Document of The World Bank FOR OFFICIAL USEONLY ReportNo: 46755-BR PROJECTAPPRAISAL DOCUMENT ON A PROPOSEDLOAN INTHEAMOUNT OF US$211.7MILLION TO THE STATE OF RIO DEJANEIRO, BRAZIL WITH THE GUARANTEE OF THE FEDERATIVE REPUBLIC OF BRAZIL FOR A RIO DEJANEIRO MASS TRANSIT 2 PROJECT June 2,2009 SustainableDevelopmentDepartment Brazil Country ManagementUnit LatinAmerica and CaribbeanRegionalOffice - This document has a restricted distribution and may be used by recipients only in the perfoiinance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. FOR OFFICIAL USE ONLY CURRENCY EQUIVALENTS (Exchange Rate EffectiveApril 2008-Dec. 2008) Currency Unit =Brazilian Real (R$) R$1.7-2.35 =US$1 FISCAL YEAR January 1 - December31 ABBREVIATIONS AND ACRONYMS AGETRANS Rio de Janeiro State Transport Regulatory Agency Agencia Reguladora de Transportes do Estado do Rio de Janeiro AMTU-RJ MetropolitanUrbanTransport Authority of Rio de Janeiro (Autoridade Metropolitana de Transporte Urbano-Rio de Janeiro) ASEP-RJ Original name of State Regulatory Agency BNDES National Economic and Social Development Bank (BancoNacional de DesenvolvimentoEconGmico e Social) CBTC Coinmunications BasedTrain Control CBTU Brazilian UrbanTrain Company (CompanhiaBrasileira de Trens Urbanos) CENTRAL State agency incharge of the suburbanrailway system; it is also the project implementation agencyreporting to SETRANS; it succeeded Flumitrens (see below) (Companhia Estadzral de Engenharia de Transportes e Logistica) CMU Country ManagementUnit CMSP SBo Paulo Metro Company (Companhia do MetrG de Sd'o Patilo) CPS Country PartnershipStrategy CPTM SRo Paulo Metropolitan Train Company (Companhia Paulista de TrensMetropolitanos) EMU Electric MultipleUnit FLUMITRJZNS Former Rio de Janeiro State suburban railway company which was replacedby CENTRAL IBGE Brazilian Institute of Geography and Statistics (Instituto Brasileiro de GeograJiae Estatistica) ICB InternationalCompetitive Bidding ICMS Circulation Tax on Goods and Services (Impost0 de Circulacd'o sobre Mercadorias e Serviyos) IERR Internal Economic Rate of Return IMT IntegratedModal Tariff (Tarfa Modal Integrada) 1 FOROFFICIAL USE ONLY MetrBRio Rio de Janeiro Metro Private Concessionaire (also known as Metro) NPV Net presentvalue 0-D Origin-Destination PER-RAP Preliminary Environmental Report (Relatorio Ambiental Preliminar) PDTU UrbanTransport Master Plan (Plano Diretor de Transporte Urbano) PMIG Project Management and Implementation Group SEAIN Federal Secretariat for Foreign Affairs (Secretaria deAssuntos Internacionais) SMA Secretariat for the Environment (Secretaria do Meio Ambiente) MRJ Rio de Janeiro Municipality RJMR Rio de Janeiro MetropolitanRegion SRJ State of Rio de Janeiro STM Rio de Janeiro Municipal Secretariat for Transport (Secretaria de Transportesda Prefeitura do Municbio de Sfio Paulo) SETRANS Rio de Janeiro State Secretariat for Transport (Secretaria de Estado de Transportesdo Rio de Janeiro) SUPERVIA Private concessionaire incharge o f operations and maintenance of the Rio de Janeiro suburban rail since 1998 Vice President: Pamela Cox Country Director: Makhtar Diop Sector Director: Laura Tuck Sector Managerhector Leader: Aurelio MenendezLTennifer Sara Task Team Leader: Jorge M.Rebelo This document has a restricted distribution and may be used by recipients only inthe performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not be otherwise disclosed without World Bank authorization. BRAZIL RIO DEJANEIRO MASS TRANSIT 2 PROJECT TABLE OF CONTENTS Page I STRATEGICCONTEXTANDRATIONALE . .................................................................. 1 A Background............................................................................................................................ . 1 B Evolution ofUrbanTransport inRJMR . ................................................................................ 1 C. State's Strategy for the Sector ................................................................................................. 3 D.Rationalefor Bank Involvement............................................................................................. 6 E Higher Level Objectives to which the Project Contributes ..................................................... . 7 I1 PROJECT DESCRIPTION . .................................................................................................. 7 A. LendingInstrument.............................................................................................................. 7 B . Project Development Objective and Key Indicators: .......................................................... 7 C. Project Components............................................................................................................. 8 D . Lessons Learned and Reflected inthe Project Design ........................................................ 8 E. Alternatives Considered and Reasons for Rejection ........................................................... 9 I11. IMPLEMENTATION ..................................................................................................... 10 A. Institutional and ImplementationArrangements ............................................................... 10 B . Monitoring and Evaluation o f OutcomeslResults ............................................................. 10 C . Sustainability ..................................................................................................................... 11 D Critical Risksand Possible ControversialAspects............................................................ . 11 E. Loadcredit conditions and covenants................................................................................. 13 I V . APPRAISAL SUMMARY .............................................................................................. 13 A. Economic and Financial Analyses ..................................................................................... 13 B. Technical ........................................................................................................................... 14 C. Fiduciary............................................................................................................................ 15 D . Social ................................................................................................................................. 15 E. Environment ...................................................................................................................... 16 . . F. Safeguard pollcies.............................................................................................................. 16 G .Policy Exceptions and Readiness ....................................................................................... 16 iii Annex 1: Sector Background ..................................................................................................... 17 Annex 2: Major RelatedProjects Financed by the Bank and/or other Agencies ..................22 Annex 3: Results Framework and Monitoring ......................................................................... 24 Annex 4: Detailed Project Description ...................................................................................... 26 Annex 5: Project Costs ................................................................................................................ 28 Annex 6: Implementation Arrangements .................................................................................. 30 Annex 7: Financial Management and DisbursementArrangements ..................................... 32 Annex 8: Procurement Arrangements ....................................................................................... 39 Annex 9: Economic and Financial Analysis .............................................................................. 44 Annex 10: Safeguard Policy Issues ............................................................................................. 51 Annex 11: Project Preparation and Supervision ...................................................................... 55 Annex 12: Documents inthe Project File .................................................................................. 57 Annex 13: Statement of Loans and Credits ............................................................................... 58 Annex 14: Country at a Glance .................................................................................................. 62 Annex 15: Maps ........................................................................................................................... 64 iv BRAZIL RIO DE JANEIRO MASS TRANSIT 2 PROJECT PROJECT APPRAISAL DOCUMENT LATINAMERICA AND CARIBBEAN LCSTR Date: June 2,2009 Team Leader: Jorge M.Rebelo Country Director: Makhtar Diop Sectors: General transportation sector (100%) Sector ManagedDirector: Aurelio Menendez/ Themes: Other urban development (P) Laura Tuck Project ID: P111996 Environmental screening category: B LendingInstrument: Specific InvestmentLoan [XI Loan [ ] Credit [ ] Grant [ ] Guarantee [ ] Other: For Loandcreditdothers: Total Bank financing (US$m.): 211.70 Proposed terms: Single currency, disbursement-linked US$denominated IBRDflexible loan with variable spread option, repayable in24.5 years, including 7 years grace and level principal repayments International Bank for Reconstructionand 0.00 211.70 211.70 Development Total: 9.29 211.70 220.99 Borrower: State of Rio de Janeiro (Secretaria de Estado de Transportes do Rio de Janeiro-SETRANS) ResponsibleAgency: CENTRAL-Companhia Estadual de Engenharia de Transportes e Logistica Jairo Favario, PMIG Coordinator Avenida Nossa Senhora de Copacabana, no493 / 5" andar - sala 503 - Rio de Janeiro - RJ - Codigo Postal: 22.031-000. Telefax: (21) 3816-6457, 3816-6458, 3816-6459. E-mail: jlfavario@central.rj.gov.br Annual I 43.9 123.4 9.2 17.6 17.6 ' Cumulative' 43.9 167.3 176.5 194.1 211.70 I V Expected effectiveness date: September 30,2009 Expected closing date: June 30,2014 Does the project depart from the CAS in content or other significant respects? [ ]Yes [ x ] N o Does the project require any exceptions from Bank policies? [ ]Yes [ x ] N o Have these been approved by Bank management? n/a I]Yes [ IN0 I s approval for any policy exception sought from the Board? [ ]Yes [ x ] No Does the project include any critical risksrated "substantial" or "high"? Itmighthave prolonged litigation inprocurement award o ftrains/systems . [x]Yes [ ] N o Does the project meet the Regional criteria for readiness for implementation? [x ]Yes [ J No Project development objective The proposed PDO i s to: a) improve the level-of-service provided to the suburban rail transport users inRJMR in a safe and cost-efficient manner and b) to improve the transport management and policy framework inthe RJMR. Project description[one-sentence summary of each component] (Part A) Infrastructure and Eauipment: Acquisition o f at least thirty (30) trains (EMUS)o f four (4) cars each and accessoriesfor a total o f at least 120 cars to be operated, on the lines o f CENTRAL'S System, by the Concessionaire under the terms o f the Concessionaire Contract (Part B) Institutional and Policy Development: provisiono ftechnical assistance to SETRANS for : 1, the carrying out o f studies on policy development, includingconsolidating regional coordination, updating the current integrated transport policy, landuse and air quality management master plan ( for the RJMR, introducing sound cost-recovery, tariff, regulatory and subsidy policies; and supporting the adoption o f Integrated Modal Tariff; and 2. Supporting the management and supervision o fthe project. Which safeguard policies are triggered, ifany? Environmental Assessment and Pest Management Significant, non-standard conditions, if any, for: None Boardpresentation: None Loadcredit effectiveness: 1. Conditions o f effectiveness are the signing o f the subsidiary agreement betweenCENTRAL and the State o fRio de Janeiro and the duly registration ofthe loan at the Central Bank. 2. Covenants applicable to pro-ject implementation: The State shall, within the limits o f its authority, commit to preserve AMTU-RJ and to introduce and maintain a type o f Integrated Modal Tariff (IMT) at all times during execution and until the completion of the Project, in the presentor other format as long as it continues to enhance the mobility and affordability of metropolitan transport to users, particularly those o f low income. In addition, the Borrower shall undertake its best efforts to extendthe IMT to other modes o f transportation and expand the AMTU-RJ to formally include other municipalities of the RJMR. 3. State o f Rio de JaneiroBETRANS must maintain throughout the project a Project Management Unit responsible for (1) managing the components o f the project and tracking the physical and financial progress of each component, and (2) ensuring the overall coordination o f the project and implementingstudies inthe institutional component related to the sector policy strengthening. vi 4. Retroactive financing up.to 20% of the value of the loan to cover expenses made after December 21,2008 related to the train acquisition contract. vii I. STRATEGICCONTEXTANDRATIONALE A. Background 1. The Rio de Janeiro Metropolitan Region (RJMR), with 546,865 ha. and 11.3 million inhabitants spread irregularly over 17 individual municipalities, i s dominated by the Municipality o f Rio de Janeiro (MRJ) with 5.7 million inhabitants. Roughly 76% o f the population in RJMR occupies just 15% o f its territory. MRJ alone has 56% o f the population o f the State of Rio de Janeiro (SRJ) and 77% o f the income o f RJMR. MRJ generates roughly 85% o f SRJ's income and 4.5 millionjobs. 2. Overview of Urban Transport in RJMR: In 2004, according to the Origin-Destination surveys used for the development o f the Urban Transport Master Plan (PDTU), the RJMR generated about 20 million trips per day o f which about 6.7 million (34%) were by foot. O f the 12.5 million motorized trips, 74% were by public transport. The share o f public transport trips has been decreasing in favor of other modes, particularly automobile, despite some important improvements in the rail-based transport systems. RJMR has a multimodal transport system including a suburban railway o f 225 km, which currently carries nearly 0.5 million passengers daily and i s operated by the concessionaire Supervia. A metro network o f 42 km i s currently carrying 0.46 million passengersper day and a formal bus system operating 14,000 buses carries 6.6 million passengers per day. Another 1.6 million daily trips are made in 13,000 minibuses and informal buses, most o f them considered "illegal" transport. The ferries carry 82,000 trips per day (about 1% o f public transport trips), school buses 190,000 per day, and chartered buses 92,000 per day. Individual or private transport accounts for 3.3 million tripdday, o f which 90% are by private cars; 4% by taxis, 3% by motorcycles and 1% by truck. 3. On the other hand, rapid motorization and over-reliance on cars and inefficient bus operations in RJMR also have a negative impact on mobility, air quality and road safety. Average travel times are increasing as congestion grows. In2007 alone, there were 196,000 new vehicles out o f a total fleet o f 3.0 million vehicles registered in the RJMR. In some areas o f the RMRJ, air quality is degraded by the presence o f excessive levels of carbon monoxide, ozone and particulatematter. Indeed,during2007 particulate matter alerts were issuedfor RJMR on 27 days and ground-level ozone alerts on 6 days. Vehicles account for three-quarters o f most air pollutants in the RJMR, and contribute to 40% o f particulate matter. However, vehicular air pollution has been somewhat mitigated by the use o f ethanol in lieu o f gasoline. In addition, vehicular accidents continue to increase and pose severe health risks. In2006, there were about 24,000 road accidents inMRJ which accounted for 13,000 injuries and about 719 deaths, with a cost conservatively estimated at US$1.4 milliodday. B. Evolution of Urban Transport inRJMR 4. The foundation for the partnership betweenthe State of Rio de Janeiro and the Bank in the urban transport sector was cast more than 15 years ago when the Federal Government initiated the decentralization of the federally-owned and operated suburban rail system (CBTU). Table 1 is a comprehensive summary of the Bank-supported sector reform and investment programs since the early 1990's. The decentralization was mandated by the 1988 Constitution, which assigned the responsibility o f urban and metropolitan transport to the local 1 State and Municipalities authorities. At that time, the Federal Government transferredto SRJ the CBTU-RJ rail network, which spread throughout the entire RJMR. The SRJ was faced with the major challenges o f integrating that system with the other public transport modes already existing in the metropolitan region. As part of this process, the State prepared with Bank support (Ln. 3633-BR and 4211-BR) a long-term metropolitan transport strategy and sector reform program, anchored in four pillars: a) establishment o f a regional transport coordination commission with the municipalities, operators and users; b) implementation of an integrated land use, urban transport and air quality strategy; c) financing mechanisms which would guarantee the long-term sustainability o f RJMR's urban transport system; and d) the progressive participation o f the private sector inthe investment and operational management o f the systems. 5. Through a number of measures summarized in Table 1, the State basically eliminated most of the operatingsubsidies for urban transport while keeping, for socialreasons, only a very small part of the suburbanrail network where demand is very low. Two milestones o f this reform were the concession to operate and maintain the suburban railway and subway systems to private sector concessionaires, respectively SuperVia and MetrBRio, without operating subsidies. To comply with its obligations in the concession contract o f the suburban railway in mid-1998, the State obtained a US$186 million loan from the Bank (Rio de Janeiro Mass Transit Project, Ln.4291-BR) to support the rehabilitation and acquisition o f rolling stock, rehabilitate stations and improve long-term transport sector planning in the RJMR. In early 2008, an Additional Financing Loan o f US$44 million was approved to compensate for the devaluation o f the US Dollar inrelation to the Brazilian Real and allow for the completion o f the investments included in Ln. 4291-BR. These actions by the State were a pioneering effort in Brazil and probably endedup saving the rail-based systems from further decay and abandonment giventhe very severe fiscal crisis o f 1999-2005. 