The World Bank Pernambuco Rural Economic Inclusion (P120139)

Transcription

1 Public Disclosure Authorized Public Disclosure Authorized The World Bank RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF PERNAMBUCO RURAL ECONOMIC INCLUSION APPROVED ON MARCH 6, 2012 TO STATE OF PERNAMBUCO REPORT NO.: RES29994 Public Disclosure Authorized AGRICULTURE LATIN AMERICA AND CARIBBEAN Public Disclosure Authorized Regional Vice President: Country Director: Senior Global Practice Director: Practice Manager/Manager: Task Team Leader: Jorge Familiar Calderon Martin Raiser Juergen Voegele Preeti S. Ahuja Maria de Fatima de Sousa Amazonas

2 ABBREVIATIONS AND ACRONYMS IFR FM PAD PDO PMU Implementation Financial Report Financial Management Project Evaluation Document Project Development Objective Project Management Unit ProRural State Program for Assistance to Small-Scale Producers/ Programa do Estado de Apoio ao Pequeno Produtor Rural RPO SARA Rural Producer Organization State Secretary of Agriculture and Agrarian Reform

3 Note to Task Teams: The following sections are system generated and can only be edited online in the Portal. BASIC DATA Product Information Project ID P Original EA Category Partial Assessment (B) Approval Date 06-Mar-2012 Financing Instrument Investment Project Financing Current EA Category Partial Assessment (B) Current Closing Date 31-Jan-2019 Organizations Borrower State of Pernambuco Responsible Agency SEDAR Project Development Objective (PDO) Original PDO The objective of the Project is to promote rural business initiatives and expansion of rural access to water and other complementary infrastructure by supporting the Borrower s Results Management Framework. Summary Status of Financing Ln/Cr/Tf Approval Signing Effectiveness Closing Net Commitment Disbursed Undisbursed IBRD Mar Jun Jul Jan Policy Waiver(s) Does this restructuring trigger the need for any policy waiver(s)? No

4 Note to Task Teams: End of system generated content, document is editable from here. I. PROJECT STATUS AND RATIONALE FOR RESTRUCTURING A. Status B. This 2 nd Restructuring Paper seeks the approval of the Brazil Country Director to the proposal from the State of Pernambuco, Brazil, for the restructuring of the Pernambuco Rural Economic Inclusion Project ProRural (P120139; Loan 8135-BR). The main objective of this second restructuring is to (i) partially cancel the original amount of the loan in USD 20 million dollars and (ii) to reallocate funds between disbursement categories. C. The Pernambuco Rural Economic Inclusion project (ProRural) was signed in June 2012, in the amount of US $ 100 million to be implemented in a period of six years. The project was signed in June 18, 2012 and was effective in July 31, The project closing date is January 31, The last disbursement requested was in October 2017, in the amount of amount of US $12,921, million. D. The original Project Development Objective (PDO) is to promote rural business initiatives and expansion of rural access to water and other complimentary infrastructure, by supporting the Borrower s Results Management Framework. This PDO will remain the same. E. Aiming to achieve the PDO, the project was divided into three components: Component I - Economic Inclusion (US $32,800,000.00); Component II - Complementary Infrastructure in the Rural Area (US $47,444,000.00); and Component III - Project Management, Supervision, Monitoring and Evaluation (US $19,506, ). F. IMPLEMENTATION PROGRESS: a. Component I - Economic Inclusion and Component II - Complementary Infrastructure in the Rural Area (i) Since November 2016, the implementation agency - SARA (State Secretary of Agriculture and Agrarian Reform) - has been committed to improve the execution speed of the components and the quality of the Business Plans. After reviewing 160 Proposals for Consultancy (components 1 and 2) sent to ProRural, and considering the eligibility criteria of the proposals, 60 consultative letters (components 1 and 2) were considered eligible for financing. These proposals selected corresponds to expenses around R$ 28 million. The release of these expenses depends on the feasibility analysis, preparation and approval of the projects and business plans and signing of the agreements with the Rural Producer Organizations (RPOs). (ii) On this note, the project decided to prioritize the support to recover the rural area of the municipalities at Mata Sul region. Mata Sul was severely affected by the most recent floods that occurred in June (iii) The process to hire a company to elaborate the subprojects and business plans (component 1) and the executive projects (component 2), including the priority investments list related to access roads /small roads and bridges destroyed by floods, was finalized. (iv) In addition, two seminars were held by Synergia, the company responsible for training the RPOs (on equipment management, environmental issues, correct use and good practices for the maintenance of water supply systems). The purpose was to present the situation diagnosis, the before and after the intervention, the progress achieved, and contributions for the future. (v) The environmental liability is undergoing and every month an update in the system is done to report the actual status of the regularization process. A company was hired to assess the environmental impact and mitigation needed to regularize the subprojects financed by ProRural.

