Document of The World Bank Report No: ICR00002315 IMPLEMENTATION COMPLETION AND RESULTS REPORT (IBRD-74990 IBRD-75810 IBRD-75820 IBRD-76480 IBRD-76820) ON FIVE LOANS IN THE AMOUNT OF US$54.38 MILLION TO THE MUNICIPALITIES OF PELOTAS, BAGÉ, URUGUAIANA, SANTA MARIA, AND RIO GRANDE FOR THE RIO GRANDE DO SUL INTEGRATED MUNICIPAL DEVELOPMENT PROGRAM (PDMI) June 30, 2014 Sustainable Development Department Brazil Country Management Unit Latin America and Caribbean Region CURRENCY EQUIVALENTS (Exchange Rate Effective June 20, 2014) Currency Unit = BRL BRL 1.00 = US$ 0.45 US$ 1.00 = BRL 2.24 FISCAL YEAR January 1 - December 31 ABBREVIATIONS AND ACRONYMS APL – Adaptable Programmatic Loan BNDES – Brazilian National Bank for Economic and Social Development (Banco Nacional de Desenvolvimento Econômico e Social) CAS – Country Assistance Strategy CB – Capacity Building CPF – Counterpart funds CORSAN – Rio Grande do Sul State WSS Utility (Companhia Riograndense de Saneamento) DAEB – Bagé’s Water and Sanitation Utility (Departamento de Água e Esgoto de Bagé) EMATER – Company for Rural Technical Assistance (Empresa de Assistência Técnica e Extensão Rural) EMP – Environmental Management Plan GDP – Gross Domestic Product GIS – Geographic Information System HDM – Highway Development and Management Model ICR – Implementation Completion Report IOI – Intermediate Outcome / Results Indicator IRR – Internal Rate of Return LA – Loan Agreement LED – Local Economic Development M&E – Monitoring and Evaluation MTR – Mid Term Review O&M – Operation and Maintenance PAC – Brazilian Federal Government’s Growth Acceleration Program (Programa de Aceleração do Crescimento) PAD – Project Appraisal Document PDMI – Rio Grande do Sul Integrated Municipal Development Program PDO – Program Development Objectives or Project Development Objectives PDOI – Program Development Objective Outcome Indicator PHRD – Japan Policy and Human Resources Development Fund PMAT – Public Sector Modernization Program (Programa de Modernização da Administração Tributária e da Gestão dos Setores Sociais Básicos, financed by BNDES) RS – State of Rio Grande do Sul SME – Small and Medium Enterprises TA – Technical Assistance TOR – Terms of Reference UAP – Program Integration Unit (Unidade de Articulação do Programa) UGM – Project Management Unit for Bagé (Unidade Gestora Municipal) UGP – Project Management Units (Unidades de Gestão do Projeto) WSS – Water Supply and Sanitation Vice President: Jorge Familiar Calderon Country Director: Deborah L. Wetzel Sector Manager: Anna Wellenstein Project Team Leader: Juliana Garrido ICR Team Leader: Juliana Garrido BRAZIL BRAZIL - RIO GRANDE DO SUL INTEGRATED MUNICIPAL DEVELOPMENT PROGRAM CONTENTS Data Sheet A. Basic Information B. Key Dates C. Ratings Summary D. Sector and Theme Codes E. Bank Staff F. Results Framework Analysis G. Ratings of Project Performance in ISRs H. Restructuring I. Disbursement Graph 1. Project Context, Development Objectives and Design ........................................................... 1 2. Key Factors Affecting Implementation and Outcomes ........................................................... 6 3. Assessment of Outcomes ...................................................................................................... 16 4. Assessment of Risk to Development Outcome ..................................................................... 22 5. Assessment of Bank and Borrower Performance.................................................................. 22 6. Lessons Learned.................................................................................................................... 24 7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners ....................... 25 Appendix 1. Pelotas Specific Data Sheet and ICR ................................................................... 26 Appendix 2. Bagé Specific Data Sheet and ICR ....................................................................... 46 Appendix 3. Uruguaiana Specific Data Sheet and ICR ............................................................ 65 Appendix 4. Rio Grande Specific Data Sheet and ICR ............................................................ 80 Appendix 5. Santa Maria Specific Data Sheet and ICR............................................................ 97 Annex 1. Program Costs and Financing.................................................................................. 118 Annex 2. Outputs by Component............................................................................................ 123 Annex 3. Economic and Financial Analysis ........................................................................... 136 Annex 4. Bank Lending and Implementation Support/Supervision Processes ....................... 143 Annex 5. Beneficiary Survey Results ..................................................................................... 146 Annex 6. Stakeholder Workshop Report and Results ............................................................. 147 Annex 7. Summary of Borrower's ICR and/or Comments on Draft ICR ............................... 152 Annex 8. Comments of Cofinanciers and Other Partners/Stakeholders ................................. 173 Annex 9. List of Supporting Documents................................................................................. 174 MAP DATA SHEET FOR THE PDMI PROGRAM The official datasheet uploaded to the Operations Portal contains inconsistencies, as some data refer to the overall PDMI and some to the Pelotas Project alone. Please refer to the Program and Project-specific datasheets below for the correct information. A. Basic Information for the Program Rio Grande do Sul Integrated Municipal Country: Brazil Project Name: Development Program (APL) IBRD-74990,IBRD- 75810,IBRD- Project ID: P094199 L/C/TF Number(s): 75820,IBRD- 76480,IBRD-76820 ICR Date: 06/30/2014 ICR Type: Core ICR PELOTAS, BAGÉ, URUGUAIANA, STA Lending Instrument: APL Borrower: MARIA, RIO GRANDE Original Total USD 18.90M Disbursed Amount: USD 47.47M Commitment: Revised Amount: USD 54.38M Environmental Category: B Implementing Agencies: Municipal Governments of Pelotas, Bagé, Uruguaiana, Santa Maria and Rio Grande Cofinanciers and Other External Partners: Not applicable B. Key Dates Revised / Actual Process Date Process Original Date Date(s) Concept Review: 11/16/2006 Effectiveness: 05/21/2008 05/21/2008 11/29/2011 Appraisal: 06/26/2007 Restructuring(s): 12/14/2012 09/13/2010 Approval: 01/15/2008 Mid-term Review: 05/02/2011 06/07/2011 Closing: 12/31/2012 12/31/2013 C. Ratings Summary C.1 Performance Rating by ICR 1 Outcomes: Moderately Satisfactory Risk to Development Outcome: Significant Bank Performance: Moderately Satisfactory PDMI (weighted average): Moderately Borrower Performance: Satisfactory C.2 Detailed Ratings of Bank and Borrower Performance (by Individual ICR) Bank Ratings Borrower Ratings Pelotas: Satisfactory Bagé: Moderately Satisfactory Uruguaiana: Unsatisfactory Santa Maria: Quality at Entry: Moderately Satisfactory Government: Moderately Satisfactory Rio Grande: Moderately Unsatisfactory PDMI (weighted average): Moderately Satisfactory Pelotas: Satisfactory Bagé: Moderately Satisfactory Uruguaiana: Unsatisfactory Santa Maria: Implementing Quality of Supervision: Moderately Satisfactory Moderately Satisfactory Agency/Agencies: Rio Grande: Moderately Unsatisfactory PDMI (weighted average): Moderately Satisfactory Pelotas: Satisfactory Bagé: Moderately Satisfactory Overall Bank Overall Borrower Uruguaiana: Moderately Satisfactory Unsatisfactory Performance: Performance: Santa Maria: Moderately Satisfactory Rio Grande: 1 Based on the weighted average (based on loan amounts) of individual Project ratings. Moderately Unsatisfactory PDMI (weighted average): Moderately Satisfactory C.3 Quality at Entry and Implementation Performance Indicators Implementation QAG Assessments Indicators Rating Performance (if any) Potential Problem Project Quality at Entry Yes None at any time (Yes/No): (QEA): Problem Project at any Quality of No None time (Yes/No): Supervision (QSA): DO rating before Moderately Closing/Inactive status: Satisfactory D. Sector and Theme Codes Original Actual Sector Code (as % of total Bank financing) General industry and trade sector 6 5 General water, sanitation and flood protection sector 14 7 Micro- and SME finance 6 2 Roads and highways 62 75 Sub-national government administration 12 11 Theme Code (as % of total Bank financing) Micro, Small and Medium Enterprise support 12 6 Municipal governance and institution building 11 7 Other urban development 54 72 Pollution management and environmental health 14 7 Rural services and infrastructure 8 7 E. Bank Staff Positions At ICR At Approval Vice President: Jorge Familiar Calderon Pamela Cox Country Director: Deborah L. Wetzel John Briscoe Sector Manager: Anna Wellenstein Anna Wellenstein (Acting) Project Team Leader: Juliana Garrido Jennifer J. Sara ICR Team Leader: Emanuela Monteiro ICR Primary Author: Emanuela Monteiro F. Results Framework Analysis Project Development Objectives (from Project Appraisal Document) The Program development objective is to strengthen the capacity of the municipalities of Bagé, Pelotas, Rio Grande, Santa Maria and Uruguaiana to provide selected infrastructure services and employment opportunities for their population. Revised Project Development Objectives (as approved by original approving authority) Not changed during Restructuring for any project. G. Ratings of Program Performance in ISRs Actual Date ISR No. DO IP Disbursements Archived (USD millions) 1 03/04/2008 Satisfactory Satisfactory 0.00 2 09/11/2008 Satisfactory Moderately Satisfactory 6.08 3 04/15/2009 Satisfactory Satisfactory 10.21 4 11/23/2009 Satisfactory Satisfactory 13.28 5 04/29/2010 Moderately Satisfactory Moderately Satisfactory 14.94 6 02/21/2011 Moderately Satisfactory Moderately Satisfactory 17.67 7 07/20/2011 Moderately Satisfactory Moderately Satisfactory 19.94 8 04/29/2012 Moderately Satisfactory Moderately Satisfactory 29.55 9 11/18/2012 Moderately Satisfactory Moderately Satisfactory 38.36 10 07/10/2013 Moderately Satisfactory Moderately Satisfactory 45.12 11 01/19/2014 Moderately Satisfactory Moderately Satisfactory 47.13 H. Restructuring (if any) Please refer to specific datasheets (Appendices 1 through 5). I. Disbursement Profile 1. Project Context, Development Objectives and Design Introduction. Rio Grande do Sul Integrated Municipal Development Program (PDMI) was an Adaptable Programmatic Loan (APL) involving five municipal projects / loans in Southern Brazil: Pelotas Polo do Sul (7499-BR); Uruguaiana Vencerá (7581-BR); Bagé Rainha da Fronteira (7582-BR); Santa Maria 2020 (7648-BR); and Rio Grande 2010 – Uma Visão de Futuro (7682-BR). PDMI represented a new scale for Bank partnerships at the subnational level in Brazil: in 2004, the Bank had begun lending directly to municipalities to support their increased autonomy with capacity and infrastructure-enhancing activities. For the first time, the Bank worked with a mix of small to medium size 2 -municipalities, which was only possible through a joint / integrated arrangement. Clarifications on the format of this ICR. This Implementation Completion Report (ICR) had to be customized to fit the unique nature of PDMI. The main text presents the assessment of the overall PDMI Program, including the Program datasheet, context and other content of general application. Performance and Program-level lessons learned are consolidated in the main text only, for the Program as a whole. The Program ICR is followed by five appendices which include specific datasheets and ICRs for each municipal Project with more detailed Project information on context, key factors affecting implementation and outcomes, risks to development outcome, and Borrower performance for each municipality (refer to Appendices 1 through 5). Finally, all mandatory annexes are included, with Project-specific inputs for Annexes 1, 2 and 7. Key dates and facts. The Project Concept Note was approved in May 2006 3. Program appraisal occurred in June 2007. Negotiations were conducted in five rounds in the following sequence – Pelotas, Uruguaiana, Bagé, Santa Maria, and lastly Rio Grande 4. The loans were thus also signed on different dates, resulting in variable implementation periods, ranging from four and a half years (Pelotas) 5 to two and a half years (Rio Grande) 6. Four out of the five loans had Level 2 restructurings – Pelotas in November 2011 and Bagé, Rio Grande and Santa Maria in December 2012. All loans closed on December 31, 2012, except for Santa Maria, which was granted an additional 12 month extension through December 31, 2013. Performance and achievements varied by municipality. 2 2006 Municipal total population varied from 120,000 (Bagé) to 334,000 inhabitants (Pelotas). 3 Project proposals (Carta Consultas) were approved by the Federal Government in December 2004. 4 The Pelotas Project was negotiated in November 2007; Uruguaiana in May 2008; Bagé in June 2008. Santa Maria was negotiated in two phases (September and November 2008) as it had to be reappraised; and Rio Grande in March 2009. 5 Loan effectiveness dates used as references. 6 The extent of the delay between approval and effectiveness for some PDMI projects was not expected or taken into account during preparation. As the closing date at appraisal was Program-wide, the implementation period for each project varied correspondingly with the delay in effectiveness. 1 Table 1: Key dates and loan amounts for the Program Rio Key information Program Pelotas Bagé Uruguaiana Santa Maria Grande Loan Amount 54.38 7 18.90 6.60 6.83 13.95 8.10 (USD million) Board date 1/15/2008 1/15/2008 7/23/2008 7/23/2008 12/23/2008 7/7/2009 Signing date - 3/26/2008 11/11/2008 5/13/2009 3/4/2010 2/25/2010 Effectiveness date - 5/21/2008 1/6/2009 6/22/2009 6/2/2010 4/16/2010 Closing date 12/31/2012 12/31/2012 12/31/2012 12/31/2012 12/31/2013 12/31/2012 1.1 Context at Appraisal Country and sector issues. The State of Rio Grande do Sul (RS) is located in the extreme South of Brazil, covering 3.2% of the nation’s area. At the time of Appraisal, RS had a population of 10.5 million, 9.5% living in the state’s Southern half (“Metade Sul”), where the Program municipalities are located 8. RS was the fourth most productive state of the country, accounting for 8% of Brazil’s GDP. Although the economy of RS was performing relatively well, and although the Metade Sul accounted for 11% of the State’s GDP 9, the benefits of economic growth were unevenly distributed across the population and overall economic growth had slowed in the State’s southern half. In order to address this imbalanced development across regions, the Rumos 2015 State Development Plan, partially funded by a previous World Bank loan, included six strategic areas of focus: State Competitiveness, Strengthening of Hub-Cities, Social Inclusion, Environmental Preservation, Participatory and Modern Governance and Regional Development Plans to Overcome Inequalities. As part of the Hub-Cities theme, the strategy emphasized the fundamental role of medium-sized cities in promoting regional development based on an increasingly urban and knowledge-driven economy. As the most prominent hub cities of the southern half of the state, the five municipalities included in PDMI needed strategic interventions to overcome economic decline, enhance their competitiveness, and accelerate sustainable economic growth. The initial request for a World Bank loan was submitted by each municipality for Brazilian Federal Government (Guarantor) approval in December 2003 10. At the time, the Bank worked with the Federal Government to clarify the municipal lending eligibility criteria to be applied. The following requirements were put forward: (a) projects would need to address difficult and cross-sectoral development challenges, (b) municipalities larger than 100,000 people would be 7 The original Program amount was estimated at US$ 66 million total loan amount. However, the originally expected second phase for the Rio Grande Project (US$ 7.80 million) was never approved and the unallocated amount (US$ 0.61 million) was not used. 8 The five municipalities had a total population of about 1,000,000. 9 With the exception of Rio Grande. 10 Coordination of all aspects related to external borrowing in Brazil is made by the National Secretary of International Affairs (SEAIN – Secretaria de Assuntos Internacionais), within the organizational structure of Ministry of Planning, Budget and Management (MPOG – Ministério do Planejamento, Orçamento e Gestão). Decisions, however, are ultimately made by the Commission for External Financing (COFIEX – Comissão de Financiamentos Externos), with representatives of various federal bodies, among them SEAIN, the Ministry of Finance (FAZENDA – Ministério da Fazenda), and the Central Bank (Banco Central do Brasil). 2 eligible, (c) cross-municipal partnerships would be promoted and (d) flexible lending terms using either Reais or hard currency would be applied. The municipalities included in the PDMI were some of the first to meet these criteria, having created a common development program. Their shared challenges included improved municipal governance, addressing rural and urban poverty, and improvement of infrastructure service provision. Rationale for Bank involvement. The Bank’s direct engagement with five municipalities in the Southern half of RS provided continuity with previous engagements 11 , and presented an opportunity to test new forms of working at the sub-national level 12 . The Bank rationale for supporting municipal development in Brazil had four pillars: (a) improving municipal fiscal and administrative management, (b) increasing the competitiveness of the municipality through local economic development (LED), (c) supporting partnerships across municipalities; and (d) strengthening municipal capacity to deliver key services. Program contributions to higher level objectives. The PDMI would also directly contribute to the objectives of the Brazil 2004-2007 multi-year plan (Plano Plurianual), on which the Bank’s 2004-2007 Country Assistance Strategy (CAS, P095908) was based. The May 2006 CAS Progress Report (Report No. 36116-BR) confirmed the strategic directions of the original 2004- 2007 CAS in support of four program pillars: equity, macroeconomic stability, sustainability and competitiveness, the latter two more specifically linked to the PDMI. 1.2 Original Program Development Objectives (PDO) and Key Indicators (as approved) The Program Development Objective (PDO) was to strengthen the capacity of the municipalities of Bagé, Pelotas, Rio Grande, Santa Maria and Uruguaiana to provide selected infrastructure services and employment opportunities for their population. Key original indicators to measure the success of PDMI are shown in Table 2. Although there was a common Results Framework at the Program level for Components 1 (Municipal Strengthening) and 2 (Income and Employment Generation), indicators for Component 3 (Infrastructure Service Improvements) were different for each individual Project 13. Table 2: Original Program development outcomes and key performance indicators Original Program Development Original Key Performance Indicators Outcomes Number of municipal projects institutionalizing improved evaluation, social and environmental management processes Improved municipal management Percentage of citizens satisfied with quicker and more user- capacity friendly access to client services provided by the municipality Number of good practices or innovations replicated from other municipalities The net percentage increase in formal jobs is higher (or its Increased LEDLED opportunities decrease is lower) among the beneficiaries of the project than 11 Successful previous operations included (P034578) Rio Grande do Sul State Highway Management Project and (P043868) Natural Resources Management & Rural Poverty Alleviation - Rio Grande do Sul. 12 Innovations included targeting the whole territory of the municipalities (including both urban and rural areas) and preparing and appraising the five loans as one program, to be implemented simultaneously under a common operational and learning framework. 13 For details on the original indicators of each individual Project, refer to the individual Project datasheets (Appendices 1 through 5). 3 Original Program Development Original Key Performance Indicators Outcomes in the municipal economy as a whole The net percentage increase in formal firms is higher (or its decrease is lower) among the beneficiaries of the project than in the municipal economy as a whole Specific indicators were not defined at Program level. They were dependent on the each Project objective, and could include: (a) Coverage, quality and sustainability of water supply, sanitation and drainage services; (b) Reduction in Improved infrastructure services number of people living in environmentally risky and protected; (c) Reduction in travel times in urban and rural areas; and (d) Satisfaction of population with quality of infrastructure services 1.3 Revised PDO (as approved by original approving authority) and Key Indicators, and reasons/justification The PDO was not revised. However, the Projects’ results frameworks were modified as part of Project Level Two Restructuring for the Pelotas, Bagé, Rio Grande and Santa Maria Projects (the first in November 2011, and the latter three in December 2012). Overall, the proposed changes were intended to: (a) reflect the revised scope of each Project; (b) adjust the frameworks to the available data and reporting capabilities of the Borrowers; (c) streamline indicators for better alignment Program-wide; and (d) incorporate core indicators, as deemed appropriate 14. 1.4 Main Beneficiaries The Project Appraisal Document (PAD) for the PDMI did not specify the primary and secondary target groups to benefit from Program investments in strengthening municipal capacities to: (a) promote income generation and employment opportunities; and (b) improve the quality of selected infrastructure services (in both rural and urban areas 15). Instead, the PAD classified the entire population of each of the participating municipalities as Program beneficiaries. Together, the five municipalities had a population of 1.04 million people at appraisal, of which 0.05 was rural and 0.99 urban 16. Approximately one fourth of the total population was estimated to live below the poverty line. These inhabitants were expected to benefit from specific investments in: (a) provision of appropriate commercial space, improvement in the overall business environment, facilitation of the access to microcredit, training and capacity enhancement activities targeted at selected clusters; (b) construction and/or rehabilitation of urban and rural roads, as well as improvements to public transport services; (c) expansion of the water supply, sanitation (WSS) and drainage networks and treatment, as well as the related environmental benefits; (d) treatment and final disposal of solid waste (Uruguaiana); and (e) urban upgrading, housing and social improvements in selected low-income neighborhoods. 14 For details on the revised indicators of each individual Project, refer to the individual Project datasheets (Appendices 1 through 5). 15 PDMI actually comprised the first set of municipal loans supporting the development of the entire municipal territory, and not just the urban area. This was particularly noticeable in the case of investments in water supply and sanitation (WSS) and road upgrading and construction. 16 Source: State Government of Rio Grande do Sul, Fundação de Economia e Estatística (FEE), 2006. 4 1.5 Original Components Component 1 - Municipal Strengthening (USD 11.73 million; USD 5.71 million IBRD; approximately 11% of total Program costs 17). The purpose of this component was to finance activities related to improving municipal capacity to plan, appraise, finance, implement, monitor and evaluate infrastructure and LED investments. It included: (a) public sector management, including counterpart investments focused on improved fiscal management, a cadaster and tax collection 18 (Rio Grande, Santa Maria and Bagé); (b) investments to improve the overall management of municipal WSS service providers (Bagé and Pelotas); (c) investments to support Project management, including those to promote learning across the five municipalities and capitalize on the horizontal APL approach of the PDMI. The types of activities funded under this component included information systems, consultants, human resource development, training, studies, equipment, office space improvements and incremental operating costs. Component 2 - Income and Employment Generation (USD 9.07 million; USD 6.83 million IBRD; approximately 9% of total Program costs). The purpose of this component – designed to be the most innovative and strategic part of PDMI – was to support municipal initiatives to generate income and employment opportunities, and improve job quality in both urban and rural areas. It included: (a) incentives to move informal businesses into the formal sector, measures to facilitate access to micro credit, provision of appropriate commercial space, and focused training and capacity enhancement activities; (b) support to selected Small and Medium Enterprises (SME) clusters (such as fruit and vegetables in Bagé, Uruguaiana and Pelotas; tourism in Rio Grande; and waste recycling in Santa Maria, Rio Grande and Uruguaiana); (c) initiatives to stimulate local potential to produce high value-added products by accessing a knowledge economy coordinated across universities and private sector firms and based on existing and new R&D efforts (Santa Maria and Pelotas); and (d) activities to improve the overall business climate by reducing administrative barriers and thus the time, effort and cost of dealing with excessive business regulations. The types of investments to be funded under this component included studies for preparing LED strategies and cluster business plans; training, cluster organization, facilitation of access to micro-credit programs and productive infrastructure for SMEs; and construction of a technology park and R&D center. Component 3: Infrastructure Service Improvements (USD 79.85 million; USD 46.88 million IBRD; or approximately 77% of total Program costs). The purpose of this component – which comprised the bulk of PDMI investments – was to assist the municipalities in expanding their ability to provide infrastructure services in an efficient, environmentally sound and sustainable manner. Specific investments were also prioritized for improving access to services by the poor, contributing to the municipal growth agenda, and/or their environmental benefits. The following infrastructure investments were included in this component: (a) rehabilitation or pavement of existing urban streets and rural roads, including rehabilitation of small bridges, improvements to public transport services, bicycle paths, landscaping and long-term maintenance strategies; (b) WSS and drainage systems in urban and rural areas; (c) treatment and final disposal of solid waste, waste recycling centers, and support to waste pickers; and (d) urban upgrading, housing and social improvements in poor neighborhoods and areas of environmental risk. 17 As estimated in the PAD (Annex 5 – Program Costs). 18 These were mostly part of a public sector modernization program financed by the Brazilian National Bank for Economic and Social Development (BNDES – Banco Nacional de Desenvolvimento Econômico e Social) called PMAT (Programa de Modernização da Administração Tributária e da Gestão dos Setores Sociais Básicos). 5 1.6 Revised Components Four of the five municipal Projects (Pelotas, Bagé, Rio Grande, and Santa Maria) were restructured to adjust the scope of activities 19. Reasons varied by Project, but overall included: (a) the need to reflect evolving / changing implementation circumstances and municipal priorities; (b) exclusion of some activities that due to implementation delays could no longer be executed within the time available; (c) loss of loan purchasing power due to construction cost increases and exchange rate variations, and (d) the need to target limited Project resources towards higher- priority activities. For details on the revised components of each individual Project, refer to Appendices 1 through 5 (Section H of the datasheets and Section 1.6 of the specific Project ICRs). 1.7 Other Significant Changes Apart from the above-mentioned adjustments in the scope and results framework , and although there were minor differences between them, the four restructurings contained similar changes: (i) reallocation of loan proceeds between expenditure categories – in general resources were channeled from Components 1 and 2 to Component 3, whose activities were most impacted by the rising costs of construction; (ii) changes in the Projects’ costs and financing plans, reflecting either an increase in counterpart funding by the Borrowers (Pelotas and Bagé) or a decrease (Santa Maria); and (iii) adjustments of wording/corrections of typos 20. Santa Maria had a one- year extension of the Project Closing Date and a change in the placement of the UGP within the municipal institutional structure. For details on the changes performed to each individual Project, refer to Appendices 1 through 5 (Section 1.7 of the specific Project ICRs). 2. Key Factors Affecting Implementation and Outcomes 2.1 Project Preparation, Design and Quality at Entry Continuation of the Bank’s municipal lending program. The PDMI represented a continuation of the Bank’s municipal lending program. Begun in 2004, it was a wide-reaching program of investments across Brazil to support public sector enhancement, competitiveness and LED, and provision of infrastructure services (especially those linked to social inclusion and environmental sustainability) by municipalities. The Program responded to the substantial autonomy and responsibility allocated to municipalities by the 1988 Brazilian Constitution, and the corresponding need for enhanced capacity at the municipal level to carry out investment planning and implementation. In order to advance its municipal lending program in Brazil, the Bank decided to support small and medium-sized municipalities by pioneering a cross-municipal, multi-sector program to take 19 For details on the overall scope and impacts of Project restructurings, refer to Sections 1.3 and 2.2 of the Program ICR. 20 Although the Projects were appraised and approved as Environmental Category B, there were typos in the original PAD (datasheet and in Annex 16) indicating Bage and Pelotas Projects as Category A. The restructuring addressed this issue, which was also formerly registered in a Corrigendum sent to the Board in June 2009. 6 on the challenge of regional municipal development through integrated partnerships. The innovative structure of the PDMI, with five individual Projects prepared and appraised as one Program, presented both a risk and an opportunity for gains through enhanced scale and synergies. Design alternatives and previous lessons considered. Four Program structure alternatives were considered: (a) stand-alone investment projects for each municipality; (b) an intermediate financing entity as a sole borrower, thus reducing the Bank’s transaction costs; (c) a regional development program (through a State loan); or (d) an APL lending approach. Preparation took into consideration lessons from previous operations regarding: (a) project focus and expected results and impacts (municipal development projects showed that more impact can be achieved by providing more targeted support to a fewer number of thematic areas and activities); (b) the nature and format of activities supporting informal businesses and cluster development (a combination of instruments beyond access to finance, such as training, organization and infrastructure is required); (c) the need to couple infrastructure investments with capacity- building in order to ensure the municipalities’ ability to effectively provide services; and (d) the importance of mainstreaming environmental aspects as part of the design and implementation of infrastructure projects. A strong fit with the APL approach. In terms of design, PDMI’s fit with the APL series was strong: first, because of its intended programmatic approach at entry 21; second, because of its shared components and indicators; and third, because it was designed to allow for inter-municipal learning and exchange of experiences. This was not the case for other individual municipal Projects of its same generation, such as Recife Urban Development and Social Inclusion (P089013), Sao Luis Enhancing Municipal Governance and Quality of Life (P094315), Teresina Enhancing Municipal Governance and Quality of Life (P088966), Uberaba Municipal (P089011), and Santos Novos Tempos (P104995), which were effectively standalone projects covered by an APL umbrella. 22 Program design and M&E. The preparation team settled on a design that would allow economies of scale (with increased efficiency in purchasing, supervision, etc.) 23 as well as cross-municipal 21 PDMI was designed to allow for a sequenced appraisal and approval of each Municipal Project upon its meeting the readiness conditions. The Rio Grande Project was specifically prepared to be implemented in two phases. 22 There were little or no inter-municipal linkages and exchanges across the mentioned projects. Also, there was no shared coordination body to support implementation, either on the side of the Bank or the Borrower. These aspects would be further developed in later horizontal APLs, including Mananciais (Integrated Water Management in Metropolitan Sao Paulo, P006553) and GEF Cerrado (P084708), which included stronger linkages between individual loans in terms of geography, shared development challenges, and integrated Project Implementation Units. 23 Despite the substantially larger geographical scale of PDMI, its total lending costs were less than those for the preparation of standalone / single municipal projects, such as Uberaba Água Viva Project (P089011) and Recife Urban Development and Social Inclusion Project (P089013) (For detailed information, refer to Annex 4). For supervision, there was an increase in cost mostly related to travel costs, but still less (percentage wise) than in the Uberaba Project. The Bank’s lending and supervision costs were the following: (i) Uberaba Água Viva Municipal Project (USD 17.27M loan; lending USD 209k (1.21% of the loan amount); supervision USD 351k (2.03%); (ii) Recife Urban Development and Social Inclusion Municipal Project (USD 32.76M loan; lending USD 350k (1.07% of the loan amount); supervision USD 312k (0.95%); and (iii) PDMI (USD 54.38M loans; lending USD 350k (0.64%); supervision USD 635k (1.67%). 7 learning. This design would also allow Bank financing to directly benefit the population of small and medium-sized cities that had previously been out of the reach of the Bank’s municipal investments. The design selected sought to balance the need for an efficient scale for the investment with the challenge of unique municipal partners with varying identities and institutional capacities. For this reason, flexible arrangements that allowed substantial municipal autonomy were selected in place of a regional development program. A downside of this design approach was that project activities addressed specific municipal needs and not overall regional development goals; thus, at the scale of the Program, the overall investment plan may appear disjointed. The Program was overall well-designed, with the PDO appropriately focused on strengthening municipal capacity and the 3-component structure targeting important development challenges. Despite this, discussions during ICR-preparation with the Borrowers suggested that the broad scope of the Program – specifically its small-scale activities – led to dispersed attention, loss of focus, and loss of implementation capacity. Component 2 (Income and Employment Generation) for instance, required implementation efforts disproportionate to the actual investments made 24. In turn, while Component 2 activities had valuable learning and demonstration effects, their results were relatively modest. Also, linkages between the actions supported under Component 2 and the others were not as strong and direct as those between Components 1 (Municipal Strengthening) and 3 (Infrastructure Service Improvements) 25. The above factors all impacted implementation. However, the wide scope of components and activities was necessary to integrate activities that had secured funding sources to compose the 60/40 loan/counterpart arrangement. This ratio was obligated by the Federal Government of Brazil as a condition of its guarantee approval for each of the five Borrowers. In terms of monitoring and evaluation (M&E), there was a clear effort during design to define a set of indicators common to all municipal Projects complemented by customized indicators to track the progress and measure the results of the individual Projects 26. However, the original design of the results framework had some weaknesses, including: (a) many indicators required specific studies (level of satisfaction, trip time reduction, etc.) beyond the Borrowers’ capacity, representing additional costs to the Borrowers (not financed under the project), and demanding technical capacity and time 27;(b) there were no baseline available for various indicators; (c) the nature and level of impact expected from Component 2 activities (increased employment and formality) was overly optimistic, and not necessarily achievable in the life of the Program 28. Partnership, institutional and implementation arrangements. Projects were to be implemented by each municipality through individual Project Management Units (UGPs – Unidades de Gestão do 24 Component 2’s share in Bagé, Rio Grande and Uruguaiana Projects was approximately 2% of the actual investments; in Pelotas, 4% (although in this case there were additional private investments); and in Santa Maria 14.5%. 25 Component 1 supported the development of planning tools, such as the WSS Master Plans (in Bage, Pelotas and Santa Maria), which were directly targeted at improving the Municipal capacities to provide infrastructure services. 26 Refer to Table 2, and to Appendices 1 through 5 (Section 1.2 of the Specific Project ICRs). 27 There were initial capacity-building workshops during project preparation. However, implementation would have benefited from structured capacity-building and/or technical assistance on M&E during implementation (as was done in areas of fiduciary management). 28 For example, in Bagé a 30% increase in the local businesses’ positive views on municipal business environment was originally expected to be reached after investments of only USD 0.32 million. 8 Projeto). In order to satisfactorily meet the APL criteria of cross-municipal learning and cooperation, the Program also included a high-level technical Program Coordination Unit (UAP – Unidade de Articulação do Programa), whose costs were shared by all 5 municipalities. The UAP was in charge of capacity building (CB) and technical assistance (TA). There were two additional coordination and decision making bodies: the Superior Council, formed by the Mayors of the five municipalities; and the Technical Council, an operational arm of the latter, formed by the Secretaries of Planning and the Project coordinators of each municipality. UAP. This structure worked well during preparation, but proved to be too complex to be sustained during implementation. Despite the fact that municipal mayors remained engaged with the Projects, they proved unable to keep the commitment to jointly make Program decisions through the Superior Council. The Technical Council had a more active but limited engagement – it occasionally held meetings, especially during Bank supervision missions, to define details and consultant selection for the UAP support and to hold technical discussions, but did not play a substantial role beyond this. The UAP 29 as proposed was a well-designed and useful organization, and proved highly successful during Program preparation. Specifically, the UAP was responsible and active in centralizing management and implementation of the PHRD grant 30 (Japan Policy and Human Resources Development Fund) used for Program preparation (development of studies and detailed investment designs). During implementation the UAP’s role diminished substantially, as its focus was reduced to sharing experience regarding specific topics of common interest (e.g. Technology Park and microcredit programs), creating incentives for exchange of experience among the municipalities, and monitoring Program results. The declining UAP role was due to several reasons: (a) municipalities lacked ownership of the results of PHRD inputs, therefore the strategic importance of UAP remained unclear; (b) after the grant was fully disbursed, the UAP did not have the power to manage and apply Program resources for joint interests nor the legal character that would allow it to effectively coordinate project activities; (c) each municipality had to be responsible for hiring and financially supporting the UAP coordinator for one term, which jeopardized the desired autonomy of the Unit; and (d) the combined technical and managerial skills necessary for effective Program coordination proved difficult to find among the individual consultants hired as coordinators. For these reasons, although it was initially effective, the UAP did not yield the expected results in terms of integration, exchange of experiences, technical assistance, and institutional capacity building during Program implementation. Difficulties stemming from the weakness of the UAP were anticipated from preparation, but due to the Borrowers’ desire for more Project autonomy, 31 there was no support for a stronger central agency. UGPs. The Program design appropriately prioritized the establishment of the UGPs and their placement within key municipal Secretariats, such as Planning. Each municipality modified this original arrangement for better individual fit as the Projects progressed, generally bringing the UGP into closer coordination with the Mayor’s office. The implications of these changes for the UGPs’ implementation capacity vary from Project to Project, and are further discussed in the 29 Originally called the UGP and based in Porto Alegre. 30 The PHRD Grant (TF05521) was signed in July 2005 with the Municipality of Bagé in the total amount of USD 700,000. 31 Once the Projects were approved, the Borrowers’ willingness to cooperate under a structured arrangement such as UAP was reduced in favor of their individual municipal interests. 9 individual Project ICRs in the Appendices. Differences in the final institutional arrangement of the UGPs will probably affect the likelihood they will remain after Project completion. However, overall, after Program completion, the Borrowers were unanimous in recognizing the importance of the UGPs not only in Project implementation, but also for development and sharing of knowledge among municipal staff. Stakeholder involvement and participatory processes. The PDMI Projects were based on the participating municipalities’ Multi-Year Plans or on other key planning tools (such as the participatory budget). These had been developed through substantial public participation. The priorities of the Projects, in terms of both institutional and infrastructural development, were therefore based on goals that had already been identified and prioritized by the local community in each of the municipalities. The flexibility of the Program design allowed substantial tailoring of priorities and actions, capturing each community’s self-determined needs within the umbrella of region-wide municipal development. Assessment of risks. The following risks (among others) were identified during preparation: (a) difficulty with the counterpart fund allocation 32; (b) the inexperience of the municipalities with procurement and financial management; (c) political discontinuity; (d) risk of delays in acquisition of land and/or risks with regard to participatory processes, which could impact Projects and interventions involving resettlement; and (e) the risk that the Component 2 investments would not achieve its objectives of sustainably increased employment and income opportunities. Most of these risks were considered “moderate,” with the exception of (b), which was assessed as between “moderate” and “high.” Given the fiscal position of the Borrowers at the time of Project preparation, (a) should have been identified as “high.” It should be emphasized – as was brought up by the municipalities themselves during ICR preparation – that, despite the efforts of the Bank to recognize secured counterpart inputs from other sources 33, the obligation of 40% counterpart total contribution was an obstacle throughout Program implementation. Additionally, the Borrower’s implementation capacity was overestimated, as risk (b) was focused solely on fiduciary aspects, not having taken into account technical and M&E capacity. Similarly, the risk of a heavy supervision burden on the Bank should have been included, along with corresponding additional human and financial resources for supervision. 2.2 Implementation Issues affecting implementation varied from Project to Project, but several overall factors can be identified: Project cycles for each municipal Project. Project cycles and milestones for each municipal Project were not aligned, meaning various key points of the Project – including readiness to sign 32 As a condition of the Federal guarantee, Brazil’s National Government requires a counterpart contribution by states or municipalities accepting Bank loans. In this case, there was a 60/40% Bank/Borrower contribution set, which ended up being beyond the fiscal capacity of the municipalities to allocate. This ratio is set without Bank input. 33 The Program’s overall investments included, apart from Bank-financed activities, those for which the municipalities had previously secured other sources of funding (e.g. public sector modernization investments financed by IDB). Inclusion of these activities was an attempt, by the Bank team, to reduce the burden on the Borrowers in terms of the mandatory financial counterpart allocation. 10 the Loan Agreement (LA), the declaration of Loan Agreement effectiveness, and implementation challenges – were reached at different times in each case. However, the Projects continued to share the same overall Program closing date of December 2012 until restructuring. Although this was expected based on PDMI’s programmatic design (where each project would operate on an independent cycle), it interfered with Program implementation and efficiency beyond original projections, largely due to complications it caused for Bank supervision. Financial difficulties of the municipalities in allocating the mandatory counterpart contribution. The counterpart contribution set by the Brazilian Federal Government at Project preparation was established at a 60/40 Bank/Borrower ratio. Despite the appropriate efforts from the preparation teams to include activities that had secured resources from other funding sources (i.e. xxx), the relatively small size and low financial capacity of each municipality impacted their ability to meet counterpart financing obligations throughout implementation. Through Project restructurings, of Bagé and Rio Grande for instance, corrective measures to increase the percentage of expenditures financed with the loan resources to as much as 100% were adopted. Format and structure of each UGP. Project implementation was expedited when the UGPs were satisfactorily staffed, committed and directly linked to the Mayors’ offices and/or priorities. This was the case throughout implementation in Pelotas and Bagé, and later in Santa Maria. In such cases, internal processing and decision making was smoother and faster. The municipalities’ overall limited capacities and unfamiliarity with the Bank’s guidelines and procedures. The municipalities’ overall limited capacities and unfamiliarity with the Bank’s safeguards and fiduciary guidelines and procedures (especially procurement) resulted in: (a) difficulties with Project management; (b) difficulties in drafting technical inputs for bidding documents (Terms of Reference – TORs and budgeting); and (c) a heavy work load for the Bank supervision team in providing support to Borrowers, as well as extended periods for analysis and final approval of documents. Beyond the technical aspects, procurement was also to some extent affected by difficulties in obtaining market response in more remote areas of Rio Grande do Sul. Limited Borrower capacity was also reflected in overall M&E performance 34. Progress Reports, for instance, usually lacked consistency and/or adequate information. Political turnover. Changes in Government impacted Project implementation in different ways and at different points of the Project cycle. In Rio Grande, there were impacts both early in implementation (as the Municipal Government in charge of identifying and preparing the PDMI in 2003 and 2004 changed in 2005, which reduced the Project priority and delayed procedures for appraisal and approval), as well as later towards Project completion (in 2012, when elections and turnover occurred again). These changes resulted in: (i) decreased implementation progress; (ii) the Final Independent Project Evaluation for Rio Grande lacked consistent information; and (iii) information exchange for the ICR was limited. In Santa Maria, the Government that prepared the Project (from 2005 until 2008) was not the same as the one which took office in 2009. This led to delayed signing of the LA (in 2010). It was not until the May 2011 Mid-Term Review (MTR) Mission that the new administration was able to redirect the Project scope and prioritize Project implementation. Inflation and exchange rate fluctuations. At the beginning of Program implementation, the United States dollar depreciated against the Brazilian Real from around BRL 1.95 per USD 1.00 to BRL 1.83, reaching BRL 1.67 at around midterm of Program timeframe. This impacted the first 34 For further information on M&E, refer to section 2.3 of this ICR. 11 projects to start implementation, especially Pelotas. In addition, the Program was impacted by the increase in construction costs, greater than overall inflation), especially considering that the infrastructure-related component was the largest. As result, there was a decrease in loan purchasing power that diminished the scope of activities possible under the Program. However, at the very end of project implementation, the exchange rate fluctuation began to reverse, resulting in some municipalities not being able to spend all loan resources (especially for Santa Maria). Graph 1 – Disbursements per Project compared to economic indexes Pelotas disbursement amount Bage disbursement amount Uruguaiana disbursement amount Santa Maria disbursement amount Rio Grande disbursement amount Exchange rate index 16.00 2.33 2.50 2.16 14.00 1.95 2.00 1.95 1.83 2.00 12.00 1.76 1.67 1.65 10.00 1.52 1.42 USD (million) 1.32 1.50 8.00 1.23 Index 1.18 1.46 1.06 1.38 6.00 1.00 1.30 1.23 1.11 1.16 1.00 1.00 1.05 4.00 2.00 0.50 0.00 2007 2008 2009 2010 2011 2012 2013 2014 -2.00 - Year Pelotas’ specific support and guidance for the other municipalities during implementation. As Pelotas was the pioneer PDMI project, it was the first to navigate the Bank’s and its own internal procedures for Project implementation, including M&E / reporting procurement, FM, and safeguard processes. Pelotas used this valuable experience to assist the other Program municipalities, providing guidance and sharing reference documentation, experiences, etc. not only through regular exchange of information, but also with the delivery of a 2-day hands-on training. This knowledge-sharing proved an important element of the Horizontal APL structure of the PDMI Program. The role of Bank missions and hands-on technical assistance. Missions were undertaken with appropriate regularity (biannually), and comprised of technical, safeguard and fiduciary specialists, despite the logistical challenge of monitoring Projects in five locations with distances ranging from 75km to 700km (and at least 300km distant from the State capital). The efforts of the Task Team in providing intensive TA and implementation support were essential in ensuring 12 the activities’ success, and were widely recognized by the Borrowers. This support included fiduciary trainings, ad hoc trainings (i.e. drafting of TORs), remote assistance in revision of technical documents (i.e. TORs, Business Plans), and contracting of consultants for TA on specific topics (i.e. water supply and sanitation). However, the high demand for TA by the Borrowers was not complemented by increased capacity or funding allocated for supervision by the Bank. Project Restructuring. Restructuring constituted an important adaptation of Project design to the realities of Borrowers capacity and the challenges of the implementation process. The restructurings, all Level II, are addressed in greater depth in sections 1.3, 1.6, and 1.7 of this ICR, and in the individual Project ICRs (see Appendices 1 through 5). For most of the municipalities 35 the restructuring process was time-consuming and occurred relatively late in the Project cycle (12/13/2012) due to limited municipal capacity to develop and process the restructuring documentation. The Bank provided extensive support to this process, despite the substantial challenge of managing parallel restructuring for four Projects. The restructuring undergone by the four Projects had important benefits, chiefly decreasing the counterpart allocations specified during preparation, which were beyond the municipalities’ capacity; and streamlining indicators to support more effective Project and Program-wide evaluation. A shortcoming of the restructuring was the failure to fully address the lack of a structured M&E strategy (see Section 2.1). However, a methodology for strong quantitative monitoring could not have been developed at the time of restructuring, given the limited capacity of the Borrowers as well as the activities themselves, which required detailed, quantitative monitoring. Brazilian Federal Government Growth Acceleration Program (PAC – Programa de Aceleração do Crescimento). The PAC infrastructure financing Program was launched in 2007, presenting an important alternative for municipalities to access relatively easily available funding for infrastructure investments. While PAC became a much needed source of PDMI counterpart contributions, in some municipalities (such as Rio Grande and Santa Maria) PAC-financed projects negatively impacted PDMI implementation, as they dissipated limited Municipal capacity. 2.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization M&E design. The design of indicators for M&E proved complicated, given the need to simultaneously evaluate the performance of individual Projects and integrate these results into the overall Program. Two sets of indicators were adopted, one common to all municipal Projects and one customized to each municipality. This structure was conserved, where applicable, during restructuring, while attempting to further streamline the overall indicators Program-wide. This indicator structure seems to have been largely successful for integration of results from multiple Projects. However, weaknesses stemmed from unrealistically high estimates of Borrower capacity for quantitative M&E, and no corresponding structured support and budget for M&E built into Program design. Efforts were made to develop M&E capacity within the municipalities through early training and support from specialists, as well as intensive support by the Bank Task Team during implementation. Nonetheless, the lack of Borrower capacity for understanding the content, data gathering needs and usefulness of M&E – as well as the practical challenge posed by the 35 Excepting Pelotas, which went through the process separately, on 11/04/2011, and including Uruguaiana, for which restructuring was prepared, but did not actually occur. 