PID THE VVORLD BANK GROUP AWorld Free olf' vorty r InfoShop Report No AB33 Initial Project Information Document (PID) Project Name BRAZIL-Sustainable Comm11uillties - AP Region Latin America and Caribbean Region Sector General agriculture; fishing and forestry sector (35%); Micro- and SME finance (25%); General water; sanitationi and flood protection sector (25%); Sub-national governmenit administration (1 5%) Project ID P076924 Supplemental Project Borrower(s) AMAPA STATE GOVT. Implementing Agency AGENCIA DE DESENVOLVIMENTO DO AMAPA (ADAP) Address Amapa Development Agency (ADAP) Address Av Proc6pio Rola - No 277- Centro, Macapa, Amapa 68906-130 Contact Person Edmar Ney Lourinho Magno, President Tel 55 96 212-1195 Fax 55 96 212-1196 Email adapdpj@hotmail com State Development Bank (AFAP) Address Rua C5ndido Mendes, 1111, Macapa, Amap6 68900-050 Contact Person Edmar Ney Lourinh& Magno, President Tel 55 96 222-7976 Fax 55 96 222-7978 Email afap@afap ap gov br Environment Category B Date PID Prepared April 1 , 2003 Auth Appr/Negs Date April 1 8, 2003 Bank Approval Date June 17, 2003 1. Country and Sector Background Sector issues. AmapA is a poor, rapidly growing and relatively new state located in the Amazoni basin 42% of the state's populationi, or 198,341 people, were considered to be poor in 2000 (there is no official poverty line in Brazil; this analysis assumed that a household was poor if the head earned less than 1 5 minimum salaries In urbani areas or one minimum salary in rural areas) This poverty is primarily concentrated In urban areas, even after reclassifying a number of urban districts and municipalities as "rural" due to their size, spatial and other char-acteristics. 82% of Amapa's poor are located in the three largest municipalities, the capital of Macapa (55%), the adjacent city of Santania (20%) and the riverine slum of Laranjal do Jan- (7%). Durinig project preparation, a poverty profile was prepared that allows for targeting the poorest munlicipalities and districts, based on a combinationi of income, access to water and 2 PID sanitation, education level, and literacy The results of this analysis can be found in Annex 1 I Thus, addressing poverty, especially urban poverty, is a critical issue for the state. Between 1996 and 2000, Amapa's population grew at a rate of nearly 6% annually, reaching a total of nearly 475,000 residents. During the same period, Brazil's Northlerin region grew at 3 3% per annum and the national populationi growth rate was 1.9%. Growth has been fostered by poor economic conditions in niearby Northeastern and Northern states, as well as perceived opportunities such as the creation of a free trade zone and new settlements through land distribution. Much of this growth occurred In Amapa's cities and towns 81% of the population was urban in 1991 and this figure reached 89% in 2000 While Amapa has a relatively low population density of 3 3 inhabitanits per kim, most people are concentrated in urban areas Assuming that the state's high growth rate has continued, the populationi should reach 566,000 in 2003. Thus, a second issue faced by Amapa is the challenlge of rapid growthi, including urbanization Referring to the first issue, it should be kept in mind that a higher percentage of rural dwellers are poor (47%) than those living in cities and townls (41%). While parts of Amapa were first settled by noni-inidigelnous people in the 17th century, Amapa only made the move from federal territory to statehood in 1988. The state's first democratically elected governor did not take power until 1991. Even after becoming a state, some of the territorial characteristics persist. a significant dependence on budget transfers from the federal govermilenit, relatively weak public institutions, aii inability to implement a development policy, Imlited availability of infrastl-ucture and services, concenitrationl of power in a large public sector, and the absence of significant investment by the private sector. On top of this, AmapA is physically located in the extreme north of the country. Its road network is underdeveloped and the state's primary connectioni withi the rest of Brazil is via waterways and air transport. Thus, a third issue Is 11hW to promote developmenit in a relatively new and isolated state Amapa's economy is based oni natural resources: minin1g, timber, extractivism (principally rubber, Brazil nuts and palm hearts), tree plantations, fishing, livestock, subsistenice agricLltuire, and trade. While much of this activity occurs in the Amazon rainforest, the state also possesses savannah, floodplain anid coastal ecosystems Amapa's rainforest is one of the best-preserved in Brazil, with 99% still intact. Logging is no longer a significanit economic activity; the primary threats to the forest now come from the expansion of cattle ranchinlg, unregulated land development and fires. The final sector'Issue, then, is how to preserve the state's rich environmental heritage while promoting economic development that helps to alleviate poverty. Government strategv: The current state administration, which assumed office in January 2003, is focusilng on growtlh and social justice. Policies and programs are being shaped by foul strategic lines of action: * Economic growth to stimulate the production of goods and wealth within the state; * Integration to reduce social and institLtional disparities