The World Bank ProCerrado Federal Project (P150892) REPORT NO.: RES29474 RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF PROCERRADO FEDERAL PROJECT APPROVED ON APRIL 27, 2015 TO FUNATURA ENVIRONMENT & NATURAL RESOURCES LATIN AMERICA AND CARIBBEAN Regional Vice President: Jorge Familiar Country Director: Martin Raiser Senior Global Practice Director: Karin Erika Kemper Practice Manager/Manager: Valerie Hickey Task Team Leader: Maria Bernadete Ribas Lange The World Bank ProCerrado Federal Project (P150892) ABBREVIATIONS AND ACRONYMS BCCCMTF Brazil Cerrado Climate Change Mitigation Trust Fund CAR Cadastro Ambiental Rural (Rural Environmental Cadastre) DEFRA Department for Environment, Food and Rural Affairs of United Kingdom FRELs Forest Reference Emission Levels Funatura Fundação Pró-Natureza (Pro-Nature Foundation) FUNCATE Fundação de Ciência, Aplicações e Tecnologia Espaciais (Foundation for Space Science, Applications and Technology) ha Hectare(s) ICMBio Instituto Chico Mendes de Conservação da Biodiversidade (Chico Mendes Institute for Biodiversity Conservation) INPE Instituto Nacional de Pesquisas Espaciais (National Institute of Space Research) MIF Manejo Integrado de Fogo (Integrated Fire Management) MMA Ministério do Meio Ambiente (Ministry of Environment) MTR Midterm Review PPCerrado Plano de Ação para Prevenção e Controle do Desmatamento e das Queimadas no Cerrado (Action Plan for Prevention and Control of Deforestation and Forest Fires in the Cerrado) PRA Programa de Regularização Ambiental (Environmental Regularization Program) PRADA Projeto de Recuperação de Áreas Degradas e Alteradas (Degraded and Changed Land Recovery Project) RL Reserva Legal (Legal Reserve) SEMA Secretaria do Meio Ambiente do Estado da Bahia (Bahia State Secretariat of Environment) SEMAR Secretaria Estadual do Meio Ambiente e Recursos Hídricos do Piauí (Piauí State Secretariat of Environment and Water Resources) SICAR Sistema Nacional de Cadastro Ambiental Rural (Rural Environmental Cadastre System) SFB Serviço Florestal Brasileiro (National Forest Service) The World Bank ProCerrado Federal Project (P150892) BASIC DATA Product Information Project ID Financing Instrument P150892 Investment Project Financing Original EA Category Current EA Category Partial Assessment (B) Partial Assessment (B) Approval Date Current Closing Date 27-Apr-2015 29-Dec-2017 Organizations Borrower Responsible Agency Funatura Ministry of Environment Project Development Objective (PDO) Original PDO The Project development objective is to enhance the capacity of the Ministry of Environment to establish integrated forest fire management and landholdings’ registration in selected areas of the Cerrado. OPS_TABLE_PDO_CURRENTPDO Summary Status of Financing Net TF Approval Signing Effectiveness Closing Commitment Disbursed Undisbursed TF-A0093 27-Apr-2015 28-Apr-2015 28-Apr-2015 29-Dec-2017 4.30 2.70 1.60 Policy Waiver(s) Does this restructuring trigger the need for any policy waiver(s)? No The World Bank ProCerrado Federal Project (P150892) I. PROJECT STATUS AND RATIONALE FOR RESTRUCTURING A. Project Status 1. The Brazil Cerrado Climate Change Mitigation Trust Fund (BCCCMTF TF071814), is a single-donor trust fund with World Bank- and recipient-executed components financed by the Department for Environment, Food and Rural Affairs of United Kingdom (DEFRA). The total amount of the BCCCMTF is £10,000,000 (Ten million British Pound Sterling). 2. The BCCCMTF contributes to the environmental regularization of rural properties in the Cerrado Biome and to the decrease in the Cerrado’s forest fires. The ProCerrado Federal Project is financed by the BCCCMTF–TF071814 together with three other Recipient-executed projects and one Bank-executed project aimed at achieving the BCCCMTF’s objectives. 3. The ProCerrado Federal Project’s Development Objective is to enhance the capacity of the Ministry of Environment (Ministério do Meio Ambiente, MMA) to establish integrated forest-fire management and landholding registration in selected rural areas of the Cerrado Biome. Grant Recipient is Pro-Nature Foundation (Funatura); and the Implementing Agencies are MMA, Chico Mendes Institute for Biodiversity Conservation (ICMBio) and National Forest Service (Serviço Florestal Brasileiro, SFB). The Project is under implementation. The rural environmental cadaster registration is under way. The national forest- fire policy was drafted and is under consultation. Three protected areas are adopting integrated forest-fire management. With this proposed extension of the closing date to May 2018, the grant is expected to be fully disbursed. Disbursements to date: 62.82 percent. 