13 type of quantitative measurements required to objectively measure the Projects activities’ results – limited success in monitoring and evaluating results. (See Section 2.1 for further information). M&E implementation. Specific areas of difficulty were (a) the frequency, consistency and quality of Progress Reports, and the reliability of the information therein; (b) limited Borrower understanding of the methodology for data collection, analysis, and reporting; and (c) the restricted role of the UAP in leading the monitoring process. Towards the end of the implementation period, difficulties with the assessment of indicators interfered with Program evaluation by the Borrower and the Bank. To guarantee the M&E methodology used by all municipalities was consistent and reliable, the Bank provided TA and guidance to the Borrowers during the contracting and supervision of consultants tasked to prepare the Borrowers’ Independent Evaluation of final Program results. Despite these efforts, there are asymmetries in the availability and reliability of the information. The report from Santa Maria is of good quality, and presents rich quantitative and qualitative information. The reports for Pelotas, Bagé and Rio Grande have limited information, sometimes mitigated (as in the cases of Pelotas and Bagé) by more recent efforts to collect additional information, and conduct additional qualitative surveys. Finally, in the case of Uruguaiana, the report was never delivered to the Bank. M&E utilization. Due to the issues detailed above, M&E were not strong tools to support Project management or decision making. It is unlikely that the Projects M&E arrangements will prove sustainable after Program closing. Despite the difficulties encountered, the strong focus that was placed on M&E from the development of the PDMI up through the end of the Program (including a stakeholder workshop, intense exchanges between the Bank and the UGPs; in the development of the Borrower evaluations, ICR missions, etc.), helped to demonstrate to the municipal governments the value of well-designed, quantitative monitoring in decision-making and Project management. 2.4 Safeguard and Fiduciary Compliance Safeguards compliance. The PDMI was given a Category B environmental rating, according to the World Bank safeguard policies. As such, all of the infrastructure interventions triggered the Environmental Assessment policy (OP 4.01). Other policies – Natural Habitats (OP 4.04), Cultural Property (OP 4.11) later replaced by Protection of Physical Cultural Resources (OP 11.03), Involuntary Resettlement (OP/BP 4.12), and Safety of Dams (OP 4.37) – were triggered depending on each individual Project 36 . Considering the need for triggering the involuntary resettlement policy due to potential loss of housing, loss of economic activity, or even demand for land acquisition, three of the five municipalities developed Simplified Involuntary Resettlement Plans. Program compliance with the applicable safeguard policies was supervised during implementation and was generally Satisfactory, dropping to Moderately Satisfactory towards the 36 Rio Grande, Santa Maria and Uruguaiana triggered the following policies: Environmental Assessment (OP 4.01), Natural Habitats (OP 4.04), Cultural Property (OP 4.11), and Involuntary Resettlement (OP/BP 4.12); Bagé triggered Environmental Assessment (OP 4.01), Natural Habitats (OP 4.04), Cultural Property (OP 4.11), and Safety of Dams (OP 4.37); and Pelotas triggered Environmental Assessment (OP 4.01), Natural Habitats (OP 4.04), Protection of Physical Cultural Resources (OP 11.03), and Involuntary Resettlement (OP/BP 4.12), Safety of Dams (OP 4.37). 14 end of the implementation period as a result of pending resettlement of four families in Santa Maria Project. 37 The works and interventions carried out for the PDMI complied with the guidelines and recommendations of the Environmental Management Plan (EMP) and the Contractors’ Environmental and Social Manual, developed during Program preparation. The environmental procedures proposed for the mandatory environmental licensing under State and Municipal legislation, as well as the instruments proposed by the EMP (including environmental records, action plans, and environmental supervision reports), were adopted by the different UGPs, and satisfactorily fulfilled the Bank’s requirements for social and environmental compliance. Fiduciary compliance. Compliance with Financial Management and Procurement aspects varied from Project to Project throughout the implementation period, but was finally rated Moderately Satisfactory overall. The case of Uruguaiana, which had substantial issues with compliance with the Bank’s fiduciary and procurement processes, is a notable exception. For details on safeguards and fiduciary compliance, refer to section 2.4 of the individual Project ICRs (See Appendices). 2.5 Post-completion Operation/Next Phase Operation and maintenance (O&M). The Bagé, Pelotas, Rio Grande, and Uruguaiana Projects had a closing date of December 2012, while Santa Maria closed one year later. There are inherent risks to the sustainability of the Program outcomes, linked to the financial capacity of the Municipalities to properly conduct O&M of Program infrastructure investments (e.g. urban and environmental improvements, street and road rehabilitation and construction, and urban and rural water supply and sanitation improvements). However, arrangements for post-completion O&M are already in place for most of these investments. An O&M allocation has been included in each municipality’s annual budget (with the exception of Uruguaiana) under the Secretariats for Works, General Services and/or Maintenance. Additionally, the PDMI included specific investments (both Bank- and counterpart-financed, as described in Annex 2) for the acquisition of road maintenance equipment in Pelotas, Bagé and Santa Maria. Guidance in quality assurance and institutionalization of plans / studies. The Program also invested in various planning tools and instruments to guide public management in the areas of urban development, transport, WSS, environment and LED 38. In addition to loan financing and to regular implementation support as part of supervision, the Bank provided continued TA to the Borrowers up through the April 2014 ICR mission, as a means to: (i) enhance the technical quality of the above mentioned tools and instruments; and (ii) give the municipalities recommendations for next steps for institutionalization and/or adoption of the tools and instruments. For example, in Uruguaiana, a solid waste expert consultant was hired to review and develop technical notes on the environmental studies for the closing of the dump and the construction of a new sanitary landfill in the municipality. The same was done in Santa Maria, through the hiring of a consultant to review the WSS, drainage and solid waste plan. Additionally, a local economic development consultant accompanied the LED plans for Rio Grande, Bagé and Pelotas throughout implementation and even post closure. 37 Although the ISRs record the overall performance of the Program, ratings were always tracked individually for each Project. The Program’s overall ratings derived from the weighted average (based on the loan amounts) of the specific ratings given to each municipal Project for each category. 38 Please refer to Annex 2 for each municipality for further information. 15 Activities pending completion and/or entailing continued supervision 39 . The Pelotas and Rio Grande Projects completed almost all Project activities 40 . The Uruguaiana and Santa Maria Projects have pending activities to be completed after Project closing. Uruguaiana has pending the closing and remediation of the existing dump site and the construction of a new sanitary landfill. However, the municipality’s technical solid waste proposal was never approved by the Bank, as the Municipality decided to finish the proposal without Bank involvement. Since implementation of the planned activities never actually began, post completion supervision is not applicable. There is no guarantee of budget allocations to conduct the activities, nor an estimated timeframe. Santa Maria did not complete the counterpart-financed integrated WSS and urban improvements in the Km3 neighborhood, nor the corresponding resettlement of four families. Continued Bank follow-up and supervision of safeguards obligations linked to resettlement are therefore required and will be carried out. The Prefecture of Santa Maria has agreed with the Bank on an action plan and a schedule for the completion of resettlement by September 2014. 3. Assessment of Outcomes Conclusions and ratings for each dimension and for the overall Program are derived from a weighted average of the individual Project ratings. 3.1 Relevance of Objectives, Design and Implementation Rating: Modest CPS 2008-2011 (Report No. 42677-BR). The PDMI was included in the list of Projects supported by the CPS 2008-2011. Among the issues and critical areas for reforms identified in the CPS, several aspects were directly addressed by the PDMI, including business environment, insufficient funding and poor quality of infrastructure, and uncoordinated approaches to infrastructure planning. The Competitive Brazil pillar of the CPS included urban development, especially through a focus on improving urban management and competitiveness; support to improve the business climate; and to improve the planning and regulatory framework for infrastructure. The CPS put less emphasis on lending for basic urban infrastructure and to small municipalities, and instead a move towards addressing major challenges through arrangements such as consortia. The PDMI, although not through a consortium structure, addressed these focus areas through support for municipal management, and the development of municipal environmental and specific business plans. CPS 2012-2015 (Report No. 63731-BR). The PDMI concept became less relevant to the development challenges elaborated in the current CPS. Although PDMI directly addresses the Strategy’s objectives of promoting regional economic development and improving sanitation through strategic infrastructure investments, the current CPS is focused on the Northeast, rather than the South. Also, the current CPS lays out a more selective engagement and a shift away from direct municipal lending at the small scale. This shift in priorities towards larger and multi sector 39 For details on post completion operation of the investments of each individual Project, refer to Appendices 1 through 5 (Section 2.5 of the individual Project ICRs). 40 Pelotas did not manage to build the Administrative Center and the Urban Improvements in the Central Area – the first because of pending required approvals from the National Institute of Heritage (IPHAM – Instituto do Patrimônio Histórico e Artístico Nacional), and the latter because of the lack of available time up to Project closing. Rio Grande did not complete the land regularization activity, for which actual titling emission is still pending. 16 projects is due to the increase in the availability of Federal Government funds for local infrastructure coupled with the increasingly limited IBRD lending space under the current Bank single borrower limit (SBL). Program relevance from a Bank perspective (Specific aspects of the design and implementation). Although the design of the PDMI demonstrated an appropriate fit with the Horizontal APL model (a joint and programmatic approach intended to allow for economies of scale and inter municipal exchange and learning), its implementation proved to be less efficient: (i) There was an overestimation of the Borrowers technical capacity to conduct a smooth implementation; (ii) Adequate structuring of the Program’s specific institutional arrangements was not guaranteed at entry (notably regarding the UAP, and its limited autonomy and role as a Program-wide coordination body); and, as a consequence of the above, there were (iii) unforeseen high demands for Bank implementation support to the PDMI. Further direct Bank engagement (individually and/or jointly) with small and medium-sized municipalities in Brazil would require strong previous evidence that the Project (individually) or Program (jointly): (i) Has a demonstration effect / is replicable; (ii) Has broader strategic relevance and transformational impact (either at the national, regional, or metropolitan level); and (iii) Addresses common development challenges in case of joint municipal arrangements. Filling infrastructure gaps as the current priority for Brazil. Despite the above, infrastructure remains a major development challenge for Brazil: (i) From 2001 to 2010, Brazil’s investments in both private and public infrastructure were only 2.16% of GDP (considering only investments in wastewater and water, this drops to 0.19%) 41; (ii) in the South Region, 39% of the households do not have waste water collection, and in RS only 37.6% 42; (iii) in the South Region, 12.9% of the households do not have water supply, and in RS 13.6% 43. These areas were all directly addressed by the PDMI activities and investments. PDMI-financed infrastructure activities also dovetailed with the core aspects of Brazil’s national priorities under the current administration, especially the Innovation and Economic Development focus, to the extent that PAC-supported infrastructure activities make up some of the counterpart elements of the Program. Additionally, PDMI has strengthened the municipalities’ institutional environment through capacity-building, which will further facilitate meeting PAC objectives. Program relevance from the Borrowers’ perspective. During ICR discussions, the Borrowers were unanimous in confirming the success and relevance of Program components and investments to local and regional development 44 . The commitment to Project implementation shown by some of the Municipalities – in counterpart allocations, despite difficulties; in involving different areas of Prefectures in Project implementation; and in planning and setting up arrangements for post completion continuity – confirms the relevance of the Program for the Borrowers. The Borrowers placed specific emphasis on the value of the direct engagement with the Bank during implementation. For the Borrowers the Program design allowing learning across municipalities complemented with direct Bank engagement was well-suited to their needs. Given the above, the Program relevance is rated Modest. 41 Source: Castelar Pinheiro and Giambiagi (2012), Frischtak (2012), Credit Suisse (2013). 42 Source: PNAD 2012. 43 PNAD, 2012 and SNIS, 2011. 44 Santa Maria, for instance, registered in their Final Evaluation Report “interest in the replicating of projects with external financing.” 17 3.2 Achievement of Project Development Objectives Rating: Substantial Overall, the Program was successful in enhancing the capacity of the municipalities to provide services and implement infrastructure. There were substantial infrastructure investments implemented under Component 3, largely but not exclusively related to improvements in urban mobility through road construction and rehabilitation. Component 2 activities (including those aimed at facilitating access to microcredit; fostering research and development through the construction of Technology Parks; and supporting local / informal businesses and small producers under selected clusters) were the most innovative Program activities, though smallest amount of loan resources 45. Rather than a major impact in enhancing employment and income opportunities per se (which is not fully achievable at the short term), they served as pilots to improve the Borrowers capacity to undertake LED in close interaction with the private sector. Finally, Component 1’s sector-specific plans and tools to improve municipal management – especially in the environmental, mobility and WSS sectors – were also important achievements contributing to the achievement of the PDO. The proposed efficacy rating for PDMI is derived from the weighted average of the individual Project ratings for Bagé (Substantial), Pelotas (Substantial), Rio Grande (Modest), Santa Maria (Substantial), and Uruguaiana (Negligible). The three “Substantial” performers – Bagé, Pelotas and Santa Maria – account for 72.5% of the total planned investment of US$54.38 million (Pelotas $18.90, Bagé $6.60, and Santa Maria $13.95), and for 79% of the total disbursed loan proceeds of US$47.47 million (Pelotas $18.90, Bagé $6.51, and Santa Maria $12.20). Rio Grande and Uruguaiana, rated “Modest” and “Negligible”, respectively, had a total planned investment of US$ 14.93 million (27.5%, including Uruguaiana at $6.83 and Rio Grande with $8.10); and total disbursed loan proceeds of US$ 9.86 million(21%), with Uruguaiana at $2.70 and Rio Grande at $7.16. Table 3 below summarizes the achievements of targets for the PDOIs and IOIs. Further assessment of specific outcomes is undertaken on a case-by-case basis in Appendices 1 through 5 (Specific Datasheets and Section 3.2 of the Project ICRs). 45 Component 2’s share in Bagé, Rio Grande and Uruguaiana Projects was approximately 2% of the actual investments; in Pelotas, 4% (although in this case there were additional private investments); and in Santa Maria 14.5%. 18 Table 3: Proposed individual ratings based on achievement of indicators PDO: To strengthen the capacity of the municipalities of Bagé, Pelotas, Rio Grande, Santa Maria and Uruguaiana to provide selected infrastructure services and employment opportunities for their population. Intermediate Outcome Indicators Proposed PDO Indicators (PDOI) (IOI) Project Individual 46 Not 48 Partially Not Rating Achieved Achieved Achieved 47 Achieved Achieved 49 Bagé Substantial 2 2 50 8 - 2 Pelotas Substantial 6 2 7 1 1 Rio Grande Modest 1 2 3 1 2 Santa Maria Substantial 4 0 4 2 3 Uruguaiana Negligible 0 5 1 - 5 3.3 Efficiency Rating: Substantial Program efficiency was assessed based on a comparison of ex-ante (at appraisal) and ex-post51 (after Project closure) results of the Economic and Financial analysis. At appraisal, it was anticipated that the Program would provide substantial economic benefits in the long term due to lower transport costs and reduction in travel time in Uruguaiana, Bagé, Pelotas, Rio Grande and Santa Maria, and due to improvements in sustainability of water supply and sanitation services in Bagé and Pelotas. Moreover, it was assumed that investments would provide additional economic benefits due to improved living standards and real estate value growth in areas of urban development. Component 2 was expected to provide increased employment and income, with a positive spillover effect on the local economy. Road infrastructure investments financed design, paving or rehabilitation of streets and installation of neighborhood drainage systems. The upgrading of urban roads was complemented by improved sidewalks, landscaping, traffic safety measures, and bikeways. Expected benefits included improved quality of life and reduced maintenance costs, car accidents and travel time. The Program’s water supply investments covered installation of micro and macro meters, rehabilitation of the water supply network, construction of a water supply system in rural Pelotas, increased treated water reserves, and expansion of capacity for sewage systems and small treatment plants. Benefits included a reduction in water losses, energy consumption and maintenance costs. Financial benefits reflected the increase in services providers’ revenues due to improvements in the accuracy of water and sanitation billing and reduced O&M costs. 46 Including targets that were surpassed, met and substantially met. 47 This category was designed conservatively to include cases where the targets were not met, cases where no quantitative data was available (even when there was substantial qualitative indication of success), and cases where no data at all was available. 48 Refer to footnote #44. 49 Refer to footnote #45. 50 No quantitative data available, but substantial indications of success. See the Appendix datasheets for more detailed information. 51 See Annex 3 for the complete ex-post Economic and Financial analysis. 19 The economic benefits of sanitation activities included improvements in housing values, living standards, and public health in Program municipalities. Although these benefits were significant, they are not included in this economic assessment due to significant data inconsistency. The total economic costs and benefits for each component were estimated at appraisal with EIRR ranging from 17% to 495% 52 for transport and from 13% to 35% for WSS investments. For the purposes of this ICR, the economic analysis was replicated for each individual Project, taking into consideration the same activities analyzed during appraisal, namely: (i) roads upgrading; and (ii) water supply and sanitation. For investments in roads, the Highway Design and Maintenance Standards Model (HDM) and real estate appreciation (i.e. increases in the IPTU-Property and Urban Land Tax) were used. For WSS investments, service delivery data were used to measure benefits. For Component 2’s employment and income generation activities, a qualitative analysis was carried out given the questionably reliable or insufficient data and low financing amounts. In addition, due to the public nature of the investments and lack of revenue from most of the activities, a financial analysis was not conducted. Economic analyses were conducted for interventions in the municipalities of Pelotas, Bagé and Santa Maria only. In Rio Grande, it was not possible to conduct such an analysis due to the lack of reliable data and low Borrower capacity to measure results. In Uruguaiana, no information was provided by the Borrower to the Bank. The economic evaluation shows that substantial results were achieved through PDMI Program investments. Activities evaluated presented EIRR ranging from 12% to 232%, with unit costs in general lower than benchmark values. Based on this, PDMI overall Efficiency is rated Substantial 53. 3.4 Justification of Overall Outcome Rating Rating: Moderately Satisfactory Based on the Program’s relevance (Modest), efficacy (Substantial), and efficiency (Substantial), the proposed overall outcome rating is Moderately Satisfactory. 3.5 Overarching Themes, Other Outcomes and Impacts (a) Poverty Impacts, Gender Aspects, and Social Development The PDMI directly targeted poverty through activities including urbanization of peripheral zones (Santa Maria), formalization of employment (Pelotas), WSS improvements (Bagé and Pelotas), land regularization of low income areas (Rio Grande) and paving of key urban transport avenues (all Projects). Social development-oriented actions included expansion of access to micro-credit (Pelotas and Santa Maria), support for employment improvement and formalization of firms 52 Several typographical errors in the PAD in Pelotas’ EIRR data for urban roads upgrading were discovered during ICR preparation: for instance, one EIRR should read 226.40 instead of 22.60. 53 Calculated based on a weighted average of the individual Projects’ efficiency ratings (Pelotas: Substantial; Bagé: Substantial; Santa Maria: Substantial; Rio Grande: Negligible; Uruguaiana: Negligible). 20 (Pelotas), and support to key economic clusters (Agriculture in Bagé and Pelotas; and Handicrafts in Santa Maria). (b) Institutional Change/Strengthening Institutional strengthening was a key PDMI element: investments for Municipal Strengthening (Component 1) were US$ 4.84 million, comprising approximately 10% of overall Program spending. As previously mentioned, the creation and adoption of important municipal development plans under this Component was among the most important of Program achievements both in terms of process and results. In addition, after Project completion, the UGP from Pelotas was transformed into a centralized municipal project development unit. As per information provided by Bagé and Santa Maria authorities, once new financing engagements are effective, they intend to replicate the structure of UGP, as well as some of the procedures mainstreamed by the PDMI (i.e. the methodology for project management and supervision, and the interdisciplinary and integrated approach). The strengthening of the UGP and Municipal teams was an aspect repeatedly mentioned as a positive result of the PDMI by the Borrowers during ICR discussions. (c) Other Unintended Outcomes and Impacts Synergies and increased access to alternate funding sources. As a result of the counterpart financing requirement and the strengthening of the Municipal teams by the PDMI, municipalities increased their capacity to access other sources of funding for infrastructure and for strengthening public sector management. In particular, they strengthened their partnerships with the Federal Government. For instance, Pelotas has secured more than US$120 million in additional resources from the Ministries of National Integration and of Cities and the Congress. These include the PAC Program and Emendas Parlamentares. 54 Increased tools and data to support municipal management in service delivery and economic development. A number of studies, plans and tools carried out during the Project are helping the municipal leaders and staff make more informed decisions and better plan the development of their cities. In the case of Santa Maria, for example, the preparation of the WSS plan has presented the Mayor with financial data of CORSAN’s (Rio Grande do Sul State WSS Utility – Companhia Riograndense de Saneamento) revenues in the Municipality, which enabled the Municipality to better negotiate the improvement of WSS service provision with the State concessionaire. Also in Santa Maria and Pelotas, the aerophotogrametric maps or GIS systems produced are serving as a basis for evaluation of property values and cadasters to increase city revenues. In Uruguaiana, Bagé, Pelotas and Rio Grande, the preparation of LED plans – conducted through participatory approaches – not only produced guidelines for informed actions by municipal leaders but also raised public awareness and engagement in city development. In Bagé, key recommendations of the LED plan have been adopted by the municipality. 3.6 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops A Stakeholder Workshop was held on November 21, 2012 to promote joint reflection on the experience of the development of the PDMI, extracting lessons learned from its design, management and implementation with the vision of assimilating them in similar projects. The workshop was organized by the World Bank with the participation of over 17 representatives from the PDMI UGPs for the municipalities of Pelotas, Bagé, Rio Grande and Santa Maria. The 54 Emenda Parlamentar is the instrument through which the Congress grants extra budget for Municipalities to invest. 21 Uruguaiana municipality did not participate. A full summary of the workshops, whose lessons generally align with and are incorporated with those of the Program, is included as Annex 6. The main lessons from the workshop included the importance of Project planning and preparation, the benefits to be gained from well-designed inter-municipal linkages as well as intra-municipal integration, and the need for a more robust and structured TA entity to support to the Borrowers. Specific quantitative beneficiary surveys were carried out as part of the Borrowers’ Independent Program Assessment for Santa Maria. Additional beneficiary satisfaction surveys were also carried out by Pelotas and Bagé. Although they do not include quantitative measurements, their qualitative results were taken into account in this assessment. The ICR Results Framework Analysis makes reference to their main findings. 4. Assessment of Risk to Development Outcome Rating: Significant The risks identified, as well as the specific ratings proposed for each, vary from Project to Project. The risks overall include: (i) limited Municipal capacity to perform O&M for the investments in WSS, drainage, and street and urban upgrading (applicable to all Projects); (ii) not completing pending activities after Project closure (environmental improvements of Km 3 neighborhood in Santa Maria; land regularization in Rio Grande) or initiated (closing and remediation of the existing dumpsite, and construction of a new sanitary landfill in Uruguaiana); (iii) sufficiency of technical and institutional arrangements to assure continuity and sustained impacts of the results of Components 1 and 2 (applicable to all Projects – i.e. plans adopted, TA provided to beneficiaries of the productive activities, learning internalized, etc.). The proposed rating is derived from the weighted average of the ratings for Bagé (Moderate), Pelotas (Moderate), Rio Grande (Substantial), Santa Maria (Substantial), and Uruguaiana (High). Further assessment of specific risks to development outcomes is undertaken on a case-by-case basis in Appendices 1 through 5 (Specific Datasheets and Section 4 of the Project ICRs). 5. Assessment of Bank and Borrower Performance 5.1 Bank Performance (a) Bank Performance in Ensuring Quality at Entry Rating: Moderately Satisfactory Bank performance during preparation and approval was characterized by quality inputs and efforts, resulting in a sound background analysis and overall concept. The APL approach employed was appropriate, as it allowed for critical inter-municipal learning and exchange of experiences to strengthen the Borrowers’ capacities. Additionally, this approach allowed the Bank to engage for the first time with a group of small and medium-sized municipalities, packaging them all together in a coherent way. The PDMI’s economic and social aspects reflected relevant development challenges for the municipalities, as presented in Section 3.5 (a) of this ICR. There were some shortcomings in Program design, including: (i) underestimated risk for allocation of counterpart funding; (ii) unforeseen operational risks stemming from limited Borrowers capacity; (iii) the supervision challenge of supporting the Program across five municipalities; (iv) the limited role of UAP during Program implementation; and (v) insufficient provisions for M&E. Although the M&E indicators at entry were in general well-designed to 22 quantitatively measure Program impacts, they were also beyond the Borrower’s capacity to monitor and evaluate. When assessed against the overall Program outcome (rated Moderately Satisfactory), the above shortcomings in Bank performance are considered moderate. For a fuller explanation, refer to sections 2.1 of the Overall ICR, and of Appendices 1 through 5. (b) Quality of Supervision Rating: Moderately Satisfactory Despite the substantial organizational and logistical challenges of supervising five Program Projects, Bank supervision overall displayed a high degree of internal coordination as well as TA, intensive support, and responsiveness to the Borrowers. This is evidenced by the frequent supervision missions and trainings undertaken, as well as the successful conclusion of restructuring processes for four of the five Projects. Exceptions to the overall strong performance on the part of the Bank include a period of delayed response times to Borrower requests for No- Objections (Santa Maria and Uruguaiana, end of 2011, due to a high volume of concentrated demands) and failure to correct minor problems with M&E indicators during Restructuring. A shortcoming on the part of the Bank in general was that additional supervision capacity / financing was not allocated to the Program even after the outsize operational burden was identified. (c) Justification of Rating for Overall Bank Performance Rating: Moderately Satisfactory Based on the ratings for Quality at Entry (Moderately Satisfactory) and for Quality of Supervision (Moderately Satisfactory), the overall rating for Bank Performance is Moderately Satisfactory. 5.2 Borrower Performance Rating: Moderately Satisfactory This overall Borrower Performance rating is based on the weighted average of the five Projects’ ratings. It is included in order to give an overall sense of the Borrowers’ success in implementing PDMI; therefore, it should not be taken as an indication of the performance of any individual Borrower. Borrower performance varied widely by Project, from Unsatisfactory (Uruguaiana) and Moderately Unsatisfactory (Rio Grande) to Moderately Satisfactory (Bagé and Santa Maria) and Satisfactory (Pelotas). In general, these variations depended on Borrower commitment, as well as unforeseen issues that complicated implementation in the case of some of the Projects 55. 55 Assessment of Borrower performance is made individually, for each municipality. Refer to section 5 of the specific Project ICRs. 23 6. Lessons Learned Lesson One. Investment projects with small and medium-sized municipalities require sustained efforts to construct and enhance the institutional capacity of the Borrowers. This effort should be structured and targeted, and should be initiated early during Project preparation, as well as continued throughout implementation, to assure its success. Capacity building should address social, technical and environmental planning and project management (including results- based systems, budgeting, contract supervision and management, inter-agency coordination), specific Bank guidelines and procedures for financial management and procurement (including the development of TORs, technical specifications, and bidding of complex works), and other topics and/or challenges that are identified during preparation or that may arise during implementation. Additional inputs are also necessary, such as ad-hoc consultancies in response to specific Borrower demands during implementation. Bank preparation and supervision budgets should consider these needs. Lesson Two. The design of investment projects with subnational clients (especially those of small and medium scale) should take the Borrower’s implementation capacity into account when introducing innovative and/or multi-faceted approaches. The relevance of PDMI’s components and activities remains substantial in relation to the development challenges faced by the Borrowers and the country. However, the Bank and the Borrowers agreed that: (i) The number and variety of Program activities were excessive, dispersing the attention and efforts of the UGPs. This, in addition to limited resources invested (especially in Component 2), undermined capacity for implementation and the scale of the results achieved; (ii) While there were direct linkages and synergies between the actions of Components 1 (i.e. the updating of municipal cadasters and the preparation of WSS master plans) and 3 (infrastructure services improvement), these linkages were less strong with regard to Component 2 activities (income and employment generation). This created an additional burden on the Clients. Actions to promote LED are by nature more innovative, multifactorial, take longer to mature, and require specialized teams that are often not present within the structure of the UGPs dealing with infrastructure projects. Their relevance and effort versus benefit ratio is questionable. Lesson Three. The success of a Project depends not only on the UGP’s internal structure and capacity, but also on the level of coordination between the UGP and the Borrower’s decision making structure and the commitment of policy makers. The design of the UGP as a robust, autonomous structure with its own staff linked directly with the Cabinet of the Prefecture (e.g. Pelotas) or a leaner structure linked to a specific secretariat and enlisting support as necessary for key areas (e.g. Bagé) can both yield successful results. Pelotas and Bagé assumed, within the context of the PDMI, these two different profiles, and both distinguished themselves in their own way as top performers. Regardless of its internal structure, the UGP’s capacity to coordinate efforts among decision- and policy-makers was the key to achieving positive results. Lesson Four. In the case of small to medium size municipalities, counterpart funding requirements should be carefully assessed at entry, considering the financial and fiscal situation of the particular Borrower. Close attention must be paid during Project design to the financial capacity of the Borrower. Overall counterpart contributions of 40/60% are unrealistically high for municipalities at the scale of PDMI Borrowers, due to the high proportion of the municipal budget that such percentages represent. During preparation, the Bank successfully anticipated this issue, and identified and recognized counterpart activities for which the Borrowers had secured alternative resources of financing that could contribute to the achievement of the PDO. While it alleviated somewhat the burden of financial allocations, this 24 measure was still not sufficient. More flexibility should have been originally built into the design of the eligible percentages of expenditures to be financed with Bank resources. Lesson Five. While grouped Projects can present advantages in economies of scale, these gains must be balanced against the operational burden on the Bank to ensure a cost- efficient Project. While economies of scale can be achieved in terms of budget (for Program preparation, supervision, and evaluation), this must be balanced against the major operational challenge of providing implementation support to five stand-alone Projects. In the case of PDMI, the complicated logistics and the Borrowers’ limited capacities – with the corresponding need for intensive Bank support – were not realistically evaluated and taken into account at Program preparation. While the Bank’s technical assistance was highly beneficial to the Borrowers, this intensive need for support was an issue for the Bank, especially vis-à-vis the relatively low magnitude of its expected impacts at the country level. Lesson Six. Horizontal APLs can be appropriate instruments for designing successful, relevant and efficient multi-Borrower Programs, provided some technical and institutional conditions are met. The choice of the Horizontal APL instrument to respond to the challenges presented by the PDMI municipalities was an appropriate one, as the Program was fully aligned with the APL criteria of: promoting inter-municipal learning and exchange of experiences; allowing for a flexible timeline and a multi-phased / programmatic approach; and capturing economies of scale. However, the relevance and efficiency of a multi-Borrower integrated Program tends to increase if the following technical and institutional aspects are taken into consideration from the beginning: (i) Participants should share important common development interests and challenges: In the case of PDMI, while the municipalities of the Metade Sul (southern half) of RS were geographically close, they did not constitute an integrated territory seeking joint impact. 56 (ii) Coordination and implementation must be undertaken by a strong and autonomous body at a supra-Borrower level, with real investment and/or decision-making capacity: During the PDMI implementation, the UAP lacked the legal and coordination character that would have allowed it to fully achieve the objective of inter-municipal integration. (iii) The selection of joint operations to finance small and/or medium size Municipalities should balance the scale of their potential development impact with the Bank’s total efforts and final goals: The main results of most Projects were satisfactorily reached, and the PDMI Borrowers have emphasized in meetings and the stakeholder workshop the importance of the Program results to their municipalities and their desire to replicate it. However, this Program was small compared with the Bank’s total municipal lending and, required highly intensive supervision. 7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners (a) Borrower/implementing agencies (b) Cofinanciers (c) Other partners and stakeholders (e.g. NGOs/private sector/civil society) 56 The later Mananciais Program (P006553), also a Horizontal APL, for instance, has three Borrowers but a common goal and regional impact to protect and maintain the quality and reliability of São Paulo Metropolitan Region’s water resources and potable water sources; and to improve the quality of life of the poor populations residing in key targeted urban river basins. 25 Appendix 1. Specific Data Sheet and ICR for the PELOTAS MUNICIPAL PROJECT (Polo do Sul Project, IBRD 7499-BR) A. Basic Information Pelotas - Rio Grande do Sul Integrated Country: Brazil Project Name: Municipal Development Program (APL) Project ID: P094199 L/C/TF Number(s): IBRD-74990 ICR Date: 06/30/2014 ICR Type: Core ICR Lending Instrument: APL Borrower: PELOTAS Original Total USD 18.90M Disbursed Amount: USD 18.90M Commitment: Revised Amount: USD 18.90M Environmental Category: B Implementing Agencies: Municipal Government of Pelotas (Project Implementation Unit linked to the Mayor’s Office) Cofinanciers and Other External Partners: B. Key Dates Revised / Actual Process Date Process Original Date Date(s) Concept Review: 11/16/2006 Effectiveness: 05/21/2008 05/21/2008 Appraisal: 06/26/2007 Restructuring(s): 11/04/2011 Approval: 01/15/2008 Mid-term Review: 09/13/2010 Closing: 12/31/2012 12/31/2012 C. Ratings Summary C.1 Performance Rating by ICR Outcomes: Moderately Satisfactory Risk to Development Outcome: Moderate Borrower Performance: Satisfactory C.2 Detailed Ratings of Bank and Borrower Performance (by ICR) Bank Ratings Borrower Ratings Quality at Entry: Moderately Satisfactory Government: Satisfactory Implementing Quality of Supervision: Moderately Satisfactory Satisfactory Agency/Agencies: Overall Bank Moderately Satisfactory Overall Borrower Satisfactory 26 Performance: Performance: C.3 Quality at Entry and Implementation Performance Indicators Implementation QAG Assessments Indicators Rating Performance (if any) Potential Problem Project Quality at Entry No None at any time (Yes/No): (QEA): Problem Project at any Quality of No None time (Yes/No): Supervision (QSA): DO rating before Moderately Closing/Inactive status: Satisfactory D. Sector and Theme Codes Original Actual Sector Code (as % of total Bank financing) General industry and trade sector 4 - General water, sanitation and flood protection sector 12 2 Micro- and SME finance 5 4 Roads and highways 69 89 Sub-national government administration 10 5 Theme Code (as % of total Bank financing) Micro, Small and Medium Enterprise support 9 4 Municipal governance and institution building 10 5 Other urban development 63 82 Pollution management and environmental health 12 2 Rural services and infrastructure 7 7 E. Bank Staff Positions At ICR At Approval Vice President: Jorge Familiar Calderon Pamela Cox Country Director: Deborah L. Wetzel John Briscoe Sector Manager: Anna Wellenstein Anna Wellenstein (acting) Project Team Leader: Juliana Garrido Jennifer J. Sara ICR Team Leader: Juliana Garrido ICR Primary Author: Emanuela Monteiro 27 F. Results Framework Analysis Project Development Objectives (from Project Appraisal Document) The Project development objective is to strengthen the capacity of Pelotas to provide selected infrastructure services and employment opportunities for its population. Revised Project Development Objectives (as approved by original approving authority) (a) PDO Indicator(s) Original Target Formally Actual Value Values (from Revised Achieved at Indicator Baseline Value approval Target Completion or documents) Values Target Years Number of municipal projects institutionalizing improved evaluation, social and Indicator 1 : environmental management processes in the municipal government. Value quantitative or 0 3 - 3 Qualitative) Date achieved 12/10/2007 01/16/2008 12/31/2012 TARGET MET Comments (i) The Project's methodology for works supervision was mainstreamed to other (incl. % municipal projects; (ii) the Landscape Guide (Guia de Arborização Urbana) was achievement) adopted by the Municipality; and (iii) the former UGP was transformed in a centralized project unit within the Municipality. Percentage of citizens satisfied with quicker and more user friendly access to Indicator 2 : client services provided by the municipality Value quantitative or 68.9% Baseline +70% 85% 84.8% Qualitative) Date achieved 11/04/2011 01/16/2008 11/04/2011 12/31/2012 UP TO DATE INFORMATION TO BE REPORTED AGAINST TARGET Comments IS NOT AVAILABLE (incl. % Baseline from May 2006. Result based on a survey conducted in Sept. 2009 by achievement) IPO (Instituto de Pesquisas de Opinião). Indicator 3 : Number of good practices or innovations replicated from other municipalities At least 3 good Value practice or quantitative or 0 - 3 innovations Qualitative) replicated Date achieved 12/10/2007 01/16/2008 12/31/2012 TARGET MET (i) Business Plan, management structure, and creation/regulation of the Comments Technology Park; (ii) Street vendors’ facility (Shopping Popular); and (iii) (incl. % Farmers' Association / Fruit and vegetable agro-industrial sector (the one achievement) benefiting from the Project’s investments in a Processing and Packing House Facility). Indicator 4 : Percentage increase in formal firms Value 0 At least 10% 15% increase 40% increase 28 quantitative or above the yearly Qualitative) performance of the municipal economy as a whole Date achieved 11/04/2011 01/16/2008 11/04/2011 12/31/2012 TARGET MET The revised target value was inaccurately set as “15% increase yearly, which is Comments impossible from the baseline of 50%. It should have been instead defined as (incl. % “15% increase”. Results refer to the 500 beneficiaries of the Street vendors’ achievement) facility (Shopping Popular). At the start of the investment 50% of them ran formal businesses. At the end, this number went up to 70%, representing a 40% increase. Number of rural people provided with access to improved water sources under Indicator 5 : the project Coverage: 2000 Coverage of water rural people Value supply; 2000 rural people. attended by water quantitative or 2000 2088 26% of collected supply, 65% of Qualitative) wastewater treated. wastewater treated. Date achieved 12/10/2007 01/16/2008 11/04/2011 12/31/2012 TARGET SURPASSED Comments The number of beneficiaries was estimated taking the number of piped (incl. % connections installed by the Project (522) in rural Pelotas and multiplying it by 4, achievement) which is the average number of people per household. Indicator 6 : Reduction in the density of vehicles in selected avenues benefited by the project Reduction by 20% in density and Value increase by 10% in quantitative or 0 speed-- in avenues -20% -29% Qualitative) receiving interventions and roads nearby. Date achieved 12/10/2007 01/16/2008 11/04/2011 12/31/2012 TARGET SURPASSED The baseline was calculated by a survey conducted in 2003 by STT in Fernando Osorio Ave (overall # of vehicles = 91,573; average flow = 1,307 vehicles per Comments hour = 1.43% of the overall number of vehicles in town). The actual result is (incl. % based on a survey conducted in 2009 by STT in Fernando Osorio Ave (overall # achievement) of vehicles = 125,532; average flow = 1,276 vehicles per hour = 1.01% of the overall number of vehicles in town). Reduction is therefore measured comparing 1.43% and 1.01%. Indicator 7 : Percentage of urban citizens satisfied with the quality of infrastructure services Value quantitative or 64.9% Baseline +70% 75% 67.4% Qualitative) Date achieved 12/10/2007 01/16/2008 11/04/2011 12/31/2012 Comments TARGET NOT MET 29 (incl. % Baseline from May 2006. Items included were paving and upgrading of parks achievement) and squares. Result based on a survey conducted in March 2012 by IPO (Instituto de Pesquisas de Opinião). The previous survey, from Sept. 2009, had shown 81.5% satisfaction. Indicator 8 : Number of direct project beneficiaries Value quantitative or 0 280,000 290,000 Qualitative) Date achieved 11/04/2011 11/04/2011 12/31/2012 Comments (incl. % TARGET SURPASSED achievement) (b) Intermediate Outcome Indicator(s) Original Target Actual Value Formally Values (from Achieved at Indicator Baseline Value Revised approval Completion or Target Values documents) Target Years Indicator 1 : Number of properties cadastered in automated information systems Value GIS and updated 127,042 (quantitative 0 cadaster of 57,000 57,000 (GIS and cadaster) or Qualitative) properties. Date achieved 12/07/2007 01/16/2008 11/04/2011 12/31/2012 TARGET SURPASSED Comments The physical cadaster of the buildings is complete. The Municipality is seeking (incl. % funding through a new PMAT program to add layers of data to it, and turn it into achievement) a multipurpose cadaster. Indicator 2 : Number of municipal staff trained Value (quantitative 0 1000 - 2,052 or Qualitative) Date achieved 12/07/2007 01/16/2008 12/31/2012 Comments TARGET SURPASSED (incl. % Results account for trainings conducted as part of the PMAT program, part of the achievement) counterpart investments linked to the Project. Indicator 3 : Percentage of annual work program delivered on time Value (quantitative 0 90% - 90% or Qualitative) Date achieved 12/07/2007 01/16/2008 12/31/2012 Comments (incl. % TARGET MET achievement) Number of beneficiaries of training and/or technical assistance (cluster firms and Indicator 4 : street vendors, rural producers, innovative firms, and incubated firms) Value 500 cluster firms 500 (street (quantitative 0 and street vendors, 500; 60; 5; 10 vendors); 60 (rural or Qualitative) 200 rural producers); 0; 0 30 producers. (Park is still under Technological implementation) Park: 5 innovative firms, 10 incubated firms. Date achieved 12/10/2007 01/16/2008 11/04/2011 12/31/2012 Comments (incl. % TARGET SUBSTANTIALLY MET achievement) Indicator 5 : Number of productive infrastructure installed Agrobusiness cluster: 1 packing house. Street vendors: Commercial 2 (Packing House Value enlargement of 1 Center and and Commercial (quantitative 0 Commercial Technology Center / Shopping or Qualitative) Centre for Social Park Popular) Inclusion (Camelodromo). 1 Technological Park Date achieved 12/10/2007 01/16/2008 11/04/2011 12/31/2012 TARGET PARTIALLY MET Comments The revised target value was inaccurately set as “Commercial Center and (incl. % Technology Park”. It should have been “Commercial Center, Technology Park achievement) and Packing House”. 2 out of 3 planned productive infrastructure installed. The Technology Park was not built. Indicator 6 : Volume of Bank Funding: Enabling Environment - Microfinance Value (quantitative 0 - USD 150.000 0 or Qualitative) Date achieved 11/04/2011 11/04/2011 12/31/2012 TARGET NOT MET Although micro credit program support was included in the Project, the Bank’s participation was limited to TA to the Borrower, with no direct Bank financing. Comments This indicator was included mistakenly during Project restructuring. (incl. % Nonetheless, results provided by the Borrower show that through Project achievement) completion in 2012, by Caixa, Banco do Brasil and Banrisul lent BRL 10,517,000.00 to micro entrepreneurs through the program. This number increased to BRL 24,072,765.66 by the end of 2013. Physical progress of infrastructure improvements in urban transport as a Indicator 7 : percentage of target attained: roads rehabilitated; roads maintained; substituted, rehabilitated or duplicated bridges 55 km of paved/rehabilitated Value 70.4Km (152 roads; 1200 km of 55Km; (quantitative 0 streets); 1,200Km; rural roads 1,200Km; 12 or Qualitative) 12 maintained; 19 bridges 31 Date achieved 12/10/2007 01/16/2008 11/04/2011 12/31/2012 Comments (incl. % TARGET SURPASSED achievement) Physical progress of urban improvements and environmental recovery as a Indicator 8 : percentage of target attained: m2 of green areas recovered Value 1 park with 3700 (quantitative 0 3,700m2 (1 park) m2 of green area or Qualitative) Date achieved 12/10/2007 01/16/2008 12/31/2012 Comments TARGET MET (incl. % Results refer to improvements made to Dom Antônio Zattera Park, and also in achievement) the Central area. Physical progress of water infrastructure improvements in absolute numbers; Indicator 9 : number of new piped household water connections that are resulting from the project intervention Expansion of 20km of water supply network in rural areas. 20Km (water Value Construction of 20Km; 600 network); 522 (quantitative 0 3.2km of water households households or Qualitative) conveyance (connections) system in urban areas. 1 treatment wastewater facility. Date achieved 12/10/2007 01/16/2008 11/04/2011 12/31/2012 Comments (incl. % TARGET SUBSTANTIALLY MET achievement) G. Ratings of Project Performance in ISRs Actual Date ISR No. DO IP Disbursements Archived (USD millions) 1 03/04/2008 Satisfactory Satisfactory 0.00 2 09/11/2008 Satisfactory Moderately Satisfactory 6.13 3 04/15/2009 Satisfactory Satisfactory 9.82 4 11/23/2009 Satisfactory Satisfactory 11.65 5 04/29/2010 Satisfactory Satisfactory 12.26 6 02/21/2011 Satisfactory Moderately Satisfactory 14.33 7 07/20/2011 Satisfactory Satisfactory 15.01 8 04/29/2012 Satisfactory Moderately Satisfactory 15.73 9 11/18/2012 Moderately Satisfactory Moderately Satisfactory 18.90 10 07/10/2013 Satisfactory Satisfactory 18.90 11 01/19/2014 Moderately Satisfactory Satisfactory 18.90 32 H. Restructuring (if any) ISR Ratings at Amount Board Restructuring Disbursed at Restructuring Reason for Restructuring & Approved Restructuring Date(s) Key Changes Made PDO Change DO IP in USD millions (i) Adjustment to the wording of the Loan Agreement, in order to correct terms used originally by mistake; (ii) Correction of a typo in the Appraisal Document specifically related to the Project’s Safeguard Category; (iii) Reduction in scope, notably the exclusion of the 11/04/2011 N S S 15.01 investments to set up centers for digital inclusion under Component 2, and some drainage and sanitation investments under Component 3; (iv) Revision of the results framework to reflect the above changes in scope; and (v) Reallocation of funds between loan categories. 33 SPECIFIC ICR FOR PELOTAS MUNICIPAL PROJECT 1. Project Context, Development Objectives and Design The Pelotas Project (Polo do Sul) was approved by the Board on January 15, 2008 in the amount of US$18.9 million, and following the signing of the Loan Agreement on March 26, 2008 became effective on May 21, 2008. Pelotas was both a pioneer and a leader for the PDMI Program, beginning implementation almost a full year before the Bagé Project, the next to start. Pelotas was also the first PDMI Project to undergo restructuring (Level II) in November of 2011. Despite some difficulties – shared for the most part by all the PDMI Projects – Pelotas’ performance remained satisfactory throughout almost all of Project implementation. The Project disbursed all of the available loan resources and, as of the closing date in December of 2012, had concluded almost all of the planned Project activities and achieved most of the PDO indicators. 