5 b. Component III - Project Management, Supervision, Monitoring and Evaluation (i) The process to hire a company to carry out the project baseline is ongoing. The ToR was finalized and submitted to the Bank for no objection. Due to the proximity of the project completion, the baseline evaluation will be prepared together with the impact evaluation assessment. (ii) The Procurement Plan was revised and resubmitted for approval, considering the procurement implementation status and the priority for acquisitions to achieve the PDOs before its closure. (iii) The Aroeira system - The analysis team indicated the need for improvements in the system. ProRural promptly adjusted it and all information regarding the project was updated accordingly. (iv) The amount of R$ ,00 was returned to the designated account, according to the recommendation in the last Aid Memoire and following letter submitted to the Government in October (v) Regarding the monitoring of strategic actions by the implementation agency, five project management committee meetings were held, which includes the monitoring of the actions of responsibility of the managers of the project. G. The project management rating was upgraded from Unsatisfactory to Moderately Satisfactory. Two managers were designated to coordinate the productive inclusion and social infrastructure and the other for planning, budget and management. Key areas of the project are being supervised tightly by the new team; H. The progress towards the PDOs has been maintained at Moderately Satisfactory. Significant changes in the project administration at the PMU (Project Management Unit) level (operational flow, responsibilities, management, etc.) presented significant and positive results towards the PDOs. I. The FM performance rating was upgraded from Unsatisfactory to Moderately Satisfactory. The project FM team made great efforts to implement key activities related to improve the financial controls of the project. Nevertheless, the overall Project FM risk rating is still High, as there have been significant changes on Control Risk factors (budgeting, accounting, internal control, funds flow, financial reporting and auditing). J. Regarding the safeguards, there are slow advances in resolving pending legal environmental compliance issues and continuation of support to new activities before obtaining necessary permits. Therefore, the project was downgraded to Moderately Unsatisfactory on the compliance ratings. However, no significant negative environmental impact has been observed to-date and most project activities are of negligible impact by nature. On the other hand, overall compliance with social safeguards was rated as Satisfactory. Implementation of measures to improve and speed up activities with Indigenous Peoples and Quilombola communities that were previously agreed with the Client have been implemented. K. After the supervision / handover mission carried out in April 17-20, 2017 and successive monitoring missions and meetings, carried out between June and August, several actions were taken by the Borrower to rectify pending critical issues, and to improve the project's implementation and fix problems that previous management was facing. To name a few: a. three missions took place during 2017 to monitor the activities and in special, the financial management; b. all monitoring systems of financing, management and procurement were revised, as well as the procedures; c. hiring of external audit firm to evaluate the financial activities since 2012; d. update of business plans in the Aroeira system, which was also improved significantly; e. capacity building of economic and financial evaluators to help the beneficiaries; f. revision and re-submission of all IFR's, since 2012, with the adjustments requested. Prorural also presented all support documentation needed/requested; g. migration to STEP and adjustment of procurement plan was done h. Contracting of technical assistance for the productive and infrastructure projects; i. Correction of the shortcomings of the agreements with the OPF s; j. Partnerships with institutions that promote the project s efficiency.