withini the state and betweenl the state and the Northerni region; * Responsible government that is comprised of transparent decision-making, allocative efficiency, environimenital balance, and fiscal justice; and * Solidarity so that state actions increaslingly contribute to humani development These policies seek to address some of the limitations faced by the previous two-tern administration without discarding the useful elements of the previous governmeit's efforts. The previous administrationi pursued a Sustainable Development Program (PDSA) that sought to break 3 PID wilth past developmenit models by the state's comparative advantages withiin the Amazon its natural wealth, possibilities for interinationlal comimierce and relations, ecological biodiversity, and cultural identify The PDSA was based on six lines of action Economic strengthening by diversifying and decentralizinig economic activities, increasling added value, improving economic infrastructure, broadening access to credit and incentives, economic integration, techinological modernilzationi, and promotioni of ecotourism; / Promotion of social equity through employmenit generation, improved income distribution, guaranteeinig basic consumption, and better access and quality of public services and infrastructure, v/ Environmental management by improving urban conditions, developing actions to control and prevent environmenital degradation, sharinig responsibility for natiral resource management, supportiig sustainable production in critical ecosystems, and recovering degraded areas; / Capacity building via raised educational standards, professional training, dissemination of knowledge and technology, institutionial development of commnulity organizations, and stakeholder participation, / Scientific and technological development with instrumenits to support R & D, responsiveniess to demand-driven scientific solutions, increased scientific cooperation, and development of technologies at the regional level, and Institutional strengthening througih administrative decentralization, muit. icipal strengthienliiug, federal-state-local coordinationi, and human resource development in the public service The PDSA yielded ilmportant resuilts in terms of governance, rural development, urbanl infrastructure, and environmental managemenit Governanice was improved through a) strengtheninig of participatory planning, b) creation of an integrated finanicial maniagemenit system for the state and its municipalities; and c) implemiienltation of a modernized tax collection system. Environmenltally-sensitive rural developmenit wvas pursued througil support for agro-forestry systems, extractivist activities, artisanal fishinig, agro-industries, appropriate technologies, and rural extensioni. Urban infrastructure and services were improved throughi increases in electricity generation and distribution and potable water supply in MacapA as well as interior towins. Environmentally, the capacity of the state environimienit secretariat (SEMA) was greatly strengthened, ecological-economic zoning was initiated, research and development of natural products was promoted, and public awareness programs (includinig museumils) were supported. No widely-accepted impact assessment of the PDSA is available. However, the urban areas of the state continue to face rapid growthi, inadequate access to infrastructure and services, a low level of econoiic development, and a higih level of poverty. Life in rural AmapA continues to be plagued by. large distances betweeni people, production and potential markets, difficult access, inadequate infrastructure and communlications; a low level of agricultural productivity; and a highi poverty rate 2. Objectives The goal of the project is to reduce urban and rural poverty through measures that are environmenitally sustainable, economically efficient and socially equitable. Specific objectives include: * Reduce urban poverty by focusing on economiiic and social development in low-income neighborhoods; * Reduce rural poverty through better access to credit, social services, basic infrastructure, and environmentally-soulid productive activities, * Create social capital throLgil strengthienied communlity organizationis, capacity-building, and stakeholder participation in decision-making and responsibility for maniaginig public resources; * Develop citizenship througIl training, participation of minlority groups, local empowermenit, and 4 PID environmentally-sensitive decision-making;and * Integrate socio-economic development and environmental conservation at the local level through Municipal Development Fora 3. Rationale for Bank's Involvement The Bank has long been the principal external lender supporting Brazil's programlis to address environmental and poverty issues Both themes are combined in the present project. The Bank will add specific value to this project through. a) transfer of successful approaches to rural poverty alleviation through community-managed initiatives from its rural poverty projects elsewhere in the country; b) lessons learned from finaclinlg Communilty associations in AmapA through the Pilot Program activities; c) global experience with community-driven development and micro-credit financilng; and d) capacity building for project and financial management. It is also important to keep in mind that this will be the first Bank loan to the state, implying that project preparation and implementation is a learning process for all concerined. 