1.1 Context at Appraisal The city of Pelotas is in the southeastern part of the State of Rio Grande do Sul, approximately 252 Km from the state capital of Porto Alegre. It was the state’s third largest city at the time of appraisal, with a population of about 335,000 inhabitants, 93% of which was urban. Nearly 21.8% of the municipal population was considered poor (2000), almost double the corresponding figure for the state capital Porto Alegre (11.3%). A survey at the time of appraisal indicated that 20.8% of the economically active population of Pelotas was unemployed, compared to 13.7% for the Porto Alegre Metropolitan Area. According to the State Statistics Agency (FEE), total municipal GDP in 2004 was nearly U$ 1 billion and per capita GDP US$3,185, about half of the state’s average (US$ 6,054). Municipal GDP had been in decline, and Pelotas had been dropping in statewide economic rankings. Nearly 85% of industrial GDP related to traditional industries, including food processing, leather, fertilizers and other agricultural inputs. 1.2 Original Project Development Objectives (PDO) and Key Indicators (as approved) Original PDO. The PDO was to strengthen the capacity of Pelotas to provide selected infrastructure services and employment opportunities for its population. Key original indicators. The original results framework contained seven PDO indicators for Pelotas. These are, for Improved Municipal Management Capacity: (i) Number of municipal projects institutionalizing improved evaluation, social and environmental management processes in the municipal government of Pelotas, (ii) Percentage of citizens satisfied with quicker and more user-friendly access to client services provided by the municipality, (iii) Number of good practices or innovations replicated from other municipalities. For Increased Local Economic Development Opportunities: (i) The net percentage increase in formal firms is higher (or its decrease is lower) among the beneficiaries of the project than in the municipal economy as a whole. For Improved Infrastructure Services: (i) Number of rural people with coverage of water supply, (ii) Reduction in the density of vehicles and increase in their average speed in selected avenues benefitted by the project, (iii) Percentage of urban citizens satisfied with the quality of infrastructure services. 34 1.3 Revised PDO (as approved by original approving authority) and Key Indicators, and reasons/justification The PDO was not revised. Indicators were revised at restructuring to correct problems with the initial results framework, and adjust to the changing context (a decrease in loan purchasing power) and the correspondingly altered Project activities. Four indicators were revised to better fit the municipality’s monitoring and reporting capabilities. Three IOIs were revised to reflect the reduced scope of many Project activities (further addressed in Section 1.7). PDOI 5 was scaled back substantially, with the target for wastewater treatment eliminated entirely, due to the removal of a substantial portion of the Project’s planned water and sanitation activities. Two new targets were included: a PDOI to monitor the number of total Project beneficiaries, and an intermediate indicator to take into account the microfinance Project activities. 1.4 Main Beneficiaries The original estimate for project beneficiaries included in the PAD was the population of Pelotas at the time – 335,000 individuals. This estimate was updated to 280,000 in the Restructuring Paper, and the final estimate for beneficiaries in Pelotas is 290,000. 1.5 Original Components (as approved) The Project’s original components were as follows: Component 1: Municipal Strengthening. Focused on improving the municipality’s capacity to more effectively and efficiently execute projects, with a focus on fiduciary, environmental and social aspects, and improving the quality and efficiency of public services provided by the municipal government. This component included: (i) public service modernization, and (ii) project management. Component 2: Income and Employment Generation. The project sought to support cross-cutting activities to improve the overall business environment, facilitate access to micro-credit, cluster development for street vendors and fruit and vegetable producers in urban and rural areas and a Technology Park to promote R&D. This component included: (i) strategies, SME and cluster support, and (ii) construction of a technology park. Component 3: Infrastructure Services Improvements. This component included: (i) rehabilitation of urban road infrastructure and landscaping, (ii) rehabilitation of rural road infrastructure and landscaping and (iii) urban upgrading and environmental rehabilitation. 1.6 Revised Components Scope tightening. Changes to all three components were made due to the increase in total project costs, stemming from exchange rate variations and construction price inflation. These changes included both a reduction in the scope of Project activities, the inclusion of alternate funding sources to complete some of the planned activities, and a shift in loan allocations to decrease funding for Components 1 and 2, and increase funding for the infrastructure actions provided for under Component 3. For Components 1 and 2, financing from other sources (including private and federal funds) allowed a decrease in loan funding to these areas, and yet relatively few planned actions had to be removed. Allocations to Component 3—infrastructure investments— 35 were proportionately increased, although the exclusion of some water and sanitation investments (the automated drainage system and the wastewater treatment facility) still proved necessary. 57 1.7 Other significant changes Increase in the Project’s total costs. Construction cost inflation and a shifting BRL/US$ exchange rate led to an increase in overall Project costs from US$ 31.5 to US$ 32.85 million, and in counterpart funds from US$ 12.60 to US$ 14.09 million. In addition, the Project was impacted by the increase in construction costs (higher than the general inflation), especially considering that the infrastructure-related component was the largest one (see Graph 2). This decrease in loan purchase power mandated a corresponding reduction in Project scope and the seeking out of alternate funding sources to complete planned activities (e.g. Federal Government’s Growth Acceleration Program – PAC funds). Reallocation of funds between loan categories. In accordance with the above revisions to the components, funds were reallocated between categories to maximize completion of actions and prioritize areas unable or unlikely to obtain alternate funding. Funding for Components 1 and 2 was reduced by 13% and 43%. This was possible, in part, because of private sector financing for Component 2 (Technology Park and the Shopping Popular., respectively). This allowed reallocation of Project funding to Component 3, which was increased by 15%. Other minor / corrective changes. (i) Corrective adjustments to the wording of the Loan Agreement; and (ii) Correction of a typo in the PAD specifically related to the Project’s Safeguard Category. 2. Key Factors Affecting Implementation and Outcomes 2.1 Project Preparation, Design and Quality at Entry See Section 2.1 of the PDMI Program ICR. 2.2 Implementation “Pioneer” project. As the first PDMI Project, it took time for the Pelotas UGP to become familiar with the Bank’s guidelines and procedures, especially those related to procurement. During preparation, the UAP was established first in Pelotas to coordinate the implementation of the PHRD (Japanese Policy and Human Resources Development Fund) grant for preparation of the initial studies and projects. The coordinator of UAP became the manager of the Pelotas UGP, which provided continuity for project implementation. The wide scope of activities and complex arrangement of counterpart investments. The combination of a complex administrative/management system and numerous counterpart activities complicated Project implementation. In addition to the UGP’s intrinsic responsibilities of Project planning, execution, monitoring and reporting, Components 1 and 2 required additional institutional coordination. The public sector modernization activities, for instance, were financed by PMAT; the GIS and electronic document management systems financed by the Project required frequent exchanges with the Prefecture’s IT sectors; and intense coordination between the UGP, the Secretary of Economic Development, and the external partners (commercial banks) 57 The municipality is seeking alternate funding sources for, and plans to complete, these actions. 36 was needed to implement the Municipal Microcredit Program. These additional tasks dispersed the UGP’s efforts and human resources, draining focus from other activities that were within the UGP’s area of competence. Structuring and performance of the UGP throughout Project implementation. The autonomous structure of the Pelotas UGP, and its direct link with the Cabinet of the Prefecture, were important aspects that, together with the organization’s formation (in terms of capacities and staffing) and proactivity, were decisive in reaching satisfactory implementation for Polo do Sul. Decrease in purchasing power and resulting Project Restructuring. As it began implementation first, when the US Dollar was weakest, Pelotas’ Project probably suffered most of the five municipalities from the depreciation of the US Dollar with respect to Brazilian Real, and the increase in the construction costs in Brazil (refer to Graph 1 and to Section 2.2 of the Overall Program ICR). These were the main reasons for the reduction in Project scope made during the November 2011 Level II restructuring. The Municipality had to secure additional funding for the activities (such as for the construction of a waste water treatment facility and of an automated urban drainage system, both part of the original scope of the water and sanitation improvements under Component 3). CPF increased from US$ 12.60 million to US$ 13.95 million. Finally, the restructuring itself demanded time and effort to be prepared and approved, diverting attention from implementation of Project activities and investments. However, the restructuring was ultimately successful in making many of the adjustments necessary for successful Project implementation and results. Graph 2 – Project disbursements compared to economic indexes Pelotas Project disbursement amount Exchange rate index Construction Index (INCC) Inflation (IPC) 12.00 2.33 2.50 2.16 10.00 1.95 2.00 1.95 1.83 2.00 1.76 1.67 1.65 8.00 1.52 1.42 USD (miilion) 1.32 1.50 1.23 Index 1.18 1.46 6.00 1.38 1.06 1.30 1.00 1.23 1.11 1.16 1.00 1.00 1.05 4.00 0.50 2.00 0.00 - 2007 2008 2009 2010 2011 2012 2013 2014 Year 37 The positive effects of the implementation support and TA provided by the Bank. The Project’s counterpart activities were difficult, demanding substantial coordination efforts, given their spread across Municipal agencies, on the part of the UGP (whose structure and know-how were focused on engineering and infrastructure aspects, which constituted the bulk of Project investments). On the other hand, the Bank made real efforts to compensate for this by providing TA and implementation support for the project. Activities such as the WSS Master Plan, the Strategic Plan for LED (PEDL) and the Municipal Microcredit Program had intensive accompaniment by Bank consultants to enhance the quality of outputs. 2.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization M&E design and implementation. M&E was challenging throughout Project implementation, as quantitatively measuring the indicators proved beyond the Borrower’s capacity. However, it is likely that quantitative monitoring would have presented a challenge regardless of initial indicator design or corrections at restructuring 58 . This is due not only to the difficulty of providing intensive technical support to five Projects simultaneously, but also the fact that the activities by nature generally required quantitative monitoring to measure their results. • Component 1. As mentioned, various indicators required separate studies to measure their results 59 , which were often beyond the technical and institutional capacity of the Borrower. • Component 2. Originally, only one PDOI was defined for Component 2 (Percentage increase in formal firms), which was justified by the limited total activities and resources directed towards increasing opportunities for employment and income. The 40% increase in formality measured under this indicator at Project closing is reliable, and shows the positive impact of the Project action for construction of the Shopping Popular to benefit street vendors. There were also two different, simplified IOIs to accompany the progress of training, technical assistance, and productive sector support actions (IOIs #4 and 5). Finally, there was some controversy regarding the inclusion, via restructuring, of IOI #6 – “Volume of Bank Funding: Enabling Environment / Microfinance” (refer to comments provided in the ICR Results Framework Analysis). While this action was strategic and merited accompaniment and reporting, it should not have been chosen as an indicator, since no direct Bank investment was targeted at this. Bank support was mostly provided through TA. • Component 3. The Component 3 indicators were both numerous (4 PDOs 60) and showed substantial capacity to (i) legitimately reflect Project investments in sanitation and 58 In the case of Pelotas, flaws in the formulation and targets of some indicators remained after Project restructuring (in IOIs # 7 and 8, for instance, the wording of the indicator refers to a percentage while the target is defined as an absolute number). 59 Satisfaction with municipal services under Component 1 with relation to the PMAT-financed public sector modernization activities was only measured in 2009, during the preliminary implementation phase. It is questionable whether this reported final value does in fact provide a valid indicator for the sustainability of results obtained. 60 Including 3 original indicators revised during restructuring, and 1 core sector indicator added via restructuring. Additionally, 3 IOIs, which were maintained through restructuring, with slight target adjustments due to the proposed reductions in scope. 38 paving 61, (ii) assist in monitoring the progress of works (in the case of the IOIs), and (iii) provide tangible evidence for the evaluation of results. Overall performance of Pelotas in conducting M&E. Once the initial difficulties were overcome, Pelotas worked satisfactorily in M&E. The reasons for this include: (i) Pelotas’ reports were delivered in a timely fashion and contained information with only moderate shortcomings; (ii) despite the above difficulties, Pelotas conducted baseline and intermediate surveys; and (iii) Pelotas participated in joint efforts among PDMI municipalities for contracting of consulting services for the development of an Independent Program Evaluation, hosted the evaluation workshop, and actively contributed during the ICR discussion process. 2.4 Safeguard and Fiduciary Compliance Safeguard Aspects. 62 Pelotas’ compliance with safeguards was Satisfactory at Project closing. Rehabilitation of the urban city center led to the relocation of street and walking vendors to units within the Shopping Popular and other designated areas constructed as part of the Project. This was appropriately conducted, in accordance with Involuntary Resettlement Plans developed and implemented with the support and follow up of the Bank. Financial Management (FM). The FM arrangements were overall Satisfactory throughout the life of the Project. The implementing agency addressed most of the shortcomings identified during financial management supervision missions, showing a clear and progressive improvement of the FM arrangements when faced with issues, allowing timely and reliable provision of information required to manage and monitor the implementation of the project. Specifically, (i) budget has been realistic and was properly executed, (ii) staff nominated and trained on Bank's processes, (iii) efficient internal control processes were in place, (iv) Financial Management Information Systems (FMIS) were in place, with timely submission of IFRs, and (v) external audit reports with an unqualified (clean) opinion were issued by auditors. Procurement. Since Pelotas was the first PDMI Project to implement, it faced the greatest challenge to adapt to the Bank’s procurement procedures and guidelines. It was particularly hard for a municipality working for the first time with the Bank to reconcile Bank’s guidelines with National guidelines and systems. This proved to be a regular learning curve. The UGP was well staffed, though, and once initial difficulties were overcome, Pelotas’ performance improved and procurement routines were found to be of good quality. Compliance with Procurement aspects was rated Moderately Satisfactory at the closing of Pelotas’ Project. 2.5 Post-completion Operation/Next Phase As of the closing date, all Project activities that had been initiated were satisfactorily completed, including those related to safeguards and resettlement. Even after the closing date, the Borrower kept reporting continuation and/or progress as well as results of the activities. No formal post- closure follow up by the Bank will be needed. Additionally, the current administration, initiated in January 2013 with a regular term ending in December 2016, is of the same party as its predecessor and has indicated continuity with the overall programs and policies of the preceding administration. 61 Component 3 accounted for 77% of the original total costs of the Project, and 85% of the revised ones. This number goes up to 91% if taken the actual total investments of the Bank / loan proceeds. 62 Details are in Section 2.4 of the Overall Program ICR 39 Project Management Unit. After Project closing, the UGP (with a staff of 30 people) was assimilated into the organizational structure of the Prefecture as a “project center”. This will bring increased post-completion security, especially with respect to the Borrower’s ability to carry out the pending counterpart activities 63. Operation and maintenance (O&M). Additional aspects in the post-completion phase include the municipality’s ability to adequately carry out O&M of urban roads and infrastructure as well as WSS networks and systems. However, the municipality has provided a budget allocation for conducting O&M, and the Project included investments to acquire road maintenance equipment. Land use control in the city center. The municipality has satisfactorily relocated street vendors to appropriate commercial facilities, not only improving their businesses, but also increasing the overall urban quality of the downtown area. It will be important to continue appropriate land use control measures to impede new squatters inappropriately conducting their activities in the public space. Pelotas’s current administration is properly dealing with this aspect. The Task Team was recently informed that an initiative for standardization of snack carts in the streets was conducted, which will greatly contribute to preserving appropriate use of public space. Both of the above aspects illustrate important improvements on the part of the Borrower in carrying out the inherent routines and responsibilities of a municipal administration. 3. Assessment of Outcomes 3.1 Relevance of Objectives, Design and Implementation Rating: Modest The relevance of the objectives, design and implementation of Polo do Sul Project is rated Modest because of the aspects already mentioned in section 3.1 of the overall PDMI ICR. The investments planned by the Project to strengthen the overall capacity of the municipality, including the generation of employment and income opportunities, and notably those in urban and rural mobility and sanitation, still remain as priorities to be tackled by the Municipality. This was reported in the Borrower’s final completion assessment of the Project and during the discussions conducted after completion. The design of the Project also shows a close fit with Brazil’s national priorities in terms of supporting municipal infrastructure and development. The proposed Modest rating is due to: (i) a weaker link with the priorities defined for World Bank engagement under the current CPS; (ii) reduced relevance and efficiency of Project implementation due to the failure to achieve Program-wide institutional arrangements or transformational impact; (iii) the substantial implementation support needed from the Bank; and (iv) the variety of funding options (including national sources) apart from Bank financing available for such a portfolio. 63 Activities pending execution were: (i) the construction of the Administrative Center; (ii) the construction of the building to house the Technology Park; and (iii) the urban upgrading works in downtown area of Pelotas (Calçadão Central). For these, the Municipality will continue to seek other sources of financing. 40 3.2 Achievement of Project Development Objectives Rating: Substantial The PDO was to strengthen the capacity of the Pelotas municipality to provide selected infrastructure services and employment opportunities for the population. The volume of Component 1 Bank financing was small (only US$ 0.86 million, less than 5% of the total loan amount), most of which targeted Project management. However, CPF activities made up an important part of this component and supported improving the quality and efficiency of municipal public services. It financed the PMAT, the WSS Master Plan and the GIS mapping, all of which were successfully conducted, as reported in the Project’s Results Framework 64. PDOIs for this component – (i) Number of municipal projects institutionalizing improved evaluation, social and environmental management processes in the municipal government and (ii) Percentage of citizens satisfied with quicker and more user friendly access to client services provided by the municipality – were met. Under Component 2 (Bank financing of US$ 0.70 million), the situation was similar. It supported strengthening the municipality’s capacity to generate employment and income opportunities, meeting targets for the following PDOIs: (i) Number of good practices or innovations replicated from other municipalities and (ii) Percentage increase in formal firms. While it constituted less than 4% of the loan amount, it included a more substantial amount of counterpart funding and private sector investment, the latter responsible for covering the cost of constructing and operating the commercial facilities to house street vendors (Shopping Popular) 65 . One of the Project’s outputs was a LED Strategy. The overall business environment in Pelotas was improved in terms of access to financing and infrastructure by Project support for the Microcredit Program (which benefited about 612 micro entrepreneurs with loans), and by investments in the construction and acquisition of equipment for a Processing and Packing House Facility to support the fruit and vegetable agro-industrial sector (60 families). Component 3 comprised the bulk of Project investments. 91.5% of loan proceeds (US$ 17.29 over US$ 18.90 million) were allocated to the construction and/or rehabilitation of streets, improvements to public spaces, rural mobility, and rural water. If the overall total Project costs (actuals) are considered, Component 3 remains at 68% (US$ 28.67 of US$ 42.09 million) of total loan proceeds, highlighting its importance in the Polo do Sul Project. The specific assessment of the results indicators shows: (i) 6 out of 8 PDOIs were met, indicating broad achievement of the goals of all three components; (ii) 2 out of 8 PDOIs were not met, one (Percentage of urban citizens satisfied with quicker and more user friendly access to client services) due to a conservative approach in the measurements; (iii) 7 out of 9 IOIs were either met or substantially met; 1 out of 9 IOIs was partially met (number of productive infrastructure installed); and (iv) only 1 out of 9 IOIs was not met (amount of Bank financing enabling environment / microfinance), in this case because of a shortcoming in Project restructuring (the appropriateness of the choice of the indicator) rather than a limited performance (in fact, the microcredit program shows very interesting results, with over 612 beneficiaries receiving BRL 24,072,765.66 in loans through the end of 2013). Nevertheless, some originally planned Project activities were not executed by the Project’s 65 If considered total project costs (actuals), Component 2 represents 22.6% (USD 9.58 million over USD 42.09 million). 41 closing date, including: (i) the construction of the Administrative Center; (ii) the construction of the building to house the Technology Park; and (iii) the urban upgrading works in downtown area of Pelotas (Calçadão Central) 66. This accounts for the Substantial, rather than High, rating for Project efficacy. The Municipality continues to attempt to conduct the remaining activities, which will require land acquisition for the construction of the Administrative Center and Technology Park as well as complementary funding sources. 3.3 Efficiency Rating: Substantial The economic analysis of the Pelotas Project was conducted considering the same activities analyzed during Appraisal for Component 3: (i) water supply and (ii) urban and road upgrading. Actual costs of these activities total US$ 21.18 million, 84% of total project cost. The same approaches/methodologies employed during appraisal were used for the cost-benefit analysis: (i) for investments in water, the amounts referring to services delivery; and (ii) for investments in roads, the Highway Design and Maintenance Standards Model (HDM). However, Project activity (iii), maintenance and improvements of rural roads, was not considered in this analysis due to the lack of information available. For Component 2, generation of employment and income through microcredit, qualitative information was included to give a sense of results achieved. There were no data available to prepare a full EA analysis. Overall Pelotas Project Beneficiaries. The Pelotas Project’s road upgrading and water activities reached more beneficiaries than targeted at Appraisal. Table 4 – Projected versus actual beneficiaries Components Projected beneficiaries Actual Beneficiaries Road upgrading 334,594 341,000 67 Rural water supply 2,000 2,088 Analysis of per capita investment cost for interventions showed higher-than-average cost per beneficiary for the rural water supply activities, due to the complex logistics of construction in a remote rural area. For road upgrading, costs were lower than the benchmark. Table 5 – Comparison of unit costs per intervention Intervention Cost per Beneficiary / Benchmark Cost per Beneficiary / per Km per Km 68 Road upgrading 0.53 (BRL million/Km) 2.45 (BRL million/Km) Rural water supply 209 (US$/beneficiary) 150-200 69 (US$/beneficiary) 66 The Administrative Center was to be built in a historical site, and as the required approvals from the National Institute of Heritage (IPHAM – Instituto do Patrimônio Histórico e Artístico Nacional) could not be obtained, the municipality sought an alternative location. For the Technology Park, all institutional arrangements were in place, but no agreement was reached on the location. Regarding the Calçadão Central, pending technical adjustments to the detailed engineering designs impeded the timely launch of the procurement process. 67 IBGE estimates for 2013 population. 68 National Association for Public Transportation (ANTP) – Information System on Urban Mobility – 2011 Report – launched in December/2012. General parameter for average cost for construction of urban roads. 69 Various sources. 42 Water Supply. This activity was expected to finance the construction of a water main to connect Pelotas stream with Sinnot treatment plant and the expansion of the water supply network to rural areas. Expected benefits included improvement of maintenance and quality of water service delivered. Activities consisted of construction of a 3.2 Km of pipeline from the Pelotas stream to the Sinnot water treatment plant (increasing treated water reserves by 10%); and construction of a 20km water supply network and a water treatment facility benefiting 522 households in rural Pelotas. On the basis of evaluation described and considering the data available, an EIRR of 12.6% was obtained. Qualitative surveys have confirmed the “regular” satisfaction of the beneficiaries with service delivery. Table 6 – Comparison of expected and actual results of the Pelotas Project Intervention Ex-ante EIRR Ext-post EIRR Water Supply 15.93% 12.60% Urban and road upgrading. This activity was expected to finance: (i) the renovation of selected historic buildings; (ii) the construction of about 50 bays for bus stops and about 10 pedestrian crossings; (iii) the rehabilitation of about 7,000 m2 of streets (around 3 Km) and paving of 1km of Sao Paulo Street; and (iv) the recovery of 3,700 m2 of green space in the downtown area, paving and/or rehabilitation of around 50 Km of streets and important access corridors, including pedestrian and bicycle infrastructure and landscaping. Expected benefits included an increase in real estate value, reduction of travel time and vehicle maintenance, and a reduction in car accidents. The actual activities consisted of: (i) the rehabilitation of 3 historic buildings; (ii) the construction of 44 bays, 38 bus stops, 79 access ramps and widening of 2 sidewalks; (iii) the rehabilitation of 10.4 Km of streets, and 1 Km of São Paulo street; (iv) the recovery of 3700m2 of the green space in the Dom Antonio Zattera Park; and (v) paving/rehabilitation/widening of 59 Km streets to include, inter alia, paving, drainage, sanitation, signaling, sidewalks and landscaping. The evaluation of the economic outcomes of these investments took into account the following aspects: • Items (i) and (ii) were not considered in the analysis either at appraisal or at closure, as (i) was a counterpart activity financed through an IDB project and not re-evaluated under the Bank’s Project, and for (ii) no information was available; • Under item (iv), the properties in the vicinity appreciated in value as indicated by municipal interlocutors. However, by executive decision, the IPTU property rates schedule was not adjusted accordingly, so the evaluation of real estate increase based on the change in the IPTU was not feasible. There were no other sources of data available for preparing an EA analysis of this item; • For items (iii) and (v), the HDMI methodology was used. The vehicle count was carried out for only some of the roadway stretches due to limited municipal capacity. For stretches that were not measured, figures were estimated based on the traffic counts actually produced for other areas, maintaining the same rate of growth. On the basis of the evaluation described and considering the availability of the data, this component provided significant benefits to the population of Pelotas, with EIRR ranging from 43 29% to 400%, with an average of 232%. This is somewhat lower than the EIRR evaluated at appraisal, with an average of 245% (ranging from 24 to 495%) 70. Additional qualitative analysis: Microcredit. Under Component 2, the Project would support cross cutting activities to facilitate access to microcredit. Microcredit activity supported by the Project was limited to technical assistance provided as part of routine Bank support, with no additional cost. However, the Municipality was able to put in place a well-qualified personnel and institutional structure to leverage the microcredit financing and to obtain microcredit support from various government banks (Banco do Brasil, Caixa Economica Federal, Banrisul). The number of microcredit operations reached 6,537, with a total advance credit of around R$ 24 million (US$ 10.90 million) from 2010 to 2013. The economic evaluation shows Substantial results achieved through Pelotas Project investments. 3.4 Justification of Overall Outcome Rating Rating: Moderately Satisfactory Based on the Project’s relevance (Moderate), efficacy (Substantial), and efficiency (Substantial), the proposed overall outcome rating is Moderately Satisfactory. 3.5 Overarching Themes, Other Outcomes and Impacts 3.6 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops For a summary of the results of the joint Stakeholders Workshop, conducted in November 2012, see section 3.6 of the overall Program ICR, as well as Annex 6 for the abridged translation of the final report. 4. Assessment of Risk to Development Outcome Rating: Moderate Given the broad achievement of the PDO across components and the retention by the municipality of both the UGP and many of the financial and monitoring practices learned through PDMI preparation and implementation, it is likely that the impacts of the Project will be sustained, especially in terms of continued institutional improvement. Risk to Component 1 development outcomes is considered low. Key instruments were prepared, such as the WSS Master Plan, which will result directly in increased municipal capacity to raise Federal Government funds to invest in WSS. Other instruments, such as the GIS and cadaster, will still require further investments in order to be broadly utilized by the different Municipal entities. The municipality is already seeking resources from PMAT to add additional layers of information to the current cadaster, and make it a multipurpose database. Likewise, the majority of Component 2 infrastructure investments were accompanied, even during implementation, by appropriate solutions for management, operations, and maintenance. 70 Several typographical errors in the PAD in Pelotas’ EIRR data for urban roads upgrading were discovered during ICR preparation: for instance, one EIRR should read 226.40 instead of 22.60. 44 In the case of the Shopping Popular, the vendors installed in the new structure were encouraged to formalize their businesses, an objective facilitated by the creation of the Brazilian Federal Law benefiting individual micro-entrepreneurs (Lei No. 128/2008, do Micro Empreendedor Individual – MEI) and capacity-building programs in the area of entrepreneurship to improve management practices. 71 The rent charged to vendors for space in the Shopping Popular was calculated to be sufficient to assure the maintenance of the equipment and at the same time the viability of the businesses of the beneficiaries. 72 Apart from the construction and tenanting of the building, the prefecture refined its policies of urban control in order to prevent the influx of new street vendors in central public areas. In the case of the Central de Beneficiamento 73 (Processing and Packing House Facility supporting the fruit and vegetable agro-industrial sector), as per information provided by the Borrower and also confirmed during supervision, the producers benefited have been highly satisfied with the use of the equipment, reporting increased revenues and profitability of their businesses and diversification of their production through the introduction of better value-added items (pre- processed). The specialists from EMATER 74 working with the group registered a similar improvement and assured that the initiative was fully successful, especially given the beneficiaries’ plan to expand the current installations to accommodate growing demand. The beneficiaries were also familiarized with the “business plan” management instrument and its importance in analyzing how market changes could alter their business, and thus its use in making routine business decisions, which will strengthen the entrepreneurial capacity of the group. There is the risk that the construction of the Technology Park will not actually lead to the aimed- for outcomes with regard to R&D promotion. The Technology Park is supported by the Prefecture, syndicates of technology-based companies in the municipality, universities, local business organizations, and the State Government of Rio Grande do Sul through the Programa Gaúcho de Parques Tecnológicos. The advances brought about by the Technology Park did not meet expectations, especially with regard to the construction of the area itself, mostly due to the difficulties in defining an area for the building. Nevertheless, other equally important initiatives to foment an environment of innovation within the municipality were put into place, principally through the approval of the Municipal Innovation Law (Lei Municipal de Inovação), which permits the granting of incentives and other facilities for technology-based companies to set up within the municipality. Finally, and as discussed in section 2.5 of this ICR, risks related to the O&M of the infrastructure built by the Project can be considered moderate. The overall Risk to Development Outcome for the Pelotas Project is assessed as Moderate. 71 There is no recent information available to indicate whether the tenants are successfully paying the rents charged, the existence/rate of default, or any improvement seen by the beneficiaries in their new location. 72 The management of the new building will be the responsibility of a private company, identified by the Prefecture, and specializing in this type of locations. 73 This investment was intended to support a group of small rural producers assisted by the EMATER rural extension through the construction and installation of a central processing unit for fruits and vegetables. The central will function as a packing-house (separation, washing, packaging, and preserving of products) and will also allow for other processes, such as dehydration of products for the preparation of food formulations (e.g. pre-processed soups) of greater local market demand. 74 A Brazilian company that provides support and technical assistance to rural producers. 45 5. Assessment of Bank and Borrower Performance Bank Performance is assessed only for the overall Program. Performance is assessed as Moderately Satisfactory at Entry, Moderately Satisfactory at Supervision, and Moderately Satisfactory overall. For details, see Section 5 of the PDMI Program ICR. 5.1 Borrower Performance (a) Government Performance Rating: Satisfactory The Prefecture of Pelotas was very quick to finish the approval process at the Federal level during the period between negotiations and signing. Only about four months passed between loan approval and effectiveness. The Government complied with all due loan covenants and met all counterpart funding allocations. A high level dialogue with the Bank was maintained throughout Project implementation. (b) Implementing Agency or Agencies Performance Rating: Satisfactory For the case of Pelotas, the implementing agency was the UGP (Project Management Unit), an autonomous structure linked to the Mayor’s Office. The Pelotas UGP’s support to other municipalities, starting from the initial phase of implementation and continuing throughout the life of the Project, was a key element in the Program’s overall success. Although initial difficulties were encountered, the UGP proved capable of overcoming these challenges and successfully implementing the Pelotas Project. At Project closure, the final ISR showed Financial Management was rated Satisfactory; Project Management was rated Satisfactory; Counterpart Funding and Procurement were Moderately Satisfactory; and Safeguards was rated Satisfactory. Additionally, despite shortcomings in M&E design, reporting was correctly undertaken by the agency. (c) Justification of Rating for Overall Borrower Performance Rating: Satisfactory Both the Prefecture and the UGP continuously demonstrated commitment to the Project and solicitously complied with Bank recommendations and responses. Based on the ratings for Government performance (Satisfactory) and Implementing Agency performance (Satisfactory), the proposed rating for Borrower performance is Satisfactory. 46 Appendix 2. Specific Data Sheet and ICR for the BAGÉ MUNICIPAL PROJECT (Rainha da Fronteira, IBRD 7582-BR) A. Basic Information Bagé - Rio Grande do Sul Integrated Country: Brazil Project Name: Municipal Development Program (APL) Project ID: P094199 L/C/TF Number(s): IBRD-75820 ICR Date: 06/30/2014 ICR Type: Core ICR Lending Instrument: APL Borrower: BAGÉ Original Total USD 6.60M Disbursed Amount: USD 6.51M Commitment: Revised Amount: USD 6.60 M Environmental Category: B Implementing Agencies: Municipal Government of Bagé (Project Implementation Unit linked to the Mayor’s Office) Cofinanciers and Other External Partners: B. Key Dates Revised / Actual Process Date Process Original Date Date(s) Concept Review: 11/16/2006 Effectiveness: 01/01/2009 01/06/2009 Appraisal: 06/26/2007 Restructuring(s): 12/14/2012 Approval: 07/23/2008 Mid-term Review: 09/16/2010 Closing: 12/31/2012 12/31/2012 C. Ratings Summary C.1 Performance Rating by ICR Moderately Satisfactory Outcomes: Risk to Development Outcome: Moderate Borrower Performance: Moderately Satisfactory C.2 Detailed Ratings of Bank and Borrower Performance (by ICR) Bank Ratings Borrower Ratings Quality at Entry: Moderately Satisfactory Government: Moderately Satisfactory Implementing Quality of Supervision: Moderately Satisfactory Moderately Satisfactory Agency/Agencies: 47 Overall Bank Overall Borrower Moderately Satisfactory Moderately Satisfactory Performance: Performance: C.3 Quality at Entry and Implementation Performance Indicators Implementation QAG Assessments Indicators Rating Performance (if any) Potential Problem Project Quality at Entry No None at any time (Yes/No): (QEA): Problem Project at any Quality of No None time (Yes/No): Supervision (QSA): DO rating before Moderately Closing/Inactive status: Satisfactory D. Sector and Theme Codes Original Actual Sector Code (as % of total Bank financing) General industry and trade sector 0 3 General water, sanitation and flood protection sector 30 6 Micro- and SME finance 4 0 Roads and highways 58 89 Sub-national government administration 8 2 Theme Code (as % of total Bank financing) Micro, Small and Medium Enterprise support 4 3 Municipal governance and institution building 8 2 Other urban development 58 89 Pollution management and environmental health 30 6 Rural services and infrastructure 0 0 E. Bank Staff Positions At ICR At Approval Vice President: Jorge Familiar Calderon Pamela Cox Country Director: Deborah L. Wetzel John Briscoe Sector Manager: Anna Wellenstein Guang Zhe Chen Project Team Leader: Juliana Garrido Marcos T. Abicalil ICR Team Leader: Juliana Garrido ICR Primary Author: Emanuela Monteiro 48 F. Results Framework Analysis Project Development Objectives (from Project Appraisal Document) The Project development objective is to strengthen the capacity of Bagé to provide selected infrastructure services and employment opportunities for its population. Revised Project Development Objectives (as approved by original approving authority) (a) PDO Indicator(s) Original Target Formally Actual Value Values (from Revised Achieved at Indicator Baseline Value approval Target Completion or documents) Values Target Years Improved municipal planning and management capacity through the preparation Indicator 1 : and adoption of planning tools 3 (LED, WSS Value 3 (LED, WSS Master Plan, quantitative or 0 - Master Plan, WSS WSS Qualitative) Cadaster) Cadaster) Date achieved 06/26/2008 12/13/2012 12/31/2012 Comments (incl. % TARGET MET achievement) Beneficiaries from the income and employment generation project activities Indicator 2 : surveyed have positive views on municipal business environment Value quantitative or 0 Baseline +30% 80% - Qualitative) Date achieved 06/26/2008 06/26/2008 12/13/2012 12/31/2012 QUANTITATIVE DATA NOT AVAILABLE Results not measured with the overall beneficiaries of Component 2. However, interviews conducted by UGP and accompaniment made by EMATER (the Brazilian’s National Institution in charge of providing TA to the Project beneficiaries) demonstrate good results and a substantial level of satisfaction by Comments beneficiaries: (i) 21 out of 25 vegetable producers benefited by the Project are (incl. % satisfied and have improved their businesses; (ii) 5 out of 10 fruit producers achievement) benefited by the Project are satisfied and have improved their businesses; and (iii) a survey conducted in Sep. 4, 2012 among those producers who were granted with new tents to sell their products in the local market showed 100% satisfaction. Activities related to the ad-hoc TA provided to 40 micro entrepreneurs were not evaluated. Community members satisfied with improved urban infrastructure in areas of Indicator 3 : intervention Value quantitative or 0 90% - Qualitative) Date achieved 06/26/2008 06/26/2008 12/31/2012 Comments QUANTITATIVE DATA NOT AVAILABLE 49 (incl. % A qualitative survey was conducted by the UGM in April 24, 2013. 121 people achievement) living in the area of Leonel Brizola Avenue, where paving and drainage investments were conducted as part of the Project, were interviewed. This activity alone accounts for approximately 53% of the total loan proceeds. Results demonstrated to be very positive, as shown below: (i) 98.35% of the participants agreed that the works in widening of the Avenue and of the bridge were important to the community; (ii) 95.87% of the participants agreed that the works helped improve the quality of life of their families; (iii) 90.08% of the participants think that their properties will have an increased value as result of the works; (iv) 79.34% of the participants reported improvements in urban mobility; (v) 88.43% of the participants reported to be either very satisfied or satisfied with the works conducted. Indicator 4 : Number of direct project beneficiaries Value quantitative or 0 27,374 28,000 Qualitative) Date achieved 12/13/2012 12/13/2012 12/31/2012 TARGET MET Comments Results are conservative, as they only account for people benefiting from (incl. % rehabilitation and/or construction of roads (9,445) and people benefiting from achievement) sanitation infrastructure (18,555). (b) Intermediate Outcome Indicator(s) Original Target Actual Value Formally Values (from Achieved at Indicator Baseline Value Revised approval Completion or Target Values documents) Target Years Municipal staff trained and using effective project planning and monitoring Indicator 1 : systems Value (quantitative 0 200 - 38 or Qualitative) Date achieved 06/26/2008 06/26/2008 12/31/2012 Comments TARGET NOT MET (incl. % The target of 200 was linked with inputs from PMAT Program, which was not achievement) entered as counterpart. In restructuring, this was mistakenly not altered. Indicator 2 : Percentage of annual work program delivered on time Value (quantitative 0 100% 100% or Qualitative) Date achieved 06/26/2008 06/26/2008 12/31/2012 Comments TARGET MET (incl. % All activities planned for were bid, contracted and executed. achievement) Beneficiaries of training and/or technical assistance (small enterprises and rural Indicator 3 : producers) Value 40 small (quantitative 0 - enterprises; 35 75 or Qualitative) rural producers 50 Date achieved 12/13/2012 12/13/2012 12/31/2012 Comments TARGET MET (incl. % 40 micro entrepreneurs benefited from ad-hoc TA; 35 rural producers benefited achievement) from TA and equipment to support their businesses. Indicator 4 : Beneficiaries of productive infrastructure installed by the Project Value (quantitative 0 - 35 35 or Qualitative) Date achieved 12/13/2012 12/13/2012 12/31/2012 Comments (incl. % TARGET MET achievement) Indicator 5 : Long-term economic development strategy prepared and/or adopted Value LED prepared LED prepared and (quantitative - - and adopted adopted or Qualitative) Date achieved 12/13/2012 12/13/2012 12/31/2012 TARGET MET Key recommendations of the LED Plan have been adopted by the Municipality: Comments (i) a proposed law to regularize the multipurpose cadaster was sent for the (incl. % approval of the Municipal Chamber; (ii) Law # 041/2012, which improves achievement) business environment for micro and small entrepreneurs, was passed; (iii) the selective collection of waste is now operational in the municipality. Indicator 6 : Roads constructed Value 146,000 m2 of (quantitative 0 urban roads 3.14km 3.2km or Qualitative) paved/rehabilitated Date achieved 06/26/2008 06/26/2008 12/13/2012 12/31/2012 TARGET MET Comments The reported result refers to paving, drainage and lighting works for the (incl. % following streets: 11 de Junho, Orvandil Alves Lucas, Walter Dias da Costa, achievement) Aksakof de Vilhena, and Leonel Brizola. Indicator 7 : Roads rehabilitated Value 146,000 m2 of (quantitative 0 urban roads 5.65km 5.31km or Qualitative) paved/rehabilitated Date achieved 06/26/2008 06/26/2008 12/13/2012 12/31/2012 TARGET SUBSTANTIALLY MET Comments The reported result refers to the rehabilitation of the following streets and (incl. % avenues: São João, Paulo Corrêa Lopes, José do Patrocínio, Portugal and achievement) Presidente Vargas. Indicator 8 : Micro meters installed in the water supply system Value (quantitative 0 10,000 - 12,021 or Qualitative) Date achieved 06/26/2008 06/26/2008 12/31/2012 Comments TARGET SURPASSED (incl. % 51 achievement) Indicator 9 : Coverage of wastewater collection and treatment Value 77% collected; 21% 50% collected; 15% 90% collected; 90% collected; (quantitative treated treated 90% treated 90% treated or Qualitative) Date achieved 06/26/2008 06/26/2008 12/13/2012 12/31/2012 Comments TARGET NOT MET (incl. % As of the end of 2014, expectation is that upon completion of PAC’s achievement) investments, 46% of urban wastewater will be treated (DAEB April 2014). Indicator 10: People provided with access to improved sanitation facilities under the project Value (quantitative 55,997 74,552 74,552 or Qualitative) Date achieved 06/26/2008 12/13/2012 12/31/2012 TARGET MET There is a shortcoming in the definition of this indicator: the baseline should Comments have been revised to 0 and the final target to 18,555. Regardless of this, the target (incl. % was still met. At the start of the Project there were already 55,997 people achievement) provided with sanitation facilities in Bagé. 18,555 is the incremental number of beneficiaries resulting from the Project’s inputs in sanitation. Therefore, the target of 74,552 (55,997 + 18,555) was achieved. G. Ratings of Project Performance in ISRs Actual Date ISR No. DO IP Disbursements Archived (USD millions) Not applicable 1 2 09/11/2008 Satisfactory Moderately Satisfactory 0.00 3 04/15/2009 Satisfactory Satisfactory 0.45 4 11/23/2009 Satisfactory Satisfactory 1.68 5 04/29/2010 Satisfactory Satisfactory 2.55 6 02/21/2011 Satisfactory Moderately Satisfactory 3.10 7 07/20/2011 Satisfactory Satisfactory 3.10 8 04/29/2012 Satisfactory Satisfactory 5.05 9 11/18/2012 Satisfactory Satisfactory 5.96 10 07/10/2013 Satisfactory Satisfactory 6.51 11 01/19/2014 Moderately Satisfactory Satisfactory 6.51 52 H. Restructuring (if any) ISR Ratings at Amount Board Restructuring Restructuring Disbursed at Reason for Restructuring & Approved Date(s) Restructuring Key Changes Made PDO Change DO IP in USD millions (i) Adjustments to the scope of Project activities due to exchange rate fluctuations; the increase in construction costs; and the delays between Project appraisal, approval and implementation launch; (ii) Revisions to the Project’s results framework to reflect the adjustments/reductions in scope of the Project; (iii) Streamlining of indicators to better monitor and capture 12/13/2012 N S S 5.96 Project impacts, align with indicators from the other individual Projects, and incorporate core indicators; (iv) Correction of a typo in the Appraisal Document specifically related to the Project’s Safeguard Category; (v) Increase in counterpart funding; (vi) Reallocation of loan proceeds between expenditure categories, and increased percentage financed. 53 SPECIFIC ICR FOR BAGÉ MUNICIPAL PROJECT 1. Project Context, Development Objectives and Design The Bagé Project (Rainha da Fronteira) was approved by the Board on July 23, 2008 in the amount of US$ 6,600,000. The Loan Agreement was signed on November 11, 2008, and the Project became effective on January 7, 2009. The Project was restructured (Level II restructuring) in 2012, and closed on December 31 of the same year. Bagé was the smallest of the PDMI municipalities. As such, its capacities for investment—as well as implementation—were limited compared to the others, where the institutional structure and human resources were more extensive. Despite this limited capacity, Bagé successfully disbursed the major part of the LA resources (US$ 6.51 of 6.60 million total) and implemented almost all of the planned Project activities, performing satisfactorily overall. 1.1 Context at Appraisal The city of Bagé is 380 km from the capital city of Porto Alegre, occupies an area of 4,095 km2 and, at the time of appraisal, had a population of 120,544 and a demographic density of 21 inhabitants per square km. 82 percent of the population at appraisal lived in the urban area, and with population growth informal peripheral settlements—with substandard accommodations— were increasing as well. Rural housing conditions were also primitive. At the time of appraisal, the municipal economy – which was traditionally based on meat production, the coal industry, and agriculture – had been in decline and the municipality was dropping in statewide economic rankings. Additionally, Bagé suffered from degraded water, sanitation, and transport infrastructure. 1.2 Original Project Development Objectives (PDO) and Key Indicators (as approved) Original PDO. The PDO was to strengthen the capacity of Bagé to provide selected infrastructure services and employment opportunities for its population. Key original indicators. The original results framework contained six PDOIs for Bagé. These are, for Improved Municipal Management Capacity: (i) Institutionalization of improved sub-project appraisal, fiduciary, social and environmental management processes in the municipal government of Bagé, and (ii) Improved performance of DAEB; for Increased Local Economic Development Opportunities, (i) Increased local business satisfaction with municipal business environment, and (ii) Increased revenues and sales volumes of supported businesses; and for Improved Infrastructure Services, (i) Reduction in travel times in urban center of Bagé, and (ii) Improved quality and consumer satisfaction with WSS service. 1.3 Revised PDO (as approved by original approving authority) and Key Indicators, and reasons/justification The PDO was not revised. Indicators were revised to better fit the municipality’s monitoring and reporting capabilities, and in some cases targets were made less ambitious to fit the reduced Project scope due to a decrease in loan purchasing power. Two new indicators were included: a PDOI to monitor the number of total Project beneficiaries, and an IOI to take into account the inclusion of a long-term economic development strategy and the rural producers benefited by the 54 project. Several original indicators (3 PDOIs and 1 IOI) were dropped in order to reflect the reduced scope of Project activities, particularly with regard to municipal wastewater treatment. 1.4 Main Beneficiaries The PAD estimate for Project beneficiaries was the population of Bagé at the appraisal – 120,000 individuals. This estimate was updated to 27,374 in the Restructuring Paper, to reflect the beneficiaries supposed to directly benefit from the Project investments in infrastructure. At Project closure, the final estimate for beneficiaries in Bagé is, at a conservative estimate, 28,00075. 1.5 Original Components (as approved) Component 1: Municipal Strengthening. This component was intended to improve the municipality’s capacity to more effectively and efficiently execute projects, with a focus on fiduciary, environmental and social aspects and improving the quality and efficiency of public services provided by the municipal government. This component included (i) Public Service Modernization and (ii) Project Management. Component 2: Income and Employment Generation. The Project sought to improve the municipality’s capacity to generate employment and income through: (i) studies on growth and LED; (ii) formalization of informal businesses by addressing administrative barriers for business registration, providing training and technical assistance to firms; and (iii) strengthening of clusters identified with high growth potential (e.g. vegetables and fruits). Component 3: Infrastructure Services Improvements. The Project planned to carry out activities aimed to improve urban and street upgrading; water, sanitation and drainage infrastructure and services. This component included (i) Urban Road Upgrading and (ii) Water and Sanitation Improvements. 