FOR OFFICIAL USE ONLY Report No: PAD2845 INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT PROJECT APPRAISAL DOCUMENT ON A PROPOSED LOAN IN THE AMOUNT OF US$126.886 MILLION TO THE STATE OF PARAIBA WITH A GUARANTEE FROM THE FEDERATIVE REPUBLIC OF BRAZIL FOR THE PARAIBA IMPROVING WATER RESOURCES MANAGEMENT AND SERVICES PROVISION PROJECT February 5, 2019 Water Global Practice Latin America and the Caribbean Region This document is being made publicly available prior to Bard consideration. This does not imply a presumed outcome. This document may be updated following Board consideration and the update document will be made publicly available in accordance with the Bank’s Policy on Access to Information. CURRENCY EQUIVALENTS (Exchange Rate Effective November 3, 2018) Currency Unit = Brazilian Real (BRL) BRL 3.86 = US$1.0 US$0.26 = BRL 1.0 FISCAL YEAR January 1 - December 31 Regional Vice President: Axel van Trotsenburg Country Director: Martin Raiser Senior Global Practice Director: Jennifer J. Sara Practice Manager: Rita E. Cestti Task Team Leaders: Marcos T. Abicalil, Paula Pedreira de Freitas de Oliveira ABBREVIATIONS AND ACRONYMS AEB Brazilian Space Agency – Agência Espacial Brasileira AESA Paraiba State Water Resources Management Executive Agency – Agência Executiva de Gestão das Águas ANA National Water Agency – Agência Nacional de Águas ARPB Paraiba State Regulation Agency – Agência de Regulação do Estado da Paraíba ASA Advisory Services and Analytics BOD Biochemical Oxygen Demand CAGEPA Water and Sewerage Company of Paraiba – Companhia de Água e Esgotos da Paraíba CERC Contingent Emergency Response Component CGE-PB Controladoria Geral do Estado da Paraíba COFIEX Foreign Financing Committee at the Ministry of Planning – Comissão de Financiamentos Externos CPF Country Partnership Framework DA Designated Account DFIL Disbursement and Financial Information Letter ESMF Environmental and Social Management Framework FM Financial Management FMA Financial Management Assessment FY Fiscal Year GAP Gender Action Plan GDP Gross Domestic Product GoP Government of Paraiba GRM Grievance Redress Mechanisms GRS Grievance Redress Service IAASB International Auditing and Assurance Standards Board IBGE Brazilian Institute for Geography and Statistics – Instituto Brasileiro de Geografia e Estatísticas IBRD International Bank for Reconstruction and Development IC Individual Consultant IFAC International Federation of Accountants IPSAS International Public-Sector Accounting Standards ISAs International Standards on Auditing JPMR João Pessoa Metropolitan Region LCS Least Cost Selection LDO Law of Budget Guidelines - Lei de Diretrizes Orçamentárias LOA Annual Budget Law- Lei Orçamentária Annual MCASP Manual de Contabilidade Aplicada ao Setor Público M&E Monitoring and Evaluation NBC Brazilian Accounting Norms - Normas Brasileiras de Contabilidade NBCASP Brazilian Accounting Norms Applied to Public Sector - Normas Brasileiras de Contabilidade Aplicadas ao Setor Público NLTA Non-Lending Technical Assistance NRW Non-Revenue Water O&M Operation and Maintenance PDO Project Development Objective PIU Project Implementation Unit PMO Project Operation Manual PMU Project Management Unit PPA Multi-year Plan - Plano Plurianual PSH-PB Paraiba Water Security Project QCBS Quality and Cost-Based Selection SBCQ Selection Based on Consultant’s Qualification SCD Systemic Country Diagnostic SEIRHMA State Secretariat for Infrastructure, Water Resources and Environment - Secretaria de Infraestrutura, dos Recursos Hídricos, do Meio Ambiente e da Ciência e Tecnologia SFB Selection under a Fixed Budget SIGBP-PB Integrated System of Assets - Sistema Integrado de Gestão de Bens e Patrimônio SNIS National Sanitation Information System – Sistema Nacional de Informações sobre Saneamento SOE Statement of Expenditures SSS Single-Source Selection STEP Systematic Tracking of Exchanges in Procurement SUDEMA Superintendence for Environmental Management – Superintendência de Administração do Meio Ambiente WA Withdrawal Application WBG World Bank Group WFATL WBG Finance and Accounting-Trust Funds and Loan Unit WRM Water Resources Management WSS Water Supply and Sanitation The World Bank Paraiba Improving Water Resources Management and Services Provision (P165683) TABLE OF CONTENTS DATASHEET ........................................................................................................................... 1 I. STRATEGIC CONTEXT ...................................................................................................... 7 A. Country Context................................................................................................................................ 7 B. Sectoral and Institutional Context .................................................................................................... 8 C. Relevance to Higher Level Objectives............................................................................................. 10 II. PROJECT DESCRIPTION.................................................................................................. 12 A. Project Development Objective ..................................................................................................... 12 B. Project Components ....................................................................................................................... 12 C. Project Beneficiaries ....................................................................................................................... 16 D. Results Chain .................................................................................................................................. 16 E. Rationale for Bank Involvement and Role of Partners ................................................................... 17 F. Lessons Learned and Reflected in the Project Design .................................................................... 18 III. IMPLEMENTATION ARRANGEMENTS ............................................................................ 19 A. Institutional and Implementation Arrangements .......................................................................... 19 B. Results Monitoring and Evaluation Arrangements......................................................................... 20 C. Sustainability................................................................................................................................... 21 IV. PROJECT APPRAISAL SUMMARY ................................................................................... 21 A. Technical, Economic and Financial Analysis (if applicable) ............................................................ 21 B. Fiduciary.......................................................................................................................................... 23 C. Safeguards ...................................................................................................................................... 24 V. KEY RISKS ..................................................................................................................... 28 VI. RESULTS FRAMEWORK AND MONITORING ................................................................... 30 ANNEX 1: Implementation Arrangements and Support Plan .......................................... 42 ANNEX 2: Detailed Project Description .......................................................................... 56 ANNEX 3: Economic and Financial Analysis .................................................................... 77 ANNEX 4: The São Francisco Water Transfer Project ...................................................... 85 ANNEX 5: Gender Action Plan ....................................................................................... 88 ANNEX 6: Map IBRD 44125 ........................................................................................... 93 The World Bank Paraiba Improving Water Resources Management and Services Provision (P165683) DATASHEET BASIC INFORMATION BASIC_INFO_TABLE Country(ies) Project Name Brazil Paraiba Improving Water Resources Management and Services Provision Project ID Financing Instrument Environmental Assessment Category Investment Project P165683 B-Partial Assessment Financing Financing & Implementation Modalities [ ] Multiphase Programmatic Approach (MPA) [✓] Contingent Emergency Response Component (CERC) [ ] Series of Projects (SOP) [ ] Fragile State(s) [ ] Disbursement-linked Indicators (DLIs) [ ] Small State(s) [ ] Financial Intermediaries (FI) [ ] Fragile within a non-fragile Country [ ] Project-Based Guarantee [ ] Conflict [ ] Deferred Drawdown [ ] Responding to Natural or Man-made Disaster [ ] Alternate Procurement Arrangements (APA) Expected Approval Date Expected Closing Date 28-Feb-2019 30-Jun-2026 Bank/IFC Collaboration No Proposed Development Objective(s) To (i) strengthen capacity for integrated water resources management in the State; (ii) improve reliability of water services in the Agreste and Borborema regions; and (iii) improve the operational efficiency of water and wastewater services in the Joao Pessoa Metropolitan Region. Page 1 of 93 The World Bank Paraiba Improving Water Resources Management and Services Provision Project (P165683) Components Component Name Cost (US$, millions) Integrated Water Resources Management 11.10 Improved Water and Sanitation Services Reliability and Efficiency 195.66 Contingent Emergency Response (CERC) 0.00 Organizations Borrower: State Secretariat for Infrastructure, Water Resources and Environment Implementing Agency: CAGEPA - State Water and Sanitation Company AESA - State Water Resources Management Executive Agency PROJECT FINANCING DATA (US$, Millions) SUMMARY -NewFin1 Total Project Cost 207.09 Total Financing 207.09 of which IBRD/IDA 126.89 Financing Gap 0.00 DETAILS -NewFinEnh1 World Bank Group Financing International Bank for Reconstruction and Development (IBRD) 126.89 Non-World Bank Group Financing Counterpart Funding 80.20 Borrower/Recipient 80.20 Expected Disbursements (in US$, Millions) WB Fiscal Year 2019 2020 2021 2022 2023 2024 2025 2026 Annual 0.32 4.39 6.17 12.07 19.97 28.57 29.23 26.18 Page 2 of 93 The World Bank Paraiba Improving Water Resources Management and Services Provision Project (P165683) Cumulative 0.32 4.70 10.87 22.94 42.91 71.48 100.71 126.89 INSTITUTIONAL DATA Practice Area (Lead) Contributing Practice Areas Water Climate Change and Disaster Screening This operation has been screened for short and long-term climate change and disaster risks Gender Tag Does the project plan to undertake any of the following? a. Analysis to identify Project-relevant gaps between males and females, especially in light of Yes country gaps identified through SCD and CPF b. Specific action(s) to address the gender gaps identified in (a) and/or to improve women or Yes men's empowerment c. Include Indicators in results framework to monitor outcomes from actions identified in (b) Yes SYSTEMATIC OPERATIONS RISK-RATING TOOL (SORT) Risk Category Rating 1. Political and Governance  Substantial 2. Macroeconomic  Moderate 3. Sector Strategies and Policies  Moderate 4. Technical Design of Project or Program  Substantial 5. Institutional Capacity for Implementation and Sustainability  High 6. Fiduciary  Substantial 7. Environment and Social  Substantial 8. Stakeholders  Moderate 9. Other Page 3 of 93 The World Bank Paraiba Improving Water Resources Management and Services Provision Project (P165683) 10. Overall  Substantial COMPLIANCE Policy Does the project depart from the CPF in content or in other significant respects? [ ] Yes [✓] No Does the project require any waivers of Bank policies? [ ] Yes [✓] No Safeguard Policies Triggered by the Project Yes No Environmental Assessment OP/BP 4.01 ✔ Performance Standards for Private Sector Activities OP/BP 4.03 ✔ Natural Habitats OP/BP 4.04 ✔ Forests OP/BP 4.36 ✔ Pest Management OP 4.09 ✔ Physical Cultural Resources OP/BP 4.11 ✔ Indigenous Peoples OP/BP 4.10 ✔ Involuntary Resettlement OP/BP 4.12 ✔ Safety of Dams OP/BP 4.37 ✔ Projects on International Waterways OP/BP 7.50 ✔ Projects in Disputed Areas OP/BP 7.60 ✔ Legal Covenants Sections and Description Schedule 2, Section I.A of the Loan Agreement, Implementation Arrangements: The Borrower shall maintain a Project Management Unit (the “PMU”) and the Special Procurement Commission at all times during the implementation of the Project, both under SEIRHMACT and with sufficient resources, decision making capacity, competent staff in adequate numbers and responsibilities, all acceptable to the Bank and as set forth in the Operational Manual. Sections and Description Page 4 of 93 The World Bank Paraiba Improving Water Resources Management and Services Provision Project (P165683) Schedule 2, Section I.A of the Loan Agreement, Implementation Arrangements: The Borrower shall maintain at all times during the implementation of the Project three technical coordination centers representing SEIRHMACT, AESA and CAGEPA, as further detailed in the Project Operational Manual and with specific functions, as follows: (a) SEIRHMACT: Project supervision and management, as well as the implementation of the studies and actions to support the institutional development of SEIRHMACT, SUDEMA and ARPB, as well as studies of selected dams under Part 1.2; (b) AESA: coordination of water resources management activities involved under Part 1.1; and (c) CAGEPA: coordination of activities involved under Part 2. Sections and Description Schedule 2, Section II of the Loan Agreement, Project Monitoring Reporting and Evaluation: The Borrower shall furnish to the Bank each Project Report not later than forty-five (45) days after the end of each calendar semester, covering the calendar semester. Sections and Description Schedule 2, Section I.B of the Loan Agreement, Implementation Arrangements: The Borrower shall: (i) adopt and carry out the Project in accordance with the Operational Manual acceptable to the Bank, which shall include the rules, methods, guidelines, standard documents and procedures for the carrying out of the Project, including the following: (a) the detailed description of Project implementation activities and the detailed institutional arrangements of the Project; (b) the Project administrative, accounting, auditing, reporting, financial (including cash flow aspects in relation thereto), procurement and disbursement procedures; (c) the monitoring indicators for the Project; (d) the contractual arrangements and missions of the Managing Company; and (e) the ESMF and the RPF; and (ii) not amend, suspend, abrogate, repeal or waive any provision of said Operational Manual without the prior written approval of the Bank. Sections and Description Schedule 2, Section I.C of the Loan Agreement, Implementation Arrangements: The Borrower shall: (a) implement the Project in accordance with the provisions of the ESMF, ESIA and the RPF; (b) ensure that all measures for carrying out the recommendations of the ESMF, and the RPF are taken in a timely manner and that all necessary plans prepared in accordance with said ESMF, ESIA and RPF have received the Bank’s written no-objection prior to the start of any works or services; and (c) ensure that the terms of reference of any consultancy in respect to the Project shall be satisfactory to the Bank following its review thereof and, to that end, such terms of reference shall duly incorporate the requirements of the Bank’s Safeguard Policies then in force, as applied to the advice conveyed through such consulting services. Sections and Description Schedule 2, Section I.C of the Loan Agreement, Implementation Arrangements: In order to ensure the proper implementation of Part 3 of the Project after the occurrence of an Eligible Crisis or Emergency, and prior to the carrying out of any activities under said Part of the Project, the Borrower shall take the following measures, all under terms and in a manner satisfactory to the Bank: (a) determine or provide evidence that a competent entity has determined that an Eligible Crisis or Emergency has occurred, and the Bank has agreed with said determination; (b) prepare and furnish to the Bank an official request to finance the Eligible Expenditures under Category (2) in order to respond to said Eligible Crisis or Emergency; (c) prepare, consult and disclose all safeguards instruments required for said activities, in accordance with the provisions of Section I.D of the Loan Agreement; and (d) prepare and furnish to the Bank a manual (the CERC Manual), for the implementation of Part 3 of the Page 5 of 93 The World Bank Paraiba Improving Water Resources Management and Services Provision Project (P165683) Project, including: (i) a list of proposed emergency response and reconstruction activities to be carried out; (ii) financial management arrangements; (iii) procurement methods and procedures; (iv) documentation required for withdrawals of Eligible Expenditures under Category (2); (v) safeguard instruments for environmental and social management consistent with the Bank’s Safeguard Policies then in force on the matter; and (vi) any other arrangements necessary to ensure proper coordination and implementation of Part 3 of the Project. Sections and Description Schedule 2, Section IV of the Loan Agreement, Other Undertakings: By June 30, 2022, or such other date as the Bank shall agree upon, the Borrower shall: (i) carry out, jointly with the Bank, a mid-term review of the implementation of the Project, which shall cover the progress achieved in the implementation of the Project; and (ii) following such mid-term review, act promptly and diligently to take any corrective action as shall be agreed by the Bank. Conditions Type Description Disbursement Schedule 2, Section III B of the Loan Agreement, Withdrawal of Loan Proceeds: Notwithstanding the provisions of Section III A of the Loan Agreement, no withdrawal shall be made: (a) for payments made prior to the Signature Date, except that withdrawals up to an aggregate amount not to exceed $10,000,000 may be made for payments made prior to this date but on or after November 1, 2018 or the date falling twelve months prior to the Signature Date, for Eligible Expenditures; or (b) under Category (2) until the Borrower has: (i) determined or provided evidence that a competent entity has determined that an Eligible Crisis or Emergency has occurred; (ii) prepared, consulted and disclosed all safeguards instruments required; and (iii) prepared and furnished the CERC Manual; all in a manner satisfactory to the Bank. The Closing Date is June 30, 2026. The Bank may grant an extension of the Closing Date only after the Guarantor’s Ministry of Finance has informed the Bank that it agrees with such extension. Type Description Effectiveness Article IV of the Loan Agreement, Effectiveness; Termination: The Operational Manual has been adopted by the Borrower in a manner and with contents acceptable to the Bank. Page 6 of 93 The World Bank Paraiba Improving Water Resources Management and Services Provision Project (P165683) I. STRATEGIC CONTEXT A. Country Context 1. Between 2003 and 2013, Brazil experienced a “Golden Decade” of rapid growth and social progress . Sound macro policies and a favorable external environment contributed to fast economic growth, which averaged 4.5 percent per year between 2006–10. This growth was accompanied by an unprecedented reduction in inequality as evidenced in the fact that an estimated 24.2 million Brazilians were lifted out of poverty and in the attendant reduction in the Gini Coefficient of household incomes from 0.59 to 0.51. The road to prosperity for most Brazilian poor was provided through formal sector jobs, which spurred a sharp decline of the unemployment rate to a low of 6.8 percent in 2014. 2. Poverty decreased the fastest in the North and Northeast, the poorest regions of Brazil, which saw 28.0 percentage points decline in the poverty headcount, compared to a decline of 10.3 percentage points in the Southeast. The income level of the bottom 40 percent of the income distribution (B40) rose, on average, 7.1 percent (in real terms) between 2003 and 2014. Access to social services and basic infrastructure, including, among others, water and sewage also increased significantly thanks to a combination of additional resources and better management . 3. However, the deterioration in both the external environment and domestic policies gave way to a steady decline in growth which, by 2015, engulfed the country in a deep recession. Growth declined to 2.4 percent between 2011 and 2014 and contracted 3.8 percent and 3.6 percent in 2015 and 2016, respectively. While external factors triggered the slowdown, an expansionary policy response led to rapidly rising fiscal disequilibria and, with rising domestic political uncertainty, a loss of confidence and sharp drop in investment. In addition, the economic crisis precipitated a rapid rise in unemployment between 2015 and 2016 during which time over 3 million Brazilians lost their jobs, pushing unemployment to 12.4 percent by September 2017 (almost doubling the 6.8 percent rate of 2014). Average real wages declined by 0.3 percent in 2015 and 2.3 percent in 2016. This considerable rise in unemployment and reduction in real wages render past progress in poverty reduction at risk of being reversed. 4. Poverty rates vary substantially across regions. While poverty varies from 43 and 45 percent in the states in the North and Northeast, respectively, where poverty is concentrated, it reaches less than 15 percent in the states in the South, against the national average of 25.4 percent. An estimated 11.2 percent of the inhabitants of the North and 12.9 percent of the population of the Northeast live in extreme poverty, against the national average of 6.5 percent. In absolute numbers, over 7 million Northeastern Brazilians live under the extreme poverty line, more than half (54.1 percent) of the total extreme poor in the country. 5. The lack of access to reliable water and wastewater services are strongly related with poverty and contributes to gender inequality. Leading to withdrawals from routine activities (including labor, education, domestic and recreational hours), the recurrence of waterborne and gastrointestinal diseases due to the lack of access to water supply services on daily basis, sewage networks and toilets for exclusive household use has direct adverse impact on school achievements, labor market performance and incomes. There is robust evidence in Brazil showing that these withdrawals are more frequent among the poor and among the least educated people. In addition, they are more frequent among women than men and particularly more frequent among poor women, contributing to the large gender gaps that prevail in the country.1 Given traditional cultural norms, in 2016, women counted for 53% of the people who 1 Nationwide and statewide data show that gender gaps remain large, leading to a gap in average earnings from jobs equal to 23 %. In 2016, 83% of the women and only 65% of men carried domestic works, whereas 28% of women and just 19% of men were responsible for health care activities in their households. While 48% of the women at productive age are out of the labor force, just 28% of men faced this situation. Women counted for just 48% of the total working force, 43% of the people with jobs, and 28% of them have only part-time jobs (BRK Ambiental, 2018, O Saneamento e a Vida da Mulher Brasileira. Available at Page 7 of 93 The World Bank Paraiba Improving Water Resources Management and Services Provision Project (P165683) had to withdraw from routine activities due to diarrhea or vomiting, resulting in more days spent away from her routine activities than men. Mortality rates due to gastrointestinal diseases were also higher among women than men. 2 6. Since 2015, the Brazilian Government has embarked on a fiscal adjustment program and a reform agenda aimed at restoring investor confidence and a favorable investment environment going forward. As a first important step to restore fiscal sustainability, in December 2016, the Congress approved a constitutional amendment to limit the growth of public expenditures3 which has since 2017 set the country back on a path of economic growth (1.0 percent), although the pace of recovery is expected to remain slow.4 Brazil’s medium-term outlook will depend on the success of current adjustments and the enactment of growth-enhancing reforms. Growth will need to be based on higher investment and productivity gains. 7. Brazil must overcome important infrastructure challenges if it is to spur sustainable growth . Since the 1980s, investment in infrastructure has declined from over 5 percent to just under 2 percent of Gross Domestic Product (GDP). Over the same period, Brazil has struggled with stagnant productivity growth and the poor status of infrastructure is widely believed to be a key reason for Brazil’s growth malaise5. While there has been no shortage of national flagship programs targeting infrastructure, their impacts have been disappointing. Brazil has neither been able to substantially raise its total rate of investment in infrastructure, nor has quality of services improved. It will need to substantially increase the efficiency of infrastructure spending to close the gap and this will require rebuilding its capacity for planning, budgeting and managing infrastructure assets6. This also holds true for water-related infrastructure. While public funding will remain constrained by Brazil’s ongoing fiscal adjustment, private investment is unlikely to be an effective substitute unless infrastructure governance improves. However, with appropriate policies, institutions and regulations in place, substantial gains in infrastructure performance could be achieved because of efficiency gains coupled with public investments. B. Sectoral and Institutional Context 8. The State of Paraiba is among the poorest states in Brazil with considerable regional economic disparities. Paraiba State, located in the northeast of Brazil, has a total population of about 4 million inhabitants with a population density of 71.29 inhabitants per kilometer square (km2). In 2016, Paraiba’s GDP was BRL 59 billion and the per capita income was BRL 14,774 (around US$4,000), the fourth lowest in the country. The State is second among northeastern states in terms of income inequality, with a GINI coefficient of 0.501. Paraiba’s Municipal Human Development Index of 0.701 ranks 22 out of 27 states. About half of the population in Paraiba State lives below the poverty line, with an estimated 10 percent living in extreme poverty. Population distribution throughout the territory is quite irregular and 53 percent of the people live in the metropolitan regions of João Pessoa, Campina Grande and Patos. These regions 2 Instituto Trata Brasil: 2018, Benefícios Econômicos e Sociais da Expansão do Saneamento no Brasil. Available at http://www.tratabrasil.org.br/images/estudos/itb/pesquisa-mulher/relatorio.pdf . BRK Ambiental: 2018, O Saneamento e a Vida da Mulher Brasileira. Available at http://www.tratabrasil.org.br/images/estudos/itb/pesquisa-mulher/relatorio.pdf. More in depth Information on these gender gaps and the positive impact of access to reliable water and wastewater services in education, health, jobs and incomes are provided in paragraph 29 and in Annex 5: Gender Action Plan. 3 The constitutional amendment (PEC 241) was approved by the Brazilian Senate in December 2016. It limits the growth of the Federal Government’s public expenditures, corrected by inflation, for up to 20 years. 4 Organization for Economic Co-operation and Development (OECD), Economic Outlook 2017: Brazil economic forecast summary (June 2017). 5 Systematic Country Diagnostic, World Bank, 2016. 6 The World Bank Report N# 117392-BR, Back to Planning: how to close Brazil's infrastructure gap in times of austerity. Page 8 of 93 The World Bank Paraiba Improving Water Resources Management and Services Provision Project (P165683) account for about 55 percent of the State’s economy, mostly in the commerce and services sectors, responsible for 73 percent of the State’s GDP. 9. The semi-arid region occupies 87 percent of Paraiba’s territory, comprising 76 percent of its municipalities and 57 percent of its population. With less than 500 cubic meter (m3) per person per year and rainfall of less than 800 millimeters per year, high temperatures and evapotranspiration reach over 2,000 millimeters per year in this region. Rains are concentrated within a few months of the year, with a strong pattern of inter-annual variability. This situation is intensified by the alternation between years of regular rainfall and consecutive years of below-average values, producing prolonged droughts with acute water shortages and depleting surface springs, rivers (most of which are now intermittent) and reservoirs. Irrigation accounts for fully 59 percent of total water consumption, followed by urban household consumption representing 26 percent, industrial use 9 percent, and rural human and livestock use 3 percent. In times of scarcity, the overriding depletive effects of irrigation gives rise to conflicts among users, further underscoring the importance of water security to address Paraiba’s human consumption and development needs. Climate change projections place the Northeast amongst the world's foremost regions facing increases in the intensity and duration of droughts. Furthermore, by 2040 the semi-arid Northeastern region could witness an average temperature increase of 0.5°C to 1°C and a decrease in rainfall levels of up to 20 percent.” 10. The State of Paraiba suffers from water scarcity in the interior and floods along the coast . Although home to a fifth of total world freshwater resources, Brazil’s contrasting climates, population densities, and development patterns have resulted in wide differences in availability and demands for water. The Northeast of Brazil has been a historically water-scarce region and is suffering one of its worst droughts since 2012, which is severely affecting Paraiba 7. Uncontrolled urban growth is further impacting scarce water resources and the quality of water is deteriorating due to pollution. At the same time, floods are frequent during the rainy season. Climate scenarios predict increasing vulnerability to droughts in the interior and more intense rains and floods along the coast in the Northeast, where João Pessoa metropolitan area is located8. 11. Current systems are not designed to respond to increasingly extreme climate events . Improving resilience requires a combination of structural and non-structural measures based on risk assessment and climate uncertainties. Paraiba State, like other states in the Northeast, has been developing infrastructure to secure water for human and agriculture consumption, including livestock in semi-arid regions. However, these investments are insufficient to address the growing problems of water scarcity. The State continues to be very vulnerable to droughts, especially in rural areas. At the same time, Paraiba is also vulnerable to floods, particularly in the coastal area 9. The State needs to invest in better weather forecasting, improve management of multi-purpose reservoirs and upstream dams and strengthen institutions. 12. Water resources management is neither a strategic priority nor fully valued by water users . There is no coherent policy to manage water resources involving all strategic sectors, such as agriculture, energy, environment, urban water supply sanitation and land use. Managing water in a large federative country like Brazil is a complex task. Many organizations are involved in managing water resources depending on whether these involve international waters, inter- state rivers, local water resources or groundwater. To increase complexity, several river basins include federal rivers, state rivers and small tributaries, resulting in the so-called double domain. This situation also imposes considerable challenges to the joint action of the Federal Government and States. In principle, water management must be decentralized and done in a participatory manner at the river basin level. This problem is clear in Paraiba State where 7 http://monitordesecas.ana.gov.br/ 8 http://revistapesquisa.fapesp.br/en/2017/05/16/a-more-vulnerable-brazil-in-the-21st-century 9 https://openknowledge.worldbank.org/bitstream/handle/10986/23344/Risk0assessment.pdf;sequence=1 Page 9 of 93 The World Bank Paraiba Improving Water Resources Management and Services Provision Project (P165683) the federally managed São Francisco River, which crosses several states. This has become one of the main suppliers of water in the semi-arid region through the recently completed São Francisco water transfer project. 13. Institutional complexity is compounded with increasing water scarcity and prolonged droughts. Water crises have exposed the constraints of the current water resources management system and the costs of these events are growing and are likely to become more expensive and difficult to solve if water resources management is not strengthened. Water management organizations in Paraiba lack the financial resources as well as qualified personnel to effectively fulfil their roles and use resources efficiently. The management and rational allocation of water to different users is not optimized, and responsible agencies are not performing well. The State Water Agency (AESA) needs to strengthen its technical and managerial capacity and develop more effective tools to assess, allocate and monitor water uses within the State and ensure water flows are maintained to sustain freshwater and estuarine ecosystems and human livelihoods downstream. The approved water tariff regulation, for example, has yet to be fully implemented due to administrative and political difficulties. Moreover, the State’s environmental, water resources, and water and sanitation (WSS) plans and procedures are not coordinated with each other. 