscape has also been adversely affected leading to large losses of productive areas. The Bank is supporting the strengthening of the State’s disaster risk management strategy through the proposed Additional Financing and through the Additional Financing for the Strengthening Public Sector Management and Territorial Development TAL (P126735) and Rio de Janeiro Renovating and Strengthening Public Management TAL (P106768), respectively in rural and urban areas. With regards to rural areas, the proposed strategy under the project would include: 1. The participation of SEAPEC in the work of the State Committee on disaster risk

management (DRM) chaired by INEA, and their contribution to the preparation of the State-level disaster risk reduction strategy;

2. Support for formal partnerships with other institutions for the implementation of the strategy in rural areas (under Subcomponent 2.1 of the proposed Additional Financing);

3. Collaboration with INEA, the DMR, Civil Defense and other relevant agencies to carry out natural hazard risk mapping in priority rural areas (under Subcomponent 1.1);

4. The focus would be on natural hazard risk mitigation, although the project would also contribute to the restoration of degraded areas.

5. The project would support the identification of good practices for natural disaster risk management in priority rural areas, with the support of a team of specialists hired under the proposed Additional Financing. The Project would build on lessons learned under the previous GEF Project with regards to integrated landscape management and conservation of natural resources. The focus would initially be on the Serrana Region and other priority areas identified through risk mapping.

6. The project would finance training activities on landscape management and natural hazard risk management for each category of beneficiary (small producers, COGEMs, project staff, EMATER staff, municipality staff, regional-level staff).

7. The project would support interested groups of producers in the identification and preparation of landscape level interventions to reduce natural hazard risks, improve landscape management, and promote the conservation of natural resources (land, soil and water resources) to maximize positive externalities.

8. The project would provide financing for those specific investments through matching grants through its Structuring Environment Subprojects (Subcomponent 1.2).

9. The project would monitor the outcome of those activities under Component 3 and disseminate lessons learned.

36

Subcomponent 1.1 (Pre-investment)

7. This subcomponent would continue to strengthen the capacity of producers and their groups at local, municipal and regional level, and prepare beneficiaries and project staff for the implementation of the specific investments under Subcomponent 1.2 (Investments) through planning activities, training activities and the provision of technical assistance, in the 366 micro-catchment to be covered by the project. This subcomponent would finance training, workshops and exchanges, technical assistance (consultant services) and goods (equipment and materials).

8. Planning. The planning cycle used at micro-catchment level under the current project would

be expanded to all new micro-catchments. The planning cycle for larger investments (Structuring Subprojects) is described under Subcomponent 1.2 below.

9. Training. Training activities would be expanded to all beneficiaries in the 72 municipalities to

be covered by the project. New training themes to be introduced include, in particular: the improvement of product quality and compliance with food safety regulations; the management of cooperatives and associations; and integrated landscape management. A training plan has been prepared for each category of beneficiary (small producers, MDCs, project staff, EMATER staff, municipality staff and regional-level staff) and a detailed training program would be prepared each year as part of the Annual Operating Plan, as is currently the practice under the original project.

10. Technical Assistance. The implementation of project activities in the field would continue to

be supported by the network of EMATER staff, with a total of 289 technicians expected to be mobilized in the 366 micro-catchments covered by the project. In order to support the introduction of new activities, the project would also contract complementary expertise, including: (a) at the regional level, 20 recently trained technicians, (b) at central level (Project Implementation Unit), a team of specialized consultants with expertise in the key value-chains relevant for the project (such as coffee, horticulture, sugar cane, dairy, certified products) and a team of specialists (Expert Team) in the restoration of degraded areas and disaster risk management.

11. Main outputs. (i) 42,655 investment proposals elaborated; (ii) 540 project implementers and

technicians trained in key project concepts; (iii) 87,240 beneficiaries trained in key project concepts; (iv) 8,000 stakeholders participating in development committees across local, municipal and regional levels; (v) 366 Micro-catchment Development Committees (MDCs) strengthened and/or created and 5 Regional Development Committees (RDCs) strengthened and/or created; and (vi) 366 Micro-catchment Development Plans (MDPs), 72 Municipality Development Plans (MuDPs), and 4 Regional Development Plans (RDPs) elaborated (or updated) and negotiated with stakeholders across territorial levels. Subcomponent 1.2 (Investments)

12. This subcomponent would continue to implement the demand-driven investments identified and developed through the different planning activities implemented under Subcomponent

37

1.1. This subcomponent would finance (a) matching grants for each type of subprojects and (b) investments in rural roads rehabilitation at the municipal level.