1.6 Revised Components Scope tightening: Some Project activities were reduced or eliminated due to the increased total Project cost (as explained below), while others were added to support existing activities. Specifically, under Component 1, the preparation of a GIS for the water users’ cadaster was postponed due to higher than anticipated costs. Under Component 3, the acquisition of maintenance equipment for roads was added to the scope of the Project to strengthen municipal capacity to perform O&M in the future. The rehabilitation of the water supply system and expansion of the water distribution network was excluded, as alternative funding under PAC was made available, and the implementation timeframe was adjusted accordingly. Finally, the increase in water treatment reservoir capacity was also excluded, due to higher than anticipated costs. 1.7 Other significant changes Increase in the Project’s total costs. Total Project costs increased from US$ 11.00 million to 11.45 (even after the elimination/reduction of some activities), the difference of which was made up through increased counterpart financing (from US$ 4.40 to 4.85 million). Activity costs increased due to BRL/USD exchange rate fluctuations, the inflation in construction costs in Brazil, 75 See Project datasheet, PDOI 4 for further information. 55 and the delays between Project appraisal, approval and implementation launch (further refer to Section 2.2 and Graph 3). Reallocation of funds between loan categories. The Project saw reallocation of loan proceeds between expenditure categories to align with revised Project activities. Other minor / corrective changes. Correction of a typo in the PAD specifically related to the Project’s Safeguard Category. 2. Key Factors Affecting Implementation and Outcomes 2.1 Project Preparation, Design and Quality at Entry See Section 2.1 of the PDMI Program ICR. 2.2 Implementation Initial difficulties and limited human resources. Bagé did not experience initial difficulties in adaptation and familiarization with the rules and directives of the Bank outside of the usual for PDMI Projects, or any which caused continued negative impacts for Project implementation. The Project’s major challenge, which persisted throughout implementation, was the municipality’s limited institutional capacity. The UGM, for example, was constituted by only 3 or 4 staffers, including the coordinator, who had to distribute amongst themselves—often without the ideal level of specialization or dedication—the activities for planning, bidding and contracting, safeguard, general Project monitoring, financial and contract management, and more. At the Program level, the UAP only partially fulfilled its role – one which could have greatly enhanced the Bagé Project – of creating linkages, fostering institutional exchanges, and providing technical assistance. On the other hand, the Bagé Project UGM had the unconditional support of the municipal administration, as well as the direct support of the Municipal Finance Secretary. The positive effects of the implementation support and TA provided by the Bank. The support and technical assistance provided by the Bank Task Team was also an important differentiating factor during implementation of Rainha da Fronteira. Given the limited human resources of the municipality, this implementation support required constant exchanges and hands-on TA during the drafting of technical and bidding documents, as well as internal coordination within the team to ensure constant availability and timely responses. This was pointed out and recognized by the Borrower on more than one occasion, including during ICR preparation. Difficulties in counterpart allocations. The challenge of adequate counterpart funding was clear during Project preparation. In response, Project design incorporated major investments already in progress and/or planned by the Borrower, which contributed to the achievement of the PDO. In the case of Bagé, these included: detailed engineering design projects for paving, road maintenance equipment, and sanitation infrastructure (refer to Annex 2). Counterpart funding nevertheless continued to be a challenge for the Bagé Project. Bagé, for example, was not always capable of meeting the 89% Loan /11% CPF pari-passu allocation originally planned for the category of goods and works under the Water and Sanitation Improvements subcomponent. An increase in the percentages financed by the Bank was one of the items addressed by Project restructuring. However, Bage’s financial issues persisted even after Project completion, as the municipality had difficulty in repaying the first tranche of the loan. The municipality was candid 56 with the Bank about this issue, and has quickly resolved it. Increase in Project costs and subsequent need for Project Restructuring. At the beginning of Project implementation, the United States dollar depreciated against the Brazilian Real from around BRL 1.95 per US$ 1.00 to BRL 1.83, reaching BRL 1.67 at around midterm of Program timeframe (red line in Graphic below). In addition, the Project was impacted by the increase in construction costs (higher than general inflation), especially considering that the infrastructure- related component was the largest one (see Graph 3). During the midterm review mission, in September 2010, when Bagé Project disbursements had already reached 40%, a loss in the loan purchasing power was identified, with a concurrent need for restructuring 76. Graph 3 – Project disbursements compared to economic indexes Bage Project disbursement amount Exchange rate index 3.00 2.33 2.50 2.16 2.50 2.00 1.95 1.83 2.00 1.76 2.00 1.67 1.65 1.52 1.42 USD (million) 1.32 1.50 1.50 1.23 Index 1.18 1.46 1.06 1.38 1.30 1.00 1.23 1.11 1.16 1.00 1.05 0.50 0.50 0.00 2008 2009 2010 2011 2012 2013 2014 -0.50 - Year Strictly from a technical point of view, it was a “loss” to reduce the Project’s scope: for instance, the GIS system to support Bagé’s water utility company was removed from the Project’s activities. From a practical point of view, the restructuring discussion, preparation by the Borrower, and the subsequent Federal Government approval consumed more time than scheduled. It was more than two years between identification of the need to restructure the Project and the final approval of the restructuring in December 2012, just before the Project closure. The Task Team worked intensively in coordination with the Borrower in the preparation and assembly of the restructuring documents. The restructuring: (i) adapted the Project to the fiscal capacity of the Municipality by reducing the amount of counterpart resources required; and (ii) provided an 76 Refer to Sections 1.6 and 1.7 of the Bagé specific ICR. 57 opportunity for exchange and learning, which to some extent also added to municipality’s capacities. There were no other major factors affecting implementation, such as change in government or staff turnover. In 2012, when critical Project investments were being conducted (such as the paving and drainage works on Leonel Brizola Avenue), there was a change in Project management on the Borrower side. Both the Prefecture and the UGM managed to perform a smooth transition. 2.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization M&E design and implementation. Conducting separate studies to measure the results of the PDOIs proved beyond Bagé’s capacity, and thus a weakness in M&E design 77. The IOIs were defined, from conception, as simple indicators to accompany and monitor implementation progress for each component, and as such were mostly maintained or only slightly adjusted during the restructuring process. They were clearly linked to the Project activities and PDOIs and readily measureable, and as such provided an adequate tool for monitoring Project implementation progress. Even with the corrections made at restructuring in order to attempt to fix the indicators and facilitate measurement, and the support given to the development of bi-annual Project Progress Reports, there were still M&E challenges throughout implementation. This is attributed to an overestimation at entry of the technical and institutional capacity of the Borrower to carry out the monitoring prescribed. Although initial capacity-building workshops were conducted during Project preparation, a more structured capacity-building and/or technical M&E assistance during implementation would have been helpful to the Borrower. Despite this, and with the guidance provided by the Task Team as part of regular Project supervision78, the Borrower did carry out some monitoring through qualitative surveys, and EMATER and UGM accompaniment, that provide reliable indication as to achievement of targets 79. Overall performance of Bagé in conducting M&E. While difficulties were encountered, there were several notable achievements by Bagé with regard to M&E: (i) Bagé’s reports were delivered in a timely fashion, although with shortcomings; (ii) Bagé led the contracting and contract management for the consulting services for the development of an Independent Program Evaluation (end of 2012); (iii) efforts were made to provide – through UGM accompaniment and complementary qualitative surveys – the information necessary for measuring and final reporting of Project results; and (iv) Bagé participated in the ICR evaluation workshop, and actively contributed during the ICR discussion. 2.4 Safeguard and Fiduciary Compliance 80 Safeguard Aspects. Bagé correctly conducted the social and environmental safeguard 77 2 out of 5 PDOIs required surveys to be measured: “Beneficiaries from the income and employment generation project activities surveyed that have positive views on municipal business environment” and “Community members satisfied with improved urban infrastructure in areas of intervention”. 78 In various aide-memoirs, there is mention of discussions on the format, frequency, content and importance of progress reports. There are also records of technical discussions on indicators. 79 Refer to Section F of the Datasheet for further information. 80 Details are in Section 2.4 of the Overall Program ICR. 58 procedures for the Project. The Bank supervision team recognized that the Prefecture already had good social and environmental practices in place even before the Project, which were refined during PDMI. Bagé’s compliance with safeguards was Satisfactory at Project closing. Financial Management (FM). The FM arrangements were overall Satisfactory throughout the life of the Project. The implementing agency addressed most of the shortcomings identified during financial management supervision missions, showing a clear and progressive improvement of FM arrangements and providing timely and reliable information as required to manage and monitor the implementation of the Project. Overall, the (i) budget was realistic and properly executed; (ii) staff was nominated and trained in Bank processes, (iii) efficient internal control processes were in place, (iv) Financial Management Information Systems (FMIS) were in place, with timely submission of IFRs, and (v) external audit reports were completed, with an unbiased opinion issued by the auditors. Procurement. Bagé did not face particular initial difficulties with the Bank’s procurement guidelines and procedures. However, due to understaffing and limited institutional capacities, Bagé’s UGM required intense procurement supervision by the Bank Team. 81 Despite these challenges, the UGM was highly committed and organized 82 . Compliance with procurement aspects was rated Moderately Satisfactory during most of the Project’s implementation period, including at closing. 2.5 Post-completion Operation/Next Phase Safeguards at completion. As of the closing date, all Project activities were fully and satisfactorily completed. No pending safeguards and/or resettlement aspects require post-closure follow up by the Bank. Project Management Unit. The UGM did not remain formally structured after Project completion, as in the case of Pelotas. If expected approval of other financing for infrastructure investments outside of the Project (such as the paving in the city’s “zona leste”) is realized, the team was informed by the Borrower that the UGM will be reconstituted and the PDMI methodologies replicated. Operation and maintenance (O&M). Additional aspects in the post-completion phase include the municipality’s ability to: (i) properly perform O&M of streets; and (ii) support DAEB (the municipal water utility) in increasing its institutional capacity to properly collect WSS revenues and enhancing its investment capacity to perform O&M and expansions of the networks in place. As anticipated in Section 2.5 of the Program ICR: (i) there is allocation in the municipality’s budget for conducting O&M; and (ii) there were Project investments in the acquisition of equipment to support road maintenance. In addition, it should be noted that over the life of the Project, the DAEB’s performance and efficiency improved—the utility is now better staffed, has improved internal organization, and has increased WSS revenues. 81 This support included revising and issuing no objections to procurement processes and hands-on TA in the development of the draft technical specifications, TORs, requests for proposals, etc. 82 The UGM’s organization and archiving of the bidding documents was noteworthy. 59 3. Assessment of Outcomes 3.1 Relevance of Objectives, Design and Implementation Rating: Modest The relevance of the objectives, design and implementation of Rainha da Fronteira Project is rated Modest, as explained in section 3.1 of the overall PDMI ICR. The investments planned by the Project aimed to strengthen the overall capacity of the municipality to (i) improve WSS management; (ii) generate employment and income opportunities (with the focus on the agriculture sector 83 ); and (iii) expand WSS services 84 , still remain as priorities for the municipality. This was reported in the Borrower’s final completion assessment of the Project, and during the discussions conducted after completion. The design of the Project also shows a close fit with Brazil’s national priorities in terms of supporting municipal infrastructure. The proposed Modest rating is due to: (i) a weaker link with the priorities defined for World Bank engagement under the current CPS; (ii) reduced relevance and efficiency of Project implementation due to the failure to achieve Program-wide institutional arrangements or transformational impact; (iii) the substantial implementation support needed from the Bank; and (iv) the variety of funding options (including national sources) apart from Bank financing available for such a portfolio. 3.2 Achievement of Project Development Objectives Rating: Substantial The PDO was to strengthen the capacity of the Bagé municipality to provide selected infrastructure services and employment opportunities for its population. Component 1 investments were limited as a percentage of the total Project investments (only US$ 0.84 million out of 11.43 million, slightly over 7%) 85 . However, given the scale of the municipality and its inexperience with project planning and execution, there is no doubt about the achievement of the municipal strengthening objectives. The process of learning and institutional enhancement that Bagé experienced, the result of exchanges with other municipalities and with the Bank, has improved the municipality’s capability to face future development challenges. Component 2 investments represented still less of total Project funds (US$ 0.25 million, approximately 2% of the total Project investment). However, important results in terms of learning and demonstration can be inferred. Not only the results, but the planning/implementation process should be noted—for example, improved productivity and income results were brought about through an innovative initiative for support to rural producers. The Project financed, through participative development and approval of a business plan, the acquisition of equipment for groups of small rural producers in the Municipality. This experience was rated as highly valuable by the Borrower, as it strengthened their capacity to act in innovative ways together with the producers as well as in partnership with other bodies, such as EMATER. Another Component 2 output was the widely participatory preparation of a LED Plan (PDE). The use of this 83 Bagé is predominately rural in character, with an agriculture-dependent economy. 84 As the municipality faces serious issues relating to water and drought, the efficiency of water management and service provision is fundamental. 85 Noteworthy here the drafting of the WSS Master Plan and the cadaster of water network users (tools to support DAEB). The remaining investments relate principally to Project Management. 60 methodology permitted citizen involvement in the discussion about the challenges of local development, and gave the participants an opportunity to influence the choices made. The Plan is in full execution, with some of its recommendations already put in place. Component 3, with investments in WSS and mobility improvements, concentrated the majority of the total project resources (USD 10.34 out of 11.43 million, slightly over 90%). Its goals were substantially achieved, especially with regard to the construction and rehabilitation of roadways. The investments in Leonel Brizola Ave (paving, drainage and bridge) alone account for approximately 53% of total Bank project investments. This work is highly relevant for the improvement of mobility and connectivity between important areas of the city. An analysis of achievement of the goals defined within the ambit of Project indicators confirms the Substantial rating proposed for efficacy: (i) 2 out of 4 PDOIs were met 86; for the remaining two 87, while there are not specific measurements, there are substantial indications of success in achieving the PDO; (ii) 8 out of 10 IOIs were either fully or substantially achieved 88; although (iii) the goals of expansion of WSS services were not fully achieved 89; with implementation of additional PAC investments in this area delayed. For detailed information on the Project’s results, refer to Bagé’s Results Framework in the Project datasheet; for detailed information on the Project’s outputs, refer to Annex 2. 3.3 Efficiency Rating: Substantial The economic analysis of the Bagé Project was conducted considering the same activities analyzed during appraisal, namely: (i) road upgrading, and (ii) water supply and sanitation. Actual costs of these activities total US$ 10.34 million, 90% of total project cost. Overall Bagé Project Beneficiaries. The number of beneficiaries of road upgrading and water supply activities exceeded the targets at appraisal; however, the number of beneficiaries of wastewater supply investments did not reach the target. The total number of beneficiaries is estimated at around 120,000 people. Table 7 – Projected versus actual beneficiaries Components Projected Beneficiaries 90 Actual Beneficiaries Road upgrading 118,965 120,000 91 Micrometers: 12,021 households, Micrometers: 6,716 households, around 36,000 people Water Supply around 33,500 people Macro meters: 100% of supplied Macro meters: 100% of supplied population population 86 PDOIs 1 and 4. 87 PDOI 2 and 3. 88 IOI #s 2-8, and 10. 89 IOI #9. 90 Appraisal estimates assumed an area average of 5 persons/household, but studies during implementation showed the actual figure to be closer to 3 persons/household. 91 IBGE estimates for 2013 population. 61 Components Projected Beneficiaries 90 Actual Beneficiaries 5,000 new connections (approx. 6,000 new connections Wastewater System 25,000 beneficiaries) 18,555 inhabitants. Analysis of investment costs showed per capita/per kilometers costs lower than the average benchmark for similar interventions. Table 8 – Comparison of unit costs per intervention Intervention Cost per Beneficiary / Benchmark Cost per Beneficiary/ per per Km Km Sewage 91.5 (US$) 100 - 200 92 (US$) Road upgrading 1.5 (BRL million/Km) 2.45 93 (BRL million/Km) Water Supply and Sanitation. Water supply and sanitation investments provided significant benefits to the population. The average EIRR for WSS investments is 30.87%, very high for this type of infrastructure project. Water supply investments resulted in an EIRR of 25%. Sanitation investments resulted in an EIRR of 32.7%, significantly higher than projected. Table 9 – Comparison of expected and actual results of the Bagé Project. Ex-ante Ex-post Intervention EIRR EIRR Water Supply 68.77% 25.00% Sewage 21.86% 32.70% Total 54,35% 30,87% These results were confirmed by the qualitative assessments, which show improvements in the management and performance of the local water and sewage utility (DAEB). The results also indicate a high approval and satisfaction rate in the communities served. Road Upgrading. This component provided significant benefits to the population of Bagé, with EIRR ranging from 22% to 115%, and an average of 62%. This is higher than the average of 42% (ranging from 12 to 93%) evaluated at appraisal. A satisfaction survey of the direct beneficiaries of urban upgrading interventions was carried out by the municipality of Bagé. Although the sample is statistically limited, the qualitative analysis presented satisfactory results, e.g.: • Satisfaction with paving and rehabilitation of streets and avenues - 92%; • Satisfaction with drainage for streets and avenues (culverts) - 92%; • Satisfaction with the Cloverleaf 21(Trevo 21) works -100%; • Satisfaction with the viaduct over the railway line, Leonel Brizola Avenue - 100%; and • Improvement in vehicle circulation - 94%. 92 Various sources. Range is for one-time capital cost for wastewater collection and treatment with septic tank. 93 National Association for Public Transportation (ANTP) – Information System on Urban Mobility – 2011 Report – launched in December/2012. General parameter for average construction cost of urban roads. 62 The economic analysis showed Substantial results for the Bagé Project. 3.4 Justification of Overall Outcome Rating Rating: Moderately Satisfactory Based on the Project’s relevance (Moderate), efficacy (Substantial), and efficiency (Substantial), the proposed overall outcome rating is Moderately Satisfactory. 3.6 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops For a summary of the results of the joint Stakeholders Workshop, conducted in November 2012, see section 3.6 of the overall Program ICR, as well as Annex 6 for the abridged translation of the final report. 4. Assessment of Risk to Development Outcome Rating: Moderate Activities completion risk. The counterpart sanitation works are contracted by the Prefecture and underway, financed through PAC. According to information from UGP as of the end of FY2014, significant process has been made in coverage and treatment of sewage in the municipality’s urban area (reaching values of 80% and 59%, respectively). Continuity and implementation aspects linked with planning instruments and/or other Component 1 and 2 investments. The following items allow an evaluation of risk: (i) DAEB has adopted, and uses, the tools of the WSS Master Plan and the cadaster of network users; (ii) the Prefecture (according to the UGP) is seeking resources to undertake a new PMAT in the municipality, with the purpose of making new investments in public sector modernization; (iii) the agricultural producers benefited through the Project have familiarized themselves with the business plan as an instrument, understand its utility in business management, and use it to analyze the impacts of cyclical changes—input costs, product prices, composition of crops, etc.—and make routine operating decisions; (iv) EMATER continues to accompany and provide TA to these producers; (v) the LED Plan is under the coordination of the Secretary of Economic Development of the Prefecture. A coordination and accompaniment group will be instituted for Plan implementation. Sustainability of O&M of Component 3 investments. Risks related to the O&M of the infrastructure built by the Project were discussed in section 2.5 of this ICR. Based on the above, Risk to Development Outcome for the Bagé Project is considered Moderate. 5. Assessment of Bank and Borrower Performance 5.1 Borrower Performance (a) Government Performance Rating: Moderately Satisfactory The Prefecture of Bagé demonstrated, during the entire Project implementation period, substantial compliance with the Project guidelines and with all due loan covenants. Given the municipal fiscal situation, there were difficulties with the counterpart allocation, as well as difficulties with repayment of the first tranche of the loan. Despite these shortcomings, the Borrower continuously 63 maintained an open and frank dialogue with the Bank to seek solutions and resolve the aspects described above. (b) Implementing Agency or Agencies Performance Rating: Moderately Satisfactory For the case of Bagé, the implementing agency was the UGP (Project Management Unit), an autonomous structure linked to the Mayor’s Office through the Municipal Secretariat of Finances. The UGP’s performance was marked by limited institutional capacity and lack of available human resources. Despite these difficulties, and with noteworthy dedication and commitment, the UGP proved capable of overcoming these challenges and successfully implementing the Bagé Project. At Project closure, FM was rated Satisfactory; Project Management was rated Satisfactory; Counterpart Funding and Procurement were Moderately Satisfactory; and Safeguards was rated Satisfactory throughout the life of the Project. Additionally, despite shortcomings in M&E design, reporting was correctly undertaken by the agency. (c) Justification of Rating for Overall Borrower Performance Rating: Moderately Satisfactory Both the Prefecture and the UGP continuously demonstrated commitment to the Project and complied with Bank recommendations. Based on the ratings for Government performance (Moderately Satisfactory) and Implementing Agency performance (Moderately Satisfactory), the proposed rating for Borrower performance is Moderately Satisfactory. 64 Appendix 3. Specific Data Sheet and ICR for the URUGUAIANA MUNICIPAL PROJECT (Uruguaiana Vencerá, IBRD 7581-BR) A. Basic Information Uruguaiana - Rio Grande do Sul Country: Brazil Project Name: Integrated Municipal Development Program (APL) Project ID: P094199 L/C/TF Number(s): IBRD-75810 ICR Date: 06/30/2014 ICR Type: Core ICR Lending Instrument: APL Borrower: URUGUAIANA Original Total USD 6.83M Disbursed Amount: USD 2.70M Commitment: Revised Amount: USD 6.83M Environmental Category: B Implementing Agencies: Municipal Government of Uruguaiana (Project Implementation Unit linked to the Municipal Secretariat of Planning – SEPLAN). Cofinanciers and Other External Partners: B. Key Dates Revised / Actual Process Date Process Original Date Date(s) Concept Review: 11/16/2006 Effectiveness: 01/01/2009 06/22/2009 Appraisal: 06/26/2007 Restructuring(s): - Approval: 07/23/2008 Mid-term Review: 05/02/2011 Closing: 12/31/2012 12/31/2012 C. Ratings Summary C.1 Performance Rating by ICR Highly Unsatisfactory Outcomes: Risk to Development Outcome: High Borrower Performance: Unsatisfactory C.2 Detailed Ratings of Bank and Borrower Performance (by ICR) Bank Ratings Borrower Ratings Quality at Entry: Moderately Satisfactory Government: Unsatisfactory Quality of Supervision: Moderately Satisfactory Implementing Unsatisfactory 65 Agency/Agencies: Overall Bank Overall Borrower Moderately Satisfactory Unsatisfactory Performance: Performance: C.3 Quality at Entry and Implementation Performance Indicators Implementation QAG Assessments Indicators Rating Performance (if any) Potential Problem Project Quality at Entry Yes None at any time (Yes/No): (QEA): Problem Project at any Quality of Yes None time (Yes/No): Supervision (QSA): DO rating before Unsatisfactory Closing/Inactive status: D. Sector and Theme Codes Original Actual Sector Code (as % of total Bank financing) General industry and trade sector 5 2 General water, sanitation and flood protection sector 13 76 Micro- and SME finance 4 0 Roads and highways 68 2 Sub-national government administration 10 20 Theme Code (as % of total Bank financing) Micro, Small and Medium Enterprise support 9 2 Municipal governance and institution building 10 20 Other urban development 56 2 Pollution management and environmental health 13 76 Rural services and infrastructure 12 0 E. Bank Staff Positions At ICR At Approval Vice President: Jorge Familiar Calderon Pamela Cox Country Director: Deborah L. Wetzel John Briscoe Sector Manager: Anna Wellenstein Guang Zhe Chen Project Team Leader: Juliana Garrido Marcos T. Abicalil ICR Team Leader: Juliana Garrido ICR Primary Author: Emanuela Monteiro 66 F. Results Framework Analysis Project Development Objectives (from Project Appraisal Document) The Project development objective is to strengthen the capacity of Uruguaiana to provide selected infrastructure services and employment opportunities for its population. Revised Project Development Objectives (as approved by original approving authority) (a) PDO Indicator(s) Original Target Formally Actual Value Values (from Revised Achieved at Indicator Baseline Value approval Target Completion or documents) Values Target Years Indicator 1 : Municipal secretariats implementing project processes Value 100 employees in quantitative or # of employees TBD - - 4 secretariats Qualitative) Date achieved 06/26/2008 12/31/2012 Comments (incl. % QUANTITATIVE DATA NOT AVAILABLE achievement) Number of local businesses surveyed have positive views on municipal business Indicator 2 : environment Value quantitative or TBD in PAD +30% - - Qualitative) Date achieved 06/26/2008 12/31/2012 Comments TARGET NOT MET (incl. % No activities supported by the Project were conductive to this result. achievement) Indicator 3 : Number of SMEs successfully using microcredit Value quantitative or 0 400 - - Qualitative) Date achieved 06/26/2008 12/31/2012 Comments TARGET NOT MET (incl. % No activities supported by the Project were conductive to this result. achievement) Indicator 4 : Peri-urban community satisfied with infrastructure provided Value quantitative or 0% 90% - - Qualitative) Date achieved 06/26/2008 12/31/2012 QUANTITATIVE DATA NOT AVAILABLE Comments Macrodrainage and infrastructure improvements were conducted in Santo Inácio (incl. % neighborhood (1Km). Although there is not a survey on satisfaction, results of achievement) the works were recognized to be positive by Bank supervision teams. Indicator 5 : % Solid waste properly disposed 67 Value quantitative or 0 100% - 0 Qualitative) Date achieved 06/26/2008 12/31/2012 TARGET NOT MET Comments Actual works for the closing and remediation of the existing dump, and for the (incl. % construction of a new sanitary landfill were not conducted up to the closing date achievement) of the Project. (b) Intermediate Outcome Indicator(s) Original Target Actual Value Formally Values (from Achieved at Indicator Baseline Value Revised approval Completion or Target Values documents) Target Years Indicator 1 : Municipal staff trained in effective sub-project planning and monitoring Value (quantitative 0 100 - 55 or Qualitative) Date achieved 06/26/2008 12/31/2012 Comments TARGET NOT MET (incl. % Information as provided in the Borrower’s last Progress Report, regarding the achievement) first semester of 2012. Indicator 2 : % work program delivered on time Value (quantitative 0 100% - - or Qualitative) Date achieved 06/26/2008 12/31/2012 Comments (incl. % QUANTITATIVE DATA NOT AVAILABLE achievement) Number of contracts signed through the microcredit program reaching target Indicator 3 : population Value (quantitative 0 500 - 0 or Qualitative) Date achieved 06/26/2008 12/31/2012 Comments TARGET NOT MET (incl. % No activities supported by the Project were conductive to this result. achievement) Indicator 4 : Number of participants in job training programs Value (quantitative 0 400 - 0 or Qualitative) Date achieved 06/26/2008 12/31/2012 Comments TARGET NOT MET (incl. % No activities supported by the Project were conductive to this result. achievement) Indicator 5 : Area (m2) of urban roads paved or rehabilitated 68 Value (quantitative 0 120,000 - 230,000 or Qualitative) Date achieved 06/26/2008 12/31/2012 TARGET MET Comments Results reported were provided by the Borrower, and refer to roads paved and/or (incl. % rehabilitated as a result of the Project counterpart investments in the acquisition achievement) of an asphalt plant. Indicator 6 : Closed landfill remediate and new one operational Value Landfill (quantitative 0 - operational or Qualitative) Date achieved 06/26/2008 12/31/2012 TARGET NOT MET Comments Actual works for the closing and remediation of the existing dump, and for the (incl. % construction of a new sanitary landfill were not conducted up to the closing date achievement) of the Project. G. Ratings of Project Performance in ISRs Actual Date ISR No. DO IP Disbursements Archived (USD millions) Not applicable 1 03/04/2008 2 09/11/2008 Satisfactory Moderately Satisfactory 0.00 3 04/15/2009 Satisfactory Satisfactory 0.00 Moderately 4 11/23/2009 Moderately Satisfactory 0.017 Unsatisfactory 5 04/29/2010 Moderately Satisfactory Moderately Satisfactory 0.22 6 02/21/2011 Moderately Satisfactory Moderately Satisfactory 0.22 Moderately Moderately 7 07/20/2011 0.96 Unsatisfactory Unsatisfactory 8 04/29/2012 Unsatisfactory Unsatisfactory 2.93 9 11/18/2012 Unsatisfactory Unsatisfactory 2.93 10 07/10/2013 Unsatisfactory Unsatisfactory 2.87 11 01/19/2014 Unsatisfactory Unsatisfactory 2.70 H. Restructuring (if any) ISR Ratings at Amount Board Restructuring Disbursed at Restructuring Reason for Restructuring & Approved Restructuring Date(s) Key Changes Made PDO Change DO IP in USD millions None 69 SPECIFIC ICR FOR URUGUAIANA MUNICIPAL PROJECT 1. Project Context, Development Objectives and Design The Uruguaiana Project (Uruguaiana Vencerá) was approved by the Board on July 23, 2008 in the amount of US$6,830,000. The Loan Agreement was signed in May 13, 2009, and the Project became effective on June 22, 2009. The closing date for the Loan Agreement was December 31, 2012. The Bank attempted to restructure this Project on date, but the Borrower did not agree and did not prepare the necessary restructuring plan for Federal Government approval. After three years of troubled implementation, the Uruguaiana Project closed without satisfactorily completing critical activities that had been originally planned. These activities, including the closing and remediation of the existing dump site and the building of a new sanitary landfill, would have led to the achievement of the Project’s PDO. Various factors 94 derailed implementation and impeded efforts to restructure the Project, as was done for the other PDMI Projects. Uruguaiana disbursed only 40% of the Loan resources—US$ 2.70 million out of US$ 6.83 million. 1.1 Context at Appraisal The city of Uruguaiana is located in the extreme west of Rio Grande do Sul, 634 km from the state capital at Porto Alegre. The municipality borders Argentina and Uruguay. The region is one of extensive flat plains forming the Pampa Gaucho. Uruguaiana had a population of around 132,040 at appraisal (FEE, 2004) and a population density of approximately 22 inhabitants per km2. About 93% resided in the urban areas and the demographic growth between 1991 and 2000 was 0.89% a year. The urban area consists of 36 neighborhoods, with 25,083 domestic properties and 6,044 unoccupied parcels of land within the municipality at appraisal. The total GDP of the municipality in 2003 was BRL 1,185,244 with a per capita GDP of BRL 8,976. Over the 20 years prior to appraisal the municipal GDP had been among the state’s 20 largest, but while Uruguaiana’s nominal GDP was growing, its share in State GDP had dropped. The key development challenges faced by municipality at the time of appraisal were to improve environmental sanitation (sewers and drainage), put in place a new sanitary landfill, address infrastructure gaps in poor neighborhoods (road paving, drainage and sanitation) and promote employment opportunities, especially for the urban and rural poor. 1.2 Original Project Development Objectives (PDO) and Key Indicators (as approved) Original PDO. The PDO was to strengthen the capacity of Uruguaiana to provide selected infrastructure services and employment opportunities for its population. Key original indicators. The original results framework contained five PDOIs for Uruguaiana. These are, for Improved Municipal Management Capacity: (i) Institutionalization of improved sub-project appraisal, fiduciary, social and environmental management processes in the municipal government of Uruguaiana; for Increased Local Economic Development Opportunities (i) Increased local business satisfaction with municipal business environment, and (ii) Increased 94 See sections 2.2 and 2.4 of this ICR. 70 revenues and sales volumes of supported businesses; and for Improved Infrastructure Services (i) Improved quality of life of people living in peri-urban areas to be benefited from infrastructure improvements, and (ii) Improved environmental quality due to removal of negative impacts of uncontrolled waste disposal. 1.3 Revised PDO (as approved by original approving authority) and Key Indicators, and reasons/justification Not applicable. 1.4 Main Beneficiaries The PAD estimate for Project beneficiaries was the population of Uruguaiana at the appraisal – 132,000 individuals. As the Project was not revised, this estimate was never updated. 1.5 Original Components (as approved) The Project’s original components (never revised) were as follows: Component 1: Municipal Strengthening. This component focused on improving the municipality’s capacity to more effectively and efficiently execute projects, with a focus on fiduciary, environmental and social aspects, and improving the quality and efficiency of public services provided by the municipal government. Component 1 included (i) Public Service Modernization, and (ii) Project Management. Component 2: Income and Employment Generation. This component was to improve the municipality’s capacity to generate employment and income through facilitating micro and small business access to micro-credit and improvement of the effectiveness of such business and to develop productive activities in the agriculture sector in a sustainable way. Component 2 included (i) Strategies, SME and Cluster Support, and (ii) Support to urban and rural agriculture. Component 3: Infrastructure Services Improvements. This component aimed to carry out activities to improve urban and street upgrading; water, sanitation and drainage infrastructure and services; and to develop an integrated solid waste management. Component 3 included (i) Urban Road Upgrading, (ii) Drainage and Sewer works, and (iii) Integrated Solid Waste Management. 1.6 Revised Components Not applicable. 1.7 Other significant changes Not applicable. 2. Key Factors Affecting Implementation and Outcomes 2.1 Project Preparation, Design and Quality at Entry See Section 2.1 of the PDMI Program ICR. 71 2.2 Implementation Limited human resources and lack of experience with international financing organizations. The implementation of the Uruguaiana Vencerá Project was impacted by the following factors: (i) little or no experience on the part of the Borrower with international financial organizations, principally the World Bank; and (ii) limited institutional capacity and human resources. The UGP, for example, was made up of only two professional civil servants in the Prefecture, including a coordinator responsible for planning, bidding, general Project monitoring, financial management and contracts, and other activities. Apart from this, during Project implementation, there were four individual consultants in charge of technical issues and social and environmental safeguards. Component 2 was never provided with specialized professional support in the area of enterprise and/or LED, as this position was only partially occupied during one semester, when the UAP coordinator was based in Uruguaiana. Persistent difficulties in adopting the directives of the Bank. Apart from the challenges above, Uruguaiana experienced difficulties—which persisted throughout the Project implementation period— adapting to the operational and fiduciary safeguards, rules, guidelines and procedures of the Bank. This issue was in part linked with the limited autonomy of the UGP in decision- making. While the UGP did have an independent structure under the coordination of the Secretary of Planning (as well as the Chief of Staff), the majority of the decisions depended directly on the Mayor. For example, the Municipality did not agree with the result of the bidding process for a consultant contract for development of a detailed engineering project for bike lanes. It resolved, alternatively, to conduct a direct contracting (through a single-source process) using national procedures, whose expenditures were presented incorrectly to the Bank, and which was later declared ineligible for payment under the Bank loan. Technical and institutional complexity of Project solid waste activities. From a technical point of view, the Prefecture of Uruguaiana and the UGP had to undertake a complex portfolio of solid waste management interventions. Closing of the dump and the construction of a proper landfill— key interventions under the Project—required the drafting of a series of environmental and social studies and engineering projects, which were contracted to a specialized consultant company 95. Accompaniment and management of this contract, as well as the quality control of the products generated, proved to be beyond the capacity of the Prefecture and UGP. The supervising Bank team pointed out the errors and technical inconsistencies in these documents, and indicated suggestions for improvement in detailed technical opinions, without which the activities would not be likely to be eligible for Project financing. After receiving the Bank’s comments, the Prefecture did not agree with the recommendations provided, therefore decided to continue to develop the activity without Bank support. Ineffective implementation support and TA provided by the Bank. The Bank team provided 95 These services were procured using the Bank’s guidelines and with technical support from the Bank team. It included the following outputs: 1 - Survey of Current Status / Diagnostics for Waste Dump; 2 - Executive Projects for Closure, Geotechnical Stabilization and Environmental Recovery at Waste Dump; 3 - Inputs to the Development of Bidding Notices for Closure, Stabilization Geotechnical and Environmental Recovery Waste Dump; 4 - Diagnosis of the Municipal Solid Waste Situation; 5 - Forecast / PGIRSU; 6 - Inputs to the Development of Bidding Notice (s) for Municipal Solid Waste Management services; 7 - Initial Environmental Assessment of the New Landfill Area; 8 - Preliminary Design Project of the New Landfill; 9 - Executive Project of the New Landfill; 10 - Monitoring Programs of the New Landfill Area; 11 - Inputs to the Development of Bidding Notice(s) for New Construction and Allied Landfill. 72 implementation support and TA as it had to the other Municipalities. With the exception of an exchange of experiences with Pelotas, the UGP team for Uruguaiana was not authorized by the municipal Prefecture to travel in order to participate in Bank-administered trainings in fiduciary and safeguards areas. Therefore, the Bank organized—during the implementation phase—training in financial management and procurement, the latter focused on drafting quality Terms of Reference and technical specifications. This TA also included the participation of specialized Bank consultants to evaluate and/or support UGP development of various necessary documents. 96 As in the case of the solid waste management activities, a nationally recognized consultant in this field was hired by the Bank to review the environmental studies and detailed designs. These efforts proved insufficient to advance the Project towards a successful implementation. Unsuccessful attempt to perform a Project restructuring. The restructuring process was discussed and prepared together with the restructuring package for the Bagé, Rio Grande, and Santa Maria Projects, in 2012. In the case of Uruguaiana, the restructuring was not finalized due to an error by the Prefecture in the identification of expenditures in the disbursement categories. This inconsistency, as it was not corrected by the Prefecture, made conclusion of the process unviable as there was not time to correct it before the Project’s closing date. However, this did not change the Project results, as the principal goal of this restructuring was to formally cancel funds already planned to go unused. Weakening and difficulties in the dialogue between the Bank and the Borrower. The sum of the above events contributed to the weakening of the dialogue between the Bank and the Borrower. Starting mid-2012, six months before the Project closing date, all Project activities were suspended. Institutional dialogue reopened only in early 2013, after a change of the municipal administration, in this case mainly to deal with the operation’s closing. (For additional information, refer to sections 2.4 on procurement, FM, and Performance of the Borrower). 2.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization M&E design and implementation. There were weaknesses in the original indicators, mostly restricted (in the case of the PDOIs) to the necessity for conducting separate studies to measure the results97. The IOIs were defined, from conception, as simple indicators to accompany and monitor implementation progress for each component. As the Project restructuring never materialized, some indicators, including those linked to the microcredit activities 98 that were planned but not executed remained as part of the formal Project plan. It should be noted that the Bank failed to correctly evaluate, at entry, the technical and institutional capacity of the Borrower to carry out the monitoring prescribed, which involved the preparation and submittal of progress reports to the Bank each semester. In practice, implementation support to M&E was conducted by 96 Various technical and fiduciary inputs and recommendations were provided to the Borrower, including: (i) recommendations for the development of the ToRs related to the LED activities; (ii) suggestion for the corrections of the environmental studies and engineering designs for the closing and remediation of the dump, and for the construction of a new landfill; (iii) detailed comments on draft bidding documents. These are in the Project electronic files. 97 2 out of 5 PDOIs required surveys to be measured: “% of local businesses surveyed that have positive views on municipal business environment” and “Peri-urban community satisfied with infrastructure provided”. 98 PDOI # 3 and IOI #3. 73 the Bank Team to the greatest extent possible 99. Overall performance of Uruguaiana in conducting M&E. Uruguaiana’s bi-annual progress reports were frequently inconsistent and/or insufficient in terms of the data provided, and presented later than the expected period. Later at the closing stage, the Project: (i) did not participate in the joint evaluation efforts conducted by the other municipalities; (ii) did not send to the Bank its final evaluation report; (iii) did not participate in the Stakeholders Workshop conducted in November 2012; and (iv) did not participate in the Post-Completion mission conducted in April 2014, during which the ICR was discussed. 2.4 Safeguard and Fiduciary Compliance Safeguard Aspects 100. Uruguaiana’s compliance with safeguards was Moderately Satisfactory at Project closing 101. Although there were valuable and recurring efforts made by UGP, it was not possible to advance on the action of greatest environmental relevance to the Project, the installation of a landfill and associated sorting and recycling centers in the municipality in cooperation with the various waste picker communities of the municipality and their cooperatives. Financial Management (FM). The FM arrangements as set out to manage the loan proceeds in the municipality of Uruguaiana were overall Unsatisfactory throughout the life of the Project. The Project has had a long history of poor execution, both in technical and fiduciary aspects: (i) The lack of a team of professionals capable of carrying out the FM activities was perhaps the key downfall of this Project, generating many problems throughout implementation. The Bank recommended that the UGP have a proper team, and the external auditors concurred with the Bank in their report. Unfortunately, the Municipality of Uruguaiana did not meet these requests; (ii) IFRs submission on quarterly basis was not properly followed, as they were manually generated, using spreadsheets, and contained many inconsistencies, which forced a full review of all Projects expenditures; and (iii) The external audit reports were oftentimes overdue 102, and when submitted to the Bank, had Qualified-Excepted opinions of the financial statements, and some other issues related to Procurement. The Bank’s reviews requested for mitigating actions to be applied by the city of Uruguaiana. Unfortunately the UGP did not respond as expected, and at closing some of the Project funds related to ineligible expenditures had to be returned. Given this history, the FMS requested additional FM information data and conducted a final visit in June/2013 in order to follow up and confirm the amounts for reimbursement. Procurement. Beyond the specific difficulties faced by most of the other municipal Projects with regard to the (i) limited capacities of the UGP and (ii) conducting procurement for the first time using the Bank’s particular guidelines and procedures. Uruguaiana’s performance in procurement 99 In various aide-memoirs, there is mention of discussions on the format, frequency, content and importance of progress reports. There are also records of technical discussions on indicators. 100 Details are in Section 2.4 of the Overall Program ICR. 101 Although the planned action on solid waste was sensitive from the point of view of environmental and social safeguards, as the required investments have not been made the concerns of effects and / or post- closure aspects of supervision do not apply to the Project. 102 The audit report for CY 2011 was 4 months overdue; the one for CY 2012 (including the grace period of the loan) was 1 month overdue. 74 was also complicated by: (i) the fact that routine Bank guidelines were never fully accepted by the municipality; and (ii) Problematic procurement processes, such as the launching of bids for which Bank non objections had not been issued (Refer to section 2.2. of this ICR). For these reasons, this Project required intense procurement-related supervision by the Bank Team 103. 2.5 Post-completion Operation/Next Phase Safeguards at completion & Post-closure supervision. 104 As was mentioned in Section 2.2, for various reasons related to the technical quality and/or problematic conduct of bidding processes, some of the activities implemented by the Borrower under Component 3 105 were not approved and/or did not receive Bank financing. As of the closing date, all Project activities initiated during the Project period had been fully completed (as presented in Annex 2), and therefore do not require post-closure supervision/follow up by the Bank. O&M and Project Management Unit. Section 4 of this specific ICR presents detailed information on applicable post-closure aspects related to both O&M and institutional capacity. 3. Assessment of Outcomes 3.1 Relevance of Objectives, Design and Implementation Rating: Negligible Planned Project investments to strengthen the overall capacity of the municipality to: (i) generate employment and income opportunities (with focus on improving cluster organization and the overall business environment for micro and small entrepreneurs); (ii) improve urban mobility, with emphasis on pedestrians and bikers; (iii) expand sanitation and drainage service provision; and (iv) improve solid waste management 106 ; remain as priorities to be tackled by the municipality. The proposed Negligible rating to Uruguaiana Vencera Project is due to: (i) a weaker link with the priorities defined for World Bank engagement under the current CPS; (ii) reduced relevance and efficiency of Project implementation due to the failure to achieve Program-wide institutional arrangements or transformational impact; (iii) the substantial implementation support needed from the Bank; and (iv) the variety of funding options (including national sources) apart from Bank financing available for such a portfolio. While the objective and design were relevant (also refer to section 3.1 of the overall PDMI ICR), the implementation for Uruguaiana was particularly flawed and ultimately unsuccessful. 103 This support included revising and issuing non-objections to procurement processes and hands-on TA in the development of the draft technical specifications, TORs, requests for proposals, etc. 104 Refer to Section 2.4 of the Project ICR for a more detailed explanation of Bank guidance provided with regard to quality review of environmental studies. 105 Urban and street upgrading / bike lanes, and environmental studies to support addressing the solid waste agenda. 106 The solid waste management agenda is a particular aspect differentiating Uruguaiana from the other PDMI Projects. It is noteworthy that the Federal Law No. 12,305, 2010 is an important regulatory milestone in the solid waste management policy in Brazil. Among other elements, this law establishes the obligation, before August 2014, for closure of all dumps in the country. 75 3.2 Achievement of Project Development Objectives Rating: Negligible The PDO was to strengthen the capacity of Uruguaiana municipality to provide selected infrastructure services and employment opportunities for its population. However, little of what was originally planned was actually implemented (US$ 4.36 million of a total of US$ 11.42), resulting in only 40% of the total loan resources being disbursed (US$ 2.70 million of a total of US$ 6.83). Component 1 investments were limited in comparison to the total (actual) Project investments (only US$ 0.75 million out of 4.36 million, 17% of the total investments) 107. With regard to strengthening of institutional capacity and/or internalization of learning acquired through Project implementation, there is no way to report on this issue as the Prefecture of Uruguaiana did not participate in the ICR discussions. Component 2 investments represented still less of total Project funds (US$ 0.07 million, less than 2% of the total Project investment). Activities with regard to (i) Facilitating micro and small business access to micro-credit; (ii) Capacity-building for workers and general training, and (iii) Supporting productive subprojects in the dairy sector did not take place. The only output developed under Component 2 was the LED Plan (PDE). Component 3 investments in urban and street upgrading and drainage infrastructure and services in Santo Inacio neighborhood concentrated the majority of the total project resources (US$ 3.54 out of 4.36 million, or 81%). Of these, approximately US$ 0.90M were for the counterpart financing in the acquisition of an asphalt plant and on maintenance of roads 108. With regard to the macro drainage works (realized along a 1Km tract), during a post-closing mission in April 2013, despite minor technical faults (which were corrected), the beneficiary population expressed their satisfaction with the general results of the work, particularly in light of recent rain events. An analysis of achievement of the goals defined within the ambit of Project indicators (despite all shortcomings in the quality of the information) confirms the Negligible rating proposed for efficacy: (i) 3 out of 5 PDOIs were not achieved 109 ; for the remaining two 110 , there is no quantitative information available to be measured against the target; (ii) 4 out of 6 IOIs were not achieved 111; (iii) just 1 out of 6 IOIs was achieved 112; and for the remaining IOI 113, there is no information available to be measured against the target. 