4. Description The overall objective of the Amapa Sustainable Communiities Project is to support the state of Amapa in the process of poverty reduction, promoting development in an economilically efficient manier, witi social equity and environmental conservation. The project will operate In rural and urban areas, seeking to reduce poverty and improve the livinig conditions of needy populations through: (1) support to productive activities and the creation of sustainable economic activities, (2) access to credit, basic social and infrastricture services; (3) strengthieninig of community organizationis and civil society participation in state policies, through the participation of beneficiaries in decision-makinig processes aiid In the sharing of responsibilities for public resources managemenit, and (4) institutionial strengthenling of the state of Amapa To achieve these objectives, the project is divided into four componenits: / Componenit I - Urban communlity development subprojects - Amount budgeted: US$2.08 million. Covers diagnostic, planninig and participatory implementationi of actions in urbani neighiborhoods with the highest concentrationis of poverty in the municipalities of Macapa, Santanla and Laranjal do Jarn. / Component 2 - Micro-credit for the urbani and rural poor- Amount budgeted- US$4.42 million Covers lies of credit for individual and group subprojects to generate income In urbani areas and developmenit of productive activities in rural areas / Componenit 3 - Rural communiity development subprojects - Amount budgeted. US$7. 10 million. Covers actions aimed at rural communities in the 16 munlicipalities of the state of Amapa for investments in social and productive infrastructure / Componenit 4 - Capacity building for articipatory managemiienlt and techniical assistance - Amount bLidgeted: US$3.10 million Covers sUppOlt to the operation of tie project's deliberative bodies (Municipal Fora and Advisory CouIcil), strengthieninilg of the operational capacity of the three State enterprises that will be directly involved in project maniagemenit and implemenitationi (ADAP, RURAP and AFAP), support for events to disseminate the project, and the carrying out of monitoriig and evaluationi activities. The target beneficiaries include the rural populationi - including varzea, extractive, fisherimienl, indigelnous and qullombola commullities - and the population living in the poorer neighiborhioods of major urban centers (Macapa, Santana and Laranjal do Jari). PID 5. Financing Total (US$m) BORROWER $4.18 IBRD $12 53 IDA Total Project Cost $16 71 6. Implementation The project will be implemented of the Development Agency of the State of Amapa (ADAP), in whiclh will be created a Project Coordinationi Unit (PCU), directly subordinate to the President Executive coordinationl will be shared by ADAP and the Developmenlt Bank of the State of Amapa (AFAP). Oversight of compliance withi the project's more general guidelines and social control of PCU's activities will be carried out by a Project Advisory Council (PAC), to consist of the Director-President of ADAP, the project's General Coordiniator, and representatives of the Secretariat of Governim1ent, the Secretariat of Integrated Munlicipal Development, the State Secretariat of Environment, AGEMP, AFAP, RURAP, IBAMA, SEBRAE and representatives of organized civil society, including entities representative of indigelnous populations, quiloinbolas, womeni's and youth movements, selected by their peers. 7. Sustainability The sustainability of this project can be evaluated along four different dimensions. financial, environmental, political/institutional, and in term of replicability Finanlcially, the project will generate employment and increased family income by increasinig access of the poor to credit, finanicinig productive sub-projects and enhanicinig living conditions. There is a siginificanit pent-up demand for micro-credit in the state, largely because small and medium-scale enterprises have very few affordable sources of finance. By implenmentinig a number of standard reforms and scaling Up to respond to this demand, AFAP can become financially sustainable The finanlcial analysis of rural productive sub-projects indicates acceptable to high rates of return. Improvements in healtlh, educationial attainment and professional capacity through urban and rural community sub-projects should also contribute to the financial sustainability of the loan. Environmenitally, the project will contribute to sustainable development througlh various mechanisms At a minimum, the environlimlenltal management plans for Componenits 1-3 will ensure that any potentially negative environim11ental impacts are mitigated. More positively, many of the potential urban sub-projects could result in improved environmenital conditionls and hiealth in poor neighborlhoods. In rural areas, investmiienit proposals must be consistent withi the locally-defined vision of sustainiable development in order to move forward. Many of the pre-identified rural sub-projects are oriented towards sustainiable natural resource management and environimenital rehabilitation. Finally, in the longer term, the Component 4 will finance the expansioni of ecological-economic zonin1g to the entire state In an effort to guide