6. Ten years after the concessions, both SuperVia and MetrGRio are holding steady and public opinion surveys suggest that they are well accepted by the population, Despite the shortcomings o f SRJ in complying from the outset with some important obligations in the concession contracts (such as imposing tariff integration between inter-municipal buses and rail and providing the investments agreed on schedule), the concessions survived through a combination o f good private management, staff downsizing, control o f fare evasion and tariff integration agreements with other modes. SuperVia struggled more than MetrBRio because the rolling stock to be rehabilitated under the Rio de Janeiro Mass Transit loan arrived late due to a combination o f fiscal restrictions and technical delays and also weak performance by the rolling stock companies in charge o f rehabilitation. But when the rehabilitated fleet and 20 new trains acquired under Ln. 4291-BR were put into service, there was a resurgence o f demand reflecting the desire of the riding public for more comfortable (air conditioned) trains and better level-of- service. Metr6Rio also was affected by delays in the completion o f new stations, yet it developed a captive demand when MRJ's mayor allowed the concessionaire to operate buses as an extension o f the metro (Le., passengers pay one single tariff for the municipal bus plus metro ride). 7. The State has agreed to invest in more trains for SuperVia given the recent successful experience with the acquisition of new trains. In addition, the State regulatory agency (AGETRANS) has recently ruled that the State has to compensate SuperVia for not complying 2 with some of the obligations of the concession contract inthe previous administrations. One o f the first major steps taken by the newly-elected State government in 2007 was to negotiate an extension o f the Metro concession with new terms makingMetreRio responsible for investment in additional rolling stock, systems and some civil works. The Metr8Rio concession has been sufficiently profitable to ,make its shareholders interested in renewing the concession for 30 years and assume these investments, which were not required inthe original concession. SuperVia also wants to do the same, but given its lower profitability, still requires the support o f the State in major investments. 8. Despitevery significantimprovementsin the rail-basedsystem, congestion levels in the RJMR continue to increase. Bus service is slow and there are few areas where there is sufficient space for segregated busways. Wherever possible, some busways, or at least reserved bus lanes, are inuse or beingplanned such as inAvenida B r a d and Alameda Ssio Boaventurain Niteroi. Furthermore, in the mid-l99O's, the proliferation o f illegal vans @emas) increased traffic and attracted 1.6 million passengers per day away from the formal. legal bus system. These illegal vans are popular as they normally do not have fixed pick-up and drop-off points (Le,, picking up passengers along the way and dropping them off closer to their destinations) and often provide a more direct service with fewer transfers. Yet, they are often operated unsafely with drivers who are not tested andvehicles which are not crashworthy. C. State's Strategy for the Sector 9. As recommended in the PDTU, the State's strategy for the sector is to strengthen the main network of rail-basedand road-basedpublic transport trunk corridors,which can be accessed by feeder buses and non-motorizedmodes. The State, in cooperation with the MRJ, public transport operators, and other regional partners, plans to improve the capacity and operations o f several major public transport corridors that connect regional activity centers, inpart driven by the anticipation o f future special events such as the 2014 World Cup. The improvement o f the rail lines currently operated by SuperVia and the rationalizationo f bus services to feed these lines are an important near-tern1 component o f this regional plan. Investnients are also planned to upgrade busway operations, terminals and ticketing (Le. bus rapid transit), and improve non- motorized facilities such as bicycle rental and parking near public transport. The public transportation system i s expected to function under compatible smart cards and with the oversight o f a strong metropolitanagency, which will periodically update the PDTU and overseethe physical and tariff modal integration to increase the accessibility, availability, acceptability and overall affordability o furbantransport for low-income users. 10. The State is also crafting the necessary financial mechanisms to ensure periodic and reliable investments to extend the metro and suburban rail, and transform the latter into a surface metro-typeoperation. On the financial management side, the State is starting to merge the organizations which oversee rail-based transport and taking measures to reduce the operating subsidy in the lines which were not concessioned out to the private sector. Finally, the State i s committed to gradually push for the optimization o f its inter-municipal bus network and cracking down on illegal vans. With these projects and other investments, the State i s makingprogress on the interconnection of its rail-based transport network and facilitating the integration with buses and other modes to expand the reach o f its existing network. This integration will improve the 3 accessibility o f employment, health and education facilities, particularly to the low-income population. 11. At the same time that physical improvements in infrastructure are being made, the State has progressed in the morechallenginginstitutionalaspects of the strategy. O f special importance i s making the regional transport coordination commission operational with the municipalities o f the RJMR. The Secretaries o f Transport and Finance created a group with representatives o f all the operating agencies and the AMTU-RJ, which with the support of consultants i s responsible for the study and gradual introduction o f Integrated Modal Tariffs (IMT). The I M T allows a user to buy a single ticket that can be used in several modes within a certain periodoftime to complete a trip. It costs less thanthe sum o fthe individualtickets, thereby significantly benefitingthe low-income segments o f the population, which make the longest trips and most transfers. Most likely, it will also increase considerably the demand on rail-based systems. i 12. There is therefore an urgentneed to increasethe supply of trains at peak hour. SuperVia expects its daily ridershipto double to nearly 1million passengersby 2015. The projected demand must be transported with a level-of-service that i s acceptable and safe, and with frequencies that reduce the waiting time at stations makingthe integration with buses more attractive. Doing so will also attract more users from road to rail with positive impacts on the environment and on containing or reducing congestion. Not doing so will discourage people from using the rail system and continue the over-reliance on road-based systems increasing all the negative externalities associatedwith such systems. 13. The proposedprojectwould contributeto the financingof the trains that are requiredby the State to meet this growing demand, The project would be a logical next step in the continuation of Bank support to help the State solidify the achievements o f its long-term strategy for the sustainable implementation o f the RJMR transport system, especially in tenns o f financial sustainability, the adoption o f more Integrated Modal Tariffs and metropolitan coordination. The project would benefit the low-income population who make up over 50% of rail users, and contribute to a reduction inroad congestion, accidents, air pollution and greenhouse gases. Finally, although small, the institutional development component will assist in the updating of the PDTU which i s beingusedas a planningtool by all operating agencies inthe RJMR. 4 Table 1: Sequencingof World Bank SupportedReform and Investment pYertt institutional Milestone RelatedBankLoan 1992 FederalGovernment decides to transfer Rio de Janeiro Metropolitan CBTL-RJ to the State rolling stock of CBTU-RJ Transport Decentraliiation State agrees and draws Long-Term Project (Ln. 3633-Br) to the Strategy with Bank support FederalGovernment (US$126M) 1996- State assumes CBTU-RJ and creates the State starts studying the Studies under Ln.3633 -BR 97 State Commuter Railway (Flumitrens) privatization of its urban evaluatethe concessions State creates the RegionalTransport transport operatingagencies Coordination Commissionby decree (AMTU-RJ) 1998 State decides to concession out and or State re-starts financing the Rio de Janeiro State Reform privatize Flumitrens, RJ Metro, Conerj extensionofthe Metra with and Privatization loan (Ln. ( f e q , boat services) and sell the State- BNDES 4211-BR) was approvedand owned bus company reducing its annual State concessions the metro and assistedthe operatingsubsidy with urban transport suburban railway to the private concessiodprivatization operations fLom USS4OOMper year to sector, privatizes the ferries andprogram zero. liquidates its bus company. State creates the Regulatory Agency State reduces its operating (ASEP-RJ) subsidies inurbantransport froniUS$400M to zero with these concessions 2000 State decides to request Bank supportto Rio Metro expansionto Rio de Janeiro Mass Transit comply with its obligations inthe Copacabanais re-started loan (Ln.4291-BR) assists in concessionof Flumitrens financedby BNDES the rehabilitation of existing State rehabilitatestrains trains, acquisition o f new (including air conditioning) and trains, rehabilitation of acquires 20 new trains stationsand preparationof the Transport Master Plan 2000- RJMunicipality allows MetrBRio to have The rehabilitated trains start Additional Financing loanto 07 integratedbus services and fares in arriving Ln.4291-BR to cover the selected locations The new twenty trains are devaluationofthe US$in D SuperVia starts integratedfare with delivered relation to the BRL, closes in MetrBRio and selected Municipal and June 2009 Intermunicipalbuses I There is anuncontrolled proliferation of informal vans both inMRJ and other municipalities of RJMR e ASEP-RJwas split in severalregulatory agencies.The regulatory agency for transport is named AGETRANS-RJ 2008 DDemandfor rail increases dramatically Determination ofneedto State requests from the Bank BState declares Mass Transit one of its increase carrying capacity and :heproposed Rio de Janeiro priorities peak hour frequencies Mass Transit 2 loan DState starts fighting informalvans BState grants extensionto MetrGRio concession bState agrees with expansionplan for SuperVia(Pr6XXI) 1 State continueswith the extension of the metro to Ipanema 1 State announcesits intention to create an IntenratedModal Tariff 5 14. Key Development issues: In the proposed loan the key development issues that will be addressedare: A) Improvement of quality-of-life of low-incomeusers: Low-income users are the most affected by poor public transport services because they have few options and spend a considerable portion o f their income on transport services. Their chances to access better employment, health and education facilities are higher if accessibility, availability, acceptability and affordability o fpublic transport services are improved. B)Bus Network Optimization:Largeefficiency gains couldbe achieved by optimizing bus network operated by the association o f intermunicipal bus operators (FETRANSPOR) and its members to optimize their route network. The same needs to be done by the MRJ bus network operators. C) Metropolitan Coordination:Strengthening the metropolitan coordination between the State and municipalities o f the RJMR through the consolidation o f the efforts, which started with the AMTU-RJ, is key to the successo fthe strategy adopted by the SRJ. D) Reduced Externalities: the switch to rail-based transport is likely to reduce andor contain congestion and road accidents in certain corridors, and improve air quality and greenhouse gases by decreasing the number o fbus-lunstraveled. E) Cost-Recovery, FinancialManagementand FundingIssues: The increase inridership through better integration o f the public transport network, more private sector participation inactivities o fthe sector, and oversight ofthe use o fthe proposed Integrated Modal Tariffs are other issues that will be addressed by the project through the institutional and policy development component in order to improve cost-recovery, financial management and fundingo fthe urbantransport systems. D.Rationalefor BankInvolvement 15. The Bank's assistance strategy in Brazil i s to support policies and investments that will encourage economic growth and social development ina context o f macroeconomic stability. This will be achieved through efficient resource allocation, increased efficiency inthe public sector and the appropriate targeting and delivery of support systems to the poor. The proposed project is consistent with the Bank's Country Partnership Strategy (CPS) endorsed by the Bank on May 1, 2008 (Report No:42677-BR). This CPS will continue to support the same four main pillars, namely equity, sustainability, competitiveness and sound macro-economic management endorsed intheprevious country strategy. 16. The proposed project objectives are in line with the Bank's Brazil Department and Transport Sector Board objectives, namely: (i) promote financial viability o f public enterprises and their to reform, including decentralization to various levels; (ii) contribute to poverty alleviation; and to (iii)to reduce government subsidies through better tariff policies and improved financial management. Through its involvement, the Bank has already helpedinthe decentralization process from Federal to State and i s now assisting the State in the consolidation o f its rail-based systems and in the tariff and modal integration process. The proposed project is also a follow-up to the efforts started under: a) the Rio de Janeiro Metropolitan Transport Decentralization Project (Ln. 6 3633-BR), which succeeded in the decentralization and modernization o f the federally-owned CBTUto the State and laid the foundations for metropolitan coordination and a long-term strategy; b) the Rio de Janeiro Mass Transit project which financed the rehabilitation of 52 trains and acquisition o f 20 new trains, as well as supporting the PDTU and metro and urban railway concessions. The State has made good progress inimproving metropolitan coordination; designing, updating and implementingan urbantransport, land use and air quality strategy (PDTU); looking for financing mechanisms other than government budgets; and progressively promoting the pa?ticipation o f the private sector in operations and investment in the sector. The new State administration has shown commitment and has given priority to urban transport Bank-financed projects even intimes o f budget restrictions. 17. Finally, the project is a cornerstone o f the Bank engagement strategy with Rio de Janeiro State. When the new Governor took office inJanuary 2007, the Secretaries o fFinance and Planningwere tasked to work with the economic team and sectoral secretariats to define a 4-year government investment plan and identify external borrowing needs. A US$500 million lending program was agreed and i s underway consisting o f investment projects inurbantransport, rural development and private sector reform. The State has indicated that urbantransport i s one o f its priorities. E.HigherLevel Objectivesto which the ProjectContributes 18. Affordable and accessible urban transport services contribute to higher equity and poverty reduction by allowing all segments o f society, and particularly those with low-income, to be able to reach employment areas, health, education and leisure facilities, thereby contributing to an improvement in quality o f life. This project seeks to improve the rail-based urban transport system to the primary benefit o f the low-income population, while also contributing to air quality improvement and climate change mitigation. 11. PROJECT DESCRIPTION A. LendingInstrument 19.The Project will be implemented as a Specific Investment Loan (SIL) to be disbursed over a five year period (FY2010-2014). B. ProjectDevelopmentObjectiveand Key Indicators: 20. The proposed development objective i s to: a) improve the level-of-service provided to the suburban rail transport users in RJMR in a safe and cost-efficient manner and b) improve the transport management and policy framework inthe RJMR. 21. These objectives will be met by: (i) financing rolling stock to increase the peak-hour carrying capacity o f the rail-based system; (ii) designing urban transport strategies and actions to mitigate the impact of rising transport costs on the mobility o f the poor through the introduction of IntegratedModal Tariffs; and (iii) strengtheningthe AMTU-RJ andupdatingthe PDTU. 22. The proposed indicators and intermediate outcome indicators that will be used to measure project performance are described inAnnex 3 and include: 7 1) In-vehicle travel time plus waiting time to measure the reduction in trip-time for selected origins and destinations 2) Passengersper square meter inpeak hour as an indicator o fthe level o f comfort 3) Percentage o f low-income SuperVia passengers to measure the distribution o f benefits to the poor 4) Bicycle parking facilities installed at railway stations to promote non-motorized access 5) Number o f SuperVia stations with bushail tariff integration as a measure o f intermodal integration 6) Off-peak hours o f the day when smartcard-based discounted fare i s to be offered to encourage integration Intermediate Outcome Indicators: Component la. Number of trains per direction inpeak/off-peak hour in5 SuperVia lines Component 1b. Additional SuperVia demand (passengerdday) generated by the Project Component IC. Working ratio o f SuperVia as a measure o f the financial condition Component 1d. Cumulative percent completion of trains to be delivered to SuperVia Component 2a. Update/completion o f studies that support the institutional and developmentcomponent C. ProjectComponents 23. The prqject will comprise two components: /PART A): Infrastructureand Eauipment:Acquisition of at least thirty (30) trains (EMUs) o f four (4) cars each and accessories for a total o f at least 120 cars to be operated, on the lines o f CENTRAL'S System, by the Concessionaire under the terms o f the Concessionaire Contract. This component represents about 97% o fthe total project cost. lPART B): Institutional and Policv Development 1, Provision of technical assistance to SETRANS for the carrying out o f studies on policy development, including: (a) consolidating the AMTU-RJfor the RJMR; (b) updatingthe current integrated transport policy, land use and air quality management master plan (PDTU) for the RJMR to meet both transport and air quality targets and to introduce sound cost-recovery, tariff, regulatory and subsidy policies; and (c) supporting the adoption o f Integrated Modal Tariffs; and 2. Provision o f technical assistanceto CENTRAL for the management and supervision o f the Project, including the acquisition and reception o f the trains (EMUs). This component representsabout 3% o fthe total project cost. D. LessonsLearnedand Reflectedinthe ProjectDesign 24. The major lessons learnedfrom previous projects inthe urbantransport sector are: 0 The first Rio de Janeiro Mass Transit project (Ln. 4291, closing June 30, 2009) quality assurance review showed that a combination o f integrated modal tariffs and new, air conditioned rolling stock can increase demand substantially. But strong action on the part o f the SRJ and MRJ i s still needed to prevent illegal transport and to rationalize their respective bus networks. 