107 Noteworthy here the improvements to the existing Municipal Administrative Center, being the remaining investments mainly linked to Project Management. 108 The Municipality has reported that it has carried out with its own resources (no supervision, quality control or approval from the Bank) the development of detailed design projects for 10Km of bike lanes linking central and peripheral neighborhoods of the city. These were undertaken in the following streets and avenues: Setembrino de Carvalho, Flores da Cunha, Pinheiro Machado and Presidente Vargas. 109 PDOIs #s 2, 3, and 5, on i. satisfaction with business environment, ii. SMEs successfully using microcredit, and iii. Solid waste properly disposed. 110 PDOIs # 1 and 4, on municipal secretariats implementing project processes; and on satisfaction of peri- urban community with infrastructure. 111 IOIs #s 1, 3, 4 and 6 112 IOI #5, on urban roads paved or rehabilitated, in this case as a result of counterpart investments in the asphalt plan. 113 IOI #s 2, on % of work program delivered. 76 For detailed information on the Project’s results, refer to Uruguaiana’s Results Framework in the Project datasheet; for detailed information on the Project’s outputs, refer to Annex 2. 3.3 Efficiency Rating: Negligible No information was available to conduct the Economic Analysis. 3.4 Justification of Overall Outcome Rating Rating: Highly Unsatisfactory Based on the Project’s relevance (Negligible), efficacy (Negligible), and efficiency (Negligible), the proposed overall outcome rating is Highly Unsatisfactory. 3.6 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops For a summary of the results of the joint Stakeholders Workshop, conducted in November 2012, see section 3.6 of the overall Program ICR, as well as Annex 6 for the abridged translation of the final report. However, it should be noted that Uruguaiana did not take part in this workshop, or provide a Project evaluation in any other form. 4. Assessment of Risk to Development Outcome Rating: High Sustainability of the results linked to Component 1. Analyzed in isolation, the risks to the sustainability of the Component 1 results can be considered low. On one hand, some of the institutional capacities built over the implementation of the Project will be lost, as the UGP of Uruguaiana was small, with most of its members outside consultants. On the other, there is no reasonable concern regarding budget and/or institutional constraints that could compromise the ability of the Municipality to operate and maintain the facilities (Administration Building) and equipment procured under the Project. Sustainability of results related to Component 2. As above, there are no major concerns with regard to the LED Plan (PDE), the one Component 2 Project activity. To the point to which it was possible to closely accompany its execution, it seems that the instrument demonstrates not only a solid technical basis but, more importantly, was created with significant involvement of local actors. There are no recent reports of the progress of the priority activities indicated in the Plan, which include (among other elements) dissemination of the Plan’s results to various public and private institutions to obtain their support in its implementation. As in the case of Bagé, despite low investment in this activity and the ambitiousness of the Plan’s recommendations, the participatory process of discussing and preparing a Plan was intrinsically valuable. The process of developing the plan raised awareness among stakeholders about local development challenges and opportunities, and compiled information and recommendations for potential investors, federal and state governments, and private institutions. Sustainability of Component 3 outcomes in drainage and urban and street upgrading. This item merits particular attention, as 81% of total Project investments (US$ 3.52 out of 4.34 M) were channeled to Component 3 (refer to Annexes 1 and 2). (i) Macro drainage investments in Santo Inácio neighborhood. During the post-conclusion mission conducted in Uruguaiana in April 2013 (4 months after project closing), minor technical 77 flaws in the work, still to be corrected, were registered; as well as the destruction of the protective enclosure of the retention basin (upstream). Despite this, at this time the Bank was informed by the Prefecture of actions being implemented for cleaning and maintenance of the channel; and the Mayor himself demonstrated interest and initiative in solving this problem. (ii) Uruguaiana has an advantageous position in road maintenance, as it has not only equipment but an asphalt plant as well, which allows maintenance at much lower than market cost. (iii) Integrated municipal solid waste management. Up to the date of this ICR, there were no indications that the investments in the closure of the landfill and the construction and operation of a new landfill would materialize. Moreover, uncertainties remain as the quality of environmental studies prepared by the City. For these reasons, and principally due to item (iii) above, the Risk to Development Outcome for the Uruguaiana Project is considered High. 5. Assessment of Bank and Borrower Performance Bank Performance is assessed only for the overall Program. Performance is assessed as Moderately Satisfactory at Entry, Moderately Satisfactory at Supervision, and Moderately Satisfactory overall. For details, see Section 5 of the PDMI Program ICR. 5.1 Borrower Performance (a) Government Performance Rating: Unsatisfactory The Prefecture of Uruguaiana demonstrated, during the entire Project implementation period, difficulty in understanding and applying Bank procedures. There were also specific issues – for which the UGP was not solely responsible – related to: (i) problematic procurement processes; and (ii) submission of ineligible expenses, which negatively affected Project implementation and results. After the loan closed, dialogue resumed with the new municipal administration, which pledged to attempt to process correctly all due cancellations of non-utilized Bank funds, as well as the return of loan funds from ineligible activities. However, Uruguaiana still did not participate in joint ICR discussions. (b) Implementing Agency or Agencies Performance Rating: Unsatisfactory Uruguaiana’s UGP was linked to SEPLAN – Planning Secretariat, and to the Mayor’s Office. Its structure lacked autonomy for decision making, which sometimes interfered with Project implementation. Overall, the UGP showed a reasonable degree of commitment throughout implementation. However, they faced difficulties in dealing with Bank FM and Procurement requirements, flawed M&E, and limited technical capacity (which interfered with their ability to accompany and guarantee the quality of the environmental studies and designs for the closing of the dump and opening of the new landfill). As implementation progressed, performance declined. At Project closure, all Project ratings apart from counterpart funding (which was Highly Unsatisfactory), were rated Unsatisfactory. Additionally, final evaluation was compromised by the lack of participation and information provided by the Borrower (the final report was not completed and thus never sent to the Bank). 78 (c) Justification of Rating for Overall Borrower Performance Rating: Unsatisfactory Based on the ratings for Government performance (Unsatisfactory) and Implementing Agency performance (Unsatisfactory), the proposed rating for Borrower performance is Unsatisfactory. 79 Appendix 4. Specific Data Sheet and ICR for the RIO GRANDE MUNICIPAL PROJECT (Rio Grande 2010: Uma Visão de Futuro, IBRD 7682-BR) A. Basic Information Rio Grande - Rio Grande do Sul Country: Brazil Project Name: Integrated Municipal Development Program (APL) Project ID: P094199 L/C/TF Number(s): IBRD-76820 ICR Date: 06/30/2014 ICR Type: Core ICR Lending Instrument: APL Borrower: RIO GR Original Total USD 8.10M Disbursed Amount: USD 7.16M Commitment: Revised Amount: USD 8.10 M Environmental Category: B Implementing Agencies: Municipal Government of Rio Grande (Project Implementation Unit linked to the Mayor’s office) Cofinanciers and Other External Partners: B. Key Dates Revised / Actual Process Date Process Original Date Date(s) Concept Review: 11/16/2006 Effectiveness: 10/01/2009 04/16/2010 Appraisal: 06/26/2007 Restructuring(s): 12/13/2012 Approval: 07/07/2009 Mid-term Review: 06/07/2011 Closing: 12/31/2012 12/31/2012 C. Ratings Summary C.1 Performance Rating by ICR Moderately Unsatisfactory Outcomes: Risk to Development Outcome: Significant Borrower Performance: Moderately Unsatisfactory C.2 Detailed Ratings of Bank and Borrower Performance (by ICR) Bank Ratings Borrower Ratings Moderately Quality at Entry: Moderately Satisfactory Government: Unsatisfactory Quality of Supervision: Moderately Satisfactory Implementing Moderately 80 Agency/Agencies: Unsatisfactory Overall Bank Overall Borrower Moderately Moderately Satisfactory Performance: Performance: Unsatisfactory C.3 Quality at Entry and Implementation Performance Indicators Implementation QAG Assessments Indicators Rating Performance (if any) Potential Problem Project Quality at Entry Yes None at any time (Yes/No): (QEA): Problem Project at any Quality of No None time (Yes/No): Supervision (QSA): DO rating before Moderately Closing/Inactive status: Unsatisfactory D. Sector and Theme Codes Original Actual Sector Code (as % of total Bank financing) General industry and trade sector 0 3 General water, sanitation and flood protection sector 0 0 Micro- and SME finance 3 0 Roads and highways 82 89 Sub-national government administration 13 8 Theme Code (as % of total Bank financing) Micro, Small and Medium Enterprise support 3 3 Municipal governance and institution building 13 2 Other urban development 82 95 Pollution management and environmental health 0 0 Rural services and infrastructure 0 0 E. Bank Staff Positions At ICR At Approval Vice President: Jorge Familiar Calderon Pamela Cox Country Director: Deborah L. Wetzel Makhtar Diop Sector Manager: Anna Wellenstein Guang Zhe Chen Project Team Leader: Juliana Garrido Juliana Garrido ICR Team Leader: Juliana Garrido ICR Primary Author: Emanuela Monteiro 81 F. Results Framework Analysis Project Development Objectives (from Project Appraisal Document) The Project development objective is to strengthen the capacity of Rio Grande to provide selected infrastructure services and employment opportunities for its population. Revised Project Development Objectives (as approved by original approving authority) (a) PDO Indicator(s) Original Target Formally Actual Value Values (from Revised Achieved at Indicator Baseline Value approval Target Completion or documents) Values Target Years Indicator 1 : Municipal secretariats implementing improved project implementation processes Secretariats of Secretariats of Secretariats of Value Planning, Planning, Finance, Planning, Finance, quantitative or 0 Finance, Works, and Works, and Qualitative) Works, and Environment Environment Environment Date achieved 06/05/2009 06/05/2009 12/13/2012 12/31/2012 Comments TARGET MET (incl. % Results account for trainings conducted and equipment bought as part of the achievement) PMAT program, part of the counterpart investments linked to the Project. Community members satisfied with improved urban infrastructure in areas of Indicator 2 : intervention Value quantitative or 0 70% - Qualitative) Date achieved 12/13/2012 12/13/2012 12/31/2012 QUANTITATIVE DATA NOT AVAILABLE The Borrower’s Final Report refers to a qualitative survey (20 interviews) conducted with overall users of the streets and with representatives of Comments transportation companies in charge of providing such services. Although they (incl. % report problems with the quality of the works, they also refer to: (i) an overall achievement) improvement in the quality of life of the population; (ii) reduced O&M costs of the vehicles / buses, as well as increased possibilities of more accurately estimate travel times; and (iii) overall satisfaction with drainage and landscaping services. Indicator 3 : Number of direct project beneficiaries Value quantitative or 0 - 40,000 44,800 Qualitative) Date achieved 12/13/2012 12/13/2012 12/31/2012 QUANTITATIVE DATA NOT AVAILABLE At the time of the preparation of the ICR, the Borrower reported that Comments approximately 44,800 people directly benefited from the Project. The reported (incl. % results are a proxy, calculated based on the population living in the area achievement) influenced by the Project’s works in the rehabilitation of urban roads. The methodology for such calculation is different from the one used to define the target. 82 (b) Intermediate Outcome Indicator(s) Original Target Actual Value Formally Values (from Achieved at Indicator Baseline Value Revised approval Completion or Target Values documents) Target Years Municipal staff trained and using effective project planning and monitoring Indicator 1 : systems Value (quantitative 0 100 100 or Qualitative) Date achieved 06/05/2009 12/13/2012 12/31/2012 Comments TARGET MET (incl. % Results account for trainings conducted as part of the PMAT program, part of the achievement) counterpart investments linked to the Project. Indicator 2 : Percentage of annual work program delivered on time Value (quantitative 0 100 - or Qualitative) Date achieved 06/05/2009 06/05/2009 12/31/2012 QUANTITATIVE DATA NOT AVAILABLE Comments The implementation progress of the Project decreased during the second semester (incl. % of 2012. The land regularization services, for instance, were not completed by achievement) closing date of the Project. Indicator 3 : Long-term economic development strategy prepared and/or adopted Value LED prepared (quantitative - LED prepared and adopted or Qualitative) Date achieved 12/13/2012 12/13/2012 12/31/2012 TARGET PARTIALLY MET Comments The LED Plan was prepared, and a Decree was enacted creating an independent (incl. % Committee for Social Economic Development. However, there is no sufficient achievement) evidence that it has been adopted. Indicator 4 : Action plan for the Tourism Sector prepared and adopted Action plan for the Action plan for the Value Tourism Tourism Sector (quantitative - Sector prepared and or Qualitative) prepared and adopted adopted Date achieved 12/13/2012 12/13/2012 12/31/2012 TARGET MET Besides the Action Plan referred to in the indicator, the Project also supported the development of a Diagnosis of the Tourism Sector and of an Inventory of the Comments Touristic Attractions within the municipality. Information provided by the (incl. % Borrower indicates that many of the actions and/or projects suggested by the Plan achievement) have been adopted or are under implementation. Also, two Decrees were enacted – Decree N. 12.108, from May/13, which creates and nominates members of a Permanent Commission for the Development of the Tourism Sector; and Decree 83 N. 12.150, from June/13, which includes additional members. Indicator 5 : Roads rehabilitated Value (quantitative 0 25 27.91 or Qualitative) Date achieved 06/05/2009 12/13/2012 12/31/2012 TARGET MET Results account for: (i) 9.37 Km of rehabilitated roads (paving and drainage), as Comments part of 100% counterpart financed investments; (ii) 15.64 Km of rehabilitated (incl. % roads (paving and drainage), as part of Bank financed investments; (iii) 2.30 Km achievement) of rehabilitated roads (paving), as part of Bank financed investments; and (iv) 0.60 Km of rehabilitated roads (drainage), as part of Bank financed investments. Target population (families) with use or ownership rights recorded as a result of Indicator 6 : the project Value (quantitative 0 3200 0 or Qualitative) Date achieved 12/13/2012 12/13/2012 12/31/2012 Comments TARGET NOT MET (incl. % Documentation services were contracted to regularize 3,481 plots, but actual achievement) titles were not emitted by the closing date of the Project. G. Ratings of Project Performance in ISRs Actual Date ISR No. DO IP Disbursements Archived (USD millions) Not applicable 1 0.00 Not applicable 2 0.00 Not applicable 3 0.00 4 11/23/2009 Moderately Satisfactory Moderately Satisfactory 0.00 5 04/29/2010 Moderately Satisfactory Moderately Satisfactory 0.02 6 02/21/2011 Moderately Satisfactory Moderately Satisfactory 0.12 7 07/20/2011 Moderately Satisfactory Moderately Satisfactory 0.96 Moderately Moderately 8 04/29/2012 4.43 Unsatisfactory Unsatisfactory Moderately Moderately 9 11/18/2012 6.48 Unsatisfactory Unsatisfactory 10 07/10/2013 Moderately Satisfactory Moderately Satisfactory 7.16 Moderately Moderately 11 01/19/2014 7.16 Unsatisfactory Unsatisfactory 84 H. Restructuring (if any) ISR Ratings at Amount Board Restructuring Restructuring Disbursed at Reason for Restructuring & Approved Date(s) Restructuring Key Changes Made PDO Change DO IP in USD millions (i) Adjustments to the scope of Project activities due to exchange rate fluctuations; the increase in construction costs; and the delays between Project appraisal, approval and implementation launch; and the unforeseen availability of other sources of funds; (ii) Revisions to the Project’s results framework to reflect the 12/13/2012 N MU MU 6.48 adjustments/reductions in scope of the Project; (iii) Streamlining of indicators to better monitor and capture Project impacts, align with indicators from the other individual Projects, and incorporate core indicators; (iv) Reallocation of loan proceeds between expenditure categories, and increased percentage financed. 85 SPECIFIC ICR FOR RIO GRANDE MUNICIPAL PROJECT 1. Project Context, Development Objectives and Design The Rio Grande Project (Rio Grande: Uma Visão de Futuro) was approved by the Board on July 07, 2009 in the amount of US$8.10 million. The Loan Agreement was signed on February 25, 2010, and the Project became effective on April 16, 2010, after substantial delays. In 2012 the Project went through a Level II restructuring process, and on December 31 of the same year it closed. Although Rio Grande was the first PDMI municipality to contact the Bank in 2004 and took the lead in getting the Federal Government’s support for the Program, it ended up with the shortest Project implementation period, at 2 years and 8 months. 1.1 Context at Appraisal Rio Grande is the state’s oldest city and the site of southern Brazil's largest port. The total population of the municipality was 192,195 in 2004 (FEE), nearly 96% of which was considered urban. With an area of 2,814 km2, Rio Grande accounts for about 1% of the total area of the state and is divided into five districts. Economically, Rio Grande was overall doing well at the time of appraisal. Municipal GDP was almost US$ 1.5 billion, of which 64.7% was generated by industry, 32% from services and 2.8% from agriculture. Main industrial activities included oil refining, fertilizers, soy bean processing and fishing (which had been decreasing steadily since the 1990's). The service sector was strongly influenced by the port and its freight terminal. Though per capita GDP was higher than that of the State overall, Rio Grande’s poverty rate of 22% was higher than the state average of 19.7%, indicating that total wealth was increasingly concentrated. Contributing to this were a fragile SME sector and a high informality rate. 1.2 Original Project Development Objectives (PDO) and Key Indicators (as approved) Original PDO. The PDO was to strengthen the capacity of Rio Grande to provide selected infrastructure services and employment opportunities for its population. Key original indicators. The original results framework contained four PDO indicators for Rio Grande. These are, for Improved Municipal Management Capacity: (i) Institutionalization of improved sub-project appraisal, fiduciary, social and environmental management processes in the municipal government of Rio Grande; for Increased Local Economic Development Opportunities: (i) Increased local business satisfaction with municipal business environment, and (ii) Increased revenues and sales volumes of the supported business; and for Improved Infrastructure Services, (i) Reduction in travel times in urban center of Rio Grande. 1.3 Revised PDO (as approved by original approving authority) and Key Indicators, and reasons/justification The PDO was not revised. Indicators were revised to better fit the municipality’s monitoring and reporting capabilities. New targets were included to take into account new activities, and several original targets were dropped in order to reflect the reduced scope of project activities (see “Revised Components” below). 86 1.4 Main Beneficiaries The PAD estimate for Project beneficiaries was the population of Rio Grande at appraisal – 193,000 individuals. This estimate was updated to 40,000 in the Restructuring Paper, to reflect the direct beneficiaries of the Project infrastructure investments. At Project closure, the final estimate for beneficiaries in Rio Grande is 44,800. 1.5 Original Components (as approved) The Project’s original components were as follows: Component 1: Municipal Strengthening. This component had the objective to strengthen the municipal’s capacity to more effectively and efficiently execute its programs and implement and mainstream the appraisal, fiduciary and environmental and social procedures of the PDMI. Included were (i) Public Service Modernization, and (ii) Project Management. Component 2: Income and Employment Generation. The component aimed to strengthen the Borrower’s capacity to generate employment and income through: (a) preparation of a sustainable long-term LED strategy; (b) improvement of the Borrower’s business environment through the development and implementation of simplified requirements for firms’ registration; and (c) development of a strategy for the development of the tourism sector. The main idea was to assess the local business environment and devise measures to overcome key barriers, including for business registration, and supporting the development of strategy for the Tourism Cluster, building on Rio Grande’s status as the first city established in the state. Included were Strategies, SME and Cluster Support. Component 3: Infrastructure Services Improvements. The main priorities for Rio Grande were to improve the traffic flow in the urban center and develop a strategy for the environmental recovery of part of the Lagoa dos Patos. Included were (i) Urban Road Upgrading, and (ii) Urban Renewal and Environmental Rehabilitation. 1.6 Revised Components Scope tightening. Some Project activities were reduced or eliminated due to the increased cost of Project activities (as explained below). Several original targets were dropped in order to reflect the reduced scope of Project activities, particularly with regard to the streamlining of the firm registration process and a comprehensive resettlement plan/environmental rehabilitation project. New activities. New activities included a LED strategy, plans for the Tourism sector, and regularization of tenancy in some informal settlements. 1.7 Other significant changes Increase in the Project’s total costs. Activity costs increased due to BRL/US$ exchange rate fluctuations, the inflation in construction costs in Brazil, and the delays between Project appraisal, approval and implementation launch. As the scope of activities was reduced, the total amount of Project and counterpart financing remained unchanged. 87 Reallocation of funds between loan categories. The Project saw reallocation of loan proceeds between expenditure categories to align with revised Project activities, and to account for the unforeseen availability of other sources of funds. 2. Key Factors Affecting Implementation and Outcomes 2.1 Project Preparation, Design and Quality at Entry See Section 2.1 of the PDMI Program ICR. 2.2 Implementation Initial delays in Project appraisal, approval and implementation. One of the factors that most affected the implementation of the Rio Grande Project was the accumulated delays between Project appraisal, approval, and the start of implementation. It was Rio Grande, in 2003-2004, which took the initiative to discuss the possibility of an umbrella Municipal APL Program with the Bank and the Federal Government. However, both the continuity and speed of Project progress were affected when a new Prefecture government came into power at the end of 2004. Factors causing this delay included the municipality’s lack of readiness to receive the loan in terms of fiscal soundness and capacity, and difficulties with staffing (at the time, there was only one staff member assigned to the Project). At effectiveness, in April 2010, there were less than three years left until the Project closing date. These delays affected the municipality’s implementation capacity, which had been assessed at preparation, as well. Different from the other Projects, Rio Grande’s was to have been implemented in two phases—Phase I, with total estimated costs of US$ 8.10 million (which was carried out); and Phase II (which never materialized), with total estimated costs of US$ 7.80 million. Phase II was to have been launched once consistent implementation progress of Phase I had been reached, including the development of social studies and of detailed engineering design projects. As planned, the majority of the Component 3 investments in urban upgrading and environmental rehabilitation were concentrated in Phase II. Municipal elections. The change in municipal administration in 2004, during preparation, contributed to a great extent to the initial Project delays. During the final phase of implementation at the end of 2012, another municipal election again negatively affected Project implementation 114, although the new government did not officially take power until January 2013, after Project closing. For example, the UGP had already been dismantled at the time of Project closing and elaboration of Phase I of the Borrower’s Completion Report at the end of 2012, complicating supervision and technical follow-up of Project activities. Despite this, a proactive dialogue between the Bank and the Prefecture was maintained for (i) closing of Project and appropriate documentation of expenditures, in 2013, (ii) the preparation of the Borrowers' Completion Report (Phase 2) in 2014, and (iii) providing supporting information for the ICR, in 2014. Format and structure of the UGP. The Rio Grande UGP was linked with the Prefecture Cabinet. Although it was organizationally and physically proximate to the Mayor’s office, the UGP’s structure and staffing did not lead to effective Project implementation. .Rio Grande’s UGP 114 Ratings for Implementation Progress were downgraded from Moderately Satisfactory to Moderately Unsatisfactory beginning in ISR # 8, archived in April 2012. 88 coordinator was totally dedicated to the Project. For much of the time, however, he acted as procurement specialist as well, an overburdening that hurt general Project management in terms of planning, meeting of deadlines, M&E/reporting, and contract management, etc. The remaining members of the UGP, including those responsible for FM and environmental or works supervision, were staff from other arms of the Prefecture. Their time was thus divided with other tasks as well. At the time of PDMI, Rio Grande had a significant portfolio of non-Program infrastructure investments also underway. Lack of experience with international financing organizations & persistent difficulties in adopting Bank guidelines and procedures. As in the case of the other PDMI municipalities, Rio Grande had little or no experience with international financial organizations. However, these difficulties in compliance with Bank directives and operational procedures persisted in the case of Rio Grande throughout implementation. In some cases (FM, for example) these lessons were eventually absorbed and monitoring activities adequately conducted. In others, including procurement, shortcomings continued to be significant, not only with regard to the quality of the bidding documents but also causing delays and flaws in routine processes. TORs, technical specifications, requests for proposals, and estimated budgets for works, for example, often required not only revision, but in many cases further technical support by the Bank team. Increase in Project costs and subsequent need for Project Restructuring. During the June 2011 Midterm Review mission, important losses in loan purchasing power, due to US$/BRL exchange rate variations, were registered. This was in addition to a significant increase in construction costs in Brazil, which accompanied the scaling up of Federal Government investment in infrastructure and economic growth. In conformance with the original Appraisal estimate (confirmed at restructuring), approximately 83% of Project investments were concentrated in infrastructure improvements under Component 3. This made the Rio Grande Project especially vulnerable to variations in construction costs. Restructuring was undertaken to respond to initial delays, adapt the Project to the realities of execution (in terms of municipal capacity and context) and mitigate this loss of purchasing power. Although only completed at the end of 2012, restructuring was still important in order to (i) adjust the Project scope, cleaning out activities for which other funding sources had been identified; (ii) adjust, as much as possible, the indicators to this change in scope and streamline them Program-wide; and most importantly (iii) re-allocate the loan resources to maximize disbursement, with a reduction of the percentage of counterpart allocation. Between Restructuring and the moment when final Project expenditures were documented, total loan disbursement increased by 10% (US$ 0.68 / 6.48 million). Diminished prioritization of the Project by the Prefecture. In the case of Rio Grande, concurrent outside financing negatively impacted the Project, as (i) PAC investments 115 simultaneous with the Project were more voluminous than the loan resources (BRL 24.52 versus US$ 8.10 million); and (ii) the Prefecture’s team for planning and implementation of PAC investments was basically the same one accompanying the Bank project, which dissipated project execution efforts and diminished the project’s priority and relevance for the Prefecture. This aspect was raised by the municipality during ICR discussions. 115 PAC I (Saneamento para Todos, October/2009) amounted BRL 20.08 million; PAC II (Pró-Transporte, August/2011) amounted BRL 4.43 million. Both were macro drainage and paving investments. 89 2.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization M&E design and implementation. Indicators at Appraisal relied heavily on surveys to measure Project results, which despite their necessity in order to objectively evaluate the Project activities often proved beyond the Borrower’s capability 116. This problem was not fully corrected during the restructuring process, and the survey requirement remained unsupported by a more structured M&E program, although the Bank Team did provide intensive support and TA to the Borrower. This impaired the final evaluation of the Project, as (i) The firm in charge of the final evaluation report of Rio Grande did not conduct ideal final surveys 117 ; (ii) Information on beneficiary satisfaction would have been difficult to obtain, since urban infrastructure works (paving and drainage) were ongoing in some of the areas through the end of December 2012. As the beneficiary surveys were not carried out as specified, the monitoring framework does not provide as robust a basis to measure PDO achievement as expected. The IOIs were defined from conception as simple indicators 118 to accompany and monitor implementation progress for each component. They were clearly linked to Project activities and the PDOIs, and as they were readily measureable provided an adequate tool for monitoring project implementation progress. As such, they were mostly maintained or only slightly adjusted during restructuring. Corrections to the Results Framework made at restructuring aimed to reflect the proposed tightening of Project scope, including the exclusion of some Component 2 119 and 3 120 activities; as well as the inclusion of activities such as the land regularization services. It should be noted that the Bank failed to correctly evaluate, both at entry and during implementation/restructuring, the technical and institutional capacity of the Borrower to carry out the monitoring prescribed, which involved the preparation and submittal of progress reports to the Bank each semester. Initial capacity-building workshops during Project preparation, or structured capacity-building or TA for M&E during implementation, would have been helpful. The Task Team did provide guidance as part of regular Project supervision 121. Overall performance of Rio Grande in conducting M&E. Rio Grande’s M&E performance was a challenge throughout implementation, and was rated Unsatisfactory at Project completion by the final ISR. This was due to several reasons: (i) Rio Grande’s bi-annual progress reports were often delayed, and/or contained significant shortcomings; (ii) Rio Grande’s UGP was being dismantled during development of the Phase I Borrowers’ Final Assessment (for Rio Grande, Pelotas and Bage) at the end of 2012, which interfered with the necessary provision of inputs to the consulting firm responsible; (iii) Although Rio Grande participated in the ICR evaluation workshop, and actively contributed during the April 2014 ICR discussion process, sufficient information for measuring and final reporting of Project results was not provided. 116 2 out of 3 original PDOIs required surveys to be measured: “% of local businesses surveyed that have positive views on municipal business environment” and “Community members satisfied with urban transport”. 117 Surveys were qualitative and did not include a sample of statistic value. The information obtained through these surveys is used in this document as a reference, to complement supervision and post-closure supervision findings. 118 With one exception, which was removed at restructuring (“Number of enterprises effectively involved in the development of the tourism sector and cluster created”). 119 Simplified requirements for registration of firms. 120 Social and environmental rehabilitation of the Henrique Pancada neighborhood. 121 In various aide-memoirs, there is mention of discussions on the format, frequency, content and importance of progress reports. There are also records of technical discussions on indicators. 90 2.4 Safeguard and Fiduciary Compliance Safeguard Aspects 122 . Rio Grande’s compliance with safeguards was Satisfactory at Project closing. There was an important effort, in partnership with the affected community, for territorial regularization of a significant proportion of the resident population living in irregular settlements. However, this process was not finalized. Regarding the investments in urban road improvements, appropriate guidance and follow-up was provided to UGP to guarantee that potential impacts of the works were pre-identified and avoided and/or mitigated where applicable. Procurement. Rio Grande’s UGP had very limited capacity to properly conduct routine procurement, and as there was no designated specialist. Procurement was often conducted by the Project coordinator. This resulted in technical and procedural shortcomings in this area, including in (i) the quality of the procurement related documents; and (ii) timing for the completion of the planned activities. The Bank team had to provide close support, often including implementation support to the UGP for their drafting of the above documents. Despite these difficulties, no misconduct occurred. Financial Management (FM). The FM arrangements were overall Satisfactory throughout the life of the Project. The implementing agency addressed most of the shortcomings identified during financial management supervision missions, showing a clear and progressive improvement within the FM arrangements whenever any issue was present and providing in a timely and reliable manner any information needed to manage and monitor project implementation. Additionally, (i) the budget was realistic and was properly executed, (ii) staff was nominated and trained in the Bank's processes, (iii) efficient internal control processes were in place, (iv) Financial Management Information Systems (FMIS) were in place, with timely submission of IFRs. The last external audit report had a qualified opinion issued by auditors. After analyzing the report, however, the Bank considered the issues raised minor, due to the external auditors’ lack of understanding of the specificity of the loan agreement. 2.5 Post-completion Operation/Next Phase Activities pending completion and/or safeguards follow-up. There were still pending Project activities to be completed as of the closing date. These include land regularization services for 3,481 urban plots, for which documentation collection services were conducted, but actual titles to date not issued. Since the land regularization services in Rio Grande are not linked to resettlement, neither OP/ BP 4.12 nor post-closure safeguards for Bank follow up apply. Operation and maintenance (O&M). Post-completion issues include the municipality’s ability and resources to properly perform O&M of streets (after paving and drainage projects were conducted). The Municipality has invested the following in O&M over the last years: (i) in 2011, BRL 5.93 million; (ii) in 2012, BRL 2.57 million; and (iii) in 2013, BRL 1.57 million. For 2014, there is BRL 2.57 million budgeted for O&M of streets. As the municipality collects substantial port revenues, it has continuing capacity to invest in O&M. 122 Details are in Section 2.4 of the Overall Program ICR. 91 3. Assessment of Outcomes 3.1 Relevance of Objectives, Design and Implementation Rating: Modest The relevance of the objectives, design and implementation of Rio Grande Project is rated Modest, as explained in section 3.1 of the overall PDMI ICR. Planned Project investments to strengthen the overall capacity of the municipality aimed to (i) provide more client-responsive services; (ii) generate employment and income opportunities (with focus on the Tourism cluster 123 ); (iii) improve urban mobility, especially in the urban center; and (iv) develop and implement a strategy for the environmental recovery of the Lagoa dos Patos; remain as priorities for the Municipality 124 . This was affirmed by the Borrower during the ICR discussions. The design of the Project also shows a close fit with Brazil’s national priorities in terms of supporting municipal infrastructure. The proposed Modest rating is due to: (i) a weaker link with the priorities defined for World Bank engagement under the current CPS; (ii) reduced relevance and efficiency of Project implementation due to the failure to achieve Program-wide institutional arrangements or transformational impact; (iii) the substantial implementation support needed from the Bank; and (iv) the variety of funding options (including national sources) apart from Bank financing available for such a portfolio. Direct Bank engagement with small and medium-sized municipalities still requires strong consideration of issues such as the nature and readiness of the institutional arrangement at entry. In the case of Rio Grande, for example, it is important to take into consideration the city’s port, important not only for south Brazil, but also for Uruguay and Argentina. On one hand, the placement of the port and the resulting population influx strengthen the demand for infrastructure; on the other, in the case of new operations in Rio Grande, focus would shift to logistical aspects such as those under Component 2, and private sector participation and capacity building on a larger scale in order to support port activities. Given the above, relevance of Project objectives, design and implementation is rated Modest. 3.2 Achievement of Project Development Objectives Rating: Modest In terms of the PDOIs, in Rio Grande: (i) Only 1 out of 3 PDOIs was fully achieved (PDOI # 1, municipal secretariats implementing improved processes); (ii) For PDOI # 2 (satisfaction with infrastructure – paving and drainage works in key urban streets), since adequate quantitative surveys were not conducted in Rio Grande (as in the cases of Pelotas or Santa Maria), there is no accurate information to be reported against the official target; (iii) For PDOI #3 (overall number of Project beneficiaries), the information is not fully reliable as it was not measured using the same methodology used in the development of the target. The reported results (44,800 against a target of 40,000) are a proxy, calculated based on the population living in the area influenced by the Project’s works in the rehabilitation of urban roads. In terms of IOIs: (a) 3 out of 6 IOIs were 123 Apart from being a historical site (the oldest city in Rio Grande do Sul), Rio Grande has the world’s largest oceanic beach. 124 Mobility, for instance, is a theme that has been at the center of attention and discussions held in Brazil in the last two years. It was, for example, the object of extensive public demonstrations in mid-year 2013. 92 achieved 125; (b) 1 out of 6 IOIs was partially achieved 126; (c) 1 out of 6 IOIs was not achieved 127; and (d) For one IOI, 128 there is no information available. Due to limitations in M&E design/supervision and the level of confidence in the available information, the above analysis is insufficient to reach definitive conclusions regarding the achievement of the PDO. Thus, the complementary information available is aggregated below, focusing on the outputs of each Component, and the potential links of these outputs with the achievement of the PDO. For Component 1, while the related PDOI has been achieved, the enhanced capacity of the Borrower to more effectively and efficiently execute its programs and to implement and mainstream the appraisal, fiduciary and environmental and social procedures of the PDMI was not due to Project investments alone. This is because the volume of Project financing was relatively small (US$ 0.47 M out of 11.54 total), equivalent to only 4% of total actual Project costs, and investments were principally in acquisition of equipment and activities to support Project management 129 (refer to Annex 2 for details). It is true that some secretariats directly benefited from Program capacity-building. However, the already mentioned shortcomings in the structure and performance of the UGP, coupled with the staff turnover, limited the internalization of the learning acquired through the Project. For Component 2, despite the relatively small Project investment (US$ 0.24 M in 11.54 total, 2% of total Project costs), favorable results were achieved towards the specific objective of strengthening the municipality’s capacity to generate employment and income opportunities. Strategic and participative planning instruments for the Tourism cluster were created, including the LED strategy for the municipality (PDES) 130, the Inventory of the Tourism Attractions 131, and the Action Plan for the Development of the Tourism Sector 132 . These represent not only guidelines for future plans, but were an important learning process for the municipality and other participants. Component 3 comprised the bulk of the investments (US$ 10.81 M in 11.54 total = 94%), and expectations for its results in terms of contribution to PDO achievement were correspondingly higher. The goal of road rehabilitation (paving and drainage) was fully achieved, with 27.9 km rehabilitated. The Borrower’s Final Report refers to a qualitative survey conducted with overall users of the streets and representatives of transportation companies (20 interviews) 133. While this survey reported problems with the quality of the works, it also indicated (i) an overall 125 IOI #1, on staff trained; IOI #4, on Action Plan for the Tourism sector prepared and adopted; and IOI #5, on road rehabilitated. 126 IOI #3, on LED prepared and adopted. 127 IOI # 6, on communities with ownership rights recorded as a result of the Project. 128 IOI # 2, on % of the work program completed. 129 The only tool acquired to support planning and decision making was the satellite imagery. 130 The plan drawn up by the council pointed out the priorities for the development planning, namely: (1) urban instrumentalization; (2) importation and improvement of manpower; (3) training and support to entrepreneurship; (4) improvement of the logistics system; (5) fishing industry; and (6) large tourism. 131 The inventory includes the major tourist attractions and their location and characteristics, including georeferencing. 132 The Action Plan was based on a study to create a set of structured programs, including indicating the priority actions to be developed in the years 2013-2015, and funding sources. The Plan also develops a marketing strategy aimed at promoting tourism in the city. 133 This survey is used only as a reference here, as the methodology employed was incomplete. 93 improvement in the quality of life of the population; (ii) reduced O&M costs for the vehicles / buses, as well as more accurately estimate travel times; and (iii) overall satisfaction with drainage and landscaping services. Additionally, the goal of regularization of tenancy for 3481 irregular urban lots, which would have been an important social contribution, was not successfully achieved. All the above confirms the Modest rating proposed for efficacy. 3.3 Efficiency Rating: Negligible Insufficient information was available to conduct the Economic Analysis. 3.4 Justification of Overall Outcome Rating Rating: Moderately Unsatisfactory Based on the Project’s relevance (Modest), efficacy (Modest), and efficiency (Negligible), the proposed overall outcome rating is Moderately Unsatisfactory. 3.6 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops For a summary of the results of the joint Stakeholders Workshop, conducted in November 2012, see section 3.6 of the overall Program ICR, as well as Annex 6 for the abridged translation of the final report. 4. Assessment of Risk to Development Outcome Rating: Significant For further exposition on this topic, please refer to the Post-completion operation section. Activities completion risk. No titles were issued up to the Project’s closing date or as of this ICR. The completion of the land regularization services is fully dependent on political will and prioritization of the effort by the municipality. The Municipality has experience in satisfactorily conducting such services. Risks that learning gained through Component 1 investments will not be internalized. Rio Grande’s UGP is not formally established outside of the Project, as in the case of Pelotas. Apart from the overall learning and training gained through Project implementation, there are no substantial indications that this learning will be internalized in a more structured manner. In fact, at the end of the Project, under a new government administration, staffing was dramatically reduced in the areas that received the most professional support during the implementation (engineering, for example). Continuity and implementation aspects linked with planning tools developed under Component 2. Risks were evaluated based on the following: (i) PDES: While drafting the Plan, participants pointed out the need for a council of public and private representatives to coordinate the diverse actions proposed by the Plan, and created a Council for Sustainable Economic Development. Risks for Plan implementation are associated with the change of management and the municipal administration. However, the Council, which includes members with mandates independent of the municipal administration, can contribute to 94 the continuance of the Plan as an effective instrument for local planning. The Plan should not be a rigid element, but a tool that can mold itself to respond to changing scenarios and situations. The experience of the members of the Council should assist in perceiving this need for flexibility and making the necessary changes. (ii) Inventory and Action Plan for Tourism: Like the PDES, this instrument was developed through a widely participatory process. Despite the major change in municipal administration in 2013, a significant part of the strategies and programs created by the Plan should be preserved and remain independent of actions by the municipal administration. Information provided by the Borrower indicates that many of the actions and/or projects suggested by the Plan have been adopted or are under implementation. Also, two Decrees were enacted – Decree N. 12.108, from May 2013, which creates and nominates members of a Permanent Commission for the Development of the Tourism Sector; and Decree N. 12.150, from June 2013, which includes additional members. However, it is possible that the new Municipal administration, which came into power towards the end of Project implementation, will have different priorities that will limit utilization and/or implementation of Plan recommendations. This may limit the Plan’s impact to some degree. Sustainability of O&M of Component 3 investments. As discussed in section 2.5 of this ICR, risks exist but are not considered to be serious given the municipality’s adequate level of O&M capacity and resources. Based on the above, especially the fact that the land regularization initiative is still not concluded, Risk to Development Outcome for the Rio Grande Project is considered Significant. 5. Assessment of Bank and Borrower Performance Bank Performance is assessed only for the overall Program. Performance is assessed as Moderately Satisfactory at Entry and Moderately Satisfactory at Supervision, and Moderately Satisfactory overall. For details, see Section 5 of the PDMI Program ICR. 5.1 Borrower Performance (a) Government Performance Rating: Moderately Unsatisfactory Rio Grande led the efforts to launch the PDMI Program in 2003/2004. However, political turnover in 2004 (early in the identification and preparation phases) and again at the end of 2012 (near the closing date) affected implementation. Both led to a consequent weakening in government ownership of the Project. PIU staffing by the Municipal government was highly delayed. As implementation progressed, the Government had difficulties prioritizing Project activities over other ongoing programs, such as PAC. This caused delays which undoubtedly impacted Project implementation, substantially shortening the implementation period and complicating the execution of Project activities. Despite the above shortcomings, there were no compliance issues. The counterpart contribution was appropriately allocated. Also, during the 2012-2013 political transition period, the new administration maintained commitment to the Project and dialogue with the Bank, consistently responding to Bank requests for information to support development of the ICR. 95 (b) Implementing Agency or Agencies Performance Rating: Moderately Unsatisfactory In Rio Grande, the implementing agency was the UGP, an autonomous structure linked to the Mayor’s Office. Although UGP was committed and had a good relationship with the Bank and other stakeholders and partners throughout the Project, its performance was marked by limited institutional capacity and understaffing. Safeguards, FM, Project management, and procurement were overall conducted moderately satisfactorily (however, procurement was especially challenging in Project’s early stages). Two aspects in particular led to significant shortcomings: (i) the UGP’s limited performance in conducting M&E and reporting; and (ii) diminished implementation performance towards the end of the Project, which clearly affected final results. (c) Justification of Rating for Overall Borrower Performance Rating: Moderately Unsatisfactory Based on the ratings for Government performance (Moderately Unsatisfactory) and Implementing Agency performance (Moderately Unsatisfactory), the proposed rating for Borrower performance is Moderately Unsatisfactory. 