MANAGEMENTRESPONSETO REQUEST FOR INSPECTIONPANEL REVIEW OF ITAPARICA RESETTLEMENTAND IRRIGATIONPROJECï LOAN 2883-BR Inspection Panel Review of the Itaparica Resettlement and Irrigation Project ("thc Rcqucst') filed The Management and Staffof the responsibleDepartment have reviewed the Request for by the Pólo :Sin&caìdos Trabalhadores Rurais do SubmédioSão Francisco on hlu& i 9. i997 Request is ineligiblefor considerationbecause more than95% of the Loan Proceeds had bcen Under the Board Resolutionestablishingthe InspectionPanel (Resolution 93-10, 9.'LC!Y3) thrs disbursed as of the datethe Request was received. However, in the interest of trsnswnc'.. the followingdetailed response has been prepared. Table of Contents EXECUTTVE SUMMARY............................................................................... ...........1 I. INTRODUCTION ................................. .......................................... ...........1 11. PROJECT IMPLEMENTATION AND BANK SUPERVISION........ . . . . . . . . . .6 111. MANAGEMENT RESPONSES TO INSPECTION REQUEST.................. ........... 11 IV.ACTION PLAN ............................................................... ..................................... 21 I ANNEX B.~ ANWEX A: IW OF~ITAPARICA REGION .......... .23 STATUS OF SUBPROJECTS.................................... ~ N T .......... .24 ANNEX C: SUPERVISION MISSIONS ...................................................................... 27 Abbreviations Used in this Document CHESI: SãoFrancisco HydroelectricPower Company CODEVASF SãoFrancisco Valley Development Commission ELETROBRAS BrazilianElectrical Power Holding Corporation FUNAJ National Indian Foundation FUNDAJ JoaquimNabuco Foundation L GOB Governmentof Brazil IICA InteramericanInstitutefor Agricultural Cooperation IP Inspection Panel MME Ministryof Mines and Energy O&M Operationand Maintenance OD Operational Directive OMS OperationalManual Statement S A R S t aAppraisalReport \MI- MaintenancePayment WUA Water Users Association ExecutiveSummary The ïtaparica Resettlement and Imgation Project is a stand-alone resettlementproject designed entirely for the benefit of the population af&ed by the construction ofthe Itaparica dam and reservoir. Construction ofthe dam, which was not financed by the Bank, began in 1979. it Brazil. Compietion ofthe dam to bringadditional power on line was considered atop priorityby was needed to provide an additional sourceof power for the rapidly growing Northeastregion of the Government and regional leaders. A plan for resettlingthe 8,1O0 families to be dislocatedby the reservoir had not been considered in depth during the design and construction of the dam. As a consequence, Bank staf, in the mid 1980s,in the context of a dialoguewith the power sector, dialogue, the Government of Brazil requested financing for the Itaparica Resettlement Project in strongly advised that adequate provision be made for the affected people. in response to this 1986, some seven years after the construction had begun and barely two years before flooding of the reservoir was to take place. The urban and rural housing and other infrastructurewas completed in a timely fashion the completion of irrigation infrastructure for the 5,800 farming families affected by the dam.The and the affected population was successfullyresettled. The mainproblem in the Project has been and five major irrigation subprojects encompassing about 4,500 imgated plots. The Bank's scope of the agreed project financed by the Bank is limited to rural housing, urban mfiamucture accountability should not be extended to non-Bank-financed imgation subprojects encompassing some 1,300plots. As was recognized at appraisal, the project involved high risk, given the relatively scanty dormation available on soil conditions in the region, the technological challenges homes. The Borrower's commitment to the project was not strong at the outset and fluctuated imposed by terrain and soils, and the socialproblems involved in dislocating people from their throughout implementation. The project has executed during a tumultuous period of Brazil's recent history, when galloping inflation, political change and shifting priorities took their toll on execution. Lack of cooperation among different agencies and the politicization of resettlement caused additional problems. As a consequenceof these factors, long delays and cost overruns affected implementation. Current program costs are estimated at more than double the o r i g d estimates and approximately 3,560 of the 5,800 farming families affected by the dam are still awaiting completion of imgation on their lots. Nevertheless, duringthe time that these families have been waiting, they have been adequately housed and have received regular maintenance payments. Also,many impoverished and landless farmers, accounting for 60% of the rural families, acquired major assets (housing and imgated land) through the project. problems asthey arose and have taken many extraordinary measures to resolve them. There were Throughout the life of the project, the record showsthat Bank staffhave sought to identify regular supervision missions conducted by qualified Bank staffand consultants. These include serving as mediator between agencies and groups, suspending disbursements because of inadequate provision of counterpart funds, approving $100 million in suppleriientai funds for the loan, and temporarily raising the disbursement rate from 28%to 100%during most of 1992. The supervision, and many of its actions were taken out of concern for the population and were Bank has maintained close contact with representatives of the affected population during project staffthat itsmainmotivationistomaintaintheBank's involvementintheProject. Whilethe supported by their representatives. In fact, the NGO that presented the Requesthas mformed Bank 1 L the Bank'sfailuresto follow itspolicies. cunent situationis farfrom ideal, the shortcomingsto which the Requestpoints do not arise fim and, inNovember 1996,requesteda fourth extensionofthe project throughthe end of 1997. "he Government of Brazil has indicatedits Commitmentto meet the project objectives, extensionwas to permit the disbursementof less thanUS$6 million, primarily for training directed Sincefiiridsunder the loan for imgation infrastnictureare now exhausted,the purpose of the completed imgation systems. The Bank and the Borrower have agreed on a set of benchmarksfor at suppo:rtingthe establishmentof water user associationsVAS)operate and mauitainthe to 1997that include major advances inthe completionof civilworks, completionof rmsed engineeringdesigns where necessary, land titling, and formation of WAS. in addition, ther Government established an InterministerialCommitteein January 1997withthe ~ b j e c t of~ reviewingthe program and making recommendationsfor acceleratingits completton Tbe that the Bank continuesupervisionof the project through December 1999,two y w s after the recommcmdations are expected in the near future. in the meanwhile,the Government has requested present loan closing date. Inthejudgment of Bank staff,given the government's contrnucù commitmentto the overall Itaparica Program in generaland the Bank-financedprojcct in particular solutionscan be found for the remaining mrai familiesby mid-1999. and the provision of additional financingamountingto about US$lO0 million, sausfactoq L L 11 I. INTRODUCTION Background 1, of US$132 niillion equivalent. A supplementalmount of US$l O0million equivalentwas The Itaparica Resettlementand Imgation Project was approved in 1987for a loan amount approved in 1990. Of the aggregate loan of Us232 millionequivalent, $226.143 million, or objective of the project is stated as follows: 97.5%,had been disbursed as of March 12, 1997,the registration dateof the Request.' The main Theproject aims at the resettlementof some 2,800urbanand 5,300ruralfamilies (includingthe TuxáAmerindiancommunities)displacedby the Itaparica reservoiron the São FranciscoRiver. Inparticular, theproject seeks to restore,and if possible, improve the incomesana' living standards of the involuntarilyresettledruralpopulation. -. 