8 It also showed that train rehabilitation takes longer and costs more than expected. On the other hand, acquisition o f newtrains provide technological advances which attract demand and are environmentally friendly producing energy savings and carbon dioxide reductions though regenerative braking. The lessons from the first Rio de Janeiro Mass Transit loan are also that counterpart fbnds should be minimized and the State should assign budget priority for the project even in times of fiscal restrictionto avoid costly delays inthe delivery o fworks androlling stock. The Siio Paul0 urban transport projects have shown that the coordination between the different levels of government (State, Municipalities) inurbantransport is fundamental for medium and long term planning and for the implementation o f a truly integrated system, both modal and tariff-wise. The policy for the sector must be strengthened to minimize distortions resulting from inefficient physical and financial coordination between transport modes and to promote multiniodal integration. The tariff levels should allow for significant cost recovery o f working costs and must be complemented by financing mechanisms and transparent subsidy policies which cover the shortfall. Demandforecast by the borrowers should be carefully scrutinized. 25. Inaddition, reconmendations emerging from the Independent Evaluation Group review o f the transport sector have been taken into account in terms o f the need for strengthening the sector's monitoring and evaluation efforts, and aligning them with the new strategy which emphasizes urban transport, multiniodal transport and climate change oriented projects. This is being achieved through the use o f relevant intermediate indicators that can be readily measured. E. AlternativesConsideredand Reasonsfor Rejection 26. Many alternative project scenarios were analyzed for the proposedtrains. The first alternative focused on whether there would be any more cost-efficient public transport options, such as segregated busways with improved service that could meet the same objectives. However, this alternative was rejected because it proved to be less cost-efficient in view o f the scarce road space and existing congestion in RJMR, as well as the resettlement and expropriation costs that would be involved. The analysis then evaluated the different options that would be available by using the existing rail lines, thereby avoiding the need for any resettlement or expropriation. The following five alternatives considered were: Do-nothing. The growing lack of system capacity and the low service frequency would result in longer waiting times and lack o f comfort at peak hours, and therefore deter new users and encourage existing users to return to road-based modes o f transport. This alternative would go against the State policy o f increasing rail-basedpublic transport. Rehabilitate existing trains which are immobilized. Almost all trains available for rehabilitation, which were inheritedby SuperVia from Flumitrens/CBTU, were rehabilitated. Part o f the fleet that was not rehabilitated needs to be replaced because it i s too old and i s becoming impossible to maintain since spare parts are no longer available. Also, they consume much more energy than the new generation o f trains and subsequently have higher carbon dioxide emissions. Inaddition, lessons from rehabilitation inthe previous loans show 9 that it always takes longer and costs more than estimated at the outset o f the contract because it is difficult to assess all o f the rehabilitation costs without disassembling the cars. Rehabilitation does not allow for the easy installation o f some modern features, including interactions with new signaling and telecom systems, as well as air-conditioning. This alternative was therefore rejected. 0 Buy second-hand trains abroad. This was only tried once by the State o f Si30 Paul0 and was quite difficult since the railway gauge (1.61~1)only exists in a few countries (Spain and Australia). Furthermore, the Association o f Brazilian Railway Industries (ABIFER) forbids the acquisition o f second-hand equipment even if it were possible to find trains that could be rehabilitated. 0 Lease new trains: This option was rejected because the present federal tax structure does not provide adequate incentives for passenger train leasingto be profitable. 0 Buy new trains: This was the alternative selected because SuperVia needs to decrease the average age o f its fleet and start taking advantage o f standard features such as air conditioning, modern signaling equipment and regenerative braking. This will save energy and increase comfort and safety. 111. IMPLEMENTATION A, Institutionaland ImplementationArrangements 27. The Borrower i s the State o f Rio de Janeiro. The Secretary o f Transport o f the State o f Rio de Janeiro (SETRANS) is the main Government agency responsible for the project. CENTRAL, the implementation agency and successor o f Flumitrens, reports to SETRANS. Project management will be located in CENTRAL through an established Project Management Implementation Group (PMIG) which will be incharge o f the implementation o f the project. The PMIG will be headed by a Project Coordinator who will report directly to the Director-President incharge o fthe implementationo fthe project. The PMIGwill be staffed with regular staff from CENTRAL and supported by project management and supervision consultants in charge o f providing technical support in areas such as engineering, procurement, environment and financial management. CENTRAL has considerable experience with this PMIG unit, acquired in ongoing and previous Bank-financed projects. B. Monitoringand Evaluationof OutcomesEtesults 28. Project progress reports will be prepared by the PMIG on a semi-annual basis, consolidated in a single report and submitted to the Bank for review. These reports should indicate the progress made under the different components o f the project and measure the performance against the indicators established in the results framework (see Annex 3). In addition, progress reports will include the following: (i)disbursement performance over the period covered by the report and updated disbursement schedule; (ii) updated procurement plan for activities under each o f the project's components; (iii) description o f progress achieved in the implementation a o f environmental and social aspects o f the project; (iv) a section describing potential developments that could affect project implementation, which could consist o f a review o f the mainrisksandthe impact of mitigation measures suggested at appraisal (see Section D on risks). For the infrastructure and equipment component, particularly the acquisition o f trains, 10 implementation progress will be measured against physical progress intheir manufacturing and installation (see intermediate outcome indicators inAnnex 3). C. Sustainability 29. The sustainability o f the project results will depend on: (i)continued ownership and priority given to the urban transport sector by the State administration; (ii) implementation and timely funding of rehabilitation and maintenance interventions to keep the infrastructure and equipment in good condition; (iii)bus network optimization and control of informal vans through appropriate incentives and/or enforcement; and (iv) maintenance and expansion o f the Integrated Modal Tariffs, which benefits primarily the low-income segments o f the population and have been introducedwith success in Sa0 Paulo. 30. The State has demonstrated its ownership o f the project and o f the sector in the last 3 years by giving priority to investments in this area even in times o f fiscal restriction. The timely implementation and funding o f rehabilitation o f infrastructure and equipment suffered during the periods o f fiscal space restriction, but even then the State provided the funds necessary to maintain the infrastructure and rolling stock or has sought mechanisms to provide the funds. The State has started a deliberate campaign to limit the number o f illegal vans and license only those that comply with minimumrequirements. Furthermore, the newly-elected Mayor o f Rio de Janeiro indicated that he would join SRJ in consolidating the AMTU-RJ, rationalizing the bus network, restricting illegal vans in as much as possible, and encouraging improvements in SuperVia and MetrGRio. Integrated Modal Tariffs are likely to continue because both the State and Municipalities have understood how important it i s for the low-income segments o f the population. Therefore, the sustainability o fthe project and o f the sector seems likely. D. CriticalRisksand PossibleControversialAspects Potentialrisks and mitigation 31. The overall level o f risk associated with this project i s assessed as Moderate. The main project risks involved are listed inTable 2 below. Table 2: Critical Risks and PossibleControversialAspects PotentialRisks Delays in negotiations and State sought very early the necessary support inSEAN Moderate effectiveness due to slow and Fazendato hold negotiations after receiving invitation; approval by Federal it is also working with Cornissilode Avaliaqilo EconGmica Government and Senate: This do Senado (CAE) as soon as negotiations are completedto has been amajor reasonfor speedup legislative approval and effectiveness. project delays and subsequent extensions 11 ProposedMitigation Prolonged Litigation in the WB experiencehas beenthat the Borrower must have a High award of the trains: It is not very good legalteam which should quickly defeat any uncommoninBrazil that the injunction (liniinar)without merit to avoid that itsjudgment secondrankedproponentwill drags through the courts. This also requires that the bidding try to go to courtto stop the documents andbiddingprocessrespectall the guidelinesto signing ofthe contract ensure that there i s no legal reasonto be questioned As the major activity of this Advancedprocurementwas completed and Bank gave its Moderate project is one large contract no objection on May 12, 2009. The Bank provideda close for theprocurement of trains, review ofthe procurementprocess with a view to address ifthe biddingfails and the bid previous lessons and mitigate any potential issues requires re-issuing, there could be major delays toproject implementation Delays in the actualprovision This shouldbe mitigated by very close supervision ofthe Moderate of the trains: Although inthe supplier, and with stiffpenaltiesfor delays inthe delivery last contract financedby the or, conversely, with bonusfor approveddeliveries aheadof Bankthe trains were provided time. on schedule, it is not uncommonto have delays in the supply ofnewtrains Final cost of trains contract A detailed analysis of similar bids for trains from around Moderate higher due to addendato the the world was usedto estimateproject costs. The winning contract bid was below cost estimates. Any addenda to the contract must be carefully evaluatedto avoid cost overruns Failure of the State to There is already IntegratedModal Tariffs between Moderate introduce more SuperVia and 150 bus line at 30 stations.The State also has comprehensiveIntegrated startedstudies for the introduction of a single electronic Modal Tariff fare system to facilitate IMT andhas officially committed that this is one of its priorities. The plan is to continually expandIMT through pilot programs inspecific areas ofthe RJMR. Ifthis fails, the State will mandate integratedtariffs or allow SuperViato charter its own busesto pickup passengersand deliver them to its stations at a lower integratedfare. SuperViafails to comp$ with State has the right to requestcorrective measures, apply Moderate its contractual obligations fines and ultimately cancelthe concessionif needbe and re- with State in a manner as to bid it. The Regulatory Agency (AGETRANS) monitors jeopardize level-of-service periodically the level-of-service provided. Financial Management CENTRAL has experiencewith fmancial management of Moderate Bank-fuianced projects but is late indelivering the annual audits. CENTRAL will be asked to start the bidding process for audits earlier and for 2 years inarow. BudgetprioriQ fiscalspace) The State was askedinthe minutes ofnegotiationto Moderate prioritize this loan incase of budgetaryrestrictions,that is, to give priority to the investments financedby the Bankincase of fiscalrestrictions. Overall Risk Moderate 12 E. Loadcredit conditionsand covenants 32. Conditions o f effectiveness o f this loan are the signing o f the subsidiary agreement between Central and the State o f Rio de Janeiro and the duly registration o f the loan at the Central Bank. Covenants applicable to prqject implementation are: The State shall, within the limits o f its authority, commit to preserve AMTU-RJ and to introduce and maintain a type o f Integrated Modal Tariff (IMT) at all times during execution and until the completion o f the Project, in the present or other format as long as it continues to enhance the mobility and affordability o f metropolitan transport to users, particularly those o f low income. In addition, the State shall undertake its best efforts to extend the IMT to other modes o f transportation and expand the AMTU-RJ to formally include other municipalities o f the RJMR. 33. The State of-Rio de Janeiro/SETRANS must maintain throughout the project a Project Management Unit responsible for (1) managing the components o f the project and tracking the physical and financial progress o f each component, and (2) ensuring the overall coordination o f the project and implementing studies in the institutional component related to the sector policy strengthening. 34. Retroactive financing up to 20% o f the value o f the loan to cover expenses made after December 22,2008 relatedto the train acquisition contract. IV. APPRAISAL SUMMARY A. Economicand Financial Analyses 35. Economic evaluation o f the proposed project was undertaken by the StateKENTRAL comparing the situation without project with the situation with project. For that purpose, the State estimated through demand modeling the passenger hours and passenger-kms with and without the project and converted them into time savings and operating cost savings. An estimate o f reduction o f accidents and road-based vehicle emissions was made using the same data and compared to the investment costs (see Annex 9 for detailed description o f economic and financial analysis). The results for the base case are the following: [XI Cost-Benefit Analysis: NPV@lO%=US$225.3 million; EIRR= 20.8% For the EIRR to be below 10% the investment costs would have to increase by about 147%, which i s unlikely. EIRRwill also be below 10% ifthe "value o f time" i s reduced by 67% from the hourly average o f about R$3.50 derivedfrom user surveys. [XI Financial Analysis: NPV@1O%=US$47.8 million; FRR= 12.5% This analysis was done by comparing total investments vs. savings due to lower maintenance costs, lower number o f breakdowns and higher revenues. The differences in the economic andfinancial indicators are becauseno value oftime savings were included inthe financial analysis, while travel time savings are the vast majority ofthe project benefits inthe economic analysis. 36. Financial projections were prepared for SuperVia for the 2007-2026 period and they show that the working ratio o f both operating agencies will be equal or less than one, and operating costs will therefore be below operating revenues. Details are available inthe Project File 13 37. Fiscal impact. The National Secretary o f the Treasury (STN) does an exhaustive and highly-professional analysis o f state debt capacity. It i s on the basis o f such analysis that the State i s allowed to borrow with a guarantee from the Federative Republic o f Brazil. The Brazil C M U undertook its own analysis o f the State debt capacity and the fiscal impact o f the proposed loans. The fiscal impact o f the project on the State's finances was evaluated and a full assessment can be found in the Project File. A summary o f the due diligence fiscal impact analysis i s also available inthe Project Files. The debt assumed by the State for this project and other loans approved at the sanie time for preparation was part o f the debt renegotiations with the Federal Government. The project itself and the other loans under preparation would have a minor impact on the State's finances. B. Technical 38. Overall, this project follows the recommendations o f the PDTU, which prioritizes increased carrying capacity o f the rail-based system at peak hour, bus network rationalization, substantial reduction o f illegal transport, improvement o f transfer terminals, introduction o f more IMT, and non-motorized access to stations wherever possible. The State and Municipality are moving towards the implementation o f these recommendations. After reviewing the alternative options for the use o f the funds available, a technical evaluation was undertaken to compare the acquisition o f new trains with other alternatives such as do-nothing, increasing reserved bus operations, rehabilitation and/or modernization o f trains, acquisition o f second hand trains, and leasing o f trains. The acquisition o f new trains in this case was judged the most cost-effective alternative either because the others were not feasible or there are no available immobilized trains to be rehabilitated. Specialized consultants examined the options rejected and agreed that the selected alternative is the most suitable for SuperVia. Bank consultants and staff also examined the present SuperVia operations and maintenance policies and reviewed its stations facilities, particularly the integration terminals, to assess their capacity to facilitate the smooth transfer o f passengers from other modes. The costs for the trains and each o f the systems proposed are in line with those acquired recently by other equivalent metro and suburban rail systems. Specialized consultants also reviewedthe proposed specifications for the acquisition of the trains and the present SuperVia signaling, telecom and energy systems and ensured that the acquisition o fthe trains alone i s sufficient to accommodate the potential demand and increase the peak-hour carrying capacity. Although the existing signal system i s sufficient to accommodate the new trains, SuperVia intendsto further improve this system as part o fthe existing concession contract. These assessmentsare available inthe Project File. 39. The State opted for the acquisition o f at least thirty Electrical Multiple Units (EMUS)o f 4 cars each and accessories for a total o f at least 120 cars to meet the near-term potential for significant ridership growth in 5 Lines currently in operation (Japeri, Santa Cruz, Saracuruna, Belford Roxo, and Deodoro). Detailed technical characteristics for the trains are presented in Annex 4. This investment and related institutional activities will complement longer-term plans by the State and its regional partners to create a integrated network o f high-capacity public transport corridors, to rationalize bus routes to better serve trunk lines and terminals, and encourage non-motorized travel with improved bicycle and pedestrian facilities. 