development while protecting critical environmenital resources. Institutionally, the project seeks to make a significant investmiienit in capacity building at various levels. Key state agencies involved in project implemilenitation (ADAP, AFAP, RURAP) will be institutionially strengthenied, especially in the areas of project managemiienit and implementationi. At the local level, the Municipal Development Fora will be reinforced in the areas of planinig, monitoring and evaluatinig so that they can continue to be viable partners durinig and beyond the life of the project At the commuIL1ty level, existing associations will be strengtlhened in tOpiCS such as project design, budgeting, contractinig, and maintenance, and new ones will be created in an effort to give more voice to underrepresenited comimnunities Political sustainability is Inore difficult to predict. The current administrationi has given 6 PID the project the highiest priority in terms of attention, skills and resources A positive sign is that the project concept wvas discussed and received the support of the gubernatorial candidates from all four major parties during the 2002 elections OpportuLnities for replication include applying lessons learned from the project for: / Sector work to help re-orient existing state programs and policies; / One or more Amapai-type projects for other poor Brazilian states in the Amazon basin, / Design of the recently requested Forest Sector Loan; and Sharing knowledge with other countries in the region through the Bank-supported Amazon Forest Network and the Amazon Treaty Cooperation Organization. 8. Lessons learned from past operations in the country/sector The project design has drawn on lessons from World Bailk experience in Brazil as well as state-specific expernenice. From 1995 to the present, the World Bank has supported a number of rural poverty alleviation projects (RPAPs) in northeastern and southiern Brazil that present a promising approach for addressing persistent poverty levels through finanicing community-managed sub-pr-ojects and providing basic services to the poorest rural families. Key lessons learned include: V/ Decentralization - delegation of duties to munlicipal couLIcils and greater use of regional offices to promote more responsive and local-level monitoring, data collection, coordination, and supervision, / Parlicipalion of beneficiaries in the selection, finanicinig, execution, and O&M of sub-projects has ensured that investments meet genuine community needs, led to cost savimgs, and has increasing owniership, leading to improved sustainability of investmenits; and / Poverty targeting - commullities themselves, i.e. municipal councils, are best-positioned and informed to target effectively, USHig simple, verifiable and objective criteria These lessons were drawn from the "Evaluation of the Brazilian Experience with Rural Poverty Reductioni", Annex 2, Report 21337-BR, Junle 2001. They are reflected in project design through the following characteristics. a) decentralized decision-makinig through Municipal Developmenit Fora; b) the installationi of regional officers to promote and facilitate the project; c) beneficiary involvement, througi Componients 1 and 3, in sub-project selection, counterpart financing, impleminentation, and maintenianice; and d) poverty targeting througlh a macro focus on priority areas and community-level selection. The RFPP has six years of experience fundinig comillullity-level demonstration projects in the Amazonl and Atlantic rainforests of Brazil (PDA) as well as the creation and managemenit of extractive reserves in the Amazon (RESEX) These projects demonstrated. a) the potential for harmoiizinig income generation activities in poor communiLties with sustainable natural resource managemilent, b) the viability of community-driven development in a rainforest environmenit; and c) the importance of technical assistance at all stages of the sub-project cycle The project has integrated this experience in its design by making environmenital conservationi an instrimnsic part of especially the rural sub-projects, basing the urban and rural sub-projects on community demand and ensuring that beneficiaries have adequate and flexible access to technical assistance. During project preparation, the state conducted its own assessment of lessons learned for project design and came to the following conclusions: 7 PID * Community organization - a low level of community participation in project design and implementationl has been correlated with poor project performance in the past. However, many community and producer associations are not yet well-structured to assume project managemenit responsibilities. They particularly need support for project maintenianice; greater representativelness and turnover of leadership; financial managemenit; project plannilng using technical design criteria, transparenlt decision-making; and financial independence from the state. * Technical assistance - this is an indispenlsable part of poverty-oriented interventions at the community level. Technical assistance should include an emipiasis on locally-appropriate technologies and its finanicing should be an intrinisic part of project financinlg (up to 20% of project costs in soime cases) The delivery of technical assistance should consider: a) training for rural producers; b) reducing what has been a higih rotation