PROJECT INFORMATION DOCUMENT (PID) APPRAISAL STAGE. Bahia Integrated Urban Development

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1 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Project Name Region Sector Project ID Borrower(s) Implementing Agency Environment Category Date PID Prepared May 18, 2005 Date of Appraisal April 26, 2005 Authorization Date of Board Approval June 23, Country and Sector Background PROJECT INFORMATION DOCUMENT (PID) APPRAISAL STAGE Bahia Integrated Urban Development Report No.: LATIN AMERICA AND CARIBBEAN General water, sanitation and flood protection sector (50%);Housing construction (25%);Other social services (25%) P STATE OF BAHIA CONDER - Companhia de Desenvolvimento Urbano do Estado da Bahia Colina de Sao Lazaro, 203 Federacao Bahia Brazil Tel: Fax: SEDUR - Secretaria de Desenvolvimento Urbano do Estado da Bahia Av. Tancredo Neves, Ed. Suarez Bahia Brazil Tel: Fax: [X ] A [] B [ ] C [ ] FI [ ] TBD (to be determined) In Brazil s cities, most of the poor live in unplanned or informal settlements of various kinds, which usually constitute a large part of the urban area. In varying degrees, these areas are characterized by poor access to basic infrastructure and services, environmental degradation, lack of economic and educational opportunities, poor health care and day care facilities, lack of security of land tenure, social exclusion and violence. The consequences include: (i) a deterioration in health conditions and quality of life in general, particularly of the most vulnerable the elderly and the young; (ii) negative economic impacts due to higher costs of health care, loss of productivity, and a poorly trained and uneducated workforce; and (iii) a perpetuation of the vicious cycle of poverty, through poor health, lack of opportunities, and lack of capacity to compete in the job market and generate income. According to data from the 2000 Census, there are about 15 million households in urban informal settlements in Brazil. Additionally, a Bank 2002 study of the dynamics of household formation found that, every year, upwards of 600,000 new urban households nationwide have no housing alternative but the informal sector. In this context, the state of Bahia is no exception. Roughly a third of Bahia s urban dwellers around 3 million people live in households that fall below the poverty line, and urban poverty correlates strongly with informal housing and slums. At 35.7% of households in 2001, the relative extent of urban poverty in

2 Bahia is now higher than in the 1980s (Verner 2004). Sprawling squatter settlement areas in Salvador, such as Alagados or Pau da Lima, are by-words for urban degradation. In the state s intermediate cities, such as Feira de Santana, Ilhéus, Itabuna or Juazeiro, large and growing areas of informality display similar features to those of Salvador. The strong correlation between urban poverty and informal settlements in Bahia was demonstrated by a recent targeting exercise carried out by the state government. The poverty and social exclusion mapping methodology introduced by Aldaiza Sposati in São Paulo was adapted for use in Bahia, and employed with data from the 2000 Census in Salvador and twelve other municipalities. At the same time, informal settlement areas were identified and mapped out. The strong correlation led the government to base its urban poverty reduction strategy on geographic targeting, coupling slum upgrading, i.e. an access to basic infrastructure and services package, with other social spending in the same geographic areas, identified by poverty mapping. Such geographic targeting of poverty reduction actions, leading to improved targeting of social spending, is a key recommendation of a recent Bank study of poverty in Bahia (Verner 2004), which shows that currently only 14 percent of social spending reaches the 1 st quintile. 2. Objectives The Project s development objective is to reduce urban poverty in a sustainable manner, targeting the poorest and most vulnerable sections of Salvador and strategic cities of the state of Bahia with access to basic services and improved housing and social support services. This development objective is aligned with the Millennium Development Goals MDGs (especially Goal 7, Target 11) in line with the growing number of governments around the world that are launching comprehensive slum upgrading programs, setting development targets, undertaking reforms to prevent the growth of new slums, and leveraging public and private resources to improve the lives of slum dwellers. Specific objectives of this Project are: (i) improved quality of life and asset base for the poor through the provision of basic infrastructure services, improvement of housing conditions and access to urban land, and regularization of land tenure and buildings in slums and unplanned settlements; (ii) improved access to social programs in the areas of income and employment generation, direct support to families survival strategies, health care, education and job training, and initiatives in the area of community security at the local settlement level; and (iii) enhanced state and local government capacity to plan, implement, monitor and evaluate integrated urban poverty reduction strategies involving several different departments, undertake urban upgrading and land delivery, coordinate social policy on the ground through participatory planning, and monitor and evaluate government programs through poverty and quality of life indicators. 3. Rationale for Bank Involvement The Brazil Country Assistance Strategy CAS , which was discussed by the Board on 9 December 2003, highlights the increasing poverty trends in metropolitan areas, expressed in urban violence and high unemployment. It suggests a stronger focus on metropolitan poverty reduction, and calls for an integrated approach in support of multisectoral, rural and urban development strategies at the sub-national level. The strategic goals of a more equitable, sustainable, and competitive Brazil include as long-term development outcomes reducing extreme poverty, vulnerability, and social exclusion, more equitable access to local services and under strategic goal #4 good governance. The proposed operation is in line with these challenges. The Program fits into at least two of the four building blocks for assistance within the Bank s urban strategy: (iii) scaling up programs to provide services to the poor; and (iv) expanding assistance for capacity building, particularly at the municipal level. The Bahia Integrated Urban Development Project is explicitly envisaged in the CAS.