96 Appendix 5. Specific Data Sheet and ICR for the SANTA MARIA MUNICIPAL PROJECT (Santa Maria 2020, IBRD 7648-BR) Santa Maria - Rio Grande do Sul Country: Brazil Project Name: Integrated Municipal Development Program (APL) Project ID: P094199 L/C/TF Number(s): IBRD-76480 ICR Date: 06/30/2014 ICR Type: Core ICR Lending Instrument: APL Borrower: STA MARIA Original Total USD 13.95M Disbursed Amount: USD 12.20M Commitment: Revised Amount: USD 13.95M Environmental Category: B Implementing Agencies: Municipal Government of Santa Maria (Project Implementation Unit linked to the Municipal Secretariat for Strategic Planning and Special Projects – PLANEPE) Cofinanciers and Other External Partners: B. Key Dates Revised / Actual Process Date Process Original Date Date(s) Concept Review: 11/16/2006 Effectiveness: 04/01/2009 06/02/2010 Appraisal: 06/26/2007 Restructuring(s): 12/13/2012 Approval: 12/23/2008 Mid-term Review: 05/04/2011 Closing: 12/31/2012 12/31/2013 C. Ratings Summary C.1 Performance Rating by ICR Outcomes: Moderately Satisfactory Risk to Development Outcome: Significant Borrower Performance: Moderately Satisfactory C.2 Detailed Ratings of Bank and Borrower Performance (by ICR) Bank Ratings Borrower Ratings Quality at Entry: Moderately Satisfactory Government: Moderately Satisfactory Moderately Satisfactory Implementing Quality of Supervision: Moderately Satisfactory Agency/Agencies: 97 Overall Bank Overall Borrower Moderately Satisfactory Moderately Satisfactory Performance: Performance: C.3 Quality at Entry and Implementation Performance Indicators Implementation QAG Assessments Indicators Rating Performance (if any) Potential Problem Project Quality at Entry Yes None at any time (Yes/No): (QEA): Problem Project at any Quality of No None time (Yes/No): Supervision (QSA): DO rating before Moderately Closing/Inactive status: Satisfactory D. Sector and Theme Codes Original Actual Sector Code (as % of total Bank financing) General industry and trade sector 14 15 General water, sanitation and flood protection sector 18 4 Micro- and SME finance 12 0 Roads and highways 41 54 Sub-national government administration 15 26 Theme Code (as % of total Bank financing) Micro, Small and Medium Enterprise support 27 16 Municipal governance and institution building 15 13 Other urban development 22 52 Pollution management and environmental health 18 4 Rural services and infrastructure 19 16 E. Bank Staff Positions At ICR At Approval Vice President: Jorge Familiar Calderon Pamela Cox Country Director: Deborah L. Wetzel John Briscoe Sector Manager: Anna Wellenstein Guang Zhe Chen Marcos T. Abicalil / Juliana Project Team Leader: Juliana Menezes Garrido Pereira Garrido (co-TTL) ICR Team Leader: Juliana Menezes Garrido Pereira ICR Primary Author: Emanuela Monteiro 98 F. Results Framework Analysis Project Development Objectives (from Project Appraisal Document) The Project development objective is to strengthen the capacity of Santa Maria to provide selected infrastructure services and employment opportunities for its population. Revised Project Development Objectives (as approved by original approving authority) (a) PDO Indicator(s) Original Target Actual Value Values (from Formally Revised Achieved at Indicator Baseline Value approval Target Values Completion or Target documents) Years Improved municipal planning and management capacity through the preparation Indicator 1 : and adoption of planning tools Urban and Rural Urban Transport, IT Transport, IT and and WSS Master Plans Value WSS Master Plans and Aero- quantitative or 0 - and Aero- photogrammetric Qualitative) photogrammetric Survey Survey prepared prepared and adopted and adopted Date achieved 12/13/2012 12/13/2012 12/31/2013 Comments TARGET SUBSTANTIALLY MET. (incl. % The Rural Transport Plan was not prepared. achievement) Beneficiaries from the income and employment generation project activities Indicator 2 : surveyed have positive views on municipal business environment 100% (Beneficiaries from the Microcredit Value Program); 90.5% quantitative or 0 - 80% (Beneficiaries / Qualitative) Artisans from capacity-building activities) Date achieved 12/13/2012 12/13/2012 12/31/2013 Comments TARGET SURPASSED (incl. % Results reported based on qualitative surveys (focal groups) conducted in March achievement) 11, 2014. These surveys are part of the Borrower’s Final Report. Community members satisfied with improved urban infrastructure in areas of Indicator 3 : intervention Value quantitative or 0 80% 80.4% Qualitative) Date achieved 12/13/2012 12/13/2012 12/31/2013 Comments TARGET MET (incl. % Results reported based on quantitative surveys conducted in February 23-27, achievement) 2014, in the areas where works were completed. These surveys are part of the 99 Borrower’s Final Report. They also include information on the overall satisfaction of the population living in adjacent neighborhoods (77.7%), as well as disaggregated information on satisfaction with each work. Indicator 4 : Number of direct project beneficiaries Value quantitative or 0 - 170,000 174,625 Qualitative) Date achieved 12/13/2012 12/13/2012 12/31/2013 Comments TARGET MET (incl. % 174,625 is the estimated population of the neighborhoods targeted by the Project achievement) with infrastructure service improvements (IBGE, 2013). (b) Intermediate Outcome Indicator(s) Original Target Actual Value Values (from Formally Revised Achieved at Indicator Baseline Value approval Target Values Completion or Target documents) Years Indicator 1 : Percentage of annual work program delivered on time Value (quantitative 0 100% - 91% or Qualitative) Date achieved 11/26/2008 11/26/2008 12/31/2013 Comments (incl. % TARGET SUBSTANTIALLY MET achievement) Indicator 2 : Microfinance strategy prepared and adopted Value Microfinance Microfinance strategy (quantitative 0 - strategy prepared prepared and adopted or Qualitative) and adopted Date achieved 12/13/2012 12/13/2012 12/31/2013 TARGET MET Comments The Project provided consulting services to support an existing entity in charge (incl. % of microcredit. The proposed methodology was adopted and the entity (ICC, achievement) further denominated Imembuí Microfinanças) went through an institutional reform. The overall microcredit policy was recognized to be strengthened. Indicator 3 : Participants of job training programs Value (quantitative 0 500 50 25 or Qualitative) Date achieved 11/26/2008 11/26/2008 12/13/2012 12/31/2013 TARGET NOT MET Comments The proposed target was not formally met. However, it is important to note that (incl. % during the Project, the Municipality decided to target the artisanal embroidery achievement) segment, for which 25 was the entire selected population. Indicator 4 : Community center (Clube 21) implemented Value 100% of Clube 21 99% of the works (quantitative 0 works completed; completed; or Qualitative) Clube 21 Management Plan 100 operational prepared, but Clube 21 not operational yet Date achieved 12/13/2012 12/13/2012 12/31/2013 Comments (incl. % TARGET PARTIALLY MET achievement) Indicator 5 : Technology Park implemented 100% of TP works Value 100% of TP works completed (in (quantitative - Park Completed completed; TP 12/13/2013); TP not or Qualitative) operational yet fully operational Date achieved 11/26/2008 11/26/2008 12/13/2012 12/31/2013 TARGET SUBSTANTIALLY MET The indicator is recognized to have been substantially met, because of the Comments following complementary activities, all completed: (i) Innovation law enacted; (incl. % (ii) Strategic Plan developed; (iii) Science and Technology Council established; achievement) (iv) 11 firms already selected; and (v) 3 firms already installed in the Park. As per information provided by the Borrower during the preparation of the ICR, it is supposed to be operational by the end of June/2014. Indicator 6 : Roads constructed Value (quantitative 0 - 8.5km 3.81km or Qualitative) Date achieved 12/13/2012 12/13/2012 12/31/2013 TARGET NOT MET The achievement of the target was not possible due to incomplete counterpart Comments financed works in Km3 neighborhood. Paving and drainage works were (incl. % estimated to have directly benefited 73,930 people, and were conducted in the achievement) following streets and avenues: Agostinho Sangoi (0.882Km); Tunel da Rio Branco (0.24Km); Joao Machado Soares (2.28Km); and Largo da Rodoviaria (0.407Km). Indicator 7 : Roads rehabilitated Value (quantitative 0 3.4km 3.4km or Qualitative) Date achieved 12/13/2012 12/13/2012 12/31/2013 TARGET MET Comments Paving works were estimated to have directly benefited 59,492 people, and were (incl. % conducted in the following streets and avenues: Av. Liberdade (2.131 km); and achievement) Av. Helvio Basso (1.273 km). People in urban areas provided with access to improved sanitation under the Indicator 8 : project Value (quantitative 0 - 1300 0 or Qualitative) Date achieved 12/13/2012 12/13/2012 12/31/2013 Comments TARGET NOT MET (incl. % The counterpart financed integrated urban upgrading and WSS works in Km 3 101 achievement) neighborhood were not completed at the closing date of the Project. Public parks in urban areas implemented and management plans developed and Indicator 9 : adopted 54,831 m2 of parks 38,813 m2 of parks Value implemented; 2 implemented (Jockey (quantitative 0 management plans Club Park); 2 or Qualitative) developed and management plans adopted developed Date achieved 12/13/2012 12/13/2012 12/31/2013 TARGET PARTIALLY MET The achievement of the target was not possible because the Municipality did not successfully and timely conduct the bidding process for the construction of Comments Pallotino Park. Also, the Management Plans that were developed (for the (incl. % Pallotino and the Dos Morros Parks) have not yet been adopted. Jockey Park, achievement) however, is estimated to have directly benefited 27,000 people. Results reported based on quantitative surveys conducted in February 23-27, 2014 include information on the overall satisfaction of the population living in the Park area (70%). G. Ratings of Project Performance in ISRs Actual Date ISR No. DO IP Disbursements Archived (USD millions) Not applicable 1 0.00 Not applicable 2 0.00 3 04/15/2009 Satisfactory Satisfactory 0.00 4 11/23/2009 Satisfactory Satisfactory 0.00 5 04/29/2010 Moderately Satisfactory Moderately Satisfactory 0.00 Moderately 6 02/21/2011 Moderately Unatisfactory 0.035 Unsatisfactory Moderately Moderately 7 07/20/2011 0.035 Unsatisfactory Unsatisfactory Moderately Moderately 8 04/29/2012 1.53 Unsatisfactory Unsatisfactory 9 11/18/2012 Moderately Satisfactory Moderately Satisfactory 4.22 10 07/10/2013 Satisfactory Satisfactory 9.81 11 01/19/2014 Moderately Satisfactory Moderately Satisfactory 11.99* (*) Additional disbursements were made up to the end of the grace period of the loan, amounting for a total of USD 12.20 million. 102 H. Restructuring (if any) ISR Ratings at Amount Board Restructuring Disbursed at Restructuring Reason for Restructuring & Approved Restructuring Date(s) Key Changes Made PDO Change DO IP in USD millions (i) Adjustments to the scope of Project activities due to exchange rate fluctuations; the increase in construction costs; and the delays between Project appraisal, approval and implementation launch; and the transition of municipal administration; (ii) Revisions to the Project’s results framework to reflect the adjustments / reductions in scope of the Project; (iii) Streamlining of indicators to better monitor and capture Project impacts, align 12/13/2012 N MS MS 4.22 with indicators from the other individual Projects, and incorporate core indicators; (iv) Reduction in counterpart funding; (v) Reallocation of loan proceeds between expenditure categories; (vi) Transfer of the coordination of the Project from the General Secretariat to the Secretariat for Strategic Planning and Special Projects (PLANEPE); (vii) Extension of closing date of 12 months, until December 31, 2013. 103 SPECIFIC ICR FOR SANTA MARIA MUNICIPAL PROJECT 1. Project Context, Development Objectives and Design The Santa Maria Project (Santa Maria 2020) was the last of the PDMI Projects to be signed and become effective. It was approved by the Board on December 23, 2008 in the amount of US$13,950,000, the Loan Agreement was signed on March 04, 2010, and the Project became effective on June 02, 2010. At the time of the MTR (mid-2011), all Project activities were still in preparation and no funds had been disbursed. The Santa Maria Project passed through a Level II Restructuring process at the end of 2012 which sought, among other goals, to compensate for the accumulated delays. Unique among the PDMI Projects, Santa Maria was granted a 12 month extension in the implementation period, time essential to reposition the Project within the ambit of municipal priorities and conduct implementation. The Project closed on December 31, 2013, after disbursing 87% of the loan resources. Despite the fact that not all of the planned activities were concluded, significant results were achieved. 1.1 Context at Appraisal Santa Maria is located in the central region of the state of Rio Grande do Sul. Its population had grown steadily since the 1970s and at appraisal had reached 257,938 inhabitants, 96% of whom lived in urban areas (FEE, 2004). Population density of the municipality was 144 inhabitants per Km2. Through participation in PDMI, Santa Maria sought to improve its economic indicators, especially through private sector strengthening. Municipal GDP had reached US$ 757.6 million and the per capita income US$ 3,030, about half of the state average (US$ 6,054). More than 70% of municipal GDP related to service, a significant part (31%) of which corresponded to public sector activities (universities, military, municipal and state agencies). Agriculture and industry made up for 6.7% and 22.6% of municipal GDP, respectively. Industrial activities were mainly in low-value added sectors, such as food processing, and wood furniture. Unemployment rate was nearly 14%. Nearly 15.6% of municipal population was considered poor, compared to the 11.3% of the state capital, Porto Alegre. 1.2 Original Project Development Objectives (PDO) and Key Indicators (as approved) Original PDO. The PDO was to strengthen the capacity of Santa Maria to provide selected infrastructure services and employment opportunities for its population. Key original indicators. The original results framework contained five PDOIs for Santa Maria. These are, for Improved Municipal Management Capacity: (i) Institutionalization of improved sub-project appraisal, fiduciary, social and environmental management processes in the municipal government of Santa Maria; for Increased Local Economic Development Opportunities, (i) Increased local business satisfaction with municipal business environment, and (ii) Increased revenues and sales volumes of supported businesses; and for Improved Infrastructure Service, (i) Reduction in travel times in urban center and rural areas of Santa Maria, and (ii) Improved quality of life of people being resettled from environmentally risky and protected areas. 104 1.3 Revised PDO (as approved by original approving authority) and Key Indicators, and reasons/justification The PDO was not revised. Indicators were revised to better fit the municipality’s monitoring and reporting capabilities, and to better reflect the reduction in the scope and the expected impact of the Project activities 134 . The proposed adjustment also took into consideration the need to streamline indicators for the PDMI, and allow for aggregated results across the Program 135. (see Section 1.6 below). 1.4 Main Beneficiaries The PAD estimate for Project beneficiaries was the population of Santa Maria at appraisal – 258,000 individuals. This estimate was updated to 170,000 in the Restructuring Paper, and the final estimate for direct beneficiaries is 174,625 (the estimated population of Santa Maria living in the areas / neighborhoods targeted by the Project’s infrastructure interventions (IBGE, 2013). 1.5 Original Components (as approved) Component 1: Municipal Strengthening. This component sought to improve the municipality’s capacity to more effectively and efficiently execute projects, with a focus on fiduciary, environmental and social aspects, and improve the quality and efficiency of public services provided by the municipal government. Included (i) Public Service Modernization, and (ii) Project Management. Component 2: Income and Employment Generation. The Project sought to improve the municipality’s capacity to generate employment and income through carrying out of activities to promote entrepreneurship in the educational establishments in Santa Maria; improve recycling and solid waste management as an income generating activity; implement a technological park and improving a Business Innovation Incubator to support business development and research and development. Included (i) Promotion of Work and Income Alternatives, and (ii) Innovation and Technological Modernization. Component 3: Infrastructure Services Improvements. The project planned to carry out activities aimed to improve urban streets and rural roads; to environmentally rehabilitate key water bodies through improving water, sanitation, drainage and paving; and to improve the quality of life of households living in these areas. Included (i) Rehabilitation of urban road infrastructure and Landscaping, (ii) Rehabilitation of Rural Roads, and (iii) Environmental Rehabilitation. 134 For instance, the original indicator on “Rehabilitation of environmental protected areas” was dropped, as there was no baseline or monitoring methodology available. An indicator on “Community members satisfied with improved urban infrastructure in areas of intervention” was introduced in lieu of the original “Community members satisfied with urban transport”, as it did not relate to the Project’s inputs. 135 The original indicator on “Municipal secretariats implementing improved project implementation processes” was replaced by the one on “Improved municipal planning and management capacity through the preparation and adoption of planning tools”. Similarly, and as done in the Project restructurings for the other municipalities, the core sector PDOI on the “Number of direct project beneficiaries” was introduced. 105 1.6 Revised Components Scope tightening: There was substantial alteration of the originally proposed Project activities, under all Components, including: the dropping of the acquisition of IT equipment; the dropping of the expansion of educational facilities, courses and seminars to promote entrepreneurship; the dropping of the provision of TA and equipment to support the solid waste collectors cluster; overall reductions in the urban road improvements; the exclusion of the rehabilitation of rural roads and bridges, as well as of the activities related to the construction of resettlement housing and infrastructure improvements in the Cancela stream. New activities: To compensate the previous reductions, new activities were included, such as: a WSS, Drainage and Solid Waste Master Plan (PLAMSAB), an Aero-photogrammetric Survey, and a Master Plan for IT (PDI); the preparation of a Strategy to promote microcredit, capacity building, and set up of a Multipurpose Community Center; the implementation of two urban parks, and the preparation of environmental management plans for conservation areas. For a more analytical opinion on the importance and impacts of the proposed Project restructuring, refer to the below section 2.2. 1.7 Other significant changes Revised Project costs. Due to delays between Project appraisal, approval and implementation launch (with a corresponding reduced implementation timeline); and to changes in municipal priorities after a political transition, total Project funding decreased from US$ 23.25 to 21.03 million. Bank financing remained constant while counterpart funding decreased from US$ 9.30 to 7.08 million. Reallocation of funds between loan categories. In line with the revised scope and total Project costs above, loan proceeds were reallocated between expenditure categories. Transfer of the coordination of the Project. The UGP was transferred from the General Secretariat to the Secretariat for Strategic Planning and Special Projects (PLANEPE). Extension of closing date. Extended for 12 months, to December 31, 2013. 2. Key Factors Affecting Implementation and Outcomes 2.1 Project Preparation, Design and Quality at Entry See Section 2.1 of the PDMI Program ICR. 2.2 Implementation Major initial delays between Project appraisal, approval and implementation impacted the implementation period. The long intervening period between Project approval by the Board in December 2008, signing of the Loan Agreement in March 2010, and effectiveness in June 2010 left the Project with a total implementation period of only three and a half years. During this interval some of the planned Project activities were undertaken with other funding sources, so the 106 expected results were not majorly impacted. 136 However, the delays led to a short, challenging implementation period, which limited the full achievement of the PDO (as explained in section 3.2 of this ICR, Assessment of Outcomes). The impacts were, among others: (i) The hurry to prepare, and consequent lack of quality, of TORs for consultancy services and of detailed engineering designs for the main Project works ; (ii) The need to tighten the Project scope (refer to Section 1.6); (iii) The lack of punctuality in Bank responses to Borrower requests for non-objections (NOs) between the end of 2011 and the first quarter of 2012, due to the concentrated demands for technical analysis and NOs; (iv) The efficiency of the bidding processes and contract management due to poor quality bid packages. Some of these bidding processes – for example the consultant services for the drafting of a Rural Mobility Plan – were not successful due to the major discrepancy between the reference budget created by the Prefecture and the actual prices submitted by the firms. Similarly, due to the lack of detail in some of the engineering designs, many of the works contracts required corrective amendments during execution. The complex nature of some Project Components and activities. The Santa Maria Project had perhaps the highest concentration of high-complexity activities of the PDMI municipalities, which required a level of accompaniment and technical knowledge that was not always available within the UGP team or the Prefecture overall. These include the plans developed under Component 1 (PLAMSAB, PDMU, and Aerophotogrametric Survey), as well as the activities to support entrepreneurship under Component 2, which additionally demanded a significant level of coordination between the UGP and the other participants, stakeholders, and external partners (Microbusinesses, Technoparque, etc.). Due to this, substantial time and effort on the part of the UGP and the Bank task team itself were required by the project. Political turnover. The initial delays were strongly related with the change of municipal administration which took place in 2008. The Municipal Government which prepared the Project with the Bank in the 2005-2008 period was different from that which took office in the following years (2009-2012), during Project implementation. This change to an extent explains (i) the delay in the administrative process for signing and effectiveness of the LA due to the lack of initial prioritization of the loan by the municipal administration; and (ii) the subsequent delay in initiating Project actions. It took the new administration up to the May 2011 MTR mission, when the Project scope was discussed during the preparation of the restructuring process, to fully get onboard with the Project, becoming comfortable with the Project design and its fit within the administration’s priorities. Format and structure of the UGP. Santa Maria’s UGP was linked with the Municipal Planning Secretariat (PLANEPE). The UGP did not have a large staff, but it was well-connected with other sectors of the Prefecture, including areas responsible for works supervision and for the development of detailed engineering designs (Escritório da Cidade) in, which positively impacted Project implementation. While Santa Maria was working for the first time with external financing organizations, it benefited from the previous experiences of the remainder of the PDMI municipalities, and its learning curve was standard given the characteristic limitations of the 136 This was the case with activities for “income generation through the improvement of recycling and solid waste management” and the “improvement of the Business Innovation Incubator”, the latter supported by the Federal University of Santa Maria. 107 PDMI Program overall. The main differentiating factors for the positive performance of Santa Maria were (i) the direct linkage between the UGP/PLANEPE and the Mayor’s Cabinet, as well as the priority eventually given to the Project – especially during the 2011-2013 period; and (ii) the Project’s management model, with a Project Manager position fully dedicated to Project coordination. As a result, the Project had simultaneously the necessary centralization and the capacity for intergovernmental interaction for adequate distribution of tasks and responsibility. Project restructuring. The Level II restructuring process was successful. Beyond the benefits experienced by all the PDMI Projects – including adjustments to and standardization of the Results Framework, scope tightening (refer to section 1.6), and redefinition/reduction of the municipal counterpart contributions – Santa Maria’s experience in particular was marked by: (i) It is an example, on the part of the Bank, of flexibility and capacity to adaptat to the priorities of the municipal administration. 137 This was the preponderant factor in guaranteeing the implementation of the Project, especially given the circumstances of initial political turnover; (ii) The expanded scope of Component 1 increased the potential impact of the Project on the institutional development of the municipality (refer to section 1.6); (iii) Scope changes under Component 2 reflected a change of approach by the administration: instead of supporting actions aimed at promoting employment and income through education, as originally planned, the municipality opted to more directly stimulate the private sector, with introduction of activities support solidarity microcredit and the craft sector; (iv) Changes in Component 3 reduced the scope of the Project. Activities excluded were the rehabilitation of rural roads, a decrease in the total amount of roads to be rehabilitated, and activities under the environmental rehabilitation subcomponent. Care was taken to maintain the significant Project impacts, including, for example, the improvement of connectivity in the Eixo Norte-Sul 138; (v) The 12-month extension of the Project closing date (until December 31, 2013) allowed time to overcome the initial implementation delays. 2.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization M&E design and implementation. The original Santa Maria PDOIs were few, and appropriately reflected the main impacts intended through the originally proposed activities. The revision of these indicators during the restructuring process was due to the change in scope alterations of the Project. An indicator was added to measure improvements in capacity to plan and manage the municipality, as well as one to reflect the major results of Component 2 and 3, through satisfaction surveys to beneficiaries. Like the PDOIs, the IOIs were defined from conception as few and simple indicators to accompany and monitor implementation of each component. Nonetheless, M&E did not prove to be an effective instrument during implementation. The Bank failed to correctly evaluate, at entry 137 This issue was observed and recorded by the Borrower on several occasions during the preparation of the Santa Maria Project May 2014 Final Evaluation Report. 138 These works are intended to solve a historical problem of connectivity between two of the densest areas of the city (North and South). 108 and during implementation, the lack of M&E culture on the part of the Borrower, as well as their limited technical and institutional capacity to carry out monitoring. Although capacity-building workshops (during Project preparation) were carried out and the Task Team provided guidance as part of regular Project supervision 139 , these proved insufficient. A more structured capacity- building or technical assistance for M&E during implementation would have been helpful. Overall performance of Santa Maria in conducting M&E. Despite the above challenges, Santa Maria worked well within its capacity for M&E. The following tasks were completed by Santa Maria: (i) Bi-annual progress reports, despite delays and/or moderate shortcomings, were appropriately delivered; (ii) Contracting and supervising the consulting services for the development of its Independent Project Evaluation, as well as for the Program’s overall Consolidated Evaluation; (iii) Conducting of an internal evaluation workshop, as well as qualitative and quantitative surveys, which provide reliable information on the Project’s results; and (iv) Participation in the joint Stakeholder Evaluation Workshop (conducted in November 2012), and actively contributed during the ICR discussion process held through April 2014. 2.4 Safeguard and Fiduciary Compliance Safeguard Aspects. 140 Santa Maria has correctly conducted the social and environmental safeguards procedures for the Project, including the preparation of a Simplified Involuntary Resettlement Plan. However, due to delays in the environmental improvements of the Km 3 neighborhoods (financed through counterpart PAC investments) relocation of 4 families was still pending at Project closing. Given the above, Santa Maria’s compliance with safeguards was rated Moderately Unsatisfactory at Project closing. The actions still in progress in Santa Maria will demand continued supervision on the part of UGP staff to ensure compliance with the simplified Resettlement Plan. On the part of the Bank, continued accompaniment will also be necessary. During the April 2014 Post-closing mission, it was agreed that the UGP would update an action plan and send frequent reports to the Bank on its progress until its effective completion. The second of these reports was sent May 2, 2014 and the resettlement is scheduled to be completed by September 2014. Financial Management (FM). The FM arrangements in Santa Maria were overall Satisfactory throughout the life of the Project. The implementing agency addressed most of the shortcomings identified during financial management supervision missions, showing a clear and progressive improvement within the FM arrangements whenever any issue was present, allowing timely and reliable provision of information required to manage and monitor the implementation of the project: (i) budget was realistic and was properly executed, (ii) staff were trained on Bank's processes, (iii) efficient internal control processes were in place, (iv) Financial Management Information Systems (FMIS) were in place, with timely submission of IFRs, and (v) external audit reports with an unqualified opinions were issued by auditors. Procurement. While the UGP itself was fairly capable and well-staffed, having internally overcome initial difficulties in dealing with Bank’s culture and procedures, Santa Maria faced the very particular challenge of convincing other areas of the Prefecture—in particular the finance, engineering and legal teams and the Bidding Commission—that there was no conflict between 139 In various aide-memoirs, there is mention of discussions on the format, frequency, content and importance of progress reports. There are also records of technical discussions on indicators. 140 Details are in Section 2.4 of the Overall Program ICR. 109 the guidelines and procedures of the Bank and the National and State specific guidelines 141 . Additionally, the UGP experienced particular difficulties in the development of cost estimates and the evaluation of proposals vis-à-vis the Bank approach to the procurement of works. Both of these interfered with Project implementation, many times lengthening internal processing and requiring the frequent participation of the Bank in clarifying, and in some cases invalidating bids. Other previously-mentioned aspects include: (i) the delay in project startup had implications on the technical quality of the procurement-related documents, as well as on the Bank’s capacity for timely response; and (ii) the fact that the contracts – especially works– had to undergo various amendments, reflecting the inadequately detailed designs. None of the above issues constituted misconduct or lack of compliance. 2.5 Post-completion Operation/Next Phase Activities pending completion & Safeguards follow up. Refer to section 2.4. Technical and institutional provisions & Project Management Unit. Towards the end of the Project’s implementation period, the Prefecture of Santa Maria underwent an important administrative reform: the old Office of the City (Escritório da Cidade) was converted to a Planning Institute (Instituto do Planejamento) to integrate research and planning, while the Secretariat of Urban Development took over leadership of executive issues including bidding, works, works supervision, and project analysis. This change led to more efficient municipal management, contributing to diminished risks to the continuity and sustainability of the results of Project. The UGP is not expected to remain active after Project closing, though the Prefecture has taken steps to help assure Project sustainability. Part of the UGP staff has been or will be reappointed to other key areas for the Prefecture, including the Planning Institute. Key activities and actions requiring specific arrangements for management and operation were assigned to the relevant municipal sector (e.g. Jockey Park will be managed by the Secretary of Sports and Leisure). O&M. Section 4 of this ICR presents detailed info on applicable post-completion aspects related to O&M of the investments supported by the Project. Budget provisions and other means of continuing and/or sustaining the Project’s results. The pending counterpart investments in the Km3 neighborhood are already contracted through PAC. According to the information provided by the UGP during the April 2014 mission, physical progress of the work was as follows: 71% of the drainage services were concluded; 42% of the paving services were concluded; 16% of the water network services were concluded; and 13% of the services for the sanitation network were concluded. The Prefecture has demonstrated their commitment to the conclusion and continuation of the post-closing Project actions, a fact confirmed by their provision of supplementary (extra- counterpart) resources of R$ 473 thousands, dedicated to: (i) equipment for the operations room 141 Reluctance and questioning was frequent regarding perceived disconnects between the bidding and contracting rules of the Bank and those of the Brazilian national government (Lei 8666-93) and the recommendations of the internal audit tribunals of the state (Tribunal de Contas do Estado – TCE / RS) and the country (Tribunal de Contas da União –TCU e Controladoria Geral da União – CGU). 110 of the Prefecture, which was only partially financed by loan resources; (ii) the development of a Final Evaluation Report for the Project and the Program; and (iii) the reform of the Community Center/ Clube 21. 3. Assessment of Outcomes 3.1 Relevance of Objectives, Design and Implementation Rating: Modest Project investments aimed to: (i) strengthen capacity of the Prefecture in planning, decision- making, obtaining financial resources, and the execution of management, water, sanitation, and mobility actions; (ii) generate job and income opportunities (by fostering innovation through, for example, the Parque Tecnológico and the Microcredit program); (iii) improve urban mobility (including the connection between the North and South parts of the city); and (iv) promote environmental preservation, improve socio-economic integration, and improve quality of life in low-income communities. These investments remain priorities of the Municipality 142 , as the Borrower affirmed during ICR discussions. As described in section 3.1 of the overall PDMI ICR, the design of the Project also shows a close fit with Brazil’s national priorities in terms of supporting municipal infrastructure. The proposed Modest rating is due to: (i) a weaker link with the priorities defined for World Bank engagement under the current CPS; (ii) reduced relevance and efficiency of Project implementation due to the failure to achieve Program-wide institutional arrangements or transformational impact; (iii) the substantial implementation support needed from the Bank; and (iv) the variety of funding options (including national sources) apart from Bank financing available for such a portfolio. 3.2 Achievement of Project Development Objectives Rating: Substantial The PDO was to strengthen the capacity of Santa Maria municipality to provide selected infrastructure services and employment opportunities for its population. 3 out of 4 PDOIs were fully achieved: PDOI # 2, on satisfaction with the results of Component 2; PDOI #3, on satisfaction with the results of Component 3; and PDOI #4, on the direct number of Project beneficiaries. PDOI # 1 (related to Component 1) on planning instruments prepared and adopted by the Municipality was substantially achieved. With regard to the IOIs, 4 out of 9 IOIs were achieved, 2 of which were substantially achieved; 2 out of 9 IOIs were partially achieved; and 3 out of 9 IOIs were not achieved. Santa Maria presented reliable quantitative and qualitative information as part of their Final Project Evaluation Report, which was an important input for this analysis. This included: (i) a sample survey with the beneficiaries of infrastructure actions 143 ; (ii) focus groups, in-depth interviews, and a workshop conducted with indirect and direct beneficiaries, managers, involved staff, and suppliers. 142 Mobility, for instance, is a theme that has been at the center of attention and discussions held in Brazil in the last two years. It was, for example, the object of extensive public demonstrations in mid-year 2013. 143 The sample is statistically significant, as 384 interviews were conducted with Santa Maria residents (of over 18 years of age). The sample was calculated with the population of the municipality as a base, with a level of confidence of 95% with a 5% plus or minus margin of error. 111 The sample survey demonstrates the achievement of the goals in terms of satisfaction with regard to Component 3. Focus groups with the beneficiaries of Component 2 actions—the Microcredit program and the Capacity-building and Technical Assistance in the artisanal sector—indicate a level of satisfaction of 100% and 90.5%, respectively. With regard to the qualitative evaluation (responses on a scale of 1 to 5) conducted with the staff and managers on the Project results, the Project overall received an average of 3.85 points, very close to “good or satisfactory” (4); the components themselves received an average of 3.90 for Institutional Development, 3.66 for Generation of Work and Income, and 4.0 for Infrastructure Improvements. Component 1 investments amounted to US$ 1.69 million (almost 10% of the total spent through Project completion), and were fully financed by the Bank. Two aspects distinguish the Santa Maria Project from the majority of the other PDMI Projects with respect to Component 1: (i) the majority of funding was allocated to actual investments rather than Project management; and (ii) Four strategic planning instruments were prepared to directly target municipal management capacity and directly linked with the remaining portfolio of Project actions (notably the infrastructure improvements under Component 3). These instruments included the Urban Transport / Mobility Master Plan (PDMU) and the Integrated WSS, Drainage and Solid Waste Management Master Plan (PLAMSAB). These plans have already begun to show positive short and medium-term impacts on the quality and efficiency of public services provided by the Municipal Government. The directives of PDMU, for instance, have already been applied to guide the preparation of the bidding process for the renewal of the Santa Maria public transportation concession. PLAMSAB (though not yet passed as a Municipal Law) provided financial information on CORSAN’s revenues that will be fundamental in guiding the municipality through upcoming negotiations on the renewal of the WSS concession. Apart from the contributions made by UFSM and the private sector (in both the Technology Park and the Microcredit Program), Component 2 was fully financed by the Bank, with a total investment of US$ 2.58 million (14.5% of the actual Project investments), the major part of which (95%) allocated to construction of the Technology Park campus and the rehabilitation of the Clube 21 Community Center. An important part of Component 2’s contribution to the achievement of the PDO is linked with the opportunity which it gave to the Municipality, through the pilot experiences supported by the Project (some of low cost, such as the support to the Microcredit Program 144 and the embroidery-sector artisans), to deepen the public-private partnerships, in order to widen the capacity for entrepreneurship and the augment the income of the population 145. Finally, Component 3, financed by the Bank and counterpart funding, constitutes the bulk of Project investments (US$13.47 million, 76% of the total), and was targeted at strengthening the capacity of the Borrower to provide selected infrastructure services. There were some shortcomings, including: 144 The Project earmarked a small investment (BRL 93,700) for hiring consultants to develop a methodology to be applied by the ICC/Imembuí. The loan institution nevertheless strengthened its management structure and completed 82 solidarity microcredit transactions. Overall, given the results of the sampling survey conducted, the initiative was successful as an exercise in social inclusion. The default rate in repayment of micro credits was reduced to near zero; restrictions were lifted on further credit for existing borrowers; and some microbusinesses showed improvement and expanded their activities. The abovementioned survey indicated 100% satisfaction by the beneficiaries. 145 For more on Component 2, refer to Annex 2 (Outputs by Component). 112 (i) The Borrower was unsuccessful in implementing some activities, such as Palloti Park and the widening of Rigoberto Duarte Street. Due to factors relating to implementation time and the failings of the bidding process, these activities were never initiated; (ii) The actions relating to urban, social, and environmental improvements in the Km3 area were not completed at the time of Project closing. This comprised the achievement of the goals relating to the construction and rehabilitation of roads and WSS provision. However, by the end of the Project, (i) Jockey Park was implemented, with an area of 38,813 m2 and benefitting approximately 27,000 people; (ii) 7.2 Km of roads for urban mobility were constructed and/or rehabilitated; and (iii) the Prefecture developed 2 management plans for the city’s parks. All the above confirms the Substantial rating proposed for efficacy. 3.3 Efficiency Rating: Substantial The economic analysis of the Santa Maria Project was conducted considering the same Component 3 activity (upgrading of public roads) analyzed during Appraisal. Actual costs of this activity total US$ 10.59 million, 60% of the total project cost. The same approach/methodology employed during Appraisal, the Highway Design and Maintenance Standards Model (HDM), was used for this benefit-cost analysis for roads investments. The Component 2 activity considered at Appraisal, construction of a Commercial Center, was not considered here as it was removed at restructuring. Overall Santa Maria Project Beneficiaries. The Santa Maria Project’s road upgrading activities reached more beneficiaries than the Appraisal targets. Table 10 – Projected versus actual beneficiaries Components Projected beneficiaries Actual Beneficiaries 146 Road upgrading 257,938 273,000 The upgrading of public roads investments were expected to rehabilitate and improve road infrastructure and landscaping in the city, prioritizing the streets used by public transport and non-motorized transport users. Road and infrastructure improvements were to include, inter alia, traffic safety improvement, pedestrian facilities and landscaping. This would include activities such as: paving/widening/rehabilitation, resealing, signaling, and lighting of 19 Km of urban streets; construction, paving, sealing, and signaling of the tunnel in the Rio Branco Avenue and its connection to the city’s road network; and rehabilitation, landscaping, extending, paving, resealing, signaling and widening of about 800 meters of access roads to the intra-urban bus terminal and neighborhood access streets. The expected benefits of these investments included: improved transport services and access to the bus terminal; reduction of the number of urban transit accidents and reduction in emission of pollutant gases. 146 IBGE estimates for 2013 population. 113 The actual activities consisted of: (i) paving/widening/rehabilitation, resealing, drainage, signaling, and lighting of 6.53km of urban streets; (ii) construction, paving, sealing, and signaling of the tunnel in the Rio Branco Avenue and its connection to the city’s road network; and (iii) rehabilitation, landscaping, extending, paving, resealing, signaling and widening of about 400 meters of access roads to the intra-urban bus terminal and neighborhood access streets. The analysis of the actual investment cost per Km for road upgrading interventions shows per- kilometer costs lower than the benchmark for similar interventions. Table 11 – Comparison of Unit Costs per Intervention Intervention Cost per Km Benchmark Cost per Km Road upgrading 2.44 (BRL million/Km) 2.45 147 (BRL million/Km) On the basis of evaluation described and considering the data available, the evaluation showed positive results for the EIRR (between 13% and 30%), with an average of 22.1%. This is slightly lower than the 29.1% evaluated at appraisal, but still high for this type of intervention. Unfortunately, the HDM method ex-ante and ex-post benchmarking was undermined by changes, during implementation, of the roads selected for priority upgrading. Positive results were confirmed by the sample surveys. An average of 80.4% satisfaction was recorded for people living in or familiar with the intervention areas. A satisfaction rating of 98.1% was recorded for the Hélvio Basso Ave. works, one of the project’s largest investments. The economic evaluation shows Substantial results achieved through the Santa Maria Project investments, higher than originally expected. 3.4 Justification of Overall Outcome Rating Rating: Moderately Satisfactory Based on the Project’s relevance (Modest), efficacy (Substantial), and efficiency (Substantial), the proposed overall outcome rating is Moderately Satisfactory. 3.6 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops For a summary of the results of the joint Stakeholders Workshop, conducted in November 2012, see section 3.6 of the overall Program ICR, as well as Annex 6. 4. Assessment of Risk to Development Outcome Rating: Significant For further exposition on this topic, please refer to section 2.5 (Post-completion) of this ICR. Risk that the knowledge acquired by the UGP will not be internalized by the Prefecture. This risk is evaluated as low. Apart from the aspects mentioned under Section 2.5 of this ICR with regard to staff redistribution, the Borrower’s Final Evaluation Report notes the interdisciplinary nature of the Project as well as the systematic supervision adopted by the Bank as lessons they have 147 National Association for Public Transportation (ANTP) – Information System on Urban Mobility – 2011 Report – launched in December/2012. General parameter for average cost for construction of urban roads. 114 internalized and will replicate. Risk that the directives and recommendations of the planning instruments will not be adopted. This risk is considered between moderate and substantial: (i) PDI: The directives of the plan148 are being gradually adopted. However, continuity of the actions of this Plan is highly dependent on the specific interests of the administration, and will thus be susceptible to political turnover; (ii) Aero-photogrammetric survey: this is an objective input, and already in use by the urban planning team of the Prefecture. It will serve as the basis for the creation of a multipurpose cadaster, for which the contract is already underway. (iii) PLAMSAB: This is a complex plan, a legal requirement for municipalities, which provides inputs for decision making on the part of the Municipality in areas such as WSS services, drainage and solid waste. Its continued successful implementation and full utilization, however, depends on participation and ownership on the part of the community, approval as municipal law (still pending), and political will; (iv) PDMU: as above, success will depend on political and community backing. Unlike the previous, however, this plan was the subject of intense discussion and participation on the part of both the Prefecture staff and the community at large. Risk to the sustainability of results and O&M of Component 2 investments. (i) Support to the artisanal embroidery segment: Actions in this sector were modest, including studies, a business plan, a marketing plan, development of a brand, and capacity-building for 25 artisans. Another vulnerable point is the lack of an organization, such as an association or cooperative, for mutual support in commercialization and other activities. (ii) Clube 21: Investments in infrastructure were not accompanied, during implementation, by adequate planning for management, operation, and maintenance. Thus, it remains unclear how the linkages between the various municipal secretaries involved will cooperate to guarantee maintenance. Although the idea of creation of a “Friends of the Club” Association should contribute to shared governance of the center, clear rules regarding use, contribution of users and supporters, and the financial sustainability of the center are lacking. The Prefecture is preparing a management, operation and maintenance plan to guarantee the site’s resources and social control by the community, and will be responsible for the acquisition of goods for the center. (iii) Microcredit: the Project financed to the preparation of the methodology for solidary credit, based on best practices for financing of formal and informal micro-entrepreneurs. In view of the results achieved (refer to section 3.2), the sustainability of this action is likely, especially with the inclusion of a new methodology to financially and institutionally strengthen ICC (the credit entity supported by the Project). (iv) Technology Park: Although the Park is not yet fully operational, there are strong indicators for the sustainable good governance of the Park: (i) the Innovation law was enacted; (ii) a Strategic Plan was developed; (iii) a Science and Technology Council was established; (iv) 11 firms have been selected for tenancy; and (v) 3 firms are already installed in the Park. As per information provided by the Borrower during the preparation of the ICR, the Park will be operational by the end of June 2014. Risk to the sustainability of the results and O&M for Component 3 investments (Urban roads and Parks). Aspects in the post-completion phase relate to the municipality’s ability and resources to properly perform O&M for streets and Jockey Park. The Municipality is drafting O&M plans for monitoring of the streets and has made investments in the acquisition of machinery to support 148 Including organizational reform, career plans for the IT area, the manual for acquisition of IT equipment; software standardization; and the norms for use of the internet. 115 maintenance. However, the question of Jockey Park remains, which will require not only O&M but substantial further investments to conclude the second phase of the Park. The Prefecture is drafting an O&M plan for the Park. At the Workshop conducted in Santa Maria, quantitative evaluation of staff opinions on the aspect of “Sustainability” showed an average rating of 2.61, between “unsatisfactory” (2) and “more or less satisfactory (3). The component with the best score in terms of sustainability was Component 3, Infrastructure Improvements, with 3.5 points, and the lowest was Component 1, Institutional Development, with a score of 1.42. Based on a weighted average 149 of the above, Risk to Development Outcome for the Santa Maria Project is considered Significant. 5. Assessment of Bank and Borrower Performance Bank Performance is assessed only for the overall Program. Performance is assessed as Moderately Satisfactory at Entry, Moderately Satisfactory at Supervision, and Moderately Satisfactory overall. For details, see Section 5 of the PDMI Program ICR. 5.2 Borrower Performance Rating: Moderately Satisfactory The performance of the municipality of Santa Maria during Project implementation was divided into two distinct phases. At the start, there was a lack of prioritization reflected in major initial delays. However, after the Municipal Government reviewed the Project and the Project was restructured in line with administration priorities, implementation effectively began. After this point, marked by the mid-2011 MTR mission, the commitment and involvement of the Government were noteworthy. Not only was there recognition and integration of the Project in the agendas of the various municipal Secretariats, but the municipal leadership was directly involved with the Project. This was evidenced by the high level dialogue with the Bank during the actual implementation and completion periods. There was, on the part of some sectors of the Prefecture (Finance and Procurement Commission, for example), difficulties or reluctance to recognize the rules and directives of the Bank with regard to procurement. However, these did not constitute lack of compliance but rather lack of experience. Finally, with respect to the counterpart allocation, although the Km 3 works were not concluded, the PAC resources to do so have been assured and the Borrower is committed to completion of the work, including post-closure reporting to the Bank. (b) Implementing Agency or Agencies Performance Rating: Moderately Satisfactory In Santa Maria the implementing agency was the UGP, linked to the Municipal Secretariat for Strategic Planning and Special Projects (PLANEPE). The capacity of the UGP was stronger than those of the other PDMI municipalities. It was the commitment and good performance of the UGP that allowed the much-improved progress on Project activities starting in mid-2011, as well 149 Amounts invested, relevance of the supported activities, and specific results achieved were considered. 116 as the satisfactory management and execution of accumulated planning, bidding, contracting, and contract supervision activities in a short period of time. However, the UGP shares with the Government the above-mentioned shortcoming related to difficulties in internalizing Bank’s specific guidelines and procedures. There were also moderate shortcomings during the last year of implementation related to flawed engineering designs and difficulties in supervision of consultant contracts (refer to Section 2.2). (c) Justification of Rating for Overall Borrower Performance Rating: Moderately Satisfactory After overcoming initial delays, both the Prefecture and the UGP demonstrated commitment and hardworking dedication to the Project, which led to the successful results achieved. Based on the ratings for Government performance (Moderately Satisfactory) and Implementing Agency performance (Moderately Satisfactory), the proposed rating for Borrower performance is Moderately Satisfactory. 