4. The ProCerrado Federal Project operates at federal level. It has four components: (i) Component 1: Support to the Action Plan for Prevention and Control of Deforestation and Forest Fires in the Cerrado–PPCerrado. This component has three pillars: i) promotion of sustainable productive activities; ii) protected areas and landscape planning; and iii) monitoring and control. The aims of the component’s activities are to reduce deforestation and promote landholders’ compliance with the Forest Code by monitoring and evaluating the PPCerrado in light of changes introduced by the 2012 Forest Code, and by developing the governance capacity to implement the PPCerrado and supporting reforms in forest policy, focusing on a National Policy on Management and Control of Burnings, Prevention and Fighting of Forest Fires. (ii) Component 2: Rural Environmental Cadaster (Cadastro Ambiental Rural, CAR). This component supports family landholders in the States of Tocantins and Maranhão in complying with the Forest Code (Law 12.651 of 2012). Family landholdings are to be registered in six selected municipalities, while CAR communication actions will be implemented in 58 municipalities. The selected municipalities for family landholder registration are located in the States of Tocantins (Natividade, Palmas, and Pium) and Maranhão (Alto Parnaíba, Balsas, Riachão and São João do Soter). Help desks will be established in eight municipalities: Alto Parnaíba, Balsas, Riachão, São João do Soter, Carolina, Estreito, Natividade, and Pium. The municipalities were selected from the 52 municipalities deemed priorities under the PPCerrado because they surround the protected areas in the project’s third component or were nominated in consultations during the preparation of the FIP–CAR Project. (iii) Component 3: Preventing and Fighting Forest Fires in Protected Areas. The aims of this component are to strengthen the ICMBio’s capacity to prevent and fight forest fires, and to promote alternatives to the use of fire in the Cerrado and especially in the project’s three targeted federal protected areas.1The proposed activities are in line with management plans under implementation in these three areas. (iv) Component 4: Project Management and Administration. The aim of Component 4 is to ensure proper and ongoing procedures to implement the project, including overall management, financial management (FM), procurement, accounting and audits. 5. The project supported four workshops in 2016 to revise the PPCerrado for a subsequent phase, which resulted in the approval and publication of its third phase in December 2016. This new phase covers the period from 2016 to 2020. The 1The three federal protected areas were selected among those most affected by forest fires in Brazil and in the Cerrado Biome: Serra da Canastra National Park (Minas Gerais), Chapada das Mesas National Park (Maranhão), and Veredas do Oeste Baiano Wildlife Refuge (Bahia). The World Bank ProCerrado Federal Project (P150892) project is supporting meetings of the technical working group on REDD+ to prepare forest reference emission levels (FRELs). This group was formed in 2014 to conduct surveys of data and information on results and emission-reduction methodologies for Brazil’s land-use and land-use change sector, and to review the technical content to be used as the basis for Brazil’s submissions to the United Nations Framework Convention on Climate Change (UNFCCC). The MMA has made good progress on the policy front. Further results are expected by the end of 2017. 