3 Of all Brazilian states, Bahia is perhaps the one whose partnership with the Bank is strongest and most consolidated. A long history of successful projects in various sectors has led to a constant and fruitful policy dialogue.in addition, the state s investment capacity, restored by a rigorous fiscal adjustment in the early 1990 s, makes it possible for the policy dialogue to translate into specific Bank-financed projects. Bahia s comprehensive poverty reduction strategy will thus be supported by Bank-financed projects in health, education, income generation, protection of vulnerable groups, slum upgrading, urban poverty reduction, transport and logistics infrastructure, water resources management, rural poverty reduction, public sector management and institutional strengthening at the local and state government levels. In addition, Bank support to this Project will add to the expertise in urban upgrading and municipal development that has already been provided to Bahia through the recently closed Bahia Municipal Development Project (PRODUR Loan 4140 BR) and the Bank s supervision of the Cities Alliancefunded TA to the Ribeira Azul Program. The State of Bahia s Government has set the long-term goal of raising the state s Human Development Index (HDI) from the current to 0.766, the median for Brazil, by To achieve this, it has prepared a long-term strategic development program (Plano Estratégico da Bahia, PEB ) and a medium-term public investment plan (Plano Plurianual, PPA, ). These plans seek a Bahia that is (i) socially just and cohesive, (ii) environmentally sustainable, (iii) spatially integrated and (iv) economically diversified and competitive. The CAS calls for transformation of the cooperation with state governments into integrated state strategies and projects, including public expenditure and policy analysis, covering both the rural space and urban centers. Within this framework, the Bank has developed a Bank assistance program (Bahia State Program) which is complementary to the assistance from other donors and which aims to support the State s strategy by expanding economic opportunities, conserving natural resources, building human capital, promoting good governance and spatial integration, and improving transport infrastructure. The proposed Project is thus part of a comprehensive poverty reduction strategy to be supported by the Bank in Bahia. The myriad problems of Bahia s informal urban settlements and the weakness of the State s urban network pose serious obstacles to the achievement of the PEB objectives. Accordingly, PEB proposes a comprehensive urban strategy that will focus on poverty reduction and the strengthening of the State s strategic cities or cidades-pólo, materialized in the Viver Melhor Program. The proposed Project in support of Viver Melhor is an important element of the Bank s emerging Bahia state strategy. In October 2004, the State of Bahia, in its document, A Participação do BIRD no Projeto Bahia 2020: Construindo Estratégias de Desenvolvimento Integradas, specified the proposed Project among six current and prospective Bank operations which are strategic for the State. These six operations, which are made possible by Bahia s creditworthiness, directly address 10 and indirectly another nine of the 37 programmatic areas contemplated in the State s PPA. The Bank s role in the State s investment program is substantial. Those Bank projects included in the State s CY04 budget account for some R$224 million, or about 7% of investments (10% if counterpart funds are included). The proposed Project will actively explore synergies with other Bank operations in Bahia. It is envisaged, for example, that the Project will be complemented by the Produzir rural poverty reduction project, which will finance activities in the rural areas of the selected municipalities. The integrated and communitydriven approach to slum upgrading and urban poverty reduction of Viver Melhor is based on the same premises that have led to the development of the approach to rural poverty reduction that is being implemented with similar local arrangements by the Produzir rural poverty reduction project series. It is expected that the combined action of the two projects will have a significant poverty reduction and capacity-building impact on the Project s municipalities. The combined poverty reduction and infrastructure investments of the two projects are also expected to enhance these municipalities prospects for economic development.