14. Water pollution has also emerged as a major challenge for water security, especially in urban areas . Rapid and irregular urbanization and the lack of wastewater treatment systems have increased the discharge of polluted effluents. Lack of proper collection and disposal of solid waste management has further contributed to environmental pollution problems. The current water coverage is estimated at 82.5 percent, while only 48.6 percent of the sewerage is collected and only 39 percent is treated (SNIS, 2014). As a result, much of the wastewater is either discharged untreated or collected in unregulated septic tanks with severe impacts on water quality. The unwillingness of households to pay for connections and sewerage service, along with inadequate enforcement of relevant regulations continue to encourage uncontrolled discharges. 15. The Water and Sewerage Company of Paraiba (CAGEPA) is responsible for water services in 195 out of 223 municipalities in the state, while operates sanitation systems in only 22 larger municipalities. Frequent failures and overflows of pumping stations result in the pollution of freshwater resources and beaches as well as clogging of drainage systems. The current tariff only covers operation and maintenance costs and only a small portion of the capital cost, requiring government support to finance capital investments. As a result, the existing infrastructure keeps deteriorating. Although Paraiba’s Regulatory Agency (ARPB) is responsible for regulating the water supply and sanitation services, it needs institutional, financing and technical strengthening to fulfill its roles set by federal and state legislations. This will become an even bigger challenge given the strict limits on state expenditures, imposed by the Fiscal Responsibility Law. C. Relevance to Higher Level Objectives 16. Nearly half of the Brazilian population was in some form affected by climate related disasters over the last two decades. A recent World Bank Report (Turn Down the Heat)10 predicts that climate change will significantly affect Latin America in future, leaving dry regions still drier and wet regions wetter, in addition to increase the likelihood of droughts, floods, and other extreme weather events. The semi-arid region of Brazil is particularly vulnerable to climate change given expected increase in rainfall variability, increase in the duration of dry spells and reduced groundwater recharge. According to the Brazilian Space Agency (AEB11), temperatures have risen by about 0.7°C over the last 50 years. Historical series of climate-related disasters project an increasing frequency of extreme events, threatening mostly cities. Various sectoral climate risk insurance mechanisms are already stretched beyond their nominal capacity. Increased vulnerabilities are also compromising the headway made by Brazil’s poverty reduction programs while 10 Turn Down the Heat: Climate Extremes, Regional Impacts, and the Case for Resilience, June 2013. 11 Agência Espacial Brasileira - AEB Page 10 of 93 The World Bank Paraiba Improving Water Resources Management and Services Provision Project (P165683) undermining the enabling environment for economic growth and shared prosperity. Furthermore, Brazil’s current water infrastructure is insufficient to respond to recent extreme climate events. Half of Brazil’s municipalities have faced extreme water-related climate events since 200812. This situation has worsened because of severe and sustained regional droughts, as the seven years long drought severely affecting the State of Paraiba. Improving resilience requires large, multipurpose infrastructure to link water sources to users and to increase storage capacity in high-demand regions. State governments have been establishing infrastructures capable of providing water to guarantee human and animal supplies. However, this overall effort is still insufficient to address the problems of water scarcity, which makes regions (especially in the northeast) vulnerable to droughts, especially when it comes to the diffuse use of water. The proposed Project intends to increase the State of Paraiba’s resilience to droughts in the face of climate change by improving water security13. 17. The proposed Paraiba Improving Water Resources Management and Services Provision Project aligns well with the FY18-23 Country Partnership Framework (CPF) for Brazil. The CPF proposes a reorientation of new lending and ASA towards supporting the Government in addressing the main development constraints identified in the Systematic Country Diagnostic (SCD), including water security, with emphasis on the third focus area of the Framework: Equitable and sustainable development. As stated in the CPF, “the third requirement for improved livelihoods and economic opportunities is the smarter management of Brazil’s natural resources and the better mitigation of environmental pollution and the risk of natural disasters. Three principal issues in natural resource management stand out and affect the B40 directly and indirectly through their effects on growth and incomes: (i) access to land and secure property rights; (ii) water management; and, more broadly, (iii) environmental management. These are largely governance issues where the state acts as a mediator between competing private interests, including the poor and vulnerable who are least able to protect their interests”. The Project will address these issues by improving governance of scarce water resources, increasing access to WSS services and enhancing water security in the poorest areas of the State. 18. The Project is directly related to Objective 3.2 of the CPF aimed at increasing urban resilience and providing more inclusive and sustainable urban services. Objective 3.2 of the CPF states that: “While Brazilian cities have become engines of economic growth, their competitiveness is below similar-sized cities in East Asia, Europe, and the US. Further, many cities face tremendous challenges in terms of reducing water and air pollution, improving the quality of the urban environment, reducing disaster risks, and addressing problems of water scarcity and lack of access to basic services”. The Bank will continue to invest in WSS to foster resilience against the increased variability of water supply, while also focusing on pricing policies to ensure that water charges reflect provision costs, representing key areas of the proposed Project. These priorities are fully consistent with the new eligibility criteria set by COFIEX, the Foreign Financing Committee at the Ministry of Planning. In the case of João Pessoa Metropolitan Region (JPMR), the Project will reduce the risks of sewage overflow and contamination of water bodies and beaches in rainy seasons through modernization, automation and increase capacity of sewerage transmission lines, pumping stations and treatment plant. The proposed Project intends to increase the State of Paraiba’s resilience by improving water services efficiency. 12 World Bank. 2014. Dealing with losses: options for financial protection against disasters in Brazil: Lidando com perdas: opções de proteção financeira contra desastres no Brasil (Portuguese). Washington, D.C.: World Bank Group. 13 Se Table A2.11. Climate-informed Activities to be Financed – Annex 2 Page 11 of 93 The World Bank Paraiba Improving Water Resources Management and Services Provision Project (P165683) II. PROJECT DESCRIPTION A. Project Development Objective PDO Statement 19. The three-part PDO is to: (i) strengthen capacity for integrated water resources management in the State; (ii) improve reliability of water services in the Agreste and Borborema regions; and (iii) improve the operational efficiency of water and wastewater services in the Metropolitan area of Joao Pessoa. PDO Level Indicators 20. For the purpose of this Project, a reliable water system provides water in more than 80 percent of days per year and the operational efficiency will be measured by non-revenue water for water supply and pollution load in terms of BOD for wastewater. 21. The following indicators will measure the proposed PDO outcomes: (a) Annual operational water management plan of the Paraiba river is issued by AESA; (b) Number of hydro-meteorological stations operational and feeding into the water information system; (c) Number of beneficiaries with reliable water services in the Agreste and Borborema regions; (d) Number of days with piped water per year in the benefitted cities of the Agreste and Borborema regions; (e) Non-revenue water (NRW) reduced in the João Pessoa Metropolitan Region; and (f) Volume of pollution load (BOD) discharges reduced in water bodies in the Joao Pessoa Metropolitan Region. B. Project Components 22. The proposed Project is a US$207.686 million Investment Project Finance (IPF) operation financed by a US$126.886 million IBRD loan and US$80.80 million of counterpart funds. It comprises the following components (see Annex 2 for more details): 23. Component 1: Integrated Water Resources Management (US$11.1 million, 100 percent IBRD financing). This component will support strengthening the institutional capacity for water resources management and meteorological and hydrological monitoring and forecasting and increasing the resilience of water supply systems to climate-related events. The component includes the following subcomponents: (a) Subcomponent 1.1. Improving Water Management (US$4.1 million). This subcomponent will finance technical assistance to AESEA to improve its governance of water resources, operational and monitoring capacity. It will provide support to improve policy instruments regarding water pricing, water allocation and demand management, as well as to expand the hydro-meteorological network and forecasting capacity. Training activities will be supported to improve staff capacity as well as the effectiveness of river basin committees and other citizen organizations. (b) Subcomponent 1.2. Project Management and Institutional Development (US$7.0 million). This subcomponent will support activities to strengthen the capacity of key government agencies involved in the water sector - including the Superintendence of Environmental Management (SUDEMA), the State Regulatory Page 12 of 93 The World Bank Paraiba Improving Water Resources Management and Services Provision Project (P165683) Agency of Paraiba (ARPB) and the General State Controller’s Office (CGE) - and ensure financing of the Project Management Unit (PMU), located in SEIRHMA. It will also support activities to improve the safety and climate resilience of four existing dams upstream of the Curimataú and Cariri water supply systems, the preparation of pre-feasibility studies of dams in the Piranhas-Açu river basin and to improve of the cartographic base of the state of Paraiba. 24. Component 2: Improved Water and Sanitation Services Reliability and Efficiency (US$195.7 million, out of which US$114.9 million IBRD financing). This component will help increase the reliability of water supply and the resilience of services to extreme drought events in water scarce regions. The component will reduce the contamination of scarce water resources in the JPMR by improving sanitation systems. The component will also invest in improving the operational efficiency of CAGEPA. The component includes the following subcomponents: (a) Subcomponent 2.1. Water Infrastructure in the Agreste and Borborema Regions (US$161.0 million, out of which US$80.2 million IBRD financing). This subcomponent will finance the Transparaíba Adductor System (Cariri and Curimataú branches), which will bring water from the São Francisco River’s transfer canal to 27 municipalities in the water scarce regions of Agreste and Borborema. It is comprised of the two subsystems: the first phase of the Curimataú Water Supply System, fully financed with counterpart funds; and the first phase of the Cariri Water Supply System, financed by the loan. Investments include water intakes, water treatment plants, water mains, pumping stations and service reservoirs. In terms of climate benefits, the subcomponent will simultaneously improve resilience to droughts and reduce fuel consumption and related GHG emissions from water trucks currently supplying water during the dry season. (b) Subcomponent 2.2. Water and Sanitation in João Pessoa Metropolitan Region (JPMR) (US$34.7 million, 100 percent IBRD financing). This subcomponent will improve the efficiency of water and sanitation services in JPMR. Investments in the existing sewerage system include new interceptor, expansion and modernization of elevation stations and pressurized lines to reduce pumping needs and increase energy efficiency. The subcomponent will also invest in the rehabilitation and expansion of the largest treatment plant in the city. Methane gas capture from the anaerobic lagoons is being considered to generate electricity for the facility. The subcomponent will also support CAGEPA in improving water supply efficiency, by reducing NRW and increase energy efficiency. The subcomponent will also help improve the management capacity and operational efficiency of CAGEPA through technical assistance, including the preparation of a modernization plan and the development and implementation of an environmental and social risk management system with participatory mechanisms. 25. Component 3: Contingent Emergency Response (zero budget). This zero-cost Contingency Emergency Response Component (CERC) will be available to support rapid response activities following a formal declaration of an eligible crisis or emergency. Loan proceeds can be reallocated from other components to eligible activities, such as emergency rehabilitation works, provision of critical equipment, or any other critical inputs to ensure the continued operation of water and sanitation infrastructure and services. Streamlined procurement and disbursement procedures will be used to expedite disbursements. The CERC Section of the Project Operational Manual provides more specific guidelines. 26. Project GHG emission reduction estimates. The Project is expected to reduce GHG emission by 835,380 tCO2e over 30 years. The following GHG emissions reduction estimates in tCO2eq were calculated using the World Bank’s GHG Accounting Tool for the water sector: Page 13 of 93 The World Bank Paraiba Improving Water Resources Management and Services Provision Project (P165683) Table 1: GHG emissions reduction estimates in tCO2eq over life of project Component/Activity Description Timeline Net Emissions Estimate (tCO2-eq) Subcomponent 2.1: Water Infrastructure Water Supply: New 30 -514,529 in the Agreste Region Production Subcomponent 2.2: Water and Sanitation NRW Reduction 30 -130,231 in João Pessoa Metropolitan Region Subcomponent 2.2: Water and Sanitation Wastewater 30 -190,620 in João Pessoa Metropolitan Region Management Total: -835,380 27. Gender Dimensions. The social assessment of impacts and benefits incorporated a gender sensitive lens. Gender gaps remain large in Brazil. Like in many other countries, women remain the main responsible for non-remunerated household and care-taking tasks and more frequently employed in part-time jobs than men, leading to significant gaps in earnings from jobs. Nationwide data from 2016 shows that women spend 18.1 hours per week in household and care- taking tasks, men spend 10.5 hours per week (meaning that women’s workload with household and care-taking tasks are 73 percent higher than men’s). In addition, 83 percent of the women and only 65 percent of men carry household works, whereas 28 percent of women and just 19 percent of men are responsible for care-taking in their households. While 48 percent of the women at productive age are out of the labor force, just 28 percent of men faced this situation. Women count for just 48 percent of the total working force, 43 percent of the people with jobs, and 28 percent of them have only part-time jobs. The gender gap in average earnings from jobs reached 23 percent. 14 28. Overall and Gender Related Impacts of the Sanitation Deficit. Lack of sanitation has immediate implication on the health and quality of life of the population; these implications are harsher among women than men. In Brazil as in many countries, lack of access to water is highly concentrated among the poor and less educated population. These adverse impacts are related with the incidence of waterborne and gastrointestinal diseases. Increasing such diseases due to the lack of sanitation leads to withdrawals from routine daily activities, interferes with school education and leads to losses on productivity, opportunities of career development and incomes. In Brazil, there is also strong evidence – at the national, regional and state level – that access to treated water (on a regular basis) and sewage services is: (i) negatively associated with women’s withdrawals from daily activities, hospitalization and deaths due to waterborne gastrointestinal diseases, and (ii) positively associated with women’s educational attainments and earnings from jobs. 15 14 BRK Ambiental, O Saneamento e a Vida da Mulher Brasileira. Available at http://www.tratabrasil.org.br/images/estudos/itb/pesquisa- mulher/relatorio.pdf. 15 Instituto Trata Brasil, Benefícios Econômicos e Sociais da Expansão do Saneamento no Brasil 2018. Available at http://www.tratabrasil.org.br/estudos/estudos-itb/itb/beneficios-economicos-e-sociais-da-expansao-do-saneamento-brasileiro. BRK Ambiental, O Saneamento e a Vida da Mulher Brasileira. Available at http://www.tratabrasil.org.br/images/estudos/itb/pesquisa- mulher/relatorio.pdf. These studies are based on main official statistical sources: Pesquisa Nacional por Amostra de Domicílios Contínua 2016 (IBGE, 2017); Pesquisa Nacional de Saúde 2013 (IBGE, 2015); and Ministério das Cidades, Sistema Nacional de Informações sobre Saneamento (SNIS), available at http://www.snis.gov.br/. These studies relied on statistical analysis that isolated the effect of access to sanitation on school attainments and worker’s income. Their analyses conclude that access to water supply networks and sewage collection networks reduced school delays among children and youth by 1.1% and 1.5%, respectively. Furthermore, access to water supply networks and sewage collection networks increased worker’s income in 3.2% and 6.8%, respectively (Instituto Trata Brasil: 2018). These effects are still more relevant for women. Between women with and without access to water supply networks the later showed school delays 5.0% higher than the former and earned incomes 36.9% lower than them. Meanwhile, between women with and without access to sewage collection networks, the later showed school delays 2.6% higher than the former and earned incomes 34.8 % lower than them (BRK Page 14 of 93 The World Bank Paraiba Improving Water Resources Management and Services Provision Project (P165683) According to available information, in 2013: (i) the rate of hospitalizations due to gastrointestinal diseases reached 1.801/1,000 women and 1.721/1,000 men (a 5 percent gap); (ii) on average, each woman spent 3.48 days per year away from her routine activities due to diarrhea and vomiting and each men spent 3.15 days per year (a 10 percent gap); (iii) mortality rates due to gastrointestinal diseases were also higher among women than men (2.5/100,000 women vis-à- vis 2.3/100,000 men); and (iii) women counted for 54.4 percent of the deaths due to gastrointestinal diseases and men for 45.6 percent (a 19 percent gap).16 In 2016, women counted for 53 percent of the people who had to withdraw from their routine activities due to diarrhea or vomiting (a 13 percent gap). Considering women’s time burden as caretakers of sick people in their family members, these gaps in withdrawals from daily activities and hospitalization have a much higher impact among women than men. All these gender gaps on health conditions related with waterborne diseases are worse in the Northeast region and the State of Paraíba,17 among the poor and among the least educated people (Instituto Trata Brasil: 2018). Lack of access to water in a reliable way is highly concentrated among them. Indeed, these withdrawals from routine activities are more frequent among poor women who did not have access to water supply networks, regular access to water supply services on daily basis, sewage networks and toilets for exclusive household use (BRK Ambiental: 2018). Source: BRK Ambiental (2018), based on data from Pesquisa Nacional de Saúde 2013 (IBGE, 2015).18 29. Gender Related Actions and Expected Effects. The Trans-Paraíba Water Supply System is expected to increase the number of days of reliable access to water during each year from the current average of 90 days up to 328 days. Reliability in access to water is expected to reduce incidence of waterborne diseases, which affects women wellbeing more than men. Consequently, this Project’s interventions are expected to reduce: (i) the average mortality rate due to gastrointestinal diseases, (ii) the average rate of hospitalization because of gastrointestinal diseases, (iii) the average number of days people withdraw from their routine works, and (iv) the time daily needed and spent on household tasks and caring for relatives. The available data shows that all these indicators are higher among women than men revealing significant gender gaps. The available data also shows that there is a strong cause-effect relationship between these water and sanitation related indicators, educational achievements, earnings from jobs and poverty incidence. Project activities will include monitoring and evaluation of these gender-sensitive indicators and potentially beneficial effects of increasing the reliability of access to water for human consumption. In addition, the Project will catalyze efforts in environmental and sanitary education together with the existing public education and health networks. Social works in the field will target teachers and community health professionals to leverage impact. Ambiental: 2018). 16 IBGE, Pesquisa Nacional de Saúde 2015, quoted by BRK Ambiental (2018). 17 Exemplarily, the incidence of cases of withdrawing from routine activities equaled 74.7/1,000 inhabitants in the country and reached 88.0/1,000 inhabitants in the Northeast (Instituto Trata Brasil: 2018). Furthermore, at the Northeast region, the mortality rate due to gastrointestinal diseases peaked at 3.9/100,000 among women. In the state of Paraíba, this rate equaled 4.1/100,000 among women (BRK Ambiental: 2018). 18 According with the analysis made by Instituto Trata Brasil (2018), information from PNADC 2016 corroborate these trends. Page 15 of 93 The World Bank Paraiba Improving Water Resources Management and Services Provision Project (P165683) 30. Gender-Sensitive Monitoring and Evaluation (M&E). The M&E system will rely both on official statistical data and first-hand data collection at the local level on a random sample basis with beneficiaries of the Trans-Paraíba Water Supply System. The survey will measure, but not limited to: (i) days of sickness or hospitalization due to water-borne and gastrointestinal diseases; (ii) time burden to secure access to water supply and to take care of sick family members due to water-borne disease, which will be compounded to measure impacts on wellbeing; and (iii) impression of water quality and safety. Information will be collected on a sample basis, disaggregated by gender, and analyzed three times during implementation: (i) at the first year of implementation, (ii) after the completion of the Curimatau water supply system, and (iii) after the completion of the Cariri water supply system. Two key indicators will be monitored: (i) time spent caring for children and adults with waterborne diseases; and (ii) time spent with household workloads (including fetching water to the household). Both indicators will be disaggregated by gender. The overall target is reducing the gender gaps on these indicators by half in relation to baseline levels. C. Project Beneficiaries 31. The Project will benefit people at two levels. The entire State’s population of about 4 million people is expected to benefit directly and indirectly from the technical assistance and institutional strengthening activities supported by the Project to improve integrated water resources management in the State. More specifically, all 1.25 million inhabitants of the JPMR will benefit from the improvements in water supply and wastewater systems. The Transparaiba Adductor System will benefit 223,000 people in 27 municipalities of the Agreste and Borborema regions. As mentioned, due to prevailing social norms related with patterns of social division of labor, women are expected to benefit the most of these activities because the adverse impacts of the lack of access to reliable water and wastewater services fall mostly on them. The reliability of water services is expected to reduce domestic workloads and the incidence of waterborne gastrointestinal diseases, contributing to improve the wellbeing of both men and women, but with a larger impact on women than men. In addition, CAGEPA will carry out supportive social works at the local level promoting educational campaigns/communication strategies, which will target teachers, community health professionals and poor women users and convey messages and information that promote improved health and hygiene practices and the rational use of water. D. Results Chain 32. A results chain was developed for the Project with the Client. Based on an assessment of the activities, expected outputs and resulting outcomes, Project performance indicators were defined in the Results Framework (see Figure 2). A monitoring and evaluation (M&E) system will be put in place during implementation. The PMU at SEIRHMA will be responsible for the M&E of the Project towards achievement of its objectives. The PMU will prepare semi-annual Project progress reports. During the Mid-Term Review, an evaluation will be conducted to assess the effectiveness of the implemented solutions to identify opportunities to improve or adjust them, as needed. Page 16 of 93 The World Bank Paraiba Improving Water Resources Management and Services Provision Project (P165683) Figure 1. Results Chain for the Paraiba Water Security Project 33. Critical assumptions include: (a) Water from Sao Francisco transfer is available at the reservoirs; (b) Institutional capacity to apply innovative policy instruments is developed; (c) Water allocation and pricing signals are put in place to ensure priority use for human consumption; and (d) CAGEPA’s tariff is sufficient to full cover operation and maintenance costs. E. Rationale for Bank Involvement and Role of Partners 34. The World Bank is uniquely positioned to support water and sanitation infrastructure investments and reforms due to its extensive experience working in Brazil and in the water sector, availability of a wide-range of highly specialized staff, and considerable experience implementing water and sanitation projects and relevant policy reforms. The World Bank can provide an array of global expertise in the design and implementation of complex water resources management projects and in tackling capacity building and water governance issues based on best practices around the world; and to ensure climate related resilience activities are effectively incorporated into project designs. While the World Bank had only worked in the rural sector in Paraiba, the recently concluded Non-Lending Technical Assistance (NLTA) entitled Improving Water Security in the State of Paraiba contributed to understand the critical challenges the State faces in managing water resources and reducing vulnerability to water scarcity. Page 17 of 93 The World Bank Paraiba Improving Water Resources Management and Services Provision Project (P165683) 35. The wide range of analytical studies that were recently completed by the World Bank have contributed to the design of the proposed operation, including: water resources management and governance; water security; climate change; drought management; utilities turnaround; institutions, policies and regulation; socio and environmental risk management, among others. Many of these analytical pieces will bring both international and national perspectives, with an additional value of the long-term Bank engagement in the Northeast region of the country. F. Lessons Learned and Reflected in the Project Design 36. The Project includes lessons from past projects, as well as international experience in developing more sustainable and resilient water supply and sanitation systems. Key lessons reflected in the design are summarized below. 37. Lack of financial viability and accountability of service providers are at the core of gaps and disparities in global water and sanitation services. Hence, water and sanitation-related projects need to address financial viability. Securing financial viability and institutional accountability is also crucial to attract much needed investments into the water and sanitation service sector. In Paraiba, this topic will be treated at the forefront of the turnaround methodology for CAGEPA, as well as the institutional restructuring of AESA and the water resources management (WRM) diagnosis. 38. Climate change, particularly impacts of water scarcity and droughts, causes long-term harm that requires a paradigm shift from emergency response to risk management. Droughts can have health impacts, hamper firm productivity, accelerate the destruction of forests, and compromise agricultural systems. At the center of this are families, who feel the impacts of this uncertainty on their incomes, jobs, and long-term health and welfare. Based on worldwide analytical work and project experience, the Project will support the State of Paraiba on increasing resilience, addressing these crucial development issues in a holistic way: improving management of scarce water resources, optimizing existing water infrastructure and flows, increasing efficiency of urban water services and providing new water infrastructure to connect people to reliable water sources. 39. Effective communications, consultations, and use of participatory approaches are integral to the success of water supply and sanitation projects. Such an approach allows for early identification of needs and priorities and potential implementation issues. It helps manage expectations, facilitates ownership and trust, and supports accountability mechanisms. These principles have been incorporated into the project design and will be applied systematically using community development activities19 which will start before and continue during and after the construction of works in the Agreste and Borborema regions. 40. The Design & Build type of contracts is essential to generate timely results. The design and build (“turnkey”) contract model used in the execution of most works has proved to be robust and effective in other Bank funded water operations. In the Paraiba case, design and building would be provided by the contractor and CAGEPA would operate the infrastructure. The following advantages compared to traditional individual contracts, were observed during implementation of the Pernambuco Sustainable Water Project (P108654) and in the Espírito Santo Water and Coastal Pollution Management Project (P087711): (a) The allocation of a larger part of the responsibilities onto the contracted firm along with a certain technical autonomy can be attractive to firms of quality with proven capacity to tolerate risks, to furnish performance securities as well as to comply with the established targets; and 19 As described in the social safeguards section of the PAD. Page 18 of 93 The World Bank Paraiba Improving Water Resources Management and Services Provision Project (P165683) (b) This type of contract can also lead to faster execution of works (4 times faster), particularly in terms of resolving implementation problems: the contract model provides an incentive to the firm to resolve issues rapidly, and fewer contract amendments are necessary. 41. Strong leadership and commitment of key partners at a high level in State government and utilities are needed to facilitate project implementation processes. The design of implementation arrangements should carefully consider the findings from capacity assessments and consultations during project preparation, mitigate potential risks, and support efficient and transparent implementation arrangements. In addition, institutional reforms also require strong commitment and priority from the Government. Addressing the necessary institutional changes for strengthening policies requires strong commitment and continued support from all the key decision makers. In a scenario of scarce resources and competing needs, it is essential to translate the technical aspects of the sector needs and benefits of institutional changes to the central Government level (planning and finance) to receive adequate support throughout the process. This will be essential in CAGEPA and AESA when using the turnaround methodology, as experienced in the Rio Grande do Norte Integrated Water Resources Management Project (P089929). 42. Urban projects that include resettlement need to analyze the political and economic pressures driving land use and allocation, the risks these pressures imposed on the project and how they will be mitigated. This is a key lesson from the Sao Luis Enhancing Municipal Governance and Quality of Life Project (P094315) The expropriating authority should take ownership of the resettlement process, collaborating with stakeholders to monitor/build commitment. The elements driving land allocation “scarcity, poverty, competing uses, budgets, speculation” need to be understood and reflected in project documents and design, including whether the correct/feasible approach is via involuntary or voluntary resettlement. Once land is expropriated. the authority needs to ensure control over it, including assigning social and/or public uses to prevent invasion or reoccupation. The Client’s prior agreement and tangible commitment to resettlement should be a condition of negotiations. In the case of Paraiba, this is being very well monitored. 43. Complex projects involving institutional reforms and strict environmental procedures require longer implementation and permanent risk reassessment. This is an important lesson from the Sao Paulo Water Recovery Project - REAGUA (P106703). Activities requiring long implementation and complex compliance with the environmental legislation, such as the construction of wastewater treatment plans, are most likely not good candidates for financing operations limited to a five-year implementation period. In this case, the State has already started preparing all plans and designs to “hit the ground running” on any intervention that is deemed to be of longer duration. 