6. The SFB is currently implementing the registration of family landholdings in Tocantins and Maranhão under the project. Six municipalities in Maranhão and three in Tocantins have been selected2 for the registration of 5,600 and 2,000 family landholdings, respectively, with a total target area of 533,200 ha. 7. The ICMBio is carrying out Component 3: Preventing and Fighting Forest Fires in Protected Areas. It is working to implement integrated fire management (manejo integrado de fogo, MIF) in three federal protected areas: (i) the Chapada das Mesas National Park in Maranhão (about 160,000 ha), (ii) the Serra da Canastra National Park in central Minas Gerais (about 71,500 ha), and (iii) the Veredas do Oeste Baiano Wildlife Refuge (about 128,000 ha) in western Bahia. These three areas were selected because they are among those most affected by forest fires in the Cerrado Biome. 8. The ICMBio is carrying out participatory planning, interactions with communities and local authorities, dissemination and training, as well as the formation of fire brigades in the Chapada das Mesas National Park and the Bahia Wildlife Refuge. Fire prevention and firefighting equipment and vehicles were acquired for all three areas, and the contracting of water tanker trucks and rural buses was initiated. The radio communication system was designed for the Chapada das Mesas National Park and the Wildlife Refuge. 9. To date, all main activities have been planned and are being implemented, and consultants have been hired, but due to the time required to fully implement the activities, the five-month extension would make it possible to successfully complete activities and contracts under execution, use all the funds allocated for the CAR, and promote more rural environmental cadasters in the selected municipalities. B. Rationale for Restructuring 10. This project experienced substantial delays during the preparation phase because of the changes made to the applicable legislation in 2012 (the Forest Code and the legal basis for the CAR). Moreover, because the CAR’s nationwide implementation began only in May 2014, and the federal responsibility for its implementation migrated from the MMA to the affiliated SFB in December 2014, the project had to be adjusted accordingly and a new partner had to be brought in. 11. After a slow start, project implementation progress improved, but the required implementation period originally estimated during project preparation was not accurate, especially due to the need to coordinate project activities with various partners, which required additional, robust planning and added more time and dialogue. 12. Since the CAR became a nationwide obligation, various firms started conducting it. Therefore, the cost of registering in the CAR decreased significantly. The project’s estimated amount for registration in the CAR was reduced, and the project was able to expand CAR coverage. Considering the time required to register in the CAR and the implementation time left, it would be risky to implement the additional 2,500 CARs in Maranhão, and the project would not be able to successfully complete the contract. The five-month extension in 2018 would make it possible to successfully complete contracts under implementation, use all the funds allocated for the CAR, and support the completion of an additional 2,500 rural environmental cadasters in selected municipalities. 13. The Midterm Review (MTR), held in January 2017, recommended a limited extension of four to six months of the grant closing date to assure the successful use of the funds, particularly under the CAR component. This extension request is based on the MTR and on the original plan to have a three-year period to implement the planned activities under the ProCerrado Federal Project, as well as to complete Bank-executed activities. This extension was discussed and agreed with the donor. This is the first extension of closing date for the ProCerrado Federal Project. 2These municipalities are Natividade, Pium and Palmas in Tocantins, and Alto Parnaíba, Balsas, Carolina, Estreito, Riachão, and São João do Soter in Maranhão. The World Bank ProCerrado Federal Project (P150892) II. DESCRIPTION OF PROPOSED CHANGES C. Description of Proposed Changes 14. The ProCerrado Federal Project is seeking to extend the project’s closing date by five months, from December 29, 2017 to May 30, 2018. 