14 C. Fiduciary 40. CENTRAL (ex-Flumitrens) has extensive experience with Bank fiduciary requirementsand a successful history o f financial management in recent Bank loans. The Rio de Janeiro Mass Transit Project (Ln. 4291-BR) and its Additional Financing Loan are still ongoing with satisfactory financial management reporting and auditing. The operating agency has very experienced staff working in their accounting departments to ensure that financial management will be carried out according to Bank guidelines. Audit of the project accounts will be carried out by independent consultants to be hiredon a competitive basis according to Bank procurement guidelines. Annex 7 provides a complete discussion o f financial management and disbursements. Procurement for the proposed project would be carried out in accordance with the World Bank "Guidelines: Procurement Under IBRD Loans and IDA Credits" dated May 2004 (revised in October 2006), "Guidelines: Selection and Employment o f Consultants by World Bank Borrowers" dated May 2004 (revised in October 20061, and the provisions stipulated inthe Legal Agreement. An assessment o f the capacity of CENTRAL to implement procurement actions for the project has been carried out by the project team. The assessment reviewed the organizational structure for implementing the project and the interaction between the project's staff responsible for procurement and the relevant units for administration and finance. CENTRAL i s very familiar with Bank procedures and procurement guidelines since it has implemented Bank- financed projects recently. Annex 8 provides a complete discussion o f procurement arrangements. The State will ensure that the project i s implemented in accordance with the Guidelines on "Preventing and Combating Fraud and Corruption in Projects Financed by IBRD Loans and IDA Credits and Grants" dated October 15, 2006. D. Social 41. The project will have a positive impact on the quality o f life of the population who use SuperVia and the urban transport network. The project will increase the quality and availability o f mass transport within the Rio de Janeiro Metropolitan Region and will provide commuters with alternatives to private automobiles, buses and vans. New air conditioned passenger rail cars will provide a higher level of comfort to passengers and shorter intervals between trains, increasing the attractiveness o f SuperVia for commuting to work and accessing urban services. Direct impacts include increasing the accessibility o f public transport to employment centers, health, education and leisure facilities. Most o f SuperVia users are low-income and live in the suburbs o f the greater RJMR. Improving metro and suburban rail services in general increases the accessibility of this lqw-income segment o f the population to employment centers and facilitates their transfer between rail and the municipal and intermunicipal bus networks. In addition, increased use of public transport will help reduce traffic congestion and air pollution, thereby contributingto overall improvements inthe quality o f life inthe RJMR. 42. The proposed project will not cause any dislocation or involuntary resettlement. Upgrading o f stations i s being carried out with non-Bank funding and i s taking place entirely within the railway right-of-way. Aside from possible minor traffic disruptions and short-term delays along train routes, there will be no adverse social impact. 15 E. Environment 43. Overall, the project is expectedto have a positive impact on the environment. Congestionand air pollution are among the main environmental problems facing RJMR. Providinga high-quality and safe transport alternative, especially for longer trips, will help dampen the rapid increase in motorized trips and related environmental impacts. 44. The project will contribute to reduce greenhouse gas emissions from the transport sector in the RJMR intwo ways: (1) by replacing conventional electro-dynamic rheostatic braking trains with new cars that use regenerative braking technology requiring less energy from the grid, and (2) by inducing a modal shift from busedautos to trains through the expansion of the rail system's capacity, which in the case of Rio de Janeiro is cleaner than other modes. Taking into account the Brazilian electricity mix characteristics, the potential for carbon dioxide reduction only from the regenerative braking is around 8,000 tons per year (See Annex 10, also detailed calculations available inthe Project File). 45. The Project Team reviewed the documentation prepared by SuperVia describing its compliance with environmental practices recommendedwhen the concessionwas awarded. The team also reviewed Supervia's environmental management system and policies to reduce and mitigate environmental impacts at the train maintenance and other facilities. They were found to be satisfactory and will continue to be strengthened during project implementation. The pest managementpolicy i s triggered only because the rail operator sprays its premises periodically to combat the dengue mosquito. F. Safeguardpolicies Safeguard Policies Triggered by the Project Yes No Environmental Assessment (OP/BP 4.01) [XI [I Natural Habitats (OP/BP 4.04) [I [XI Pest Management (OP 4.09) [XI [I Physical Cultural Resources (OP/BP 4.11) [I [XI Involuntary Resettlement (OP/BP 4.12) [I [XI Indigenous Peoples (OP/BP 4.10) [ I [XI Forests (OP/BP 4.36) [I [XI Safety of Dams (OP/BP 4.37) [ I [XI ProjectsinDisputed Areas (OP/BP 7.60)* [I [XI Projectson International Waterways (OP/BP 7.50) [I [XI G. Policy Exceptions and Readiness The project does not warrant any exceptions to Bank policies and is deemed to be ready for implementation, The procurement process for the 30 trains contract is very advanced and the opening of the bids took place on February 5,2009. The Borrower indicated that the contract will be awardedand signed soon after the proposedloani s approved. * By supporting theproposedproject, the Bank does not intend toprejudice thefinal determination oj'the parties` claims on the disputed areas 16 Annex 1: Sector Background BRAZIL: RIO DEJANEIRO MASS TRANSIT 2 I.RiodeJaneiroStateGovernment'sUrbanTransportSectorStrategy 1 . The SRJ urban transport strategy for the RJMR i s anchored in 4 pillars: a) to establish with the municipalities, operators and users a regional transport coordination commission (RTCC); b) to develop and update on a periodic basis, an integrated land use, urban transport and air quality strategy; c) to introduce financing mechanisms which will guarantee the long-term sustainability o f the urban transport systems; and d) to promote progressive private sector participation in the investment and operations management o f those systems. SRJ has shown progress towards the above objectives. First, an RTCC (named AMTU-RJ) functions as a forum for discussion o f metropolitan policies for prices and subsidies as well for discussion o f common issues such as multimodal tickets and major investment projects. Second, SRJ has refined an integrated land use, urban transport and air quality strategy using sketch planning techniques (PDTU), which i s now a major planning tool which i s continuously updated. This strategy has been used for decision-makers and stakeholders to discuss proposed projects. SRJ has explored several financing mechanisms for the urban transport sector other than government budgets. Through its concessionaires, it has accelerated the rental o f station spaces, in-vehicle and outside vehicle advertising, has created partnerships for shopping centers close to metro stations and sells space in the right-of-way for cable services in an effort to increase non-operating revenues. Lastly, conscious o f the scarcity o f resources it faces, SRJ i s the most advanced Brazilian state regarding private sector participation in investments and operations considering all its operating agencies have beenconcessioned out to the private sector and/or privatized since 1998. 2. In 2007 and very early inthe current administration, the State made it clear that mass transport was a priority for his administration. The State confirmed that he will take all steps necessary to strengthen the trunk systems (both rail and road-based) and improve hub-and-spoke networks as a means to decongest the RJMR. SRJ's strategy i s to integrate the existing systems, to offer an acceptable level o f service to the user and to reduce operating subsidies. But it i s also a State goal to improve rail-based urban transport in low-income areas to facilitate the access to employment centers, health, education and leisure facilities. Finally, the State has clearly decided that a major improvement o f the rail-based network, particularly the SuperVia and MetrBRio networks, i s a cost-efficient priority, upgrading it to surface metro like operation. 3. A number o f key issues must be addressed in order to improve the supply o f urban transport services and to guarantee their orderly development and sustainability in the long term for the RJMR. They are: (a) institutional issues; (b) cost recovery and financial management issues; (c) environmental issues; and (d) transport planningissues. 0 Institutionnl Issues. The most critical institutional issues are: (a) the fine-tuning o f relations between state and municipal governments and a clear definition o f their respective roles in the financing, planning and operation o f urban transport services in accordance with the 1988 Constitution; and (b) a clear definition o f the funding mechanisms o f the sector at the metropolitan level through an agreement between State and Municipalities of the region. The Government's strategy developed under the previous Bank-supported project was to 17 create a regional urban transport coordination agency (AMTU-RJ) for planning, coordinating and setting priorities for new investments and modal integration. AMTU-RJ now meets frequently and is primarily a forum for discussion of metropolitan transport policies and projects. The SRJ has made it clear that it intends to strengthen AMTU-RJ, merge the state administrations o f metro and suburban rail, and strengthen the enabling environment to build integration terminals identified inthe PDTU. 0 Cost Recovery, Financial Management and Funding Issues. A number o f measures are needed to improve the cost and financial performance o f the sector: (a) setting tariffs which. when added to subsidies, cover at least the long-run variable costs (definedas out- of-pocket costs plus depreciationo f equipment and cost o f capital) o f the service provided; (b) controlling fare evasion; (c) appropriate peak and off-peak pricing; (d) improving the financial management o f the systems through wide-ranging cost cutting measures and generating more non-operating revenues through advertising, station space rentals and use o f the right-of-way; and (e) revamping the funding mechanisms in order to guarantee adequate financing for the implementation o f new mass transit systems and the sustainability o f the existing systems. Since 1998, to help achieve these goals, SRJ has embarked on an aggressive campaign to promote private sector participation in the urban transport sector, to reduce fare evasion, to cut costs and to generate more non-operating revenues. But much more needs to be done and, in the proposed project, the institutional and policy development component includes studies to assist the State in this area. As its financial situation improves and its capacity to obtain authorization from the Federal government for multilateral/bilateral loans i s increased, SRJ plans to increase investment inpublic transport. 0 Environnzental Issues. Air pollution, noise, traffic congestion, and road accidents are major environmental issues to be addressed in the RJMR. The reduction o f the environmental impacts o furbancongestion and noise pollution inthe urbanarea could be done through: (a) the allocation of responsibilities across govemment levels for the enforcement of the law and definition of tougher standards; (b) the use of cleaner and quieter systems; (c) where appropriate, the use o f non-motorized transport; (d) improved traffic management and control: and (e) the strengtheningo f traffic safety education and the enforcement o f traffic regulations. Extension o f the MetrBRio network and the proposed improvements on Metro and SuperVia will most likely reduce the numbero f bus-his inthe corridors where they are happeningand consequently will reduce vehicle emissions. Mandatedfuel changesto CNG ininteiinunicipal and municipal buses would also contribute. Aggressive control ofinformal vans may also help because these vehicles are in general in bad maintenance condition. This may also reduce congestion and emissions. 0 Transport Planning Issues. The need to continue to strengthen RJMR's transportation planning, traffic data base, traffic management, and economic and financial evaluation o f new investmentswas emphasized during the preparation o f the project and was addressed by SRJ. SETRANSICENTRAL i s equipped with a battery o f sketch planning, demand and supply models which will test different land use, air quality, and urban transport scenarios. Furthermore, an integrated land use, urban transport, and air-quality strategy (PDTU) exists and should continue to be fine-tuned with more attention to the land use and environmental aspects. The PDTU will be updated under this loan and should be an important tool in the planning o f future transport networks. 18 11. UrbanTransportCharacteristiesinRJMR 4. Figure 1-1 depicts the mode share for all 20 million daily trips in RJMR estimated in 2004. About one-third o f all trips are iion-motorized, about one-half are on public transport (PT) modes, and the remained {about one-sixth) are on private modes. The share for private modes shares, hoheter, are increasing at the expense o fnon-motorizedand public transport trips. Figure 1-1:ModeSharesof All Trips inRJMR Taxi Mtorcycle I%-\ 1% ', /-m1% e r M V Other PT(ferries, 5. Sub~irbanrail. currently operated by Supervia. represents about 3% o f all trips. less than 4% o f all motorized trips. and less than 5% of all public transport trips. Table 1-1provides a suimary o f the most recent Supervia operational characteristics. Table 1-2 is a summary of operational characteristics by Line. Table 1-1:SummaryData OM.SuperViaOperations i O ~ e r a ~ i o nStations a I 80 6. Table 1-3 presents the growth in total passengers transported and passenger-luii since 1999. The number o f passengers transported has nearly doubled in 10 years, Figure 1-2 presents the evolution of ayerage SuperVia daily demand by month for the last I O years. Finally. Figure 1-3 19 - Peak-hourioff-peak Headway Local 7110 (minutes) Direct - 5110 6110 6110 20130 10120 Local- 18,000 Peak hour seats offered Direct - 23,000 13,000 16,000 4,500 9.000 Average Commercial Speed Local - 34 (kndh) Direct - 47 43 46 39 3 3 Travel Time (min) 38 75 79 46153 59163 *as o f December2008, averagelyear 464 20 Figure1-2: Average Daily Demand on SuperVia ~ ~ dmensa1dia u ~ j l i a - 1999-- -2000 -2001 - 2002 -2004 --2003 -2005 -2006 2007 -2008 ~ Figure 1-3: Socio-Economic Classes* of SuperVis Passengers D E A 8% 1% -1% B 65% Class A: Hi~h-~~iddle Income (89 or inore essential household items, equivalent to 6 and higher MS) I Class B: 3fiddle Income (59-88 essential household items, equivalent to 3-6 MS) i Class D: Poor (20-34 essential lrousehold items. equivalent to 2-3 MS) I Class E:Very poor (0-19 essential household items, equivalent to 1-2 minimumsalaries (MS)) 1 *Defined by the ABPEME (Brazilian Market Research Association) based on ownership o f essential household items bv families. I More derailed transport and socio-economic data available inthe Project Fife Annex 2: Major RelatedProjectsFinancedby the Bank and/or other Agencies BRAZIL: RIO DEJANEIRO MASSTRANSIT 2 Sector Issue Project IEGrating Latest PSR Ratings Implementation Development Progress(IP) Objective (DO) Bank-financed Decentralization o f rail services Sao Paulo S froin federal to state govenunent Metropolitan with system Transport rehabilitatiodmodernization . Decentralization (Ln. Borrower was Federal 3457-BR) Government Decentralization o f rail services Rio de Janeiro S from federal to state government Metropolitan with system Transport rehabilitatiodmodernization. Decentralization (Ln. Borrower was Federal 3633-BR) Government Decentralization o f rail services Recife Metropolitan S from federal to state govemnent Transport with systemrehabilitationand Decentralization (Ln. extension. Borrower was Federal 3915-BR) Government Decentralization o frail services Belo Horizonte S from federal to state government Metropolitan with system extension. Borrower Transport was Federal Government Decentralization (Ln. 3916-BR) Decentralization o f rail services Salvador Urban NA M S M S from federal to state government Transport Project with system extension. Borrower (Ln.4494-Br was Federal Government Decentralization o f rail services Fortaleza NA M S M S from federal to state government Metropolitan with system extension. Borrower Transport Project was Federal Government (Ln.7083-Br) Consolidation o fthe system and Rio de Janeiro Mass NA S S its concession to the private Transit Project(Ln. sector. Borrower was the State of 429 1-Br) Rio de Janeiro Table continues on following page... 22 Table continues from previouspage... Connection betweenthe ex- Stio Paulo Integrated H S federally owned CBTU system UrbanTransport and the State-ownedFepasa Project (the Barra systemto create CPTM and Funda-Roosevelt modernization of major link) (Ln.43 12-Br) integration stations. Borrower was the State of Siio Paulo Construction of Line 4 of SBo Stio Paulo Metro Line NA Paulo Metro under a PPP project. 