Document of The World Bank Report No: 21780-BR PROJECT APPRAISAL DOCUMENT ONA PROPOSED LOAN IN THE AMOUNT OF US$209 MLLION TO THE STATE OF SAO PAULO GUARANTEED BY THE FEDERATIVE REPUBLIC OF BRAZIL FOR THE SAO PAULO METRO LINE 4 PROJECT December 6, 2001 Finance, Private Sector and Infrastructure Department Brazil Country Management Unit Latin America and the Caribbean Region CURRENCY EQUIVALENTS (Exchange Rate Effective (December 2000 - April 2001)) Currency Unit = Brazilian Real (R$) R$l = US$0.51-0.43 US$1 = R$ 1.95-2.30 FISCAL YEAR January 1 -- December 31 ABBREVIATIONS AND ACRONYMS ABTN - Brazilian Association of Technical Standards LUCI - Land Use Change Indicator (Associalo Brasileira de Normas Tecrncas) KV - Kilovolt ATC - Automatic Train Control METRO - Sao Paulo Metro Company (Companhia do Metropolitano de Sdo Paulo) BNDES - National Economic and Social Development Bank MR - Metropolitan Region (Banco Nacional de Desenvolvimento Econoimico e Social) BOT - Build-Operate-Transfer (Construir-Operar-Transferir) MT - Ministry of Transport CBTU - Brazilian Urban Train Company NATM - New Austrian Tunnelling Method (Companhia Brasileira de Trens Urbanos) CETESB - Environmental Technology Company NOx - Nitrogen Oxide (Companhia de Tecnologia de Saneamento Ambiental) CIF - Cost, Insurance, Freight PCU - Project Coordination Unit CMSP - Sao Paulo Metro Company PITU - Integrated Urban Transport Project (Companhia do Metro de Sdo Paulo) (Projeto Integrado de Tramsporte Urbano) CMTC - Municipal Bus Company(CompanhiaMunicipalde Transporte Coletivo) PMIO - Particulate Matter less than 10 microns in diameter CO - Carbon Monoxide PMIC - Project Management and Implementation Consultant COFIEX - External Financing Commission(Comisssdo de Financiamento Extemo) PMOC - Project Management Oversight Consultant CPTM - Sao Paulo Metropolitan Company PMU - Project Management Unit (Companhia Paulista de TrensMetropolitanos) CTC - Centralized Traffic Control pphpd - Persons per hour per direction DERSA - Sao Paulo State Roads Directorate ppm - Parts per million (Direcdo de Estradas de Rodagem do Estado de Sdo Paulo) EBTU - Brazilian Urban Transport Company PROCONVE - Program for the Control of Vehicle Emissions (Empresa Brasileira de Transportes Urbanos) EMTU - Metropolitan Bus Company RTCC - Regional Transport Coordination Commission (Emnpresa Metropolitana de Transporte Urbano) EMU - Electric Multiple Unit SEAIN - State Secretariat for Foreign Affairs FEPASA - Sao Paulo State Railways (Ferrovias Paulistas S.A.) SMA - Secretariat for the Environment (Secreiana do Meio Ambiente) GEIPOT - National Transport Planning Agency SOx - Sulfur Oxide (Empresa Brasileira de Planejamento dos Transportes) GSP - Government of the State of Sao Paulo SPM - Sao Paulo Municipality HC - Hydrocarbons SPMR - Sao Paulo Metropolitan Region IBGE Brazilian Institute of Geography and Statistics SSP - State of Sao Paulo (Instituto Brasileiro de Geografia e Estatistica) ICB - Intemational Competitive Bidding STM - SAo Paulo Municipal Secretariat for Transport (Secretaria de Transportes da Prefeitura do Municipio de Sdo Paulo) ICMS - Circulation Tax on Goods and Services STMSP - Sao Paulo Secretariat for Metropolitan Transport (limposto de Circula,cdo sobre Mercadorias e Servifos) (Secretaria de Transportes Metropolitanos) IERR - Internal Economic Rate of Return TBM - Tunnel Boring Machine I/M - Inspection and Maintenance System TRENSURB - Porto Alegre Metropolitan Rail Mass Transit (Trens Urbanos de Porto Alegre) LRT - Light Rail Transport VOC - Volatile Organic Compound Vice President: David de Ferranti Country Manager/Director: Vinod Thomas Sector Manager/Director: Danny M. Leipziger Task Team Leader/Task Manager: Jorge M. Rebelo BRAZIL SAO PAULO METRO LINE 4 PROJECT CONTENTS A. Project Development Objective Page 1. Project development objective 2 2. Key performance indicators 2 B. Strategic Context 1. Sector-related Country Assistance Strategy (CAS) goal supported by the project 2 2. Main sector issues and Government strategy 4 3. Sector issues to be addressed by the project and strategic choices 6 C. Project Description Summnary 1. Project components 7 2. Key policy and institutional reforms supported by the project 7 3. Benefits and target population 8 4. Institutional and implementation arrangements 8 D. Project Rationale 1. Project alternatives considered and reasons for rejection 8 2. Major related projects financed by the Bank and other development agencies 9 3. Lessons learned and reflected in the project design 10 4. Indications of borrower commitment and ownership 10 5. Value added of Bank support in this project 11 E. Summary Project Analysis 1. Economic 11 2. Financial 11 3. Technical 11 4. Institutional 12 5. Environmental 13 6. Social 14 7. Safeguard Policies 16 F. Sustainability and Risks 1. Sustainability 16 2. Critical risks 17 3. Possible controversial aspects 18 G. Main Loan Conditions 1. Effectiveness Condition 18 2. Other 19 H. Readiness for Implementation 20 I. Compliance with Bank Policies 21 Annexes Annex 1: Project Design Summary 22 Annex 2: Detailed Project Description 27 Annex 3: Estimated Project Costs 31 Annex 4: Cost Benefit Analysis Summary, or Cost-Effectiveness Analysis Summary 32 Annex 5: Financial Summary for Revenue-Earning Project Entities, or Financial Summary 36 Annex 6: Procurement and Disbursement Arrangements 42 Annex 7: Project Processing Schedule 46 Annex 8: Documents in the Project File 47 Annex 9: Statement of Loans and Credits 51 Annex 10: Country at a Glance 55 Annex 11: The Impact of Line 4 on Poverty in the Sao Paulo Metropolitan Region (SPMR) 57 Annex 12: Fiscal Impact 68 Annex 13: Environmental Assessment 73 Annex 14: Social-Economic Characteristics of the Sao Paulo Metropolitan Region 76 MAP(S) IBRD 31576 BRAZIL Sao Paulo Metro Line 4 Project Project Appraisal Document Latin America and Caribbean Region LCSFT Date: December 3, 2001 Team Leader: Jorge M. Rebelo Country Manager/Director: Vinod Thomas Sector Manager/Director: Danny Leipziger Project ID: P051696 Sector(s): DV - Privatization, TU - Urban Transport Lending Instrument: Specific Investment Loan (SIL) Theme(s): Private Sector; Transport; Urban Poverty Targeted Intervention: N Program Financing Data [X] Loan [ ] Credit [ Grant [ ] Guarantee [ Other: For Loans/Credits/Others: Amount (US$m): US$209 Proposed Terms (IBRD): Variable Spread & Rate Single Currency Loan (VSCL) Grace period (years): 5 Years to maturity: 15 Commitment fee: 0.75% Front end fee on Bank loan: 1.00% Financing Plan (US$m): Source Local Foreign Total BORROWER 332.90 209.00 541.90 IBRD 0.00 209.00 209.00 FOREIGN PRIVATE COMMERCIAL SOURCES 111.00 72.00 183.00 (UNIDENTIFIED) Total: 443.90 490.00 933.90 Borrower: STATE OF SAO PAULO Responsible agency: SECRETARY OF METROPOLITAN TRANSPORT/SAO PAULO METRO COMPANY Address: Av. Paulista, 402 - 13o andar - CEP 01310-903 - Sao Paulo - Brasil Contact Person: Rui Criscuolo Tel: (011)281-6141 Fax: (011)283-0186 Email: ruicrisc@metrosp.com.br Estimated disbursements ( Bank FY/US$m): FY 2002 2003 2004 2005 2006 2007 Annual 3.00 83.10 66.00 47.70 7.20 2.00 Cumulative 3.00 86.10 152.10 199.80 207.00 209.00 Project implementation period: FY 2002-2007 Expected effectiveness date: 12/30/2001 Expected closing date: 06/30/2007 OCS PAD FA- Rew MadD 2000 A. Project Development Objective 1. Project development objective: (see Annex 1) The objectives of the project are: (a) to improve the quality and long-term sustainability of urban transport in the Sao Paulo Metropolitan Region (SPMR) by interconnecting the existing subway, commuter rail and bus networks through the construction of METRO's Line 4; (b) to improve the accessibility of the low-income population of the areas served by Line 4 to employment centers and health and education facilities; and (c) to seek private sector participation in the development of Line 4. The first objective will be achieved by financing the construction of Line 4 of the