4 With regard to the Health and Education operations, by agreement with the relevant sector Secretariats the various Bank operations will seek to concentrate their actions, where possible, in or near Viver Melhor intervention areas, taking advantage of the geographic targeting mechanism that has been set in place for the Project. The Health and Education Secretariats will take part in the planning process for each subproject, which will lead to specific and detailed agreements with SEDUR regarding Project actions in these sectors. Such cross-sectoral integration is reflected in the Project s proposed expenditures. 25% of the Bank loan and its correspondent counterpart funding are slated for social investments. 4. Description The proposed Project consists of three major components, as follows: - Component A - Urban Infrastructure Delivery (65%): This component will finance urban upgrading of informal settlements and will have four sub-components. The first will finance urban infrastructure investments (urban drainage, roads, street paving, water supply and sewage, solid waste management, home improvement, replacement housing) with impacts within the targeted communities The second will finance macro-level infrastructure with impacts within and beyond the target communities, such as road links to enhance citywide mobility, macro drainage and green areas / parks. The third will finance lowcost housing alternatives for the poor. The fourth will finance engineering designs and consultant services for on-site supervision and quality control. - Component B- Social Services and Facilities Delivery ( 25%): This component will finance social service delivery and the provision of the physical facilities needed to deliver such services and will have three sub-components. The first will finance social services delivery through: strengthening of local community based organizations (CBOs); support to government institutions, NGOs and CBOs providing key social services to local residents; income and employment generation; health and environmental education; direct support to families survival strategies; promotion of and support to sport and cultural activities; and crime and violence prevention initiatives for enhanced security at local level. The second will finance refurbishment or construction of facilities and buildings needed to deliver or enhance social services listed under sub-component B1 such as day care centers, kindergartens, buildings for primary education and health care, sport and professional training facilities. The third will finance architectural designs and operation and maintenance plans of specific facilities and buildings. The nature and scope of the necessary social services and facilities will be identified within the Social Development Plans, which will be developed with the participation of local residents and their organizations as well as the participating municipalities and state Secretariats, and will be part of the PID - Component C- Institutional Strengthening and Project Management (10%): This component will include three sub-components: The first will finance the preparation of studies on topics such as Local Economic Development, affordable land delivery mechanisms and cost recovery and subsidy mechanisms for infrastructure, and others required for Project implementation. The second will finance institutional capacity building for slum upgrading and urban poverty reduction both on state and local government level and sustainable urban and social service delivery by benefited municipalities. The third will finance project management, including monitoring and evaluation. 5. Financing Source: ($m.) BORROWER (40%) INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (60%) Total Implementation

5 While the Borrower will be the State of Bahia, SEDUR, the Secretariat for Urban Development, will be the executing agency, responsible for planning, overall supervision and control of all Project activities and monitoring and evaluation. In addition, CONDER, the state s Urban Development Company, which reports to SEDUR and is one of the Secretariat s implementation arms, will take the lead role in implementing component A, component B and a good part of component C. To this end, SEDUR has nominated a Project Coordinator who will work with the various relevant departments of the Secretariat. Project management functions will be carried out by civil servants in the various departments of SEDUR, but the Project Coordinator and a small group of civil servants working on the project full-time will constitute a Project Management Unit (UGP). SEDUR will also interact with the Bank and other relevant state entities and municipalities that will be implementing other actions complementary to the Project in each subproject area. A Steering Committee chaired by the State Governor and integrated by the Secretaries of Finance, Labor and Social Protection, Planning, Public Security, Reduction of Poverty and Social Exclusion, Education, Health, and Urban Development, will provide strategic direction and political support for project implementation and will meet at least twice a year. Other Secretaries may participate in these meetings whenever their presence is required to discuss specific sector issues related to the project. The UGP will review and submit to the Bank all required documentation during project implementation. The UGP was established through Decree No of February 4, 