4 project(Ln. 4646- Borrower was the State of SBo BR) Paulo Provisionoftrains, signaling and Stio Paulo Trains and NA telecom systems for Stio Paulo Signaling Metro and CPTM Other development agencies IDB-financed improvements of Metro's Line 5 stations o f ex-FEPASA South line, acquisition of rolling stock and construction of Metro's Fifth Line Ingeneral, all State financed prqjects have fared very well particularlythose inSilo Paulo State and Rio de Janeiro. Two federally-financed projects such as Salvador and Fortaleza were highly affected by the fiscal restrictions from 2002-2005 which delayed implementation. 23 Annex 3: ResultsFrameworkandMonitoring BRAZIL: RIO DEJANEIRO MASSTRANSIT 2 ResultsFramework PDO ProjectOutcomeIndicators Use of ProjectOutcome Information a) to improve the level-of-service 1. Reduction o f in-vehicle 1. To assess the improvement in providedto the urban rail travel time plus waiting time trip time transport users inRJMR ina safe 2. Passengers per square meter 2. To assess improvement in and cost-efficient manner; and 3. Number o f low-income level-of-service b) to strengthenthe transport passengers (up to 4MS) in 3. To assess impact on the low- management and policy SuperVia income population framework in the RJMR. 4. Bicycle parking facilities 4. To assess progress o f policy installed at railway stations to promote non-motorized 5. Number o f SuperVia stations facilities with bus-rail tariff 5. To assess progress in integration intermodal integration policy 6. Use o f smartcard-based 6. To assess the level o f fare discounted fare duringoff- integration where ridership peak by SuperVia can be increased IntermediateOutcomes Useof Intermediate Outcome Monitoring Component 1 a. Number o f trains per peak a. To assess the carrying Deli\,en o ftrains to SuperVia hour/direction and off-peak capacity in peak hour and off in 5 lines of SuperVia peak b. Additional demand generated b. To measure overall impact o f by the Project project on total ridershipo f c. Working ratio o f SuperVia the lines benefited by project d. % completion o f trains to be c. To assess the financial deliveredto SuperVia condition o f operations d. To assess the progress on the delivery of SuperVia trains Component 2 a. Updatekompletion o f studies a. To assess the progress o f Maintaining and strengthening o f plans for metropolitan the PDTU coordination Arrangements for results monitoring: 0 Institutional issues: The PMUwill be in charge o f making sure that the periodic supervision reports include data on the project outcome indicators and the intermediate outcome indicators 0 Data collection: Data collection will be undertakenby operating divisions of SETRANS and by CENTRAL will be verified by the project management consultants. The low-income participation surveys will be undertaken every t w o years. 0 Capacity: SETRANWENTRAL have the capability required to collect the data and prepare the progress reports. In case they cannot do it directly they will be supported by the prqject management consultants 24 I Annex 4: DetailedProjectDescription BRAZIL: RIO DE JANEIRO MASS TRANSIT 2 1, The proposed project comprises the following components: [PART A): Infrastructure and EauiDment:Acquisition o f at least thirty (30) trains (EMUs) o f four (4) cars each and accessories for a total o f at least 120 cars to be operated, on the lines o f CENTRAL'S System, by the Concessionaire under the terms o f the Concessionaire Contract. This component represents about 97% o fthe total project cost. lPART B): Institutional and Policv Development 1. Provision o f technical assistance to SETRANS for the carrying out o f studies on policy development, including: (a) consolidating the AMTU-RJ for the RJMR; (b) updating the current integrated transport policy, land use and air quality management master plan (PDTU) for the RJMR to meet both transport and air quality targets and to introduce sound cost-recovery, tariff, regulatory and subsidy policies; and (c) supporting the adoption o f Integrated Modal Tariffs; and 2. Provision o f technical assistance to CENTRAL for the management and supervision o f the Project, including the acquisition and reception o f the trains (EMUs). This component represents about 3% o fthe total project cost. 2. Summary Terms o fReference i. StrengthenandexpandtheRegionalTransportCoordinationCommission(AMTU- RJ) for the RJMR: this institutional action will examine the present configuration of the AMTU-RJ, identify its weaknesses andpropose ifneed be staff changes and a discussion of its proposed planof action. Furthermore,it will design a strategy for expanding the AMTU- RJ to other municipalities o f the RJMR which have not yet joined it. The main goal i s to make the AMTU-RJ a stronger coordination body in charge o f periodically updating o f the PDTU, preparation o f medium and long-term investment plans with proper evaluation o f individual investments and package o f investments as well as an alternative analysis o f policy packages to increase accessibility, affordability, availability and acceptability o f public transport inthe RJMR. .. 11. Update the Integrated Transport Policy, Land Use and Air Quality Management strategy (PDTU) for the RJMR to meet both transport and air quality targets and to introduce sound cost-recovery, tariff, regulatory and subsidy policies: a study will be undertaken to update the current PDTU data base and run again the models to assess the impact o f policy measures related to integrated modal tariffs, bus network rationalization and reduction o f informal transport. The main objective is to have an updated data base that RJMRplannerswill continue to use intheir transport options alternative analysis. ... 111. Support the adoption of Integrated Modal Tariffs (IMT): This study will examine specific transport corridors and will test bus network rationalization in a way as to increase modal and tariff integration between rail and bus. On the basis o f the several alternatives tested, an optimized bus network will be proposed as well as Integrated Modal Tariffs for discussion betweenthe operators and with the State and Municipalities involved. 26 iv. Project managementand supervision, includingacquisitionand receptionof the trains designed to support the implementationand supervisionof the project: this consultancy will support the PMIG in the management and supervision of the project and in the preparation o f monitoring reports agreed with the Bank. TECHNICAL CHARACTERISTICS OF N O DEJANEIRO NEW 30 ELECTICAL MULTIPLE UNITS COMPOSITION OF EMU I M + T + T + M I EMUcapacity (8 standing passengers/m2) 1,300 passengers Seated passenger 20% o f its capacity (with a density o f 6 standing Dasseneers/mZ) I Seats for preferential passengers 5% o f total seats Car body shell structure and collision strut austenitic stainless steel Sides austenitic stainless steel plates Framework head: low alloy and highresistance carbon steel Front mask: polyester resin reinforcedwith fiberglass Car body shell length: 22,000 mm + 1 % / - 2 % Car's width between 2.970 inm and 2.980 mm Floor height starting from top o f the tracks: 1,305 mm Floor manufactured with hardboard plywood plates covered with stainless steel and floor finished with last generation plastic Internal finishing plates made with polyester resin reinforced with fiberglass Side windows highresistance polycarbonate fixed panels 1 Bogie conventional, with four wheels, with welded plate structure and frame cross member with pivot plate 1 Suspension primary: By helicoidal springs secondary: Pneumatic (air chambers) 1 Wheel type: A38 material: Forged drawn steel diameter: 965 mm (new wheel) diameter: 889 mm (life diameter) wheel axle gauge: 1,600 mm Bearings self-trimmer type 1 Brake amlication disk brake inall cars Parking Brake spring brake cylinder built-in to the main brake equipment I Power 3000V dc ,Overhead catenary 1 AccelerationDeceleratioii performance Acc: 0.85 d s 2 , between 0 and 35 kdh. Dec: Service Braking: 0.77 ids2 Emergency Braking: equal or above 1.1 ids2, between extreme speed limits (100 km/h down to 0) Coupler and traction and collision mechanism automatic mechanic coupler, having equipment for energy absorption (hydraulic gas type), compatible with the load Passengers car doors Number o f doors Der each car side 1Number o f door sheets per gap 27 Annex 5: ProjectCosts BRAZIL: N O DEJANEIRO MASS TRANSIT 2 (I)Identifiable taxes and duties are US$26.5 million, and the total project cost, net o f taxes, is US$ 194.5 million. Therefore, the share of project cost net of taxes is 12 %. 28 Schedule of EstimatedDisbursements(includingContingencies) June 30 2009 to December 31 December 3 1,2009 to June June 30 1013 to December EstimatedDisbursements(includingContingencies,US$Million) LBRDFiscal Year 10 11 12 13 14 TOTAL-ANNUAL 43.9 123.4 9.2 17.6 17.6 TOTAL CUMULATIVE - 43.9 167.3 176.5 194.1 211.7 29 Annex 6: ImplementationArrangements BRAZIL: RIO DEJANEIRO MASS TRANSIT 2 A. State Agency Responsiblefor the Project 1. The Secretary o f Transport o f the State o f Rio de Janeiro (SETRANS) i s the main Government agency responsible for the project and it will represent the State o f Rio de Janeiro. To oversee the project on behalf o fthe State o f Rio de Janeiro, SETRANS has delegated the implementationo f the projectto CENTRAL one o fthe operating agencies under itsjurisdiction, which was incharge o fthe implementation o fthe first Rio de Janeiro Mass Transit loan (Ln.4291-BR). B. ProjectImplementationAgent 2. CENTRAL will maintain the same Project Management Implementation Group (PMIG) used in the previous loan. This group which will be incharge of the implementation andmonitoring of the project components. It will be headed by a Project Coordinator which would report directly to the Director-President incharge o fthe implementationo fthe project. This Director-President will report to the Secretary o f Transport. PMIG will be staffed with regular staff from CENTRAL and supported by project management and supervision consultants in charge o f providing technical support in areas such as engineering, procurement, environment and financial management. CENTRAL acquired considerable experience with this PMIG unit inthe Rio de Janeiro Mass Transit Project (Ln.4291-BR) and the Additional Financing loanto the sanie project. 3. Given the importance of quick response to issues that might be faced during the project, the Director-President to which the PMIG reports is required to have sufficient autonomy to decide and, in extreme cases, have quick access to the Secretary of SETRANS. CENTRAL has strong technical, procurement, environmental and legal staff which will support the implementation o f the project. C. Assessment of ProjectImplementationCapacity 4. As mentioned above, CENTRAL'S PMIG has considerable experience acquired in recent Bank-financed projects. Their knowledge o f procurement, financial, disbursement and safeguards procedures will be an asset for the project implementation. N o special launch training i s judged necessary. LegalAgreements 5. There will be a Guaranteeagreement betweenthe Federative Republic o fBrazil and the Bank, a loan agreement between the State and the Bank and subsidiary agreement between SETRANS and CENTRAL. 30 LEGALAGREEMENTS Loan Agreement State of RJ CENTRAL' 1 Concession Agreement I 31 Annex 7: FinancialManagementand DisbursementArrangements BRAZIL: N O DE JANEIRO MASS TRANSIT 2 1. A financial management assessment o f the Rio de Janeiro Mass Transit Project I1 was carried out for Companhia Estadual de Engenharia de Transporte e Logistica - CENTRAL, in accordance with OP/BP 10.02 and the Financial Management Practices in World Bank Financed Investment, dated November 3, 2005. The purpose o f the assessment was to determine whether the implementingagency, CENTRAL, have acceptable financial management and disbursements arrangements in place to adequately control, manage, account and report about the funds to be allocated to this project. 2. These arrangements include, but are not limitedto its capacity to: (a) properly manage and account for all Project's proceeds, expenditures and transactions, (b) produce timely, accurate and reliable financial statements and reports, including unaudited Interim Financial Reports (IFRs) for project management and monitoring purposes, (c) safeguard the project's assets, and (c) disburse Bank funds in the most efficient way, in accordance with applicable Bank rules and procedures. 3. This assessment was completed based on the last FM Mission to CENTRAL and included discussions with the coordinators and staff o f the implementing agency on: (i) review o f staffing requirements; (ii) review o f the flow o f funds arrangements and disbursement methodology; (iii) review o f internal control mechanisms in place; (iv) discussion in regard to reporting requirements, including the forniat and content o f IFRs; and (v) review o f internal and external audit arrangements. 4. Based on the assessment o f the implementing agency (CENTRAL), the conclusion o f the assessment i s that the financial management arrangements as set out for this project satisfy the Bank's minimum fiduciary requirements and that the project can rely on and utilize the State Administrative and Financial Management Systems (SIGO and SIAFEM). 5. The overall financial management risk associated with this project i s considered Moderate mainly due to: (a) highly qualified project staff, including professionals with strong capacity in planning, budgeting and financial management, the commitment o f the entity to the Project; (b) strong existing financial management arrangements in place SIAFEM; and, (c) a strong and supportive internal audit department. 32 RiskAssessment Matrix Risk Risk IdentifiedRisks & MitigationMeasures Rating ~~ ~~~~ ~ InherentRisks Country Level L Brazil's Federal government system provides reliable information. Adequate systems exist to manage and track the receipt and use of funds and there is a high level of fiscal transparency, both of which would support any lending program. The risk to both the Bank and the country funds is low. The government is coininitted to addressing its PFM weaknesses. Federal FM laws and regulations applicable to sub-nationals provide a strong PFM framework for sub-nationals. OverallInherent Risk ControlRisks Budget The budget and accounting ofthe projectare part of the state accounting system, so all transactions ofthe Projectwill be implementedby the Budgetary Administration, Financeand Accounting System- SIGO Accounting L SIAFEM state's PFM system FundsFlow Financial [FR's by excel worksheet Auditin Risk H-High S-Substantial M-Moderate L-Low ImplementationArrangements 6. The project components will be implemented by CENTRAL which will be responsiblefor all administrative and financial management activities, including accounting and disbursements (based on Records/SOEs) for the components. CENTRAL will be responsible for consolidating the interim financial reports and forwarding them to the Bank. 7. CENTRAL i s the State company responsible for Rio's suburban rail system, and reports to the State Secretary of Transport. There is already an active Pr0.ject Management Implementation Group (PMIG), which manages the ongoing Bank financed Rio de Janeiro Mass Transit Project -PET (Loan NO.4291-BlUP043421). 8. CENTRAL PMIG will be responsible for carrying out the project activities related to its respective component and also for coordinating the preparation of Project periodic financial 33 reports to the Bank. The CENTRAL PMIG i s staffed with qualified professionals and staff turnover has been low. CENTRAL PMIG staff has prior experience in Bank and state procedures. 9. Under the ongoing Ln. 4291-Br, CENTRAL signed on 12/08/2005, a services contract (Gerenciadora) with a project management consultant to provide consulting (program management) services. TRENDS-ENEFER will be responsible for deployment planning and other related services, including technical supervision, monitoring and control of works and services, inaddition to planning for materials, equipment and services. 10. The proposed institutional arrangementsare as follows: I I I I I I I--==+ -- I I /I A. Internal Control 11. CENTRAL has no management information system (MIS) in place capable o f ensuring the schedules of payments to be made and schedules o f future payments, linked to the Designated Account related to the two separate sources of payments, including the control o f its flow o f resources. 12. All financial management information i s maintained in Excel. Many customary internal controls, however, such as the segregation o f staff functions, fiscal/administrative staff expertise, review o f support documentation, passwordsfor access to systems and approval of expenses are in place. As part of the service contract, to be signed between CENTRAL and the project management consultant for this loan, the former will actively participate in and support the financial management administration o f the project. 34 13. Additionally, Internal Audits examine expenses, the schedule o f planning, implementation and disbursement and annual reports, financial statements required by law and the explanatory notes prepared by the external auditors. B.FinancialManagement System 14. CENTRAL manages their financial accounts through the Sistema Integrado de Gestco Orqamentciria - SIGO and Sistema de Administraq8o Financeira para Estados e MunicrIpios - SIAFEMandExcel spreadsheets. a. The annual budget is enteredand controlled inSIGO; b. The commitment and disbursement cycle (empenho, liqzaidaqfio e pagamento) is controlled in SIAFEM. SIAFEM is part of the state public financial management system for the recording o f activities, work plans, budget, revenues, commitments, expenditures and payments. The system has the ability to provide financial information on project execution by activity. c. SIAFEMi s the integrated administrative and financial system used by the State of Rio de Janeiro to execute its budget. SIAFEM was developed to comply with the national regulations on budget execution and other fiscal requirements o f the national treasury (see Lei de Responsabilidade Fiscal). d. CENTRAL'S financial management systems, SIAFEM, SIGO and Excel, have been used before by CENTRAL to adequately account for prior WB loans proceeds. CENTRAL follows the accounting practices adopted inBrazil 15. In addition to producing entity and state-wide budget monitoring reports, the CENTRAL'S financial systems can also produce project financial management reports (for project monitoring and/or disbursements). The financial systems can record project transactions utilizing the loan disbursement categories. They are able to produce detailed and sunmary that meet the reporting requirementsofthe Bank. 16. Reporting and Monitoring: CENTRAL will use the same IFR forms used on LN 4291-BR and 7508-BR. However, these previous financial reports will be complemented by report 1-C (Designated Account reconciliation) format below. 