44. Finally, a very important lesson in past unsatisfactory projects in Brazil has to do with the need for a solid and pragmatic monitoring and evaluation (M&E) framework. It is essential that the project not only select appropriate and relevant indicators, but that it measures what it proposes to measure. Building better M&E information systems can effectively store and organize the collected data and allow for in-depth analysis. Such systems should be developed up- front so that M&E arrangements are set up in a timely manner and responsibilities for M&E are clearly defined. III. IMPLEMENTATION ARRANGEMENTS A. Institutional and Implementation Arrangements 45. The Borrower will be the State of Paraiba. To coordinate the Paraiba Improving Water Resources Management and Services Provision Project in its different stages, a Project Management Unit (PMU) reporting directly to SEIRHMA will be established. The PMU will consist of three technical coordination staff, representing SEIRHMA, AESA and CAGEPA, respectively. Page 19 of 93 The World Bank Paraiba Improving Water Resources Management and Services Provision Project (P165683) 46. Each technical coordination center would have its specific function, as follows: (a) SEIRHMA: Project Supervision and Management, as well as the implementation of the studies and actions to support institutional development of the Secretariat and of SUDEMA and ARPB, and studies of the proposed dams (subcomponent 1.2). (b) AESA: coordination of most water resources management activities involved under Component 1 (subcomponent 1.1). (c) CAGEPA: coordination of most activities involved under Component 2, except the activities under the auspices of SEIRHMA. 47. The following table sets out detailed implementation agency arrangement under the Project. Table 2. Implementation Agency Arrangement Coordination Technical Monitoring Social/ Procurement Contracts Financial Committee Management Environmental Management Management Safeguards Main PMU (SEIRHMA) Coordination Component 1 AESA, SUDEMA AESA, SUDEMA AESA  PMU PMU PMU SEIRHMA PMU SEIRHMA SEIRHMA Component 2 CAGEPA CAGEPA CAGEPA  CAGEPA  PMU CAGEPA PMU Component 3 PMU/CAGEPA 48. As seen in Table 2, procurement will be centralized in the PMU/SEIRHMA, while contract management will be decentralized by implementer. The PMU/SEIRHMA will also centralize financial management (FM) arrangements . Implementation of social and environmental safeguards management will be decentralized to PMU/SEIRHMA (Component 1) and CAGEPA (Component 2). B. Results Monitoring and Evaluation Arrangements 49. M&E of Project activities will be undertaken by the PMU at SEIRHMA, which will be responsible for coordinating and reporting the progress towards achieving PDO and results indicators with support from AESA and CAGEPA. The PMU will also be responsible for safeguards compliance and legal matters and will have a M&E staff that will report to the Project Coordinator. The M&E functions will be a core element of the technical assistance to be provided to the PMU, Page 20 of 93 The World Bank Paraiba Improving Water Resources Management and Services Provision Project (P165683) which will focus on the design of the M&E system building on the existing M&E framework. It will also assist in further rolling out of the Project management information system, facilitate regular joint monitoring and reporting, and provide feedback on lessons learned to ensure learning and continuous improvements in Project implementation. The PMU will prepare semi-annual reports, which will reflect Project progress using performance indicators defined in the Results Framework and the Project Operations Manual. C. Sustainability 50. Sustainability of water and sanitation investments supported by the Project relies on the financial and economic sustainability and technical capacity of beneficiary utilities to efficiently operate and maintain built infrastructure and to bear at least the O&M costs. The Project will assist participating utilities in improving their financial and technical performance through technical assistance towards improving commercial efficiency, improving demand management, increasing operational efficiency, and being better prepared to plan and manage service delivery and operation of water and sanitation infrastructure, especially with the use of the turnaround methodology. 51. The major social focus of the Project is on providing services to populations in the semi-arid region of Paraiba. The Project will also address sustainability through the following activities: (i) education and communication programs to induce knowledge, attitude, and behavioral changes related to a range of drinking water, sanitation, and hygiene issues, and with regard tariffs; (ii) citizen engagement mechanisms to enhance accountability; (iii) application of Brazilian technical design standards, or international standards where Brazilian standards do not exist in the Brazilian normativity framework; and (iv) initiation of activities that incentivize households to get connected to the network before construction of the sanitation collection networks begins. 52. The technical specifications and terms of reference for the hydromet system contract will be informed by World Bank international experience and assessed by high-level experts from the Water Expert Team, to ensure they are tailored to the existing needs and include appropriate capacity building mechanisms to local staff to ensure sustainability. The contractor should gradually transfer O&M responsibilities to the technical staff of AESA, who will also be trained in these tasks. The O&M needs of these investments in the medium- and long-term will be incorporated in the AESA annual budget. The functionality of the hydromet system will be monitored through the Results Framework. 53. The public good nature of drought and mitigation infrastructure services related to more reliable supply of water and reduced floods and sewage overflows from heavy rains, coupled with the large capital outlays required for their construction, justifies public financing of these investments. Nevertheless, the impact of these investments to the government budget could be mitigated by progressively increasing cost recovery within the water sector. This Project will contribute to this aim by assessing and promoting the application of tariff structure and payment instruments, setting the stage for the most direct beneficiaries of infrastructure investments to start paying for flood protection and risk mitigation services. IV. PROJECT APPRAISAL SUMMARY A. Technical, Economic and Financial Analysis (if applicable) Technical 54. The proposed actions to support the improvement of water management in the State of Paraiba are based on a sound technical diagnostic carried out within the framework of the recently concluded Bank’s NLTA including Page 21 of 93 The World Bank Paraiba Improving Water Resources Management and Services Provision Project (P165683) stakeholder involvement, and technical inputs from a recently concluded study on water security in Brazil. The diagnostic followed a multidisciplinary approach including an evaluation of: (i) AESA existing technical and financing capacity and the legal framework for water resources management; (ii) the challenges of the increasing water supply and additional infrastructure resulting from the São Francisco water transfers; (iii) water allocation and water rights system; (iv) water and climate monitoring; (v) social aspects; and (vi) institutional arrangements with interrelated sectors and institutions. 55. The proposed investments to increase the reliability of water supply to the Borborema and Agreste regions were assessed and changes in the technical solutions were influenced by the discussions and recommendations of the NLTA. Investments to improve the wastewater system of the JPMR were also influenced by the NLTA, particularly regarding prioritization and energy efficiency. Technical solutions to improve and expand the existing wastewater treatment plant are still being developed, with Bank technical support. The decision to invest in water losses reduction was also influenced by the Bank, to save water downstream. The approach to sectorization and pressure control follows international recommendations and are based on the Guidelines of the International Water Association (IWA). The Project will also support studies to increase water availability in the Piranha-Açu river basin, in the Sertão region, by undertaking pre-feasibility studies of dams as part of the Investment plan of the State Water Resources plan. 56. The proposed technical assistance to improver CAGEPA management and performance will be based on both international best practices and successful experiences in Brazil. The work will also be based on the Bank report on Utility Turnaround Framework. Economic and Financial 57. The economic analysis of the project assessed the benefits and costs comparing with and without intervention scenarios. The transformative scope of the Project with regards to integrated water management and water supply and sanitation efficiency generates diverse types of costs and benefits in specific locations of the State of Paraiba. The Project is assumed to have a lifecycle of 30 years and 5 years of implementation. A discount rate of 10 percent is also considered. 58. The economic analysis involved two major water subsectors with investments . The first subsector involves investments targeting water resources management improvements: (i) improving WRM; and (ii) creating a hydrometeorological information tool (HMIT) for the region (subcomponent 1.1). The second subsector involves investments targeting water supply and sanitation improvements: (i) infrastructures that will improve water availability and conveyance in the Agreste region (subcomponent 2.1); and (ii) improved efficiency and increased access (EIA) to wastewater treatment in the JPMR (subcomponent 2.2). 59. The activities of subcomponent 1.1 will contribute economically to improve water resources availability, management and allocations. The benefits of this subcomponent will improve water allocation from basins to municipalities. The subcomponent 2.1 involves investments on water infrastructure in the Agreste region, which will increase water availability of the region, useful to cope with scarcity and distribution issues. The subcomponent 2.2 will generate savings in energy costs, pollution reduction, water efficiency savings and health benefits. 60. The economic analysis shows an internal Economic Rate of Return (ERR) of 19.9 percent. The net total present at 10 percent discount rate reaches US$282.1 million and a benefit-cost ratio of 1.88. Sensitivity analysis shows that cost overruns of 30 percent reduce the ERR to 15.5 percent and a benefit reduction of 30 percent leads to a decline in the ERR to 14.1 percent. Page 22 of 93 The World Bank Paraiba Improving Water Resources Management and Services Provision Project (P165683) 61. The economic analysis adds the benefits from the GHG emission reductions accounted through the Project. The percentage points added to the ERR with the Net Emissions Estimate of 27,848 tCO2-eq per year valued at the social price of carbon with minimum and maximum values per tCO2-eq of US$39.1 and US$78.2, respectively, expected to growth at 2.26 percent per year, are 0.27 percent and 0.54 percent, respectively. B. Fiduciary Financial Management (FM) 62. The Bank performed a Financial Management Assessment (FMA) of the FM arrangements for the Project . The FMA was carried out in accordance with Bank Policy: IPF and Bank Directive: IPF and the Financial Management Manual for World Bank-Financed Investment Operations (effective March 1, 2010 and revised February 10, 2017). 63. The scope of the FMA included: (i) an evaluation of existing FM systems to be used for Project monitoring, accounting and reporting; (ii) a review of staffing arrangements; (iii) a review of the flow of funds arrangements and disbursement methods to be used; (iv) a review of internal control mechanisms in place, including internal audit; (v) a discussion with regards to reporting requirements, including the format and content of Unaudited Interim Financial Reports (IFRs); and (vi) a review of the external audit arrangements. 64. The overall conclusions of the FMA are that: (i) the FM arrangements for the proposed Project are considered adequate; (ii) the funds flow, disbursements, monitoring, auditing and supervision arrangements have been designed in a way to respond to the Project’s implementation arrangements; and (iii) the residual FM risk associated with the Project is rated as Moderate. Procurement 65. Procurement will be conducted per the World Bank’s “Procurement Regulations for IPF Borrowers” , issued in July 201, for the supply of goods, works, non-consulting and consulting services under the Project. SEIRHMA, AESA and CAGEPA are responsible for the technical aspects of their respective actions and for managing the contracts. 66. The PMU will be responsible for coordinating and consolidating all procurement actions pertaining to the Project, with the ability to have information and reports that reflect the status of each bid conducted separately. The institutions involved will provide the necessary technical inputs (e.g., terms of reference and technical specifications) to allow the PMU to carry out the procurement process with due diligence. A Special Bidding Committee will be formed to carry out all the procurement processes along the Project. 67. A procurement assessment was carried out to appraise the capacity of SEIRHMA, AESA and CAGEPA to implement procurement actions and to review the organizational structure for implementing the Project and the interaction between the PMU and Project benefiting institutions. All agencies have well-functioning procurement teams, with experience in procuring goods and services, but no previous experience with World Bank regulations. Civil works have been handled by a well-qualified procurement staff and technical assistants, but without experience with World Bank procedures. Project agencies don’t have experience on selecting consulting services. 68. The Borrower’s developed a Project Procurement Strategy for Development (PPSD) , and based on the PPSD, a Procurement Plan was prepared and discussed. Page 23 of 93 The World Bank Paraiba Improving Water Resources Management and Services Provision Project (P165683) 69. The overall conclusions of the procurement assessment are that : (i) the procurement arrangements for the proposed Project are considered adequate; (ii) the draft procurement plan have been designed and a final version was submitted to the Bank before negotiations, (iii) the PMU and the Special Bidding Committee are structured in a way to respond to the Project’s implementation arrangements; and (iii) the residual procurement risk associated with the Project is rated as Substantial. C. Safeguards 70. The Project is classified as Environmental Category B, as there are potential reputational and material risks associated with the: (i) preparation of pre-feasibilities studies of dams on a single watershed, the Piranhas-Açu River Basin; (ii) centralized sanitation facilities in João Pessoa, including collection of sewage, piped sewer collection network, stores and treat, septic tanks, and reuse it and return to the environment, which may result in direct impacts on the mangrove, an ecologically sensitive habitat; and (ii) TransParaíba Adductor System’s constructions. Environmental Safeguards 71. The proposed Project will consist of: (i) technical assistance including the improvement of the policies and strategies of the State of Paraíba, strengthening of the legal and organizational framework of the water resources management and WSS, strengthening of institutions, supporting the use of new technologies and information management and pre-feasibility studies of small dams; and (ii) investments in water infrastructure and sanitation works, including the Transparaíba Adductor System (Cariri and Curimataú branches), the improvement of the water supply and the expansion and modernization of the sanitary sewage system of the municipalities of João Pessoa, Cabedelo and Conde. The proposed Project also includes a CERC, which would support possible disaster recovery needs in Paraiba water and sanitation systems. It would finance goods and services to ensure the continued operation of the WSS infrastructure, training, and operating costs in the event of a natural disaster. The CERC activation should be done through formal declaration of a state of emergency or at the formal request of the GoP following a disaster. 72. Environmental Impacts. The foreseen potential adverse environmental and social impacts are expected to be site specific. Most planned activities would be developed in altered areas and most impacts during the construction phase can be properly mitigated. The proposed interventions in João Pessoa may have net positive impacts on the local ecosystems, reducing raw wastewater spillovers and minimizing/mitigating the disposal of the wastewater treatment plant effluents on the Paraiba River estuary and mangroves. Potential adverse environmental impacts on natural areas or environmentally important areas – including mangroves – would be site specific and in most cases, measures can be designed to minimize or mitigate impacts as well as to improve environmental performance of the existing wastewater system. 73. Safeguard Polices. As part of the preparation process and in accordance with the World Bank project financing procedures, a screening of the type of activities proposed, their location, scale and magnitude and their potential direct and indirect socioenvironmental impacts was carried out. An institutional capacity assessment of the implementing agency for management of social and environmental risks was also carried-out. Based on the assessment of potential environmental social risks and impacts, the Environmental Category B was assigned. The following environmental safeguards are triggered: OP/BP 4.01 on Environmental Assessment, OP/BP 4.04 on Natural Habitats, OP/BP 4.36 on Forests, OP 4.09 on Pest Management, and OP/BP 4.37 on Safety of Dams. 74. The conceptual engineering design and location studies of the Cariri water main and the expansion of wastewater services in the city of João Pessoa are at initial stage. Their impacts cannot be determined until the location and Page 24 of 93 The World Bank Paraiba Improving Water Resources Management and Services Provision Project (P165683) engineering design details have been identified. Full Environmental and Social Impact Assessment (ESIA) will be developed during implementation for these sub-projects. Overall water balance and cumulative impacts of works for water infrastructure, water use, and retention will be considered under the Paraiba river basin plan, for the activities in the Paraiba river basin, and in the pre-feasibility studies for dams in the Piranhas-Açu river basin, including the mitigation hierarchy regarding sensitive and natural habitats. 75. A CERC component is available for financing emergency and contingency response situations, limited to interventions in water infrastructure, such as technical assistance, construction, replacement, adaptation or repair of water supply and sanitation infrastructure affected by extreme climatic events typical of climate change, such droughts or torrential rains that can cause great destruction. 76. An Environmental and Social Management Framework (ESMF) was prepared, publicly disseminated and consulted prior to appraisal. The ESMF includes a section on the CERC, including the types of activities likely to be financed and evaluates the potential risks and mitigation measures associated with them. Given the uncertainties and rapid changes inherent in emergency situations and responses, the ESMF was designed around a flexible “adaptive management” approach, with emphasis on monitoring of key outcomes and mechanisms. 77. OP/BP 4.04 on Natural Habitats. Some activities under the proposed Project may have interference on natural mangroves habitats. Additionally, technical assistance activities for the elaboration of pre-feasibility studies of dams in the Piranhas-Açu river basin may have significant environmental and social implications going forward, as potential impacts on natural vegetation and river flow changes, demanding comprehensive environmental analysis, seeking to minimize vegetation cover loss, as well as impact mitigation and compensation measures. The ESMF includes criteria and necessary management measures to ensure that potential impacts on sensitive biodiversity areas are considered in the design of the proposed works. 78. OP/BP 4.36 on Forests. This policy is triggered given the need to consider impacts of increased water use on ecosystems as well as the direct impacts of investments in the wastewater treatment plant (WWTP) on mangrove ecosystems around Joao Pessoa. Nevertheless, it is not expected that the Project will have negative impacts on forest resources. The ESMF considers the requirements of OB/BP4.36 whenever restoration activities are being planned, and should be designed and executed in such a way to minimize or prevent negative impacts on natural vegetation areas. 79. OP 4.09 on Pest Management. This policy is triggered given potential use of algicides. The ESMF contemplates the environmental guidelines. In case of use of algaecides, the products must comply with the national legislation in force. The proposed Project will not include any support for agriculture land use, which would promote pest management. 80. OP/BP 4.37 on Safety of Dams. The TransParaíba water supply scheme, to be financed by the Project, would draw directly from two reservoirs controlled by existing dams, Epitácio Pessoa Dam (Curimataú water main) and Poções Dam (Cariri water main). Investments to be financed by the Project depend on the performance of two other existing dams, the Camalaú Dam, located upstream of the Epitácio Pessoa Dam and the São José II Dam, located upstream of Poções Dam. Epitácio Pessoa, Poções and Camalaú dams are classified as "large dams" according to OP 4.37. 81. The Borrower has retained an independent dam expert to: (i) inspect and evaluate the safety status of the existing dams, their appurtenances and performance history; (ii) review and evaluate the owners' operation and maintenance procedures; and (iii) provide written reports of findings and recommendations for any remedial work or safety-related measures necessary to upgrade the existing dams to an acceptable standard of safety. 82. The Independent Dam Safety Assessment Report submitted to the Bank showed that the three large dams related to the Project (Poções, Camalaú and Boqueirão dams) had in 2016-2018 comprehensive rehabilitation works by the Federal Government, aiming to improve the dam's safety condition to match the requirements of the National Dam Page 25 of 93 The World Bank Paraiba Improving Water Resources Management and Services Provision Project (P165683) Safety Policy (Federal Law No. 12.334/2010). The Report concluded that none of the dams related to the Project exhibited imminent dam safety risks. However, the Report presented a series of recommendations, including additional studies, technical investigations, and comprehensive risk assessment of the Epitácio Pessoa Dam (Boqueirão), improvements of the existing O&M plans and development of emergency preparedness plans, installation/upgrading of monitoring instruments, review of the hydrological studies of the entire basin in the upstream of Boqueirão Dam, and capacity building/strengthening of Paraiba Water Agency (AESA) for regulation dam safety in the State. The activities described above will be funded by the Project. The Borrower has also agreed to the establisment of an Independent Dam Safety Panel to follow-up on all activities related to the dams. Social Safeguards 83. Social Impacts. A social assessment determined that the overall envisaged social impacts of project activities would be beneficial. Some adverse impacts associated with involuntary resettlement may be caused due to land acquisition needed for the works related with: (i) the implementation of the Trans-Paraiba Water Supply System, (ii) the technical assistance for the elaboration of pre-feasibility studies of dams in the Piranhas-Açu River Basin, and (iii) the improvement of wastewater services in the city of João Pessoa. In addition, the construction of water mains may require the payment of easement fees for the establishment of rights-of-way. These impacts are expected to affect a small number of private properties, as most of the water mains would make use of the rights of way of existing roads and highways, and are expected to be minor, because the strips of land required would affect less than 10 percent of total area of the landholdings. Alternatives of main alignments are being considered to avoid or minimize these adverse impacts, which tend to be site-specific. As mentioned, the social assessment of impacts and benefits of the project and the envisaged provision of access to reliable water services incorporated a gender sensitive lens and the project includes gender related actions and a gender sensitive monitoring and evaluation approach. 84. Citizen Engagement. When increasing reliability of water supply services to populations in the semi-arid region of Paraiba, the Project will include citizen engagement mechanisms to enhance accountability. In this regard, the Project will promote education and communication programs to induce knowledge, attitude, and behavioral changes related to a range of drinking water, sanitation, and hygiene practices as well as tariffs. In addition, the Project will support activities to incentivize households to get connected to the network before construction of the sanitation collection networks begins. The Project will also establish a Grievance Redress Mechanism (GRM) to regulate the relationship between beneficiaries and Project’s officers. To assess the outcomes of the increased reliability of the water supply system and the education and communication programs, the Project will carry out beneficiary assessment surveys aimed at measuring changes in their level of satisfaction with the services provided by the Trans-Paraíba Water Supply System. The survey will measure, but not limited to, the level of satisfaction with the provision of water services, the proportion of households adopting new hygiene and sanitation behaviors, the proportion of households adopting practices of rational use of water, the proportion of households paying water tariffs on time, and the proportion of households connected to the water network. Information will be collected on a sample basis and analyzed three times during implementation: (i) at the first year of implementation, (ii) after the completion of the Curimataú WS system, and (iii) after the completion of the Cariri water supply system. Data collected through these surveys will also be compared to state wide information about users’ satisfaction with CAGEPA’s services. The GRM includes a costumer’s service in CAGEPA and the Ombudsman offices in CAGEPA and SEIRHMA, which are integrated with the General Ombudsman Office of the State of Paraiba. These offices and services can be accessed by phone, websites, e-mail addresses and local offices. Efficiency of the GRM will be periodically evaluated in terms of: (i) number of complaints registered (a proxy of the level of public recognition and trust on the GRM), (ii) number of grievances redressed on an appropriate time frame, and (iii) portion of grievances that could not be solved at the GRM level. Page 26 of 93 The World Bank Paraiba Improving Water Resources Management and Services Provision Project (P165683) 85. Public Consultations. Consultations with key stakeholders, beneficiaries and affected people were carried-out by the Borrower during preparation. A first consultation meeting with key stakeholders – including representatives of the organized civil society, experts and scholars, and members of the two relevant watershed councils (Paraiba watershed and Piranhas-Açu watershed) – was carried-out in February 15, 2018. The consultation dealt with the scope of the Project and the terms of reference for the social and environmental assessment of its activities. A total of 57 people took part in this first consultation round, including state officials and representative members of the Committees of the Paraiba and Piranhas-Açu River Basin, the State Council of Cities, the State Council of Environmental Protection and the State Council of Water Resources, the State Forum to Combat Corruption, the State General Attorney’s Office, and the General Court of Justice. A critical recommendation of the participants was to hold new consultation rounds in the areas of intervention of Agreste, Borborema and Metropolitan Region of the Capital City. Taking in consideration this guidance, a second round of consultations was held in November 20-21, 2018. Two meetings took place in João Pessoa and Sumé (covering the Agreste and Borborema regions) for sharing the findings of the social and environmental assessment including the impacts and benefits identified as well as the proposed measures to avoid, minimize and/or mitigate adverse impacts. The main concerns raised in these consultations refer to: (i) expand new water supply systems to other dry areas of the state; (ii) allow the use of additional water to agricultural purposes; and (iii) include environmental and sanitary education within the social activities included in the Project. In response to the consultations concerns, state officials explained that: (i) expanding water supply systems to other areas are part of the State long- term plan but are out of the scope of this Project; (ii) water use for agricultural purposes would be allowed in specific favorable hydroclimatic conditions to be defined in a yearly basis by AESA’s annual operational plan for the Paraiba river basin; and (iii) the Project will catalyze efforts in environmental and sanitary education together with the existing public education and health networks. Safeguard instruments were also made available through the Project’s website (http://paraiba.pb.gov.br/projeto-de-sustentabilidade-hidrica/) since November 1st, 2018, and disclosed on the Bank website from February 1, 2019. 86. Labor Influx Impacts. The proposed Project will involve construction of civil works, including labor force and associated goods and services, but no significant labor influx is expected. Nevertheless, the ESMF and bidding documents should include specific measures to address labor requirements and performance, assess and manage labor influx related risks, as well as monitor potential impacts from labor influx. 87. Mitigation Measures. Most of the Project’s envisaged impacts would be site-specific and reversible. Mitigatory measures can be designed and implemented during the Project life. Although the proposed Project locations are not yet fully defined, it is expected that mitigation measures would be required for the following direct potential environmental and social impacts, which may arise: diffuse and point pollution, flow modification and hydro-morphological alterations (physical alteration of channels, bed disruption) to improve water services provision; construction activities can bring about noise, dust, and wastes; and local communities can be affected by the use of local roads for improving water services provision, affecting traffic patterns and local infrastructure, increasing levels of noise and dust and other nuisances and, consequently, posing risks to safety in local communities. 88. OP/BP 4.11 on Physical Cultural Resources. This policy is triggered on a precautions basis, as there is no indication, so far, that the Project works may interfere with known cultural resources. However, the nature and scope of some construction works may result in interference with historical and/or paleontological sites. The ESMF includes procedures for screening any known cultural property in the Project area and incorporate ‘chance find’ procedures if culturally significant resources are discovered during the Project implementation. The ‘chance find’ procedures are defined in accordance with requirements from IPHAN (Instituto de Patrimônio Histórico e Artístico Nacional) and from OP 4.11. Page 27 of 93 The World Bank Paraiba Improving Water Resources Management and Services Provision Project (P165683) 89. OP/BP 4.12 on Involuntary Resettlement. Land acquisition with potential adverse impacts related with involuntary resettlement is envisaged in the works related with the implementation of the Trans-Paraiba Water Supply System, the improvement of wastewater services in the city of João Pessoa and as a downstream effect of the preparation of the pre-feasibility studies of the dams in the Piranhas-Açu river basin. The water mains of the Transparaiba System will mostly follow the rights-of-way of federal and state roadways. In a few points, it is expected the water mains will need to cross private properties. Pipes will mostly be installed under the ground and the rights-of- way of the pipeline will affect minimally the landholders, probably requiring just the payment of easement fees. The number of facilities will be few and the impacts will be site-located. Project design will favor options that avoid and/or minimize impact on areas used productively and over households. In the sewage system of Joao Pessoa, the technical alternative will give preference for the use of worn out mining pits, avoiding physical displacement and minimizing adverse impacts related with economic displacement. A Resettlement Policy Framework (RPF), disclosed on the Bank website from February 1, 2019, was prepared for the Project and will guide the preparation of specific Resettlement Action Plans (RAPs) to deal with physical and economic displacement. The Borrower has prepared an Abbreviated Resettlement Action Plan for the activities in the Curimataú water main that may be procured before Project effectiveness as well as an audit of the process of land acquisition already carried out as part of the construction of the Curimataú water main. Grievance Redress Mechanisms (GRM) 90. The ESMF and the RPF also define the processes and procedures for the operation of the Project’s GRM. The Project’s GRM would rely as much as possible and appropriate on the structures already in place in the implementing agencies to avoid unnecessary duplication of structures. These include a costumer’s service in CAGEPA and the Ombudsman offices in CAGEPA and SEIRHMA, which are integrated with the General Ombudsman Office of the State of Paraiba. These offices and services can be accessed by phone, websites, e-mail addresses and local offices. The adequacy of these grievance redressing structures was evaluated as part of the institutional capacity assessment. The Project’s ESMF would also set processes and procedures for public dissemination and operation of the GRM. 91. Communities and individuals who believe that they are adversely affected by a World Bank (WB) supported project may submit complaints to existing project-level grievance redress mechanisms or the WB’s Grievance Redress Service (GRS). The GRS ensures that complaints received are promptly reviewed to address project-related concerns. Project affected communities and individuals may submit their complaint to the WB’s independent Inspection Panel which determines whether harm occurred, or could occur, because of WB non-compliance with its policies and procedures. Complaints may be submitted at any time after concerns have been brought directly to the World Bank's attention, and Bank Management has been given an opportunity to respond. For information on how to submit complaints to the World Bank’s corporate Grievance Redress Service (GRS), please visit http://www.worldbank.org/en/projects-operations/products-and-services/grievance-redress-service. For information on how to submit complaints to the World Bank Inspection Panel, please visit www.inspectionpanel.org. V. KEY RISKS . 