2004, and an experienced civil servant was appointed to head the unit, which is already operational and has participated in Project preparation activities since its inception. During Project implementation, the UGP will have an additional consultant on procurement and five full-time staff to cover the areas of: results monitoring and evaluation; management information system; financial management; and urban infrastructure. The UGP will be responsible for overall management and supervision of Project implementation. To this end, it will: plan, coordinate, control, monitor and evaluate Project activities; define priorities and allocate resources for carrying out Project activities on the basis of annual work programs; seek partnerships to ensure the implementation of complementary investments by municipalities, other state Secretariats and other service providers, both public and private, in areas benefiting from Project investments; liaise with other Government agencies involved in Project execution; prepare Project monitoring reports, including FMR and disbursement requests; liaise with the World Bank; and serve as a secretariat to the Executive Committee, among other responsibilities (see Annex 6). The detailed set of responsibilities of the UGP is part of the Operational Manual for Project implementation. Eight strategic cities of the State s urban network have been selected for Project interventions, on the basis of criteria described in Annex 4A. Participating municipal governments will play an important role during project implementation by entering into Participation Agreements (Acordos de Participação) for each subproject to be implemented in its jurisdiction. Such agreements will clearly define the responsibilities of both parties, including the responsibility of the State to implement urban upgrading investments in selected areas and provide grant financing for institutional strengthening activities that may be required so that the municipality can structure the provision of services that will result from the upgrading effort supported by the Project, such as: solid waste collection; street cleaning; maintenance of roads and storm sewers; among others. Through such Participation Agreements, municipalities would agree to carry out such activities according to project implementation procedures established in the Operational Manual and to implement services per studies and plans financed as part of the institutional strengthening activities. SEDUR will also sign Participation Agreements with the other agencies participating in each subproject, such as other state secretariats and utility companies. In addition, Participation Agreements would also define the responsibility of municipalities to implement complementary investments such as those for the construction of pre-school, day care and/or primary health facilities, operation and maintenance of such facilities (also when built by the Project), and

6 operation and maintenance of road networks, drainage works and other infrastructure built by the Project. Municipalities will have a strong performance incentive, since their performance of obligations under the Participation Agreement will be closely monitored, and well-performing municipalities will have preferential access to further investments under the Project. This approach will ensure allocative efficiency of funds and reward better-prepared and more efficient municipalities. There will be no acrossthe-board complementary investment requirements to be met by participating municipalities or secretariats. Each case will be analyzed on its own merits and the level of complementary investments will be the result of a negotiation based on the needs of each subproject and the capacity of the participating institutions. Contributions from municipalities and state secretariats other than SEDUR and SECOMP would be part of the Viver Melhor Program, and would thus be covered by the legal documents to be signed by the partners, but would not be part of the Bank-financed Project. PRODUR and other experiences have shown that having the municipal contribution as counterpart funding for the loan can lead to administrative complexity and delays in subproject execution and Bank disbursement, which the client Government would like to avoid in this Project. Prior to entering into specific Participation Agreements regarding subprojects, municipalities will formalize their commitment to join the Project by signing Commitment Letters (Termos de Adesão) in which they make themselves responsible for certain activities and investments, among which participation in subproject selection and planning, and project-sponsored capacity-building efforts. These Commitment Letters will be in place before Project activities start in each municipality. Once Commitment Letters are signed, two key tools will be used in subproject selection: the poverty and social exclusion maps mentioned in paragraph #3, and the Cost-Beneficiaries Estimate System (SECB). Together, these tools will allow the state government and partner municipalities to target the poor in the most vulnerable urban areas in a given municipality and select the lowest-cost intervention. Beyond mayors and municipal secretaries, the process of subproject selection will involve the municipality s technical staff and allow the municipality to prioritize investments in poor areas on the basis of previously unavailable information. The involvement of