17. CENTRAL will also provide annual financial statements for auditing purposes that reflect the activities o f the operation supported by the Bank loan, prepared in accordance with accounting standards acceptable to the Bank and will be responsible for sending to the Bank the consolidated 1-A, 1-By 1-C and 1-D IFRs, on a quarterly basis the reports will be prepared following cash-basis o f accounting. e IFR 1-A Source and application o f funds by cost category as per Project Agreement; IFR I-B Statement of Investmentsby Components and activities; 35 0 IFR 1-C Designated Account reconciliation; and 18. All IFRs will be in local currency (R$), and will present expenditures by quarter, accuinulated for the year and accumulated over the life o f the project. IFRs for the project will be submittedby CENTRAL through its PMIG to the Bank up to 45 days after the closing of each quarter. 19. Any other funds and counterpart contributions which i s part o f the project, such as cofinanciers, should be reflected in IFRs (1-A and 1-B), to better monitor all amounts invested underthe project. 20. The fourth quarter IFRs generated during the year, showing the cumulative figures for the year, may be used as the project annual financial statements that would be audited.. Inaddition to IFRs each entity will be responsible for producing physical implementation progress reports, as well as procurement and contracting reports as part o f the Project Report. The contents and the formats o f I-C and 1D reports will be discuss prior to the Loan Agreement singing. C. Flow o f Funds and Disbursements 21. The Bank will make loan disbursements to the Project primarily using the advance method. A Designated Account (DA) opened in the name o f the State o f Rio de Janeiro at Banco do Brasil S.A. in U.S. Dollars - managed by CENTRAL as it was the case in LN 4291-BR and 7508-BR could be used for the deposit o f advances under the proposed loan provided that there are no loan proceeds or counterpart funds, or pending transactions, from the previous loans inthe Designated Account or to flow through the Designated account when the new loan becomes effective or subsequent to that date. 22. Loan proceeds will be transferred from the Designated Account to the State's single treasury account and subsequently to a project Operating Account. Payments for eligible expenditures would be made directly from Operating Account by the State on behalf o f the implementing entity CENTRAL. The P M U will also have the option o frequestingdirect payments by the Bank to service providers for large payments ineither local or foreign currency. Counterpart funds will be disbursed from the State Treasury's single account to contractors and service providers through an operative account. 36 -. Project Designated Account World Bank Banco do Brasil-New York t . Counterpart funds SEFM single account (in Reais) Operating Account (in Reais) - +I I Providers of Goods, works and Services I I 23. The proposed ceiling for the Designated Account will be based on projected cash needs o f the project. The proposed DA Ceiling will be included inthe loan Disbursement Letter prepared by the Bank's Loan Department and will be discussed and agreed at negotiations. The minimum amount for Reimbursement or Direct Payment applications, ifany, will also be established in the DisbursementLetter and discussed and agreed at negotiations. 24. Records and/or Statements o f Expenditures (SOEs) will be used to report the use o f loan advances and request replenishment o f the Designated Account. Ideally, Withdrawal Applications should be submitted monthly to the Bank but not later than quarterly. Each Withdrawal Application requesting a replenishment o f the Designated Account should be accompanied by a reconciled bank statement as well as other appropriate supporting documents. The Statements o f Expenditures (SOEs) will be prepared on the basis o f payments actually made through bank payment orders issued under instructions from CENTRAL. The detailed requirements for submitting SOEs, supporting documentation and SOE formats will be established inthe Disbursement Letter. D.ExternalAudit 25. The project's accounts and financial statements will be audited by an independentaudit firm, selected among a pre-approved short list of three to six candidates, under Terms o f Reference previously reviewedand approved by the Bank. It i s recommended that the hiring process starts right after the signature of the Loan. The annual audit report will contain a single opinion on projects' financial statements which would include retroactive financing, if any, the Designated Accounts, IFRs and SOEs, and a management letter identifying any internal control weaknesses and areas o f improvement. 37 26. The audit report should be submitted to the Bank within six months at the end fiscal year (including the grace period, if any). All records(contracts, orders, invoices, bills, receipts, and other documents) evidencing eligible expenditures and to enable the Bank's representative to examine such records for at least one year following receipt by the Bank o f the final audited financial statement required inaccordance with the legal agreement or two years after the closing date, whichever i s later. 27. The financial statements, as audited by an independent entity acceptable by the Bank, should be audited in accordance with International Standards on Auditing (ISA) issued by the International Federation o f Accountants (IFAC). CENTRAL will be responsible for hiring an external audit firm to audit its respective components. External auditing costs are to be financed by project funds, thus allowing for the use of Bank's procurement guidelines Quality and Cost based - or national procurement procedures if financed by counterpart funds. E. Supervision 28. The Bank will undertake supervision missions two times per year to monitor the implementation and performance o f the Project and confirm that the financial management, disbursement and audit arrangements included in the project design are being adhered to and continue to be valid. F. Withdrawal o fLoan Proceeds 29. The following table specifies the categories o f Eligible Expendituresthat may be financed out o f the proceeds o f the Loan ("Category"), the allocation o f the amounts o f the Loan to each Category, and the percentage o f expenditures to be financed for Eligible Expenditures in each Category Amount of the Loan Percentageof Expenditures Allocated to be financed -Cateeorv (exnressed inU S 9 (1) Goods (including warehousing) 206,370,750 100% (2) Consultant services 4,800,000 100% (3) Front-end Fee 529,250 100% TOTAL AMOUNT 211,700,000 38 Annex 8: ProcurementArrangements BRAZIL: RIO DEJANEIRO MASSTRANSIT 2 A. General 1. Procurement for the proposed project would be carried out in accordance with the World Bank "Guidelines:Procurement Under IBRD Loans and IDA Credits" dated May 2004 (revised in October 2006), "Guidelines: Selection and Employment of Consultants by World Bank Borrowers" dated May 2004 (revised in October 2006), and the provisions stipulated inthe Legal Agreement. The various items under different expenditure categories are described in general below. For each contract to be financed by the Loadcredit, the different procurement methods or consultant selection methods, the need for pre-qualification, estimated costs, prior review requirements, and time frame are agreed betweenthe Borrower and the Bank inthe Procurement Plan. The Procurement Plan will be updated at least annually or as required to reflect the actual project implementation needs and improvements in institutional capacity. The State will ensure that the project i s implemented inaccordance with the Guidelines on Preventing and Combating Fraud and Corruption in Projects Financed by IBRD Loans and IDA Credits and Grants" dated October 15,2006 2. Procurementof Works: There are no bids under the category works financed by the Bank loan. 3 . Procurement of Goods: Goods procured under funding from the proposed loan for this prqject would include procurement o f 30 trains o f 4 cars each for a total o f 120 cars for use inthe suburbanrail system presently operated by Supervia. The procurement o f trains was done using the Bank's SBD o f goods with few adaptations agreed with the Bank. 4. The advanced procurement for the 30 trains was authorized by the Bank. Given the lead time for manufacturing the trains is at least 16-18 months after signing, the Borrower requested this advanced procurement at his own risk. The procurement process for the acquisition of 30 trains was initiated inNovember 2008. It i s now completed and the evaluation report submitted by the Borrower was reviewed and approved by the Bank on May 12, 2009 and a no objection issued. Procurement for the warehousing, insurance and forwarding procedures for the 30 trains at the port o f Rio will be done usingN C B procedures. . 5. Selection of Consultants: The project includes the use o f Consultants for (a) project management and supervision o f assembling the trains and inspection for delivery o f finalized units; and (d) specific consultancy needs for the updating o f the Urban Transport Master Plan (PDTU) and the introduction o f Integrated Modal Tariffs and others to be defined in accordance with implementation o f the project. Short lists o f consultants for services estimated to cost less than US$ 500,000 equivalent per contract may be composed entirely o f national consultants in accordance with the provisions o f paragraph 2.7 of the Consultant Guidelines. B. Assessment of the Agency's Capacityto ImplementProcurement 6. Procurement activities were and will be carried out by a CENTRAL project management team. CENTRAL i s staffed by a General Manager for procurement and contracts and 39 administration o f material, who oversees among other departments the manager o f the procurement department. The procurement department i s staffed by a very competent group of procurement specialists supported by consultants experienced in Bank procurement. CENTRAL'S procurement staff has gained experience Bank financed contract such as those financed under Ln.4291-Br (Rio de Janeiro Mass Transit Prqject), which included acquisition o f 20 new trains, rehabilitation o f 55 trains in lots o f 18 trains, rehabilitation and modernization o f stations, track and electrification systems. These bids allowed CENTRAL'S staff to gain the experience required for the proposed project. 7. An assessment of the capacity o f CENTRAL to implement procurement actions for the project has been carried out by the project team procurement specialist on November 11, 2008. The assessment reviewed the organizational structure for implementing the project and the interaction between the project's staff responsible for procurement and the relevant units for administration and finance. The agency is very familiar with Bank procedures and procurement guidelines since they hadimplemented Bank financed projects recently. 8. The overall pro-jectrisk for procurement implementation capacity i s Moderate. C. ProcurementPlan 9. The Borrower, at negotiations, amended the procurement plan which had been agreed at appraisal with the Project team on November 11, 2008. This change was agreed on April 29, 2009, reflects the new dates and also the inclusion o f a N C B bid for the warehousing o f trains mentioned above. This procurement plan is available in the Project Files. It will also be available inthe project's database and inthe Bank's external website. The Procurement Plan will be updated in agreement with the Project Team annually or as required to reflect the actual project implementation needs and improvements ininstitutional capacity. D. Frequencyof ProcurementSupervision 10. In addition to the prior review supervision to be carried out from Bank offices, the capacity assessment o f the ImplementingAgency has recommended supervision missions to visit the field to carry out post review of procurement actions every six months during the first year o f project implementation and annual visits thereafter. 40 E. Detailsof the ProcurementArrangementsInvolvingInternationalCompetition 1. Goods, Works, and NonConsultingServices 1 2 3 4 5 6 7 8 9 Estimated Procure Review Ref. Contract Base Total merit P-Q Preference Domestic by Bank (Prior Expected No. (Description) cost Bid-Opening Comments US$ million' Method (yeslno) post) Date Supply of 30 trains of 4 cars February For State/ (half 212.23 ICB N o No Prior 2009 CENTRAL motorized) Warehousing, Insuranceand For State/ Forwarding of 2.70 NCB No No * Prior April 2010 CENTRAL Trains 2. ConsultingServices (a) List o f consulting assignments with short-list o f international firms. 1 1 2 3 4 5 6 7 Ref. Description of Base Total Selection by Bank Prdposals No. Assignment cost Method (Prior I Submission Comments US$million Post) Date Project Managementand To be defined in To 2.64 QCBS Prior the Procurement Supervision PMIG Consultants Plan To be defined in For 2 Updating ofPDTU 2.30 QCBS Prior the Procurement SETRANS/ Plan CENTRAL To be defined in For 4 Support IMT Plans 0.46 QCBS Prior the Procurement SETRANW Plan CENTRAL To be To be defuiedin defined in defined in the To be To be defined in 5 Other studies 0.13 the Procurement the the Procurement Plan Procurement Plan Procurement Plan Plan (b) The Procurement Planwill define which contracts will be subject to prior reviewby the Bank. (c) Short lists composed entirely o f national consultants: Short lists o f consultants for services estimated to cost less than US$500,000 (five hundred thousand US dollar) equivalent per contract may be composed entirely of national consultants in accordance with the provisions o f paragraph 2.7 o f the Consultant Guidelines. Estimatedprices at appraisalincluding taxes 41 Expenditure Category ProcurementMethod Total Cost (including Total 220.99 under QCBS Thresholdsfor Procurement Methods and Prior Review I Description Type of Prior Review Limit Contract Value Procurement 1.Goods ICB, All NOthreshold NCB 2. Consulting QCBS All To be defined inthe Services Firms procurementplan I I I I 42 kj Annex 9: Economicand FinancialAnalysis BRAZIL: RIO DEJANEIRO MAS TRANSIT 2 A. Summary of Cost Benefit-Analysis 1. An incremental cost-benefit analysis o f the proposed investments on the railway system operated by SuperVia was undertaken to evaluate the economic feasibility o f the project. The methodology applied consisted o f comparing the situation with and without the project and quantifying the benefits due to time savings for users for public transport modes including railway, bus system and informal services such as vans and deregulated buses. Other benefits related to operating cost savings for all modes, road maintenance cost savings, bus management system savings, accident reduction, air pollution savings and investment and operating costs were quantified. The demand for each mode was determined using a discrete choice model which estimated the passenger-hours and passenger-kni saved by mode with the project for without and with scenarios. 2. The main benefits considered were: a) Operatingcost savings resulting from the lower costs o f operating all modes through estimates o f passenger-km with and without the project, which are multipliedby the respective estimated unit operating costs; b) Travel time savings estimated by determining the effect o f travel time reduction on the consumer surplus for each passenger trip pertaining to the potential travel demand o f the project; c) Reduction in road maintenancecosts due to the reduction o fbus-kmwith the project (minor); d) Reductionin the bus system managing costs due to avoided costs o f expanding the existing public management structure; e) Reduction of air pollution costs due to the reduction o f bus-km with the project (minor). To be conservative the costs of avoided investments in the do- nothing situation were not considered; f) Reduction of accidents costs estimated by multiplying the average cost per accident per 1000 passenger-km with and without project and are a function o fthe bus-kmsaved (minor). 3. The main costs considered were: a) Investment costs for the acquisition o f trains and b) Operating costs including operation andmaintenance personnel for additional fleet. 4. The project will decrease the number of bus-kmand bus passenger-hourtraveled on the urban network through the acquisition o f new fleet. The bus-km saved per year are estimated by the discrete mode choice model. The main beneficial impacts o f the project under evaluation are reduced congestion (mainly due to fewer buses on the street), reduction in traffic-related accidents, reduced vehicular air pollution due to fewer buses on the street and economic savings from reduction o ftravel time. B. Traffic DemandAnalysis 5. Demandanalysis was undertaken by specialized consulting team based on data provided by a comprehensive Origin-Destination Survey carried out in2002 inthe Metropolitan Area o f Rio de Janeiro which collected data from 400 traffic zones, interviewed close to 99,300 people o f 34,000 households. 44 6. Traffic demand levels for the project life cycle were estimated by consulting advisers through simulation of a discrete mode choice model, which tested several scenarios with different combinations of headway andnetwork speed. 7. The mode choice model was calibrated under the conditional logit formulation and assumptions, and was applied to simulate mode choice and trip assignment. The choice utility equations were derived from a dataset including 2,03 1 choice observations including railway, bus and informal modes. 8. The withoutproject scenario consisted of simulating the current public transport network without the railway improvements inheadway and capacity which will result from the rolling stock acquisition. A signaling system upgrade, not financed by the Project, will be implemented separately and before the new rail cars enter service. This upgrade was consideredinthe quantification of benefits only to the extent that it will support the increase of train frequency and operating speeds for the additional 30 trains that are part of the Project. Headway ranging from 7.5 to 20 minutes were applied during the peak hour and from 10to 40 minutesduring off-peak periods as shown inTable 9-1. 