6 L. It should be noted that in 2012, when the project was approved, the dollar was quoted at R$ 1.55, as stated in the Project Appraisal Document (PAD). Thus, the estimated amount to achieve the project development objectives and to implement the actions envisaged in the operation corresponded to R$ 155,000, The appreciation of the US dollar against the Real (R$3.08 approximately), during these recent years caused a significantly increase in the amount available in Reais, since then. M. Rationale a. The project's development objectives remain the same as before and will be achieved despite the cancellation of US$ 20 million and the reallocation between disbursement categories b. The disbursement rate is at 64% but this percentage is still low considering that the project will end in January However, the project has already received approximately 87% of the amount initially required for the activities originally planned. A cancellation of such amount will help Prorural to disburse all the funds that will remain available. c. The PMU intends to focus its efforts to recover the Mata Sul rural area, where recent flooding has affected dramatically the local population. Therefore, an amount of US $ 10,000, will be applied in activities and investment already planned to recover the region. d. Because of the reduction in the contracted value of the project, some targets previously established in the Project Results and Monitoring Matrix were revised. The new proposed targets are in line with the amount to be invested. e. To assure the achievement of the new targets proposed, PMU hired consultancies to improve the quality of the subprojects preparations and to supervise the implementation. In addition, PMU hired an audit firm to identify issues and to provide support to define priorities and bottlenecks that need to be worked on. f. Changes are being implemented throughout the project structure, from the way it works to reviewing the roles and responsibilities of the technical team. The changes are already generating tangible results in the project. Planned actions are being implemented in accordance with the timetables agreed with the Bank and the Federal Government. g. Among the new methodologies implemented, the integrated management model used by the State Government in the Covenants for Life, Health and Education state program was adopted. This management model provides accurate and relevant information through monitoring cycles. The monitoring generates better information to support subproject evaluation and decision making. It also allows the project to evolve and execute its actions with quality and efficiency. h. The monitoring cycles happens monthly within eleven territorial offices. The status of each agreement signed with the Rural Producer Organizations and follow up actions are debated on a case by case basis. It is important to highlight that the general monitoring and monitoring of the new agreements are a priority for the technical team, to ensure that ProRural improves its evaluation and are in line with the beneficiaries needs. i. In view of the above, it is verified that the new management team is working to mitigate any risks aiming to achieve a good execution of the Project. This is being done through a detailed planning of all the activities and a rigorous monitoring of the commitments agreed. II. DESCRIPTION OF PROPOSED CHANGES (i) Cancel US $ 20,000, of the total credit operation a. As agreed at the meeting held on July 5, 2017 and in accordance to the letter sent by the Government of Pernambuco in July 26, 2017 Oficio No. 521/2017-GG/PE and in October 10, b. This cancellation still allows sufficient amount to implement the project and the activities estimated to be fully completed. (ii) Reallocation between Disbursement Categories a. The project intends to focus its support to the recovery of infrastructure (mostly bridges) on those municipalities in the rural area in Mata Sul region that were most affected / destroyed by the recent floods that occurred in June 2017 (component 2).

7 b. Even though these specific investments were not programmed when the project was approved, a preliminary survey shows that US $ 10 million is sufficient to finance these investments at Mata Sul. c. The proposed reduction of the amounts presented in each category (see Table 1 below) was prepared in line with the demands identified by each category. i. Category 1 reduce US $ 8 million ii. Category 2 reduce US $9 million iii. Category 3 reduce US $ 2,7 million iv. Category 4 reduce US US $ 0,3 million (iii) Change in Results Framework a. Due to the reduction of the loan amount and reallocation between disbursement categories, some targets will need to be adjusted. The proposed changes in the target results were based on the measurement of the performance achieved by the project, as of today, and in accordance with the execution plan until January 2019, considering the existing resources and the demands of new agreements with the beneficiaries of the Project. b. To assure the achievement of the targets, proposed changes are being implemented throughout the project structure, from the way it operates to reviewing the roles and responsibilities of the technical team. The changes are already generating tangible outcomes in the project s results. Planned actions are being implemented in accordance with the timetables agreed with the Bank and the Federal Government. c. Among the new methodologies implemented, the integrated management model used by the State Government was applied to ProRural. This management model provides intensive use of precise and relevant information through monitoring cycles. These monitoring cycles generates more accurate information that support the subproject for their evaluation and decision making. d. The new management team is working to mitigate any risks in the good execution of the Project, through a detailed planning of all the activities and a rigorous monitoring of the commitments agreed.

8 Note to Task Teams: The following sections are system generated and can only be edited online in the Portal. III. SUMMARY OF CHANGES Changed Change in Results Framework Not Changed Cancellations Proposed Reallocation between Disbursement Categories Change in Disbursement Estimates Change in Overall Risk Rating Change in Implementation Schedule Change in Implementing Agency Change in DDO Status Change in Project's Development Objectives Change in Components and Cost Change in Loan Closing Date(s) Change in Disbursements Arrangements Change in Safeguard Policies Triggered Change of EA category Change in Legal Covenants Change in Institutional Arrangements Change in Financial Management Change in Procurement Other Change(s) Change in Economic and Financial Analysis Change in Technical Analysis Change in Social Analysis Change in Environmental Analysis