the local technical staff will allow the State s team to identify issues and areas in need of improvement and design the specific capacity-building activities that will be implemented by the Project in each municipality. See Annex 4B for details and a flowchart of the subproject cycle. For each subproject that is identified, a participatory planning process will be organized. A methodology for the preparation of participatory Integrated Local Development Plans (PID) has been developed in the Ribeira Azul Program and will be used in the Project to organize the participatory planning process, gather the contributions of local residents and their organizations, municipalities and state secretariats and negotiate with each to define Project investments in each sector and the complementary investments and commitments of each organization. Local residents and their organizations will be gathered in a Local Development Forum for each subproject area, and the Project s technicians, from CONDER, the municipality and the participating secretariats, will work out of a local facility called the Casa do Viver Melhor. Specific project components will be implemented as follows: 3 Components A and B CONDER will be responsible for implementing the full range of activities in each subproject, under Components A (Urban Infrastructure Delivery) and B (Social Services and Facilities Delivery). To this end, CONDER will enter contracts with private firms for the execution of works and facilities; and will engage consultants to work on the design of specific investment projects, as needed. For

7 implementation of Components A and B, CONDER will be supported by the same NGO that was engaged in the upgrading of Novos Alagados II and Ribeira Azul, thanks to a new Italian Government grant through the Cities Alliance. Once investments are completed, SEDUR/CONDER will enter Transfer Agreements (Termos de Cessão) with entities, either public or private, responsible for the operation and maintenance of services provided, in order to secure sustainability. CONDER will: (a) assist municipalities in the preparation of subproject proposals and ensure their compliance with the established eligibility criteria; (b) organize the participatory planning process, gather the contributions of local residents and their organizations, municipalities and state secretariats and negotiate with each to define Project investments in each sector and the complementary investments and commitments of each organization; (c) prepare all required documentation for the participation of partner agencies in the Project, including drafts of the legal agreements mentioned above; (d) prepare implementation and procurement plans for each subproject; (e) plan, prepare and carry out the required bidding processes for civil works, goods and services; (f) prepare draft contracts, agreements and working plans; (g) monitor the execution of each contract and perform quality control functions; and (h) provide to UGP monthly progress reports on the implementation of activities under its responsibility. CONDER will also work with municipalities in the establishment of the local Casa do Viver Melhor and provide management and technical support for the Local Development Forum (see item C4 below) 3 Component C, SEDUR will be responsible for carrying out the set of studies in the areas of housing, urban development and poverty reduction that will support policy making at the State level. It will also be in charge of implementing overall Project management activities through the UGP, as well as the capacity-building activities that will benefit SEDUR itself. Also under component C, Municipalities will be responsible for implementing some of the activities of the institutional capacity building sub-component. Municipal institutional strengthening activities under this sub-component will be implemented by participating municipalities in order to enhance their capacity - financial, management and technical - to provide services for which they are responsible in the areas benefiting from Project investments. Finally, CONDER will implement some of the activities in component C, such as management of the monitoring and evaluation plan and capacity-building activities that will benefit CONDER itself. 7. Sustainability There are several levels of sustainability in this project. With regard to the physical infrastructure, sustainability would depend on the proper maintenance of structures developed with Project support. This would be primarily a responsibility of municipal government to repair streets and walkways, maintain drainage ways, collect waste, etc. At a financial level, improved public services such as water, sanitation and electricity will be subject (in many cases for the first time) to payment of normal utility tariffs. These aspects are often fragile in slum upgrading projects, due to the following issues: (a) lack of involvement in the planning, design and works phases, of the organizations that will be responsible for the post-intervention day-to-day operations and management of infrastructure and services created by the Project (local government, municipal council, utility companies); (b) emphasis on the creation of new services rather than the strengthening of existing local public sector facilities or private non-profit organizations already providing services;