9. The withproject scenario consistedof simulating the proposed public transport network with the railway improvements in frequency and capacity which will result from the rolling stock and signaling system acquisition. Headway ranging from 3 to 7.5 minutes were applied during the peak hour and headway ranging from 3.8 to 15 minutes were considered during off-peak periods as shown inTable 9-1. Table 9-1: With and Without Project Scenarios 10. The network workday performance in the year 2008 was estimated by the model and adjusted according to data froin the PDTU and provided by SuperVia describing existing public transport demand and services supply by rail, bus and informal transport. The model application on the disaggregateddata obtained from O/D surveys provided estimates of time value for each type of user andtrip purpose. 11. Value of time in the year 2008 was estimated as US$l.Sl/hour or distributed indifferent user categories as shown inTable 9-2. 45 Table 9-2: EstimatedValue of Time for Railway Users Valueof Time YEAR2008 US$/mia US$/hour, 1 General 0.030243 1.814568 Low income (<12 minimumwage) 0.016484 0.989039 High income (11.2 minimum wage ) 0.040045 2.402712 Fornialjob 10.045538 2.732243 I Informaljob 10.021688 I 1.301274 Highschool level 10.036838 2.210238 1 Basic schooling level [ 0.024806 I 1.48838 Minimumwage = US$216,14 per month 12. The value o f time i s also estimated individually for each user included in the O/D database which represents the potential demand for the railway services. The user categories mentioned above account for 64% o f the demand formally employed. About 58% o f all rail users have a monthly income above US$259.38, 36% o f all users have a formal job, and 45% o f all users have higher than basic education. 13. In the year 2008 the daily traffic o f the railway system was estimated to be 458,208 passengers in the do-nothing scenario increasing to 483,409 in the with project scenario, adding 25,201 passengers or 5.5% and increasing rail commercial speed by 10%. Estimates o f trips on bus and informal modes show a 8.2% reduction from withoutproject scenario to the withproject scenario. Table 9-3: Daily PerformanceIndicators I 1 I I I With project 483,409 90,497 193,344 Variation 25,201 (8,626) (16,576) Pass-Km Without project 21,178,700 4,3 13,476 8,595,228 With project 22,288,225 3,920,233 7,878,946 Variation 1,109,525 (393,243) (716,282) Pass-HoLlrs Without project 921,126 170,584 348,7 76 With project 883,545 154,357 3 17.65 1 1Variation 1 20,368 I 133,286 I 1,982 1 Coininercial Without project 1 3 25 25 Speed With project 25 25 25 Variation 9.7% 0.4% 0.6% 46 C. InvestmentCosts of the RailSystems 14. Investment Cost estimations resulted in a total o f US$215 million including the fleet acquisition costs o f 30 trains for the years 2009 to 2011. Salvage value and depreciation assumptions were made for the investment o f the components on rolling stock amounting to US$31.8 Million after a project useful life o f 25 years. According to information received from similar studies (Sa0 Paulo Trains Project, 2008) trains are considered to have a fill depreciation period of 30 years. 15. SuperVia provided an estimation o f additional operating costs for the fleet and system operation during project implementation from 2009 to 2011. The breakdown o f operational costs basically involved personnel expenses for operating and maintaining the new trains including wages and labor costs. Costs were expected to grow from a yearly value o f US$ 42,462 in2009 to US$359,527 in2011 and afterwards. D. PublicTransportEconomic Benefits 16. Direct economic benefits were derived from the application o f unit values o f operating costs, bus system management cost and road maintenance costs considered for each scenario (with or w/o project) on system performance indicators derived from choice model simulation. These values are available inthe Project File. 17. Direct economic benefits o f travel time were derived from the results o f the adjusted choice model. Marginal utility o f income was determined from the cost parameter o f the choice model and was applied to calculate consumer surpluses as log-sum functions for the with project and do-nothing scenarios. Whereas railway travel time reduction was the major improvementto be quantified, benefits o f travel time were calculated from the increase inthe consumer surplus for each user inthe with project scenario. Daily results were multipliedby a constant o f 272 working days to obtain yearly results. For secondary benefits such as accident and pollutionreduction, the methodology i s described inthe Project File. E. EconomicCosts-BenefitAnalysis 18. The general cost-benefit evaluation methodology adopted was that o f comparing the situation with the proposed project implemented, with the situation that would occur without implementation o f the project. This implies that operating savings, travel time savings and avoided road maintenance, bus system management expenses and accident and pollution costs for the proposed project are considered to be the incremental: with-project costs minus without-project costs. 19. Growth rates were adopted according to projections included in the Economic and Financial Balance Analysis for the 2003-2007 Tariff Review Process, elaborated for SuperVia by Fundaqgo Getfilio Vargas. Growth rates were derived from this study for the period 2009-2023 and was adopted a linear rate for the period 2024-2036. The expected average annual growth rate during 2009-2036 period i s 4.8%. In the year 2012 the daily traffic for the railway system was estimated to be 567,873 passengers in the do-nothing scenario and increasing to 598,007 inthe withproject scenario, adding up 30,134 passengers 47 to the rail system. Benefits from fleet acquisition are considered separate from total benefits provided from signaling system implementation. It was considered attributable for the additional fleet only a 30% proportion o f the total benefits incurred in time and distance savings (or roughly the share o f the fleet being increased by the Project). Transfer payments such as taxes and subsidies were withdrawn from the project profile and the adopted value for the exchange rate was R$1.92/US$ referred to October 01,2008. 20. The project flows are presentedinthe Table 9-4, discounted to present values at a rate of 10% per year for the basic alternative studied. As may be seen the simulated scenario present positive net present value o f US$225.3 million and benefivcost ratio o f 2.45. The economic internal rate o f return of 20.83% was obtained for the basic alternative. 21. Travel time savings are the most significant benefits obtained. Operating costs saved by the decrease o f bus and informal services showed a sufficient amount to compensate railway additional operating costs generated by the new service frequency and longer travel distances. Road maintenance and bus system avoided costs amount to 11.7% of the value o f time benefits and environmental benefits were estimated as 1.3%. F.SensitivityAnalysis 22. The results o f the sensitivity analysis in Table 9-5 show the effects on the performance indicators from changes in selected cost and benefit items referred to the base case. Significant variations were observed for value o f time benefits and investment costs. The switching cases for discount rate o f 10%o f each were estimated as a factor o f 0.333 for value o f time and 2.47 for investment costs, respectively. Switching values for a 10% discount were also calculated for the growth rate of demand (-1.785%) and the level o f demand relative to a constant 2008 demand (factor o f 0.8185). G. FinancialAnalysis 23. This analysis was done by comparing total investments vs savings due to lower operating and maintenance costs, lower number o f breakdowns and higher revenues. The higher revenues are based on conservative assumptions o f no change inthe nominal value o f the average fare (approximately R$2) and an estimated 5.5% increase in the projected ridership with the Project (currently about 500,000 passengers per weekday) based on demand studies cited by Supervia. The indicators for 2009-2036 yield an NPV@lO%=US$47.8 million and an FRR= 12.5%, and confirm a solid financial standingo f the project. H. ReferenceDocuments Fundaqgo Getulio Vargas - Analise do Equilibrio EconBniico-Financeiro para o Process0 de Revisgo Tarifaria Quinqiienal - 2003 a 2007,2008. 0 World Bank - Sgo Paulo Trains and Signaling Project Report No: 40891-BR, 2008. - 48 Table 9-5: SensitivityAnalysis I I IRase Case 1 20.83% I 225.3 1 2.45 1 10% reduction 19.42% 1 191.5 1 2.23 10% increase 22.19% 259.0 2.66 15% increase 22.85% 275.9 Value of Time 15% decrease 18.70% 174.7 2.12 BENEFITS 10.01% 33% VoT reduction 15.98% 113.9 1.73 50% VoT reduction 13.16% 56.6 1.36 10% increase 228.7I 2.47 Operational 10% reduction I 20.69% 1 221.9I 2.42 Demand GrowthRate RollingStock Acquisition Costs A detailed descriptionof the economic evaluation can be found inthe Project File 50 Annex 10: SafeguardPolicyIssues BRAZIL: RIO DE JANEIRO MASS TRANSIT 2 A. Social Safeguards 1. The proposed project will not cause any dislocation or involuntary resettlement. The trains will be operated in CENTRAL'S existing lines where SuperVia operates as the only private rail concessionaire since 1998. B. Environmentalanalysis 2. Overall, the project i s expected to have a positive impact on the local environment. Congestion and air pollution are among the main environmental problems that the metropolitan region i s facing. Providing a high-quality and safe transport alternative, especially for longer trips, will help dampen the rapid increase inmotorized trips and related environmental impacts. The project will help quantify these long-term environmental impacts in terms o f modal `retention' or shift and associated emission benefits. 3. As mentioned above, the main activity o f the project is the acquisition o f new trains, which will be operating on Lines Japeri, Santa Cruz, Saracuruna, Belford Roxo, and Deodoro o f the SuperVia network. This activity i s not expected to result in any significant negative environmentaland social impacts. 4. On the contrary, the project will contribute to the reduction o f greenhouse gas emissions by (1) replacing conventional electro-dynamic rheostatic braking trains with new ones that use regenerative braking technology, and (2) expanding the capacity o f the system which will induce a modal shift towards the train, a less polluting mode considering the production o f electricity in RJMR. The regenerative braking system works on the principle o f converting kinetic energy o f the rolling stock while decelerating into electrical energy. The regenerated electrical energy reduces the consumption o f equivalent amount o f grid electrical energy which would otherwise have been consumed by the accelerating trains, thereby conserving it and reducing emissions. 5. Using a similar methodology to the Clean Development Mechanism approved UNFCCC 1351, it was estimated that the Project technology upgrade could reduce emissions by about 8,000 tons o f carbon dioxide per year. In the baseline scenario, the total electrical energy consumed by the current rolling stock i s estimated as consumed from the grid only. The saved energy i s estimated as the energy used without the project minus the energy used with the project. Therefore, the project emission savings per year are estimated as the energy saved per vehicle-kni multiplied by the emission factor o f the Brazilian grid multipliedby the vehicle-km for the new trains per year. (Detailed calculations available inthe Project File). 6. The environmental assessment during project preparation focused on the environmental management systems at the assembly and maintenance facilities for trains o f SuperVia and the overall environmental policies o f the company. Inaddition, the team reviewed the environmental licenses and recommendations for works and operation o f existing lines. Although the World Bank i s not directly financing any works along these lines, the acquired trains will be operating 51 on these lines and the team wanted to ensure that SuperVia i s following all required steps to reduce and mitigate potential impacts according to OP 4.01. 7. The approach to the environmental analysis therefore includes the undertaking of: (i)an analysis o f the overall environmental resultdimpacts anticipated by Project's interventions; and (ii)aspecific environmentalanalysis ofSupervia's environmentalpoliciesatthemaintenance facilities. The impact analysis and environmental management plan (EMP) are similarly presented: firstly, by considering the general impacts o f the Project and, secondly, by reviewing the specific impacts o fthe acquisition ofthe trains. C. EnvironmentalAssessment of SuperVia Network 8. Inthe State o f Rio de Janeiro, the environmental licensing is done by the SMA - Secretariat o f the Environment, by means o f DAIA - Department of Environmental Impact Assessment, which analyzes the environmental studies o f projects potentially or effectively causing significant environmental impact, subject to licensing with an environmental study, according to CONAMA Resolutions 01/86 and 237/97. 9. Following the Federal and State Legislation, SuperVia i s required to obtain three different environmentallicenses prior to operation: (i) Preliminw License (Licenca Pre`via - LP) i s granted inthe planning stage o f the project and contains basic requirements for site selection, installation and operation; (ii)InstallationLicense (Licenca de Instnlaclio - LI) authorizes the establishment o fthe business, according to the specifications o f approved executive project; and (iii)Operation License (Licenca de Operac&o LO) authorizes the start of the use o f the new -the works and systems ineach Line (which i s not the case o f this loan), as well as for the functioning o f the required equipment after the environmental authorities verify the fulfillment o f the requirementsin the Installation License. This license is not required for the new trains because trains are already being operated inthe Lines included inthis study. 10. Since SuperVia is operating the system since 1998 as a concessionaire to the State and recently the Bank approved an Additional Financing Loan to the Rio de Janeiro Mass Transit loan (Ln.4291 -BR), the Bank reviewed the Environmental Management Plan (EMP) preparedby SuperVia and the implementation progress toward the recommendations o f the EMP. The Bank also requested an update o f the EMP to reflect the impact on the system due to the additional ridership expected. Finally, the Bank requested details on how the Government is going to monitor the environmental management o f SuperVia and the institutional capacity o f SuperVia to undertake this environmental management. 11. SuperVia is following all required steps by State Legislation to address potential environmental impacts related to the rehabilitation, improvement and operation o f the existing Lines. SuperVia is working closely with the State Environmental Agencies and Authorities to reduce and mitigate potential negative impacts o f operation o f the lines. The updated 52 Environmental Management Plan (EMP) and environmental recommendation presented by the SMA was submittedto the Bank on October 28,2008. D. Supervia's EnvironmentalManagementSystems 12. Supervia's railway network o f 225 km covers 11 municipalities o f the RJMR with 80 stations and 159 trains (587 cars), it transpofts 480,000 passengers on average every day. The strategic plan o f SuperVia includes doubling passengers by 2015 to over 1 milliodday. As part o f the modernization o f services and improved efficiency, the SuperVia i s implementing an Environmental Management System (Sistema de GestGo Ambiental - SGA) to improve waste management and reduce environmental impacts from its operations. 13. The SGA i s being implemented in 4 steps: (i) training and awareness raising among staff and managers o f different units o f CPTM; (ii) introduction o f generic guidelines and procedures for proper waste management; (iii) preparation and implementation o f Specific Management Plans (Planos de GestGo Especzlficos - PGE 's), which focus on industrial wastes, domestic wastes and other demands; and (iv) increasing awareness o f neighbors to prevent garbage disposal on the rail right-of-way and train "multipliers" in each neighborhood. 14. Between November 2006 and May 2007, over 2300 managers and leaders o f different units had been trained on issues related to: basic environmental concepts, environmental impact evaluation, I S 0 14001 guidelines, operational control o f industrial waste, management o f hazardous materials, effluents and emissions, energy efficiency, and introduction to relevant national and state regulations and norms. 15. SuperVia has implemented guidelines for treatment o f waste. An inventory of waste streams has been finalized and a detailed process for each type o f waste has been defined following these steps: (i) classification (ii) waste segregation (iii) storage; (iv) transport; (v) final treatment: re- use, recycling, co-processing, incinerationand final disposal in sanitary landfills. 16. SuperVia has implemented a number o f specific PGE's to manage specific waste-streams. The project will help inthe implementation o f these Plans and strengtheningSupervia's efforts inimplementing integrated environmentalmanagement systems inSupervia. These systems will include social and outreach aspects related to users and surrounding population and information systems. These efforts will be part o f the institutional capacity building and management efforts o f the Project. E. Compliancewith World Bankenvironmentalsafeguardpolicy 17. The proposed Rio de Janeiro Mass Transit 2 project has received an Environmental Category "B" rating in accordance with the corresponding safeguard policies. The PMG interventions plannedin the Project triggered OP 4.01 (Environmental Assessment) and OP4.09 (Pest Management)- the latter because the rail right-of-way is sprayed periodically against the dengue mosquito, but no specific Plani s requiredto mitigate the potential impacts. 53 18. Environmental Assessment The Project Team reviewed the documentation prepared by SuperVia and the validity of the existing `operational license'. The team also reviewed Supervia's environmental management systems and policies to reduce and mitigate environmental impacts at the train maintenance and other facilities, which will be strengthened during project implementation. These documents are available inthe Project File. F.EnvironmentalManagementSystem. 19. A Project Management Implementation Group will be established by the Borrower to supervise the project and ensure compliance with Bank policies. A social-environmental specialist consultant will be assigned to this unit and help integrate environmental concerns into the daily activities of Supervia's maintenance facilities, focusing on implementing activities to reduce and properly treat different waste streams, reduce energy use, better manage the risk associated with using hazardous chemicals, and integrate environmental and worker safety and healthrequirementsindaily operations. 