92. The overall rating for Project risk is considered Substantial. The key risks and corresponding risk mitigation measures include: (a) Political and governance context risk is rated Substantial. There are political risks related to the transition after the recent elections. Fiscal requirements imposed by the Federal Government for sub-national debt may be further tightened, which could delay signature of the Loan Agreement. The State Government may keep close attention to the state fiscal situation and follow-up with federal authorities. Page 28 of 93 The World Bank Paraiba Improving Water Resources Management and Services Provision Project (P165683) (b) Sector strategies and policies risk is rated Moderate. The current State Administration is committed to the water resources management sectoral strategy developed with Bank support under the NLTA. As a result, sectoral policy changes are very unlike soon. (c) Technical design of Project risk is rated Substantial. Technical risk is rated substantial as some designs are still being developed, including the rehabilitation and expansion of the wastewater treatment plant of João Pessoa. In addition, non-revenue water (NRW) activities require an advance level of technical skills and strong support from senior managers. As detailed designs are not yet ready, cost estimates and implementation schedules are at the level of feasibility and may not be entirely realistic. The Bank will provide technical assistance to mitigate these risks and the PMU will incorporate qualified technical staff. (d) Institutional capacity for implementation and sustainability risk is rated High . Although both SEIRHMA and CAGEPA have extensive experience in designing and implementing civil works projects, they lack experience in implementing World Bank operations. To mitigate these risks the Project will hire dedicated consultants to provide technical support. The Bank is promoting a technical exchange with other clients with similar World Bank projects and dedicated training on procurement and safeguards will be provided. In addition, implementation arrangements were simplified with only two implementation agencies. (e) Fiduciary aspects risk is rated Substantial. The FMA identified the following risks to the achievement of the PDO: (i) the limited experience of both SEIRHMA and CAGEPA with Bank financed projects; (ii) the close coordination that will be required between SEIRHMA and the other Project entities; and (iii) the low capacity of the entities involved in the Project. The following mitigating actions will be taken: (i) the Project’s internal control processes and systems will be documented in a POM; (ii) the Project will be subject to internal audit reviews of both CAGEPA’s internal auditors and those of the CGE-PB; (iii) the Project’s staff will participate in the Bank’s fiduciary training sessions; and (iv) the Bank’s FM supervision of the Project will be intensified, in the first years of the Project’s implementation. (f) Environmental and Social aspects risk is rated Substantial. There is a substantial likelihood that environmental or social impacts and risks could adversely affect the achievement of PDO. Environmental and social risks include extreme climate events, such as droughts and floods, failure in operation of the wastewater treatment plant that may cause pollution, affecting mostly the most vulnerable population. These risks will be mitigated by the implementation of the social and environmental management plan by CAGEPA. Page 29 of 93 The World Bank Paraiba Improving Water Resources Management and Services Provision (P165683) VI. RESULTS FRAMEWORK AND MONITORING Results Framework COUNTRY: Brazil Paraiba Improving Water Resources Management and Services Provision Project Development Objectives(s) To (i) strengthen capacity for integrated water resources management in the State; (ii) improve reliability of water services in the Agreste and Borborema regions; and (iii) improve the operational efficiency of water and wastewater services in the Joao Pessoa Metropolitan Region. Project Development Objective Indicators RESULT_FRAME_T BL_ PD O Indicator Name DLI Baseline End Target Strenghen capacity for integrated water resources management Annual operation water management plan for the Paraiba river No Yes issued (Yes/No) Hydromet stations operational and feeding into the water 10.00 83.00 information system (Number) Improve reliability of water services in the Agreste and Borborema regions Number of days with piped water in the benefitted cities of the 98.00 328.00 Agreste and Borborema regions (Number) Number of beneficiaries with reliable water services (Number) 0.00 235,000.00 Increase operational efficiency of water and sanitation Services in the JPMR Non-Revenue Water redcued in the JPMR (Cubic meters/year) 0.00 17,000,000.00 Volume of pollution loads (BOD) discharges reduced in water 3,200.00 9,600.00 bodies in the JPMR (Tones/year) Page 30 of 93 The World Bank Paraiba Improving Water Resources Management and Services Provision (P165683) PDO Table SPACE Intermediate Results Indicators by Components RESULT_FRAME_T BL_ IO Indicator Name DLI Baseline End Target Integrated Water Resources Management AESA draft resolution with revised criteria for water rights is No Yes submitted to the State Water Resources Council (Yes/No) AESA draft resolution with revised bulk water charges submitted to the State Waer Rsources Council (Yes/No) No Yes Updated Paraiba River Basin plan submitted to the Paraiba River No Yes Basin Committee (Yes/No) Number of dams prioritized for future design in the Piranhas-Açu 0.00 3.00 Basin (Number) Operation, Management and Emergency Preparedness Plans elaborated for existing dams in the Paraíba river basin (Number) 0.00 3.00 Improved Water and Sanitation Services Reliability and Efficiency Increased water treatment capacity in the Agreste and Borborema Regions (Cubic meters/year) 0.00 23,000,000.00 Water distribution sectors zones implemented in João Pessoa Metropolitan Region (Number) 0.00 29.00 Energy efficiency increased in the wastewater system in João 8.90 4.10 Pessoa Metropolitan Region (Megawatt hour(MWh)) Establishment and Functioning of Non-Revenue Water No Yes Management Program in CAGEPA (Yes/No) Establishment of social and environmental risk management system in CAGEPA (Yes/No) No Yes Reduction of the time lost from routine activities because of 3.15 2.30 waterborne and gastrointestinal diseases - MEN (Days) Reduction of the gender gap in time spent with household 73.00 53.00 workloads (including fetching water to the household) Page 31 of 93 The World Bank Paraiba Improving Water Resources Management and Services Provision (P165683) RESULT_FRAME_T BL_ IO Indicator Name DLI Baseline End Target (Percentage) Level of beneficiary satisfaction with project activities in the Transparaíba Water Supply System (Percentage) 0.00 80.00 Grievances and claims addressed and resolved within the agreed 0.00 80.00 time frame (Percentage) Reduction of the time lost from routine activities because of 3.48 2.30 waterborne and gastrointestinal diseases - WOMEN (Days) IO Table SPACE UL Table SPACE Monitoring & Evaluation Plan: PDO Indicators Methodology for Data Responsibility for Data Indicator Name Definition/Description Frequency Datasource Collection Collection Plan describing water AESA will publish the transfered from São plan in the website and Annual operation water management Francisco river, expected Annual AESA AESA submitt to the National plan for the Paraiba river issued reservoirs level and the Water Agency main uses authorized for the following year. Total number of automartized hydromet AESA Water Resources Hydromet stations operational and stations that are funcional Annual AESA AESA Information System feeding into the water information system and regulalry feeding intom the AESA information system. Number of days with piped water in the Average number of days per Annual CAGEPA Average days that CAGEPA benefitted cities of the Agreste and year that municipalities water municipalities Page 32 of 93 The World Bank Paraiba Improving Water Resources Management and Services Provision (P165683) Borborema regions benefiting from the operations benefiting from Transparaiba Water Sypply department the Cariri and System (Curimataú and Curimataú Water Cariri Branches) will have Supply Systems piped water supply. stretched in 2017 and in one yeras after water systems become operational. Project progress reports. Urban population in the muncipalities benefiting CAGEPA operations in from the Transparaiba the regional offices will Water Supply Systems CAGEPA water Number of beneficiaries with reliable Annual CAGEPA provide information to (Curimataú and Cariri operations department water services CAGEPA management branches) with reliable system water services (water supplied in at leat 80% of days per year) Reduction of non-revenuu wate in the JPMR, calculated in cubic meters per year. Current losses stand at an CAGEPA estimated volume of Project progress Annual operations CAGEPA Non-Revenue Water redcued in the JPMR 45,000,000 m3/y, target reports department losses estimated at 28,000,000 m3/y, resulting in a target of 17,000,000 m3/y of reduced water losses (or water saved). Volume of pollution loads (BOD) Reduction of pollution loads Annual CAGEPA Project progress report CAGEPA discharges reduced in water bodies in the discharged by the operations Page 33 of 93 The World Bank Paraiba Improving Water Resources Management and Services Provision (P165683) JPMR wastewater treatment plant depertment in the Paraiba river estuary, measured in tons of BOD per year. ME PDO Table SPACE Monitoring & Evaluation Plan: Intermediate Results Indicators Methodology for Data Responsibility for Data Indicator Name Definition/Description Frequency Datasource Collection Collection AESA will submitt to the State Water Resources AESA draft resolution with revised criteria Council a draft resolution Project progress Annual AESA AESA for water rights is submitted to the State redefining the criteria for reports Water Resources Council issuing water rights, based on studies to be carried out under the project AESA will submitt to the State Water Resources Council a draft resolution AESA draft resolution with revised bulk Project progress redefining criteria and unit Annual AESA AESA water charges submitted to the State reports prices for water use Waer Rsources Council charging, based on studies carried out under the project AESA will submitt to the Paraiba River Basin Updated Paraiba River Basin plan Committee a draft Update Annual AESA Project progress report AESA submitted to the Paraiba River Basin of the Paraiba River Basin Committee Plan, based on studies carried out under the project Page 34 of 93 The World Bank Paraiba Improving Water Resources Management and Services Provision (P165683) SEIRHMA will prioritize at least three dams for future design in the Piranhas-Áçu SEIRHMA Project progress Number of dams prioritized for future Annual SEIRHMA river basin, based on the resolution reports design in the Piranhas-Açu Basin pre-feasibility studies of dams to be carried out under the project SEIRHMA will coordinate with DNOCS to ellaborate Operation, Management and Emergency O&M and EPP for the Annual SIRHMA Project Progress Report SEIRHMA Preparedness Plans elaborated for Pocoes, Camalau and existing dams in the Paraíba river basin Boqueirao dams, to be carried out and completed under the project The Carimatau and the Cariri water supply system will CAGEPA add a treatement capacity Project progress Increased water treatment capacity in the Annual operations CAGEPA of 740 l/s at completion and reports Agreste and Borborema Regions department operation, equivalent to 23 million of cubic meters per year of treated water Ring fenced sector pressure CAGEPA Water distribution sectors zones zones will be installed in the Project progress Annual operations CAGEPA implemented in João Pessoa Metropolitan water distribution network reports department Region of the João Pessoa Metropolitan Region Energy demand for pumping and treatment in the Roger CAGEPA Energy efficiency increased in the Project progress Wastewater System of JPMR Annual Operations CAGEPA wastewater system in João Pessoa reports is reduced in kilowatt-hour department Metropolitan Region per cubic meter (kwh/m3) upon completion of the Page 35 of 93 The World Bank Paraiba Improving Water Resources Management and Services Provision (P165683) works and operation of the system Biannual reports by CAGEPA will issue a Establishment of Group Working Establishment and Functioning of Non- resolution establishng and via Board Resolution Biannual group. CAGEPA Revenue Water Management Program in make functional a Non- Project progress Project CAGEPA Revenue Water reports Progress Management Program Report CAGEPA will develop, establish and make Biannual Establishment of Group Establishment of social and functional a social and reports by via Board Resolution Biannual CAGEPA environmental risk management system environmental risk Working Project progress in CAGEPA management plan, based on group reports studies financed under the project A household survey in the Annual: Survey M&E process will rely municipalities benefiting first survey carried out both on official from the Transparaiba to be by CAGEPA statistical data and Water Supply system will be carried out with first-hand data carried out three times to during the assistance collection at the local collect data and to first year of from the level on a random CAGEPA social and Reduction of the time lost from routine measuring the effect of project Bank sample basis. First-hand environmental activities because of waterborne and increased water reliability implement Target: data will be collected in department gastrointestinal diseases - MEN on time spent caring for ation; For women: two points in time (T1 children and adults with second, 2.30 and T2): T1 data will be water-borne diseases, after the days/year or collected after the disaggregated by gender. completion reduction of Curimataú main of the This indicator aims to of the 34% with Transparaíba Water measure changes in time Curimataú regards to Supply System starts spent by women and men water baseline operations; and T2 data Page 36 of 93 The World Bank Paraiba Improving Water Resources Management and Services Provision (P165683) with sickness and supply value. will be collected after hospitalizations because of system For men: the Cariri main starts waterborne diseases. (first 2.30 operation. This will phase); and days/year% allow before and after third, after or reduction as well with and the of 27% with without comparisons, completion regards to measuring the effect of of the baseline increased water Cariri value. reliability on changes in water Baseline: time spent by women supply For and men with sickness system women: 3.48 and hospitalizations, days/year securing access to For men: water supply, taking 3.15 care of sick family days/year members, and Baseline will withdrawing from be updated routine daily activities after the first due to sickness and survey (first hospitalization because year of of water-borne disease. project implementati on). A household survey in the Annual: Survey M&E process will rely municipalities benefiting first survey carried out both on official Reduction of the gender gap in time spent from the Transparaiba to be by CAGEPA statistical data and CAGEPA with household workloads (including Water Supply system will be carried out with first-hand data fetching water to the household) carried out three times to during the assistance collection at the local collect data and to first year of from the level on a random measuring the effect of project Bank sample basis. First-hand Page 37 of 93 The World Bank Paraiba Improving Water Resources Management and Services Provision (P165683) increased water reliability implement Target: data will be collected in on time spent with ation; Reducing two points in time (T1 household workloads, second, 20% on gaps and T2): T1 data will be disaggregated by gender. after the by in relation collected after the completion to baseline Curimataú main of the of the levels. Transparaíba Water Curimataú Baseline Supply System starts water values will be operations; and T2 data supply updated will be collected after system after the first the Cariri main starts (first survey (year operation. This will phase); and 1). allow before and after third, after as well with and the without comparisons, completion measuring the effect of of the increased water Cariri reliability on changes in water time spent by women supply and men system with household workloads (including fetching water to the household). Level of beneficiary Annual: Survey M&E process will rely satisfaction with project first survey carried out both on official activities in the to be by CAGEPA statistical data and Level of beneficiary satisfaction with Transparaíba Water Supply carried out with first-hand data CAGEPA project activities in the Transparaíba System. This indicator is to during the assistance collection at the local Water Supply System measure changes in the first year of from the level on a random level of satisfaction of water project Bank sample basis. First-hand supply and sanitation implement data will be collected in Page 38 of 93 The World Bank Paraiba Improving Water Resources Management and Services Provision (P165683) services and its impacts on ation; three points in time well-being through second, (T0, T1 and T2): T0 household surveys. It is after the baseline data will be calculated based on completion collected before the percentage of water users of the Transparaíba Water who are satisfied with the Curimataú Supply System starts services, disaggregated by water operation on a sample gender. supply basis; T1 data will be system collected after the (first Curimataú main of the phase); and Transparaíba Water third, after Supply System starts the operations; and T2 data completion will be collected after of the the Cariri main starts Cariri operation. This will water allow before and after supply as well with and system without comparisons, measuring the effect of increased water reliability and the level of beneficiary satisfaction with project activities in the Transparaíba Water Supply System. Grievances and claims CAGEPA CAGEPA Grievances and claims addressed and addressed and resolved Annual GRM/ombud GRM/ombdusperson CAGEPA resolved within the agreed time frame within the agreed time sperson system frame system Page 39 of 93 The World Bank Paraiba Improving Water Resources Management and Services Provision (P165683) Survey M&E process will rely Annual: carried out both on official first survey by CAGEPA statistical data and to be with first-hand data carried out assistance collection at the local during the from the level on a random A household survey in the first year of Bank sample basis. First-hand municipalities benefiting project Target: data will be collected in from the Transparaiba implement For women: two points in time (T1 Water Supply system will be ation; 2.30 and T2): T1 data will be carried out three times to second, days/year or collected after the collect data and to after the reduction of Curimataú main of the measuring the effect of completion 34% with Transparaíba Water increased water reliability of the regards to Supply System starts CAGEPA social and Reduction of the time lost from routine on time spent caring for Curimataú baseline operations; and T2 data environmental activities because of waterborne and children and adults with water value. will be collected after department gastrointestinal diseases - WOMEN water-borne diseases, supply For men: the Cariri main starts disaggregated by gender. system 2.30 operation. This will This indicator aims to (first days/year% allow before and after measure changes in time phase); and or reduction as well with and spent by women and men third, after of 27% with without comparisons, with sickness and the regards to measuring the effect of hospitalizations because of completion baseline increased water waterborne diseases. of the value. reliability on changes in Cariri Baseline: time spent by women water For and men with sickness supply women: 3.48 and hospitalizations, system days/year securing access to For men: water supply, taking 3.15 care of sick family Page 40 of 93 The World Bank Paraiba Improving Water Resources Management and Services Provision (P165683) days/year members, and Baseline will withdrawing from be updated routine daily activities after the first due to sickness and survey (first hospitalization because year of of water-borne disease. project implementati on). ME IO Table SPACE Page 41 of 93 The World Bank Paraiba Improving Water Resources Management and Services Provision (P165683) ANNEX 1: Implementation Arrangements and Support Plan COUNTRY: Brazil Paraiba Improving Water Resources Management and Services Provision 1. The Borrower will be the State of Paraiba. To coordinate the Paraiba Improving Water Resources Management and Services Provision Project in its different stages, a Project Management Unit (PMU) reporting directly to SEIRHMA will be established. The PMU will consist of three technical coordination staff, representing SEIRHMA, AESA and CAGEPA, respectively. 2. Each technical coordination center would have its specific function, as follows: (d) SEIRHMA: Project Supervision and Management, as well as the implementation of the studies and actions to support institutional development of the Secretariat and of SUDEMA and ARPB, and studies of the proposed dams (subcomponent 1.2). (e) AESA: coordination of most water resources management activities involved under Component 1 (subcomponent 1.1). (f) CAGEPA: coordination of most activities involved under Component 2, except the activities under the auspices of SEIRHMA. 3. The following table sets out the general implementation agency arrangement under the Project. Table A1.1. Implementation Agency Arrangement Coordination Technical Monitoring Social/ Procurement Contracts Financial Committee Management Environmental Management Management Safeguards Main PMU (SEIRHMA) Coordination Component 1 AESA, SUDEMA AESA, SUDEMA AESA  PMU PMU PMU SEIRHMA PMU SEIRHMA SEIRHMA Component 2 CAGEPA CAGEPA CAGEPA  CAGEPA  PMU CAGEPA PMU Component 3 PMU/CAGEPA Page 42 of 93 The World Bank Paraiba Improving Water Resources Management and Services Provision (P165683) 4. The PMU will be responsible for monitoring the overall Project execution, providing support to all implementing agencies on each of its responsibilities. It will be composed of a technical team to support the implementing agencies with financial, management, monitoring, control, operational and logistic tasks. The PMU staff will include consultants to be hired as needed specifically to carry out procurement activities, following World Bank Guidelines. SEIRHMA is the institution responsible to the establishment of PMU. 5. The specific attributions of the PMU will include: (i) general coordination of the Project; (ii) act as focal point with the World Bank and its technical missions; (iii) preparation and submission of contractual reports (including Procurement and Financial Plans, Progress Reports, Midterm Review and Final Report); and (iv) monitoring and supervision of activities related to the socio-environmental aspects to ensure the compliance of the Bank safeguards. The PMU will be also responsible for obtaining internal no-objection of the procurement processes, whether they are prior or post review. 6. The PMU will also be responsible for overall safeguards compliance and legal matters. Safeguards responsibilities related to Component 1 activities will remain under SEIRHMA, and CAGEPA will have safeguards responsibilities for Component 2. 7. Every six months, the PMU will make the Project Progress Report available on the SEIRHMA website with the objective of reporting on the actions of the Project to the State, the World Bank, the Federal Government (SEAIN) and to the society. In addition, all project performance information will be made available on the SEIRHMA website, as well as on the site of the beneficiary institutions as a means of increasing the transparency and access to the Project information. 8. All projects will have a technical officer appointed by the sectoral part, who will oversee all steps of the process, from the elaboration of the Terms of Reference or Technical Specifications to the accountability of the service, work or good purchased. The technical officer will also support the audit processes of the World Bank. 9. Procurement will be centralized in the PMU/SEIRHMA, while contract management will be decentralized by implementer. The PMU/SEIRHMA will also centralize financial management (FM) arrangements. Implementation of social and environmental safeguards management will be decentralized to PMU/SEIRHMA (Component 1) and CAGEPA (Component 2). Table 2 below summarizes the general and project-specific roles of the main institutions benefiting from the Project: Page 43 of 93 The World Bank Paraiba Improving Water Resources Management and Services Provision (P165683) Table A1.2 General and project specific roles. State Secretariat for Paraiba State Water Resources Infrastructure, Water Water and Sewerage Management Executive Agency Resources and Environment Company of Paraiba (Agência Executiva de Gestão das and Science (Secretaria de (Companhia de Água e Águas) Infraestrutura, dos Recursos Esgotos da Paraíba) Hídricos e do Meio Ambiente) AESA SEIRHMA CAGEPA Institution Law n° 7.779 in 2005, in the legal State law n°4456 in 1983 State law n° 3.459 in 1966 form of an Autarchy, with Creation administrative and financial autonomy and linked to SEIRHMA Management Body Coordinating Body Water & Sewerage Services The management of groundwater To plan, coordinate, supervise To plan, execute and operate and surface water resources in and execute governmental basic sanitation services the state of Paraíba as well as actions related to the throughout the territory of water originating in hydrographic identification, exploitation and the State of Paraíba, basins located outside the State use of water resources, including the capture, but transferred through works minerals and the environment. adduction, treatment and General implemented by the Federal distribution of water and objectives Government and, by delegation, collection, treatment and water domain of the Union that is final disposal of sewage, in the region of Paraíba state. marketing of these services and the benefits that directly or indirectly derive from its undertakings, as well as any other related or similar activities. To improve the efficiency of To strengthen the To improve Water and Project water resources management management of water Sanitation Services reliability general governance and improvement and efficiency roles of water resource management instruments Page 44 of 93 The World Bank Paraiba Improving Water Resources Management and Services Provision (P165683) 1.1- Improving water 1.1- Improving water 2.1- Water infrastructure in management management the Agreste region  To review its normative/legal  To review its  To implement the framework and its normative/legal Transparaíba water institutional/organizational framework. supply system. composition, to publish periodically a report on the 2.2- Water and Sanitation in management of water 1.2- Project management and João Pessoa Metropolitan resources and to establish institutional management Region (JPMR) strategic planning;  To manage the PSH-PB  To improve sanitation  To improve the monitoring of with ensure financing and services in the city of water resources, with these strengthening of the PMU; João Pessoa; Project specific following activities:  To support institutional  To improve water supply roles expansion and development of SUDEMA, efficiency, by financing modernization; to elaborate ARPB, CGE (organizations water losses reduction hydrogeological studies, map involved in the PSH-PB); plan in the JPMR; of management zones and  To prepare pre-feasibility  To improve governance groundwater monitoring studies and engineering of capacity and operational network; to prepare the five proposed dams efficiency by using the Water Management Plan; located in the Piranhas- World Bank’s Utility  To improve the management Açu River Basin; Turnaround Framework. instruments, especially  Update of the regarding water rights, water Cartographic Base of the use charging, water planning State of Paraiba. and information. 10. Supervision during Implementation. The Bank will undertake formal supervision of the Project based on a risk profile. Supervision missions will be carried out at least twice a year, involving technical, safeguards and fiduciary teams. Depending upon changes in risks or specific project needs, additional supervision missions will be carried out. Consultants may be required to support the Bank team in supervising the project and in assisting the client on specific technical issues, amongst others: (i) non-revenue water; (ii) wastewater treatment; (iii) water resources management; (iv) institutional reform; and (v) design and build contracts. The Bank team will also promote cross-support and technical exchange with other clients in Brazil and abroad dealing with similar project. 11. It is estimated that eight staff weeks per year of the TTL will be needed during the life of the Project. Additional fifteen staff weeks per year are estimated to cover safeguards and fiduciary aspects of the Project. Financial Management Assessment of SEIRHMA and CAGEPA 12. Implementing Entities’ Staffing. SEIRHMA has an appropriate management structure and independent senior management. SEIRHMA has not previously implemented any Bank financed project. SEIRHMA will be responsible for implementing Component 1 of the Project. 13. CAGEPA has an appropriate management structure and independent senior management consisting of a General Assembly, Administration Council, Board of Directors, and Fiscal Council. The composition and responsibilities of each Page 45 of 93 The World Bank Paraiba Improving Water Resources Management and Services Provision (P165683) of the above units are described in CAGEPA’s bylaws. CAGEPA has not previously implemented any Bank financed project. CAGEPA will be responsible for implementing Component 2 of the Project. 14. SEIRHMA’s Financial/Accounting Department will have the primary FM fiduciary responsibilities for the Project (as part of the PMU) including: (i) coordinating and supervising Project implementation; (ii) submitting disbursement requests and documentation of expenditures to the Bank; (iii) preparing and submitting IFRs to the Bank; (iv) preparing and providing all financial documentation and Project reports/information requested by external auditors and Bank staff; and (v) preparing and updating the POM and ensuring that all Project agencies follow it. The Financial/Accounting Department of SEIRHMA responsible for the Project, will be comprised of a Head of Planning, Budgeting and Finance, supported by five Administration and Technical Analysts responsible for Planning and Budgeting (1), Finance (1) and General Administrative Support (3). it is not expected that any key positions will remain unfilled and staff turnover is expected to be minimal, with staff being hired as public or commissioned servants. 15. CAGEPA’s Financial/Accounting Department will be responsible for controlling, monitoring and accounting for the activities under Component 2 of the Project. The Financial/Accounting Department of CAGEPA responsible for the Project will comprise 3 people. It is not expected that any key positions will remain unfilled and staff turnover is expected to be minimal, with staff being hired as public or commissioned servants. 16. Paraíba is the sole State in Brazil where the State’s accounting function is managed/controlled by a specific unit within the CGE-PB. The CGE-PB, therefore, works closely with the Financial/Accounting Departments of both SEIRHMA and CAGEPA (and all other State institutions) on all relevant accounting/financial matters. The staff of the CGE-PB accounting units consists of 29 people who are suitably qualified. 