8 (c) absence of a clear and previously negotiated handover policy for the post-intervention stage, including a funding strategy for the new recurrent expenditures linked to the new services and infrastructure; (d) lack of negotiated service use and cost recovery arrangements leading to clear contractual relationships with Project beneficiaries, leading to poor cost recovery and persistence of illegal connections and other instances of non-compliance. These problems will be dealt with in a systematic way in the Project. The highly participatory nature of the Project, in which neighborhood residents and CBOs are involved at every stage of planning and execution, increases the likelihood that the Project works will be properly maintained since the communities involved will have a stake in the new infrastructure. This factor will also contribute to sustainability since local residents and utilities will have a financial stake in maintaining physical infrastructure and discouraging improper use. Finally, the social sustainability of the Project will depend in large measure on the effectiveness of community/cbo mobilization, the post intervention services provided and the capacity of the community to take over management and operation of community facilities such as day-care and job training so that such facilities will become self-sustaining. CONDER has accumulated a great deal of experience in this area and can point to successful experiences in developing community-based social services in the Alagados and Ribeira Azul areas in Salvador, Bahia. There will also be an emphasis on clear contractual relationships with partner institutions, stakeholders and beneficiaries. The Participation Agreement that will be signed with the municipality and participating state Secretarias for each subproject, the clear handover terms (Transfer Agreements) for infrastructure and services, the contract-based partnerships that will be established with local organizations providing social services for their strengthening and for enhanced service provision, and clear contracts with beneficiaries specifying rights and obligations will be key features of the Project. Many of these features, such as the contracts with existing local organizations/cbos to enhance service provision, have been successfully introduced and tested in the Ribeira Azul Program, while others, such as the subproject Participation Agreements, will be introduced by the Project. 8. Lessons Learned from Past Operations in the Country/Sector The concept of coupling a slum upgrading package with social support actions is not new. In addition to experiences in Bahia itself, projects like the Bank-funded Guarapiranga in São Paulo (Loan 3504 BR, closed in 2002), the recently launched PROMETROPOLE in Recife (Loan 4690 BR), the PAT- PROSANEAR Program to extend water supply and sanitation service coverage to the poor (Loan 4532 BR) and Rio s Favela-Bairro (financed by IDB) have utilized integrated approaches to slum upgrading, at a large scale. One of the lessons from such large-scale projects has been the importance of support to resident communities extending beyond the period of the physical works, in the areas of income generation and social development, as well as in the use and upkeep of the new facilities and infrastructure. A promising new approach to urban poverty reduction is emerging from these projects, using urban upgrading as an entry point for a range of social programs. This new approach seems poised to make a key contribution to the attainment of the "Cities Without Slums" MDG (Target 11). Some slum upgrading interventions implemented in Bahia in recent years have allowed the state government, with assistance from the World Bank, the Cities Alliance and bilateral donors, to develop an approach to slum upgrading that is particularly integrated, in the sense that it includes a very strong emphasis on social program content. The pilot project at Novos Alagados, in Salvador, which was financed by the Bank s PRODUR project, was based on an integrated and participatory methodology, seeking to address the many dimensions of poverty and enhance the asset base of the poor in one of

9 Salvador s poorest areas. Begun in 1995, the Novos Alagados Urban Upgrading and Social Promotion Project was implemented in the northernmost part of the area known as Ribeira Azul. In 1999, the Government of Bahia launched the Ribeira Azul Program, aiming at replicating the methodology of Novos Alagados in the remaining parts of Ribeira Azul, including the series of squatter settlements on stilts known as Alagados. The Ribeira Azul Program benefits from a Cities Alliance-funded and NGO-executed TA and social support project, through a $5 million grant from the Italian Government, whose execution is supervised by the Bank. In addition to the standard slum upgrading package of provision of basic urban infrastructure, housing improvements and environmental rehabilitation, the Ribeira Azul Program devotes significant resources to community-driven development and participatory planning, plus a range of actions that address social exclusion, inter alia access to basic education, improvement of the quality of education, improved public health services, support to families (and especially women-headed households) through enhanced day care services and income and employment opportunities. In this context, the social intermediation role of AVSI, the Italian NGO that executes the TA project, is very important. One of the challenges of Viver Melhor/BIRD in