15. The reasons for this proposed extension are to: (a) ensure successful completion of an additional 2,500 rural environmental cadasters due to project savings, resulting in an additional number of beneficiaries; (b) fully complete financing of contracts under implementation, in particular the radio communication system in the protected areas, to be fully operational by the end of the project; and (c) ensure successful completion of the CAR in the target area. 16. After the MTR, the MMA and Funatura revised their planned expenses, realized that the planned amounts under Grant Categories 3(a) and 3(c) were overestimated, and requested a reallocation among grant categories, as shown in the table below: CATEGORY ORIGINAL AMOUNT OF THE PROPOSED REALLOCATION GRANT ALLOCATED (expressed in US$) (expressed in US$) (1) Goods, non-consulting services, 3,208,000 3,308,000 consultants’ services, and training (2) Works 270,000 270,000 (3) Operating Costs: (a) MMA 306,000 241,000 (b) FUNATURA 430,000 430,000 (c) Auditing 86,000 51,000 TOTAL AMOUNT 4,300,000 4,300,000 17. These additional funds in Category 1 will be used under Component 1: Support for the Action Plan for Prevention and Control of Deforestation and Forest Fires in the Cerrado–PPCerrado, and Component 3: Preventing and Fighting Forest Fires in Protected Areas. 18. Regarding the PDO and indicators, the project is in line with the Cerrado Climate Change Mitigation Trust Fund and has its own framework of objectives, intermediate results and associated results indicators. There is little need for adjustment to intermediate indicators, particularly at this late stage of implementation, with one exception: deletion of the intermediate indicator “Medium and larger landholding applications to enroll in CAR system.” After project implementation began and the the CARs began to be implemented in the various municipalities, it was clear that the project would not be able to correctly identify the medium and large landholdings that were registered as a result of the project, considering that various actions were taken in the area to implement the CAR, and it was not possible to affirm that a medium or large landholding had been registered as a result of this project’s actions. 19. Although the procurement rating remained Satisfactory, it is necessary to incorporate the changes in the Bank’s Procurement Guidelines to reflect the Regulations of Procurement for Investment Project Financing, launched on June 1, The World Bank ProCerrado Federal Project (P150892) 2016. These new guidelines will be effective upon approval of this restructuring and of the consequent signed Amendment to the Grant Agreement. All goods, works, non-consulting services and consulting services required for the project, to be financed from the loan proceeds and for which the procurement process starts on or after the date of the countersignature of this Amendment Letter, shall be procured in accordance with the requirements set forth or referred to in the Procurement Regulations and the provisions of the Procurement Plan. 20. This restructuring fully complies with OP/BP 10.00 because: (a) the PDO remains achievable; (b) the Recipient’s performance remains Satisfactory; (c) the Bank and Recipient agree on actions that will be undertaken by the Recipient to complete the project; (d) the project is not subject to suspension of disbursements; and (e) the Recipient has no outstanding audit reports nor there are any audit reports that are not satisfactory to the Bank. The World Bank ProCerrado Federal Project (P150892) III. SUMMARY OF CHANGES Changed Not Changed Change in Results Framework ✔ Change in Loan Closing Date(s) ✔ Reallocation between Disbursement Categories ✔ Change in Disbursement Estimates ✔ Change in Procurement ✔ Change in Implementing Agency ✔ Change in Project's Development Objectives ✔ Change in Components and Cost ✔ Cancellations Proposed ✔ Additional Financing Proposed ✔ Change in Disbursements Arrangements ✔ Change in Overall Risk Rating ✔ Change in Safeguard Policies Triggered ✔ Change of EA category ✔ Change in Legal Covenants ✔ Change in Institutional Arrangements ✔ Change in Financial Management ✔ Change in Implementation Schedule ✔ Other Change(s) ✔ IV. DETAILED CHANGE(S) OPS_DETAILEDCHANGES_RESULTS_TABLE RESULTS FRAMEWORK Project Development Objective Indicators PDO_IND_TABLE Reforms in forest policy, legislation or other regulations supported Unit of Measure: Yes/No Indicator