20. The Project will help in estimating the impact o f regenerative braking in the new trains on the carbondioxide emissions. 54 Annex 11:ProjectPreparationand Supervision BRAZIL: RIO DEJANEIROMASS TRANSIT 2 PCNreview 10/16/2008 10116/2008 Initial PID to PIC 10/23/2008 Appraisal 11/15/2008 12/22/2008 Negotiations 04/28/2009 Board/RVP approval 07/09/2009 Planneddate of effectiveness 09/20/2009 Planneddate of mid-termreview 06/30/2011 Plannedclosing date 06/30/2014 Key institutions responsible for preparation of the project: CENTRAL, Supervia, Secretaria de Transpoi-tes do Estado do Rio de Janeiro, Secretaria da Fazenda do Estado do Rio de Janeiro; World Bank staff and consultants Bank staff and consultants who worked on the project included: Jorge Rebelo TTL, LeadTransport Specialist LCSTR Armando Araido Procurement Specialist Consultant BemardoAlviin Transport Economics and Consultant DemandAnalysis PaulProcee EnvironmentalSpecialist LCSEN Miguel Oliveira Finance Officer LOAFC Miguel NavarroMartin Senior FinancialOfficer BDM FernandoBlanco Economistfor FiscalAnalysis LCSPE Georges Darido Transport Specialist LCSTR Jog0 Vicente FM Specialist LCSFM CatarinaPortelo Senior Counselor LEGLA Isabella M.Drossos Senior Counselor LEGLA Projob Consultants SignalingandTelecom Specialist Consultant Projob Consultants Rolling Stock Specialist Consultant Aurelio Menendez Peer Reviewer, LeadTransport EASTE Specialist MarthaLawrence Peer Reviewer, Sr. Transport ECSSD (Railway) Specialist Jose Barber0 Peer Reviewer, Sr. Transport LCSTR Specialist Maria Catalina Ochoa Junior Professional Associate LCSTR Solange Van Veldhuizen LanguageProgramAssistant LCSTR 55 Bank funds expended to date on project preparation: 1. Bank resources: US$ 120,000 (committed) 2. Trust funds: 0 3. Total: US$120,000 EstimatedApproval and Supervisioncosts: 1. Remaining costs to approval: US$30,000 2. Estimatedannual supervisioncost: US$lOO,OOO/year= US$500,000 56 Annex 12: Documents inthe ProjectFile BRAZIL: RIO DE JANEIRO MASS TRANSIT 2 A. ProjectImplementationPlan Rio de Janeiro Mass Transit 2 Project. "Project Implementation Plan", December 23,2008. Preparedby CENTRAL/SETRANS to confirm appraisal agreements. B. Bank StaffAssessments 1. Full Economic Evaluation ofthe Project 2. Fiscal Analysis of Rio de Janeiro State Government, 2003-2007 3. Status o f Public Transport Integration inRio de Janeiro: Issues and Options 4. Impact on the Rio de Janeiro Mass Transit Project on Low-Income Users 5. Relevant Socio-Economic and Transport Data for the RJMR C. Other 1. Federaqiio das Enipresas de Transportes de Passageiros do Estado do Rio de Janeiro. October 2008. "Apresentaqiio sobre Integraqiio na RMRJ" 2. Secretaria Estadual de Transporte, 2005. PDTU-RMRJ, 2005. "Plan0 diretor de transporte urbano - regiiio metropolitana do Rio de Janeiro". Governo do Estado do Rio de Janeiro. Relatbrio de Maio de 2005. 3. Secretaria Estadual de Transporte, 2008. "Estruturaqiio do Corredor Expresso Metropolitano do Rio de Janeiro - Av. Brad". Governo do Estado do Rio de Janeiro. Apresentaq2o de Outubro de 2008. 4. Secretaria Estadual de Transporte, 2008. "SOLICITACAO DE PROPOSTAS: Projeto de EstnituraqBo do Corredor BRT Expresso Metropolitano do Rio de Janeiro. Brazil. 5. Supervia. October 2008. "Apresentaqiio sobre a Supervia." Brazil. 6. Supervia. October 2008. "Environmental Report." Brazil. 7. Supervia. October 2008. "0 Sistema Ferroviario no Context0 da Regiiio Metropolitana do RJ".Brazil. 8. Supervia, August 2008. "Relatorio de Integraqiio".Brazil. 9. World Bank. 29 October 2008. "Relatorio do Estudo de Demanda e Viabilidade Econdmica para a AquisiqBo de Novos Trens para a Supervia." By Bernard0G.Alvini. Consultant report. 57 Annex 13: Statement of Loans and Credits BRAZIL: RIO DEJANEIRO MASS TRANSIT 2 Difference between expected and actual Original Amount in US$Millions disbursements Project ID FY Purpose IBRD IDA SF GEF Camel. Undisb Orig. Frm.Rev'd PO88716 2009 BR Health h'emork Formation & Quality 235.00 0.00 0.00 0.00 0.00 235 00 0.00 0.00 Ill1 PO943I S 2009 BR Municipal APL4 Sao Luis 35.64 0.00 0 00 0.00 0.00 33 49 -2.00 0.00 PO95205 2009 BR 1st Prog.DPL for Sust Env Mgnit 1,300.00 0.00 0.00 0.00 0.00 1,300 00 0.53 0.00 PO99369 2009 BR CearaRegional Development 46.00 0.00 0.00 0.00 0.00 46 00 0.00 0.00 P104752 2009 BR Paraiba 2nd Rural Pov Reduction 20.90 0.00 0.00 0.00 0.00 20 90 0.00 0.00 P106208 2009 BR Pemambuco Educ Results& Account. 154.00 0.00 0.00 0.00 0.00 154 00 0.00 0.00 PI10614 2009 BR: Sergipe State Int. Proj.: Rural Pov 20.80 0.00 0.00 0.00 0.00 20 80 I.75 0.00 P107843 2009 BR FedDistrict Multisector Manag.Pr0.i. 130.00 0.00 0.00 0.00 0.00 13000 0.00 0.00 PI07146 2009 BR Acre Social Economic InclusionSust 120.00 0.00 0.00 0.00 0.00 10400 -11.37 0.00 D PI06767 2009 BR RGS Fiscal Sustainability DPL 1.100.00 0.00 0.00 0.00 0.00 450 00 0.00 0.00 P10676.5 2009 BR Ceara Inclusive Growth (SWAp 11) 240.00 0.00 0.00 0.00 0.00 239 40 0.00 0.00 PO89013 2008 BR Municipal APL: Recife 32.76 0.00 0.00 0.00 0.00 32 76 6.66 0.00 PO89929 2008 BR RGN State IntegratedWater Res Mgnit 35.90 0.00 0.00 0.00 0.00 33 78 14.97 0.00 PO88966 2008 BR Municipal APW: Teresina 31.13 0.00 0.00 0.00 0.00 30 47 0.92 0.00 Po94199 2008 BR-(APL)RS (Pelotas) Integr. Mun. Dev. 46.28 0.00 0.00 0.00 0.00 34 83 -8.22 0.00 PO83997 2008 BR Alto Solinioes Basic Services and Sust 24.25 0.00 0.00 0.00 0.00 23 21 1.72 0.00 P09.5626 2008 BR (APL2)Family Health Extension2nd 83.45 0.00 0.00 0.00 0.00 83 45 8.67 0.00 APL P101324 2008 BR-SecondMinas Gerais Dev't 976.00 0.00 0.00 0.00 0.00 470 06 -503.50 0.00 PArtnership P106038 2008 BR Sao Paul0 Trains and Signalling 550.00 0.00 0.00 0.00 0.00 382 72 -29.70 0.00 PO95460 2007 BR-Bahia Integr.Hway Mngnlt. 100.00 0.00 0.00 0.00 0.00 95 00 10.53 0.00 PO89793 2007 BR State PensionReform TAL I1 5.00 0.00 0.00 0.00 0.00 4 99 2.42 0.17 PO89011 2007 BR Municipal APLI:Uberaba 17.27 0.00 0.00 0.00 0.00 15 60 8.71 0.00 PO82651 2007 BR APL 1Para Integrated Rural Dev 60.00 0.00 0.00 0.00 0.00 56 14 41.14 0.00 PO50761 2006 BR-Housing Sector TAL 4.00 0.00 0.00 0.00 2.70 127 3.39 0.00 PO52256 2006 BR-MG Rural Poverty Reduction 35.00 0.00 0.00 0.00 0.00 2 55 -3.35 0.00 PO81436 2006 BR-Bahia Poor UrbanAreas Integrated 49.30 0.00 0 00 0.00 0.00 42 66 42.19 0.00 Dev PO93787 2006 BR Bahia State IntegProj Rur Pov 54.35 0.00 0.00 0.00 0.00 2 64 -3.00 0.00 P092990 2006 BR - RoadTransport Project 501.25 0.00 0.00 0.00 0.00 309 19 239.27 136.27 PO90041 2006 BR ENVIRONMENTAL SUST. 8.00 0.00 0.00 0.00 0.00 5 39 5.30 0.00 AGENDA TAL PO89440 2006 BR-BrasiliaEnviroiimentally Sustainable 57.64 0.00 0.00 0.00 0.00 29 76 22.56 0.00 PO82523 2006 BR HDTechnical Assistance Loan 8.00 0.00 0.00 0.00 0.00 3 49 3.49 0.00 PO69934 2005 BR-PERNAMBUCO NTEG DEVT: 31.50 0.00 0.00 0.00 0.00 1163 11.63 0.00 EDUC QUAL MPR PO83533 2005 BR TA-Sustain & Equit Growth 12.12 0.00 0.00 0.00 0.00 8 91 8.91 0.00 PO76924 2005 BR- Amapa Sustainable Communities 4.80 0.00 0.00 0.00 0.00 3 1s 3.18 0.00 PO87711 2005 BR Espirito Santo Wtr R: Coastal Pollu 107.50 0.00 0.00 0.00 0.00 71 50 0.00 0.00 PO82328 2005 BR-Ititzg.Munic.Pro~,-Betim Municipality 24.08 0.00 0.00 0.00 0.00 0 80 0.40 0.00 PO60573 2004 BR Tocantins SustainableRegional Dev 60.00 0 00 0.00 0.00 0.00 23.73 23.39 23 19 PO87713 2004 BR BolsaFamilia1st APL 572.20 0 00 0.00 0.00 2.86 10.62 13.48 0 00 PO83013 2004 BR DiseaseSurveillance & Coiitrol APL 2 99.50 0 00 0.00 0.00 0.00 22.72 23.22 0 00 PO49265 2003 BR-RECIFE URBANUPGRADING 46.00 0 00 0.00 0.00 0.00 13.63 13.63 13 63 PROJECT PO76977 2003 BR-Energy Sector TA Project 12.12 0 00 0.00 0.00 0.00 7 43 7 43 0 00 PO54119 2003 BR BAHIA DEVT (HEALTH ) 30.00 0 00 0.00 0.00 0.00 5.94 5.94 0 00 PO74777 2003 BR-MmiicipalPensionReform TAL 5.00 0 00 0.00 0.00 0.00 1.80 1.80 -0 20 PO51696 2002 BR SA0 PAUL0METRO LINE 4 304.00 0 00 0.00 0.00 0.00 71.56 -23.20 -23 20 PROJECT PO60221 2002 BR FORTALEZA METROPOLITAN 85.00 0 00 0.00 0.00 62.60 13.89 72.01 20 29 TRANSPORT PROJ PO66170 2002 BR-RGNRural Poverty Reductioii 45.00 0 00 0.00 0.00 0.00 21.85 -0.60 16 24 PO50881 2001 BR BR-PIAUI RURAL POVERTY 45.00 0 00 0.00 0.00 0.00 15.97 -6.53 15 97 REDUCTION PO50880 2001 BR Peniambuco Rural Poverty Reduction 60.10 0 00 0.00 0.00 0.63 11.55 -17.82 3 01 PO50875 2001 BR Ceara Rural Poverty Reduction Project 75.00 0 00 0.00 0.00 0.00 2.82 -34 68 199 PO06449 2000 BR CEARA WTR MGT PROGERIRH 239.00 0 00 0.00 0.00 0.00 105.85 2.85 140 S I M PO38895 1998 BR FED WTR MGT 248 00 0 00 0 00 0.00 4000 4575 35 87 34 21 Total 8,18784 000 000 000 10879 4,86468 - 601 24297 BRAZIL STATEMENTOF IFC's Held andDisbursedPortfolio InMillions ofUSDollars ~ Committed Disbursed IFC - IFC FY Approval Company Loan Equity Quasi Partic. Loan Equity Quasi Partic ABNAMRO REAL 98.00 0.00 0.00 0.00 15.77 0.00 0.00 0.00 2005 2005 ABNAMRO REAL 98.00 0.00 0.00 0.00 15.77 0.00 0.00 0.00 2001 AG Concession 0.00 30.00 0.00 0.00 0.00 30.00 0.00 0.00 . 2002 Amaggi 17.14 0.00 0.00 0.00 17.14 0.00 0.00 0.00 2005 Amaggi 30.00 0.00 0.00 0.00 30.00 0.00 0.00 0.00 2002 Andrade G SA 22.00 0.00 10.00 12.12 22.00 0.00 10.00 12.12 2001 Apolo 6.04 0.00 0.00 0.00 3.54 0.00 0.00 0.00 1998 Asteb 20.00 0.00 0.00 18.33 20.00 0.00 0.00 18.33 2006 BBM 49.40 0.00 0.00 0.00 49.40 0.00 0.00 0.00 2001 Brazil CGFund 0.00 19.75 0.00 0.00 0.00 18.15 0.00 0.00 1004 CGTF 54.01 0.00 7.00 65.12 54.01 0.00 7.00 65.12 1991 CHAPECO 10.00 0.00 0.00 0.00 10.00 0.00 0.00 0.00 1996 CHAPECO 1.50 0.00 0.00 5.26 1.50 0.00 0.00 5.26 2003 CPFL Eiiergia 0.00 40.00 0.00 0.00 0.00 40.00 0.00 0.00 I996 CTBC Telecom 3.00 8.00 0.00 0.00 3.00 8.00 0.00 0.00 1997 CTBC Telecom 0.00 6.54 0.00 0.00 0.00 6.54 0.00 0.00 1999 Cibrasec 0.00 3.27 0.00 0.00 0.00 3.27 0.00 0.00 59 2004 Comgas 11.90 0.00 0.00 11.54 11.90 0.00 0.00 11.54 2005 Cosan S.A. 50.00 5.00 15.00 0.00 50.00 5.00 15.00 0.00 Coteminas 0.00 1.84 0.00 0.00 0.00 1.84 0.00 0.00 1997 Coteminas 1.85 1.25 0.00 0.00 1.85 1.25 0.00 0.00 2000 Coteminas 0.00 0.18 0.00 0.00 0.00 0.18 0.00 0.00 1980 DENPASA 0.00 0.52 0.00 0.00 0.00 0.48 0.00 0.00 1992 DENPASA 0.00 0.06 0.00 0.00 0.00 0.06 0.00 0.00 Dixie Toga 0.00 0.34 0.00 0.00 0.00 0.34 0.00 0.00 1998 Dixie Toga 0.00 10.03 0.00 0.00 0.00 10.03 0.00 0.00 1997 Duratex 1.36 0.00 3.00 0.57 1.36 0.00 3.00 0.57 2005 EMBRAER 35.00 0.00 0.00 145.00 35.00 0.00 0.00 145.00 1999 Eliarie 14.93 0.00 13.00 0.00 14.93 0.00 13.00 0.00 1998 Empesca 1.33 0.00 2.67 0.00 1.33 0.00 2.67 0.00 2006 EndesaBrasil 0.00 50.00 0.00 0.00 0.00 50.00 0.00 0.00 2006 Eiierbrasil Ltda 0.00 5.50 0.00 0.00 0.00 0.00 0.00 0.00 2006 FEBR 12.00 0.00 0.00 0.00 12.00 0.00 0.00 0.00 2000 Fleury 0.00 0.00 6.00 0.00 0.00 0.00 6.00 0.00 1998 Fras-le 4.00 0.00 9.34 0.00 4.00 0.00 6.04 0.00 2006 GOL 50.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 2005 GP Capital I11 0.00 14.00 0.00 0.00 0.00 0.14 0.00 0.00 GP Cptl Rstrctd 0.00 2.22 0.00 0.00 0.00 2.16 0.00 0.00 200 1 GPC 0.00 0 00 9 00 0.00 0.00 0.00 9.00 0.00 GTFP BIC Banco 44.91 0.00 0.00 0 00 44.91 0.00 0.00 0.00 GTFP BM Brazil 4.22 0.00 0.00 0.00 4.22 0.00 0.00 0.00 GTFP Indusval 5.00 0.00 0.00 0.00 5.00 0.00 0.00 0.00 1997 Guilman-Amorim 18.08 0.00 0.00 14.37 18.08 0.00 0.00 14.37 1998 Icatu-Equity 0.00 5.46 0.00 0.00 0.00 4.16 0.00 0.00 1999 Innova SA 0.00 5.00 0.00 0.00 0.00 5.00 0.00 0.00 1980 Ipiranga 0.00 2.87 0.00 0.00 0.00 2.87 0.00 0.00 1987 Ipiranga 0.00 0.54 0.00 0.00 0.00 0.54 0.00 0.00 2006 Ipiranga 50.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 2006 ltambe 15.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 2000 Itau-BBA 12.86 0.00 0.00 0.00 12.86 0.00 0.00 0.00 2002 Itau-BBA 70.61 0.00 0.00 0.00 38.47 0.00 0.00 0.00 1999 JOSAPAR 7.57 0.00 7.00 0.00 2.57 0.00 7.00 0.00 2005 Lqias Americana 35.00 0.00 0.00 0.00 35.00 0.00 0.00 0.00 1992 MBR 0.00 0.00 10.00 0.00 0.00 0.00 10 00 0.00 2006 .MRS 50.00 0.00 0.00 50.00 0.00 0.00 0.00 0.00 2002 Microinvest 0.00 1.25 0.00 0.00 0.00 0.82 0.00 0.00 Net Servicos 0.00 10.93 0.00 0.00 0.00 10.93 0.00 0.00 2002 Net Servicos 0.00 1.60 0.00 0.00 0.00 1.60 0.00 0.00 2005 NetServicos 0.00 5.08 0.00 0.00 0.00 5.08 0.00 0.00 1994 Para Pigiiieiitos 2.15 0.00 9.00 0.00 2.15 0.00 9.00 0.00 1994 Portobello 0.00 0.59 0.00 0.00 0.00 0.59 0.00 0.00 2000 Portobello 4.28 0.00 7.00 0.00 4.28 0.00 7.00 0.00 2002 Portobello 0.00 0.90 0.00 0.00 0.00 0.90 0.00 0.00 2000 Pura 0.00 0.00 1.00 0.00 0.00 0.00 1.oo 0.00 2003 QueiroL Galvao 26.67 0.00 10.00 0.00 26.67 0.00 10.00 0.00 2004 QueirozGalvao 0.60 0.00 0.00 0.00 0.08 0.00 0.00 0.00 60 2006 RBSec 22.83 1.51 0.00 0 00 0 00 151 0.00 0.00 RandonImp1Part 2.33 0.00 3.00 0 00 2 33 0 00 3.00 0.00 1997 Sadia 2.55 0.00 2.33 3 28 2 55 0 00 2.33 3.28 1997 SanlarCO 3.60 0.00 0.00 0 00 3 60 0 00 0.00 0.00 1998 Saraiva 0.00 1.24 0.00 0 00 0 00 124 0.00 0.00 2000 Sepetiba 26.24 0.00 5.00 0 00 1124 0 00 5,OO 0.00 2002 Suape ICT 6.00 0.00 0.00 0 00 6 00 0 00 0.00 0.00 1999 Sudamerica 0.00 7.35 0.00 0 00 0 00 7 35 0.00 0.00 2006 Suzano petroq 50.00 0.00 10.00 14000 39 50 0 00 10.00 110.50 2001 Synteko 11.57 0.00 0.00 0 00 11 57 0 00 0.00 0.00 2006 TAM 50.00 0.00 0.00 0 00 1700 0 00 0.00 0.00 1998 Tecon Rio Grande 3.55 0.00 5.50 3 71 3 55 0 00 5.50 3.71 2004 Tecon Rio Graiide 7.87 0.00 0.00 7 76 7 59 0 00 0.00 7.48 2001 Tecon Salvador 2.95 1.oo 0.00 3 10 2 95 0 77 0.00 3.10 2003 Tecon Salvador 0.00 0.55 0.00 0 00 0 00 0 55 0.00 0.00 2004 TriBanco 10.00 0.00 0.00 0 00 10 00 0 00 0.00 0.00 2006 TriBanco 0.35 0.00 0.00 0 00 0 35 0 00 0.00 0.00 2002 UP Offshore 9.01 9.51 0.00 23 29 0 00 2 51 0.00 0.00 2002 Unibmico 16.89 0.00 0.00 0 00 16 89 0 00 0.00 0.00 Total porrfolio 1,164 15 253 88 144 84 503 45 703 91 223 86 14154 400 38 Approvals PendingCommitment FY Approval Company Loan Equity Quasi Partic. 2000 BBA 0.01 0.00 0.00 0.00 1999 Cibrasec 0.00 0.00 0.00 0.00 2006 Ipiranga I1 0.00 0.00 0.00 0.10 2002 Banco Itau-BBA 0.00 0.00 0.00 0.10 Total pendingcommitment: 0.01 0.00 0.00 0.20 61 Annex 14: Country at a Glance BRAZIL: RIO DEJANEIRO MASSTRANSIT 2 Lath Upper- POVERTY and SOCIAL America mlddie- Brarll &Carib. Income Development dlamond' 2007 P0pulation mid-year(millions) 816 563 823 Lifeexpectancy GNIper capita (Atlas method US$) 5 9 0 5,540 6 987 GNI (Atlas method US$ billions) 17330 3,18 5 750 - Average annual growth, 2001-07 Population (Yd 13 13 0 7 Laborforce (%) 18 2 1 13 GNI - Gross primary M o s t recent estlmate (latest year avallable, 2001-07) capita enroiiment Poverty (%of population below nationalpovertyline) 22 Utbanpopulation (%of totalpopulation) 85 78 75 Lifeexpectancyat birth (years) 72 73 71 1 Infant mortallty(per lOOOllvebirths) 8 22 22 Childmalnutntion (%ofchildrenunUer5) 4 5 Access to improved watersource A C C ~ S Sto animproved watersource (%ofpopulation) 91 91 95 Literacy(%ofpopulationage 154 89 90 93 Gross pnmaryenrollment (%of school-age population) 737 18 111 -_ I"_ B rani Male 111 PO 1P -Upper-middle-income group Female 733 18 0 9 KEY ECONOMIC RATIOS and LONG-TERM TRENDS 1987 is97 2006 2001 Economic ratios. GDP (US$ billions) 2941 8712 10678 1,3142 Gross capital formation1GDP 223 174 8 8 22 1 Exports of goods and SeNlCeslGDP Trade 95 68 117 P 9 Gross domestic savIngslGDP 256 152 8 7 243 Gross nationalsavings/GDP 218 736 7 3 22 2 Current account balancelGDP -05 -35 13 0 4 Domestic , Capital Interest paymentslGDP 21 12 12 ~ <\'a + savings ,/- formation Total debtlGDP 408 228 8 2 Total debt SeNiCelexpOrtS 417 625 38 0 Present valueof debffGDP 20 7 Present valueof debffexports 052 Indebtedness 1087-97 lS97.07 2008 2007 2007-11 (averageannualgrowth) GDP 19 2 8 3 7 5 4 4 5 x-ll- Bran1 GDP percapita 03 13 2 4 4 2 3 7 Upper-middle-incomegroup ~ Exports of goods andSeNiCeS 57 9 3 4 6 3 5 3 2 STRUCTURE o f the ECONOMY I 1987 1997 2006 2007 (%of GDP) IGrowth o f capital and GDP (X) Agnculture no 54 5 1 4 9 1 607 Industry 459 261 30 9 306 Manufacturing 320 8 7 8 4 175 sewices 441 685 64 0 64 5 Household final consumption expenditure 623 649 60 4 47 7 Generalgov't final consumption eqenditure 2 2 199 8 9 28 0 I Imports of goods andservices 62 90 117 1)7 GCF d G D P ~ 1981-97 1997.07 2006 2007 (averageannualgrovdh) Growth o f exports and Imports (Oh) Agnculture 21 42 4 1 15 Industry 09 23 2 7 5 5 M anufactunng 32 24 16 5 5 services 31 37 4 1 6 7 Householdfinal consumption expenditure 36 19 47 -2 9 Generalgov't final consumption expenditure 08 25 36 2 2 Gross capital formation 18 21 87 40 7 lmpoT1s of goods and services '40 27 8 1 732 Note 2007data are preliminaryestimates This tablewas producedfrom the Development Economics LDB database 'Thediamondsshowfourkeyindicators inthecountry(inbold)comparedwth its income-groupaverage If dataaremissing thediamondwll beincomplete 62 Brazil PRICES and GOVERNMENT FINANCE 1687 1987 2006 2007 Domestic prices (%change) Consunerpnces 2283 5 2 6 9 5 1 mpl,ciiGO? dei!a:or 2 i 4 1 7 7 4 3 4 5 Government finance ( M C 9 OD?. IPCludes ciiman:y.arisl Cdrent r&v%nue 0 4 7 1 36 5 =il..en: budget DdlanCe rr .:4 0 1 -3 2 3ve;ali bumlusldefici: -28 2 4 -2 a TRADE 1981 1997 2006 2 0 0 1 (US%niliions) Export and Import levels (LIS$ mlil.) To:al e)g)crts [iobj 26,225 43,674 P7,335 148,324 230 0G3 - iionore manganese 1.7% 2 846 11620 II Soybeans 2.325 2,452 a 030 M anufacturas K331 29239 79904 75323 To:al impons (cif) 5,053 59,747 96,835 D7941 1OC COJI Food 500 2,463 1055 Fuel and enersy 4s74 5597 B345 Capital goods 3,958 6,098 43,303 28,179 Export orice index(?005=60) 82 lt3 a6 li] Import pi:e index (200C=OO~ 42 1.3 89 91 -erns oitrede iiO00=1)01 8 3 0 0 SC PI BALANCE O f P A Y M E N T 3 1887 1997 2006 2007 (US%ni'!'ons) Current account balance to GDP (%) ~ x p o n sof goods andservices 28373 59,870 86908 68002 4 - intpO*.S of goods andservices 7,749 77,259 60243 Tu9394 Resource balance 0324 -7,399 36665 2a608 ~ eincome : -11699 -14.876 47456 - 2 3 8 ~ Net current transfers -43 1,323 4307 - 0 5 Current account Salance -1,418 -30.452 0,621 4661 Financing ,terns [net) 3583 22201 8 4 8 i 8 8 9 Chatiges ,nne: reserves -2,735 5.251 .32 C40 -32 860 M e m o : Rsseives including gold (US$ m!ii!o!is) 7468 52 7 3 5583c, 69445 Convers,on rate (DEC,!ocai/USSJ 133E-5 1; 2 2 19 EXTERNAL DEBT and RESOURCE FLOWS 1987 1997 2006 2007 !US$ mi:i:onsJ Composition o f 2006 debt /US$ mill. Total de3t outstandmg and disbursad 123642 8 8 457 194 '60 i8RD 9.384 5 743 9,694 9,676 G A 9684 !DP 3 0 0 0 20 325 Total deb: Service ::,957 41243 52 145 iBRC 2555 1428 $174 1353 IDA 3 0 0 3 Composition ofnet resourceflows C.f:ic,ai grants 35 a3 93 O:fii8a! creditors 36 -1185 -40' Pnvate creditors -705 1?4% 6 w Conign direc: ~nvestmant(net ,nflows) 1739 P65G 6762 %eiol.o equ!:y:ne: .n!!ows! 6: 5 0% 7 ' B ;%orlo Dank program Canmitnents 1394 1T34 i557 '365 Disbh'sements . 9'6 14% 22C3 6% Pfnc,pairepaymen:s E67 I" -4s 743 805 \e: flo ws 48 388 '460 -199 hteres: payments 588 360 432 546 Net transfers -641 -'il 1028 -747 Acts -r,s table was pro6uced:rorthe Deveiopment Economics LOB aa'ahase B124:OE 63 RJMR'sExistingSubu~banRailNetwork(Operated by Supervia) andIntegration Stations 65