Sao Paulo METRO which links the Vila Sonia suburb with the Luz station and will have at the end of the proposed project, 12.9 km of double underground track, 5 stations, one yard, one workshop and 13 trainsets. When fully built, i.e., after the proposed project, Line 4 will have in total 14 stations and 23 trainsets. The proposed project would be undertaken under a turnkey contract with private sector participation (concession or other arrangement), in which 80% of the project will be financed by the public sector and the remainder by the private sector. The second objective will be achieved by promoting modal and fare integration between buses, subway and rail, in such a way as to minimize the overall generalized cost of travel (tariff, travel time, reliability and safety) to the low income users of the system, particularly those from Embu and Taboao da Serra. The third objective will be met through either a concession agreement or other private sector participation (PSP) arrangement to obtain at least 20% of the cost of the project. The Line 4 Project is a priority undertaking within the Integrated Urban Transportation Plan (PITU) for the SPMR. The Project will (i) serve as a "bridge" between METRO's Line 5 and Companhia Paulista de Trens Metropolitanos (CPTM) West commuter line to the METRO network, (ii) interconnect with all three existing METRO lines to provide a grid flexibility to the METRO network which does not exist with the present radial configuration, and (iii) interconnect two CPTM commuter rail lines. At the end of the project, the whole metrorail network will be interconnected thereby facilitating access to most of the sectors of the SPMR. 2. Key performance indicators: (see Annex 1) The key performance indicators measure the modal integration objective by estimating the % of stations where bus/rail integration is provided, the public transport improvement related objective by measuring the increase in the rail share in urban transport motorized trips, and the accessibility of low-income user related objective by measuring the generalized cost of travel (travel time plus fare plus reliability). B. Strategic Context 1. Sector-related Country Assistance Strategy (CAS) goal supported by the project: (see Annex 1) Document number: 20160-BR Date of latest CAS discussion: March 30, 2000 The current Bank's assistance strategy to Brazil was approved by the Board on March 30, 2000 (Document nbr. R2000-25(IFC/R2000-34). A progress report (22116-BR) was presented to the Board on May 24, 2001 (Document nbr. R2001-0057(IFC/R2001-0069).The five pillars that support the overall poverty reduction strategy of the CAS are: (a) targeted interventions to reduce poverty, among others through the provision of urban services to the poor, (b) sustainable fiscal adjustment, among others through reform of public enterprises, (c) renewed growth, among others through private sector participation in infrastructure provision, (d) improved government effectiveness, and (e) effective environmental management. The proposed project constitutes an important part of the program to meet the CAS objectives, in particular in - 2 - terms of targeted provision of services to the poor, fiscal adjustment and growth. The project will have the following impacts: (a) Direct poverty effects. Although nearly all Line 4 users have incomes above the food poverty line usually used to calculate poverty in Brazil, fifty percent of the users are from a low income family and earns less than US$4/day with about twenty two percent earning less than US$2/day. The access to health, education and employment benefits of the new line will be significant for the following poor communities in the Sao Paulo Metropolitan Region: Taboao da Serra, Embu, Cotia, Embu Guacu, Itapecerica da Serra, Juquitiba, Sao Lourenco and Vargem Grande Paulista among others (see Annex 11). (b) Direct Fiscal Effects. The Bank's support for the turnkey contract with PSP of this greenfield construction project in Brazil should generate significant fiscal savings over the equivalent public-sector-only project of about US$200 million over the next 6 years. There will be no operating subsidies since this is a positive concession. (c) Dynamic Fiscal Effects/Governance and Institutions. The loan is part of a dynamic process of support to institutional improvements by the state government of Sao Paulo, during which the state has transformed itself administratively and achieved fiscal balance. In pushing forward this process, and bringing best practice to Sao Paulo State in the areas of PSP/infrastructure construction/regulation, the project has political and institutional benefits both at the level of Sao Paulo, and, owing to the State's fiscal significance at the federal level, outside it. (d) Economic Growth. Traffic congestion is becoming a serious impediment to the economic performance of the Brazilian economy's largest single component: It is estimated that in the Sao Paulo Metropolitan Region 316 million passenger hours/year are wasted for bus and auto trips, and total length of congested roads tripled between 1992 and 1996 from 39 to 122 km. By connecting the existing rail and metro networks, the Line 4 project will increase accessibility to all areas of the SPMR and consequently to the job market particularly for the low-income segment of the population. (e) Environment. The project has significant environmental benefits by reducing the number of buses and the length of bus trips in the area of influence of Line 4 and consequently the auto and bus emissions in that corridor. Through its involvement the Bank has already helped accelerate the private sector participation process in METRO and will stimulate a thorough review and improvements of sub-sector policies - particularly financial and modal integration - at the state and municipal levels. This project also contributes to the attainment of state creditworthiness and fiscal improvement because the new line will not have an operating subsidy. The proposed project is also a follow-up to the efforts started with the CBTU Sao Paulo Metropolitan Transport Decentralization Project and the Barra Funda-Roosevelt Project which aimed respectively at decentralizing the federally-owned CBTU to the State to allow for more effective modal and tariff integration and to link the two existing commuter railways of the region. The proposed project is also anchored on the following ESW: a) Urban Transportation: Issues and Options, which laid the foundations for the CBTU decentralization program; b) Essentials for Sustainable Urban Transport in Brazil's Large Metropolitan Areas. This ESW was widely discussed within the Bank and with our Brazilian counterparts. They have adopted b) as their urban transport strategy; and -3 - c) the discussions of the Bank's Urban Transport Strategy, in which it was concluded that the Bank could be involved in the financing of subways when the high levels of demand so require, the environmental benefits are significant, alternative modes are incapable of satisfying the demand and the fares will be sufficient to cover working costs defined as out-of-pocket costs plus depreciation and cost of capital of equipment and the impact on State finances is adequately funded and sustainable. 2. Main sector issues and Government strategy: Backiround. The Sao Paulo Metropolitan Region (SPMR), with 8050 sq. km, has 16.8 million inhabitants spread irregularly over 39 individual municipalities which are dominated by the Sao Paulo Municipality (SPM) with 8.5 million inhabitants. The SPMR generates roughly 20% of the GNP and is considered the most important economic region of the country. Each day, 31.4 million person trips take place in the SPMR of which 10.8 million are walking trips, 10.1 are private auto trips and 10.4 are public transport. Fifty percent of the motorized trips are by private automobile while of the remaining 50% by public transport 76% are by bus (mostly private operators), 2% by vans, 16% by METRO and 6% by train. Of the 12 million trips by public modes, about one third use more than one vehicle, requiring some sort of modal transfer: 78% of all METRO trips, 61% of all train trips and 16% of all bus trips require one or more transfers to be completed. This level of urban transport activity, dominated by the road-based motorized modes has significant impacts on the SPMR's environment. Despite an existing 270 km rail network, the lack of integration between the METRO and the suburban trains discourages more rail trips, in favor of buses and the automobile creating heavy congestion during peak hours thereby significantly increasing home-to-work trip time. The urban poor are the main users of public transport and bear the brunt of these problems: (i) shortage of capacity at peak hours resulting in overcrowded (>8 pass/m2) often inhuman conditions, (ii) long work journeys (2.5 hours/day) from the Metropolitan periphery to the urban centers, with often more than two modal transfers; and (c) paying over a fifth of their income towards fares. The proposed Line 4 will link the ME,TRO and suburban rail (CPTM) network integrating the whole rail-based system with a huge network o:f intermunicipal feeder buses. Institutional Framework: There are two main bodies responsible for overseeing the Metropolitan and urban transport sector in the SPMR: (a) the Secretaria de Transportes Metropolitanos do Estado de Sao Paulo (STMSP) created in 1991; and (b) the Secretaria de Transportes da Prefeitura do Municipio de Sdo Paulo (STM). STMSP is responsible for urban transport in the metropolitan region outside the jurisdiction of Sao Paulo Municipality and oversees the Sao Paulo METRO, the suburban railway (CPTM) and the metropolitan bus company (EMTU). Therefore, the whole rail-based network of the SPMR is under the STMSP along with the intermunicipal buses i.e. buses that operate in more than one municipality. The STM is responsible for all the buses that operate in the Sao Paulo Municipality. At present there is no regulatory agency in the SPMR either at the municipality or State level. Present interaction between the STMSP and STM is facilitated by the RTCC (Camaras Tematicas) but a more formal coordination would be desirable. A number of key issues must be addressed in order to improve the supply of urban transport services and to guarantee their orderly development and sustainability in the long term for the SPMR. They are: (a) institutional issues; (b) cost recovery and financial management issues; (c) environmental issues; and (d) transport planning issues. Institutional Issues. The most critical institutional issues are: (a) the fine-tuning of relations between state and municipal govemments and a clear definition of their respective roles in the financing, planning and operation of urban transport services in accordance with the 1988 Constitution; (b) the appropriate modification of regulations, including the elimination of regulatory barriers which might prevent free entry - 4 - and/or competition in the market for provision of public transport services, particularly in the bus industry; and (c) the need for a regulatory agency for metropolitan transport in view of the existing and upcoming concessions of Line 4, CPTM and state busway services. To deal with a) Government's strategy was to create a regional coordination entity (Camara Tematica de Transportes) empowered by the SPMR for planning, coordinating and setting priorities for new investments and modal integration. This entity meets frequently and is primarily a forum for discussion of metropolitan transport policies and projects which has successfully discussed integration between municipal and state projects and the specifications for the future SPMR's smart card. Although the Camara Tematica has served the purpose of a forum for discussion of main issues it is not deliberative. The proposed project will require a formal coordination agreement between the State and the Sao Paulo Municipality to ensure that physical and tariff integration agreements are formal and cannot be changed without joint consent. To deal with b) the State is committed to reform the bus industry route contracts through competitive bidding just as it did with the Sao Mateus-Jabaquara busway concession, as soon as the present permissions to operate expire; and finally to deal with c) the State's Assembly is discussing a Regulatory Agency draft law to set a regulatory entity for transport. While it awaits legislative approval, the State should create an interim commission which will act as a regulatory agency to oversee the Line 4 concession. Cost Recovery and Financial Management Issues. The need to address cost recovery from a more commercially oriented standpoint by: (a) setting tariffs which, when added to subsidies, cover at least the long-run variable costs (defined as out-of-pocket costs plus depreciation of equipment and cost of capital) of the service provided; (b) controlling fare evasion; (c) appropriate peak and off-peak pricing; (d) improving the financial management of the systems through wide-ranging cost cutting measures, staff rationalization policies, and employing more financial managers to run the mass transit systems; and (e) revamping the funding mechanisms in order to guarantee adequate financing for the implementation of new mass transit systems and the sustainability of the existing systems. Since the initial preparation of this project in 1993-94, to help achieve these goals, the Sao Paulo State Government (GSP) has embarked on an aggressive campaign to promote private sector participation in the urban transport sector. METRO has adjusted its fares to reflect increases in costs, outsourced a number of services to reduce operating costs, reduced staff and decided to seek private sector participation in the construction of this line. However, despite these efforts, METRO can still have cost-efficiency gains, if it manages to operate the new line without increasing its staff. That METRO maintains a working ratio of less than one is a conditionality of this project. Environmental Issues. Air pollution, noise, traffic congestion, and road accidents are major environmental issues to be addressed in the SPMR. The reduction of the environmental impacts of urban congestion and noise pollution in the urban area could be done through: (a) the allocation of responsibilities across government levels for the enforcement of the law and definition of tougher standards; (b) the use of cleaner and quieter systems; (c) where appropriate, the use of non-motorized transport; (d) improved traffic management and control; and (e) the strengthening of traffic safety education and the enforcement of traffic regulations. As part of a long-term strategy, the Government is reviewing the potential role of market-based incentives to address pollution as well as the implementation-to the extent possible-of the polluter-pay principle to minimize the fiscal burden implied by defacto government subsidies to polluters. The financing of the noise and emissions laboratory (under Ln. 4312-Br), as well as the PHRD grant (TF25255) which financed air-quality related studies to measure the impact of vehicle emissions on health, contribute to these objectives. Construction of Line 4 will definitely reduce the number of bus-kms in the same corridor and consequently will reduce vehicle emissions. The impact on auto emissions will be reduced because the number of auto users which will switch to METRO is smaller for cultural reasons. METRO and commuter rail are unfortunately still seen as transportation for the lower income classes, especially at peak-hour. The - 5- State Environmental Agency (CETESB) has, however, introduced legislation, by which only vehicles with tags ending in an odd number can circulate in some days of the week and those with tags ending in an even number will circulate during the other days, in some months of the year, to reduce the environmental impacts. This has reduced the number of vehicles per day by an estimated 600,000 in those months of the year in which this rotation is in force. The Sao Paulo Municipality Traffic Agency (CET) has introduced the same system on a daily basis for the peak-periods to ease traffic congestion. This measure has also had positive impacts on the environment which are now being quantified. Transport Planninig Issues. The need to strengthen SPMR's transportation planning, traffic data base, traffic management, and economic and financial evaluation of new investments was emphasized during the preparation of the project and is being successfully addressed by the SPMR since 1994. STMSP is equipped with a battery of sketch planning, demand and supply models which will test different land use, air quality, and urban transport scenarios. Furthermore, an integrated land use, urban transport, and air-quality strategy (PITU) has been carefully crafted using a participatory approach and resulted in a blueprint for the development of the SPMR's public transport system until year 2020. Sio Paulo State Government Strategv: The SSP urban transport strategy for the SPMR is anchored in 4 pillars: a) to establish with the municipalities, operators and users a regional transport coordination commission (RTCC), which has already occurred; b) to develop and update on a periodic basis, an integrated land use, urban transport and air quality strategy; c) to introduce financing mechanisms which will guarantee the long-term sustainability of the urban transport systems; and d) to promote progressive private sector participation in the investment and operations management of those systems. SSP has shown a remarkable progress towards the above objectives. First, there is an RTCC functioning as a forum for discussion of metropolitan policies for prices and subsidies as well as for discussion of common issues such as multimodal tickets and major investment projects. Second, SSP has refined an integrated land use, urban transport and air quality strategy using sketch planning techniques (PITU). This strategy has been used for decision-makers and stakeholders to discuss proposed projects. SSP has explored several financing mechanisms for the urban transport sector. Last, conscious of the scarcity of resources it faces, SSP has sought a progressive participation of the private sector in the operation of its systems: the Sao Mateus-Jabaquara trolleybusway was successfully concessioned out to the private sector for 20 years, the initial studies for the concession of the suburban rail system (CPTM) were completed under the Bank-financed Ln.3457-BR and the transactional structure report for the actual concession process is being prepared, several activities of the METRO were outsourced to the private sector and they are either reducing costs or generating non-operating revenues. The construction of Line 4 under a public-private partnership will be a pioneer project because it starts a trend towards investment of the private sector in the construction of new infrastructure and equipment. SSP's strategy is therefore to integrate the existing systems, to offer an acceptable level of service to the user and to eliminate operating subsidies. 3. Sector issues to be addressed by the project and strategic choices: Institutional Issues. * The Regional Transport Coordination Commission (RTCC) must ensure that integrated modal fares are introduced both with municipal and intermunicipal buses, and with the METRO and suburban rail system through the introduction of a multimodal type of ticket using smart card technology. * A consultation mechanism between the State and the municipalities of the SPMR, especially the municipality of Sao Paulo will be put into effect to ensure modal and tariff integration and joint urban operations ("operacoes urbanas") * A Regulatory Agency or Transitional Regulatory Entity independent of the State Secretariat for Metropolitan Transport must be established by the State not later than one year after signing. - 6 - Cost Recovery and Financial Management Issues. One of the objectives of the proposed project is maintain or improve the working ratio of METRO by making sure that its fixed costs are spread over a greater number of passengers to be transported by the new Line 4 and by not hiring additional staff. If METRO achieves this goal it will rank amongst the most efficient in the world. C. Project Description Summary 1. Project components (see Annex 2 for a detailed description and Annex 3 for a detailed cost breakdown): Indicative Bank- % of Component Sector Costs % of financing Bank- (US$M) Total (US$M) financing Part A is an Infrastructure and Urban Transport 898.81 96.2 201.91 96.6 Equipment Investment Component to build Line 4 under a turnkey contract with PSP (concession or other arrangement) including the transfer stations between the METRO, commuter rail, buses, autos, and non-motorized transport. Part B is a Technical Assistance Urban Transport 33.00 3.5 5.00 2.4 Component to: (i) finance the Project management and supervision consultants; (ii) undertake a cost-efficiency study of the Sao Paulo METRO; and (iii) support for follow-up project finance studies. Total Project Costs 931.81 99.8 206.91 99.0 Front-end fee 2.09 0.2 2.09 1.0 Total Financing Required 933.90 100.0 209.00 100.0 2. Key policy and institutional reforms supported by the project: The main reform supported by the project is the pioneering of a public-private partnership in the construction of a subway line under a turnkey with PSP scheme. In the past, Sao Paulo METRO always relied on State funds for the construction of its lines. The State budgetary constraints in the last ten years prevented the METRO network to grow faster as it was desirable in a city with the population density of Sao Paulo. This project is not only jump-starting a public-private partnership but also creating the enabling environment to attract private sector investment for future projects in urban transport. The other key policy reform supported by the project addresses the issue of cost-recovery by the Sao Paulo METRO and stresses the importance of covering working costs with operating revenues. During project preparation METRO has already progressed considerably in this area. - 7 - 3. Benefits and target population: Beneficiaries are the residents of the Sao Paulo Metropolitan Region, particularly low-income households (earning up to four minimum salaries) who are major users of public transport. Line 4 catchment area is not limited to the neighborhoods directly served by its stations. Its "missing link" role between the suburban railway and the METRO network makes it attractive to a huge number of transit users. The number of poor living in Line 4 catchment basin amounts to 3.15 million persons (and 1.28 million jobs), i.e. 79 % of the overall poor population in the SPMR. This line will be significantly used by users from the poor municipalities located at the periphery and connected to the Metropolitan Area center by suburban railway lines serving overwhelmingly low-income people, or by bus feeder lines. Even though Line 4 is located in the southwestern quadrant of the SPMR, trip origins are far from being restricted to this area: as an example, 20 % of the trips on Line 4 are originated in the peripheral districts of the eastern part of the SPMR (which are amongst the poorest areas in the SPMR), thanks to the good connection between the rail network and Line 4. Line 4 will not only increase the number of jobs accessible from the periphery but also improve the travel conditions of public transport users. The main beneficiaries of the new line will be the populations of Embu ,Taboao da Serra, Cotia, Embu Gua,u, Itapecerica da Serra, Juquitiba, Sao Lourenco and Vargem Grande Paulista among others whose accessibility to the CBD and other areas of employment, health and education facilities will be highly enhanced. The Govemrnent of the State of Sao Paulo will also benefit from the turnkey with concession to the private sector because it will not pay any operating subsidies and yet will expand its METRO system thereby diverting from road-based modes a substantial number of commuters. The reduction of bus-kilometers and less congestion in the area of influence of the line will have positive air quality impacts which are quantified in the economic evaluation. 