17. In summary, SEIRHMA and CAGEPA, together with the support of CGE-PB, have a suitable organizational structure to ensure responsible Project management. However, given that the Financial/Accounting Department staff of both SEIRHMA and CAGEPA are unfamiliar and inexperienced with the Bank’s policies and procedures (as well as with general accounting principles), staff from all entities will need to participate in the Bank’s next fiduciary training session. 18. Planning and Budgeting. The Project will follow the State’s budget cycle. The budget cycle includes the planning and implementation of all government activities which are reflected in the Multiannual Investment Plan ( Plano Plurianual (PPA)), the Budget Guidance Law (Lei de Diretrizes Orçamentárias (LDO)), and Annual Budget Law (Lei Orçamentária Annual (LOA)). 19. All the Project’s budgeting and accounting transactions will be processed through SIAFI. All payments will follow the official commitment (empenho), verification (liquidação) and payment (pagamento) routines. These routines are processed by the Financial/Accounting Department of SEIRHMA and CAGEPA. Any request for an increase of the approved budget requires pre-approval that is sought through a supplemental budget process. Actual expenditures are compared to budgeted expenditures, with reasonable frequency, and justifications provided for variations relevant to the budget. 20. The PMU will request the creation of (a) specific program(s)/line(s) in the LOA for the Project. This will enable recording and reporting of Project operations/activities and their respective disbursement categories, using the States’ (i.e. Country) systems. Page 46 of 93 The World Bank Paraiba Improving Water Resources Management and Services Provision (P165683) 21. The procedures in place to plan Project activities, prepare related budgets, and collect information from the units in charge of the different components is adequate, but will require close monitoring. This Project requires counterpart funding, which will be monitored via the review of IFRs. 22. Accounting. Since the Project will be implemented using the State’s existing systems, the State accounting standards will be followed. The State of Paraiba follows: (i) the Brazilian Accounting Standards Applicable to the Public Sector (Normas Brasileiras de Contabilidade Aplicadas ao Setor Público-NBCASP); (ii) Law 4.320/64, that establishes certain high-level accounting principles (Normas Brasileiras de Contabilidade-NBC); and (iii) the Accounting Manual Applicable to the Public Sector (Manual de Contabilidade Aplicada ao Setor Público-MCASP) issued under Law 10.180 of February 6, 2001 and Decree 3.589 of September 6, 2001. 23. Both the NBCASP and MCASP were revised via Portaria STN 467 of August 6, 2009 and updated in 2013 to incorporate the text of the International Public-Sector Accounting Standards (IPSAS), with adaptations for the Brazilian reality. There is a work plan (National Treasury Secretariat (STN) Ordinance Implementation Plan n ° 548/2015) in progress, that will culminate in the convergence of 35 IPSAS currently in force by 2021; with the STN subsequently verifying the data of the respective entities of the Federation by 2024. The State is following the STN’s schedule to adopt the NBCASP and MCASP (and thereby IPSAS) by 2024. 24. SEIRHMA, CAGEPA and the CGE-PB, will have access to the Bank’s Client Connection system for up-to-date information relating to the disbursement of the proceeds of the Loan. The Project’s accounting records in SIAFI will be reconciled on a regular basis with this information. SIAFI can produce the necessary financial reports for the Project and accounting and financial staff are adequately trained to use and maintain the system. 25. Internal Controls. Transactions processing will use either the State’s or CAGEPA’s internal approval processes and systems that provide for reasonable segregation of duties, supervision, quality control reviews and reconciliation. The processes flows appear to be well understood by both SEIRHMA and CAGEPA’s personnel. 26. All Project transactions will be processed within SIAFI that enforces strict segregation of duties, controls the preparation and approval of transactions to ensure that these transactions are properly executed and recorded (i.e. different units or persons authorize the transaction and record the transaction), and guarantees the confidentiality, integrity and availability of data. All accounting and support documents are retained on a permanent basis, using a system that allows for easy retrieval for the authorized user. 27. The CGE-PB is an integral part of the State’s internal control system providing the following core services: (a) auditing and assessing the adequacy and effectiveness of the internal control system (internal audit of the Executive branch), including maintaining the State’s Transparency Portal; (b) monitoring the public debt of the State; (c) compliance auditing of procurement processes and contracts; and (d) monitoring and controlling the State’s accounting processes and procedures. 28. The CGE-PB can carry out its audits after prior notification to the organizational unit being audited; it documents any violations of the rules and reports directly and continuously to the Governor of the State. The CGE-PB maintains the unlimited right to information within the scope of their audit mandates. They have access to all premises and facilities Page 47 of 93 The World Bank Paraiba Improving Water Resources Management and Services Provision (P165683) and are authorized to conduct discussions with any member of the organizational unit being audited to clarify questions. 29. The CGE-PB units responsible for the non-accounting functions, consists of 41 auditors with adequate qualifications and experience. The CGE-PB will include the Project in its work program. Recommendations of the CGE-PB will be monitored using an IT system, with the audited business manager having to report back to the CGE-PB, after an appropriate period, whether the audit recommendations have been implemented or not. 30. CAGEPA has a well-established internal audit department (consisting of five staff), with adequate qualifications and experience, that reports directly to the entity’s Board of Directors. The internal audit processes consist of periodic reviews that aim to assess the adequacy of undertaken procedures compared to the guidelines established by the entity. The Project will be included in CAGEPA’s internal audit department’s scope. 31. The Project’s bank account reconciliation will be prepared by someone from SEIRHMA who does not process or approve payments, and all unusual items on the bank reconciliation will be reviewed and approved by a responsible official. 32. There is also an adequate system for protecting the Project’s assets from fraud, waste and abuse. Assets purchased will be listed in an inventory record, using the State asset system (Sistema Integrado de Gestão de Bens e Patrimônio (SIGBP-PB)). Each asset is given an individual master record and number. A physical inventory control is performed at the end of each fiscal year for these assets and reconciled with the respective control accounts annually. If assets are no longer needed, they can either be sold to a third party (public tender/auction), handed over to a project or third party, or retired. Detailed procedures to document the disposal, exist. 33. The Project’s internal control system will be documented in a POM. The POM will comprise descriptions, flow charts, policies, templates and forms, user-friendly tools, tips and techniques to ensure that the approval and authorization controls continue to be adequate and are properly documented and followed with adequate safeguarding of the Project’s assets (including the following topics in the FM and Disbursements section: flow of funds, chart of accounts, Project organizational structure and responsibilities, oversight lines, authority limits, internal and external audit arrangements, accounting practices, disbursement procedures and the financial reporting arrangements). The POM should be prepared by the PMU, approved by the Bank, and maintained/updated throughout the Projects’ life. 34. Flow of Funds and Disbursement Arrangements. The disbursement of Project funds will be processed in accordance with Bank procedures as stipulated in the Legal Agreement and in the Disbursement and Financial Information Letter (DFIL). Funds will be disbursed in respect of eligible expenditures incurred or to be incurred under the Project and in accordance with agreed financing percentages. 35. The primary disbursement method will be Advances. The Project will also be able to process Reimbursements and Direct Payments if required. The funds flow will rely on existing State (i.e. Country) systems: all payments will be made by SEIRHMA and CAGEPA using the SIAFI system, once payment obligations have been committed and verified. 36. The following diagram indicates de flow of funds for the Advance disbursement method: Page 48 of 93 The World Bank Paraiba Improving Water Resources Management and Services Provision (P165683) Figure A1.1. Flow of funds for the Advances. (a) The funds will be transferred to a specific (to be opened specifically for the Project) segregated bank account (DA) administered by SEIRHMA. This account will be opened at a commercial bank acceptable to the Bank (Banco do Brasil). The account will be denominated in Reais (R$ or BRL). Project payments will be made from the DA. (b) Payment processes will be registered in SIAFI by SEIRHMA and CAGEPA and the records will be reconciled at the end of each month. (c) The IFRs and Statement of Expenditures (SOEs) will be prepared by SEIRHMA with information available in SIAFI and supported by the accounting records. 37. The proposed Fixed Ceiling for the DA will be BRL 50,000,000. The Minimum Application Size (MAS) for Direct Payment Withdrawal Applications (WA) will be USD 500,000 equivalent. This MAS is not applicable for the retroactive expenditures WA. The frequency for the presentation of eligible expenditures paid from the DA is at least once every three months. 38. The Project will report on the use of Advances and process Reimbursement requests through WAs supported by SOEs. Direct payments will be documented by Records. SEIRHMA will sign off on the WAs documenting expenditures based only on actual expenditures, ensuring that the Loan proceeds were exclusively used for eligible expenditures. The Project Application Deadline Date (final date on which the Bank will accept WAs from the Borrower or documentation on the use of loan proceeds already advanced by the Bank) will be four months after the Loan Closing Date. This “Grace Period” is granted to permit orderly Project completion and closure of the Loan Account via the submission of WAs and support documentation for expenditures incurred before the Closing Date. 39. No withdrawal shall be made for payments made prior to the date of the Legal Agreement, except that withdrawals up to an aggregate amount not to exceed USD 10,000,000.00 equivalent may be made for payments made on or after November 1, 2018 or the date falling twelve months prior to the Signature Date for Eligible Expenditures as set out in the Legal Agreement. Page 49 of 93 The World Bank Paraiba Improving Water Resources Management and Services Provision (P165683) 40. Category of expenditures and financing percentages: Table A1.3. Category of expenditures. Category Description Amount Percentage of Allocated (USD) Expenditures to be Financed (1) Goods, Works, Consultants’ Services, Non-Consulting Services, 126,568,785 100% Operating Costs, and Training and Workshops for Components 1 and 2 (2) Goods, Works, Consultants’ Services, Non-Consulting Services, 0 100% Operating Costs, and Training and Workshops for Component 3 (3) Front-End Fee 317,215 Total IBRD Project Costs 126,886,000 100% 41. Financial Reporting. SEIRHMA will prepare and submit to the Bank quarterly IFRs no later than 45 days after the end of each reporting period. These IFRs will be produced with information extracted from SIAFI and will consolidate the Project’s financial data for all components using the cash basis. 42. At the end of each fiscal year, SEIRHMA will prepare the annual financial statements for the Project that will be audited. The final quarter IFRs with accompanying notes will serve as the Projects’ annual financial statements. 43. The following quarterly IFRs (to be prepared in Reais, since this is the currency of the DA, will be prepared for Project monitoring and management purposes and submitted to the Bank: (a) IFR 1 –Sources and Uses of Funds by Disbursement Category (period to date, year-to-date, Project-to-date) showing budgeted amounts versus actual expenditures, (i.e., documented expenditures), including a variance analysis; (b) IFR 2 –Uses of Funds by Project Component (period to date, year-to-date, Project-to-date) showing budgeted amounts versus actual expenditures, (i.e., documented expenditures), including a variance analysis; and (c) IFR 3 – DA bank reconciliation and accompanying bank statements. 44. External Auditing. For Project purposes, the external audit of the Project will be performed by a private firm following agreed TORs acceptable to the Bank and in accordance with International Standards on Auditing (ISAs) (issued by The International Auditing and Assurance Standards Board (IAASB) of the International Federation of Accountants (IFAC)) (or national auditing standards if, as determined by the Bank, these do not significantly depart from international standards). 45. The audited financial statements will be prepared in accordance with accounting standards acceptable to the Bank (i.e. IPSAS or national accounting standards where, as determined by the Bank, they do not significantly depart from international standards). The TORs should be prepared by SEIRHMA and approved by the Bank (within 3 months after the Signing Date) with a view to appointing the auditors within 6 months after the Signing Date. 46. The audit report (and any accompanying management letter) should be submitted to the Bank no more than six months after the end of the fiscal year. The Bank will review the audit report and will periodically determine whether the audit recommendations are satisfactorily implemented. The Bank also requires that the Borrower/Recipient Page 50 of 93 The World Bank Paraiba Improving Water Resources Management and Services Provision (P165683) disclose the audited financial statements in a manner acceptable to the Bank and following the Bank’s formal receipt of these statements from the Borrower/Recipient, the Bank will also make them available to the public in accordance with The World Bank Policy on Access to Information. 47. The cost of the Financial Statement Audit will be financed from the Loan. 48. Contingent Emergency Response Component (CERC). The overriding aim of a CERC is to improve the response capacity of the Borrower in case of an emergency. CERCs are designed to disburse only after an emergency has occurred or is about to occur. A disbursement condition for CERC will define the circumstances when the funds under the component will become available. 49. The same flow of funds, accounting, financial reporting, disbursement methods and corresponding supporting documentation requirements will apply to disbursements under the CERC that will be described in the initial DFIL, as the CERC will also be implemented by either SEIRHMA and/or CAGEPA20. 50. The Task Team Leader, in consultation with WBG Finance and Accounting-Trust Funds and Loan Unit (WFATL), will revise the ceiling or limit of the DA and the MAS taking into consideration the planned emergency program expenditures, potential delays or difficulties in banking transfers in emergency situations, communication difficulties in working in remote or inaccessible areas, and other factors to ensure that sufficient liquidity is secured to enable smooth Project implementation. 51. To expedite disbursements for emergency components, the Bank will give priority to the processing of WAs for designated emergency operations. The revised turnaround standards applicable to emergency operations reduce the processing time on WAs from the standard five working days to one working day. 52. Conditions or Nonstandard/Significant Financial Covenants (i.e. Relevant issues to be included in the Legal Documents). There are no significant FM-related conditions for Board and/or Effectiveness. 53. Plan for FM Supervision during Implementation. The Bank will undertake formal supervision of the Project based on a risk profile. Supervision missions will involve amongst other steps: (i) review of the IFRs; (ii) reviews of the auditors’ reports and follow-up on issues raised by auditors, as appropriate; (iii) follow up on any financial reporting and disbursement issues; (iv) a discussion of FM issues with the Project team; and (v) an update of the FM risk and performance ratings in the Implementation Status and Results Report (ISR). 54. It is estimated21 that three to six staff weeks of FM supervision will be needed during the life of the Project. Procurement Assessment of SEIRHMA and CAGEPA 55. Procurement under the proposed Project will be carried out in accordance with the World Bank Procurement Regulations for IPF Borrowers dated July 2016 and the provisions stipulated in the Legal Agreement. The various items under different expenditure categories are described in general terms below. For each contract to be financed by the Loan, the different procurement methods or consultant selection methods, the need for pre-qualification, estimated costs, prior review requirements, and timeframe will be agreed between the Borrower and the Bank in the Procurement Plan. The World Bank's Standard Procurement Documents will govern the international competitive 20 If another entity, other than SEIRHMACT or CAGEPA will be responsible for the CERC, a new FMA will need to be performed of that entity. 21 Assuming implementation and performance is Satisfactory, and the FM risk rating remains MODERATE. Page 51 of 93 The World Bank Paraiba Improving Water Resources Management and Services Provision (P165683) procurement. For national procurement processes, the Borrower will use Standard Procurement Documents acceptable to the World Bank that will be included in the Operational Manual. 56. Procurement of works. Works procured under the Project will include, among others, the Transparaiba water supply system (Ramal Cariri), with international competitive process, the improvement of the wastewater system and the water losses reduction projects in the Metropolitan Region of João Pessoa, with national procurement processes. 57. Procurement of goods. Goods procured under the Project will include, among others: pipes and hydraulic equipment, software packages, communications services, educational materials, vehicles, IT equipment and other tools required to put in place an integrated client system control. Such procurement may be carried out in accordance with the method known as “Pregão Eletrônico”, provided (i) documents are acceptable to the Bank and in accordance with the Procurement Regulations, (ii) documents include anti-corruption clauses, and (iii) the process is carried out under an e-procurement system previously approved by the Bank. 58. Procurement of non-consulting services Non-consulting services under the Project will include, among others: capacity building support to the implementation and beneficiaries’ agencies; monitoring, reporting and evaluation- related services; events of various natures, among which training, workshops and seminars; logistics, such as hotel services, catering and travel services; printing services, videoconferencing materials, brochures, magazines, intranet, and videos; communication and education campaigns and events, etc. It may be carried out in accordance with the method known as “Pregão Eletrônico” in accordance with the Procurement Regulations, (ii) documents include anti- corruption clauses, and (iii) the process is carried out under an e-procurement system previously approved by the Bank. 59. Selection of consultants. Consulting services under the Project will include technical assistance and advisory services of various natures and purposes, among which: engineering services; water resources and environmental studies, feasibility and pre-feasibility studies, diagnostics and impact assessments; software and system development-related services, etc. The following methods will be used for selecting consulting firms depending on the nature and complexity of assignments, attractiveness to foreign firms and need for international expertise, estimated budget of the services: Quality and Cost Based Selection (QCBS), Least Cost Selection (LCS), Selection under a Fixed Budget (SFB), Selection Based on Consultant’s Qualification (SBCQ), Single-Source Selection (SSS) both for consulting firms and individual consultants, and Selection of Individual Consultants (IC). Contracts estimated to cost USD 300,000 equivalent and more will be advertised internationally. 60. Operational costs refer to office supplies, per diem, staff related expenses, sundries, incidentals, and other project implementation related expenses which would be financed by the Project and will be procured using any implementing agency’s administrative procedures acceptable to the Bank and outlined in the Project’s Operations Manual. However, they should be described in the procurement plan accordingly. 61. Others. The procurement procedures and standard bidding documents to be used for each procurement method, as well as model contracts for works and goods to be procured, are presented in the Project’s Operational Manual. 62. The assessment determined that the procurement staff to be designated for the Special Bidding Committee be kept exclusively on the PMU team to assist project implementation. 63. Procurement assessment. The Bank team performed a Procurement Assessment to evaluate the capacity of the agencies involved to implement procurement actions for the Project. Procurement activities will be carried out by Page 52 of 93 The World Bank Paraiba Improving Water Resources Management and Services Provision (P165683) SEIRHMA – the PMU’s central unit for the execution, coordination and monitoring of procurement processes and for overall project implementation and monitoring. The agency’s responsibilities will include, among others: procurement planning, implementation and monitoring, ensuring quality of bidding documents, and participating in bid evaluations. The Bank reviewed the organizational structure for Project implementation and the interaction between Projects staff responsible for technical aspects and PMU, staff skills, quality and adequacy of supporting and control systems, and suitability of applicable laws, rules and regulations. The assessment determined that the procurement staff designated for the Project should be kept exclusively within the implementation agencies to assist project implementation, especially in PMU. In addition, a procurement consultant with experience in Bank procedures should be hired on an ad hoc basis to assist during critical stages of the procurement processes. Based on the information provided at preparation, the procurement risk is Substantial. 64. The following action plan was proposed to address and/or mitigate risks during Project implementation: Table A1.4. Procurement Action Plan. Act Description Action Timeframe Lack of Paraiba Hiring of an ad hoc procurement specialist to State and support PMU and Agencies staff; CAGEPA’s 1 experience in Strengthening the capacity of Agencies, By Effectiveness. implementing through ongoing Bank support and specific World Bank- procurement training. financed projects Use of: (i) national media to elicit interest in Lack of Interest of for works, goods and non-consulting services, companies to (ii) international media to elicit interest in the As defined in the Operations 2 participate in the selections of consultancy of higher Manual. tendering complexity, and (iii) direct contact with the procedures market. Obtain expert advice to inform the definitions Prior to Effectiveness, as the Inadequate quality of the ToRs and TEs. ToRs and TEs are prepared, of TORs and and throughout 3 Technical implementation Specifications (TEs) Technical no objections to technical Prior to launch of each Project documents to be issued by the World Bank. procurement process. Look for budgeting based on data that Weak and Prior to Effectiveness, as cost reflects the market and not just on official 4 imprecise cost estimates are prepared, and tables issued by various spheres of estimates throughout implementation. government. Page 53 of 93 The World Bank Paraiba Improving Water Resources Management and Services Provision (P165683) Maintain strict control over the companies Before signing the first Companies and individuals present in the different contract using loan funds, and involved in fraud 5 control lists in Federal, State, and Municipal throughout implementation. and corruption scope, and even in lists of international issues financing institutions. Members of the team with responsibility for Before signing the first the formal control of the execution of contract using loan funds, and Contract contracts, controlling and monitoring the throughout implementation. 6 management progress of the contracts, also the milestones for their development, such as deadlines, readjustments (when applicable), etc. 65. It was agreed that an approximate amount of USD 200,000 will be made available under Project proceeds to finance some procurement capacity deemed appropriate and previously approved by the Bank. 66. Procurement arrangements for the Project were established taking into consideration Paraiba and CAGEPA’s existing systems. The agencies are responsibility for elaborating the Terms of Reference and Technical Specifications. The PMU is responsible for elaborating the bidding documents and Requests for Proposals and conducting the procurement/selection processes. The Project team will count on a focal point from the PMU to be responsible for developing the Project’s procurement packages, including among other activities: (i) consolidating the procurement packages for consulting services; (ii) issuing requests for expressions of interest, requests for proposals and procurement notices; (iii) conducting opening and negotiations sessions, when applicable; and (iv) consolidating evaluations and inputs from the technical evaluations. 67. All bidding documents and respective contracts regardless of the procurement method are required to have the anticorruption (A/C) clause as a condition for eligibility of expenditures. Procurement Plan 68. The Borrower has developed a Procurement Plan for the first eighteen months of Project implementation, which provides the basis for the procurement processes. The use of STEP – Systematic tracking of exchanges in procurement is mandatory to manage the Procurement Plan. This Plan has been agreed upon between the Borrower and the Bank Project Team on December 18, 2018. The Procurement Plan will be updated in agreement with the Bank on an annual basis or as required to reflect actual Project implementation needs and improvements in institutional capacity. Frequency of Procurement Supervision 69. In addition to the prior review supervision to be carried out from Bank offices, the capacity assessment of the Implementing Agency has recommended yearly field visit supervision missions to carry out post reviews of procurement actions. Page 54 of 93 The World Bank Paraiba Improving Water Resources Management and Services Provision (P165683) Summary of PPSD 70. Based on the strategy developed and low-risk and low-value activities planned so far, it is expected that the activities will be carried out with the following arrangements: (i) Works: carried out through RFB and RFC - National approach; (ii) Goods and non-consulting services: The project plans to finance the procurement of goods to be acquired through SDO, SDC - National Approach and e-reverse auction, with bidding documents acceptable to the Bank; (iii) Consulting Services: The project will finance, inter alia: consulting activities, mainly for planning, construction projects, auditing, monitoring, supervision and data collection. QCBS, LCS, QCS are the most appropriate selection methods, but this approach can be reviewed in the face of the finalized TORs. It should be noted that any change in the conditions described in this strategy must necessarily be reflected in this document and in the Procurement Plan. Plan for Procurement Supervision during Implementation. 71. In addition to the prior review supervision to be carried out from Bank offices, the Bank will undertake at least one early supervision mission to visit the field and carry out post review of procurement actions. 72. it is estimated22 that twelve staff weeks for procurement supervision will be required during the life of the Project. 22 Assuming implementation and performance is Satisfactory, and the procurement risk rating remains Substantial. Page 55 of 93 The World Bank Paraiba Improving Water Resources Management and Services Provision (P165683) ANNEX 2: Detailed Project Description COUNTRY: Brazil Paraiba Improving Water Resources Management and Services Provision Detailed Project Description by Component 1. Given the State of Paraiba and the Project’s sectoral context, the Government of Paraiba (GoP) established water security as a high priority within the current four-year government plan. The Project’s design seeks to address these priorities by supporting: (i) the expansion and modernization of water infrastructure; and (ii) the development and implementation of institutional models that will improve the efficiency of water resources management (AESA) and water and sewerage services (CAGEPA). 2. The Project will likewise contribute to building climate resilience in participating water and wastewater agencies by improving their operational efficiency, better preparing them to manage extreme weather events, and by using water resources more efficiently through improved water distribution. These investments are aimed at enhancing efficiency in water distribution and providing an acceptable quantity and quality of water supply and wastewater services in the long term. 3. The Project is comprised of three components as follows: Component 1 - Integrated Water Resources Management; Component 2- Improved Water and Sanitation Services Reliability and Efficiency; and Component 3 - Contingent Emergency Response. Table A2.2 presents the integrated approach of Project components in relation to government priorities, agenda and sectors and Table A2.3 presents the components structure, broken down to main activities for each (sub)component. Table A2.2. Project Components in alignment with Government Priorities, Agenda and Sectors. Government Priorities, Agenda and Sectors Water Resources Management Water & Wastewater Services Policies and Strategy Institutions (legal and organizational) framework Planning Component 1 Component 2 Knowledge, Technology and Information Incentives/Financing Infrastructure Page 56 of 93 The World Bank Paraiba Improving Water Resources Management and Services Provision (P165683) Table A2.3. Project Structure by Components, Sub-components and Main Activities. CP FUNDS COMPONENT BUDGET (USD) SUBCOMPONENT WB LOAN (USD) IMPLEMENTER MAIN ACTIVITIES (USD)  Water governance  Operation and monitoring of 1.1. Improving Water 4,100,000 ASEA / SEIRHMA water resources Management  Water Resources Management Instruments  PSH/PB management  Institutional strengthening of 1. Integrated the institution related to the Water PSH/PB 11,100,000 Resources  Dam safety studies and Management monitoring of 4 existing dams 1.2. Project Management and 7,000,000 SEIRHMA upstream of water intakes in Institutional Development the Paraiba river  Pre-feasibility studies of 5 proposed dams in in the Piranhas-Açu River Basin  Cartographic base of the State of Paraiba  Transparaíba Water Supply System – Cariri water supply 2.1. Water infrastructure in system 80,800,000 80,200,000 2. Improved the Agreste Region  Transparaíba Water Supply Water and System – Curimataú water Sanitation supply system 195,668,785 CAPEGA Services  Restructuring/upgrade of João Reliability and Pessoa’s wastewater system Efficiency 2.2. Water and Sanitation in  Institutional the João Pessoa Metropolitan 34,668,785 restructure/strengthening of Region CAGEPA  Non-revenue water program 3. Contingent Emergency 0 - SEIRHMA Response (CERC) Front-end fee – 317,215 317,215 0,25% TOTAL (US) 207,086,000 126,886,000 80,200,000 Component 1: Integrated Water Resources Management (US$11.1 million, 100 percent IBRD financing) 6. This component will support Government of Paraiba efforts to improve water security in the State, though, inter alia technical assistance and minor works to: (i) strengthen the management and planning of water resources; (ii) improve hydrometeorological network and forecast capabilities; (iii) modernize the operation and maintenance of key bulk water infrastructure; and (iv) increase the safety of existing dams in the Paraiba river. A summary of activities for this component is presented in table A2.5. 