The World Bank FIP: Environmental regularization of rural lands in the Cerrado of Brazil (P143334) REPORT NO.: RES40120 DOCUMENT OF THE WORLD BANK RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF FIP: ENVIRONMENTAL REGULARIZATION OF RURAL LANDS IN THE CERRADO OF BRAZIL APPROVED ON JULY 21, 2015 TO FEDERATIVE REPUBLIC OF BRAZIL ENVIRONMENT, NATURAL RESOURCES & THE BLUE ECONOMY LATIN AMERICA AND CARIBBEAN Regional Vice President: J. Humberto Lopez Country Director: Paloma Anos Casero Regional Director: Anna Wellenstein Practice Manager/Manager: Valerie Hickey Task Team Leader(s): Maria Bernadete Ribas Lange The World Bank FIP: Environmental regularization of rural lands in the Cerrado of Brazil (P143334) I. BASIC DATA Product Information Project ID Financing Instrument P143334 Investment Project Financing Original EA Category Current EA Category Partial Assessment (B) Partial Assessment (B) Approval Date Current Closing Date 21-Jul-2015 28-Feb-2020 Organizations Borrower Responsible Agency Federative Republic of Brazil Ministry of Agriculture, Livestock and Food Supply Project Development Objective (PDO) Original PDO The Project Development Objective is to enhance the capacity of the Borrower’s MMA and nine SEAs to receive, analyze and approve rural environmental cadaster entries and link them to SICAR; and support, in selected municipalities, landholding registration in the CAR. Current PDO The Project Development Objective is to enhance the capacity of the Federative Republic of Brazil's Ministry of Agriculture, livestock and Food Supply, through Brazilian Forest Service, and nine SEAs to receive, analyze and approve rural environmental cadaster entries and link them to SICAR; and support, in selected municipalities, landholding registration in the CAR. Summary Status of Financing Net Ln/Cr/Tf Approval Signing Effectiveness Closing Commitment Disbursed Undisbursed TF-19211 21-Jul-2015 22-May-2017 18-Aug-2017 28-Feb-2020 24.48 2.01 22.47 The World Bank FIP: Environmental regularization of rural lands in the Cerrado of Brazil (P143334) Policy Waiver(s) Does this restructuring trigger the need for any policy waiver(s)? No I. SUMMARY OF PROJECT STATUS AND PROPOSED CHANGES This Project is part of the Brazil Investment Plan (BIP), funded by the Forest Investment Program (FIP), and was approved by the Board on July 7, 2015, during a very complex political moment in Brazil. As a result, the legal agreement was only signed almost two years later, on May 22, 2017, and it became effective on August 18, 2017. This Project was initially a US$ 32.48 million Forest Investment Program loan. The project budget allocation has been impacted by the National Budget Freeze, Constitutional Amendment (PEC 241/2016) implemented by the Federal Government, that determined that no governmental institution could have additional budget for the next 20 years. As consequence, after two years of actual implementation, the Project’s disbursement rate is low, only 8.21%. Despite the low disbursements, the progress towards achievement of the Project Development Objective (PDO) and Overall Implementation Progress are both rated Moderately Satisfactory. In the project selected municipalities, more than 120,000 rural landholders have been registered, counting for about 22.5 million hectares. These remarkable numbers surpass the original targets and most PDO indicators have been exceeded. This is mainly due to the considerable decrease costs of registries, more competition among contractors responsible for registries, and improvements in the Rural Environmental Cadaster System (SICAR), which has made the registration process easier. In addition, the Brazilian Forest Service (SFB), implementing entity, has used own resources to fund some project activities. As a result, more municipalities have benefited from project support and the States of Piauí and Bahia were added to the original nine States as project beneficiaries. A restructuring process was carried out in 2019 to: (i) cancel part of the loan, US$ 8 million, and reallocate remaining funds; (ii) change the agency responsible for project implementation; (iii) revise the Result Framework to fully capture the Project outcomes and result; and (iv) revise the disbursement schedule to reflect the accumulated delay of the project implementation. As agreed with the Government, the second part of the restructuring process, to extend the Closing Date by 22 months to December 31, 2021, would be processed once the Ministry of Agriculture, Livestock and Food Supply confirmed allocation of funds under the Ministry's budget, to the Brazil Forest Service (SFB) to implement the Project. On December 4, 2019, the Minister confirmed the project budget allocation for 2020 calendar year and reiterated the Ministry's commitment to the Project and the effort to allocate more funds. The team confirms that the Borrower does not have any outstanding audit reports nor there are audit reports which are not satisfactory to the Bank. II. DETAILED CHANGES LOAN CLOSING DATE(S) Original Revised Proposed Proposed Deadline Ln/Cr/Tf Status Closing Closing(s) Closing for Withdrawal Applications The World Bank FIP: Environmental regularization of rural lands in the Cerrado of Brazil (P143334) TF-19211 Effective 28-Feb-2020 31-Dec-2021 30-Apr-2022