replicating this approach on a larger scale will be to foster the creation of a critical mass of local social intermediation capacity, through NGOs and also consultancy firms. The continuation of the Cities Alliance-funded TA arrangement will be ensured by a second Italian Government grant. This will allow the Project, with AVSI s help, to organize courses and on-the-job training for the creation of local social intermediation capacity. The experience of the Novos Alagados Project and the Ribeira Azul Program constitute the conceptual underpinnings of the Viver Melhor Program. The poverty reduction strategy of Ribeira Azul and its spending allocation methodology, which will be replicated at a larger scale in Viver Melhor, are based on a study of poverty correlates in the area. The findings are similar to, and the approach matches key recommendations of, the recent Bank study on poverty in Bahia inter alia, the use of a geographic targeting mechanism, in which spending allocations are guided by overlaying poverty and service coverage maps; focusing public spending on items that disproportionately benefit the poor, such as basic services in slum areas; beneficiary participation in design and implementation; the emphasis given to day care and early childhood 1 programs; the emphasis given to education as the strongest poverty reduction correlate; and the resources devoted and emphasis given to monitoring and evaluation, including, importantly, impact evaluation. Given the importance of the Novos Alagados and Ribeira Azul experience to the concept of the proposed Project, a Poverty and Social Impact Analysis was carried out with a view to learning the lessons in a systematic way and reflecting them in Project design. The preliminary findings of the PSIA studies confirm the findings of the study of poverty correlates in the area and the soundness of the integrated approach suggested. Project design also benefited from the experience acquired through previous Bank operations in urban development in Bahia, and especially the recently completed PRODUR project). Lessons learned from PRODUR include the need to: (i) base partnerships between the state government and the Project s participating municipalities on the latter s active participation in the subproject identification and planning process; (ii) develop clear contractual arrangements spelling out the rights and obligations of the partners; (iii) monitor compliance with these covenants and use it as an incentive for access to further subprojects under the Project; and (iv) continue organizing and financing Project-related capacitybuilding for municipalities. 1 One of the key poverty correlates in Bahia is young heads of households with young children; furthermore, the gender of head of household affects poverty more in Bahia than in Brazil as a whole (Verner 2004).

10 The format and content for the Participation Agreements, contractual arrangements that will spell out rights and obligations of municipalities and the state government in each subproject, borrows from the Contrats de Ville or City Development Contracts concept that is being used by Bank projects in West Africa. The Convênio, the usual format for agreements between different government levels in Brazil, has a short time horizon and usually covers only the execution of pre-identified works. The City Development Contract - Participation Agreement format engages the partner in a long-term development process, starting with subproject identification and planning and spanning the implementation and postimplementation stages, including operation and maintenance of facilities and infrastructure, as well as monitoring and evaluation and participation in Project-sponsored capacity-building activities. Drafts of the Participation Agreement and other legal documents have been prepared and are available in the Project files. They will also be included in the Project s Operational Manual. 9. Safeguard Policies (including public consultation) Safeguard Policies Triggered by the Project Yes No Environmental Assessment (OP/BP/GP 4.01) [X] [ ] Natural Habitats (OP/BP 4.04) [X] [ ] Pest Management (OP 4.09) [ ] [X] Cultural Property (OPN 11.03, being revised as OP 4.11) [X] [ ] Involuntary Resettlement (OP/BP 4.12) [X] [ ] Indigenous Peoples (OD 4.20, being revised as OP 4.10) [ ] [X] Forests (OP/BP 4.36) [ ] [X] Safety of Dams (OP/BP 4.37) [ ] [X] Projects in Disputed Areas (OP/BP/GP 7.60) [ ] [X] Projects on International Waterways (OP/BP/GP 7.50) [ ] [X] 10. List of Factual Technical Documents 3 Poverty and Social exclusion Maps of thirteen municipalities in the State of Bahia. CONDER 3 Cost-Beneficiaries Estimate System (SECB). COBRAPE 3 Integrated Local Development Plans (PDLI). Golder/Higesa 3 Viver Melhor II Program Executive Summary. TC/BR. 3 Social Development Strategic Plan. AVSI. 3 Environmental Impact Assessment report (Preliminary version). 3 Environmental Impact Assessment executive summary. 3 Resettlement Framework Alagados VI. 3 Resettlement Framework Alagados VI, Executive Summary. 3 Preparation Missions Aides Memoire 3 PCN and PCN Meeting Minutes and Comments 3 QER and Decision Meeting Minutes and Comments 11. Contact point Contact: Ivo G.P. Imparato Title: Sr Urban Spec. Tel: Fax: iimparato@worldbank.org Location: Sao Paulo, Brazil (IBRD) 12. For more information contact: The InfoShop

11 The World Bank 1818 H Street, NW Washington, D.C Telephone: (202) Fax: (202) Web: