PROJECT INFORMATION DOCUMENT (PID)
CONCEPT STAGE
Report No.: AB4147
Project Name / Sergipe State Integrated Project: Rural PovertyRegion / LATIN AMERICA AND CARIBBEAN
Sector / General agriculture, fishing and forestry sector (70%);Power (10%);Water supply (10%);Sub-national government administration (10%)
Project ID / P110614
Borrower(s) / STATE OF SERGIPE
State of Sergipe
Sergipe
Brazil
Implementing Agency
Secretariat of Planning / PRONESE
Rua Vila Cristina, 1051
Sergipe
Brazil
Tel: 55-79-3179 5091 Fax: 55 79 3211 8878
Environment Category / [ ] A [X] B [ ] C [ ] FI [ ] TBD (to be determined)
Date PID Prepared / September 9, 2008
Estimated Date of Appraisal Authorization / February 1, 2008
Estimated Date of Board Approval / September 23, 2008
- Key development issues and rationale for Bank involvement
The State of Sergipe, in NE Brazil, has improved its Human Development Index (HDI) from 0.597 in 1991 to 0.682 in 2000. Nevertheless, almost 54% of the state’s population is still considered poor, while the state ranks 23nd among all states in terms of HDI. Rural poverty in Sergipe is pervasive: about one-third of all rural households have an monthly income of less than one minimum salary, with two-thirds of rural households at less than two minimum salaries, indicating that roughly 343,000 rural citizens live in poverty. Despite major improvements over the past decade in basic service delivery, significant deficiencies in coverage remain. In 2003, some 52% of rural Sergipe households lacked piped water, 22% had no access to sanitation services, and 23% lacked electricity, compared, respectively, with 8%, 3%, and 1% for urban Sergipe and 42%, 28% and 18% for rural Brazil as a whole.
The State Government of Sergipe, in its Strategic Development Program, has set a goal to increase its HDI from 0.682 to 0.71 by 2007. Sergipe’s medium-term investment program (Plano Plurianual (PPA) 2004-2007) calls for meaningful economic growth to spur social development, reduce regional inequalities, and improve the quality of life for the residents of the state. As such, the Government of Sergipe is concentrating investments under its PPA in education, health, information access, basic sanitation and social inclusion – all of which are expected to contribute both to just and equitable economic growth and the expected increase in HDI.
At present, and in contrast to several other Northeast States (e.g., Bahia, Ceará, Pernambuco, Rio Grande do Norte), the Bank has no Sergipe-specific assistance strategy. Nonetheless, thirteen Bank loans to the Federal Government finance activities in Sergipe. Specifically, the Federal Water Management Project (PROÁGUAS) and the Land-Based Poverty Alleviation Project (Crédito Fundiário) – both supported by Federal loans – along with the state’s loan to finance the first phase of the Rural Poverty Reduction Project (RPRP-SE), directly address twelve of the 29 priorities outlined in the PPA.
While continuing to focus on the rural space, the proposed second phase of the RPRP-SE would integrate with Bank-supported operations in Sergipe. For example, in the case of PROÁGUAS, small-scale investments in rural water supply would be financed, using a tested community-driven development (CDD) approach, while facilitating community participation and consultation for larger-scale public sector works. The second phase of the RPRP-SE would also integrate with a number of state- and federally-funded programs, among them Luz Para Todos (federal) and Sergipe Cidadão (under the State Secretariat of Education), both of which are intended to extend universal access to electricity and literacy, respectively, to Sergipe’s population by 2007. Such integration is similar in style to that being undertaken the Maranhão Integrated Program: Rural Poverty Reduction Project (approved by the Board in May 2004) and the proposed Bahia State Integrated Project: Rural Poverty (awaiting negotiations and scheduled for Board presentation in late-April 2005). Other state-level programs that will integrate with the second phase of the RPRP-SE include (i) the Sustainable Development Program for the Semi-Arido , under preparation with the Inter-american Development Bank (IADB), (ii) Citrus Revitalization, and (iii) agribusiness development. Various social programs under the responsibility of the State Secretariat for Rural Poverty Eradication would also be the focus of intended integration, for example, (i) Erradicação das Casas de Taipas, (ii) Tá na Mesa, and (iii) Pró Mulher.
