ICRR 10683
                                                                                               Report Number : ICRR10683
                   ICR Review
                   Operations Evaluation Department


1. Project Data :                                        Date Posted : 08/07/2000
             PROJ ID : P039197 OEDID:
                                   OEDID : L4211                            Appraisal                       Actual
        Project Name : Rio de Janeiro State                    US$M )
                                                Project Costs (US$M)                  5900                           6304.1
                        Reform Privatization
                        Project
              Country : Brazil                   Loan/         US$M )
                                                 Loan /Credit (US$M)                   250                            199.6
  Sector, Major Sect .: Public Sector                          US$M )
                                                 Cofinancing (US$M)                   5650                           6104.5
                        Management
                        Adjustment, Public
                        Sector Management
          L/C Number : L4211
                                                                  FY )
                                                 Board Approval (FY)                                                   98
    Partners involved :                                  Closing Date           12/31/1998                     12/31/1998

Prepared by :            Reviewed by :           Group Manager :            Group :
Anwar M. Shah            Jorge Garcia-Garcia     Ruben Lamdany              OEDCR

2. Project Objectives and Components
 a. Objectives
 The project sought to support the timely completion of the state's privatization and concession program .
 b. Components
 The project financed (i) the costs of restructuring state enterprises in preparation for privatization and /or concesssion
including the cost of rightsizing the government work force; (ii) payrolls of employees of the suburban rail company
that was transferred from the federal government to the state; (iii) the cost of restructuring and privatizing BANERJ,
the state bank.
 c. Comments on Project Cost, Financing and Dates
 The project financed 3.2% of the total costs of the above mentioned programs . It closed on time and the undisbursed
balance of US$50 million was cancelled.

3. Achievement of Relevant Objectives :
With the single exception of CEDAE, the water and sanitation agency, all planned privatization or concessions were
completed by the project closing date . This included the sale, liquidation or concession of the state bank, the
electricity utility, the gas distribution company and its subsidiary, the suburban railways, the subway, the state ferry
service, two bus companies and the bus terminal management agency . A regulatory agency for the private provision
of public services was also established .

4. Significant Outcomes /Impacts :
A leaner and more efficient state government sector was achieved and the enabling environment for private sector
participation in the provision of public services was strengthened .

5. Significant Shortcomings (including non -compliance with safeguard policies ):
The state water and sanitation agency, CEDAE could not be concessioned due to legal and political difficulties .


6. Ratings :             ICR                       OED Review                 Reason for Disagreement /Comments
               Outcome : Satisfactory              Satisfactory
     Institutional Dev .: Partial                  Substantial                The project helped focus the state public
                                                                              sector on its core mandate.
       Sustainability : Likely                     Likely
   Bank Performance : Highly Satisfactory          Highly Satisfactory
      Borrower Perf .: Satisfactory                Satisfactory
       Quality of ICR :                            Exemplary
7. Lessons of Broad Applicability :
The ICR distills important lessons from this experience . These include (a) Splitting of the state bank into "good" and
"bad" banks leaves the state a large fiscal, legal and administrative burden after privatization; (b) Independence of
state regulatory agencies may be safeguarded through state constitution or the federal regulatory powers; and (c)
Legal conflicts of competence must be resolved before including any public agency in a concession program .

8. Audit Recommended?         Yes     No

9. Comments on Quality of ICR :
The ICR is of exemplary quality. It provides a candid, thorough and thoughtful analysis of project achievements and
shortcomings. It further distills important lessons from this experience . It should be on the must read list for those
writing ICRs.