Type: Custom The World Bank ProCerrado Federal Project (P150892) Baseline Actual (Current) End Target Action Value No Yes Yes No Change Date 27-Apr-2015 28-Jul-2017 31-Dec-2017 Reforms in forest policy, legislation or other regulations supported Unit of Measure: Yes/No Indicator Type: Custom Baseline Actual (Current) End Target Action Value No Yes Yes No Change Date 27-Apr-2015 28-Jul-2017 31-Dec-2017 Land area under sustainable landscape management practices Unit of Measure: Hectare(Ha) Indicator Type: Corporate Baseline Actual (Current) End Target Action Value 0.00 122588.00 533200.00 No Change Date 27-Apr-2015 28-Jul-2017 31-Dec-2017 Protected Areas brought under integrated forest-fire management plans Unit of Measure: Number Indicator Type: Custom Baseline Actual (Current) End Target Action Value 0.00 3.00 3.00 No Change Date 27-Apr-2015 28-Jul-2017 31-Dec-2017 Intermediate Indicators IO_IND_TABLE Actions of PPCerrado Phase 2 under implementation Unit of Measure: Percentage Indicator Type: Custom Baseline Actual (Current) End Target Action Value 0.00 58.00 30.00 No Change Date 27-Apr-2015 28-Jul-2017 31-Dec-2017 PPCerrado monitored and evaluated periodically Unit of Measure: Number The World Bank ProCerrado Federal Project (P150892) Indicator Type: Custom Baseline Actual (Current) End Target Action Value 0.00 2.00 2.00 No Change Date 27-Feb-2015 28-Jul-2017 31-Dec-2017 National Policy on Forest-Fire Management, Prevention and Control, including the Cerrado Biome, under preparation. Unit of Measure: Yes/No Indicator Type: Custom Baseline Actual (Current) End Target Action Value No Yes Yes No Change Date 27-Apr-2015 28-Jul-2017 31-Dec-2017 Small landholdings applications to enroll in CAR Unit of Measure: Number Indicator Type: Custom Baseline Actual (Current) End Target Action Value 0.00 1600.00 3700.00 No Change Date 27-Apr-2015 28-Jul-2017 31-Dec-2017 Medium and larger landholdings applications to enroll in CAR system Unit of Measure: Number Indicator Type: Custom Baseline Actual (Current) End Target Action Value 0.00 0.00 280.00 Marked for Deletion Date 27-Apr-2015 28-Jul-2017 31-Dec-2017 People trained to combat forest fires in the selected PAs Unit of Measure: Number Indicator Type: Custom Baseline Actual (Current) End Target Action Value 0.00 449.00 580.00 No Change Date 27-Apr-2015 28-Jul-2017 31-Dec-2017 PAs provided with capacity-building support to improve integrated forest fire management Unit of Measure: Number Indicator Type: Custom The World Bank ProCerrado Federal Project (P150892) Baseline Actual (Current) End Target Action Value 0.00 3.00 3.00 No Change Date 27-Apr-2015 28-Jul-2017 31-Dec-2017 PAs' forest management plans prepared Unit of Measure: Number Indicator Type: Custom Baseline Actual (Current) End Target Action Value 0.00 3.00 3.00 No Change Date 27-Apr-2015 28-Jul-2017 31-Dec-2017 OPS_DETAILEDCHANGES_LOANCLOSING_TABLE LOAN CLOSING DATE(S) Original Revised Proposed Proposed Deadline TF Status Closing Closing(s) Closing for Withdrawal Applications TF-A0093 Effective 29-Dec-2017 30-May-2018 30-Sep-2018 OPS_DETAILEDCHANGES_REALLOCATION _TABLE REALLOCATION BETWEEN DISBURSEMENT CATEGORIES Financing % Current Allocation Actuals + Committed Proposed Allocation (Type Total) Current Proposed TF-A0093-001 | Currency: USD iLap Category Sequence No: 1 Current Expenditure Category: GO, NON-CS, CS & TRG 3,208,000.00 1,549,138.59 3,308,000.00 100.00 100.00 iLap Category Sequence No: 2 Current Expenditure Category: CIVIL WORKS 270,000.00 0.00 270,000.00 100.00 100.00 iLap Category Sequence No: 3A Current Expenditure Category: OPERATING COSTS - MMA The World Bank ProCerrado Federal Project (P150892) 306,000.00 63,958.05 241,000.00 100.00 100.00 iLap Category Sequence No: 3B Current Expenditure Category: OPERATING COSTS - Funatura 430,000.00 343,858.69 430,000.00 100.00 100.00 iLap Category Sequence No: 3C Current Expenditure Category: OPERATING COSTS - Auditing 86,000.00 11,639.66 51,000.00 100.00 100.00 Total 4,300,000.00 1,968,594.99 4,300,000.00 OPS_DETAILEDCHANGES_DISBURSEMENT_TABLE DISBURSEMENT ESTIMATES Change in Disbursement Estimates Yes Year Current Proposed 2015 860,000.00 500,000.00 2016 1,500,000.00 1,000,000.00 2017 1,440,000.00 1,800,000.00 2018 500,000.00 1,000,000.00 2019 0.00 0.00