13. Productive and Environment Subprojects. There would be no change in the modalities for the

implementation of those subprojects. The methodology applied at micro-catchment level would continue to be used in all micro-catchments under the scaled-up project. The eligibility criteria for beneficiaries, the co-financing parameters for matching grants and the selection process would be those used in the original project and described in the original PAD.

14. Structuring Subprojects. The Subcomponent would finance two types of Structuring Subprojects, Structuring Environment Subprojects and Structuring Productive Subprojects.

15. Beneficiaries. Beneficiaries of Structuring Productive Subprojects would be formally registered producer associations and cooperatives, and other formally registered groups of producers whose members meet the eligibility criteria of the original project. Those groups would include a minimum of 20 producers, and a minimum of 50 percent small and/or family producers (as defined under the original project). Small and medium rural enterprises using a minimum of 80 percent of their inputs from small and/or family producers would also be eligible, with a minimum of 50 percent of the value of the project incentive directly supporting the producers associated with the investment proposal. Beneficiaries of Structuring Environment Subprojects would be rural producers organized in formal or informal groups in the targeted areas.

16. Structuring Productive Subprojects. Examples of activities to be financed include coffee quality improvement units, processing and packaging units for fruit and vegetables, organic certification of specific products for associations or groups of producers, food safety improvement for dairy associations and cooperatives, and the development of green tourism activities and rural handicrafts.

17. Structuring Environment Subprojects. Examples of activities to be financed include the restoration of degraded areas, the restoration and connection of Areas of Permanent Conservation (APP), biodiversity corridors, connecting native forest fragments, slope stabilization, and water management.

18. Incentives. The incentive to be provided for the Structuring Subprojects would follow the

same principles as those used for the original subprojects. The one-time incentives (matching grants) provided by the project would aim at promoting improved agricultural production, processing and marketing practices, by reducing the up-front transaction costs and risks associated with the adoption of those improved practices (whether technological or organizational innovations, in the case of associations or cooperatives investing in the value-chain) by small family farmers. The level of incentives would be higher for those subprojects with a higher public goods content, such as those with clear positive environmental externalities. The level of incentives would also be higher for poorer producers (or groups with a higher percentage of poorer producers) who tend to face higher barriers to entry when adopting new technologies, assuming risk, organizing groups or providing environmental services or other public goods. Similar to the original project, the level of incentive would never exceed 80 percent of the total cost of the investment.

38

19. The design of the matching grants system under Subcomponent 1.2 will continue to seek to

influence prevailing credit practices within the rural sector in the State of Rio de Janeiro. While local credit is generally available for operating costs, financing for capital investments is not. By providing grants and technical assistance for investment planning, the project is expected to lower the perceived financial risk of the beneficiary producers on the part of financial institutions. In the case of larger investments (Structuring Subprojects), the project would seek to closely associate existing finance institutions with the proposed investments, and promote co-financing of those initiatives7.

20. Financing Parameters. Limits per type of subproject, per beneficiary, per group of producers

and the level of counterpart contributions for various activities are defined in the Project Operational Manual, on the basis of the principles described in paragraph 17 above. These parameters would be regularly reviewed and adjusted as needed during project implementation, based on the experience gained.

21. Planning and Implementation Cycle for Structuring Subprojects. Grants provided under Structuring Subprojects would follow a similar project cycle as the one used at micro-catchment level under the original project. The planning and consultative structure already established at local, municipal and regional level would be used to support the process. Given the different nature of those subprojects, the planning, selection and implementation cycles for each window (Environment and Productive) would be separate.

22. During the subproject identification phase, the network of MDCs, MuDCs and RDCs would be used to disseminate information to beneficiaries about the two new windows of support under the project and to identify initial demands for support. SEAPEC, with the support of its expert team, would collect information and carry out the necessary diagnostics to inform the preparation and evaluation of specific proposals. SEAPEC, through the PIU, would issue calls for expressions of interests from groups of producers on a semi-annual basis, respectively under each window (Structuring Productive Subprojects and Structuring Environment Subprojects).