7. This component will support the improvement of water resources management in the State, challenged by the significant and competing demands on water which are compounded by increasing extreme droughts throughout 87 percent of the state which lies in the semi-arid region, and by floods in the coastal area. A significant portion of activities to be supported under this component were identified as priority interventions in the 2017 World Bank-financed NLTA Improving Water Security in the State of Paraiba. Page 57 of 93 The World Bank Paraiba Improving Water Resources Management and Services Provision (P165683) 8. Component 1 comprises two sub-components: Subcomponent 1.1 - Improving Water Management - and Subcomponent 1.2 - Project Management and Institutional Development - which will be implemented by SEIRHMA and benefit AESA. Subcomponent 1.1 - Improving Water Management (US$4.1 million, 100 percent IBRD financing) 9. Subcomponent 1.1 will finance technical assistance to AESA to support the: (i) improvement of water governance and management instruments; (ii) operation of bulk water infrastructure; and (iii) hydrological and meteorological monitoring and forecast. The main activities to be financed include: (a) Revision of the normative and legal framework of the State Water Resources Policy and institutional review of AESA; (b) Expansion and modernization of the State’s meteorological and hydrological monitoring, including the installation of automatized stations, computerized systems, and training; (c) Installation of a groundwater monitoring network, development of hydrogeological studies and mapping of groundwater management zones; (d) Studies to improve the operation, maintenance and management of key bulk water infrastructure in the State, including the ones benefiting from the additional water transferred from the PISF; (e) Development of and training on guidelines and procedures to improve dam safety regulation in the State; (f) Studies to improve bulk water charges and revenue collection in the state, including PISF operation and maintenance costs imposed by the Federal Government to the State; (g) Studies to improve criteria and procedures to grant water use rights in state waters, including mechanisms to coordinate with ANA regarding water bodies under Union domain; (h) Improvement and expansion of the Water Resources Information System, including a decision-making support system; (i) Updating of the Paraiba River Basin Plan. 10. Readiness. Roughly 30 percent of this subcomponent is expected to be procured or selected during the first year of Project implementation. The Terms of Reference for the revision of the State Water Resources Policy are already being developed, while those underlying the institutional strengthening of AESA and technical specifications for automatized stations are ready. 11. Water governance. The main assumptions of good water governance are related to efficiency, effectiveness trust, and commitment of responsible agencies in the performance of their duties. It is, therefore, fundamental that the institutional and legal frameworks underlying the State Policy on Water Resources incorporate such principles and that it adequately responds to the challenges of decentralized and participatory water resources management. To this end, the Project will support the revision of the normative and legal framework of the State Water Resources Policy, AESA and SEIRHMA, and the institutional review of AESA. Although the legal framework of the Paraiba Water Resources Policy that was published in 1996, has undergone some updates, a broader review of the overall framework is necessary to ensure that modern organizational and methodological principles of water governance are incorporated. Proposed revisions may include improvements the legal frameworks of the State Policy on Water Resources and to relevant institutions, such as AESA, SEIRHMA ant the CERH. Page 58 of 93 The World Bank Paraiba Improving Water Resources Management and Services Provision (P165683) 12. The Project will fund a technical assistance for improving AESA’s institutional capacity to perform the dam safety regulatory role. AESA is the Supervisory Agency in charge of regulating and enforcing dam safety of multiple use dams located in state rivers, such as Sao José, Poções, Camalaú and Boqueirão. AESA has limited institutional capacity and technical staff to supervise dam safety in the Paraíba State, and deal with more complex situations, such as the Epitácio Pessoa (Boqueirão) dam risk assessment. 13. Strengthening AESA’s strategic planning is an important step to improve its performance in the long run . AESA was created in 2005 with scope and mandate in the climate and water sectors and manages water resources in the State of Paraiba. In order to effectively address the ever-increasing complexities associated with water resources management in the State, the Agency needs to update its institutional/organizational structures including the adoption of an organizational management model that will allow it to better confront prevailing challenges and achieve good water governance – particularly as relates to strengthening commitment to and efficiency in carrying out its duties. Transparency and accountability are likewise crucial for good water governance. It is, therefore, essential AESA periodically publish reports on the management of water resources - including dam safety - which will inform both water users and civil society alike about management activities/services and the state of water resources in Paraiba. 14. Improve operation and monitoring of water resources. AESA monitors hydrometeorological variables and water resources, through monitoring stations (rainfall, fluviometric and agrometeorological), rulers in reservoirs, measurement campaigns of flow and bathymetry in reservoirs. Such data must be stored, analyzed, consolidated and made available to decision makers and water users alike. The complexity of the water management requires extended coverage and real time monitoring to increase the robustness and agility of decision making processes. This is essential to both the operation and planning water use, to guarantee water security and the most efficient use of water. 15. Water originating from the transposition of the São Francisco river arrives in Paraiba from the east (under operation) and the north (under final construction phase) canals . On the eastern canal, waters enter the Upper Paraiba River in the region of Monteiro, flowing down along the Paraiba River to: (i) the Poções reservoir, which will supply the Cariri branch of the Transparaiba Water Supply System; (ii) to Camalaú reservoirs, which supplies water to existing water system; (iii) and to Boqueirão reservoir, located in its middle course, which supplies the metropolitan region of Campina Grande and the Curimataú branch of the Transparaíba Water Supply system; and (iv) the Acauã reservoir, connecting the Paraíba river to the costal side through the Acauã-Araçagi canal. The Northern canal will reach Paraiba in the Sertão region, with no relation to the project. 16. To improve operation of water resources and key bulk water infrastructure, the Project will support the expansion and modernization of the hydrometeorological monitoring and forecasting in the State, though, inter alia: (a) Modernization of the AESA fluviometry activities with the acquisition of automatic volumetric system of rivers and reservoirs, with state-of-the-art acoustic doppler, integrated to automatic bathymetric system, georeferenced satellite data with RTK (PCM), including training. (b) Modernization of AESA fluviometry measurement systems, with the acquisition of automatic flowmeters, portable type, for verifying and supervising the volumes of rivers and canals, including training. (c) Modernization of the state water quality monitoring program with the acquisition of multiparameter probes with automatic measurement capability of the following parameters: depth, conductivity, temperature, pH, oxidation potential, dissolved oxygen, total algae combo (green algae and blue & phycocyanin for freshwater + chlorophyll), turbidity, fdom (fluorescent dissolved organic matter), salinity, specific conductance, total dissolved solids and total solids, including training. (d) Modernization of the pluviometric network and implementation of the climate impact monitoring network with the acquisition and installation of automatic thermohydrometer stations. Page 59 of 93 The World Bank Paraiba Improving Water Resources Management and Services Provision (P165683) (e) Acquisition and installation of agrometeorological stations, representative of the climate of geographic microregions of the state of Paraiba. 17. PISF23 water management plan. The state of Paraiba should plan the operation of water systems and their infrastructures considering the addition of São Francisco waters, seeking to optimize the use of this water and institutional sustainability, including financial aspects of the operating system. In this sense, the proposed PISF water management in the State will incorporate the following aspects: institutional, economic and financial; and operational and water management. On the other hand, the channels of Redenção and Coastal Slopes (Acauã-Araçagi canal) are responsible for the transfer of water resources for agricultural uses and supply. Thus, they require planning for their proper operation and maintenance, considering the optimization of the uses of the channels, as well as technical, institutional and financial issues. 18. Groundwater knowledge and management. The project will support groundwater monitoring network and hydrogeological studies on the recharge areas in the Pernambuco-Paraiba system and mapping of management zones. The State of Paraiba does not have a groundwater monitoring network to observe productivity and possibilities for the aquifer, as well as impacts of the exploitation. The State has important alluvial and confined aquifers, Pernambuco- Paraiba and the Peixe River Basin, which represent a strategic water source. The lack of data observed hinders the management of such resources, especially the granting of the possible permits. In addition to the monitoring network, the State needs to identify recharge areas and management zones to establish possible areas of protection and subsidize the granting of permits for wells. 19. Water Resources Management Instruments. The implementation of the management should be done through the management tools of the basin plan, granting of water use rights, collection by the uses of water resources, Information System, framing of water bodies according to with the classes of use and other instruments and tools that subsidize an integrated water resources management. (a) Regulatory and operational enhancement of the granting of rights to use water resources and management agreements: The concession has been regulated in Paraiba since 1997 and is the main management instrument of the State. Its regulatory character has enabled the knowledge and attendance of multiple uses. However, the methodological and operational bases of the instrument need to be improved and modernized, to give greater speed in the concession and guarantee to the user. The State has water bodies characterized by conflicts of use, and for the resolution of these conflicts a methodological and operational proposal must be elaborated for the construction of management pacts that incorporate commitments related to the execution of the management, water allocation and conditions agreements between states and/or water systems in the river basin. It is important that the State establishes dialogues with ANA, due to water bodies of Union domain, such as the Epitácio Pessoa reservoir (Boqueirão). (b) Study on bulk water charging and revenue collection - Financial sustainability and financial solidarity between basins: The State of Paraiba has adopted the application of the Billing instrument since 2012 with the objective of recognizing water as an economic good and encouraging the rational use of water in accordance with 23 Integration Project of the São Francisco River (PISF – Projeto de Integração do rio São Francisco). PISF has an extension of 477 km organized in two water transfer axes - North and East. The work includes the construction of 4 tunnels, 14 aqueducts, 9 pumping stations and 27 reservoirs. The project will integrate the São Francisco basin with the Jaguaribe, Piranhas Açu and Apodi (CE/RN/PB/PE) basins by means of channel, drainage, pumping and adduction stations. In addition, there will be implementation of the water infrastructure through land acquisition, population relocation, implementation of transmission lines and substations, channel implementation works, drainage works, construction of tunnels, aqueducts, pumping stations, structure of disengagement, construction of buses and implementation of control and derivation structures. This project from the Federal government of Brazil seeks to secure the long-term water supply of large urban centers in the region, such as Fortaleza, Juazeiro do Norte, Crato, Mossoró, Campina Grande, Caruaru, João Pessoa and hundreds of small and medium-sized semi-arid cities. Page 60 of 93 The World Bank Paraiba Improving Water Resources Management and Services Provision (P165683) Decree 33.613/12. This Decree indicates that the amount collected by AESA must be applied, strictly, in the financing of actions of programs foreseen in the State Plan of Water Resources; in the financing of actions that aim at the optimization of water use; and the payment of maintenance and administrative expenses of the river basin committees, when they are established. The total revenue collected for 2015-2017 was slightly below R$2 million, of which about 87% were users of the Abiaí, Paraiba, Gramame and Miriri river basins. The Decree also indicates that the collection values should be reviewed after three years. In this sense, it is imperative to analyze and revise revenue collection in the State, to study the capacity of payment of water users and methodology and concepts adopted, as well as to update the values practiced and propose a plan of application of the collected resources, aiming at a greater financial sustainability of the management system, incorporating the perspective of financial solidarity among the river basins. (c) Expansion of the Water Resources Information System for strategic management level – decision-making tool: AESA has undergone a modernization process that includes the massive adoption of Information Technology in its processes, turning the agency more efficient and effective. In this case, efficiency means greater agility in the various operations of the agency, while effectiveness relates to operations done more correctly since they have well-defined information flows and well-developed business rules that validate the information flowing in the agency. These systems are located at the operational level, namely: Management System of Grant and Water Works License, Hydrometeorological Monitoring System, Water Use Inspection System, Water Quality System, Dam Operation and Safety System, Fluviometry System, Geographic Information System of Water Resources; Electronic Process System. All these systems are integrated and operate in the operational and tactical areas of the Agency. To continue the modernization process, AESA needs to understand its efforts to implement decision-making information systems (managerial and strategic), assisting agency managers in decision-making, supported by data, information and knowledge. (d) Updating of the Paraiba River Basin Plan: The Paraiba River Basin Plan was drawn up in 2002, with a deadline horizon of 2022. It can be observed that the Basin has several socioeconomic and physical changes not foreseen in the Plan (2012-2017) with large impacts. Several aspects hindered the effective application of the instrument in the orientation of public investments and management of the basin. In this sense, it is necessary to review this instrument, incorporating issues such as planning cycle, sources of resources, the content of the Plan itself, regulation, linkage to the PPA (budget law), preparation for drought, water allocation, articulation process and mobilization, implementation and monitoring. It is essential that the activity be developed with the Paraiba River Basin Committee, public participation, inter- and intrasectorial articulation, as well as dialogue the Paraiba State Plan. Sub-Component 1.2: Project Management and Institutional Development (US$7 million, 100 percent IBRD financing) 20. Sub-component 1.2 will finance the following set of activities: project management, update of the cartographic base of the state of Paraiba, institutional strengthening of the organizations related to the project, planning water security infrastructure through the support to prepare pre-feasibility studies of proposed dams in in the Piranhas-Açu River Basin, located in the Sertão (Western) Region of the State, and develop dam safety instruments to improve safety of existing upstream dams in the Paraiba river. Main activities supported by the project include: (a) support the project management unit, including financing of consultants to provide technical, safeguards, fiduciary, monitoring and administrative support; (b) technical support and minor works to improve the safety of existing upstream dams in the Paraiba river, including dam safety panel; Page 61 of 93 The World Bank Paraiba Improving Water Resources Management and Services Provision (P165683) (c) support the institutional strengthening of organizations related to the project, such as ARPB, SUDEMA and CGE; (d) development of pre-feasibility studies of dams in the Piranhas-Açu river basin; and (e) support the updating of the cartographic base of the state of Paraiba. 21. Readiness. Around 20 percent of this s subcomponent is expected to be procured or selected during the first year of project implementation. Terms of reference are already being developed for the consultants supporting the project management, for the dam safety panel, which should be ready by project effectiveness, and for the operation and emergency plans for the existing upstream dams, based on sample provided by the Bank. 22. Project Management. The first activity of this sub-component is to finance the general operating costs of the PMU (located in SEIRHMA) to coordinate, implement, supervise, and monitor the Project. Responsibilities of the PMU include project management and coordination, procurement and financial management, project monitoring and evaluation, social and environmental safeguards management and oversight, and strategic project communications and outreach. This will include: (a) Ensuring the presence of a group of core experts, including but not limited to project coordinator, financial management, social and environmental safeguards, M&E, and procurement; (b) Conduct of external project audits as required; (c) Independent technical, economic, and financial reviews of the project as required; (d) Project procurement systems, and other requirements for effective procurement; (e) FM systems, and other requirements for effective FM; (f) Preparation of environmental and social safeguards instruments, including RPF, ESIA, ESMP (as appropriate), and social audits; (g) Gender-balanced community consultation and communication activities with project beneficiaries, affected people, and primary stakeholders; (h) Data collection and studies for project evaluations, baseline beneficiary surveys, and alignment with national M&E systems; (i) Project reporting, as required by the legal agreement and POM, including but not limited to semi-annual progress reports, preparation of the project mid-term review, and the preparation of the implementation completion report; (j) Design and implementation of the project’s information and communication activities. 23. Specifically, on improving safety of existing dams, the TransParaíba water supply scheme, to be financed by the project, would draw directly from two reservoirs controlled by existing dams, Epitácio Pessoa Dam (Curimataú water supply system) and Poções Dam (Cariri water supply system). The Project involves two other existing dams, the Camalaú Dam, located upstream of the Epitácio Pessoa Dam and the São José II Dam, located upstream of Poções Dam. Only the São José II Dam is not classified as a “large dam” according to OP 4.37. The Camalaú Dam belongs to the State of Paraiba and the other others to the Federal Agency - Departamento Nacional de Obras Contra as Secas (DNOCS). Page 62 of 93 The World Bank Paraiba Improving Water Resources Management and Services Provision (P165683) Table A2.4. Existing Dams Related to the Project. San José II Poções Camalaú Boqueirão (Epitácio Pessoa) Owner/ Operator DNOCS DNOCS Paraíba DNOCS Dam height (m) 9 19 Government 28 42 Reservoir Capacity 1.3 30 46 535 (million m3) Relation to the Upstream of Intake – Cariri Upstream of Intake – Curimataú Project Poções Water Boqueirão Water Subsystem Year of Construction 50s Subsystem 1982 1986 1956 Type Reinforced Earth Rockfill Earth Homogeneous concrete Homogenous 24. The Borrower has retained an independent dam expert to: (i) inspect and evaluate the safety status of the existing dams, their appurtenances and performance history; (ii) review and evaluate the owners’ operation and maintenance procedures; and (iii) provide written reports of findings and recommendations for any remedial work or safety-related measures necessary to upgrade the existing dams to an acceptable standard of safety. 25. The Independent Dam Safety Assessment Report was submitted to the Bank, noting that the three large dams related to the Project (Poções, Camalaú and Boqueirão), have been undergoing comprehensive rehabilitation works in 2016/2018 by the Federal Government, aimed to improve the dam's safety in compliance with the requirements set out in the National Dam Safety Policy (Federal Law No. 12334 of 2010), developed between 2010-2015 with WB support. The rehabilitation has included the preparation of detailed engineering designs aimed at recuperating the three dams, including enlargement of the existing spillways, construction of new low-level outlets, among other interventions. By mid-2018, the rehabilitation works in the Epitácio Pessoa Dam had been concluded while the other two dams were in advanced stages. 26. The Independent Dam Safety Assessment Report also assessed the capacity of the spillways, the existence of a proper set of monitoring instruments and adequate instrumentation plan, availability of applicable plans (e.g. dam safety plans, operation and maintenance O&M plans, emergency preparedness plans – EPPs), as well as the need for additional interventions, beyond the rehabilitation works already developed by the Federal Government. 27. The Independent Dam Safety Assessment Report concluded that none of the dams related to the Project posed major risks, but presented a series of recommendations, including additional studies and technical investigations in the Epitácio Pessoa (Boqueirão) Dam, improvements to the existing O&M plans and development of emergency preparedness plans, developments in the instrumentation, review of the hydrological studies of the entire basin, upstream of Boqueirão, and capacity building/strengthening of the Paraiba Water Agency (AESA) for regulation of dam safety in the State. It was agreed that an Independent Dam Safety Panel would be established to follow-up on all activities related to the dams. The activities described above would be funded by the Project. 28. The additional studies on the Epitácio Pessoa (Boqueirão) Dam will include preparation of a comprehensive risk analysis, covering the embankment, dikes, along with associated appurtenant structures and critical components of associated appurtenant structures. The risk analysis would be conducted in accordance with Good International Page 63 of 93 The World Bank Paraiba Improving Water Resources Management and Services Provision (P165683) Practices, such as the US Bureau of Reclamation Standards24, and may result in the recommendation of additional rehabilitation measures. 29. The improvements in the dam safety plans would consist of the preparation/completion of specific operation and maintenance manuals for the large dams, an emergency preparedness plan (EPP) publicly approved and an emergency action plan (EAP) for high spillway discharge & dam break contingencies to warn the population and implement partial or full evacuation, as necessary. The EPPs will include a dam break analysis as well as the definition of security areas around the reservoir, dams, and structures. 30. Pre-feasibility studies for dams located in the Piranhas-Açu basin. The Piranhas-Açu River has its intermittent course in natural conditions and, like the other rivers in the basin, the perennial condition occurs through two regularization reservoirs built by the National Department of Drought Control ( DNOCS - Departamento Nacional de Obras Contra as Secas): (i) Coremas/Mãe d'Água, in Paraiba; and (ii) Armando Ribeiro Gonçalves, in Rio Grande do Norte. These reservoirs constitute the main water sources of the basin, responsible for meeting external water demands, which are associated with adjacent basins. With demands exceeding water availability, indicative of repressed demands or served with a low level of water security, the situation characterizes the vulnerability of the basin's water infrastructure, both in terms of water storage and in the capacity of water transfer between basins, for service established uses. In view of the higher demands on water availability in the Piancó-Piranhas-Açu River Basin, and observing the Hydrographic Basin Plan, it was verified that the Plan includes several dams’ construction for water reserve in secondary sub-basins, facilitated by the presence of bottlenecks located in the tributaries, which reduces costs and enables dams with better distribution in the territory. In the context, the Plan outlined sixteen probable locations for the construction and expansion of dams. The Paraiba Water Security Project, however, will only focus on the pre-feasibility study of possible dams in the Piranhas-Açu Basin. This activity will include all preliminary studies and feasibility for the detection of dams, as well as all hydrological, geotechnical, social, environmental and economic studies. 31. Institutional strengthening of the organizations related to the Project . Preliminary studies carried out by SEIRHMA as well as the NLTA prior to this IPF, point out that the institutions of the water resources and sanitation sector in Paraiba are in urgent need of institutional modernization to improve their technical-functional and operational performance. Along with AESA and CAGEPA, three other institutions are key to the integrated water resources management of the State: ARPB, SUDEMA and CGE. a. Regulatory Agency of the State of Paraiba – ARPB. A special regime independent agency created in 2005, and regulated in 2006, with the purpose to regulate, control and supervise the public service of energy supply, distribution of piped gas, sanitation and other public services, in the jurisdiction of the State of Paraiba. It is ARPB's responsibility to ensure compliance with the legislation and the public service concession contracts which it is responsible for supervising. To this end, the Agency, in monitoring services, in deciding or preventing conflicts, in guiding dealers and consumers, will be working towards the desirable balance between the granting authority, the concessionaire and the consumers, in this case, for the water and sanitation sectors. b. Superintendence of Environment Administration – SUDEMA. Created by the State of Paraiba in 1978 to develop the State’s environmental policy. Its mission is to develop policy actions geared towards environmental protection, prevention and education, as well as strategies to guarantee current and future generations, a quality of life compatible 24 Including the review/completion of the dam documentation (engineering designs, as built drawings); Geotechnical investigation (embankment and foundations); Installation of the instrumentation required for the embankment stability analysis; Embankment stability analysis; Seepage investigation (embankment and foundation); Hydraulic Analysis/Design; Identify and define plausible Potential Failure Modes – PFMs; Definition of occasional remedial works. Page 64 of 93 The World Bank Paraiba Improving Water Resources Management and Services Provision (P165683) with the harmony of environmental and natural resources, such as water resources. SUDEMA provides environmental licenses following an evaluation of any action that might have any impact on the environment, like wastewater works. c. General Controller of the State of Paraiba – CGE. It is the responsibility of the CGE to monitor the management, oversee and analyze the processes of account rendering, acts of admission of personnel, pensions, bids, contracts and agreements of the state administration, all which water resources management institutions are part of. 32. Update of the cartographic base of the state of Paraiba. This activity will provide technical assistance to the State to assess the existing cartographic database and its management. The goal is to propose an innovative strategy to update both, database and management system. Table A2.5. Summary of Activities under Sub-Components 1.1 and 1.2. SUB- MAIN COST SPECIFIC SPECIFIC ACTIVITY (SA) IMPLEMENTER COMPONENT ACTIVITY (MA) (USD) COST (USD) Consultancy to review the normative, legal framework (of the state policy of water resources, AESA and 170,000 Water SEIRHMA), and institutional review of AESA. Governance Consultancy for the elaboration of the Strategic Planning 150,000 of AESA. Modernization of Fluviometric activities of AESA with the acquisition of automatic system of volumetric survey of rivers and reservoirs, with state-of-the-art acoustic 139,000 doppler, integrated to automatic bathymetric system, georeferenced system of satellite data with RTK correction (PCM) - Purchase and training. Modernization of AESA fluviometry measuring systems, with acquisition of automatic flow meters, portable type, 63,000 for verifying and supervising the volumes of rivers and canals. - Purchase and training. Modernization of the state water quality monitoring 1.1. Improving AESA/SEIRHMA program with the acquisition of two multiparameter Water probes with automatic measurement capability of the Management 4,100,000 Operation and following parameters: depth, conductivity, temperature, Monitoring of pH, oxidation potential, dissolved oxygen, total algae 89,000 Water combo (green algae and blue and phycocyanin for fresh Resources water + chlorophyll), turbidity, fdom, salinity, specific conductance, total dissolved solids and total suspended solids - Purchase and training. Modernization of the pluviometric network and implementation of the climate impact monitoring network with the acquisition and installation of 999,000 automatic thermohydrometer stations - Purchase and installation. Acquisition and installation of agrometeorological stations, representative of the climate of the geographic 640,000 microregion - Purchase and installation. Preparation of hydrogeological studies on the recharge areas in the Pernambuco-Paraiba system with the 150,000 elaboration of the map of management zones and Page 65 of 93 The World Bank Paraiba Improving Water Resources Management and Services Provision (P165683) SUB- MAIN COST SPECIFIC SPECIFIC ACTIVITY (SA) IMPLEMENTER COMPONENT ACTIVITY (MA) (USD) COST (USD) elaboration of a groundwater monitoring network proposal for the state of Paraiba. Consultancies to prepare the Water Management Plan for the transposition of the São Francisco River in the 320,000 state of Paraiba and the channel of Redenção and Coastal Slopes. Support AESA to improve dam safety regulation ion the 80,000 State. Consultancy to carry out the normative and operational improvement of the granting of water resources 25,000 management rights and management agreements. Consultancy to carry out a study on revenue collection: Water Financial sustainability and financial solidarity between AESA/SEIRHMA 25,000 Resources basins. Management Consultancies for expansion of the water resources Instruments information system to a strategic decision-making 250,000 management level. Consultancy to elaborate the Plan for the revitalization 500,000 of the Paraíba River Basin Consultancy to update the Paraiba River Basin Plan. 500,000 Project Management of the PSH-PB (Strengthening of the PMU 2,000,000 Management to coordinate, implement, supervise, and monitor). Institutional Strengthening of the Institutional strengthening of the organizations involved 500,000 1.2. Project Organizations in the PSH-PB (SUDEMA, ARPB, CGE). Management related to the and Project 7,000,000 SEIRHMA Institutional Dam safety of Safety studies and plans of existing upstream dams, Development 1,500,000 existing dams instrumentalization and minor rehabilitation works. Support AESA Update of the cartographic base of the state of Paraiba 1,000,000 in planning water security Consultancy to prepare pre-feasibility studies of 5 infrastructure proposed dams in in the Piranhas-Açu River Basin, 2,000,000 located in the Sertão (Western) Region of the State. Component 2: Improved Water and Sanitation Services Reliability and Efficiency (US$195.668 million, of which US$115.468 IBRD financing) 33. This component will contribute to increasing water reliability of urban centers in the Agreste and Sertão regions through infrastructure and access to services in areas most affected by water scarcity and supply rationing. It will support Page 66 of 93 The World Bank Paraiba Improving Water Resources Management and Services Provision (P165683) CAGEPA in improving operational efficiency in the João Pessoa Metropolitan Region. A summary of activities for this component is presented in table below. Table A2.6. Summary of Activities under Sub-Components 2.1 and 2.2. MAIN ACTIVITY COST (USD) SPECIFIC ACTIVITY (SA) Water Supply System: Cariri Branch 2.1 Water Infrastructure in Transparaiba Water Supply (WB Loan – US$ 80.8 million) and 161,000,000 the Agreste Region System Curimataú Branch (Counterpart funds – US$ 80.2 million) Restructuring/ upgrade of Restructuring/ upgrading of the João Pessoa’s wastewater 17,000,000 Wastewater System for João Pessoa system Metropolitan Region Restructure with the Utility Institutional restructure/ 1.948,000 Turnaround Framework and strengthening of CAGEPA Institutional Strengthening of CAGEPA 2.2 Water and Sanitation in Program for the Control and João Pessoa Metropolitan Reduction of Water Losses (NRW): Region automation project of the water distribution system in the Non-revenue water 15,720,785 Metropolitan Region of João Pessoa, program - NRW Corporate GIS (asset management, improvement of collection and operational management) and micro measurement project. 