7 and which went intooperation in 1988. The dam was financedand built by the Brazilian Electrical The resett!mext project is linked to the Itaparica dam whch began construction in i979 Power Sector Holding Company, ELETROBRAS MrithoutWorld Bank involvement in the design and construction phases. During 1986, the Government of Brazil (GOB) requested financing to support the rehabilitationand financial restructuring of the power sector in Brazil. Preparationof this loan revealed a need to strengthenthe sector's capacity to iden* and mitigate potential environmentalproblems. Among the specificneeds identified was the need for a comprehensive resettlement pian for the people affected by the then nearly complete Itaparica dam.2 3. (GOB) (Loan No. 2720-BR). Although this loan did not contributeto the ñnancing of the in Jurie 1986,the Bank approved a US$500million loanto the Government of Brazil Itaparica dam3, the Bank and the Borrower agreedthat greater attentionshould be paid to the resettlement needs of the population affectedby the Itaparica Dam. Accordingly,a clause in the Povíer Sector ProjectAgreement (Sec.2.03) stipulatesthat (a) . . ELETROBRAS shallprepare andjitmish to the Bank an actionplan, satisfactory . to the Bank (theItapanca ResettlementPlan) containing specific measures to resettle the human communities to be afected by the Itapanca HydroelectricProject; (6) ELETROBRASshall cause CHESFto carry out the Itapanca ResettlementPlan . . . in a manner SahSf¿CtO?yto the Bank. . . <' 4 Subsequently,ELETROBRAS requested separate Bank financmg for the Itapanca Resettlement F'lan Under the Itapanca Loan Agreement, the Borrower, ELETROBRAS, onlent 1 The ori@nalloan amount of US$132 million equivalent was increased in 1990by US$lOO million equivalent,to covercosí overruns under an amendingagreement. From the legal and operational standpoints,the origmal and supplementalloans constitute one single loan. There isone There is a singledosing date. amortizationschedulewith hvo uanches; the project financed by the two uanches is the same. z ELETR0BU.S and CIiESF adopted a comprehensiveProgram to meet the needs of all 8,100 families affectedby the Dam.The Project appraised by the Bank aiid described in the Loan Agreement is narrower in scopeas explained below. This paper will maintain a disunction betweenthe comprehensiveProgrumand the Bank-financedProjectwhich is narrower in scope. '4s in other sector loans, this loan did not disburse against specfic expendituresbut rather against general imports. No equipment, works or servicesdirectly used in the construction of Itaparicawas procxred with the proceeds of this loan. I L the prmreds of the Loanto its subsidiary, CHESF,the regional power authority, which implemented the project. It was further agreed that wheneverthere is reasonable cause to believe that thefinds available to CHESF will be inadequateto meet the estimatedexpendituresrequiredfor carryrngout the Project,[the .Borrowerwill]make arrangementspromptly toprovide or cause CHESFto beprovided withsuchfinds as are needed to meet suchexpenditures. .5. these, about 2,800 families were resettled in urban areas that were rebuilt under the Program. The `TheItaparica damaffected altogetherabout 8,lO0 families, or about 40,000 people. Of remaininig 5,300 families were resettled in about 110agrovilas, or rural villages, built closeto agriculturalsubprojectswith imgation facilities. An additional 500firming Eamilies requested irrigated plots. The irrigation works were built under two different financial arrangements: five relocation to an urban areabut wished to continue farming, creating a total demand for 5,800 irrigation subprojects encompassing some 4,500 imgated plots were c o h c e d by the Bank and ELETROBRAS; and about 1,300more imgated plots were designed and developed without Bank íiMIlC*,. 6. World Bank is broader in scope thanthe Itaparica Resettlement Project financed by the Bank. The `Theoverall Itaparica Resettlement Program designed by CHESFwithassistance from the Bank-finmced Project consists ofthree components, namely, !(a) of some4,500 plots4;(2) agricultural production and social support; (3)rural RuralResettlement, consisting of (1) fivemajor imgation subprojectsconsisting housing (5,300 houses); (4)water supply; (5)a road system; (6) a primary power education, health and social services; supply systemto servethe agricultural and domestic requirements; and (7) I@) Urban Resettlement, consisting of relocation of four towns includmg (1) construction of urban uifrastnicture; (2) provision of serviced residential plots, building materials and construction of new housing; (3) public builriuigs for health, education, post offices and telecommunications, police services, cemeteries, etc.; (4)provision of serviced plots for commercial use; (5) provision of road system; (7)an electric power system for urban settlements;and (8) water community infrastnicture such as replacement churches, public squares, etc. (6)a supply and sewerage; i(c) Fisheries Research. mentioned above. 7. IDuringpreparation, CHEW presented detailed plans accommodatingthe 1,300 Edmlies 'The Bank did not agree to financethese subprojectsbecause, in most cases, 4 The 4,500 plots were accommodatedin two "LakesideSubprojects" Borda de Lago,Bahia; Borda de - Lago, Penambuco ;and three"SpecialProjects" BnBda; Caraibas, and Pedra Branca (see - -- - Anriexes A and B). L 5 Those riot financedby the Bank include the ApolônioSales,W g a de Baixo, Brejinho,Jeremoab, Exra doTarrachil subprojects(see Annex B). In most cases,Lbese subprojectsinvolved technical Renmw, Canafistuia, itacuruba,lnajá (Twij, Jusante, Rodel= (Tuxá),btirama CrWCa), and app:roachesthat Bank expens regarded as experimental and untried. For example,the Itacuruba challengingand seemed more complex and excessively needful of management attention. The subixcjectwas an integrated hog-fishduck production schemethat was techndogxally quite Borrower exercised its right not to accept the Bank's advice in t.!ese cases. These subprojectswere desieed for a total of some 1,268 families,leaving a total of some4,541 familiesin subprojects 2 they did not meet feasibiiitycritena,eitherbecause of soil conditionsin the sites identifiedor because of the untriednature of thetechnology involved. These 1,300familiesinclude the T& policies at the time would not allowthe Bank to providedirectfinancingforindigenousgroups. indigenousgroup which was not included in the Bank-financed package for another reason: GOB The Borrower decidedto implementthese subprojectsusing its own funds. The relevant policy in effectatthe time (OMS 2.34 of Februq 1982)stipulatesthat the Bank will assist projects "oniy when satisfied that the Borrower or relevantgovernmentagency supportsand can implement measuresthat wiil effectivelysafeguardthe integrity and well-being oftribal people" (para 5). Thereforethe Bank included language in the SARand Project Agreement, under which CHESF agreed to formulateand implement a special plan to assist the T ~ x á . ~ 8. The itaparica Resettlement Project was the Bank's first stand-aloneresettlement project. Northeastem region had createdhigh demand for electricitywith resulting power rationing and Launching the hydropower dam was a high priority since rapid urban and industnal growth in the consequent economic losses estimated at U S 2 billion in i987 alone. The hgh pnonty placed by t!!e the resettlement project between high quality planning and speed of execution. In the final Bcncwe:ron floodingthe reservoir su that power generation could begin created a tradeoffin analysis, the Bank decided it could better help provide assistanceto the resettlerpopulation if it became a pa.rber along with ELETROBRAS and the GOB. The project as a whole was dislocated by the inundationof Itaparica, but to raise the standards of living of a substantial conceived as a rural developmentproject designed not only to restorethe livelihoodof families segment of the resettled population. 9. rccogriized in the StaffAppraisal Report (SAR)as follows: Thert: nas a risk in the Bank's entering at this stage in the resettlementproject that was Resettlement as a result of manmade changes in the environment is always a dipcult task Risks are Increased due to the hght hmef-amein which the resettlement must be carried cut because of IVortheastpower shortages, the needfor efTecnve cooperanon among a number of public agencies, ana'complex social and technical issues involved In the establishment of newiy Irrigated agriculiural areas. implemeritation of these subprojects. cofinanced 5y the Bank and ELETROBRAS The Bani cannot legJ!y be held accountable for the 6 Such planning,under the neme "IndigenousPeoples Development Plan,"would be req~redunder OD 4.20 "IndigenousPeoples" adopted in 1990. 3 L 1O. Due to the timing of the Bank's entry intothe project, it wasnot possible to planthe acknowledgedatthe time of appraisal,'but the Bank recognizedthat the human need was great, resettlernent simultaneouslywiththe hydropower damas Bankpolicy prescribes. Thiswas virtually all the principles found in OMS 2.33 were present in the designof the Itaparica especiallyinview of the relative lack of resettlement planning done up to that date. Nevertheless, determination of the needs of the resettlers, provision of necessary services such as training and Resettlement Project including participation inthe design and willing consent by the resettlers, health, tampensation for lost assets, etc. ParticipationbyBeneficiaries 11. Shortly after construction began on the Itaparica Dam, a confederation of rural labor unionsin the municipalities to be affëcted was formed under the name Pólo Sindical dos Trabalhadores Rurais do Submédio São Francisco. This group sought to represent the interests of the rural population in the region affected by the Dam and Reservoir and it held a number of meetings with CHESFmanagement and organized demonstrations.The most dramatic of these site. Alter the World Bank entered the discussion in 1986Pólo Sindical looked to the Bank as a occurred in December 1986when 2,000 potential resettlers occupied the Itaparica construction signed on December 6, 1986, ELETROBRAS,CHESF, the Ministry of Mines and Energy and sometime ally, sometime mediator in its disagreements with the government. In an agreement representatives of Pólo Sindical agreed on a series of parameters concerning resettlement of rural families, including the following: L 0 defïnxtionof rural producers eligible for resettlement benefits; 0 determination of the size of the imgated plot from 1.5 to 6 ha per family to be provided to rural producers, considering their landoming status, amount of land owned and the family workforce available; 0 provision of one salary per family equal to at least 2.5 minimum salariespayable by one of the construction firms through the first harvest.' 12. agricultural hamlets (or agrovilas). Agreement was also reached on the size and type of housing provided in some 110 13. Shortiyafter the agreement was reached, contractors began buildmg the agrovilas, each of which Typically consisted of some 40-60 individual homes of 45-65m2,each with electrical power, also equipped mith a 500 liter water storage tank.In addition to some 5,322 homes', the running water, water closet and septic tank. Later, after negotiation with CHESF, each home was contractors also built 74 schools and 16health posts. In brief, the new housing for the resettlers flooded in March 1988. In the original project design, tie productive infrastructure was ready very quicklyand the population was successfully relocated as the reservoir began to be w2s expected to be completed by the end of 1988. It was recognized that there would be a hiatus between relocation of the rural families and completion of the irrigatiun works, the reason for which the CHESFíPÓlo Sindical agreement included a maintenance payment equivalent to 2.5 minimum salaries per month. However, there were major dzlays in completion of the productive infrastructure in the five major reseidement areas,each linked to one imgation subproject ? Thiscompensationwou!d laterbe transformed into an entitlement,payableby CHESF, with no work requirement at the insistenceof the Pólo Sindical and the basis for calculatingthe size of the benefit would change several times over the life of the project. 8The nimber of homes in agrovilas for rural dwellersis sniallerthanthe nurnkr of agncuiturallots betause some of the farm familiessettied in urbanareas. 4 mentioned above, withthe resultthat a substantialsegment of the resettiedpopulation has not had accessto cultivableland and has been obligedto subsiston the VMT for asmuch as eight years afterthe move. the agreementwith the affected rural dwellers, t e m that some observersregard as excessively 14. With hindsight, it is possibleto discernthat someof the problems arosefrom the terms of unusually highfor projects of thissort (nearly US$60,000). The high cost of the project costly. Even using the initial cost estimate for the project, the cost per relocated fämily was exacerbatedthe shortageof counterpartfundingthat was to plague the project throughout its life. It is possible:that in a differentpolitical environment,without the time pressure, a solutioncould have been found that would have been technologicallysimpler, lower in cost and more satisfactory to the displaced population. Current Situation of the Resettled Families 15. The resettlement of 2,800 urban familieswas carried out smoothlyand without major considerably higher qualitythanthe urban settlementsthey replaced and the quality of life of the difficulties. The housing and associated uifrastructureconstructed by CHESFare of settlementshas been fullyrestored to pre-relocationlevels by any reasonablemeasure. resettled families seemsto have improved significantly. Economic and social life in these 16. The jpicture in the rural settlements(agrovilas)built to accommodatesome 5,300 productive infhstructure needed to allowthe familiesto restoretheir agriculturalproduction is not agricultural familiesis mixed. While good quality housing and uifrastnictureare in place, the complete in nmy communities At present, about 2,239 families have plots with working imgation systems. 5 L 11. PROJECT IMPLEMENTATIONAND BANKSUPERVISION Implementation Problems 17. difficulties:financial, technical and socidinstitutional. Onthe financial side, consideredto be the Throughoutimplementation,the project hasbeen affected by threemainsources of allocation of counterpartfunding by the Borrower and from cost overruns. On the technical side, major element hindering project implementation,the project has suffered from insufficient timely there hive been difficulties related to the technical design of some of the irrigation perimeters, and unforeseen engineering problems with the main conveyance systemsof water to the imgation sites. the best available patches of land in the vicinity of the reservoir, the entire area is withinthe There have also been social and institutionalproblems. While the ruralfamilies were resettled on droughtpolygon of Northeastern Brazil wihn which ramfed agriculture has always been extremelyrisky. Except where these sites were close to the reservoir or river, until the imgation s33%lizc subprojects (Caraíbas, Pedra Branca and Brigida, See Map, Annex A). There were additional were conpleted, there was e general lack of employment, especially in the three western problem with adjustment to the new location, problems with the delivery of social services, transport, etc. 18. Brazil's recent economic and political histoq. While planning and construction of the dam took The Itaparica Resettlement Project was implemented during a tumultuouspenod of place rnainly during the period of military rule, the resettlement Program was planned and implemented after the restoration of democratic presidential elections. In the pend following military government, there was a substantial resurgence of popular movements and greatlyraised given greater weight in decision-making.. There was great public sympathy for the plight of the expectations. Public officials felt that demands from parties affectedby public works had to be were c'losd,the poliúcal pressure favoring the resettlement Program decreased considerabl!. and families who would be resettled, but after the crisis passed, and the floodgates of the Itapanca dam other rancem took precedence. Financial Problems 19. The macroeconomic situation was alsounstable. During the late 80s and early 90s, Brazil underwent some of the highest levels of infiation in its history. In addition,the budget allocation were actually only released for capital projects late in the year, once as late as Nosember. The process was in turmoil. Budgets were drawn up and approved early in the fiscal year,but funds Itaparica Resettlement Project competed for funds with the Xingo Hydropower project, another high ~i~iorpower project on the SãoFrancisco River, downstream from Itaparica. in addition to competition from Xingó, foreign debt serviceand other obligations, ELETROBRAS experienced i v to make remittancesto their parent company. As a consequence,ELETROBRAS was chronically fluctuations in its income from its subsidiaq power companies whch, on several occasionstfailed delayed in its fùndmg of the project (Table 1) a situation that eventually led to a tempor- suspension of disbursements on the project. Table 1 ' Itaparica: Annual Disbursement Totals 1994 14,473317.43 1995 (1-281.848 13 1996 13,789.083.86 1997 1,275,221.98 LTotal 226,142,546.91 20. By June 1989, the estimated cost had nsen to an estimated US$614 million. As of April 1997,the been due to various factors. Totalproject costswere estimated at appraisal at US304miUion. Project costs have been much higher thananticipated at appraisal. The increases have total estimated cost of the Itaparica Resettlement Project had risen to about US774 million. The factors contributing to this cost increase are complex and it is difficultto weigh the importance of each. The first factor contributingto the cost overrun seems to be an error that occurred at appraisal when the cruzado/uS$ exchange rate (Brazilian cruzados into US dollars)was not updated resulting in the underestimation of the dollar costs. The secondmajor factorwas the shortage of counterpart funds, especially during 1989and 1991which resulted in reduction in the rate of work .and,in some cases, the demobilization of contractors. Technical factors also ledto cost increases, mainlythe need to revise constructiondesigns as more detailed topographical and soil data became available during project implementati~n.~Finally, wavering Borrower commitment and COnflictamong differentgovernmental agencies also contributedto costiydelays. TechnicalProblems 21. Discussions between CHESF and rural resettlers took place during I984 and 1985 and some 12 different sites were discussed in terms of their proximity to the resettlers' homes, transport and other characteristics. Most of these sites were close to the future reservoir. However, when the Bank and CHESFbegan discussions of site selection in 1987,more stringent soil requirements of widely respected experts, recmited in Brazil and internationally, in an attempt to find the best were set in view of the Bank's feasibility criteria". The Bank brought to the project areaa number sites to locatethe imgation areas. As a result, three of the five major imgation schemes were located in an upstream area,the largest of which is actually well beyond the reservoir's westemmost tip (see Map, Annex A), and therefore several hundred kmfrom the on@ riverside locations. Thesesites were identifiedonthe basis of soli surveys conducted pnorto project preparation anid with the assistance of experts from the US Bureau of Reclamation and from the 9At project sump, there were aenai photos, saîellite images and topographical maps at 1:25,000scale, inadequatt: foi the engineering design of the conveyancs canais and irrigated plots. The notes to the Table in Amex B also provide some indications of how the cost of the project escalatedduring implemenntion. 7 ' Extension Serviceof Israel." They required substantialliftingofwater and water transport over long distances. The selection of sprinklertechnology with its requirement of pressurized pipes, also raised the cost and complexity of implementation. 22. progressed, engineers developeda new solutionfor canyrngwater to the Caraíbas site, largest of imgaticonperimeters required adjusiment, leadingto additional delays and higher costs. As work During project implementation, as samplinggaps were filled in,some of the planned the western sites, providing imgation plots for some 1,400families. The fluctuationinproject fínancesreferred to above also led to partial demobilization or slowdownsby the contractors carrying out design and constructionwork in several locations. SociaUInstitutionalProblems 23. Some of the problems encountered by the Itaparica Resettlement Project have been institutional in nature. Among these can be cited occasional poor communication between ELETROBRAS and its subsidiary CHESF, responsible for executing the imgation works. This situation reached a head in 1990when ELETROBRASestablished a special oversight group that subjected CHESF's operations to closer physical and financial scrutiny. Another institutional the Government of Brazil (GOB)is the guarantor of the Loan and of the performance of difficultyarose in the relationship between the Ministry of Finance and ELETROBRAS. Although ELETROBRAS.,during the early years of the project, the Ministry of Finance was extremely L reluctant to release budgetary funds for the implementation of the project to d e up for shortfalls in EL,ETROBRAS' allocations. CHESFhas alsohad strained relations with FUNAI,the National for the Tuxá more difficult. Under FUNAI's tutelage, the Tuxá have been suspicious of CHESF's indigenous Foundation. In CHESF's view, FUNAl's stance has made reaching a satisfactory plan proposed solutions, demandmg the right to contract their own expert consultants, and rejecting several proposed solutions. FUNAI itself made a proposal forthe Ibotirama Tuxá with a cost out of proportion to the imgation systems provided for the other resettlers in the system, whch has not been accepted by CHESF. 24. There have also been occasional breakdowns in communicationbetween CHESF and Polo leadership shifiedwith some frequency and sometimes resorted to public confrontation when Sinciicai. While Pólo Sindxcal can claim to be the legitimate voice of most of the resettlers, its ~ i t the Pólo Sindicalleadership and has not always disclosed information fully. Finally, there negotiation mighthave achieved its goals. CHESF, on its side, has frequently postponed meetings h were problems between CHESF and the FundaçãoJoaquim Nabuco (FUNDAJ),a research to CHESF. CHESF, on its side, suspended payments to FUNDAJ for a long period. in nearly all institution contracted to carry out project monitoring,which often adopted an adversaria1 approach these instances,the Bank has taken on the role of mdator between institutions, a role it has carried out with mixed success. - 10 Someof the seas initially se!ected by CHESFfor resettlement had soilswhich were iriadequateto bve been the first choice on the cntenon ofproximity is made up of poor, shdlow, mainly sandy supprt irrigated agriculture. In fact, must of area rrìediately mmnd the reservoir - - which would soils.unsuitable for imgation. WhileareasUnthimgable soilswere identified from existingsurvey data and spot checks, the actual proceeded. dimensionsof theseareas h d to be raised with more samplingasproject implementation 8 BankSupervision 25. daily basis. From 1990onward, theproject was supervisedfiom headquarters. From August 1996 Recife,where meetings, sitevisits and discussionswithmanagertookplace on a weekiy or even appraisalin 1987thro.ugh 1990,the for the project was resident in CHESF to date,a member ofthe Bank'sBrazil water team has been stationedin Brasilia allowing frequent operationand maintenance of the imgation schemesaswell astrainingof the farmers. Throughout opportunitiesfor contactwith CHESFand CODEVASF, the agency responsiblefor overseeing the period of implementationthere was a normalnumber of supervisionmissionsin additiontothe fiequent informalcontacts between thetask manager, CHESFand ELETROBRAS. Official position onthe delaysin implementationand the lack of counterpartfunds. Althoughthe Brazilian correspondencewiththe Borrower during the entire period shows that the Bank took a very strong portfoliowas experiencingproblems acrossthe board, the Bank frequentlystressedthe human factor in the situation.12 ExceptionalActions Taken by Bank during ItaparicaProject Supplemental loan of US$lOO million in Suspension of Disbursements in 1990 Raised financing percentage to 100%ofWorks for 12 months in 1992/93 ClosingDate of Loan Extended 4 Times 27. The had been m i e in the use of exchange rates and in view of the extremeneed of the resettled of acost-overrunis unusual but was agreed to in view of the fact that errors An independent report filedon October 3, 1989concludedthat, a redesign of theproject ISneitherfeasible nor desirable,since almost all worùsare under construction or have been bid, and a redesignar this stage would not only likely 12For example, in November 1988. the PortfolioManagerof the managing divisionwote to the the transiition period has been discussed at length in theInpast. . . .we are aware that the primary Borrower stating, . . the problem of preserving an adequate level of resettier satisfaction during the President of ELETROBRAS,stating, "We were sony to find that no progress u% made with social problem lies in the lack of useN work to do. December 1943,the Division Chef wrote to respect to the solution of current problems and more significantly finding a permanent solutionto the delivery ofhealth and education to the resettled population." 13It shouidbe noted that the approval of the supplemental loan by the Eank complied with its policy on the financingof cost overruns Policy Note 3.12 of February 8, 1984) because the and it was still econsmicallyviable. Governmentwas unable to finance the additional costs, the project rsuidnot be reduced in scope, 9 L raise costs,butfurtherdelay completionof theproject and increase the hardshipsof ruralfamilies. 28. warnings to the Borrower afterwhich it exercised its legal remedy under the Loan Agreementby Laterin 1990,when counterpartfundinghad slowedto atrickle the Bankissued several implementationimproved marginally but many ofthe technical, financialand general presentationof at h g plan, disbursementswere resumed on January 3,i99 suspendingdisbursementsasof October 5, 1990. After discussionswiththe Borrower and Project macroeconomicproblems referred to abovepersisted. In March 1992,in view ofELETROBRAS' from 28%to 100%which was done through January 1993. As a result, 1992was the year of difficulties in providing counterpartfunds,the Bank agreedto increaseits financing of civil works greatest amount of disbursementover the life of the project (Table i). This made significant advancesin project works possible sothat in 1993,the first irrigationschemes (Borda de Lago Bahiaa d Borda de Lago Pernambucowitha total of 790 plots) became operational. (709 plots) also became operational. Finally,at the request of the Borrower and withthe support Subsequently, in February 1994the irrigation schemesin Brigida (431 plots), and Pedra Branca extensionwas granted for one year (through December 31, 1997)even though more than97% of of Pólo Sindical,the closing dateof the loan has been extended four times. The most recent the loan has been disbursed. This is unusual, but the request largelyreflectsthe concerns of the affectedpopulationwho have stated severaltimes in meetingsthat the Bank'sparticipation is L highlypositive fromtheir 29. the project. There have been innumerablemissions, informaland formal discussionswith CHESF in summary,Bank supervisionofthe Itapanca Project was intensethroughout the life of completethe project as adequately and quickly aspossibie. Sincethe inceptionof its involvement, and ELETROBRASmanagement, and specialmeasurestaken aimedat assistingthe Borrower to the Bank's uppermost concernwas for the welfare of the resetilers who were obligedto move because of the inundationof the itaparica Reservoir. it is possiblethat had the Bank been involved place (OMS 2.33, 1980)would have led to better planning. However, successivereviews of the in the financing of the hydropower project, timelyapplicationof the resettlementpolicy then in project by different parties" have concludedthat there were no significantlapses in the Bank's supervision and oversight of the project under its guidelines and procedures as summarized. 14Given the strong support by Pólo Sindicalfor the Bank's role in the project, the Request byPólo attempting to inducethe Borrower to request continued Bank involvement Sindicalto the Inspection Panel might seem paradoxid. In fact it is consistent with the goal of 15Perhaps the most cornprehensiveof these was ``ItaparicaResettlement Review" by Syed S. October 1989. I 10 IiI. MANAGEMENTRESPONSESTOINSPECTIONREQUEST 30. raisedinthe Requestto the InspectionPanel and ofthe Fist, it is importantto recognizethatBank Management is fullyaware of the issues that led to its hawig been filed. The Bank enteredthe project withthe intentionof assistingthe Brazilianauthoritiesin to developand implementa sound resettlementplan thereby mitigatingpoîentiaihardship, Bank and have visitedthe resettlementsites and understandthe mistrationand disappomtmentof the staff and managem& have met on many occasionswithrepresentativesof the affected population goals have been and farmers who are living on the VMT and unable to returnto a fullyproductive life The Bank's are to achievethe originalgoals of the project of helping to m o r e the affected population to full productivity. It is in this spirit that management responds to the Request. 3 response by Bank Management. The followingsection reviews the principal issues raisedby the Request and prcscnts a Complaint: Irrigation Works are Incomplete 32. operatingirrigationsystemsat their disposal. However, the rnformationin the Requm IS not fully The:statementis factuallycorrect, in that many resettied farmfamilies still do not have accurate. First, it shouldbe pointed out that the Request omits mention of the whtch has to the resettiers (see below for a detailed dscussion). been paid faithfullysincethe inception of the resettlementand mitigatesserious mataiiilhardsiup 33. Widh regardto construction itself, Table 2 shows the current (March 1997)daza on operating irrigation systems and those under construction. Part of the dscrepanq Request and construmon and equipment acquisitionis well advanced, but work had to be suspcndd vrhen data lies in the use of the term "design phase." In somc subprojects, the unexpected soil problems were encountered requiringsupplementalpedological snrdies These studiesare time consuming and a source of mistrationto all concerned, but failure to thcm out could result in waste of resources and even greater fiustration in the future. A second discrepancyarisesfrom the factthat Bank financingcovered only 5 imgation subprojects(see paragraph 6(a), footnote4 and Annex B).I6 The remaining subprojectsmentioned u1theyreport and in Annex B, Icovering some 1,300famhes, were not included in the project thc meet the Bank's feasibility criteria. Given the Bank's late entry intothe project, n was not possible did not to demand that ail resettlement subprojectsmeet the basic feasibilitycriteria laid Bank's experts. the 16 Considenng all subprojects,including those not financed follows In Operation 39%. Under Construction 4 %, Design Phase 20% Contnbuting to this the Bank,the smuxq down as reasonsand entirely new schemes had toFUNAI situation ISthe factt h t someof the schemes financed without Bank support have failed fortechntca! the dúiïailties in negotiaúons bedesigned (seeAnnex B) Another contnbuungfaaor are for the Ti& IndrgenousGroup and CHESF which delayedimpiernenting a solution 11 L Table 2: Status of Irrigation Works Statusof Pólo Sindical Bank-Financed irrigation work1' (Request) Subprojects 34. (in Borda de Lago,Pernambuco and Caraíbas). Borda de Lago Pernambuco subproject is CHESF andthe Bank continueto fínancethe constructionofthreeimportant subprojects schetíuledfor June 1997, and about 40% of the Caraibas subproject is scheduledto begin operation before the end of 1997. All Bank-financed subprojectswill be completeby the end of 1998 although Bank financing will only be availablethrough December 3i, 1997. In addition, CHESF remainingsubprojects (see Annex B). contmues to h c e studieswiththe objectiveof defïningsolutionsfor the implementationof the Complaint: Bank ResettlementGuidelineswere not Followed L 35. 1990have been followed in all major aspects, except for the timelypreparation of the resettlement As indicatedabove, Bank policy in place at the time of appraisal, and those adopted in plaritogether withthe underlying dam constmctionthat caused the resettlement. Production Because the IrrigationSystem is Still Under Design. Complaint: The Tuxá IndigenousCommunity was Resettled but is Unable to Resume 36. Ciry of Rodelas and cultivating land with ditch irrigationon Viuva Island in the São Francisco ?he Tuxá Amerindian population consistedof about 2I1 familiesin 1987, living in the financing for the Tuxá imgation schemes. However, there are several clauses in the Loan and River that was inundated by the reservoir. As mentioned above, the GOB did not allow Bank Project agreements stipulating specificactionsaimed at providingsupport for this population. The operation." Although the Bank did not financethe Tuxá resettlementplan, the Bank closely SAR states that "Resettlementof the Tuxá Amerindian communitywould be treated as a separate beween the Bank, CHESF and FUNAI, withthe Bank frequentlyplayingmediator bemeen the supervisedthe developmentof plans to deal withthis group and there were frequent meetings - `Thisdata refers:o the proportion of lots with fully operational irrigation systemsout of a total of 5,809 imgated lots of which 453 1 lots received financing from the Bank. "Fully operational"refers to lots with irrigauoninfrasuucturcinstalledand tested. 18Construction has resumed on the large Caraibaswbproject with 1406 lots; full operation is scheduled for 1998. In Barreiras. Bloco 2, designed for 600 families already relocated in the area,sigmfkant L progress has already been made in the implementatbn of the imgauon infrmcnire inclubng the hydro-mechamcalequipmenr has been purchased and delivered to CHESF.However,the reservoir, pipeline. water intake and power sub-station all of which areconcluded;all the necessary inpiementationof the on-farm systemwas suspendedbecauseunexpected soil probl-a swere encountered. Soil expertswere brought in to help refomdate the design of the on-farm systen to accommodatepermanent crops. Constructionis scheduled to resume shortly and conclusion of the works is expectedby the eíìd of 1998. 19"ne detailedengineering design for these works is undergoingadjustmentsand the works will be put up forbids during 1C9?. 12 this issue and it is mentioned in virtually every supervision and back-to-office report. othertwo agencies. More thanhalf the correspondencebetweenthe Bank andthe Borrower raises 37. Foundation (FUNAI) and cannot act independently without FUNAI's consent. Because of its Under Braziiian law, the Tuxáare under the Iegd tuteiage of the National Indian the particip;ationof the communityand under the supervisionof FUNAI. Two opera- special legal status, the Tuxáwere the objectof a special resettlementplan that was prepared with fundamentals of what amounts to an Indigenous Peoples Development Planzoincluding housing, agreements were signed between CHESFand FUNAIin 1986and 1987laying out the infrastructure, production systems, and social support. Housing and community infrastnicîure have been ñdly implemented, but productive infrastructure has stillnot been completed. The Tuxá were included in the support payments made by CHESFto rural resettlers while they awaited restoration of productive infrastructure. The mainreason for the delay is the inability of CHESF and FUNAI to reach agreement on the location and specificationsof imgation systems for the Tuxá 38. resettled in it separate subdtvision of the rebuilt city ofNova Rodelas, while another faction of About the time of these operating agreements, the Tuxá community split: one faction was some 1O0 families requested and was granted resettlement in the Municipality of ibotirama,some for the Tuxá,and constructed housing for all the resettled families, completed in 1986in ibotirama 800 km upstream on the São Francisco River. In Ibotirama, CHESF secured an area of 2,082 ha and i987 in Rodelas. It also installed a ditch imgation system (comparableto the system previously constructionir1that will utilize sprinklers. The total imgated area planned by CHESFwould reach a use on the Viúva Island)covering 1O0 ha. An additionai area of 100ha is under total of 380 ;haincludmg the areas already installed and under construction. In May 1996, FUNAi presented a proposal to CHESF entitled "TuxáLand Management" requiring investmentstotaiing Tuxámoved to i'botirama. in September 1996,consideringthat the proposal presented by FUNAi about US $37.5 million, or about $272,000 per family includmg the new families formed sincethe was unreasonably costly in light of the average cost ofthe resettlement to date, CHESF madea counter-proposal of a subproject costing about US$7 million, and is awaiting a response from income they (derivefrom the land they have under irrigation. FUNAI. in lhe meantime, the Tuxá families in Ibotirama are receiving the VMT in addition to the 39. acquired. However, there was a protracted dispute between FUN& and CHESFconcerning the land of some 4,000 ha about 15 lanaway from the town was selected by the communityand In "ova Rodelas, the Tuxá were re-settled in a separate section of the town and a parcel of soil quality of the land selected. A new parcel of the same size has now been identified less than CHESF after anexpropriation decree is obtained by FUNAI. CHESFhas proposed to installa lkm from the town, withan estimated 690 ha of imgable land. The parcel would be acquired by plm. entitled "`TuxáLand Management - Rodelas''wiil be drawn up and presented to CHESF for spnnkler imgation system covering some 380 ha at this site. DuMgthe first semester of 1997,a financing. in the neanwhle, the Tuxá families in Rodelas are receiving the VMT in addition to the income they derive from rainfed agriculture. 40. continuing to make efforts to reach a satisfactory conclusion. in the meantime, the Tuxá institutional diificulties and distrust on the part of the indigenous population. The Bank is Unfortunately, the resettlement md rehabilitation of the Tuxá has been hampered by population, while unable to'resumeimgated farming, is not undergoing finansia1hardship. 20An Indigenous Peopks Development Plan was not required in OMS 2.34 in eEect at the time of project appraisal 13 Complaint: IrrigationSystemsin OperationSuffer From SeriousOperational and MaintenanceProblems: This issuehas not been raised at any of the numerous meetings between Bank Staff and Pólo 41. The Request does not specifythe extent or nature of the alleged operationalproblems. Sindirralduring supervisionmissions. As expected in any systems ofthis sizeand complexity, therehave beenstartupproblems in severalof the operatingirrigationperimetersincludmg during the testing phase before being handed over by the contractors. The Bankhas closely equipment maifunctians,leaks, etc. in general, such problems have been detected and corrected supervisedthe procurement of goods and services and has evidence that the equipmentprocured and iinsblledis of thehighest quality available in the world. Spot checks by Bank staffand other expeitshave not revealed any systematicpattern of defects or seriousoperationalproblems ansing out of the design, equipmentquality or installationof the imgation systems. 42. the fimers to assumeresponsibility for the operation and maintenance. occasional vandalism resulting in damage to imgation equipment, ana (b)The The most seriousoperational problems of which the Bank and CHESF are aware are (a) reluctanceon the part of Request allegesthat the iinigationsystems in operation are running at low levels of efficiencyand consumeexcessive amounts of energy, although the benchmark levels mentioned in the statement do not correspond to known intemational standards. 43. There is, however, virtually universal recogrutionthat a well organized Water User L Association (WUA) is the most effectiveand lowestast way of managing demand and allocating water resources. Someof the problems referred to in the Request could be resolved by better management ofthe installedsystems. For example, the systems have been designed to operate "on Water Users Association could agree on timing of system use to minimize energy costs and demand"requiring continuousoperation of pumps and high energy cost. A properly organized incrmse efficiency. CHESF, CODEVASFand the Bank have placed a great deal of emphasison assumption of Operationand Maintenance (O&M) of the operatingsystems by WUAs. Although responsibility for O&M. Pólo Sindicalhas agreed in principleto encourageWAS,not a smgleN'UA has yet assumed Complaint: A Significant Portion of the Affected Families are in Worse Social and Economic Conditionthan Before the Constructionof the ItaparicaDam. 44. will not have fulfilled its goals. A situation in which families without employment are living on the Until the productivecapacity of the displaced ruralfamilies is fully restored, the project WiTis inherentlyundesirable. Nevertheless,thefollowingconsiderationsare alsorelevanttothe assessment of the change in social and economic conditionssince resettlement took place. Families that lost assets in excess of the value of the replacement housing and land were compensated in cash for their loss; also families preferring not to move to agrovilas and imgated plots were fully compensated in cash; * L a new house of 45m2with runningwater and electrícil;, and an imgated plot of at The 3,486 landless farriiing families (60%of total) living m the area gained accessto least 1S hectares, assets that most of them probably could not have imagined owning mean constructed area of rural dwellingsuas 5V m2of taipa (wattleand daub). without this project. Baseline data collected before resettlement indicatethat the Those familiesthat had homes largerttm45 m' were compensatedin cash for the difiFerence in area althoughthe pality of the new houses was sripenor; 14 0 Socialservices includingschools, health posts, and school buses, are availabletothe resettled mrai families; A maintenancepayment ongmally equalto about 2.5timesthe prevaiiing official minimumsala$* the resettlementsincethe inceptionofthe resettlement. Baselinedata collectedbefore has been paid by CHESFto all 5,800 farming families a f f e c t e d by the project began showedthat 55% of the affectedrural familieshad incomes below one minimumsalary, and 39.5%between one andtwo minimumsalanes per month, while only 5.5% had incomes higher than2 minimum salaries. Therefore,the VMT paid by CHESFsince 1988is higher thanthe baseline incomeof 94.5%of the population. Agricultural incomes fluctuated widely duringthe year, while the VMT was paid reliablythroughoutthe year; Many resettlers have been ableto restore their income based on aitemativeactivities includmg livestock raising, ramfed agriculture,wage labor, and mcroenterpnse percentage of resettled rural familieswith incomesgreaterthanthe VMT increased activities. The Joaquim Nabuco Foundationcoliected data showingthat the from 5 1%in 1989to 66% in 1994.22It should be recognized,however,that families resettled in the western areas,fartherfrom urban centers,have probably had fewer opportunitiesfor alternativeemploymentand business oppomirilties 45. significantlyhigher thanprevious levels in a large majority of cases. Insilunma~).,while the VMT is a palliative, it is adequateto maintama level of Iiwig Alcoholism and Family Breakdown Complaint: Delays in Completing Productive Infrastructure led to an Increase in Violence, 46. There have been many expressionsof fiustrationby the resettled population over the lack alcoholismand family breakdown in the agrovilas. While not discountingthe possibility that of work oppcsrtunities. Management is also aware of accountsof increased incidence of violence, unaffected b y Itapanca. In the absenceof baseline data,it is impossibleto deterttunewhat the these increasing,such occurrences also occur in many populations in this region includingthose e f f i of lack:of productive infrastructureUTISon the incidence of violence,alcohol abuse or family breakdown. Complaint: Erosion and Saiinization of Soils is Occurring in Irrigation Perimeters Financed by the Project. 47 salinization in any imgated area supported under the Itapanca Project The alieged saîuiizmon 111 The Bank,CHESFand CODEVASFare not aware of any signxficant degree of erosion or the projects f i c e d by the Bank,ISdeiiied by CHESFtechnicalpersonnel The referenced the Apolônio Sales subproject,a pnvate colonizationcum imgauon scheme which is not part of e to saluuzation 111 the Senador Nilo Coelho Project is irrelevant because it is not part of the Itapanca project or located JIIthe same regon Under the soil and climateconditionsprevailing 111the followed Aware of these nsks,the Bank has stressedthe need for adqiate training of farmers m regon, a nsk of salinization ewsts if proper soil and water managemeniprocedures are not proper soil arid water management through the programs that have been supported through 21 The cunent VMT isRS23Ihonth. The national minimum wage isRSI12ímonth. 22Partsalaries increase may be an artact of a slightly lower value of the VMT in 1994 (2.2 minimiim of thevs.2.5 in 1991). i5 L IICA partnershipto minimizethese risks. Thisquestion further stressesthe importance of strong CODEYASF,technical assistanceconsultants,and,more recently strengthened withthe CHESF- WUAsto socializethe farmers for goodenvironmentalmanagement. 48. that mayhave suffered erosion. Somefourplots inBorda de Lago,Pemambuco, seemto have CHESF reports indicatethatthere are someplots not yet turned over to their occupants are cut by naturally occurrhg gullies and CHESF has taken steps to arrest this erosion andprevent unáergone an erosiveprocess because the vegetative cover was removed prematurely. Other plots its becoming an obstacleto production. Complaint: Poor Materiais Led to Deteriorationof Housing and Infrastructurein the Agrovilas. 49. deterioration, if it exists, is exceptional and localized. Construction and quality of infrastructure The Request does not indicate the extent or nature of the alleged deterioration, but such were monitored by Bank supervisionand problems detected were correctxi. In one area, some 600 houses were affected by cracking of walls and slab floors due to expansible soilsthat were not detected prior to construction. These defects were corrected and, in some cases, houses or entire villagirs were completelyrebuilt. There have also been isolated, temporary breakdowns in water supply to some of the villages,mainly those not yet served by irrigation water. These problems, were not caused by the use of poor materials. some caused by water theft and vandalism, have alsobeen corrected as they arise. These problems L Complaint: Misuse of Resources or Diversionof Allocation to Other Works 50. The complaint does not make specific allegations or document this claim. CHESF offici;& recall that at one point, CHESFproposed that some stocks of material originally acquired for another imgation system, be used for the Apolônio Sales Subprojectand returned at a later date. However, because of the protests from Pó10 Sindical,the proposed exchange was not made allegzttions of diversion of materiel. and no material was diverted to other purposes. The Bank is unaware of any other specific Comlplaint: Project was not AdequatelySupervised by the Bank 5 1. throughout its life. Startingon April 29, 1988,there were 21 formal supervisionmissions in which As documentedabove, the Bank supervised this project continuously and closely fiom one to four Bank staff or expert consultants participatedu (seeAnnex C). From 1987 onward, an average of 19 @-weeks per year was spent on the project. In addition, there were innumerableinformal visits and contacts made in person, by telephone, faxand letter between file documents extensive correspondence with the Borrower and CHESF concerning all of the key Bank staffin Recife, Brasilia and at Headquarters and CHESFand ELETROBMS. The project issues mentioned in the Request. 7 I, 23 Th,eRequest itself recognizes the Bank's careful supenisionof the project and its attention to the average of at least three meetingsper year were held withWorld Bank representatives in Prtrolh&a concernsof the affected population."Pólo Sindicalleaders from differentperiods recall that an translzted version). It also statesthat," . . .the World Bank. despite the availability of many of its and in other affectedareason problems re!ated to resettiemeritand imgation systems."(p 8 of managers and experts, was unable to make CHESFimpleixnt its resettlement guidelines . , . ip.9 `I of translated version). 16 Conclusion ItaparicaRmttkrnent Project. It is truethat compliance with the Bank'srequests was not always 52. TheBankhascompliedwithailrelevantpoliciesinthe designand implementation ofthe the history of thisproject shows that Management and staffmade significantefforts to detect and sufficient, endmany unconscionabledelays OCCUIT~due to an accumulation of factors. However, COK& current situation is f'arfrom ideal, but the shortcomings to which the Request points d&inot arise probllems asthey arose and tookappropriateand timely actionto remedy problems. The from the Bank'sfailureto follow its policies. 17 I I I e. E C 53. Both the GOBandthe Bank remaincommittedto accomplishingthe of the project. TheGOB has also assumed responsibilityfor honoringail agreements population. To this end, in December 1996,GOB formeda high level withthe to propose lines of actionto concludethe program. This group was installed on 14, 1997,with representativesof the followingMinistries:Mines and Energy well as (coordinator),Planning and EconomicCoordination, Finance, Environment,and Agriculture, as and Thegroup'sgoal is to reach agreementon ail issues, and to prepare a subprojectsand has held discussionswith representativesof action plan. Thegroup has made visitsto ali the Bank. A preliminaryreport has been issued and discussedinternally. andthe 54. relatively Bank extend the closingdate ofthe Loan throughDecember 1997,an unusual action in view of the The GOB, largelyin response to the urging of Pólo Sindical,has also requested that the remainingbalance the and Governmenthave alreadyagreedon a Account.in the contextof thisextension,the Bank set of actionsthat will be completedby December 31, 1997, as listedbelow. Theultimate objectiveis the self sufficientoperationof ail subprojectsin the Bank projectthrough the creationof that will take over responsibilityfor and organizeefficientwater use. With regardto the subprojectsunder construction,the objective is to complete regard to subprojectsthat have been suspendedbecause of unexpected soil problems encountered, as and efficientlyas possible. With the objectiveis to completethe supplementalstudiesas quicklyas possiblewith the necessary level of accuracy, and to prepare specificationsand bidding documentsforthe conclusionof these subprojects. 55. The Benchmarksestablishedfor December 31, 1997are as Creationof at least one in 1997(Gloria sub-project); of those subprojectscurrentlyin operationby the end of 1997; Issuanceof 20% of rural land the reductionof on those subprojectsin production (currentproposal going into a fund to supportthe of a progressivereductionof 25% every three months with half of amount of each subproject); Completeissuanceof 100%of urban titles; Conclusionof construction and start of of the Mandantes subproject; Completionand commissioningof at least 40% of the Caraibas Initiationof in Caraibasand 21 L (h) Conclusionof negotiationsbetween CHESFandF"AI forthe implementa~onof the Ibotirama (Tuxá)com muni^; (i) the Rodelas (Tuxá)program; and Conclusionof negotiationsbetweenCHESFand FUNAI for the implementationof (j) Conclusionof supplementarystudiesand detailedimplementationschedule for the completionof the BarreiraBL2 subproject. The above-listed actions will be financedprimarilyout of ELETROBRASand GOB fundsin view of the smallloan balance andthe factthat somedisbursementcategorieshave alreadybeen reduced to zero. 56. Bank would play in insunng sabsfactorycompletionof any componentsof the project left The GOB and Bank managementh v e also initiateddiscussionsconcerningthe rolethe unfinished after the Loan ClosingDate. The Governmentof Brazilhas askedthe Bank to extend fonnai supervisionof the project two years beyond the closingdate ofthe Loan Agreement (i.e. until December 1999). The pomt of departurefor any future Bank involvementwill be the Interministerial Action Plan referredto above. The Bank will not assume responsibilityfor supervisingsubprojectsoutsidethose appraised inthe originalproject, but will work with the L Brazilian authoritiesto seek solutionsfor ail the affected people.Bank Managementwill seekto insurethat the followingprinciplesare adheredto in any solutionadopted and intendsto use every possible avenueof influenceto secureagreementon them: h4ainiain and improvelines of communicationand negotiationwith affected familiesthrough their legitimaterepresentatives; Timelycompletionof supplementarystucbes, bidding, contractingand construction of ail remainingworks; Preparation and adherenceto timetablesfor ali actions; Continuousmonitoringof project financialand physical performance; Timelyprovisionof fundsfor studies, trainingand completionof works; Continuedpayment of VMT for eligible farmersuntil productionis restored; Commissioningand operationof completedimgationperimeters; Timely and adequatetrainingof f m e r s in imgationtechniques, soil and water conservation,O&M of imgation systems,commercializationof crops; L- Formationof WJAs for all imgated areas;and Issuanceof Land Titlesto all project beneficiaries. 22 . -- L L L a" m X ? I ea .- v1 U -u