Overall, integration under the proposed second phase of the RPRP-SE is expected to leverage US$15 for each US$1 of loan resources. Table 1 summarizes how ongoing Bank assistance, the proposed second phase of the RPRP-SE and selected state and federal programs will contribute to the objectives of Sergipe’s PPA.
Table 1: Integration of Bank-funded Operations and selected state and federal programs with selected priorities under the PPA
Segment
/Lines of Intervention
/ Bank-funded Operations / Sergipe State/Federal ProgramsRPRP / Proáguas / Crédito Fundiário / Luz para Todos / SE Cidadão / Semi-Arid Dev.
Agriculture
/ · Irrigation· Family agriculture
· Land access and settlement
· New productive initiatives
· Drought mitigation
· Lower S. Francisco Development
· Fruit production / X
X
X
X / X
X / X
X
X
X
X / X
X
X
X
X
X
Municipal Development / · Urban/ rural infrastructure / X / X
Poverty Reduction, Social Assistance and Labor / · Families at risk
· Social Protection
· Human Resources Development
· Youth Development / X
X
X
X / X
X
X / X
X
Education
/ · Increase enrollment· Efficiency of Educational Actions / X
X / X / X
X
Energy
/ · Urban and Rural Electrification / X / X / XPublic Management
/ · M & E of Development Program / XHousing
/ · Access by the poor· Reduction of housing deficit / X
X / X
X
Agro-industry
/ · Increase farmers’ income / X / X / XEnvironment
/ · Environmental education· Licensing, monitoring / X / X / X / X
Water resources
/ · Water management· Irrigation
· Community water supply / X
X / X
X
X / X
X / X
X
X
Basic Sanitation
/ · Water supply· Drainage and sewage / X
X / X / X
X
Health
/ · Decentralization of services· disease prevention / X
The Northeast Rural Poverty Reduction Program has been a major component of the Bank’s assistance to Brazil, with US$278 million in outstanding loans to participating NE States. The 2004 Brazil Country Assistance Evaluation by OED gave the Northeast portfolio a positive overall assessment, particularly for its role in expanding provision of basic small-scale infrastructure to the region’s rural poor and its use of project-financed municipal councils to strengthen social capital, thus creating the basis for a wider range of poverty reduction activities. The FY04-07 Brazil Country Assistance Strategy (CAS) indicates that successive projects under the NE program would focus more specifically on revenue-generating activities, as well as on integrating CDD components more closely with other federal- and state-level activities in the participating municipalities. All new future projects in this series would fit within each state’s development strategies and build strong links and synergies with other Bank-supported operations (both lending and AAA) as well as with those of other financiers (e.g. IADB).
The proposed second phase of the RPRP-SE would be fully consistent with the above CAS guidance. It would be the second and final phase of an overall operation presented by the State of Sergipe to the Federal government and approved by the Comissão de Financiamentos Externos (COFIEX) on October 26, 2000. In its approval, COFIEX divided the operation into two phases – each comprising a Bank loan of US$20.8 million – and established three conditions which, when achieved, would trigger preparation of the second phase: (i) the satisfactory implementation of the first phase; (ii) disbursement of 50% of first-phase loan proceeds; and (iii) the commitment of an additional 25% of first-phase loan proceeds. Bank supervision of the first phase of the RPRP-SE confirms the achievement of these three conditions, namely, (i) all principal implementation targets have been met or exceeded, (ii) the loan is now 93% disbursed and (iii) the remaining loan balance is fully committed and sufficient to finance an additional 265 community subprojects.
Fiscally, Sergipe´s capacity for new debt is strong. The State is in full compliance with the Law of Fiscal Responsibility (L.F.R.), with a budget surplus (2003) of R$25.0 million. Additionally, public salaries for the same period were 59% of net revenues and consolidated debt represented 0.79 times net current revenue, well below the limit of 2.0 established under the L.F.R.
The first phase of the RPRP-SE was approved by the Bank’s Board on January 29, 2002, and is scheduled to close on June 30, 2006. Nevertheless, in view of its rapid and successful implementation, as verified through Bank supervision, the project is expected to be completed ahead of schedule. Under the first phase, some 825 small-scale investments have been financed so far – via a matching grants scheme with community participation – in socioeconomic infrastructure and agricultural production, benefiting more than 100,000 rural inhabitants organized in over 540 community associations across 70 municipalities. Project Municipal Councils are now active in 100% of the project area statewide and play a key role in prioritizing, administering and ensuring strong local social auditing over the use of Project resources, as well as providing a forum for prioritizing community investment needs more broadly and channeling these demands to other state and federal programs.