34. The component includes the following subcomponents: Subcomponent 2.1 - Water Infrastructure in the Agreste Region (US$161 million, of which US$80.8 million IBRD financing) 35. This sub-component will support CAGEPA in implementing the Transparaíba Water Supply System (TWSS), connecting the water transferred from the São Francisco River to the Agreste Region of Paraiba. This subcomponent will also finance the construction of the Curimataú water supply system and the Cariri water supply system. 36. Readiness. CAGEPA already initiated the works of the first phase of the Curimataú water supply system, financed with counterpart funds. The utility is completing the basic engineering design, technical specifications and cost estimates for the Cariri water supply system, which is expected to be completed by December 2018. The procurement package for this system is expected to be launched by June 2019. As a result, the total amount of this subcomponent is expected to be contracted in the first year of Project implementation. 37. The Transparaíba Water Supply System contemplates a complete diagnosis of all existing water supply systems, aiming to maximize the quality and efficiency of these services in the surroundings of the adductor system, designing alternative solutions based on analysis of technical-operational, economic-financial and environmental aspects in such a way that the scenarios and adopted solution present the best feasibility. The system comprises two large segments, Page 67 of 93 The World Bank Paraiba Improving Water Resources Management and Services Provision (P165683) with an approximate flow of 389 l/s for the first segment known as the Cariri system, and 544 l/s for the second segment known as the Curimataú system. The GoP has already started the process of implementing part of the Curimataú system with its own financial resources, which will initially include the municipalities of Boqueirão, Boa Vista, Soledade, São Vicente do Seridó, Cubati, Sossego, Baraúnas, Picuí e Frei Martinho. The Curimatú water supply system follows World Bank safeguards. The Project is expected to benefit presently 223,000 inhabitants and at the end of the plan, 30 years from now, a total of 353,000 inhabitants. 38. The Cariri system will supply water to the region with the highest water shortages in the State. A treatment plant that will bring quality water to the population with capacity to treat more than 388 l/s, and 14 pumping stations will be built, benefiting 142,000 inhabitants in 18 municipalities. See figure A2.1 for details of each system. Figure A2.1. Transparaíba Water Supply System overview. Source: State Government of Paraiba, “Avaliação Social e Ambiental Implantação do Sistema Adutor Transparaíba”, June 2018 Subcomponent 2.2 - Water and Sanitation in João Pessoa Metropolitan Region (US$34.668 million, 100 percent IBRD financing) 39. This sub-component will support CAGEPA in improving the operational efficiency and quality of services through the following set of activities: works for the improvement of the wastewater system in the João Pessoa Metropolitan Region; works to increase water supply efficiency and reduce non-revenue water in the Metropolitan Region of João Pessoa; and technical assistance to improve governance capacity, operational efficiency of the utility and Project implementation. 40. Readiness. Engineering designs for the improvement of the wastewater system has been contracted by CAGEPA with own resources. While some parts are expected to be completed by June 2019 – renewal of existing elevation stations, new elevation stations and new interceptors - technical solutions for the wastewater treatment, final discharge in the estuary of the Paraiba river and methane gas capture and energetic use have yet to be defined. To expedite project implementation and bring innovation to these facilities, CAPEGA is considering the use of a design and build (DB) Page 68 of 93 The World Bank Paraiba Improving Water Resources Management and Services Provision (P165683) contract. Procurement is expected to be launched by December 2019. Works for the non-revenue water activities are expected to be procured at project Effectiveness, as detailed engineering designs are completed, and cost estimates need to be updated prior to the launch of procurement processes. CAGEPA is already developing, with Bank support, terms of reference for improving corporate governance capacity and operational efficiency, based on the Bank’s utility torn-around framework. TORs are expected to be ready around June 2019, allowing the selection process to start during the first year of project implementation. 41. Restructuring/upgrade of João Pessoa's wastewater system. The objective of this activity is to upgrade the wastewater systems of João Pessoa, Cabedelo and Bayeux, to benefit a projected population of approximately 1.1 million inhabitants. Current sewage coverage attends 72 percent of the population in these three municipalities, part of the Joao Pessoa metropolitan region. CAGEPA is planning additional investments in the medium term to attend the remaining 28 percent of the population (224,000 inhabitants). 42. The current wastewater system of João Pessoa was updated in the 1970s and has been operating for over 43 years. The system presents several failures and requires urgent reform and modernization of the main structures. Current failures cause numerous problems to the environment and tourism, one of the main sources of income of the city, as well as the need to maintain and expand current levels of public health and to improve quality of urban water courses. 43. At the chosen site for the installation of the treatment plant, in an area near the flowable tanks, there are currently several mining pits, resulting from the removal of limestone for civil construction. Of the existing pits, those of numbers 1, 4 and 7 are practically contiguous, with a total volume in the order of 1 million m 3. Table A2.7. Quarry pits available for possible sewage treatment. Quarry (Pit) Volume - m3 Quarry 7 84,725 Quarry 1 444,528 Quarry 4 518,000 Total 1,047,253 44. The pits represent a great environmental gain as they are still being used by mineral extraction firms. These pits are considered by environmentalists as degraded areas and will contribute to the solution of the most serious problem of environmental pollution of the city, which is the treatment of sewage, where the sewage treatment unit of João Pessoa, Cabedelo and Bayeux I already located. 45. In order to extend sanitary sewage services to the entire city of João Pessoa, Cabedelo and Bayeux, CAGEPA is proposing to increase the existing treatment unit to expand its capacity and allow for increased coverage with collection of sewage in these cities. To this end it is proposed that two additional mining pits (1 and 4) which are adjacent to pit 7 and currently in use by CAGEPA be used for this purpose. Use of the existing pits would only require that they be cleaned. The Project foresees the expansion of treatment capacity to allow the extension sanitary sewage services, considering the following project parameters: Page 69 of 93 The World Bank Paraiba Improving Water Resources Management and Services Provision (P165683) Table A2.8. Sewage treatment capacity after project intervention. Initial End of Plan Population 414,645 1,086,372 hab. Average sewage flow + infiltration 700,00 1,834.8 l/s DBO5 concentration in raw wastewater 308 308 mg/l CF concentration 5E+07 5E+07 NMP/100ml 46. The proposed solution to increase treatment capacity, including the use of two more pits, results in a unit composed of three deep anaerobic lagoons, arranged in series. This configuration allows for high treatment efficiency, in the order of 75 percent of organic matter removal, with the following operational characteristics: Table A2.9. Operational characteristics of sewage treatment after project intervention. Volume - m3 Initial Withholding (days) Final plan retention (days) Quarry (pit) 7 84,725 1.40 0.53 Quarry (pit) 1 444,528 7.35 2.81 Quarry (pit) 4 518,000 8.56 3.27 Total 1,047,253 17.32 6.61 Temperature 29.00 29.00 K t DBO 0.47 0.47 Rem DBO. - % 88.96 75.47 DBO5 effluent (mg/l) 39.36 87.47 K t col 12.44 12.44 Rem CF - % 99.54 98.80 CF effluent NMP/100ml 4.53E+04 1.18E+05 OD effluent (mg/l) 6,50 6.50 47. The expected effluent is very close in quality to what could be expected from a conventional secondary treatment plant. For the estuary of the Paraiba river, the natural receiving body of the treatment unit, this level of treatment seems quite adequate considering the large size of the estuary. The option to use the existing mining pits offers the opportunity to treat sewage with very low investment and operating costs. However, as per Bank’s recommendation, a detailed study on the estuarine area will be commissioned by CAGEPA to better understand the current situation and the behavior of the estuary, the dilution capacity and the impact of existing and proposed discharges of treated effluent. The study will develop a dynamic water quality model for the estuary, including different tide scenarios. Based on the findings of the study, the treatment typology and technology will be detailed as well as the discharge point. 48. Regarding transportation of the collected sewage from the network to the treatment plant, three pumping stations were designed for the first stage, with the following characteristics: Page 70 of 93 The World Bank Paraiba Improving Water Resources Management and Services Provision (P165683) Table A2.10. Pumping Stations for sewage treatment intervention. Rotation Sewage Treatment Flow Pump Flow Manometric Power Pumping Station Nº of total sets (RPM) (l/s) (l/s) height (m) (hp) 412 (6) Final Pump Station 3 880 2,472 10.08 125 206 (4) New High Plateau 4 (1 reserve) 1160 714.68 238.23 13.84 75 New Station II 4 (1 reserve) 1160 1.028.74 342.91 35.71 250 49. The non-revenue water program. CAGEPA currently lacks a system to control and reduce non-revenue water (NRW). There are designs already prepared and available for immediate implementation that would result in the adoption by CAGEPA of a much-needed NRW program. 50. In the João Pessoa Metropolitan Region, CAGEPA operates two water treatment stations --Gramame and Tides - which account for more than 50 percent of all water distributed in the State of Paraiba. that’s why the JPMR was selected as a priority for the implementation of Water Loss Control activities. Four key actions will be implemented in the Water Loss Program: (a) Sector projects for the distribution network of water supply systems in Cabedelo, João Pessoa, Bayeux and Várzea Nova district; (b) Automation project of the water distribution system in the Metropolitan Region of João Pessoa; (c) Corporate GIS - asset management, improvement of collection and operational management; and (d) Micro measurement. 51. Sector projects for the distribution network of water supply systems in Cabedelo, João Pessoa, Bayeux and Várzea Nova district. Among the efficiency activities aimed at the management of losses, pressure control is one of the most effective alternatives for reducing the volume of lost water due to leaks in water distribution systems. As such, CAGEPA began in 2013, through the resources of the Ministry of Cities, the project for the Sectorization of the distribution network of the Water Supply Systems of the Cities of João Pessoa and Cabedelo. It was extended to the city of Bayeux and the district of Várzea Nova, in the city of Santa Rita, thus closing all areas served by the João Pessoa producer system. The project was finalized in 2017, with 2034 as the horizon. The Sectorization Project seeks to effectively manage the integrated water distribution system of João Pessoa, through the implementation of Monitoring and Control Districts (MCD) to obtain effective control and management of pressure and of permanent supply. The main technical characteristics of the project include the adequacy of 27 Pressure Zones, deployment of 64 MCDs, implementation/revitalization of 65 thousand meters of pipes, installation of 68 flowmeters and installation of 22 VRPs. 52. Automation project of the water distribution system in the Metropolitan Region of João Pessoa . Data management systems provide the opportunity to easily collect, store and update information in real time. Automation systems and geographic information systems (GIS) are the main instruments for this purpose. CAGEPA already has at hand the Automation Project of the Water Supply System for the Metropolitan Region of João Pessoa. With the implementation of this project, it would be possible to obtain control and monitoring of the various variables of the distribution system, among them: hydraulic network flows and pressures, real-time consumption, electric motors, reservoir levels, etc. 53. Corporate GIS - asset management, improvement of collection and operational management . In 2008, CAGEPA started the implementation of a Corporate GIS, where the necessary software licenses were acquired. However, this project was paralyzed after the start of its implementation, and today acquired licenses acquired are outdated. To resume this project and continue the implementation of a Corporate GIS, the licenses would need to be updated, incorporating other tools, as well as the acquisition of the necessary hardware, which provides for the implementation of the modules Asset Management, Improvement of Collection and Operational Management of Corporate GIS in the Page 71 of 93 The World Bank Paraiba Improving Water Resources Management and Services Provision (P165683) Integrated Water Supply System of the metropolitan region of João Pessoa. The implementation of Corporate GIS will allow CAGEPA: (a) to manage and maintain the geographic registration database (Technical Register) of the water distribution system and the sewage collection system. This register can be used to carry out the survey of network infrastructure, evaluation of operational maneuvers, projects of expansion or replacement of assets, registration of commercial data (Commercial Register), dispatch of work orders and simulations of the hydraulic behavior of the network. The integrated provision of diverse information subsidizes more precise decision making in a shorter period, promoting greater efficiency in the processes involved. (b) to undertake spatial analyses of commercial data to support commercial management, reduce apparent losses and to determine critical regions and customers where the company no longer collects significant amounts every month. (c) to complement the analysis of assets and improvement of collection through hydraulic simulations, integrated in the GIS platform. The data and information available in the geographic database will be used for the construction of hydraulic models that allow to carry out analyzes in a stationary or extended period, the creation of operational scenarios, the calibration of models, the optimization of the pumping, the study of the reduction of the energy consumption, the evaluation of leaks in the network, among others. 54. Micro measurement project. Approximately 26 percent of existing meters in the network have been operating for more than 12 years. The percentage of consumption in the range of 0 to 10 m³/month (Minimum Rate) exceeds 60 percent. Collections based on average consumption when not inferior to actual consumption, provides reasons for legal questions, which CAGEPA usually loses. This activity would enable the installation of new meters in the metropolitan region of João Pessoa as a means of reducing existing losses. As such, it is necessary to acquire measuring equipment (water meters) to be installed in the areas in dispute, in addition to the renovation of the calibration and control equipment of water meters. The main technical characteristics for this activity include the installation of 42,159 water meters, replacement of 122,076 water meters and acquisition of Hydrometers Bench. 55. Institutional restructure/ strengthening of CAGEPA . The scope of this activity is to ensure that water supply and sewage services are sufficient, reliable, convenient and safe, thus meeting the expectations of its users in a financially sustainable and transparent manner. The institutional restructuring and development of CAGEPA’s human capital are expected to lead CAGEPA to technical excellence in the provision of services. 56. The modernization of CAGEPA, in view of the complexity and size of the Company, suggests the need for the development and implementation within the Paraiba Water Security Project (PSH-PB) of a comprehensive reengineering and reorganization program, that will provide solutions to the institutional, organizational and operational problems of the sector in Paraiba, considering the different levels in which the national system of basic sanitation is developed. 57. The World Bank’s Utility Turnaround Framework will be used to shape this restructuring process. The strategy proposes a systematic, coordinated and prioritized approach to improving operational and managerial capacity, to be developed in four phases, as illustrated in Figure A2.2. Page 72 of 93 The World Bank Paraiba Improving Water Resources Management and Services Provision (P165683) FigureA2.2. Utility Turnaround Framework. 58. Phase 0 is a preliminary phase in which the current state of CAGEPA and its external environment are evaluated. Phase 1 will assist the utility's administration in implementing relatively small, low-cost interventions to increase the credibility, accountability and autonomy required to move to Phase 2. This following phase will allow CAGEPA management to plan and implement the Action Plan. Finally, in Phase 3, management develops and implements measures that continue to improve the maturity of human resources, institutionalize best practices, and enable the utility to make long-term strategic plans. Some water utilities may be ready to proceed to Phase 2 or Phase 3 directly, others may have to start at Phase 1. Starting with Phase 1, all steps are sequential and must be performed in the order defined by the strategy. Component 3: Contingent Emergency Response Component (CERC) (US$0) 59. The objective of this component is to support possible disaster recovery needs in Paraiba water and sanitation systems. This component is a zero-budget disaster recovery contingency component that could be triggered in the event of a natural disaster through formal declaration of a state emergency or at the formal request of the GoP following a disaster. By triggering, Project funds are reallocated from other components and activities, facilitating rapid financing of goods and services under the Project. It is noteworthy that the specific activities to be financed by the proceeds allocated to the CERC are event-and demand-driven. 60. Upon activation of the CERC, uncommitted financial resources from other Disbursement Categories would be re- categorized to a new disbursement category: Emergency Expenditures. Eligible activities may include emergency rehabilitation works, provision of critical equipment, or any other critical inputs to ensure the continued operation of the water supply and sanitation infrastructure. 61. The causal relationship between: (i) the relevant emergency, and (ii) the need to trigger the CERC (in order to consider the expenditures eligible for financing under a specific Disbursement Category) will be established by an official GoP “Declaration of State of Emergency” in accordance with the State Law. 62. Upon the Declaration of a State of Emergency, the GoP will undertake the necessary steps to complete a rapid initial impact assessment with the objective of identifying a list of potential activities for inclusion in the Contingent Emergency Response Plan (CERP). Upon compilation of the list of potential activities, the GoP will review and select those for financing under the CERC based upon: (i) the eligibility and safeguard criteria outlined in the Financing Agreement, and (ii) national priorities. Page 73 of 93 The World Bank Paraiba Improving Water Resources Management and Services Provision (P165683) 63. The request to trigger the CERC and seek approval of activities as eligible expenditures for financing under the Specific Disbursement Category, will be communicated to the World Bank’s Brazil Country Director by the Governor of the Paraiba State, or her/his delegate, in a letter. The package to trigger the CERC shall contain the following information: (a) Nature of emergency, its impacts and confirmation of causal relationship (as supported by the Declaration of a State of Emergency) between the event and the need to access the financing allocated to specific Disbursement Category; (b) Nature of emergency activities (brief description); (c) The CERC CERIP and Supporting Annexes. 64. The Project Management Unit (PMU) within SEIRHMA will serve as the Implementing Agency for the CERC. The PMU will be responsible for the preparation of the CERIP and its day-to-day implementation, including all aspects related to procurement, financial management, disbursement, monitoring & evaluation, and safeguard compliance. 65. To be considered as a crisis or an emergency, the event has caused or is likely to imminently cause, a major adverse economic and/or social impact to the Recipient, associated with a natural or man-made crisis or disaster. Examples of such activities would include: (a) an earthquake, tsunami, cyclone, storm, flood, volcanic eruption, drought, bush fire or other natural happening; (b) an explosion, fire, oil spill, chemical spill, air disaster, maritime disaster or accident of any other kind; (c) an infestation, plague or epidemic. Climate benefits 66. Adaptation to climate change is closely linked to water and its role in sustainable development. With the objective of improving water security and increasing resilience in the sector, it is necessary to put into practice several adaptive measures that deal with climatic variability, in line with existing water management practices. The Project has been developed specifically to increase local water sector resilience to climate-induced shocks, especially drought in the semiarid region but also floods in the coastal area. The potential climate-related benefits from Project components involve: (i) improvement of water security and water resource management instruments, including better water allocation in wet and dry periods; (ii) increased water reliability of urban centers in the Agreste and Sertão regions, which are the areas most affected by water scarcity and supply rationing; (iii) improvement of wastewater services in the city of João Pessoa via the restructuring/upgrading of João Pessoa's wastewater system, reducing sewage overflows from heavy rains, energy demand by more efficient pumping and transmissions lines and capturing methane in the wastewater treatment plant to generate energy to supply the facility demand. Please refer to the Table A2.21 for a detailed breakdown of each sub-components’ contribution to increased local climate resilience in the water sector, summarizing adaptation and mitigation activities. Table A2.11. Climate-informed Activities to be Financed. Component Adaptation Mitigation Subcomponent 1.1 Activities to be financed under this sub- Better hydro-met forecasting and water component are based on the Water Security allocation together with improved management NLTA provided by the Bank to improve water of storage reservoirs will lead to energy allocation and to be used as a tool to increase efficiency, using less water pumped from the São resilience to periods of drought resulting from Francisco Water Transfer in wet seasons. the climate change. Page 74 of 93 The World Bank Paraiba Improving Water Resources Management and Services Provision (P165683) The studies supported under this sub- component aimed at improving water resources management instruments, especially regarding water rights, water use charging, water planning and information, as well as studies to improve AESA management and planning. Additionally, the project will finance institutional capacity building activities, including training and qualification of staff and members of the citizen participation committees. The Project will support the preparation of hydrogeological studies on the recharge areas in the Pernambuco-Paraiba system. The project will support the increase and improvement of the hydro-meteorological network. Subcomponent 1.2 Activities to be supported under this NA. subcomponent include the planning of water security infrastructure through the elaboration of pre-feasibility studies of 5 proposed dams in in the Piranhas-Açu River Basin, located in the Sertão (Western) Region of the State. The project will support the improvement of the safety of four existing dams upstream of the Curimataú and Cariri water supply systems, Subcomponent 2.1 This subcomponent will support the This subcomponent is estimated to experience implementation of Transparaíba Water Supply net emissions of -514,529 tCO2-eq due to the System (TWSS), connecting water transferred reduction in fuel use from ending tanker use from the São Francisco River to the Borborema since the project will replace tankers with a more and Agreste Regions of Paraiba. This system aims reliable piped system to guarantee water supply to 27 municipal sites, located in areas of extreme water shortage in the Agreste Region. The TWSS contemplated region has an area of approximately 28,000 km², belonging to the semi-arid region of Paraiba and has the lowest rainfall levels in the state. With the aim of serving the population of 41 municipalities inserted, almost entirely, in the Meso-regions of Borborema and Agreste Paraibano, the project is expected to benefit presently 223,000 inhabitants and at the end of the plan, 30 years from now, a total of 353,000 inhabitants. Page 75 of 93 The World Bank Paraiba Improving Water Resources Management and Services Provision (P165683) Subcomponent 2.2 Reducing water losses through the With the reduction of losses currently verified implementation of the Water Loss Control and the adequacy of the pressures in the activities, including: network, there is also a forecast of lower energy demand. The GHG analysis estimates that the - adequacy of 27 Pressure Zones, deployment of NRW reduction activities under this 64 MCDs, implementation/revitalization of 65 thousand meters of pipes, installation of 68 subcomponent will see net emissions of - flowmeters and installation of 22 VRPs. 130,231 tCO2-eq, which represents a net decrease in emissions due to energy efficiency - upgrade of software licenses, in company gains. training, server acquisition and base storage - 8x8TB, and acquisition of 15 computers. - installation of 42,159 water meters, Methane gas capture for WWTP will contribute replacement of 122,076 water meters and to reduce emissions and it will be used for power acquisition of Hydrometers Bench. generation to cover energy consumption of the WWTP. Wastewater treatment, including methane capture, will result in estimated net emissions reductions of -190,620 tCO2-eq. Page 76 of 93 The World Bank Paraiba Improving Water Resources Management and Services Provision (P165683) ANNEX 3: Economic and Financial Analysis COUNTRY: Brazil Paraiba Improving Water Resources Management and Services Provision Economic rationale 1. The economic rationale of the Project is based on the returns that Project investments will generate in important regions of the State of Paraiba, affecting growing urban centers, and clusters of agricultural and industrial activities. The aim of these investments is to improve the efficiency of water management and distribution by integrating network infrastructures to make water available and efficiently managed in basins that are affected by droughts and floods. 2. In addition, there are economic gains from investing in hydrometeorological information tools that will improve monitoring, planning and resilience against climatic shocks that affect water resources and infrastructure in the region. The State has 128 major water reservoirs that are monitored by AESA (water management agency of the State) with a total supply capacity of 3,500 million cubic meters (m3) and a total demand of 780 million m3, predominantly distributed to irrigation (55 percent of total demand), households (20 percent), industry and cattle (25 percent) 25. Despite the gap between supply and demand, water resources are misallocated due to deficient infrastructure, water resources management and basin planning. The misallocation, inefficiencies and availability of water resources among these competing uses, particularly in situations of droughts and floods, are addressed by the suite of interventions provided through the Project. The value added of the Bank 3. The Bank brings value to CAGEPA and the State of Paraiba by combining technical support with the most beneficial interventions to manage and distribute water and sanitation services efficiently. These interventions will likewise prepare certain regions of the State to cope with the increasing costs associated with droughts and floods. The Bank has vast experience in project financing on these issues and will bring knowledge and implementation support including safeguards and standards that will contribute to enhance the capacity of local sector agencies in developing these complex and impactful infrastructures. Finally, the limited commercial financing available for agencies like CAGEPA provides opportunities for subnational project financing to fill in the gaps of service delivery in the region. Methodology and Assumptions 4. The economic analysis follows the World Bank’s Operational Policy and Bank Procedure (OP/BP) 10.00 26. It uses a discount rate of 6 percent as per World Bank guidelines with 4 percentage points added, totaling a discount rate of 10 percent. This considers contextual and national risks and opportunity costs of financing. The economic analysis assumes a project lifecycle of 30 years. It follows a conventional approach, where the incremental financial cash flows have been translated into economic cash flows by adding externalities as appropriate. It compares “with” and “without” project situation, where the “with-project” situation is defined as the proposed Project with its associated targets and the See www.aesa.pb.gov.br/aesa-website/ 25 See World Bank (2016) Discounting Costs and Benefits in Economic Analysis of World Bank Projects. OPSPQ. Washington D.C. and 26 World Bank (2013) Investment Project Financing Economic Analysis Guidance Note. OPSPQ. Washington D.C. Page 77 of 93 The World Bank Paraiba Improving Water Resources Management and Services Provision (P165683) “without project” considers a status quo situation with current levels of efficiency and operations of the infrastructures, reservoir capacity and services. An exchange rate of R$3.5 per US Dollar is used in the analysis. 5. The transformative scope of the Project with regards to integrated water management and water supply and sanitation efficiency generates diverse types of costs and benefits in specific locations of the State of Paraiba. The analysis compares all quantifiable sources of costs (investment, recurrent, indirect) and benefits (environmental, health, efficiency gains, water availability) within the area of influence of the interventions, involving subcomponents 1.1, 2.1 and 2.2 of the Project. The benefits and costs were distributed to the different local sector institutions (SEIRHMA, AESA, CAGEPA-Financial analysis) and beneficiary locations, as stated in tables A2.5 and A2.6 of Annex 2. 6. The economic analysis involves two major water subsectors. The first subsector involves targeted investments on improving water resources management (WRM) and establishing a hydrometeorological information tool (HMIT) for the region (subcomponent 1.1). The second subsector involves investments on water supply and sanitation infrastructure that will improve water availability and conveyance in the Agreste region (subcomponent 2.1), and on improved efficiency and increased access (EIA) to wastewater treatment in JPMR (subcomponent 2.2). Capital investment costs are distributed in the first 5 years of Project implementation. The benefits are accounted after the fifth year of implementation. Subcomponent 1.1 7. The activities of subcomponent 1.1 will contribute economically to improve water resources availability, management and allocations. In addition, the establishment of the HMIT information system in the state agencies (CAGEPA/SEIRHMA) will improve regional basin planning and climate monitoring to better design preparedness and resilience strategies against floods and droughts. This subcomponent will also contribute to collect additional revenues from gross water fees among competing uses. 8. The capital investments of subcomponent 1.1 includes the investments for establishing the HMIT system and operation and maintenance costs (5 percent of total capital cost). In terms of benefits, the HMIT system will provide information to monitor the increased water flows from 10.4 m 3/s to 16.4 m3/s. Through improvements in WRM, the integrated system and information will allow collecting gross water sales from incremental flows charging US$0.15/m 3. There are also qualitative benefits from HMIT such as: (i) improved service delivery/WRM through business optimization and evidence for decisionmakers, (ii) better planning of water resources in event of droughts/floods (see table A3.1), (iii) more efficient scheduling of agricultural rainfed harvests, and (iv) improve water reallocation from basins to municipalities. The Government of Paraiba expects a 15 percent increased efficiency of water resources allocations between 2020-2030. Table A3.1. Affected population by floods in basin’s reservoirs. Water basin Population directly Population density in Reservoir area (ha.) affected basin (thousand hab/km2) Espinho Branco 1,536.95 174,000 11.32 Almas 787.48 216,000 27.43 Poço Redondo 745.10 59,000 7.92 Boqueirão do 1,256.36 81,000 6.45 Canoas 192.31 34,000 17.68 Garra 299.46 10,000 3.34 Chabocão 617.04 102,000 16.53 Sabugi 98.47 4,000 4.06 Serra Grande 66.00 13,000 19.70 Total 5,599.17 693,000 12.38 Source: AVALIAÇÃO SOCIAL E AMBIENTAL DO PROJETO DESAFIOS DE SEGURANÇA HÍDRICA NO ESTADO DA PARAÍBA – PSH/PB. 2018. Page 78 of 93 The World Bank Paraiba Improving Water Resources Management and Services Provision (P165683) Subcomponent 2.1 9. Subcomponent 2.1 involves investments in water management and water infrastructure in the Agreste region. The economic costs include the costs associated with the engineering designs and safety measures of selected dams in the Piranhas-Açu basin under subcomponent 1.2, which will benefit the effectiveness of main works provided by subcomponent 2.1 that involve the basins São Francisco River to the Borborema and Agreste Regions of Paraiba. It also includes the investment cost of the water conveyance system. The conveyance system will increase water availability and storage. This infrastructure will incur operation and maintenance costs including the water treatment cost of 740 l/s (23.3 million m3) and a unit cost of US$0.38/m3. 10. The economic benefits of the water supply system translate in avoidance of water scarcity costs. Additional water in the sub-basin from the São Francisco Water Transfer will increase supply in urban centers, increase availability for irrigation in agricultural areas, expand fishing and regional tourism. Existing water supply reservoirs (see table A2.3) are the main sources of water in the region and in the occurrence of droughts, depletion of water level and restrictions for water use cause social conflicts due to shortages and competing uses of water resources, particularly in Boqueirão. The economic value of one cubic meter of water is estimated at R$5.29/m 3 (US$1.5/m3). Thus, the overall benefit of the transfer is estimated at US$35 million per year. This compares well with the avoided coping cost to provide water by water-trucks to 223,000 inhabitants at a rate of 50 lcd, 290 days per year (US$28.4 million). 11. Moreover, the interventions from subcomponent 2.1 will avoid costs of water overflows (680 l/s equivalent to 21.4 million m3) based on new designs and improved dam safety in six small dams in the Piranhas-Açu river basin. The economic cost of overflow is estimated at R$5.29/m3 (US$1.50/m3) and with 10 percent overflow per year. Finally, the economic benefits of the Cariri water supply system are to reduce costs of off-peak pumping equivalent to US$6.1 million per year. There are indirect benefits from avoiding GHG emissions from water tankers. Subcomponent 2.2 12. Finally, for Subcomponent 2.2, the costs are distributed according to investment costs of a wastewater system upgrade and a water efficiency (loss reduction) program. The analysis does not include US$1.95 million on institutional development and restructuring of CAGEPA. With the wastewater upgrade, there will be considerable energy savings (from 8.9 KWh/m3 to 4.1 KWh/m3) estimated at US$0.05/KWh and a production volume of JPRM of 490 million m 3 and BOD pollution reduction (6,400 tons of per year) estimated at US$2.70/ton. There are also direct benefits of reducing NRW estimated at 17 million m3 per year equivalent to US$13.60 million per year. Also, there are indirect benefits from avoiding GHG emissions. 13. With improved water supply availability and coverage of wastewater, there will be indirect health and environmental benefits. The benefits are assumed to show decreasing returns of 5 percent per year. The approach to estimate the health benefits is presented in the following equation: 14. The value of avoided years of life lost is estimated through the Disability-Adjusted Life Years that is reported for each disease in the country (2016). The DALY is adjusted by age cohorts, population and disease mortality discounted values expressed in the function (z). These values are expressed in total days adjusted per disease (d) and adjusted by the weighted factor that includes the total beneficiaries, and the mean salary (W) and Incidence rate (Ir) by location (i). The environmental benefits draw from the avoided pollution into the natural basins. The lack of water supply and sanitation systems (WSS) in the JPMR leads to uncontrolled discharge of wastewater. These indirect benefits are Page 79 of 93 The World Bank Paraiba Improving Water Resources Management and Services Provision (P165683) estimated based on avoided pollution of US$0.7/m 3 of pollutant discharged. Close to 28 percent of the population in the region will achieve universalization by means of accessing sanitation (close to 224,706 inhabitants). Beneficiaries 15. The beneficiaries considered for the economic analysis involve 223,000 direct beneficiaries from the Transparaiba subcomponent with indirect beneficiaries reaching 130,000. Direct and indirect water resources management beneficiaries are estimated to be 51,300 and 33,700 inhabitants, respectively. For the JPRM investments, the direct beneficiaries involve 1.73 million individuals benefiting from expanding WSS services and 810,000 from improved water efficiency and pollution removal (both direct and indirect). The beneficiaries of the Project are presented in the table below: Table A3.2. Beneficiaries of the Project. Total Direct Indirect Transparaiba 353,000 223,000 130,000 Water resources management* 85,000 51,300 33,700 Optimization of Water Supply and Sanitation Systems Expanding services 1,729,142 1,729,142 0.0 Beneficiaries from improved water and 810,000 405,000 405,000 pollution removal *WRM included direct beneficiaries from Boqueirao (12,000), Camalau (3000), Sao Jose/Monteiro (20000), Pocoes (16300). Based on: RELATÓRIO DE INSPEÇÃO DAS BARRAGENS DO RIO PARAÍBA VINCULADAS AO PSH/PB, 2018 16. The profile of the beneficiaries of the JPMR is presented below, including the municipalities of Bayeux, Cabedelo and Joao Pessoa. Table A3.3. Profile of Beneficiaries of the Project. Results 17. Based on the assumptions presented earlier, the economic analysis shows an Economic Rate of Return (ERR) of 19.9 percent; net present values of total economic costs and total economic benefits at 10 percent discount rate of US$282.1 million and US$529.7 million, respectively; net present value of net economic benefits at 10 percent discount rate of US$247.6 million; and benefit-cost ratio of 1.88. Page 80 of 93 The World Bank Paraiba Improving Water Resources Management and Services Provision (P165683) Table A3.4. Summary of NPV, costs and benefits and ERR, by subcomponent Component 2.1 and Component 1.1 WSS + WRM 2.2 Transparaiba Cost components Water Management O&M and and Optimization Improvement~ indirect costs WSS Percent distribution 9.1% 63.7% 27.2% ~ Including extra 3 million of the cartographic base first year. Energy savings, Benefits of Cariri pollution Environmental WRM increased Benefits Transparaiba reduction and and health benefits resilience water components Benefits * reduction in benefits to scarcity* losses Percent 16.8% 45.2% 7.2% 20.5% 10.4% distribution *Avoided off-peak water pumping cost. Discounted Values (in million US$) ERR Subcomponent NPV per year Costs Benefits Subcomponent 1.2 54.74 35.06 88.8 25.6 Subcomponents 2.1 and 2.2 193.8 247.0 440.9 19.1% Total 247.6 282.1 529.7 19.9 18. The economic analysis also considers the benefits from the GHG emission reductions accounted through the Project. The analysis considers the percentage points added with the Net Emissions Estimate of total of -27,846 tCO2- eq per year valued at the social price of carbon with minimum and maximum values per tCO2-eq of US$39.1 and US$78.2, respectively, which are expected to growth at an annual rate of 2.26 percent. This results in a maximum increase in the ERR of the Project by 0.54 percentage points (20.4 percent total ERR), and minimum increase of 0.27 percentage points (20.2 percent total ERR).. Sensitivity analysis 19. A sensitivity analysis with cost overruns of 30 percent distributed throughout the lifetime of the Project and a reduction of benefits of 30 percent results in a drop of the ERR to 15.5 percent with cost overruns and to 14.1 percent with reduction in the benefits. The Project and its components are economically more sensitive against benefit reductions. If the Project were to experience 30 percent cost overrun and 30 percent benefit reduction, the ERR reaches 10.2 percent. Financial Analysis of CAGEPA 20. The financial analysis comprises the impacts of Project financing on the main agency benefiting from the World Bank’s project investment. CAGEPA is a mixed-capital company with a predominantly majority shareholding in the State Government that currently lacks autonomy to fix its tariffs. Although current tariff covers all operational and Page 81 of 93 The World Bank Paraiba Improving Water Resources Management and Services Provision (P165683) maintenance costs, CAGEPA is not able to finance its capital costs from tariffs. Thus, it depends upon government support to finance its investment plan. 21. The financial analysis is based on the financial statements of the company between 2007 and 2017. The main parameters analyzed include the trends in gross revenues from water and sanitation sales, the net operating income (NOI) and the operating margins (gross revenue ratio/NOI). With financial statement information that includes current expenditures, commercial losses, depreciation and revenue, scenarios with and without Project financing are developed to determine the aggregate financial return of the financing flows of the Project compared with a situation without Project financing. 22. The net present values under the with and without project scenarios are estimated by projecting financial flows from 2018 to 2039, based on the growth rates of yearly current revenues and expenses between 2007 and 2017. The total present value of the net balance (difference between revenues minus expenses) of the financial streams with the Project reaches - US$369 million and for a without Project scenario the financial balance is - US$679 million between 2018 and 2039. The overall financial return of the net balance is 4.3 percent, lower than the discount rate of 10 percent. Finally, the gross revenue ratio/NOI with the Project are positive until 2034--keeping the baseline assumptions. Table A3.5. CAGEPA’s Financial Statement Information. Page 82 of 93 The World Bank Paraiba Improving Water Resources Management and Services Provision (P165683) Green House Gas Analysis 23. The quantification of GHG emission is an important step in managing and ultimately reducing GHG emission. The World Bank adopted the Ex-Ante Carbon-balance Tool (EX-ACT), which was developed by the Food and Agriculture Organization of the United Nations (FAO) in 2010 to assess the impact of agricultural investment lending on GHG emission and carbon sequestration. EX-ACT allows the assessment of a project’s net carbon-balance, defined as the net balance of CO2 equivalent GHG that were emitted or sequestered because of project implementation compared to a without project scenario. EX-ACT estimates the carbon stock changes (emissions or sinks), expressed in equivalent tons of CO2 per hectare and year. In the case of investments in Water, Wastewater and Sanitation, the methodology applies a two-prone approach. Investments aim to rehabilitate the potable water distribution will follow the hypothesis that improvements will be reduced leakages which decreases energy needs for water pumping following the approach of Hendrickson and Horvath (2014)27 Investment supporting the wastewater and sanitation treatment will be calculated based on IPCC’s wastewater treatment and discharge tier 1 methodology as described in chapter 6 of the 2006 IPCC guidelines volume 5. 24. The GHG analysis relies on a set of potential investments profiles that are likely to be financed by the Project. It uses the EX-Act tool and applies its methodology to quantify the GHG emission/avoidance and assess the potential mitigation impact of the project for subcomponents. For waste water and sludge from subcomponent 2.2 the first step 27 See A perspective on cost-effectiveness of greenhouse gas reduction solutions in water distribution systems http://iopscience.iop.org/article/10.1088/1748-9326/9/2/024017/pdf Page 83 of 93 The World Bank Paraiba Improving Water Resources Management and Services Provision (P165683) in the analysis is to calculate the total organically biodegradable carbon (TOW) in wastewater. This calculation applies equation 6.3 from the IPCC guidelines: TOW = P*BOD*0.001*I*365. Where P = population; I = 1 and the BOD of the Project is calculated with a conversion factor from IPCC guidelines of 40 g per person per day for LAC, 0.001 conversion grams to kilograms. The TOW for both without Project and with Project is 8,700 tons of BOD per year. The second step is to estimate the GHG from energy savings, where the subcomponent 2.2 will contribute to reduce energy consumption. The emission conversion factor for energy is 0.507 ton of CO2 per MWh/ year with estimated 3,549 tons of CO2 avoided per year. Page 84 of 93 The World Bank Paraiba Improving Water Resources Management and Services Provision (P165683) ANNEX 4: The São Francisco Water Transfer Project COUNTRY: Brazil Paraiba Improving Water Resources Management and Services Provision 1. The São Francisco Water Transfer Project (PISF) is underway to transfer water from the São Francisco river basin to the semiarid northeastern states. PISF is a strategic national project in the context of scarcer water resources, aggravated by climate change, and the government’s efforts to meet universal access to safe drinking water. PISF is a large-scale project that aims to supply water to dry regions in the states of Paraiba, Ceará, Rio Grande do Norte and Pernambuco (see figure below), improving water security in 390 municipalities and benefiting around 12 million people. The project comprises 700 km of channels and tunnels. PISF is the largest water infrastructure project in the country. The project was initiated in 2005 and started operation in the East Canal to the State of Paraíba in 2017. Works for the North canal are expected to be completed by December 2018. 2. PISF has minor hydrologic impact on the São Francisco river basin. Current water withdrawal can go up to 26.4 3 m /s, based on water demand forecasts for human supply and livestock in 2025. Water withdrawal could go up to 114.3 m3/s (daily average) and 127 m3/s (at peak), but additional water withdrawals will depend upon on the Sobradinho reservoir level and the São Francisco river hydrological conditions. Although PISF represents an additional demand for water from the São Francisco basin, the maximum water diversion would represent 3.5 percent of the average flow of the São Francisco river, which can only occur in conditions of water surplus in the basin. 3. PISF is the most consistent structural alternative for reliable water supply to the semiarid region and crucial to increase resilience to drought. The Environmental Impact Report (RIMA), the São Francisco Project, complementary studies and technical evaluations were carried out before the project started (e.g. environmental impact studies, regional insertion, technical feasibility, economic and hydrological feasibility). The project was decided according to the guidelines of the Ten-year Plan of the São Francisco River Basin, carried out by the National Water Agency (ANA). 4. PISF is formed by two independent systems, the East and the North canals. The East Canal transfers water to the Paraiba River, withdrawal is located near the city of Floresta (PE). Operating since early 2017, the East Canal can transfer up to 28 m3/s, but the average flow is of 10 m3/s. The North Canal transfers water to different basins in the States of Ceará, Paraiba and Rio Grande do Norte. Water withdraw is located in the city of Cabrobó (PE), and the works are expected to be completed by December 2018. The North canal can transfer up to 99 m 3/s, but the project considered an average flow of 16.4 m3/s. Page 85 of 93 The World Bank Paraiba Improving Water Resources Management and Services Provision (P165683) FigureA4.1. PISF East and the North canals. Source: State Government of Paraíba, “Mapa Geral da Infraestrutura Hídrica”, August 2017. 5. The approval involved participatory processes. In addition to the technical and scientific studies related to the project, several participatory processes were carried out before and during the construction of the PISF, from initial studies through works, operation and complementary activities. The approval process of the PISF involved participatory processes in all states of the basin and in the ones benefiting from the project. These participatory processes followed both the Brazilian legislations of environmental licensing and pf water resources management, as follows: (a) Before the Preliminary License was issued by the National Environmental Institute (IBAMA) in 2005, Environmental and Social Impact Assessment Study (EIA) and Report (RIMA) were produced and submitted to several public hearings in all states of the basin and in the beneficiary ones. The Installation License authorizing works to start was issued in 2007, including a detailed environmental and social action plan and conditions to be observed during construction. The operation license for the East Canal was issued in 2017; and (b) Before the National Water Agency issued the water use rights (outorga) and the certification of sustainable water infrastructure works (CERTOH), the PISF was approved by the was discussed and approved by the National Water Resources Council (CNRH), a participatory deliberative body of the national water resources management system. 6. Both environmental permits and water use rights involved a long process with detailed technical, economic, social and environmental assessments that subsidized the participatory processes and the official authorizations. The links with the Paraíba Water Security Project and PISF 7. The PISF is crucial for the development and resilience to droughts of the Northeast region in general and to the State of Paraiba, in particular. Several studies have already been done on the subject and concluded that water transfer Page 86 of 93 The World Bank Paraiba Improving Water Resources Management and Services Provision (P165683) project creates a more sustainable environment in the region and improved resilience to prolonged droughts, which may be aggravated by climate change. 8. The proposed Transparaíba Water Supply System is dependent on the storage and operation of cascade dams located in the Paraíba River Basin, namely São José, Poções, Camalaú and Epitácio Pessoa/Boqueirão. In addition to the natural water inflow, those reservoirs receive additional water from the East Canal of the PISF, being able to ensure that the Transparaiba Water Supply System would be reliable and resilient to droughts in the basin. 9. The water available in the Paraíba River will significantly change the water availability in the Agreste and Borborema regions. Although the maximum capacity to transfer water to the State of Paraiba through the East Canal is 28 m3/s, the PISF considered an average flow of 10 m3/s and the minimum flow of 4.2 m3/s to be available in the Paraíba River, near the city of Monteiro. To confront the high losses of the water flow in the river's natural bed and to make water use more efficient and supply more reliable, the GofPB is developing the Transparaiba water supply systems. 10. The Transparaiba water supply system will increase reliability and resilience to droughts. The abstractions of the Transparaíba System will be at the Poções dam, approximately 10 km downstream from Monteiro, and at the Boqueirão Dam, approximately 130 km downstream of the PISF launch, respectively for the Cariri and Curimataú subsystems. These subsystems will allow treated water to be transposed to approximately 40 municipalities, increasing reliability of supply to urban areas and resilience to droughts. 11. The impacts of the water transferred to the State of Paraíba in the São Francisco river basin is minimal . Water withdraw to Paraiba through the East Canal, is estimated at only 0.4 percent of the São Francisco average flow. Considering that 0.9 m3/s will be used by the Transparaíba Systems (both the Curimataú and the Cariri Subsystems), the impact in the São Francisco river will be neglectable. Page 87 of 93 The World Bank Paraiba Improving Water Resources Management and Services Provision (P165683) ANNEX 5: Gender Action Plan COUNTRY: Brazil Paraiba Improving Water Resources Management and Services Provision 1. Project Objectives. The proposed project has three main objectives. First, it will contribute to strengthen capacity for integrated water resources management in the State of Paraíba. Second, it will improve reliability of water services in the Agreste and Borborema regions, which comprise 27 municipalities that have been severely affected by seven years of severe drought in a row. Improvements in the reliability of water services are expected to increase the number of days of water availability from the current level of 90 days per year up to 328 days per year. Finally, it will also contribute to improve the efficiency of water and wastewater services in the Metropolitan Region of João Pessoa (JPMR), the capital city of the state of Paraíba. 2. Project Beneficiaries. The Project will benefit the entire population of the state (about 4 million people) through technical assistance and institutional strengthening activities to improve water resources management It will directly benefit 223,000 people in 27 municipalities of the Agreste and Borborema regions through the Trans-Paraiba water system. Finally, 1.25 million people in JPMR will benefit from improvements in water supply and wastewater systems . 3. Social Impacts. The overall envisaged social impacts of project activities are beneficial and socially inclusive. Worldwide, there is robust evidence that access to sanitation has immediate repercussions on health indicators such as infant mortality and longevity of the population. Access to sanitation is also positively associated with the Human Development Index.28 The expected positive impacts of the project will be particularly relevant at the municipalities that will have access to reliable water services in the Agreste and Borborema regions. These municipalities are ridden by high rates of poverty and extreme poverty. Due to prevailing social norms related with patterns of social division of labor, these impacts are expected to be particularly beneficial to women, who continue to hold the responsibilities for fetching water to the households, taking care of household tasks, and for caring for the health of the family. Reliability of water services are expected to reduce domestic workloads and the incidence of waterborne gastrointestinal diseases, contributing to improve the wellbeing of both men and women, but with a larger impact on women than men. 4. Sanitation in Brazil.29 The share of the Brazilian population with access to reliable water services increased from 80.6 percent in 2004 to 83.3 percent in 2016. During this period, 33.7 million Brazilians gained access to this service. Simultaneously, the share of the Brazilian population with access to wastewater services rose from 38.4 percent to 51.9 percent, giving access to sewage systems to more 40.6 million people. Despite the progress, the number of Brazilians without access to reliable water and wastewater services remains huge and the challenge of universalization is growing. The challenge is still larger in the poor Northeast region of the country. And within this region, the challenge is higher in the state of Paraíba. 28 Unicef and WHO, 25 years: Progresso n Sanitation and Drinking Water (Geneva: 2015). UNDP, Human Development Report 2015: Work for Human Development (New York:2015). 29 This analysis is based on Instituto Trata Brasil, Benefícios Econômicos e Sociais da Expansão do Saneamento no Brasil 2018. Available at http://www.tratabrasil.org.br/estudos/estudos-itb/itb/beneficios-economicos-e-sociais-da-expansao-do-saneamento-brasileiro . This is study relies on three main official statistical sources: Pesquisa Nacional por Amostra de Domicílios Contínua 2016 (IBGE, 2017); Pesquisa Nacional de Saúde 2013 (IBGE, 2015); and Ministério das Cidades, Sistema Nacional de Informações sobre Saneamento (SNIS), available at http://www.snis.gov.br/. Page 88 of 93 The World Bank Paraiba Improving Water Resources Management and Services Provision (P165683) Source: Instituto Trata Brasil (2018), based on data from SNIS. 5. Sanitation and wellbeing in Brazil. Lack of sanitation has immediate implications on the health and quality of life of the population because of the incidence of waterborne and gastrointestinal diseases. In Brazil, there is robust evidence that the recurrence of waterborne and gastrointestinal diseases leads to socioeconomic costs related with (i) the withdrawal of routine activities (including labor, education, domestic and recreational hours) and (ii) public and private expenses with the treatment of infected people. There is also robust evidence linking the lack of access to reliable water and wastewater services and the recurrence of the associated diseases with direct impact on the labor market and school activities, affecting productive performance in detriment of career opportunities and income potential as well as hampering educational attainments in detriment to their future potential in the labor market. The incidence of gastrointestinal diseases reached 74.7/1,000 people in Brazil and 88.0/1,000 people in the Northeast. In average, 3.32 days per year were lost due to these withdrawals. There were 353,500 hospitalizations and 2,193 deaths in consequence of gastrointestinal diseases. Hospitalization due to gastrointestinal diseases among people with access to WSS systems – Brazil, 2004-2016 Source: Instituto Trata Brasil (2018), based on SNIS and Datasus . Page 89 of 93 The World Bank Paraiba Improving Water Resources Management and Services Provision (P165683) 6. Gender gaps in Brazil remain large. The assessment of the social impacts and benefits of the Project incorporated a gender sensitive lens. Nationwide and statewide data show that women remain the main responsible for non- remunerated domestic tasks and more frequently employed in part-time jobs than men, leading to significant gaps in earnings from jobs. In 2016, 83% of the women and only 65% of men carry domestic works, whereas 28% of women and just 19% of men are responsible for health care activities in their households. While 48% of the women at productive age are out of the labor force, just 28% of men faced this situation. Women counted for just 48% of the total working force, 43% of the people with jobs, and 28% of them have only part-time jobs. Finally, the gender gap in average earnings from jobs reached 23 %.30 7. Gender Gaps related with sanitation.31 As mentioned, lack of sanitation has immediate implication on the health and quality of life of the population; these implications are harsher among women than men. These adverse impacts are related with the incidence of waterborne and gastrointestinal diseases. Increasing such diseases, the lack of sanitation leads to withdrawals from routine daily activities, interferes with school education and leads to losses on productivity, opportunities of career development and incomes. In Brazil, there is strong evidence – at the national, regional and state level – that access to water (on a regular basis) and wastewater services is (i) negatively associated with women’s withdrawals from daily activities, hospitalization and deaths due to waterborne gastrointestinal diseases and (ii) positively associated with women’s educational attainments and earnings from jobs. 8. The evidence shows that, in 2016, women counted for 53% of the people who had to withdraw from their routine activities due to diarrhea or vomiting. The rate of withdrawals reached 76,0/1,000 women in the country and 129,2/1,000 women in the state of Paraíba (peaking at 164,8/1,000 women at urban areas). In average, each woman spent 3.48 days per year away from their routine activities due to diarrhea and vomiting. Among men, this average dropped to 3.15 days per year. Mortality rates due to gastrointestinal diseases were also higher among women than men (2.5/100,000 women vis-à-vis 2.3/100,000 men). At the country level, 0.95/1,000 women died because of gastrointestinal diseases. At the state, this rate double, reaching 1.95/1,000 women (BRK Ambiental: 2018). Withdrawals from routine activities were more frequent among the poor, and among the least educated people (Instituto Trata Brasil: 2018). These withdrawals were also more frequent among poor women who did not have access to water supply networks, regular access to water supply services on daily basis, sewage networks and toilets for exclusive household use (BRK Ambiental: 2018). 30 BRK Ambiental, O Saneamento e a Vida da Mulher Brasileira. Available at http://www.tratabrasil.org.br/images/estudos/itb/pesquisa-mulher/relatorio.pdf. 31This analysis combines information and analytical outcomes presented on the reports of Instituto Trata Brasil (2018) and BRK Ambiental (2018). These studies rely on statistical analysis that isolated the effect of access to sanitation on school attainments and worker’s income. Page 90 of 93 The World Bank Paraiba Improving Water Resources Management and Services Provision (P165683) Source: BRK Ambiental (2018), based on data from Pesquisa Nacional de Saúde 2013 (IBGE, 2015).32 9. The evidence also shows that access to water supply networks and sewage collection networks reduced school delays among children and youth by 1.1 percent and 1.5 percent, respectively. Furthermore, access to water supply networks and sewage collection networks increased worker’s income in 3.2 percent and 6.8 percent, respectively (Instituto Trata Brasil: 2018). These effects are still more relevant for women. Between women with and without access to water supply networks the later showed school delays 5.0 percent higher than the former and earned incomes 36.9 percent lower than them. Meanwhile, between women with and without access to sewage collection networks, the later showed school delays 2.6 percent higher than the former and earned incomes 34.8 percent lower than them (BRK Ambiental: 2018). All these gender gaps on health conditions related with waterborne diseases are worse in the Northeast region and the state of Paraíba, Thus, and exemplarily, the incidence of cases of withdrawing from routine activities equaled 74.7/1,000 inhabitants in the country and reached 88.0/1,000 inhabitants in the Northeast (Instituto Trata Brasil: 2018). Furthermore, at the Northeast region, the mortality rate due to gastrointestinal diseases peaked at 3.9/100,000 among women. In the state of Paraíba, this rate equaled 3.6/100,000 among women (BRK Ambiental: 2018). Source: Instituto Trata Brasil, based on data from PNADC 2016 (IBGE: 2017) 32 According with the analysis made by Instituto Trata Brasil (2018), information from PNADC 2016 corroborate these trends. Page 91 of 93 The World Bank Paraiba Improving Water Resources Management and Services Provision (P165683) 10. Gender Related Actions included in the Project. The project’s Gender Action Plan will comprise three main activities: (i) physical infrastructure construction; (ii) social works at the local level; and (iii) monitoring and evaluation procedures. (a) The construction of the Trans-Paraíba Water Supply System is a core activity supported by the project. It is expected to increase the number of days of reliable access to water during each year from the current average of 90 days up to 328 days in 27 municipalities of the Agreste and Borborema regions, benefiting up to 223,000 people. (b) CAGEPA will also carry out supportive social works at the local level. These works will promote educational campaigns/communication strategies targeting women groups to convey messages and information that promote improved health and hygiene practices and the rational use of water. This environmental and sanitary education efforts will also target teachers and community health professionals to leverage impact. (c) Project activities will include monitoring and evaluation of gender-sensitive indicators and potentially beneficial effects of increasing the reliability of access to water for human consumption. The M&E process will rely both on official statistical data and first-hand data collection at the local level on a random sample basis. First-hand data will be collected in three points in time (T0, T1 and T2): T0 baseline data will be collected before the Trans-Paraíba Water Supply System starts operation on a sample basis; T 1 data will be collected after the Curimataú main of the Trans-Paraíba Water Supply System starts operations; and T 2 data will be collected after the Cariri main starts operation. This will allow before and after as well with and without comparisons, measuring the effect of increased water reliability on (i) the reduction of the incidence of waterborne/gastrointestinal diseases, (ii) its impact on time use and availability and (iii) the consequent creation of opportunities to (a) improve the wellbeing of both women and men and (b) reducing the current gender gap on these indicators. 11. Expected Effects of the Project. Reliability on access to water is expected to reduce incidence of waterborne diseases, which affects women wellbeing more than men’s. Consequently, this project intervention is expected to reduce: (i) the average mortality rate due to gastrointestinal diseases; (ii) the average rate of hospitalization because of gastrointestinal diseases; (iii) the average number of days people withdraw from their routine works; (iv) the time daily needed and spent on household tasks and caring for relatives. The available data shows that all these indicators reveal significant gender gaps, are higher among women than men. The available data also shows that there is a strong cause- effect relationship between these sanitation related indicators, educational achievements, earnings from jobs and poverty incidence. The overall target is reducing the gender gaps on these indicators by half in relation to baseline levels. Page 92 of 93 The World Bank Paraiba Improving Water Resources Management and Services Provision (P165683) ANNEX 6: Map IBRD 44125 COUNTRY: Brazil Paraiba Improving Water Resources Management and Services Provision Page 93 of 93