4. Institutional and implementation arrangements: The overall coordination of the proposed project rests with the Sao Paulo Secretariat for Metropolitan Transport (STMSP) which will establish a Project Coordination Unit (PCU) for the Sao Paulo METRO Line 4 project which will be supported by its own Project Management Oversight consultant group. The Sao Paulo METRO Company (CMSP) will be the implementing agency responsible for the supervision of the project. D. Project Rationale 1. Project alternatives considered and reasons for rejection: The following technical alternatives were compared at identification: (a) do-nothing; (b) introduce 2 parallel reserved bus lanes; (c) build a metrorail line with underground and elevated portions; and (c) build the metrorail link as proposed, i.e., totally underground. The underground metrorail link was selected as the preferred alternative because of lower costs (minimum land expropriation requirements and resettlement), elimination of the number of modal transfers required, congestion relief, and shorter implementation schedule. -8 - 2. Major related projects financed by the Bank and/or other development agencies (completed, ongoing and planned). Latest Supervision Sector Issue Project (PSR) Ratings . (Bank-financed projects only) Implementation Development Bank-financed Progress (IP) Objective (DO) Decentralization of rails services from Sao Paulo Metropolitan S S federal to state government with system Transport Decentralization rehabilitation (Ln. 3457-BR) Decentralization of rail services from Rio de Janeiro Metropolitan S S federal to state government with system Transport Decentralization rehabilitation (Ln. 3633-BR) Decentralization of rail services from S S federal to state government with system Recife Metropolitan Transport extension Decentralization (Ln. 3915-BR) Decentralization of rail services from Belo Horizonte Metropolitan S S federal government with system Transport Decentralization extension (Ln. 3916-BR) Increase private sector participation Rio de Janeiro Mass Transit S S in the decentralized metropolitan rail Project (Ln. 4291-BR) agency, Flumitrens Increase private sector participation Sao Paulo Integrated Transport S S in the decentralized metropolitan rail Project agency, CPTM (Ln. 4312-BR) Decentralization of rail services from Salvador Urban Transport S S federal to state government with BOT Project (Ln. 4494-BR) type construction of new metrorail line Other development agencies IDB (Ongoing) Metro's Line 5 IP/DO Ratings: HS (Highly Satisfactory), S (Satisfactory), U (Unsatisfactory), HU (Highly Unsatisfactory) Bank Strategy. Since 1992, the Bank has supported the rehabilitation and decentralization of CBTU subdivisions to the State govemments in Sao Paulo (Ln. 3457-BR) and Rio de Janeiro (Ln. 3633-BR). Loan 3457-BR closed on March 31, 1998, having met its main objectives of (i) supporting the transfer of CBTU-SP to the State of Sao Paulo to enhance its management and operations; (ii) introducing institutional, organizational, and financial policy reforms to ensure its long-term financial sustainability, including improved multimodal integration, and expanded capacity; and (iii) contributing to poverty alleviation and environmental improvement. Loan 3633-BR, which had similar objectives, closed at the end of 2000. In June 1995, the Board approved two more loans (Lns. 3915-BR and 3916-BR) for US$102.0 million and US$99.0 million to finance the decentralization of the urban rail systems in Recife and Belo Horizonte, respectively. These loans were declared effective in April 1996 and are progressing satisfactorily. Follow-up loans in Sao Paulo (4312-BR) and Rio de Janeiro (4291-BR), which became effective recently, have attempted to introduce private sector participation in the decentralized commuter rail systems-CPTM and Flumitrens, respectively. Flumitrens has been concessioned out to the private sector in 1998. One line of CPTM is scheduled to be concessioned out in 2002/3. Even more recently, in -9- 1999 the Bank financed a BOT type project in Salvador, Bahia with an operating concession for 25 years to the private sector. This project is also progressing satisfactorily. 3. Lessons learned and reflected in the project design: To build upon the experience of previous urban transport and urban projects around the world, an ex-post analysis of Project Completion Reports and Performance Audit Reports (PCR/PAR) was undertaken. This review recognized the trends and changes in project design after the PCRs/PARs were completed. The main lessons identified and incorporated in the design of the proposed project are: Institutional Strengthening.The organizations dealing with urban transport at the federal, state and municipal levels should be reorganized and strengthened. Studies included in the institutional component must be carefully monitored and translated into action plans, which the Borrower must implement. The proposed project jump-started the creation of the RTCC and completion of critical studies. Lack of timely counterpart funding has greatly influenced the pace of project implementation and in some cases has led to cancellation of components. An effort must be made to ensure that the adequate provisions of counterpart funds are included in the annual budgets of federal and state enterprises. The State of Sao Paulo has included the project in their CY02 and CY03 budgets. Slow implementation has been a frequently occurring theme. The reasons have included a lack of familiarity with Bank procedures, overoptimistic scheduling at appraisal, lack of final engineering designs at appraisal, changes in political commitment, and lack of counterpart funds. These problems would be mitigated in the proposed project by such measures as: (i) strengthening capacity of operating agencies for financial management and application of Bank procedures; (ii) requiring the submission of final engineering design for the first year of project works prior to negotiations; and (iii) providing with technical assistance as needed. 4. Indications of borrower commitment and ownership: The Government of the State of Sao Paulo has, through the creation of a Secretariat for Metropolitan Transport, indicated the importance they attach to the provision and maintenance of an efficient metropolitan and suburban rail system. The Government has also shown its commitment to the development of the rail system and to the proposed project by quickly taking over the federally-owned and operated ex-CBTU Sao Paulo subdivision and by integrating it with the metropolitan lines of the state-owned FEPASA system, thereby creating the CPTM. To fully integrate both systems from a physical standpoint, the Government realized that it needs the link between the Barra Funda and Roosevelt stations (which is being financed under Ln. 4312-BR), and it has shown its commitment to this project by already having signed a contract for rolling stock to be used in that link. Furthermore, the Governor and the Secretary of Transport have shown their ownership and commitment to the project by, even during the worse financial straits, providing the subsidies required to cover the operating deficit of METRO and improve the system. The proposed project which was on hold since 1994, was considered a priority by the State administration as soon as the Federal Government authorized the resumption of borrowing from the Bank. The decision of the State to seek a solution for Line 4 which relied on a