9 PDO_IND_TABLE The World Bank IV. DETAILED CHANGE(S) OPS_DETAILEDCHANGES_RESULTS_TABLE RESULTS FRAMEWORK Project Development Objective Indicators Beneficiary RPOs successfully inserted into LPAs. Unit of Measure: Text Value No Change Date 25-Apr Apr Jan-2019 Increase in real gross sales value beneficiary RPOs Unit of Measure: Percentage Value Revised Date 25-Apr Oct Jan-2019 Beneficiary RPOs selling products to institutional or private markets after subproject conclusion Unit of Measure: Percentage Value No Change Date 25-Apr Apr Jan-2019 Rural households with access to Improved Water Sources, including 30% female headed and 5% belonging to vulnerable groups (IP or Quilombola) Unit of Measure: Text Value 0 families (cum) families (cum) 27,000 families (cum) Revised Date 27-Jun Oct Jan-2019 Rural households with access to Improved Sanitation Services, including 30% female headed and 5% belonging to vulnerable groups (IP or Quilombola) Unit of Measure: Text

10 Value 0 families (cum) families (cum) 3,000 families (cum) Revised Date 27-Jun Oct Jan-2019 Intermediate Indicators IO_IND_TABLE Rural households benefiting directly from project interventions, including 30% women-headed and 5% belonging to vulnerable groups (IP or Quilombola). Unit of Measure: Number Value Revised Date 25-Apr Oct Jan-2019 Beneficiary RPOs, including 30% with women in specific management positions Unit of Measure: Number Value Revised Date 27-Jun Oct Jan-2019 RPOs trained and/or using financial management instruments for their financed productive activities Unit of Measure: Percentage Value No Change Date 27-Jun Apr Jan-2019 Beneficiary RPOs with organized arrangements for the management, operation and maintenance of financed productive investments Unit of Measure: Percentage Value Revised

11 Date 27-Jun Oct Jan-2019 Beneficiary rural households using water supply investments for drinking water Unit of Measure: Number Value No Change Date 25-Apr Apr Jan-2019 RPOs charging user fees for management and maintenance of financed water supply projects. Unit of Measure: Percentage Value Revised Date 25-Apr Oct Jan-2019 Rural water and sanitation subprojects concluded, including 30% of RPOs with women in specific management positions Unit of Measure: Number Value Revised Date 27-Jun Oct Jan-2019 Processing time between first subproject profile submission and release of first disbursement to RPO Unit of Measure: Text Value Processing time of initial round of Business 0 90% reduction Revised Plans Date 30-Aug Oct Jan-2019 MIS fully functional and producing all required products Unit of Measure: Yes/No

12 OPS_DETAILEDCHANGES_CANCELLATIONS_TABLE The World Bank Value No Yes Yes No Change Date 27-Jun Apr Jan-2019 CANCELLATIONS Ln/Cr/Tf Status Currency IBRD Disburs ing USD Current Amount 100,000, Cancellation Amount Value Date of Cancellation New Amount 20,000, Jan ,000, Reason for Cancellation BORROWER' S REQUEST FOR COUNTRY REASONS OPS_DETAILEDCHANGES_REALLOCATION _TABLE REALLOCATION BETWEEN DISBURSEMENT CATEGORIES Current Allocation Actuals + Committed Proposed Allocation Financing % (Type Total) Current Proposed IBRD Currency: USD ilap Category Sequence No: 1 Current Expenditure Category: GO,CW,NCS&CS-PROD.SUBPJ PART 1(b) 32,800, ,819, ,800, ilap Category Sequence No: 2 Current Expenditure Category: GO,CW,NCS&CS-SUB P2(a),TRG P2(a)ii 47,444, ,019, ,044, ilap Category Sequence No: 3 Current Expenditure Category: GO,CW,CS,NCS&TRGN-EXCP COVERCATS1&2 14,206, ,671, ,006, ilap Category Sequence No: 4 Current Expenditure Category: OPERATING COSTS 5,300, ,901, ,900,

13 OPS_DETAILEDCHANGES_SORT_TABLE The World Bank ilap Category Sequence No: 6 Current Expenditure Category: PREMIUM FOR CAPS/COLLARS ilap Category Sequence No: 7 Current Expenditure Category: UNALLOCATED Total 99,750, ,411, ,750, OPS_DETAILEDCHANGES_DISBURSEMENT_TABLE DISBURSEMENT ESTIMATES Change in Disbursement Estimates Yes Year Current Proposed ,619, ,619, ,414, ,888, ,254, ,185, ,890, ,486, ,206, ,300, ,861, ,000, ,000, ,520, ,752, SYSTEMATIC OPERATIONS RISK-RATING TOOL (SORT) Risk Category Rating at Approval Current Rating Political and Governance Moderate Macroeconomic Moderate Sector Strategies and Policies Low Technical Design of Project or Program Moderate Institutional Capacity for Implementation and Sustainability Moderate

14 Fiduciary Moderate Environment and Social Low Stakeholders Low Other Overall Moderate Note to Task Teams: End of system generated content, document is editable from here.