23. Given the greater technical complexity of the Structuring Subprojects, Regional Technical Teams (Câmaras Técnicas) would be established at the regional level to support the screening and evaluation of the expressions of interest and provide support to SEAPEC with the supervision of the implementation of the following phases. The technical and economic evaluation of proposals would be carried out by SEAPEC at central level (with the support of specialized expertise) and the final selection of proposals endorsed by the Regional Development Committees (RDCs).

24. In view of the technical complexity of those subprojects, SEAPEC would rely on specialized expertise to carry out the technical, economic and financial evaluation of the proposals. In the case of the Structuring Productive Subprojects, these would be agribusiness specialists with

7 The Bank is conducting, with SFLAC Trust Fund support, an analysis of the offer of and demand for financial services for project beneficiaries, with the aim of developing recommendations to improve their access to financial services. The study was carried out in the State of Rio de Janeiro in January 2012, and it is expected that some of the recommendations of the study could be taken up during project implementation.

39

extensive experience of the key value-chains involved in the project areas, hired by SEAPEC under the project. With regards to the Structuring Environment Subprojects, the expertise would be provided by the expert team of landscape management and disaster risk management specialists hired by SEAPEC under the project.

Figure 1 – Structuring Subprojects Cycle Overview

PHASE ACTIVITIES SUBPROJECT IDENTIFICATION

1. Divulgation Divulgation of information about new lines of support through the network of MDCs, MuDCs and RDCs

2. Diagnostic Identification of initial demands for support Diagnostic studies (environmental or productive) to

inform and support the preparation of proposals 3. Calls for Expressions of

Interest (Environment or Productive)

SEAPEC to issue semi-annual calls for expressions of interest for specific regions and themes, based on initial diagnostics, for each type of Structuring Subprojects

SUBPROJECT PREPARATION 1. Evaluation of Expressions of

Interest Regional Technical Team to screen proposals for

eligibility for each call for proposal Prioritization of eligible proposals and divulgation of

results by SEAPEC 2. Preparation of detailed

proposals by producers Preparation of detailed proposals by proponents (with

TA as needed) 3. Technical and economic

evaluation of proposals Technical and economic evaluation by Project

Implementation Unit (PIU) with support from agribusiness specialists (Productive Subprojects) and landscape management and disaster risk management team (Environment Subprojects)

Ranking of proposals following criteria established in the Project Operational Manual for each window

4. Selection and divulgation of results

Final selection and approval of proposals by RDCs Divulgation of results by SEAPEC

SUBPROJECT IMPLEMENTATION

1. Implementation Physical and financial implementation by groups of producers

2. Supervision/monitoring Supervision and monitoring by Regional Technical Team with support of local technical network (EMATER)

3. Completion Subproject activities completed and final evaluation prepared jointly by beneficiaries and SEAPEC

40

25. Rural Roads. The proposed additional loan would finance: (a) drainage and paving works in areas of the Serrana region affected by the January 2011 disaster, to fully restore the trafficability of critical segments, and, (b) additional equipment to complete the existing rural road patrols established under the original project. The selection of critical segments for rehabilitation would follow the same participatory and transparent approach established under the original project.

26. Main Outputs. With the proposed expanded geographical coverage of the project, an

estimated 40,300 Productive and Environment Subprojects would be financed as well as an estimated 50 Structuring Subprojects (including 20 Environment Subprojects and 30 Productive Subprojects), approximately 185,000 ha of agricultural land brought under improved production systems, and approximately 2,500 km of rural roads would be rehabilitated.

Component 2 (Strengthening Institutional Frameworks, US$3.4 million from IBRD) 27. The objective of this component is to improve the State of Rio de Janeiro’s institutional

frameworks supporting market-driven development. 28. Subcomponent 2.1 (Strengthening Rural Institutions and Coordination Mechanisms). The

objective of this subcomponent is to strengthen rural institutions and coordination mechanisms through capacity-building for the State’s agencies to more quickly and effectively respond to rural sector demands, to provide better services and coordination with other public and private sector stakeholders through, in the short term, the implementation of specific activities (Institutional Subprojects) identified in an institutional sustainability plan (ISP) and, in the long term, by contributing to the implementation of a national policy in support of territorial development. The Additional Financing would support the establishment of formal partnerships between SEAPEC and other institutions to strengthen their collaboration in the two following areas: (a) disaster risk management in rural areas, and (b) access to markets for small rural producers. With regards to (a), the Additional Financing would support SEAPEC’s contribution to the preparation of the State’s disaster risk management strategy, and the subsequent establishment and implementation of the related partnerships, at State and local level, for the implementation of the strategy in rural areas. With regards to (b), the additional financing would enable the implementation of key recommendations emerging from the institutional analysis to be carried out in calendar year 2012.

29. Subcomponent 2.2 (Improving Public and Private Financial Support Mechanisms). The objective of this subcomponent is to enhance the linkages between the supply and the demand of financial resources for sustainable rural development activities by the development of an economic sustainability system, with participation of public and private sector representatives, to: promote awareness of and access to the existing supply of public and private financial support resources to beneficiaries; promote a better flow of financial resources in favor of beneficiaries, and facilitate the exchange of information between the parties involved. The additional financing would finance an assessment of the viability of the pilot mechanism

41

developed under the original project and, subject to a positive evaluation, it could provide additional seed capital for the proposed mechanism.

30. Subcomponent 2.3 (Undertaking Participatory Research). The objective of this subcomponent is to develop a new and effective operational system (the Sustainable Services Research Network System) to conduct agriculture-related research and induce innovation and interaction between research bodies and stakeholders in the identification, discussion and prioritization of key issues in the agriculture and food sector in the State of Rio de Janeiro and, specifically, provide direct support to the implementation of short and medium-term research demands identified by beneficiaries through a participatory process. The implementation of the subcomponent is coordinated by PESAGRO, with specific research activities implemented in collaboration with other research institutions.

31. The proposed additional financing would finance new activities in six areas: (a) the establishment of 6 additional participatory on-farm research units in new project areas, based on producer demand, (b) 10 additional research-station based long-term programs to support the activities of Component 1 on market access, (c) an applied research program on the production of organic inputs in support of the development of the State’s organically-certified products, (d) a research program on Good Agricultural Practices in the dairy sector, (e) a research program on the development of organic and other sustainable products in the State of Rio de Janeiro, and (f) institutional strengthening, including the upgrade and certification of existing PESAGRO laboratories (soil analysis and animal health).

Component 3 (Project Coordination and Information Management, US$7.2 million from IBRD) 32. The objective of this component is to support overall project management, coordination and

implementation, monitoring and evaluation as well as dissemination of key sustainable rural development information under the project.

33. Subcomponent 3.1 (Project Coordination). The additional financing would finance the

expanded Project Implementation Unit (PIU) structure as well as the related incremental support in the form of TA for expert services, goods (equipment and materials) and civil works.

34. Subcomponent 3.2 (Information Management). The additional financing would finance (a) the establishment of an Integrated System of Communication (Sistema Integrado de Comunicação, SIACOM), which would use the mobile phone network for information flows to and from rural producers, (b) the expansion of the participatory monitoring activities to new micro-catchments, and (c) the monitoring and evaluation of the new activities under the project.

42

ANNEX 3: OPERATIONAL RISK ASSESSMENT FRAMEWORK (ORAF) BRAZIL: Additional Financing for the Rio de Janeiro Sustainable Rural Development Project (P126684)

1. Project Stakeholder Risks Rating Low Description: Given the demand-driven nature of subprojects, the availability of transparent and accessible information about the project for all stakeholders will remain a critical factor for successful project implementation.

Risk Management: Implementing agencies to continue ongoing communication activities and collaboration with broad range of partners (NGOs, private sector, research institutions, municipalities, producer groups, etc) Resp: Client| Stage: Implementation| Due Date : Recurrent| Status: Ongoing

2. Implementing Agency Risks (including fiduciary) 2.1 Capacity Rating: Moderate

Description: Implementation of activities in the field will depend

on the quality of EMATER’s engagement with the project. EMATER staff will continue to need training to adjust to the new approaches and tools used by the project.

Lack of experience within IAs with regards to new activities will require new partnerships and external expertise.

Procurement capacity within IAs has been built

through implementation of the original project and with the previous GEF project (P075379), but there is a heavy workload on SEAPEC procurement staff.

Financial Management. The main risks include the

multiple agencies involved in project implementation, low reporting capacity of subproject beneficiaries and use of multiple, non-integrated IT systems. In

Risk Management: Institutional analysis to be carried out in calendar year 2012. Training and capacity building to continue to be an integral part of project activities. New partnerships to be identified during preparation to complement EMATER expertise. Resp: Client| Stage: Implementation| Due Date : 12/31/12| Status: Ongoing

Risk Management: SEAPEC’s procurement capacity would be strengthened by (i) hiring additional procurement support staff; (ii) developing a procurement planning and monitoring module in the information management system; and (iii) elaborating a checklist to verify compliance with all required procedures under each procurement process. Resp: Bank and Client| Stage: Implementation| Due Date : 12/31/12| Status: Ongoing

Risk Management: The FM risks will be mitigated by increased inter-institutional coordination; SEAPEC will provide support to the co-executing entities specialists on the project’s FM activities; improve the SAFF MIS functionality; improve internal controls; update

43

addition, with a larger scale of operation, there is a need to strengthen internal controls and for wide-scope audits. The SAFF MIS will need to be customized to meet the accounting and reporting needs of the project.

the Operational Manual (OM) with regards to new activities; and the Bank will provide close FM supervision and guidance.

Resp: Bank and Client | Stage: Implementation| Due Date: Recurrent | Status: Ongoing

2.2 Governance Rating Moderate Description: Timely availability of counterpart funds has been an

issue in the past. The decentralized implementation structure and the

involvement of various partner institutions could increase risks and delays for the project. However, partnership arrangements are gradually being strengthened.

Larger-scale investments and a greater geographical

coverage may increase the risk of elite-capture.

Risk Management: Timely preparation of annual budgets and workplans (and their implementation) by Client will be monitored by Bank team. Resp: Client| Stage: Implementation| Due Date : Recurrent| Status: Ongoing Risk Management: Continue work on partnership development and capacity building activities. Resp: Client| Stage: Implementation| Due Date : Recurrent | Status: Ongoing

Risk Management: Strengthen monitoring activities, including independent monitoring. Resp: Client| Stage: Implementation| Due Date : Recurrent | Status: Ongoing

3 Project Risks 3.1 Design Rating Moderate Description: Beneficiary reluctance to adopt new approaches and

practices Market risks associated with prices, contracts, etc

affect the viability of project investments Vulnerability to natural disasters in particular in the

Serrana Region.

Risk Management: During preparation, design has integrated lessons from GEF project with regards to adoption of new practices, and used results from GEF project to demonstrate benefits of new approaches. Risk Management: Although the project cannot control market risk, the viability of producers business proposals will be assessed against those risks, and additional value-chain studies are included as part of new activities

Resp: Client| Stage: Implementation| Due Date : Recurrent| Status: Ongoing Risk Management: During preparation, introduction of new activities to strengthen productive landscape resilience and risk management under the Additional Financing. Coordination with State-level DRM initiatives.

44

3.2 Social & Environmental Rating: Low Description: The safeguard policies applicable to the original

project continue to remain relevant and no new safeguard policies are applicable. The main change is the need to mitigate the potential environmental impact of new, medium-sized subprojects.

Risk Management: The EA, including the EMF, and the Resettlement Framework were updated during preparation. Training of project staff will be undertaken in 2012 to implement the revised EMF; and improved coordination is foreseen with the State Environmental Institute (INEA).

3.3 Program & Donor Rating Low Description: The Rio Rural Project is an ongoing Government

program which has strong ownership within SEAPEC. The project is also proactively building partnerships and leveraging complementary cofinancing from other sources.

Risk Management: Continue policy dialogue to ensure program has ongoing support from Government Resp: Bank and Client| Stage: Implementation| Due Date: Recurrent| Status: Ongoing

3.4 Delivery Monitoring & Sustainability Rating Low Description: The key systems to monitor delivery have been put in

place under the ongoing project (including participatory M&E).

The main risk is the sustainability of financing for the

project activities, however the establishment of a sustainable financing mechanism is included in the project design and work is already well advanced.

Risk Management: Finalize design of financial sustainability mechanism during implementation. Resp: Client| Stage: Implementation| Due Date : 11/30/2014| Status: Ongoing

Implementation Risk Rating: Moderate Comments: A moderate risk rating was selected on the basis of the capacity of the implementing agency to coordinate the implementation of a larger scale program and fiduciary risks.

document of the world bank for official use...

Documents