117 Annex 1. Project Costs and Financing: Project Costs and Financing: PELOTAS (a) Project Cost by Component (in USD Million equivalent) Actual Total Percentage Appraisal Estimate at (Spent Percentage of of Component Estimate Restructuring through Appraisal Restructuri (US$m) (US$m) Project ng Closing) (US$m) I. Municipal 4.31 3.74 1.14 26% 30% Strengthening I.1.Public Service 3.32 3.64 1.06 32% 29% Modernization I.2. Project 0.99 0.10 0.08 8% 80% Management II. Employment and 2.18 1.24 0.94 43% 76% Income Generation II.1. Strategies, Cluster Support and 1.25 1.04 0.94 75% 90% Access to Micro- Credit II.2. Technology Park 0.93 0.20 0 0% 0% III. Infrastructure 24.26 27.82 23.05 95% 83% Service Improvements III.1. Urban and Road 17.76 23.48 20.57 116% 88% Upgrading III.2. Rehabilitation of Rural Road 3.01 3.38 1.87 62% 55% Infrastructure III.3. Water and Sanitation 3.49 0.95 0.61 17% 64% Improvements Total Project Cost 31.45 32.8 25.13 80% 77% Front End Fee 0.05 0.05 0.05 100% 100% Grand Total 31.50 32.85 25.18 80% 77% (b) Financing Actual/Latest Appraisal Estimate Percentage of Source of Funds Estimate (US$ millions) Appraisal (USD millions) Borrower 12.60 14.09 111.83% International Bank for Reconstruction 18.90 18.90 100.00% and Development Total 31.50 32.99 104.73% 118 Project Costs and Financing: BAGÉ (a) Project Cost by Component (in USD Million equivalent) Actual Total Appraisal (Spent through Percentage of Component Estimate Project Closing) Appraisal (US$m) (US$m) I. Municipal Strengthening 1.09 0.84 77% I.1.Public Service 0.45 - - Modernization I.2. Project Management 0.64 - - II. Employment and Income 0.32 0.25 78% Generation II.1. Strategies, Cluster Support and Access to 0.32 - - Micro-Credit III. Infrastructure Service 9.52 10.34 109% Improvements III.1. Urban and Road 4.34 - - Upgrading III.3. Water and Sanitation 5.18 - - Improvements Total Project Cost 10.93 11.43 105% Front End Fee 0.02 0.02 100% Unallocated 0.05 - - Grand Total 11.00 11.45 104% (b) Financing Actual/Latest Appraisal Estimate Percentage of Source of Funds Estimate (USD millions) Appraisal (USD millions) Borrower 4.40 4.96 113% International Bank for Reconstruction and 6.60 6.49 98% Development Total 11.00 11.45 10% 119 Project Costs and Financing: URUGUAIANA (a) Project Cost by Component (in USD Million equivalent) Actual Total Appraisal (Spent through Percentage Component Estimate Project Closing) of Appraisal (US$m) (US$m) I. Municipal Strengthening 0.84 0.75 89 I.1.Public Service Modernization 0.44 - - I.2. Project Management 0.40 - - II. Employment and Income 1.19 0.07 6 Generation II.1. Strategies, SME and Cluster 0.55 - - Support II.2. Support to Urban and Rural 0.64 - - Agriculture III. Infrastructure Service 9.30 3.52 38 Improvements III.1. Urban Road Upgrading 6.80 - - III.2. Drainage and Sewer Works 1.28 - - III.3. Integrated Solid Waste 1.22 - - Management Total Project Cost 11.34 4.34 38 Front End Fee 0.08 0.02 25 Grand Total 11.42 4.36 38 * No disaggregated data by subcomponent was informed by the Borrower. (b) Financing Actual/Latest Appraisal Estimate Percentage of Source of Funds Estimate (USD millions) Appraisal (USD millions) Borrower 4.59 1.66 36 International Bank for Reconstruction 6.83 2.70 40 and Development Total 11.42 4.36 100 120 Project Costs and Financing: RIO GRANDE (a) Project Cost by Component (in USD Million equivalent) Actual Total (Spent Appraisal through Percentage of Component Estimate Project Appraisal (US$m) Closing) (US$m) I. Municipal Strengthening 2.01 0.47 23% I.1.Public Service Modernization 0.84 - - I.2. Project Management 1.17 - - II. Employment and Income 0.22 0.24 109% Generation II.1. Strategies, SME and Cluster 0.22 - - Support III. Infrastructure Service 11.09 10.81 97% Improvements III.1. Urban Road Upgrading 10.91 - - III.2. Urban Renewal and 0.18 - - Environmental Rehabilitation Unallocated 0.16 0.00 - Total Project Cost 13.32 11.52 86 % Front End Fee 0.02 0.02 100% Grand Total 13.50 11.54 85% (b) Financing Appraisal Actual/Latest Percentage of Source of Funds Estimate Estimate Appraisal (USD millions) (USD millions) Borrower 5.40 4.38 81% International Bank for Reconstruction 8.10 7.16 90% and Development Total 13.50 11.54 85% 121 Project Costs and Financing: SANTA MARIA (a) Project Cost by Component (in USD Million equivalent) Actual Total (Spent Appraisal Estimate at through Estimate Percentage Percentage of Component (USD Restructuring Project of Appraisal Restructuring (USD millions) Closing) millions) (USD millions) I. Municipal Strengthening 2.02 1.84 1.69 84% 92% I.1.Public Service 0.95 - 1.64 172% - Modernization I.2. Project Management 1.07 - 0.05 5% - II. Employment and Income 4.00 2.57 2.58 65% 100% Generation II.1. Promotion of Work 2.00 - 0.76 38% - and Income Alternatives II.2. Innovation and Technological 2.00 - 1.82 91% - Modernization III. Infrastructure Service 17.20 16.59 13.47 78% 81% Improvements III.1. Rehabilitation of Urban Road Infrastructure 7.04 - 10.59 150% - and Landscaping III.2. Rehabilitation of 2.70 - 1.93 71% - Rural Roads III.3. Environmental 7.46 - 0.95 13% - Rehabilitation Total Project Cost 23.22 21.00 17.74 76% 84% Front End Fee 0.03 0.03 0.03 100% 100% Grand Total 23.25 21.03 17.77 76% 85% (b) Financing Appraisal Estimate at Actual / Latest Source of Funds Estimate Restructuring Estimate Percentage of Appraisal (USD millions) (USD millions) (USD millions) Borrower 9.30 7.08 5.57 78.67% International Bank for Reconstruction and 13.95 13.95 12.20 87.46% Development Total 23.25 21.03 17.77 84.50% 122 Annex 2. Outputs by Component Outputs by Component: PELOTAS (as of 12/31/2013) COMPLETED ONGOING COMPONENTS, SUBCOMPONENTS AND STATUS ACTIVITIES I. Municipal Strengthening Acquisition of 25 vehicles to support the supervision of the X Municipality. Consulting services to support 6 projects and audit executed. X UAP. Consulting services to develop a GIS and GED systems implemented for GIS, as well as an electronic development of Multipurpose Cadaster, to X system for the management of improve public management of the official documents (GED). municipality. Development of 6 detailed design Management and implementation of 2 units. projects for paving of “great avenues” (Fernando Osório, X Domingos de Almeida, Leopoldo Broldi, Ferreira Vana, 25 de Julho, Salgado Filho). Public Sector Modernization Capacity-building for 2052 employees, Program – PMAT, including the construction of a Strategic Management acquisition of equipment (IT and System (SGE), acquisition of furniture and furniture), training of 2,052 X equipment. Implementation of PGPQ and municipal staff, and a MBC. management system (SGE) - (CPF). The construction of 5,200 m of Construction of 5,200 meters of pipeline and pipeline, and installation of acquisition of pump groups. X automated water supply pumps (CPF); Consulting services to support 1 report developed. X Project management; audits, etc. Consulting services to develop a 1 plan developed, and projects executed for WSS and drainage Master Plan X four pumping stations. (CPF). II. Employment and Income Generation Construction and acquisition of Area for classification, washing, packaging, X equipment for a Processing and and marketing of agricultural products from 123 (as of 12/31/2013) COMPLETED ONGOING COMPONENTS, SUBCOMPONENTS AND STATUS ACTIVITIES Packing House Facility to support farmers organized in cooperatives in the the agro-industrial sector. town of Monte Bonito. 60 families benefited. Municipal Micro Credit Program 612 micro entrepreneurs were benefited. X (CPF) 383 peddlers and 217 walking vendors Construction of a commercial benefited. 100 of the 600 persons targeted facility for the relocation of street X were not removed to the Shopping Popular vendors (Shopping Popular and since they had several stalls or changed their Camelodromo). routes. Consulting services to develop a 1 Plan developed. X LED Strategy (PEDL); III. Infrastructure Service Improvements 29.6 Km of rehabilitated streets – 29.6 km of roads were rehabilitated. asphalt layering, drainage, X signaling, landscaping; 10.6 Km –TSDI X 10.6 km of neighborhood roads paved. 6.1 Km – new paving, drainage, Rehabilitation of 6.1 km of roads. sanitation, signaling, and X landscaping of an avenue and 4 streets Replacement of pavement, widening of Rehabilitation of Dom Antonio sidewalks, placing of hydraulic tile, Zattera Park and historical X “encanteiramento”, street furniture, buildings; phytosanitary treatment, tree planting and lighting. Rehabilitation of 7.5 Km of Rehabilitation of 7.5 km of roads. “Great Avenues / Fernando Osorio” – paving, drainage, X sanitation, signaling, and landscaping Rehabilitation of 3.2 Km of Rehabilitation of 3.2 km of roads. Ferreira Viana Avenue – new X paving, drainage, sanitation, signaling, and landscaping; Rehabilitation of the Lake Rehabilitation of 2.0 km of sidewalks. X Waterfront (Laranjal) – 2.0Km; Construction, rehabilitation and/or 12 bridges constructed. X expansion of 12 rural bridges. Water supply system and water Implementation of 20km of network for 600 X treatment facility in rural areas families. 124 (as of 12/31/2013) COMPLETED ONGOING COMPONENTS, SUBCOMPONENTS AND STATUS ACTIVITIES (20 Km & 600 families benefiting); Capture of raw water from the Pelotas River, Construction of a water main X construction of 3,200 meters of pipeline to (3,200 m) (CPF); augment by 10% treated water reserves. Renovation of 3 historic buildings Restoration of 3 historic buildings. X (CPF – Monumenta Program); Construction of bays for bus stops Construction of 44 bays, 38 shelters, 79 – 44 bays, 38 bus stops, 79 access accessibility ramps, and 2 routes widened. X ramps, widening of 2 sidewalks (CPF – PRO-MOB Program); Acquisition of machinery for 11 trucks, 3 graders, and 3 backhoes street and road maintenance (CPF X acquired. – PRO-VIAS) Paving of Sao Paulo street – 1 Km Rehabilitation of 1.0 km of roads. – paving, drainage, and signaling X (CPF); Paving (TSDI) of 2.9 Km of Rehabilitation of 2.9 km of roads. X streets – CIDE (2007 /1) (CPF); Other TSDI – 7.5 Km of streets Rehabilitation of 7.5 km of roads. X (CPF) 125 Outputs by Component: BAGÉ (as of 12/31/2013) COMPLETED ONGOING COMPONENTS, SUBCOMPONENTS AND STATUS ACTIVITIES I. Municipal Strengthening WSS Master Plan (counterpart) Master Plan and User Cadaster water and sanitation X and Cadaster (CPF) prepared and approved. Contracting of the UAP Executive Secretary for the first Contracting of UAP Executive X semester of 2011. Covers meetings and reports Secretary submitted during this administrative period. Training of UGM members in financial management, UGM Capacity-building X MS Project and acquisitions. Consulting services to complete External Audit of the Consulting services for external Projeto Rainha da Fronteira for 2 years of program X audit execution and the Grace Period, observing accounting/financial statements. Final Program Evaluation Qualitative and quantitative evaluation of development X of PDMI actions to produce PDMI Final Evaluation Reports. Project Disclosure Creation and execution of Media Plan. X (CP 100%) IT Equipment Acquisition of 2 computers for UGM. X (CP 100%) Vehicle Acquisition of 1 vehicle for site visits. X (CP 100%) II. Employment and Income Generation PDE – Economic Development Creation of Economic Development Plan with a long- X Plan term development vision (20 years). PEE – Plan for Business Advisory services for micro and small businesses, Expansion X involving general, technological, and organizational aspects. 40 micro-entrepreneurs trained. Executive Projects Creation and application of a Business Plan and X Executive Project for the Horticultural Project. Horticultural Projects Materials acquired and provided to small farmers selected through a Public Announcement. Productive infrastructure provided to 25 small farmers in garden production and 10 in orchards. Materials included citrus X seedlings and windbreak Inputs for Orchards, materials for greenhouse construction, agricultural films on greenhouses and low tunnels, irrigation systems, shading screens, and open-air tents. 126 (as of 12/31/2013) COMPLETED ONGOING COMPONENTS, SUBCOMPONENTS AND STATUS ACTIVITIES III. Infrastructure Service Improvements Executive Projects X (CP 100%) Road Resurfacing X Road Paving X Paving of 21 Cloverleaf X Paving of Av. Leonel de Moura X Brizola Construction of Av. Leonel de Construction of a 34.90m viaduct over a rail line. X Moura Brizola Viaduct Installation of bus shelters Item awarded through an agreement with the Federal X (CP 100%) Government. Equipment Acquisition of equipment to support maintenance and (CP 100%) X paving of urban roads. Acquired through the Municipal Bidding Process. Acquisition of 3,000 micrometers X Installation of 2,021 micrometers X Acquisition and installation of 3 X macrometers (CPF) Sewage Treatment Plant and 36 Km of sanitation network and 5 treatment facilities X Collection Network (CP 100%) installed. Installation of 10,000 X micrometers 127 Outputs by Component: URUGUAIANA (as of 12/31/2013) COMPLETED ONGOING COMPONENTS, SUBCOMPONENTS AND STATUS ACTIVITIES I. Municipal Strengthening Reform of Administration Reform of approximately 400 m2 of area, centralization X Building of related sectors in this area. Acquisition of Management Acquisition of a software to support financial X Software management Acquisition of 80 computers, 9 printers, 3 copiers, 2 Equipment Acquisition X closets, and 13 counters. 4 individual consultants contracted for technical support Consultant Contracts X for the project. Contracting of consultant companies for drafting of 3 External Audit X Audit Reports (2010, 2011, 2012+Grace Period) Contracting of consultant company for 1 final evaluation Final Project Evaluation X of the project. Courses and Capacity-building for 10 civil servants trained, capacity-building for 4 X Project Team consultants. Acquisition of vehicle X Acquisition of 1 Ford Ecosport SUV. Equipment and furniture for UGM and SEPLAN. 10 Acquisition of equipment and fixed chairs, 7 rolling chairs, 3 2-door closets, 3 X furniture computers, 1 server computer for archives, 3 notebook computers, 1 multimedia projector, 1 multifunction unit. UAP Executive Secretary X Consulting services Costs of publication of program activities and payment of entertainment expenses, including dissemination of Support for UAP X project activities on site and cost of the participation of members of the program in training and integration events between programs. Operational Expenses Small expenses for maintenance and payments. II. Employment and Income Generation Contracting of specialized company for drafting of 1 Construction of Uruguaiana PDE X Economic Development Plan. III. Infrastructure Service Improvements Acquisition of an asphalt plant and machinery, pavement of 2,100 blocks (approximately 230,000 Asphalt Plant X meters of roads paved), permanent maintenance of damaged roads. 128 (as of 12/31/2013) COMPLETED ONGOING COMPONENTS, SUBCOMPONENTS AND STATUS ACTIVITIES Contracting of an executive Project (received) and Drainage investments in Santo implementation of 1,043 meters of pluvial drainage in X Inácio the neighborhoods of Santo Inacio and Hipicas I and II. 129 Outputs by Component: RIO GRANDE (as of 12/31/2013) COMPLETED ONGOING COMPONENTS, SUBCOMPONENTS AND STATUS ACTIVITIES I. Municipal Strengthening Acquisition of 1 Zafira Elegance 2.0 Flex Acquisition of a vehicle and Power Vehicle, a plotter, a computer station, X equipment to support UGP software, GPS, high-resolution satellite imagery. Acquisition of equipment, Completed with PMAT resources. integration of databases, Acquisition of 1 air conditioning unit, 1 hardware and software, training X multipurpose printer, 1 wireless router, 1 for municipal staff, internet telephone, 1 portable projector screen, 1 wireless network (PMAT / CPF) subwoofer sound box. Consulting services to support Contracting of Ricardo Barbará as UAP X UAP Secretary. Consulting services to support X Auditing of project for 2010-2013. Project management (Auditing) II. Employment and Income Generation Report on the Creation and Implementation Consulting services for the of a Methodology for Construction of a development of a LED strategy X Local Economic Development Plan for the for the municipality (PDES) Municipality of Rio Grande. Includes (i) Inventory of the Tourism Consulting services to support the X Attractions; (ii) Action Plan for the tourism sector: Development of the Tourism Sector. III. Infrastructure Service Improvements Paving and drainage for: 9.37 Km: R. 1.º de maio- 1.91Km, R. Teixeira Jr. 0.59Km, R. Paving and drainage works for Visconde de Mauá/R. Visc. Rio Grande- 2.45 X urban streets Km, Cassino-0.65Km, R. Pedro Sá Freitas- 0.55Km, R. Eng. Ernesto Luiz Otero- 3.22Km. Including concrete tubing for paving and drainage works for public roads; Unistein- type concrete blocks for paving and drainage, Paving, associated drainage and execution of paving and drainage works, landscape works for 18.54 km of X concrete curbing. streets. Paving and drainage: 15.64km total. Av. Pelotas 3.30 km, R. Bernardo Taveira 1.60 km,R. Irmão Isício 0.37km, R. Dr. 130 (as of 12/31/2013) COMPLETED ONGOING COMPONENTS, SUBCOMPONENTS AND STATUS ACTIVITIES Nascimento 1.13km, Av. Atl (l. esquerdo) 1.2km, Av. Atlântica (l. direito)1.20km, R. Arroio Grande 1.20km, R. Buarque de Macedo 0.90km, R. ângelo Trindade 1.50km, R. Raul Pilla 0.54km, R. Manoel Gonzales Lopes 0.46km, R. Barão de Sto. ângelo 0.50 km, Acesso às Ilhas 1.20 km, Av. Rio Grande 0.15 km, R. Castro Alves 0.39km; Paving Only: 2.30 Km total. R. Gen. Vitorino 1.80km, R. 24 de maio 0.50 km, Drainage: 0.60 Km total. R. Tobias Barreto 0.38 e R. Bento Gonçalves 0.22km. Total: 18.54 Km Tree Planting on Urban Streets X Acquisition and planning of 1480 seedlings. Regularization of 3500 lots in 6 neighborhoods of the municipality planned. Documentation collection 3,481 registrations made in the following services to allow land titling (No X neighborhoods: Carlos Santos / Profilurb I titles were issued, however) (398), Carlos Santos / Profilurb II (317), Hidráulica (233), Humaitá (155), Querência (1491), and Barra Velha (887). 131 Outputs by Component: SANTA MARIA (as of 12/31/2013) COMPLETED ONGOING COMPONENTS, SUBCOMPONENTS AND STATUS ACTIVITIES I. Municipal Strengthening An IT Master Plan has been prepared and IT Master Plan (PDI) X adopted. The directives of the plan are being used to guide the activities of the IT team. An Aero-photogrammetric Survey encompassing the urban and rural areas of the Aero-photogrammetric Survey X municipality has been prepared and adopted. This activity is serving as the basis for the multipurpose cadaster. Plan prepared and adopted. The directives are being applied, the related software is already in Urban Transport Master Plan X use, and the PMSM is preparing the bidding (PDMU) process for the provision of public transportation services. Plan prepared and available for public WSS, Drainage and Solid Waste consultations and suggestions by interested X Master Plan (PLAMSAB) parties, before being proposed as law to the Municipal Chamber. Consulting services to support Final evaluation completed and delivered to the Project management (Auditing, X bank in May 2014; final audit report to be Final Evaluation of the PDMI delivered up to June 30, 2014. Program) Acquisition of furniture and equipment for the The acquisition of equipment (IT PMU office 100% complete, including 5 and furniture) to support the X desktop computers, 1 notebook, 1 data projector, Project Unit 1 projector screen, 1 printer, 2 workstations, 3 closets and 2 file cabinets. Consulting services to support X UAP Acquisition of equipment: 9 flat screens, 9 notebooks, 2 multimedia projectors, 6 Goods for the Operations Center stabilizers. The Situation Room will be installed X in Prefecture on the 2nd floor of the SUCV building to assist in decision-making. (*) Most of the investments were made using CPF. II. Employment and Income Generation Consulting services for the Implementation of a methodology for formation X development and implementation of solidary credit groups: Microcredit expansion 132 (as of 12/31/2013) COMPLETED ONGOING COMPONENTS, SUBCOMPONENTS AND STATUS ACTIVITIES of a Microfinance Strategy activities are supported by the Lei Geral da Micro e Pequena Empresa. 82 solidary credits were released during the project period. 100% of beneficiaries were shown to be satisfied with the activities realized. Reform of the Clube 21 de Abril for implementation of a community center was completed after the Project closing date, but the facility is not yet operational. Prefecture is Works for the rehabilitation of a performing small adjustments with its own building to house a community X resources, and preparing a management, center (Clube 21 de Abril) operation and maintenance plan that will guarantee the site’s resources and social control by the community. Prefecture will also be in charge of the acquisition of goods to support Clube 21. 25 artists trained (with capacity-building), and Consulting services for the 90% satisfied with the activity. The business support and capacity building of plan provides for the creation of an association the crafts sector (local brand, X to train new craftsmen and integrate them in the catalog, and business plan production of excellent products for the fashion (which proposes the creation of a and decorative arts markets. 25 artisans from the community association) crafts sector were selected. The Technology Park is not yet fully operational. However, the team for management of the Park is already active, with 11 companies ready to be installed at the location. To Works for the construction of the guarantee the initial operations, prefecture has X Santa Maria Technology Park signed an agreement with the Technology Park to guarantee financial support through the municipal Innovation Law (Lei de Inovação). The Park is estimated to be fully operational by the end of June 2014. III. Infrastructure Service Improvements Asphalt paving between Av. Presidente Vargas and R. Venâncio Aires. Prefecture is drafting an Paving of Liberdade Avenue O&M plan for monitoring of this route. 2.131 X (2.13 Km) Km of roads improved with asphalt paving. 34,492 people directly benefited, with a level of satisfaction 65.2%. The general level of 133 (as of 12/31/2013) COMPLETED ONGOING COMPONENTS, SUBCOMPONENTS AND STATUS ACTIVITIES satisfaction was 69.3%. Asphalt paving of Ruas Agostinho Sangói and Guilherme J. Fabrin between Av. Dores e Av. F. Ferrari for alternate highway access. Prefecture Paving and drainage in is drafting an O&M plan for monitoring of this Agostinho Sangoi Avenue X route. 0.882 Km of roads constructed and (0.88 / 0.85 Km) 0.851km of drainage. 10,649 people directly benefited, with a level of satisfaction 83.3%. The general level of satisfaction was 71%. Paving of Av. Hélvio between BR-392 and Av. Medianeira. Prefecture is drafting an O&M plan for monitoring of this route. 1.273km of roads Paving/Expansion of Helvio X improved with asphalt paving. 25,000 people Basso Avenue (1.27 Km) directly benefited, with a level of satisfaction 98.1%. The general level of satisfaction was 83.3%. 38,813 m² implemented (70%). prefecture is drafting an O&M plan for the Park, which will be under the management of the Secretary of Sports and Leisure. With regards to the landscape project, prefecture is using Works for the construction of X environmental compensations for afforestation Jockey Club Park of the area. 240 trees of medium to large size will be planted at the location in May. 27,000 people directly benefited, with a level of satisfaction of 70.8%. General level of satisfaction of 74.7%. Consulting services for the Management Plans for Parque Palotino and development of 2 management Parque dos Morros developed, taking into plans for the parks (Plano de account that Parque Palotino will not be a X Gestao do Parque Palotino + conservation area (under the National Plano de Manejo do Parque dos Framework for Conservation Areas – SNUC), Morros) and Parque dos Morros will. Acquisition of machinery for rural development: Acquisition of equipment for X 2 motor graders, 2 rollers, 2 bulldozers, and 4 O&M of rural roads trucks. Infrastructural improvement of Km3 Integrated investments in Km 3 neighborhood. neighborhood (paving, drainage, X WSS) - CPF The work is paralyzed, since the water and 134 (as of 12/31/2013) COMPLETED ONGOING COMPONENTS, SUBCOMPONENTS AND STATUS ACTIVITIES sewage utility has requested changes to the original project design, which have not yet been approved. 16% of the water network and 13% of the sewage network have been concluded, but 0 connections installed. No roads have been constructed, but 3.06 km of drainage (71%) have been installed. This investment is financed by PAC. Passage of Av. Rio Branco beneath Gare da Rio Branco Tunnel (CPF) Viação Férrea until R. Marechal Deodoro. (0.93 Km of drainage & 0.24 Km X 31,298 people directly benefited, with a of paving -) satisfaction level of 86.4%. General satisfaction level of 86.7%. Gal Neto and Pedro Santini / Rua Gal. Neto linked with Rua Pedro Santini. Largo da Rodoviaria (CPF) 10,061 people directly benefited, with a level of X (0.40 Km of roads constructed & satisfaction of 77.8%. General satisfaction level 0.054 Kim of drainage) of 75.8%. Asphalt paving of Rua João Machado Soares in Joao Machado Soares (CPF) Bairro Camobi. 21,822 people directly (0.55 Km of drainage & 2.28 Km X benefitted, with a satisfaction level of 87.1%. of paving) General satisfaction level of 87.6%. 135 Annex 3. Economic and Financial Analysis This Annex presents the economic and financial analysis carried out for the activities implemented under the Program. At appraisal, it was anticipated that the Program would provide substantial economic benefits in the long term due to lower transport costs and reduction in travel time in Uruguaiana, Bagé, Pelotas, Rio Grande and Santa Maria, and due to improvements in sustainability of water supply and sanitation services in Bage and Pelotas. Moreover, it was assumed that investments would provide additional economic benefits due to improved living standards and real estate value growth in areas of urban development. Component 2 was expected to provide increased employment and income, with a positive spillover effect on the local economy. Road infrastructure investments financed design, paving or rehabilitation of streets and installation of neighborhood drainage systems. The upgrading of urban roads was complemented by improved sidewalks, landscaping, traffic safety measures, and bikeways. Expected benefits included improved quality of life and reduced maintenance costs, car accidents and travel time. The Program’s water supply investments covered installation of micro and macro meters, rehabilitation of the water supply network, construction of a water supply system in rural Pelotas, increased treated water reserves, and expansion of capacity for sewage systems and small treatment plants. Benefits included a reduction in water losses, energy consumption and maintenance costs. Financial benefits reflected the increase in services providers’ revenues due to improvements in the accuracy of water and sanitation billing and reduced O&M costs. The economic benefits of sanitation activities included improvements in housing values, living standards, and public health in Program municipalities. Although these benefits were significant, they are not included in this economic assessment due to significant data inconsistency. The total economic costs and benefits for each component were estimated at appraisal with EIRR ranging from 17% to 495% 150 for transport and from 13% to 35% for WSS investments. For the purposes of this ICR, the economic analysis was replicated for each individual project, taking into consideration the same activities analyzed during appraisal, namely: (i) roads upgrading; and (ii) water supply and sanitation. For investments in roads, the Highway Design and Maintenance Standards Model (HDM) and real estate appreciation (i.e. increases in the IPTU-Property and Urban Land Tax) were used. For investments in water and sanitation, service delivery data were used to measure benefits. For Component 2’s employment and income generation activities, a qualitative analysis was carried out given the questionably reliable or insufficient data and low financing amounts. In addition, due to the public nature of the investments and lack of revenue from most of the activities, a financial analysis was not conducted. 150 Several typographical errors in the PAD in Pelotas’ EIRR data for urban roads upgrading were discovered during ICR preparation: for instance, one EIRR should read 226.40 instead of 22.60. 136 Economic analyses were conducted for interventions in the municipalities of Pelotas, Bagé and Santa Maria only. In Rio Grande, it was not possible to conduct such an analysis due to the lack of reliable data and low Borrower capacity to measure results. In Uruguaiana, no information was provided by the Borrower to the Bank. The economic evaluation below shows that substantial results were achieved through PDMI Program investments. Activities evaluated presented EIRR ranging from 12% to 232%, with unit costs in general lower than benchmark values. 1 - BAGÉ (RAINHA DA FRONTEIRA) PROJECT The economic analysis of the Bagé Project was conducted considering the same activities analyzed during appraisal, namely: (i) road upgrading, and (ii) water supply and sanitation. Actual costs of these activities total US$ 10.34 million, 90% of total project cost. Overall Bagé Project Beneficiaries. The number of beneficiaries of road upgrading and water supply activities exceeded the targets at appraisal; however, the number of beneficiaries of wastewater supply investments did not reach the target. The total number of beneficiaries is estimated at around 120,000 people. Table 1 – Projected versus Actual Beneficiaries Components Projected Beneficiaries 151 Actual Beneficiaries Road upgrading 118,965 120,000 152 Micrometers: 12,021 households, Micrometers: 6,716 households, around 36,000 people Water Supply around 33,500 people Macro meters: 100% of supplied Macro meters: 100% of supplied population population 5,000 new connections (approx. 6,000 new connections Wastewater System 25,000 beneficiaries) 18,555 inhabitants. Analysis of investment costs showed per capita/per kilometers costs lower than the average benchmark for similar interventions. Table 2 – Comparison of Unit Costs per Intervention Intervention Cost per Beneficiary / Benchmark Cost per Beneficiary / per per Km Km Sewage 91.5 (US$) 100 - 200 153 (US$) Road upgrading 1.5 (BRL million/km) 2.45 154(BRL million/km) 151 Appraisal estimates assumed an area average of 5 persons/household, but studies during implementation showed the actual figure to be closer to 3 persons/household. 152 IBGE estimates for 2013 population. 153 Various sources. Range is for one-time capital cost for wastewater collection and treatment with septic tank. 137 Results for each intervention are as follows: A) Water Supply and Sanitation Water supply and sanitation investments provided significant benefits to the population. The average EIRR for WSS investments is 30.87%, very high for this type of infrastructure project. Water supply investments resulted in an EIRR of 25%. Sanitation investments resulted in an EIRR of 32.7%, significantly higher than projected. Table 3 – Comparison of expected and actual results of the Bagé Project. Ex-ante Ex-post Intervention EIRR EIRR Water Supply 68.77% 25.00% Sewage 21.86% 32.70% Total 54,35% 30,87% These results were confirmed by the qualitative assessments, which show improvements in the management and performance of the local water and sewage utility (DAEB). The results also indicate a high approval and satisfaction rate in the communities served. B) Road Upgrading This component provided significant benefits to the population of Bagé, with EIRR ranging from 22% to 115%, and an average of 62%. This is higher than the average of 42% (ranging from 12 to 93%) evaluated at appraisal. A satisfaction survey of the direct beneficiaries of urban upgrading interventions was carried out by the municipality of Bagé. Although the sample is statistically limited, the qualitative analysis presented satisfactory results, e.g.: • Satisfaction with paving and rehabilitation of streets and avenues - 92%; • Satisfaction with drainage for streets and avenues (culverts) - 92%; • Satisfaction with the Cloverleaf 21(Trevo 21) works -100%; • Satisfaction with the viaduct over the railway line, Leonel Brizola Avenue - 100%; and • Improvement in vehicle circulation - 94%. 2 - PELOTAS PROJECT (PÓLO DO SUL) The economic analysis of the Pelotas Project was conducted considering the same activities analyzed during Appraisal for Component 3: (i) water supply and (ii) urban and road upgrading. Actual costs of these activities total US$ 21.18 million, 84% of total project cost. The same approaches/methodologies employed during appraisal were used for the cost-benefit analysis: (i) for investments in water, the amounts referring to services delivery; and (ii) for investments in 154 National Association for Public Transportation (ANTP) – Information System on Urban Mobility – 2011 Report – launched in December/2012. General parameter for average construction cost of urban roads. 138 roads, the Highway Design and Maintenance Standards Model (HDM). However, Project activity (iii), maintenance and improvements of rural roads, was not considered in this analysis due to the lack of information available. For Component 2, generation of employment and income through microcredit, qualitative information was included to give a sense of results achieved. There were no data available to prepare a full EA analysis. The economic evaluation shows substantial results achieved through Pelotas Project investments. Overall Pelotas Project Beneficiaries. The Pelotas Project’s road upgrading and water activities reached more beneficiaries than targeted at Appraisal. Table 4 – Projected versus Actual Beneficiaries Components Projected beneficiaries Actual Beneficiaries Road upgrading 334,594 341,000 155 Rural water supply 2,000 2,088 Analysis of per capita investment cost for interventions showed higher-than-average cost per beneficiary for the rural water supply activities, due to the complex logistics of construction in a remote rural area. For road upgrading, costs were lower than the benchmark. Table 5 – Comparison of Unit Costs per Intervention Intervention Cost per Beneficiary / Benchmark Cost per Beneficiary / per Km per Km 156 Road upgrading 0.53 (BRL million/km) 2.45 (BRL million/km) Rural water supply 209 (US$/beneficiary) 150-200 157 (US$/beneficiary) Results of each intervention are as follows: A) Water Supply This activity was expected to finance the construction of a water main to connect Pelotas stream with Sinnot treatment plant and the expansion of the water supply network to rural areas. Expected benefits included improvement of maintenance and quality of water service delivered. Activities consisted of construction of a 3.2 Km of pipeline from the Pelotas stream to the Sinnot water treatment plant (increasing treated water reserves by 10%); and construction of a 20km water supply network and a water treatment facility benefiting 522 households in rural Pelotas. Results On the basis of evaluation described and considering the data available, an EIRR of 12.6% was obtained. Qualitative surveys have confirmed the “regular” satisfaction of the beneficiaries with service delivery. 155 IBGE estimates for 2013 population. 156 National Association for Public Transportation (ANTP) – Information System on Urban Mobility – 2011 Report – launched in December/2012. General parameter for average cost for construction of urban roads. 157 Various sources. 139 Table 6 – Comparison of Expected and Actual Results of the Pelotas Project Intervention Ex-ante EIRR Ext-post EIRR Water Supply 15.93% 12.60% B) Urban and road upgrading This activity was expected to finance: (i) the renovation of selected historic buildings; (ii) the construction of about 50 bays for bus stops and about 10 pedestrian crossings; (iii) the rehabilitation of about 7,000 m2 of streets (around 3 Km) and paving of 1km of Sao Paulo Street; and (iv) the recovery of 3,700 m2 of green space in the downtown area, paving and/or rehabilitation of around 50 Km of streets and important access corridors, including pedestrian and bicycle infrastructure and landscaping. Expected benefits included an increase in real estate value, reduction of travel time and vehicle maintenance, and a reduction in car accidents. The actual activities consisted of: (i) the rehabilitation of 3 historic buildings; (ii) the construction of 44 bays, 38 bus stops, 79 access ramps and widening of 2 sidewalks; (iii) the rehabilitation of 10.4 Km of streets, and 1 Km of São Paulo street; (iv) the recovery of 3700m2 of the green space in the Dom Antonio Zattera Park; and (v) paving/rehabilitation/widening of 59 Km streets to include, inter alia, paving, drainage, sanitation, signaling, sidewalks and landscaping. Estimation of Benefits. The evaluation of the economic outcomes of these investments took into account the following aspects: • Items (i) and (ii) were not considered in the analysis either at appraisal or at closure, as (i) was a counterpart activity financed through an IDB project and not re-evaluated under the Bank’s Project, and for (ii) no information was available; • Under item (iv), the properties in the vicinity appreciated in value as indicated by municipal interlocutors. However, by executive decision, the IPTU property rates schedule was not adjusted accordingly, so the evaluation of real estate increase based on the change in the IPTU was not feasible. There were no other sources of data available for preparing an EA analysis of this item; • For items (iii) and (v), the HDMI methodology was used. The vehicle count was carried out for only some of the roadway stretches due to limited municipal capacity. For stretches that were not measured, figures were estimated based on the traffic counts actually produced for other areas, maintaining the same rate of growth. Results On the basis of the evaluation described and considering the availability of the data, this component provided significant benefits to the population of Pelotas, with EIRR ranging from 29% to 400%, with an average of 232%. This is somewhat lower than the EIRR evaluated at appraisal, with an average of 245% (ranging from 24 to 495%) 158. 158 Several typographical errors in the PAD in Pelotas’ EIRR data for urban roads upgrading were discovered during ICR preparation: for instance, one EIRR should read 226.40 instead of 22.60. 140 Additional qualitative analysis C) Microcredit Under Component 2, the Project would support cross cutting activities to facilitate access to microcredit. Microcredit activity supported by the Project was limited to technical assistance provided as part of routine Bank support, with no additional cost. However, the Municipality was able to put in place a well-qualified personnel and institutional structure to leverage the microcredit financing and to obtain microcredit support from various government banks (Banco do Brasil, Caixa Economica Federal, Banrisul). The number of microcredit operations reached 6,537, with a total advance credit of around R$ 24 million (US$ 10.90 million) from 2010 to 2013. 3 - SANTA MARIA PROJECT (SANTA MARIA 2020) The economic analysis of the Santa Maria Project was conducted considering the same Component 3 activity (upgrading of public roads) analyzed during Appraisal. Actual costs of this activity total US$ 10.59 million, 60% of the total project cost. The same approach/methodology employed during Appraisal, the Highway Design and Maintenance Standards Model (HDM), was used for this benefit-cost analysis for roads investments. The Component 2 activity considered at Appraisal, construction of a Commercial Center, was not considered here as it was removed at restructuring. The economic evaluation shows substantial results achieved through the Santa Maria Project investments, higher than originally expected. Overall Santa Maria Project Beneficiaries. The Santa Maria Project’s road upgrading activities reached more beneficiaries than the Appraisal targets. Table 8 – Projected versus Actual Beneficiaries Components Projected beneficiaries Actual Beneficiaries 159 Road upgrading 257,938 273,000 The upgrading of public roads investments were expected to rehabilitate and improve road infrastructure and landscaping in the city, prioritizing the streets used by public transport and non-motorized transport users. Road and infrastructure improvements were to include, inter alia, traffic safety improvement, pedestrian facilities and landscaping. This would include activities such as: paving/widening/rehabilitation, resealing, signaling, and lighting of 19 Km of urban streets; construction, paving, sealing, and signaling of the tunnel in the Rio Branco Avenue and its connection to the city’s road network; and rehabilitation, landscaping, extending, paving, resealing, signaling and widening of about 800 meters of access roads to the intra-urban bus terminal and neighborhood access streets. The expected benefits of these investments included: improved transport services and access to the bus terminal; reduction of the number of urban transit accidents and reduction in emission of pollutant gases. The actual activities consisted of: (i) paving/widening/rehabilitation, resealing, drainage, signaling, and lighting of 6.53km of urban streets; (ii) construction, paving, sealing, and signaling of the tunnel in the Rio Branco Avenue and its connection to the city’s road network; and (iii) 159 IBGE estimates for 2013 population. 141 rehabilitation, landscaping, extending, paving, resealing, signaling and widening of about 400 meters of access roads to the intra-urban bus terminal and neighborhood access streets. The analysis of the actual investment cost per km for road upgrading interventions shows per- kilometer costs lower than the benchmark for similar interventions. Table 9 – Comparison of Unit Costs per Intervention Intervention Cost per Km Benchmark Cost per Km Road upgrading 2.44 (BRL million/Km) 2.45 160 (BRL million/Km) On the basis of evaluation described and considering the data available, the evaluation showed positive results for the EIRR (between 13% and 30%), with an average of 22.1%. This is slightly lower than the 29.1% evaluated at appraisal, but still high for this type of intervention. Unfortunately, the HDM method ex-ante and ex-post benchmarking was undermined by changes, during implementation, of the roads selected for priority upgrading. Positive results were confirmed by the sample surveys. An average of 80.4% satisfaction was recorded for people living in or familiar with the intervention areas. A satisfaction rating of 98.1% was recorded for the Avenida Hélvio Basso works, one of the project’s largest investments. 160 National Association for Public Transportation (ANTP) – Information System on Urban Mobility – 2011 Report – launched in December/2012. General parameter for average cost for construction of urban roads. 142 Annex 4. Bank Lending and Implementation Support/Supervision Processes a) Task Team members Responsibility/ Names Title Unit Specialty Lending Monica Alves Amorim Consultant LCSUW LED Specialist Fernando A. Blanco Cossio Senior Economist AFTP4 Regis Thomas Cunningham Sr. Financial Management Spec. LCSFM FMS Operations Analyst Juliana M. Garrido Pereira Operations Analyst LCSUW / co-TTL Economic & Rogerio Dias Gerheim Consultant LCSUW Financial analysis Jose C. Janeiro Senior Finance Officer CTRLA FMS Marta Elena Molares- Lead Counsel LEGES Lawyer Halberg Safeguard Paul Procee Senior Infrastructure Specialist EASCS Specialist Anemarie Guth Proite Procurement Specialist LCSPT PMS Julia Conter Ribeiro Program Assistant LCC5C ACS Second TTL / Jennifer J. Sara Sector Manager EASVS Second Sector Leader Fabson Vogel Financial Management Specialist LCSFM FMS Mauricio Cifuentes Luiz Gabriel Azevedo Sector Leader First Sector Leader Michael Carroll First TTL Edgardo M. Floto Simon Nicholas Milward Caroline Barreto Moreira ACS Jeannette Ramirez Emilio H. Rodriguez Cristina Oliveira Roriz Operations Analyst Dan Biller Frederico Rabello Costa Procurement Specialist Second PMS Cristiane Herold Juliana de Paula Marques Soraya Melgaço Consultant – Social Safeguards John Penney Translator Luis Prada FM Specialist Safeguard Paul Procee Specialist and first co-TTL Anemarie Guth Proite Procurement Specialist First PMS Jeannette Ramirez 143 Rajeev Kumar Swami Fabson Vogel FM Specialist FMS Marcos T. Abicalil Senior Water Specialist Last TTL Susana Amaral FM Specialist FM Specialist S. A. Dan Biller Joseph Kizito Mubiru FMS Francesco N. di Villarosa M&E Consultant M&E Specialist Sinue Aliram Procurement Specialist Last PMS Waleska Pedrosa Legal Assistant Sameh Wahba Sr. Urban Specialist Co-TTL Isabella Micali Drossos Sr. Counsel LEGAM Lawyer Adriana M.G.M. Weisman Operations Officer OPCCE Supervision/ICR Marcos T. Abicalil Sr Water & Sanitation Spec. LCSUW First TTL Sinue Aliram Procurement Specialist LCSPT Procurement (last) Financial Susana Amaral Financial Management Specialis LCSFM Mgt.(first) Eduardo Franca De Souza Financial Management Analyst LCSFM Financial Mgt.(last) Juliana M. Garrido Pereira Sr. Water and Sanitation Specialist LCSWS Last TTL Emanuela Monteiro Urban Specialist LCSDU Co-TTL (last) Michele Martins Program Assistant LCC5C Waleska Magalhaes Pedrosa Program Assistant LCC5C Safeguard Paul Procee Senior Infrastructure Specialist EASCS Specialist Anemarie Guth Proite Procurement Specialist LCSPT Jennifer J. Sara Sector Manager EASVS Sector Leader (first) Co-TTL (first) and Sameh Naguib Wahba Sector Leader LCSSD Sector Leader Monica Amorim Consultant LED Specialist Paul Kriss Sector Leader LCSSD Last Sector Leader Marcus Vinicius F. da Silva Consultant Infrastructure Spec. Michele Martins Program Assistant Emerson E. Medeiros Consultant Institutional Dev. Soraya Melgaço Consultant Social Safeguard Luis Prada Sr. Procurement Specialist LCSPT Jefferson R. de Q. Andrade Consultant Infrastructure Spec. Etel P. Bereslawski Procurement Specialist LCSPT Everaldo A. Cabral Consultant Infrastructure Spec. Clarisse Dall’acqua Safeguard Specialist LCSEN Safeguard Spec. Sergio Akira Kaimoto Consultant Solid Waste Spec. Cristina Oliveira Roriz Araífe Basílio dos Santos Consultant Infrastructure Spec. Pedro Miguel P. de Almeida Consultant Infrastructure Spec. Eri Watanabe Consultant Adauto Santos Consultant WSS Specialist Rogerio Dias Gerheim Consultant Economic- 144 Evaluation Ana Paula A. Gutierrez Consultant Willow Latham Consultant (b) Staff Time and Cost Staff Time and Cost (Bank Budget Only) Stage of Project Cycle USD Thousands (including No. of staff weeks travel and consultant costs) LENDING FY05 P094199 – All projects 0.20 1.90 FY06 P094199 - All projects 8.41 86.65 FY07 P094199 - All projects 45.27 21.68 P094199 – All projects 20.53 92.39 FY08 P111511 - Bagé 0.00 4.48 P111514 - Uruguaiana 1.70 27.42 P111511 - Bagé 0.24 6.68 P111512 – Rio Grande 12.69 33.30 FY09 P111513 – Santa Maria 8.68 29.41 P111514 - Uruguaiana 0.03 2.99 FY10 P111512 – Rio Grande 0.33 42.47 Total: 98.08 349.37 SUPERVISION FY08 6.00 20.60 FY09 22.07 95.72 FY10 24.75 159.40 FY11* P094199 – All projects 14.12 115.33 FY12* 20.84 88.79 FY13* 23.13 98.13 FY14* 12.82 57.00 Total: 123.73 634.97 * The Staff Time and Costs for FY11-FY14 do not include procurement, financial management or safeguards supervision time as these were funded off-the-top, nor do they reflect the time spent by Management on Project oversight nor for legal services as these were covered by the CMU. 145 Annex 5. Beneficiary Survey Results *** Beneficiary surveys are part of the Borrowers’ Completion Report*** 146 Annex 6. Stakeholder Workshop Report and Results The following is a summarized translation of the report on the results of the Stakeholder Workshop for the PDMI - Integrated Municipal Development Program. It presents the structure, participants and Lessons Learned. The Workshop was held in Pelotas-RS, on November 21, 2012. The Lessons Learned Workshop is one of the project completion events financed by IBRD and aimed to "promote joint reflection on the experience of the development of PDMI, extracting lessons learned from its design, management and implementation with the vision of assimilating them in similar projects." The workshop was organized by the World Bank with the participation of representatives of the PDMI PMUs for the municipalities of Pelotas, Bagé, Rio Grande and Santa Maria. The PDMI Lessons Learned workshop was structured as a learning event on the design, management, and execution of the Integrated Municipal Development Program. Representatives of all five (5) members of the program Prefecture: Pelotas, Rio Grande, Bagé, Santa Maria, and Uruguaiana; were invited to attend the PDMI Workshop on Lessons Learned. With the exception of Uruguaiana, which could not attend, representatives of all municipalities invited were present at the event. In addition, members of the World Bank mission; the coordinator of the UAP; and a representative of PUBLIX, the contractor for completion of the evaluation report on the program; attended the workshop. List of Participants: From the Prefecture and PMU of Pelotas: Raul Odone Gonçalves; Ana Lúcia Victória Sena; Luciana M. Gomes; Jair Seidel; Roberto dos Santos Ramalho; Ana Aline M. de Oliveira; From the Prefecture and PMU of Rio Grande: Daniel V. da Silva; Nevron R. Morais; Sílvia Adornes; Marlon Soares; From the Prefecture and PMU of Bagé: Danusa G. Bittencourt; Jocimara G. Santos; Ivan Cesar Pinheiro; From the Prefecture and PMU of Santa Maria: Kerstin K. Kickhofa; Elisandro Ruatin do Couto; From the UAP: Ricardo Barbará Dias; From Instituto Publix: Antonio Carlos Brites Jacques; From the World Bank: Sinuê Aliram; Eduardo França; Pedro Almeida; 147 Mônica Amorim; Emanuela Monteiro; Juliana Garrido. The lessons learned were constructed in three (3) steps during the workshop. In the first stage, the lessons learned relating to the preparation, implementation and monitoring of PDMI were analyzed and defined. In the second stage, the lessons learned with regard to PDMI Development Components (Institutional Development, Work and Income Generation, and Territorial Analysis)were analyzed and defined. In the third stage, the lessons learned relating to the structure and functioning Program Management were analyzed and defined. Five (5) teams were formed, with four (4) teams with representatives from each of the municipalities and management units and 01 (one) team of IBRD representatives. The coordinator of UAP - Project Coordination Unit was free to follow teams and the representative of Publix Institute was an observer of the work. 3.1.4 Summary of Lessons Learned from the Structuring, Execution and Monitoring PDMI Structuring phase: 1. Organization and adequate staffing of the PMU from at the initial preparation phase is crucial to the success of the project in its various stages; 2. The training of PMU staff should be undertaken starting with its formation and continuing through the program, and the permanence of its members should be ensured to the maximum; 3. Training in project management is a basic condition for the members of the PMU and the departments involved. Understanding and mastery of project subjects will greatly facilitate structuring, implementation and monitoring; 4. In an integrated program, effective linkages between the municipalities at political, technical and executive levels are critical to ensuring integrated design and actions. In the case of PDMI this link functioned better during the structuring phase of the program, especially at the political level, motivated by the requirement of the same to obtain loan resources; 5. Obtaining information and a lack of previous diagnoses is one of the main difficulties in the assembly and structure of a program; 6. It is necessary to focus on objectives, clear targets and a reduced number of actions, clearly linked to measurable outcomes, to reduce the risk of dispersion and difficulty in perceiving the results obtained. For this reason, as well, it is necessary to work more intensely during the preparation phase on the concepts and notions of monitoring as part of the planning process. Implementation phase (engineering, procurement, physical implementation, and financial execution): 7. The implementation of the program depends largely on the PMU having been properly structured with a multidisciplinary team, the PMU’s skills in planning and project management, and its proper placement in the municipal chain of command; 8. The integration of PMU with the Secretariats and executive units of the Prefecture involved with the program is a "sine qua non" to facilitate the development and implementation of the program. Without the involvement and availability of executive 148 departments and units to meet the demands of the PMU and the program, treatment and resolution of issues affecting the planning and execution of actions becomes difficult; 9. The implementation of a program funded by international body implies the need to adopt and practice the rules of the financers, which demands changes and adjustments in the norms, standards and procedures of municipal management. These are significant changes that inspire apprehension and require expertise not always possessed by agents of the municipality. It is not easy to learn and accept working with international standards; 10. A great part of the problems during execution arose from the initial planning, which was many times unfocused and undertaken in a non-integrated manner, principally with regard to the interdependence of actions and poorly scaled timeframes. It is necessary to regard planning as an essential activity for project execution; 11. The preparation of terms of reference was one of the central problems in the development of PDMI. In an integrated program, drafting of TRs could have been facilitated by a better link between the PMUs and by the existence of a common technical support unit in the UAP. The quality of TRs is fundamental to the whole process of acquisition, monitoring and overseeing of implementation; 12. In the case of PDMI, one of the difficulties of the acquisition phase was obtaining market responses to project demands, due in some cases to strong existing demand, especially in the construction sector. Developing suppliers is a challenge to be considered in such projects; 13. Understanding and mastery of IBRD standards by PMUs, and the Bank’s response time to demands and questions, generated delay and rework on many occasions, hindering progress in program implementation; 14. The integration of the PMU with the budget and finances areas of the municipality, and the effective participation of specialists in these areas of the municipality with the PMU, were of fundamental importance to expedite program implementation. Where and when this was integrated, and when the counterparts were guaranteed in a timely manner, the processes flowed more satisfactorily. Finally, with regard to the monitoring phase, the following lessons learned in PDMI were highlighted: 15. The monitoring was a new concept and had not been previously mastered by the project executors. It was often mistaken as solely a control activity, without appreciating it as an opportunity for learning and improvement for processes and people; 16. The definition of appropriate indicators and baselines are essential for monitoring. The lack of these elements, combined with precarious information systems, greatly hampered monitoring in PDMI. These issues were only resolved towards the end of the program, including the obtainment of tools for research and information processing; 17. The quality of monitoring, as well as of all other phases, depends crucially on the qualification of technicians and managers. 