Project monitoring and evaluation indicates strong community support for this method of service delivery. Some 84,000 poor rural people have better living conditions through 600 subprojects in rural water supply, sanitary facilities, housing improvement, septic systems and other social and economic infrastructure, including rural electrification. Another 46,000 poor rural people are improving their incomes through more than 240 subprojects in productive activities (e.g., agro-industry, mechanization, grain marketing, sheep production). A December 2004 evaluation shows that 89% of all subprojects surveyed were reaching their intended objectives and the beneficiaries of these subprojects expressed their full satisfaction with the services rendered. The evaluation reports that at least 85% of beneficiaries surveyed deemed the subproject investments to be highly sustainable. The evaluation concludes that 100% of farm mechanization and electrification subprojects are fully sustainable. The evaluation also finds that communities in Sergipe specifically, and across the rural NE more generally, attribute these subprojects with positively impacting their living standards and increasing incentives for local collective action.
From the implementation of the first phase of the RPRP-SE specifically, and the NE Brazil program more broadly, the following main lessons have emerged as relevant to the proposed second phase of the RPRP-SE:
1. Self-selection of beneficiaries results in effective targeting: The ex ante socio-economic profile of prospective project beneficiaries indicates that 44% overall are illiterate and two-thirds have monthly incomes of less than two minimum salaries.
2. CDD motivates and augments social capital: The demand-driven design of the Project has contributed to improved governance at the local level and helped to transform the traditional cycle of poverty and vulnerability to one of empowerment through participatory methodologies. Tangible benefits from subproject investments strengthen the community’s collective capacity, sense of citizenship, and raise the need for accountability on the part of local governments.
3 Greater impact on poverty reduction is possible through scaling up by using CDD mechanisms to improve use of non-project resources: Sergipe wishes to use the project Municipal Councils to scale up the local integration of Federal and State programs to eradicate illiteracy, reach 100% of households with electricity and water of good quality, and expand opportunities for income generation. It is expected that these programs would be deployed via the planning, implementation and monitoring processes of these Municipal Councils. The State’s objective is to have each dollar of the Bank loan for the second phase of the RPRP-SE leverage an additional US$15 of other programs, using the participatory institutional mechanisms of the RPRP-SE.
4 Greater alignment of community investments with HDI: The desired increase in Sergipe’s HDI to 0.71 by 2007 serves to unite public investment in the state. The proposed project would contribute to this objective, both through investments in income-generation, health and sanitation, and literacy education, and through dissemination and training to build a better understanding, on the part of the Municipal Councils and community associations, of the HDI, its components, and the kinds of investments which can best contribute to its increase.
- Proposed objective(s)
The proposed project would increase social and economic opportunities for the rural poor in Sergipe by improving their access to basic socioeconomic infrastructure, thus contributing to the Borrower’s objective of increasing the HDI from 0.682 to 0.71 by 2007. While building on the CDD approach proven successful under the first phase of the RPRP-SE, the proposed second phase would improve on this experience by: (a) integrating with and/or complementing activities of other Bank loans active in the State; (b) strengthening the cross-sectoral integration and providing significantly more emphasis on education, health, culture, natural resources management and environmental sustainability; and (c) scaling up the impact on poverty by using the skills, social capital and experience of the Municipal Councils and community associations to improve the relevance, efficiency, sustainability, targeting and outcomes of non-project State and Federal investments in rural Sergipe.
- Preliminary description
Total project cost is estimated at US$28.0 million. A Specific Investment Loan (SIL) of US$20.8 million would finance:
Component 1 – Community Subprojects will provide matching grants to community associations to finance their implementation of about 1,000 small-scale socio-economic infrastructure, education, health, culture, productive, environmental and other investments aimed at raising the HDI. Community associations will identify investment opportunities, within the context of other federal and state programs active in the state (see Table 1 above) and drawing on an information campaign conducted by the State to increase understanding of the HDI and its constituent components. Some 71 municipalities in Sergipe will be covered, with 70% of component resources concentrated in the 41 poorest project municipalities (i.e., HDI<0.623).