public-private partnership was emphasized by its decision to hire iFC corporate services to put together the BOT and concession . This shows a remarkable shift in the State philosophy and confirms the irreversible trend towards more substantial private sector participation in the sector. - 10- 5. Value added of Bank support in this project: The proposed project consolidates and deepens the policy reforms initiated under the Sao Paulo Metropolitan Transport Decentralization Project (Ln. 3457-BR) and the Barra Funda-Roosevelt project (Ln.43 12-BR), which assisted respectively in the decentralization of the federally-owned CBTU to the State to allow for more effective modal and tariff integration, and in connecting the two suburban rail systems. The main value-added by the Bank in this project is its role as promoter of a wider private sector participation in the investments and operation of urban rail systems, a catalyst for physical and tariff integration in the SPMR and as an honest broker to provide more credibility and ensure accountability in the preparation and bidding process of Line 4. E. Summary Project Analysis (Detailed assessments are in the project file, see Annex 8) 1. Economic (see Annex 4): * Cost benefit NPV=US$554 million; ERR = 17.7 % (see Annex 4) O Cost effectiveness O Other (specify) 2. Financial (see Annex 4 and Annex 5): NPV=US$ 16.5 18 million; FRR = 20.6 % (see Annex 4) This would be the financial rate of return for the private sector concessionaire in case his participation in the investment is US$183 million or about 20% of the capital cost of phase 1 of the project assuming he will pay a concession fee with a NPV of US$5 million at the social tariff imposed by the State.The FRR of the investment if it was done in its entirety by the State with the present social tariff would be 4.2%. Fiscal Impact: The fiscal impact of the project on the States Finances was analyzed by the CMU. As described in Annex 12, Sao Paulo state has an annual budget of about US$20 billion. Over the last four years, Sao Paulo state has achieved a remarkable fiscal turnaround. Having rescheduled over R$50 billion in outstanding debt to the federal government on favorable terms and significantly reduced spending on active personnel, the state ran an overall surplus in 2000 (excluding capitalized interest) and will be capable of doing so over the project implementation period. The direct impact of project counterpart funding and debt service on the state's finances will be modest. The state's counterpart contribution to capital costs will amount to only eight percent of its total capital spending during the construction period. Interest on the project loan will not exceed 0.1% of net current revenues at any time during the repayment period. No operating subsidies would be provided to the new line. Indirectly, the project may have a positive fiscal impact, when compared with the fiscal impact of a do-nothing situation, where traffic congestion and environmental impacts would be very detrimental and where alternative investments such as new roadways and bridges would be required. 3. Technical: Compared with other alternatives such as reserved or exclusive busways, this is a sound project from a technical standpoint because by adding only 12.9 km of subway line, it will allow the SPMR to have a METRO and rail system fully connected with 340 km of rail-based system serving a wide geographical area. The construction methods proposed are well known and the technology required is widely available. The preparation of a BOT in this type of project has forced METRO and STMSP to re-energize their - 11 - transport planning, economic evaluation and financial engineering capabilities. Furthermore, METRO is equipped to implement this project and has the capability to provide a quality service on the overall network. The Bank project team and IFC staff reviewed several options to structure this project including a) a single Build-Operate-Transfer type bid with all infrastructure, equipment and operating concession included; b) two bids: a tumkey bid for the infrastructure and fixed installation systems; and a second bid for the operating concession with provision of rolling stock and other systems by the private sector; c) an Installment model which would consist on a turnkey project financed by a public-private partnership but operated by METRO, with conditionalities on METRO's working ratio; and d) a traditional procurement with several bids for each main component and support from export credit agencies. After a long discussion of the advantages and disadvantages of each alternative and analyzing the market conditions, alternative b) was considered the most cost-effective and viable to secure the highest private sector participation in the project without jeopardizing its main objective. 4. Institutional: 4. 1 Executing agencies: The implementing agency is METRO under the general coordination of the STMSP. METRO will sign the turnkey and concession contracts and the contracts with the consultants for Part B of the Project. METRO will conduct the bidding process with the help of financial advisors and consultants. METRO will be responsible for the actual supervision of the project also with the help of consultants. 4.2 Project management: STMSP will establish and maintain a Project Coordination Unit (PCU) headed by a Project Coordinator, to assist in the general coordination of the project from the State standpoint. The Project Coordinator would report directly to STMSP Secretary and participate in the negotiations of the loan. Project Management Oversight (PMO) consultants financed under Part B of the project would act as full time advisers to the Project Coordinator to provide the technical support and cross-country experience required for managing the project. METRO will have a Project Management Unit.This Project Management Unit (METRO/PMU) will report directly to METRO's President, and will be responsible for the preparation of bidding documents for the contracts, supervision of compliance with the contracts and for authorizing payments to the contractors. The PMU will call on the existing environmental, expropriation/resettlement and social monitoring division of METRO to ensure that the action plan approved in the environmental assessment report is implemented and the impacts of the project are properly monitored. 4.3 Procurement issues: The procurement preparation, evaluation, management and monitoring will be undertaken by METRO. METRO has some experience in Bank procurement guidelines and SBDs. The Regional Procurement Advisor undertook a procurement capacity assessment of METRO and concluded that this agency is procurement proficient. - 12- 4.4 Financial management issues: Both the State and METRO have experience with Bank loans and will be able to handle all aspects related to the financial management of the project including accounting, disbursement and auditing functions. Metro will be the agency responsible for loan disbursements. A Bank financial management specialist evaluated METRO's accounting, disbursement, procurement and auditing procedures and considered it capable and experienced to undertake those functions. METRO will carry out a time bound action plan to the Bank to integrate the existing systems so that it can produce PMRs not later than one year after effectiveness of the Loan Agreement. 5. Environmental: Environmental Category: A (Full Assessment) 5.1 Summarize the steps undertaken for environmental assessment and EMP preparation (including consultation and disclosure) and the significant issues and their treatment emerging from this analysis. The project is expected to have a net beneficial impact on the environment. The new subway link will help relieve congestion in major transport corridors and central areas, resulting in lower emission of pollutants per vehicle-kilometer. Junction improvements and pedestrian overpasses will improve safety and quality of life. Nonetheless, construction of the line will cause scme minor and localized negative environmental and social impacts. The proposed underground routing of Line 4 and use of tunneling (with minimal "cut-and-cover") as the method of construction of the line and stations will minimize environmental impacts during construction. Such impacts are expected to consist essentially of limited expropriation of land for stations, and noise, vibration, dust, traffic disruption and limited disruption to underground utilities and services. Additional negative impacts during construction will occur due to haulage and final disposal of excavated materials from the construction sites. (The problems of excavated material are likely to be less severe than if "cut-and-cover" methods were to be used.) Measures to mitigate such impacts are specified in the EA's detailed action plan and in the bidding documents for works. A prior version of the EA prepared in 1994 for the Vila Sonia-Paulista segment was cleared by the Bank and approved by the State licensing agency (Secretaria do Meio Ambiente - SMA). The revised EA for Vila S6nia-Paulista and the Paulista-Luz segments were submitted to the Bank on October 20, 2000. They comprise a package of mitigating actions, as well as public informnation, monitoring and evaluation programs. Land and/or property expropriation are limited to the areas close to the Vila Sonia subway yard and to some stations. A social assessment has been recently conducted for the full extension of the line. Affected properties (274 units in all) will be expropriated. Residential units (77) and commercial establishments (197) will be compensated for lost assets and assisted in relocating, through grants and services to be provided by the Company. In the 77 residential units about 227 persons will be affected of which 194 in the Paulista-Vila S6nia link and 33 in the Paulista-Luz link.The construction of replacement housing will not be undertaken, as it is envisaged that families and commercial establishments will be able to relocate within the surrounding area in existing housing stock and commercial units if they so desire. Valuation criteria and expropriation procedures are clearly defined for such cases. The expropriation decrees for the Vila Sonia-Paulista-Luz segments have been signed by the State Govemor on November 8, 2001. A Relocation Plan, comprising guidelines and specific detailed relocation options, compensation packages and support services, as well as institutional arrangements, timetables and budgets for implementation of the plan, was cleared by the Bank and approved by the Metro's Board of Directors in 1994 for the Vila Sonia-Paulista segment. It was updated and was resubmitted to the Board of Directors on March 30, 2001. A monitoring and evaluation program has also been designed and will be undertaken by the Company. - 13 - The Final Environmental Assessment Report and the detailed Resettlement Plan (prepared according to Bank guidelines) was approved by the Board of Directors of the METRO and submitted to the State licensing authority. As requested by the Bank, the Borrower has updated the Resettlement Plan and submitted evidence that the Installation License has been requested. Evidence that the Environmental Assessment has been approved and that the appropriate license has been issued by the SMA should be provided to the Bank as a condition of effectiveness. 5.2 What are the main features of the EMP and are they adequate? An environmental management action plan has been proposed as part of the EA. An implementation manual with all the measures required to mitigate impacts during construction was prepared and will be part of the bidding documents. The Project Implementation Unit will have an environmental specialist and will be supported by METRO's resettlement team. 5.3 For Category A and B projects, timeline and status of EA: Date of receipt of final draft: March, 2001 5.4 How have stakeholders been consulted at the stage of (a) environmental screening and (b) draft EA report on the environmental impacts and proposed environment management plan? Describe mechanisms of consultation that were used and which groups were consulted? Stakeholders were consulted during preparation in public meetings previously announced and scheduled with minutes recorded for each meeting; through conferences to different trade associations and neighborhood committees. The EA was discussed in official public audience and the comments were judged by the State Environmental Agency. 5.5 What mechanisms have been established to monitor and evaluate the impact of the project on the environment? Do the indicators reflect the objectives and results of the EMP? Yes. An environmental specialist will be part of the core team and will assess the impacts due to noise, vibration and dust during and after the construction. The impact on buses and modal share will also be measured. See monitoring indicators in Annex 1. 6. Social: 6.1 Summarize key social issues relevant to the project objectives, and specify the project's social development outcomes. Line 4 will not only increase the number of jobs accessible from the periphery but also improve the travel conditions of public transport users. As mentioned above, the main beneficiaries of the new line will be the populations of Embu, Taboao da Serra, Cotia, Embu Guacu, Itapecerica da Serra, Juquitiba, Sao LourenSo e Vargem Grande Paulista whose accessibility to the Central Business District (CBD) and other areas of employment, health and education facilities will be highly enhanced. At least 50% of Metro users are low income and live in the suburbs of the greater SPMR. Improving suburban and metrorail services in general increases the accessibility of this low-income segment of the population to employment centers. Transport Users Associations have often stressed to Bank missions and to the RTCC the importance of having an efficient and above all reliable metrorail system. They have also stressed the need for more integration with other modes. The project was presented several times to the public initially under the label of the Projeto SIM (Sistema Integrado Metropolitano) in the previous government and in the present government under the name of PITU (Projeto Integrado de Transporte Urbano). Requests from some small towns served by the system were taken into account as well as requests from users associations which wanted the CPTM and Metro systems connected. Suggestions received after the public presentations of the system were also incorporated. There is a consensus that this project furthers the main goal of the beneficiaries: integration - 14 - with other modes and between rail lines and the subway system, lower generalized costs (shorter trip times, greater reliability) at an affordable fare. No negative social impacts are expected from the proposed project. A full review of the social impact of the proposed project and future extensions of the mass transit system was undertaken in the context of the PITU program and is available in the Project Files. 6.2 Participatory Approach: How are key stakeholders participating in the project? a. Primary beneficiaries and other affected groups: The primary beneficiaries of the project are the low-income users of the Vila S6nia and Taboao da Serra areas who will be able to reduce substantially their travel time commute downtown using a bus-metro combination and integrated fare. The Associacao Nacional de Transportes Puiblicos (ANTP) which represents users and operators was involved in the preparation of the SIM and PITU programs. The association is very supportive of the project. b. Other key stakeholders: Other key stakeholders are the municipalities of Sao Paulo and others of the SPMR which are served by the line. In general there is a consensus that the Line 4 project is overdue and will represent a major gain for the users of the system in terms of travel time, reliability and quality of life. 6.3 How does the project involve consultations or collaboration with NGOs or other civil society organizations? The Metro project was discussed and explained to a considerable number of trade associations and community groups either interested in the project or directly/indirectly affected by it. A display on the Line 4 project was open to the public in one of METRO stations. 