149 Summary of Lessons Learned from the Development of Components PDMI Component 1 - Institutional Development: 18. The structure and capacity of the PMU / UGM were one of the main results of component 1. For some municipalities, these units were institutionalized as structures for managing special municipal projects, and will remain as such after completion. One effect, already obtained in these cases, was the leveraging of additional resources through the structuring and negotiating of projects with other funding sources; 19. The improvement of capacity of municipal civil servants and leaders is another important result obtained through the realization of Component 1. Due to improvements in work conditions through acquisition of property, furniture and equipment, as well as in the review process and the implementation of tools and systems such as GIS; GED; SGE, an improvement in the performance standards of the municipal administration can be expected; 20. Among the institutional improvement results obtained, advances in the use of long-term planning and development of strategic plans by municipalities should be highlighted; 21. It is important to highlight among the lessons learned that institutional development has not received the same attention as other components, and there is a greater lack of clarity regarding its objectives and goals. Institutional and management changes are still seen as issues of secondary importance within the scope of the municipalities. Component 2 - Generation of Work and Income: 22. Actions to promote employment and income are by nature multifactorial, and effects take time to be obtained. Physical actions, such as structures (shopping popular, centrais de beneficiamento, etc.), institutional actions (simplification of registration, microcredit, etc.), and especially actions for mobilization and capacity-building of people are involved. The results obtained under this component were satisfactory, but the actions must be continued to enhance future results; 23. Among the most important results of Component 2 are the drafting of local development plans and the understanding of the importance of business models. These constitute tools that change mental models and generate an attitude of planning for transformation; 24. Generation of employment and income require integrated action by several municipal departments as well as other agencies and entities, both public and private. Good projects, capacity-building, and integrated action by many actors are critical to results of component 2; 25. It takes more focus, primarily on scarce resources— as was the case in PDMI Component 2— to ensure results, which is associated with persistence in these actions. Component 3 – Improvements in Infrastructure Services (urban, rural and environmental): 26. This component was the one which ended up concentrating the largest number of actions, resources invested, and results obtained. This resulted primarily from improved tradition and expertise on the part of the municipalities with projects and execution of works, and the clear perception by the population of its effects; 27. Qualified projects and adequate budgets are vital to the success of infrastructure improvement actions. The PDMI led to the development of better technical skills in both prefectures, as executors of the works, due to the requirements of supervision and monitoring; 150 28. Improvements to the road system and public spaces, with resulting improvements in urban mobility, were highlighted as the main results of the urban improvement. In rural areas, improvements in access (roads and bridges), improvement of the machine park for road maintenance, and access to water were the main gains. Regarding environmental improvement, the biggest gains were associated with tree planting, increasing green and leisure areas, and in sanitation; 29. The issue of greater focus on action planning was also highlighted as a need to ensure relevant impacts. Summary of Lessons Learned from Management of PDMI Management of PDMI as an integrated program: 30. In the case of PDMI member municipalities there were no physical-territorial or economic factors to determine common issues to be addressed. What united the municipalities was the need for linkages to facilitate access to funding resources. After the preparation and contracting phase of the program, the linkages on the level of political decision-making practically ceased to function, developing into isolated actions in each municipality; 31. Integrated projects depend on the need for integrated action. The economies of scale that could have been obtained, such as joint procurement, were not sufficient to demand integration at the political level; 32. For the reasons above, the structures created – the Political Council, Technical Council and UAP - did not work well. The UAP should have been constituted as a legal structure, able to convene with each municipality, and not an ad hoc unit without its own structure, linked in each period to one of the municipalities ; 33. The UAP was not structured as designed. In order to be effective, in addition to a legal character, a technical structure to support UGPs, with a multidisciplinary team, technically mediating the relationship with the IBRD, would be necessary. Management of PDMI in each municipality: 34. The UGPs need to be well structured and qualified, and properly positioned in the power structure of the Prefecture, in order to exercise the internal and external coordination role required of them in a PDMI-type program; 35. The integration of Secretaries and executive and administrative bodies of the Municipality , especially budget and finance, with the PMU and the program is key, as has been previously reported, for the management of a program like PDMI; 36. The UGPs need to develop competency (knowledge, skills and attitudes) in articulation, conflict mediation, and treatment and resolution of problems within their roles as manager of the program and projects; 37. Learning achieved by the UGP teams through exchange of experiences with IBRD and other the UGPs is critical to the successful management of the program; 38. When understanding and mastery of the processes and rules required by IBRD, and the adjustment of the municipalities to these requirements, is faster, losses due to loss and rework in relations with the financer will be less. 151 Annex 7. Summary of Borrower's ICR and/or Comments on Draft ICR 7A. Summary of Borrower's ICR Evaluation of Integrated Municipal Development Program (PDMI) Executive Summary Publix Institute, May 2014 1. Introduction This document is a translation of the Executive Summary of the Independent Evaluation of the Integrated Municipal Development Program - PDMI/RS, undertaken by the Borrowers. The summary describes the results of the projects in four municipalities: Bagé, Pelotas, Rio Grande and Santa Maria. The program was evaluated in Bagé, Pelotas and Rio Grande between September 2012 and January 2013, and in Santa Maria from February to April 2014. The evaluation methodology involved reviewing documents, on-site visits to works, sampling surveys, focus group feedback, in depth individual interviews and workshops. The evaluation of each of the PDMI projects was done before the management units submitted the final reports. The appraisals therefore had to rely partly on data contained in the other most recent reports produced by the municipalities. This was updated with information obtained by the Publix Institute, hired by the Borrowers to prepare the overall evaluation. 2. Evaluation of Program Results 2.1. Relevance of Program Objectives The general objective of the program was relevant, pertinent, and in line with the context and needs of the target municipalities, correctly defined at the program design stage. The specific goals, aimed at producing the fully achievable outcomes envisaged at the outset were (despite the initial decision to limit the scope of some key issues) expressed in very broad terms, encouraging ambitions far beyond what was possible with the resources and means available. In other words, in order to achieve these specific program objectives it would have been necessary to include other activities and to increase the amounts invested. A better approach would have been to define the goals more specifically and more in proportion with the limited scope of the project as originally planned. 2.2. Relevance of Program Design The idea behind the original design of the PDMI was to provide investment financing to meet the shortage of funds for municipalities to improve their infrastructure services and boost employment and income generation. The strategy adopted by the program was to have an integrated set of projects covering five municipalities, with goals and a basic structure common to all. The strategy of financing projects in five municipalities within a single program focused on economic and social infrastructure development was advantageous in terms of economies of scale 152 (UAP, World Bank project framework and comprehensive evaluation) and was especially important for ensuring that the loan was directed to vital investments in municipalities in the southern half (Metade Sul) of Rio Grande do Sul, with its low level of economic dynamism and social indicators below the average for the state as a whole. As for the decision to provide support for the ‘hub’ municipalities of the Metade Sul´s subregions, i.e. Santa Maria (Central Region), Pelotas and Rio Grande (South Zone), Bagé (Southeast frontier) and Uruguaiana (West frontier), it is worth looking closely at the consequences of financing municipalities with such different characteristics through a program with goals and components intended to apply to them all. Structuring components and subcomponents The components and subcomponents that gave effective expression to the program's objectives were pertinent and relevant to the context analyzed at the time. Municipal Strengthening / Institutional Development The subcomponent Strengthening Public Administration, focused on plans and tools for improving municipal management, produced good results. This had not been considered a priority by the municipal authorities and the Bank's experience in this area was greatly appreciated insofar as it addressed deficiencies in institutional and managerial capacities in relation to project management, internal processes, use of technology for municipal management, modernization of tax administration, quality of public spending and services delivery. As for Project Management, this subcomponent was rightly included, both in terms of funding the management of project implementation and especially as a mechanism for disseminating good project management practices to the rest of the municipal administration. Employment and Income Generation The municipalities possessed little economic dynamism and suffered from low per capita incomes and high unemployment. Given the needs of the municipalities involved, the program was right to target the key role of the municipal public sector for inducing economic and technological development and for supporting the generation of alternative production and jobs in sectors that were uncompetitive due to problems of scale or lack of capitalization. These sectors included micro-enterprises, small rural producers and unregistered businesses with good potential for generating employment opportunities and income. Improvements to Infrastructure Services / Territory Improvement The four subcomponents correctly addressed the shortcomings of the municipalities in urban and rural infrastructure, particularly in paving and drainage of urban roads and improving roads in rural areas. Regarding the linkage between development and the environment, addressed in Component 3, the Bank´s environmental and social safeguards were instrumental in instilling a broader environmental approach in all the infrastructure initiatives (over and above current environmental licensing procedures), by introducing aspects such as engagement with the community, workplace safety and disposal of waste from construction sites. 153 Financing Aspects The risk assumed by municipalities by agreeing to financing transactions indexed to the dollar during a period of relative instability in Brazil and internationally, and without proper protection, needed to be understood in terms of the damage that exchange rate fluctuations can cause, e.g. affecting the real amount of cash available for funding works where bidding and contracting processes can take several months. The effects varied from municipality to municipality (in the case of Pelotas the contract value turned out to be lower on the date of signature, whereas in Rio Grande and Santa Maria the values increased). We believe that that some mechanism (e.g. currency hedging) could have been used to mitigate this risk. As for the question of counterpart funding (40% own resources and 60% IBRD), it was clear that these municipalities did not have sufficient budget resources to match the required contributions, which led the Bank to accept counterpart funding in the form of works and other activities that the municipalities had previously undertaken or were undertaking. Implementation Arrangements The institutional structure envisaged for implementing the program was built around the need for good project management and implementation. Figure 1. Institutional Arrangement The superior and technical councils (mayors and municipal planning secretaries, respectively) were an essential component at the preparation stage. The UAP, basically intended to facilitate coordination, in practice consisted of a single professional. This meant that, due to a lack of manpower, key responsibilities such as consolidating information on the progress of projects in municipalities and disseminating it among them were to some extent neglected. The learning process and exchange of experiences between municipalities were important for generating and disseminating knowledge, especially regarding Bank practices. A further factor that contributed to interaction was the Bank´s effort to bring municipalities together to prepare joint reports and, especially, to share a common operating model. 154 The original design of the program envisaged each municipality setting up a UGP (or UGM), with specific responsibilities: Table 1. Institutional Comparison between UGPs Bagé Pelotas Rio Grande Santa Maria Instrument Decree Law Law Decree General General Planning Mayor Planning Department coordination Secretariat Department PDMI / PAC Competences PDMI PDMI PDMI / Bids Formal Basic Robust Small Basic structure Sector 5 8 4 5 coordinators Type Temporary Permanent Permanent Temporary The structure established by Pelotas was robust while those of the other municipalities were less so. It is not possible to conclude, following the implementation of the projects, what the best UGP/ UGM model was. The decision on which project management structure to use depended inter alia on the size and level of institutional maturity of the respective Prefecture. Operation Manual Table 2. Additional information about the Operation Manual Item Respondents´ comments Criteria influenced the original project design, but were hardly used at all in Criteria for projects selection the selection of the sites earmarked for paving and sanitation work. Procedures for risk assessment and mitigation of potential Useful for getting municipalities to take into account the socio- environmental and social environmental situation in the vicinity of the works. impacts The annual operating plan was not the municipalities´ main planning tool. The procurement plan was used more, effectively assisting them to Planning Instruments control the flow of procurement and contracting processes. The social and environmental plans were used in projects that required socio- environmental inputs. Adopted at the Bank's insistence on the importance of monitoring the quality and deadlines of contracts. Technical assistance provided by the Contracts management Bank for this activity proved to be more important than the operation manual. Oversight of actions by the Essential for monitoring, as well as for providing guidance to Bank municipalities and correcting shifts of emphasis. Administrative and financial This proved to be a challenge, met with some difficulty by the management of projects municipalities. Uruguaiana faced the biggest problems in this respect and it 155 Item Respondents´ comments was one of the reasons for the difficulty it experienced with the program. The Bank and the municipalities acknowledged that this was a gap in the Monitoring, evaluation and program that the operation manual was unable to fill. The indicators as performance indicators formulated were extremely vague and difficult to measure. No baseline was defined for most of the targets. 2.3. Key Aspects of Implementation Preparation Phase / Design / "Quality at Entry" A number of important findings and lessons were assimilated during the preparation phase of the Program: • Unavailable or poorly organized information for preparing the projects in the municipalities. • A need existed to improve training and qualification of municipal staff to prepare them to deal with the formulation of complex development projects, especially since external resources were involved. • Considerable difficulty was experienced in getting local teams to work together, especially on joint and shared actions with common goals. • The local organizations and population were ready and willing to participate in preparing proposals and public policies, providing appropriate methodologies were used. • A need existed to adopt a comprehensive approach covering economic, social, environmental and institutional aspects in order to overcome the complex challenges presented by territory development. • The indicators for monitoring and evaluating local development projects needed to be clear, easy to understand and measure to ensure engagement and commitment of the people involved. • The data and information presented in the Project Document contributed to the specific contextual analysis of each project, particularly regarding the level of access to urban public services. However information and ex-ante analysis was lacking, which would have made a useful contribution to establishing the baseline of the program in areas such as: a. The level of quality of public services b. The degree of satisfaction of the population with the services c. Data on employment, income and formal/informal status of businesses d. Data on real estate values in the vicinity of the works. In general, the interviewees considered that the investment in the program design phase was very important for establishing QAE and for preparing the individual municipalities to enhance the quality of services delivery. Some interviewees considered that four years between the start of talks and conclusion of the preparation phase was too long. There can be no doubt that the changes that occurred during this period, including in the economic scenario and those affecting municipal administration priorities, interfered substantially in the process. 156 Projects Planning All municipalities experienced difficulties with planning their projects, although it is fair to say that the Annual Operating Plans contained some unworkable deadlines. The Environmental and Social Management Plan (PAS) was a robust and highly detailed instrument, and probably due to these qualities (and the shortage of time) it was only marginally adhered to in practice. In the event it was the environmental specifications sheets (fichas) that defined the specific instrument to be used in the works (works supervision plan, population resettlement plan, etc.). The Procurement Plan was the planning instrument that was most used and which produced good results in all municipalities assessed. Implementation Phase Positive aspects: • The training given by the Bank in purchasing, financial management and safeguards. • The care taken in the preparation of TORs and procurement and contracts processes. • The assistance given by Pelotas in terms of training for the other municipalities given that its project got underway before the others. Aspects that impeded implementation: • The exchange rate variation during the implementation phase. Together with increased construction prices, this meant that the scope and costs of the works had to be revised in order to reallocate resources from Components 1 and 2 to Component 3. • Difficulties in defining and using indicators as M&E tools. Given the vast experience that the Bank possesses in this area, more and deeper knowledge could have been transmitted to the municipalities, and the Bank could have demanded a more effective return. • The two-year delay in the municipality of Santa Maria, which resulted in their project being effectively deployed in around 30 months, including the extension. The rush to finish caused some inconsistencies in the projects, as well as problems in key bidding/procurement processes. • In Component 2 difficulties arose for municipalities wishing to form strategic partnerships such as with SEBRAE (training for micro-entrepreneurs), which would have been more effective than the strategies adopted. Also the municipalities´ limited capacity to fully comprehend some of the activities was caused by difficulties in understanding program documents. • In Component 3 there were delays in preparing engineering designs and difficulties encountered in preparing budgets (mainly for consultancies), with substantial differences between the prices submitted by bidders. • Santa Maria was obliged, for various reasons, to halt the "Km. 3 Infrastructure Works", and also canceled the Rural Mobility Plan and the works on the Parque Palotino. 157 2.4. Assessment of Program Effectiveness Goals achieved The goals of the program, according to previously defined intermediate and outcome indicators, were defined at different periods, with no uniform methodologies, and adapted to each of the projects. It is difficult therefore to produce a comparative analysis to reflect an accurate assessment of the consolidated results of the program as a whole. Intermediate Indicators Virtually 70% of the 35 targets were achieved and 91% of the activities of the partially-achieved goals. Pelotas performed the best out of the four municipalities. Table 3. Intermediate indicators Achievement of targets Comp. 1 Comp. 2 Comp. 3 Total % Not achieved 13% 0% 7% 6% Partially achieved 13% 25% 27% 23% Achieved 63% 75% 67% 69% No Information 13% 0% 0% 3% Outcome Indicators In this evaluation of the results, the indicators of the 25 targets were measured. These indicators reflect the objectives of the investment program, representing 52% of the targets achieved and 24% of those partially achieved. The remaining 24% refer to goals on which no information was supplied. The latter is itself an indication of the way in which the indicators were prepared. Table 4. Outcome indicators Rio Santa Achievement of targets Bagé Pelotas Grande Maria Total Not achieved 0% 0% 0% 0% 0% Partially achieved 40% 22% 33% 0% 24% Achieved 20% 67% 17% 100% 52% No Information 40% 11% 50% 0% 24% The evaluation adopted a scale with scores from 1 to 5, where 1 represents no improvement, 2 represents little or no improvement, 3 indicates moderate and/or regular improvement, 4 means good or satisfactory, and 5 excellent. The following table shows the values of the scores used to indicate what would have been the indicators for Bagé and Rio Grande (which produced no measurable data): “ % of beneficiaries satisfied with the generation of employment, income and business opportunities” and “ % of residents satisfied with the improvements in urban infrastructure in the intervention areas (area residents).” Note that in Bagé the resident satisfaction results appear to be ‘good’ or ‘excellent’, and in Rio Grande they were at or near to ‘good’. 158 Table 5. Satisfaction level based on interviews with key actors, staff and end-users Level of Bagé Pelotas Rio Grande satisfaction Component 2 4.5 to 4.8 2.1 to 4.2 - Component 3 4.1 to 4.7 2.7 to 3.8 3.7 to 4.1 2.5. Assessment of the Effectiveness of the Program The results of the program (91% of the intermediate targets and 76% fully/partially achieved) involved a total investment of US$66 million (91% of planned expenditure) in 4 municipalities, home to 942,000 people, directly benefiting 492,208 (52%) of them, who pronounced themselves “satisfied”. Program Costs Table 6. Planned costs of projects, by component, in US$ million Rio Santa Uses Bagé Pelotas Grande Maria Total % Comp. 1 1.09 2.44 2.01 2.02 7.56 10% Comp. 2 0.32 2.2 0.22 4 6.74 9% Comp. 3 9.52 20.49 11.09 17.2 58.3 80% Adm. fee 0.07 0.05 0.02 0.03 0.17 0% Total 11 25.18 13.34 23.25 72.77 100% Table 7. Investments made in the projects, by component, in US$ million Rio Santa Uses Bagé Pelotas Grande Maria Total % Comp. 1 0.84 1.14 0.47 1.69 4.14 6% Comp. 2 0.25 0.94 0.24 2.58 4.01 6% Comp. 3 10.34 23.05 10.81 13.47 57.67 87% Adm. fee 0.02 0.05 0.02 0.03 0.12 0% Total 11.45 25.18 11.54 17.77 65.94 100% Table 8. Variation between the projected values and the projects undertaken, by component Rio Santa Uses Bagé Pelotas Grande Maria Total % Comp. 1 77% 47% 23% 84% 55% 60% Comp. 2 78% 43% 109% 65% 59% 66% Comp. 3 109% 112% 97% 78% 99% 109% Adm. fee 29% 100% 100% 100% 71% 78% Total 104% 100% 87% 76% 91% 100% 159 Table 9. Sources of Funding: IBRD and Counterpart, in US$ million Rio Santa Sources Bagé Pelotas Grande Maria Total % IBRD 6.6 18.9 7.96 13.95 47.41 65% Counterpart 4.4 6.28 5.38 9.3 25.36 35% Total 11 25.18 13.34 23.25 72.77 100% Table 10. Sources of completed funding: IBRD and Counterpart, in US$ million Rio Santa Sources Bagé Pelotas Grande Maria Total % IBRD 6.47 18.9 7.16 12.2 44.73 68% Counterpart 4.98 6.28 4.38 5.57 21.21 32% Total 11.45 25.18 11.54 17.77 65.94 100% Table 11. Variation between sources of projected and completed funding: IBRD and Counterpart Rio Santa Sources Bagé Pelotas Grande Maria Total % IBRD 98% 100% 90% 87% 94% 104% Counterpart 113% 100% 81% 60% 84% 92% Total 104% 100% 87% 76% 91% 100% Program Results Table 12. Results of the Program, by component C Results Beneficiaries Satisfaction Invest. % 1 57,000 properties 2,159 84.8% registered in the GIS municipal satisfaction of (Geographic Information employees population with System), 7 plans for trained and municipal improving municipal making services and planning and management effective use more user US$ 4.14 capacity, 3 municipal of planning friendly access 6% million projects with improved and to public processes, 4 municipal monitoring services in applying better project systems. Pelotas. implementation processes, 3 good practices replicated. 2 1 microcredit strategy 625 people 90-100% of the prepared and adopted, benefited beneficiaries US$ 5.35 million to from training satisfied with support microcredit or technical generation of US$ 4.01 6% segment, 1 technology assistance employment, million park built and gradually provided for income and being operationalized, 1 small business 160 C Results Beneficiaries Satisfaction Invest. % central processing plant businesses opportunities in for agricultural products and farmers, Santa Maria. built and 1 popular and 35 shopping extended, 1 beneficiaries community center in the of the final stages of productive construction, 3 long-term infrastructure economic development of strategies prepared and 2 horticultural commencing gradual plots and adoption, 1 plan of action orchards. for the tourism sector prepared and initiating step-by-step adoption. 3 104.7 km of paved or 74,552 Over 80% of repaiered streets, 1208.7 people residents km of roads upgraded, 12 benefited satisfied with bridges replaced, repaired from sewage improvements to or duplicated, 20 km collection the urban extension of the water and 38,912 infrastructure in supply network and 622 from sewage the intervention new connections made, treatment, areas in Pelotas 12,021 micrometers 3,481 and Santa installed in the water families with Maria. US$ 57.67 supply system, 60% rights of use 87% million sewage collection and or registered 15% sewage treatment in tenure of Bagé, 1 park, 3,700 m2 of properties green area, 1,480 seedlings and 4,744 planted, 38,813 m2 built rural area in park, 2 residents management plans with clean developed and 42% water reduction in vehicle supply. concentration in Pelotas. Major difficulties were encountered in obtaining the necessary data and information for the economic evaluation. This indicated clearly that the efforts to modernize municipal managements were not sufficient to get them to make progress in areas such as flexible, linked data banks, integrated management systems, business intelligence softwares and data cross- checking. It can be said that the PDMI made more progress in terms of the volume of investment and the quality of the interventions than in the institutional development and modernization of municipal management. Institutional Development The following are some of the beneficial outcomes that will only become apparent in the medium term: (i) the Aerophotogrammetric Survey – a vital key to georeferencing and relisting properties, implementing a multipurpose cadastre and revising the generic property values register, all 161 designed to have an impact on boosting revenue from the IPTU (property tax), on the physical and fiscal controls by City Hall) and on the Urban Mobility Master Plan and Environmental Sanitation Plan (legal requirements related to these sectors could influence the quality of planning and management in the municipal administration, as well as the quality of life in general). Employment and Income Generation Lack of documentary evidence made it impossible to assess the results of projects for supporting microbusinesses. The Santa Maria Craft Project (Projeto de Artesanato) was obviously of importance from a jobs creation and social point of view, but was not substantial enough to allow an economic evaluation of the project. The Pelotas and Santa Maria microcredit projects had grown in terms of the number of borrowers and the amount of credit advanced , but it was not possible to obtain further details. As for the plans for long term local economic development, only the Bagé plan had been completed at the time of the evaluation visits but none of the recommended actions had yet got underway. Development plans in market economies have a limited effect on economic growth and are generally indicative of economic strategies and priorities. We conclude that the abovementioned plans might eventually serve as precedents for joint municipal efforts, which could perhaps involve municipalities submitting their various ideas to federal and state governments or private institutions. Territory Improvement The largest volume of projects investment was allocated to this component in all four municipalities. The Highway Design and Maintenance Standards Model (HDM) nevertheless contained a number of limitations for preparing the ex-ante economic evaluation. 3. Risk Assessment on Sustainability of Program Outcomes The assessments indicate whether the sustainability of the results could be perceived as high risk (A), substantial risk (S), moderate risk (M) or low risk (B). Table 13. Suggested Strategies and Measures Adopted - Financial Sustainability Recommended strategy Measures adopted by municipalities Assessment Develop strategies to ensure During the program implementation phase financial resources through the municipalities complied with the budget planning. To inform counterpart provisions. No information S the community about the regarding assured availability of financial resources applied and their resources to cover management, operation results. and post-deployment maintenance costs. Build alliances and All the municipalities used mechanisms to partnerships around specific promote social participation, but no record M themes to mobilize additional exists of resources that have been mobilized resources. for future project phases. Identify public and private To implement the program, the funding sources and municipalities succeeded in accessing mechanisms able to cover additional funding sources such as the PAC, S costs incurred as the result of Promob, CIDE, Provias, PMAT and program activities. Monumenta. 162 Table 14. Suggested Strategies and Measures Adopted - Institutional Sustainability Measures adopted by Recommended strategy Assessment municipalities The projects involved communication activities, Raise the awareness of society including meetings with local regarding the importance of leaders in the areas affected by M sustaining the results of the the project. A ‘culture of program. participation’ is still in its infancy. PDMI strategies were incorporated in public Incorporate strategies in the policies. Pelotas and Santa M municipalities´ public policies. Maria would appear to be continuing to do this. Only Pelotas continued to Build institutional arrangement to operate the UGP structure and S support the continuity of the actions. added new functions. The PEDL (Local Strategic Development Plan) and GIS of Pelotas, the PED of Bagé, the PAT of Rio Grande, and the Create an institutional platform IPLAN of Santa Maria could through public policies with a view boost local development. M to developing local development in Lessons learned in the course each municipality. of the program fostered a culture of project management that can contribute to public policy planning processes. Create monitoring and evaluation Substantial difficulties system to strengthen institutional encountered with respect to capacity to manage and coordinate M&E and there is no sign that A public sector interventions and such a system can be disseminate experiences and lessons established. learned. Table 15. Suggested Strategies and Measures Adopted – Sustainability of investments Measures adopted by Recommended strategy Assessment municipalities The municipalities have facilities for maintaining Formulate a strategy to maintain and investments using their own operate the investments made in S budget allocations, but the order to extend their lifespan. shortage of resources in the amounts needed is of concern. 163 4. Efficient and effective management and administration of the Program 4.1. Evaluation of Bank performance Ensuring "Quality of Entry”. The Bank´s technical team played an important, expert role at the project preparation stage aimed at ensuring QaE and generating institutional capacity in the teams involved. However, the Bank team devoted little attention to defining the indicator tables. Oversight. The Bank´s follow-up missions, the M&E mission and lessons learned played a key role in drawing attention to the program´s governance model, to administrative and financial management, to the monitoring, evaluation and implementation of components, to overall risk assessment and, finally, to the question of environmental and social safeguards. Considering the lack of experience of the selected municipalities and the recognized expertise of the IBRD consultants and technical staff, it would appear that little support was forthcoming (from the Bank) in terms of explaining, training and empowering people to supervise project implementation or to monitor indicators and measure results. In Santa Maria the delay in the Bank´s issuance of “ no objections” was mentioned. 4.2. Assessment of Borrower Performance The high turnover of management staff members in the City Halls led to discontinuity and constant revision, resulting in delays in project execution. Problems arose from differences in policy orientation as well as from the fact that information was not readily transferred from a departing management team to its successor. 5. Lessons Learned 5.1. Investment Strategy It is essential to avoid fragmentation and dispersion of resources to a lot of different projects. The ideal would be to concentrate resources on a smaller number of projects, manage implementation better and ensure that they are completed within realistic deadlines. 5.2. Financing in foreign currency A climate of national and international economic uncertainty and instability can occasion significant currency risks for municipal governments with funding projects expressed in dollars, since contracts are drawn up in local currency. If the national currency is devalued the projects may become unviable. A reasonable way forward would therefore be to examine ways to establish mechanisms to mitigate this kind of risk. 5.3. Counterparts The value of the counterpart contributions of the municipalities should match their financial reality. In the event of replicating projects of this type, the National Treasury must be fully informed of the proposed arrangements. 5.4. Structure for project management In the management structure of large-scale projects, special emphasis needs to be placed on training local municipal technical staff in project management, and procedures are needed to ensure that practitioners remain in office until the activities are completed. 164 5.5. Deadlines for preparation and implementation The time required for preparation of TOR and engineering projects should be strictly adhered to. Late, incomplete or flawed preliminary studies can cause procurement problems and implementation delays. 5.6. Training in procurement and financial controls Training is recommended in procurement, finance and juridical procuracy areas for dealing with bids involving international financing, accounting and financial controls. The aim would be to ensure that staff are aware of the variety of technical and legal interpretations, especially the differences between the requirements of the Bank and those of the national public accounting system. 5.7. Community participation Specific investment is needed in social participation processes for identifying needs and evaluating outcomes with all stakeholders, thus enhancing social accountability. 5.8. Internal Communication The communication plan must involve internal municipality staff members so that they can assume ownership of the process and its results. 5.9. Intermunicipal liaison Intermunicipal coordination can be fostered by the existence of a strong, legally-established structure such as a consortium of municipalities, or by a technical coordination unit charged with exchanging information and knowledge, consolidating data, information and results, etc. Such a structure must be staffed by a small technical staff and receive external assistance if appropriate, with well-defined roles and responsibilities as well as institutional mechanisms to ensure its efficient operation. 5.10. Monitoring and evaluation The M&E of projects must be considered a priority, through the observance of guidelines or contractual clauses that require monitoring and assessments to be performed throughout the entire process. M&E should cover procedures for defining goals, baselines and indicators. It is also important to provide advice and training in M&E for municipal technical staff involved in the projects. 5.11. Final evaluation of the project The final project evaluation should consider which outcomes can be better assessed after a period (of, say, one year) after project closure. It is worth noting that, from an operational point of view, it is more difficult to obtain data and conduct interviews between the months of December and February, which is the prime holiday season in Brazil, and also occasionally a period of government transition. 165 7B. Borrower's Comments on Draft ICR Borrower Letters The below are translated versions of the Borrowers’ commentary on the ICR. Scanned versions of the original, signed letters are filed in the system. Pelotas Pelotas Prefecture Project Management Unit Cabinet of the Prefecture OF/GAB/466/2014 Pelotas June 10, 2014 Esteemed Madam: Having received the draft of the Implementation Completion Report for the PDMI Program and Projects, the Municipal Administration of Pelotas registers its agreement with the terms of the document as presented. We would like to take advantage of this opportunity to make several comments on the Polo do Sul Project (7499-BR), the PDMI project in this municipality, which was developed with resources and guidance from the World Bank in the period between 2008 and 2012. The Municipality of Pelotas, after many years without significant investments due to the economic depression affecting this region of the State of Rio Grande do Sul, had with Project resources a new opportunity to achieve integrated and sustainable development. From 2008-2013, the unemployment rate decreased and GDP grew substantially. Among Project actions and activities, which obtained significant results for all three components, the following in particular should be highlighted: 1. For infrastructure activities, we can highlight the rehabilitation of public spaces and the improvements to the roadway system, which included the paving of 73.3km and the improvement of streets and avenues with extremely positive results for public transport, flow of vehicles, and movement of people. 2. With relation to the Generation of Work and Income, we can highlight in the rural area the creation of a cooperative, which was necessary for the farmers’ organization to correctly create and implement the Agricultural Products Processing Center (Central de Beneficiamento de Productos Agricolas), resulting in an increase in value added for products and improved market offering of products of improved presentation and quality. 3. In the urban area, the construction of the Shopping Popular allowed all walking and street vendors to move off of the streets. Support to these small entrepreneurs through microcredit and formalization has made increased income for their businesses and a more comfortable space for their consumers possible. 166 Public management was modernized through capacity-building for public servants, implementation of a real estate cadaster, and implementation of a project management program for government program projects. The Strategic Plan for Municipal Development created will serve as a goal for future public policy programs in the municipality. Due to all the benefits which were obtained in the Municipality of Pelotas through the Polo do Sul project, we would like to express our recognition for what it was possible to realize here to benefit our population. We would also like to express our gratitude to the management and technical team of the Bank, whose support and guidance in assuring that the results achieved were at the desired level were decisive. Finally, given this successful experience, it seems to us that this institution, which focuses on local development in relation to economic, social and environmental dimensions, could repeat this initiative in other municipalities of our country, where the results would certainly also be successful. Attentively, Eduardo Leite Mayor, Prefecture of Pelotas 167 Bagé Municipal Prefecture of Bagé Rio Grande do Sul State Bagé, June 13, 2013 Esteemed Director, The municipality of Bagé, through its Mayor, Mr. Luis Eduardo Dudu Colombo dos Santos, acknowledges the receipt of the draft Implementation Completion Report concerning Loan Agreement 7582-0 with the International Bank for Reconstruction and Development – IBRD. This agreement was possible through the creation of the Integrated Program for Municipal Development – PDMI, which gathered together the municipalities of Bagé, Pelotas, Rio Grande, Santa Maria, and Uruguaiana to make the loan viable. Each municipality presented a project where the actions to be implemented aimed at improving public service, urban infrastructure, and the generation of employment and income. The financial contribution made available was a substantial sum, given that the municipality did not have its own resources for the development of project actions. The Rainha da Fronteria project involved actions within the established periods and achieving the desired objectives, although not entirely. Some issues impeded the 100% realization of the project’s goals. However, this did not affect the success of the same. We would like to highlight the good relationship between the PDMI municipalities where, primarily through the UAP- Program Linking Unit, there were exchanges of information and interaction. We emphasize, additionally, the excellent relationship with the World Bank team. The team is of high professional quality and, from the beginning to the end of the project, was attentive to the project’s needs, assisting and guiding the municipal team. We consider this project of significant value to the municipality not only due to the actions realized, which led to improved quality of life for our population, but also due to the new culture brought by the Bank. Apart from learning of norms and processes and the execution of the work by a multidisciplinary team, there was a different vision of everyday actions, as without distancing ourselves from technical aspects, there was an increased social focus. Thus, despite the difficulties encountered throughout the course of the project, and given the analysis undertaken by the Bank, we consider it a success. Reiterating our respect and esteem, we express our appreciation. Attentively, Luís Eduardo Dudu Colombo dos Santos Municipal Prefecture of Bagé 168 Rio Grande Rio Grande do Sul State Municipal Prefecture of Rio Grande Cabinet of the Prefecture Oficio No. 114/2014/GF/PMRG Rio Grande June 18, 2014 Esteemed Madam, Sending our compliments, we acknowledge our receipt of the draft Final Implementation and Completion Report (ICR) of the PDMI Projects. In analyzing the referenced draft, we verified that the report evaluated the performance of the Program in the municipality of Rio Grande, transcribing the data provided by this Prefecture. We stress that the results of the Program are apparent in our city, in drainage and paving works on the following streets and avenues: The creation of a Sustainable Economic Development Plan (PDES), as well as an Action Plan for Tourism Development, was also made a reality in the municipality through instruments of strategic and participative planning. Considering the above, we would like to take advantage of this opportunity to express our satisfaction in participating in the Program; although all goals were not achieved, among those that were achieved brought about improvements in the quality of life for the population directly and indirectly benefited by the sanitation works. This being our commentary for the moment, we sign Attentively, Alexandre Duarte Lindenmeyer Mayor, Municipal Prefecture 169 Santa Maria Santa Maria June 9, 2014 Madam Manager, We would like to take this opportunity to send our compliments and acknowledge our receipt of the document entitled "Implementation Completion and Results Report" (ICR) of June 4 of this year, containing the final results of the evaluation of the PDMI program and the Santa Maria 2020 Project in particular. Allow us, before beginning with the comments that we consider relevant, to thank you for the loyalty and commitment shown to us by you and your staff during the period of implementation of this project. Without this high-level dialogue, the obstacles faced would have been insurmountable. We therefore extend to the whole team our sincere appreciation and consideration. In relation to the Integrated Municipal Development program (PDMI) and the final evaluation results, we have to observe them in light of the objectives proposed by five most important municipalities of less economically prestigious half of RS: "improve the capacity of the municipalities of Bagé, Pelotas, Rio Grande, Santa Maria and Uruguaiana to provide infrastructure services and income opportunities for its population.” First of all, this is not just the goal of the program or the project. In reality, it is an everyday challenge for mayors of small and medium cities in Brazil to do much with little. There is a serious distortion in our federative model, which distributes responsibilities and obligations to subnational levels, while concentrating more than 66% of resources at the national level. For example, in 2013, the tax concentration was such that only 15.5% of the revenue of R$1.5 trillion was passed on to Brazil's 5,500 municipalities to invest in sensitive areas such as education, health, security and transport. At this juncture, achieving the result of "Moderately Satisfactory" in fulfilling the aimed-for development objectives of the program is encouraging. This shows how far the reforms, the commitment and the organization of municipal administrations can do for the quality of life of Brazilians. Therefore, managers of the municipalities that comprised the PDMI are to be congratulated. With regard to our project specifically, there were many challenges we had in the beginning of the Government administration in preparing the management of the municipality in accordance with our vision of the city and development. During this period our experiences proved limited in the face of challenges undertaken—the report correctly identifies a "delay" in the initial project. To correct the project’s course, we created the Office of Strategic Planning and Special Projects, and structured the Project Management Unit to bring it physically near the Mayor's Office, in order to closely monitor and control all issues pertaining to the Santa Maria Project 2020. With consistent commitment and dedication, we were able to execute in less than 30 months a project that in other municipalities took at least twice as long. As pointed out by the report, we complied substantially with the effectiveness and efficiency requirements of the project; achieved 100% of the final results indicators; and even more pleasing 170 to us, obtained the recognition of more than 80% of the population with the infrastructure works carried out. I have no doubt that among the great achievements of our project are the two most complex institutional development activities of all of PDMI: the Environmental Sanitation Master Plan and the Urban Mobility Master Plan. These are plans whose quality is unparalleled in the recent context of the Brazilian municipalities, and they represent a unique breakthrough in the public management of Santa Maria. These, along with the information technology master plan, the survey data collected though aerial photographs, and the consequent Multipurpose Cadaster (in progress), prepare our city for the future, with respect to providing services with high quality and efficiency for citizens. As for employment and income generation, although investments were modest, they widen our continuing efforts in the field of entrepreneurship and innovation to generate economic development opportunities. Microfinance policy has been an area of special attention since the beginning of our Government, with significant contribution of financial and technical resources, and the artisanal sector presents great economic and social potential to be explored and encouraged, under the General Municipal Law for Micro and Small Business. In the field of social innovation, the establishment of a community center at the Clube 21 is a pilot project for community development. This important structure will be managed by the city in partnership with an association of friends of the Clube 21. At this time, we are taking all measures necessary to make it operational in the short term, such as the creation of the Management Plan and the Firefighting and Prevention Plan (PPCI). Technology Park, as a physical area, will add to the environment of entrepreneurship created through the Innovation Law. It has sparked the interest for major international investments in the fields of military, aerospace, information and communication technology, among others. In this sense, we consider the Santa Maria Tecnoparque a fully operational development instrument. The huge investment made in urban mobility in the city, creating alternative routes of access to the urban center and the bus station, such as the Rio Branco tunnel, the widening of Avenida Helvio Basso, the paving of Avenida Liberdade, and the paving of Ruas Agostinho Sangoi/Guilherme J. Fabrin, either due to the practical need for or the aesthetic quality of the works, renewed the good spirits of the population and the confidence of citizens in the work of the Municipal Government. As the research survey pointed out, more than 80% of the population is fully satisfied or very satisfied with the activities performed. However, the highlight of the improvement of infrastructure services is the first major city park, the Jockey Club Park, an area of 30, 000 m2 for leisure, sports, concerts and shows like the recent 5th International Balloon Festival held on the occasion of the anniversary of the city. Without a doubt, the Jockey Club is a gift to the city, one which we are dedicating to improving and expanding, and which has already been approved by 74% of the population. Meanwhile, we regret that Palotino Park, which would have been the largest green area in the urban center with a bold architectural proposal by the standards of the State’s southern half, was not constructed. However, we advanced substantially with the management plans for Palotino Park and Morro Park, which will allow us to fundraise for investments to offer two further alternatives for leisure, culture and entertainment for Santa Maria, perhaps with support from the World Bank itself. 171 Continuing in the environment area, in addition to the continued creation of municipal parks, we are conducting actions together with Corsan and the Caixa Federal to conclude the Km 3 infrastructure works as soon as possible and ensure access to water and sewage services, as well as paved and well-lit streets, for more than 1,300 residents of the locality. Complying fully with the Bank's social and environmental safeguards, our Government is committed to quality of life and environmental sustainability. As promised in our correspondence of December 2010, we have managed to make up for lost time. These last three years of conviviality and hard work were an important learning experience. It is certain that the lessons learned will be replicated in other programs and projects of the municipal administration. To conclude, we would like to thank you on behalf of the population of Santa Maria for the World Bank's support in all stages of this project. Fraternally, Cezar Schirmer Municipal Mayor 172 Annex 8. Comments of Cofinanciers and Other Partners/Stakeholders ***Not applicable*** 173 Annex 9. List of Supporting Documents Project Appraisal Document / Pelotas (Report No. 39931-BR) – December 10, 2007 Project Appraisal Document / Uruguaiana and Bagé (Report No. 43889-BR) – June 26, 2008 Project Appraisal Document / Santa Maria (Report No. 45098-BR) – November 26, 2008 Project Appraisal Document / Rio Grande (Report No. 47688-BR) – June 5, 2009 Restructuring Paper 1 / Pelotas (Report No. 63733-BR) – November 4, 2011 Restructuring Paper 2 / Bagé, Rio Grande and Santa Maria (Report No. 72292-BR) – December 13, 2012 Environmental Impact Assessment – September 1, 2007 Resettlement Framework – January 1, 2007 Country Partnership Strategy 2008-2011 (Report No. 42677-BR) Country Partnership Strategy 2012-2015 (Report No. 63731-BR) – September 21, 2011 Aide Memoire (Mid Term Review – Pelotas) – September 13-15, 2010 Aide Memoire (Mid Term Review – Bagé) – September 16-17, 2010 Aide Memoire (Mid Term Review – Rio Grande) – June 7, 2011 Aide Memoire (Mid Term Review – Uruguaiana) – May 2-3, 2011 Aide Memoire (Mid Term Review – Santa Maria) – May 4-5, 2011 Other previous AM’s Aide Memoires (Uruguaiana, Santa Maria) – September / October, 2010 Aide Memoire (Rio Grande) – September, 2010 Aide Memoire (Pelotas) – June, 2011 Aide Memoire (Bagé) – September, 2011 Aide Memoires (Santa Maria and Uruguaiana) – October, 2011 Aide Memoires (Bagé, Pelotas and Rio Grande) – November, 2011 Aide Memoires (Bagé, Pelotas and Rio Grande) – May, 2012 Aide Memoire (Santa Maria) – June, 2012 Aide Memoire (Santa Maria) – October, 2012 Aide Memoires (Bagé, Pelotas and Rio Grande) – November, 2012 Aide Memoires (Supervision and Completion missions – Bagé, Pelotas, Rio Grande, Uruguainana, and Santa Maria) – April, 2013 Aide Memoire (FM Supervision mission – Uruguaiana) – June, 2013 Aide Memoire (Santa Maria) – September, 2013 Draft Aide Memoire (Post Completion mission – Santa Maria) – April, 2014 Implementation Status Report 11 – January 19, 2014 Implementation Status Report 10 – July 10, 2013 Implementation Status Report 9 – November 18, 2012 Implementation Status Report 8 – April 29, 2012 Implementation Status Report 7 – July 20, 2011 Implementation Status Report 6 – February 21, 2011 Implementation Status Report 5 – April 29, 2010 Implementation Status Report 4 – November 23, 2009 Implementation Status Report 3 – April 15, 2009 174 Implementation Status Report 2 – September 11, 208 Implementation Status Report 1 – March 4, 2008 Borrowers’ Independent Project Assessment (Phase I – Bagé, Pelotas and Rio Grande) – February, 2013 (Instituto Publix) Borrowers’ Independent Project Assessment (Phase II – Santa Maria, Consolidated for the Program, and Executive Summary) – May, 2014 (Instituto Publix) Economic Analysis (Complete document – Gerheim, Rogerio Dias) – May, 2014 Stakeholder Workshop Report and Results – November 21, 2012 World Bank (2008-2014), Additional Documents in Project’s Electronic File, including, among others, Loan Agreements, Guarantee Agreements, Amendment Letters, Management Letters, Back-to-Office Reports, Project Status Reports, Project Financial Assessments, Project Procurement Assessments; Washington, D.C. 175 MAP INSERT MAP HERE AFTER APPROVAL BY COUNTRY DIRECTOR AN ORIGINAL MAP OBTAINED FROM GSD MAP DESIGN UNIT SHOULD BE INSERTED MANUALLY IN HARD COPY BEFORE SENDING A FINAL ICR TO THE PRINT SHOP. NOTE: To obtain a map, please contact the GSD Map Design Unit (Ext. 31482) A minimum of a one week turnaround is required 176