rate of extension agents; and c) the limits of privatizing technical assistance such as the lack of developing an institutional memory withinl a government agency. * Credit - there is a pent-Lip demand for credit in both the urbanl and rural areas of Amapa because there are few suppliers and those that exist do not have sufficient capital, humani resources and/or sufficient speed to meet the demand. Some lessons of particular interest for rural credit include. as land tenure is complex in the state, most lenders do not require real estate as collateral, a migratory rural population has had a negative effect on the repaymenit rate of some rural loan programs, technical and legal assistance with loan applications are needed; and the use of a registry of techilical assistance providers can help mainitain the quality of advice received by clients. * Economic viability - Finanicial analysis and preparation of business plans are practices that have not yet become part of local entreprenieurial habits in Amapa One key to reducing the costs of doing business in the Amazon is to invest in local transportationi networks, bridges, electrification, and telecommunications. Transportation subsidies provided by the Agricultural Secretariat should be quantified and analyzed in comparison with alternatives. In maniy cases, community enterprises need to develop partnerships with more experienced actors in the private sector. * Capacity building - While capacity bulildilig needs to be an integral part of any project, it was concluded that the state training agency (SEFORH) cannot meet these needs by itself. Other partners will be needed such as SEBRAE which has offered comm11un1ity coLirses on leadership and entrepreneurshiip Capacity buildinig is a medium-term investimienit that cannot function without specialized technical assistance and follow-up investment Specific attention should be paid to training youths and increasinig the adult literacy rate. 9. Environment Aspects (including any public consultation) Issues : The project was designed to ensure compliance with the requiremenits of the Bank's ulimbrella policy on Environimienital Assessmenit (OP 4 01). Environmenital impacts of the project are expected to be positive or neutral because of. a) the small scale of sLib-projects; b) the environmenltally-beneficial nature of many anticipated sub-prolects such as agroforestry systems, water purification systems, cultivation of medicinal plants, iilproved soil conservation techniiques, seedling nurseries, and beekeeping; c) a requirement that sub-projects are consistenit with locally-defined visIlols for sustainable development, d) preparation of a simplified environimiental impact report with mitigating measures for each sub-project, and e) environimentally-soulid templates for sub-projects will be used wherever possible. Despite these anticipated impacts, submissioni of an Environimlenital Managemilent Plan (EMP) was considered prudent to ensure conformity with Bank policy. Project preparation since February 2002 has involved the participation of over 500 potential beneficiaries and other stakeholders including state and local government agencies, Municipal Developmenit Fora, NGOs, indigenous groups, Afro-Brazilian communLities, the private sector, academia, and the proposed 8 PID implementing agencies. During the final preparation phase, the Government posted the EA/EMP on the state's web site for public comment and made copies of the Plan available at its offices for public review. 10. List of factual technical documents: A. Project Implementation Plan Carta Consulta - Projeto Comunidades Sustentaveis (January 2003) Plano Geral de Aquisiq5es (Procurement Plan; January 2003) B. Bank Staff Assessments * Participation Strategy for Indigenous Populations, Quilombo Remnant Communities, Poor Women and Youth (English and Portuguese) * Plano de GestdoAmnbiental (February 2003; Portuguese) C. Other * Avaliaado Institucional da Agencia de Fonmento do Amapa (January 2003) * Cost-Benefit Analysis of Productive Sub-projects (March 2003) * Participaqdo e Desenvolvimento: Avaliaqdo Institucional dos 16 Foruns de Desenvolvimento Sustentavel e Tipologia de Representatividade das Comnunidades do Estado do Amnapa (August 2002) * Pobreza, Desenvolvimento e Politica Social: 0 caso do Estado do Anmapa (June 2002) * Principais Atividades do Projecto Comunidades Sustentaveis (February 2003) * Proposta de Indicadores para Monitoramento e Avaliaado do Projeto Comnunidades Sustentciveis do Aniapa (November 2002) * Relat6rio de Consultoria Sobre a Situaado Fundiaria do Estado do Amnapa (November 2002) * Unidade Gestora do Projeto (January 2003) *Including electronic files 11. Contact Point: Task Manager Josef Lloyd Leitmann The World Bank 1818 H Street, NW Washington D.C. 20433 Telephone: 55/61/329-101 5 Fax: 55/61/329-l010 12. For information on other project related documents contact: The InfoShop The World Bank 1818 H Street, NW Washington, D.C. 20433 Telephone: (202) 458-5454 Fax: (202) 522-1500 Web: http:/H www.worldbank.org/infoshop Note: This is information on an evolving project. Certain components may not be necessarily included in the final project. 9 PID Tables, Charts, Graphs: Processed by the InfoShop week ending: 04/24/2002 For a list of World Bank news releases on projects and reports, click here SEARCH _ ___ EEDBACK _ _ i TCnE MP SHOWCASE, - -