6.4 What institutional arrangements have been provided to ensure the project achieves its social development outcomes? The project management team at METRO will include specialized personnel which will monitor the impact of the project on the social development objectives set at appraisal. 6.5 How will the project monitor performance in terms of social development outcomes? A METRO Team will monitor the families and businesses displaced by the project and ensure that they have been properly relocated. Property prices before and after construction will be recorded. The evolution of tariffs and satisfaction of the users with the level-of-service provided will be monitored every 2 years by an independent survey organization. - 15 - 7. Safeguard Policies: 7.1 Do any of the following safeguard policies apply to the project? Policy Applicability Environmental Assessment (OP 4.01, BP 4.01, GP 4.01) 0 Yes 0 No Natural Habitats (OP 4.04, BP 4.04, GP 4.04) 0 Yes 0 No Forestry (OP 4.36, GP 4.36) 0 Yes 0 No Pest Management (OP 4.09) C Yes * No Cultural Property (OPN 11.03) 0 Yes * No Indigenous Peoples (OD 4.20) 0 Yes * No Involuntary Resettlement (OD 4.30) 0 Yes 0 No Safety of Dams (OP 4.37, BP 4.37) 0 Yes * No Projects in International Waters (OP 7.50, BP 7.50, GP 7.50) 0 Yes * No Projects in Disputed Areas (OP 7.60, BP 7.60, GP 7.60)* 0 Yes 0 No 7.2 Describe provisions made by the project to ensure compliance with applicable safeguard policies. A full Environmental Action Plan and a Relocation Plan were prepared in accordance with Bank policies. F. Sustainability and Risks 1. Sustainability: One of the main objectives of the proposed project is to establish long-term financial mechanisms and an institutional framework which will ensure not only project sustainability, but also the financial sustainability of the Sao Paulo urban transport system. The RTCC is already in operation. The study for the concession of CPTM is underway and preliminary results suggest that the concession is expected to substantially reduce operating and capital subsidies to the system and, in a very short period, produce "royalties" which will be paid to the government for the concession of the system. A draft law defining financing mechanisms for the urban transport sector, based on studies financed under Ln.3457-BR, will be submitted to the Sao Paulo Legislature. In this project, the State continues its strategy towards sustainability of the urban transport sector by granting a concession which will not require operating subsidies. Furthermore, there is a conditionality requiring that METRO improves its working ratio, i.e., the ratio between working costs and operating revenues. - 16- 2. Critical Risks (reflecting the failure of critical assumptions found in the fourth column of Annex 1): Risk Risk Rating Risk Mitigation Measure From Outputs to Objective Project cost and time overruns. N Use of well-known technology, available from many sources. Detailed Project Engineering estimates at appraisal. Delays in the procurement process N Delays will be minimized by starting at pre-appraisal the pre-qualification by using standard bidding documents and requiring the borrower to produce the major tender documents by negotiations. From Components to Outputs Unsustainability of the RTTC N Bank conditionality to ensure that RTCC is maintained. Resettlement delays M Start the implementation of the Resettlement action plan right after appraisal. Demand Forecast overestimated N Several Independent demand forecast studies will be available. Proliferation of Illegal Transport (vans, M Assurances of enforcement by State, topics) Municipalities. Inclusion of clauses in concession contract assuring enforcement and penalties in case Government fails to enforce the law. Poor Modal and Fare integration N The consultation mechanism with the Municipality of Sao Paulo is a dated covenant and the continuation of the RTCC will facilitate modal and tariff integration. The concession contract will emphasize this aspect. Delay in approving Bus Feeder Routes to M The consultation mechanism between the rail stations Municipality and the State is a dated covenant. State will indicate in the concession contract when and how is going to concession out feeder routes as per plan agreed with the Bank. Repeated failure to concession out the M Alternative PSP options would be studied and operations of the system agreed between the Bank and the State to obtain 20% of the project cost financing. Failure to obtain private sector financing N The State has agreed to finance the gap. or higher construction costs due to unexpected soil conditions Tariff too high for low-income users after M State must approve tariffs and will examine PSP burden on low-income users. If need be and request for tariff increases by concessionaire is - 17- justified, State will put in place mechanisms targeted to the poor to subsidize their travel. Untimely availability of counterpart funds M The State Government has agreed to include the necessary counterpart funds in CY 02 and 03. Limited Private Sector Interest in the M The proposed package will be designed in a way Concession as to attract the attention of the private sector by providing most of the infrastructure and equipment required for operations. This will make the concession very attractive for the private sector given the high ridership forecast. Overall Risk Rating M Risk Rating - H (High Risk), S (Substantial Risk), M (Modest Risk), N(Negligible or Low Risk) 3. Possible Controversial Aspects: In view of the BOT type model selected by the Borrower, in case there will be repeated failures in the concession bid, the Borrower will review with the Bank alternative options to undertake the project which meet the basic objectives of the project, particularly the private sector participation in the investment and operation. The integration of the privately-operated Line 4 with an existing state-operated subway network will require reliable revenue-sharing mechanisms which must have been agreed prior to the concession of the system. Tariff integration with municipal buses will require agreements between the State and those municipalities and this might be difficult in some cases. The project has been described to the METRO Union who sees it as the only way to continue to expand the network. There is support for the Line 4 project by all Sao Paulo political parties. G. Main Loan Conditions 1. Effectiveness Condition a) The duly registration of the Loan by the Central Bank of Brazil; b) The PCU and METRO/PMU have been established and their respective coordinators have been appointed; c) Evidence that population relocation is being carried out in accordance with the Resettlement Plan approved by the Bank and Brazilian authorities; d) Evidence that the Environmental Assessment and the corresponding Environmental Action Plan have been approved and that the appropriate license has been issued by the State licensing authority should be provided to the Bank. - 18- 2. Other [classify according to covenant types used in the Legal Agreements.] During Negotiations, the following aspects were confirmed: a) that the Project Coordination Unit (PCU) and the METRO PMU would be structured and adequately staffed and otherwise supported in the implementation of its responsibility under the project; b) that procurement would be carried out in accordance with Bank guidelines, including: (i) the use of standard bidding documents for the procurement of the turnkey contract under ICB procedures; (ii) use of Bank's guidelines for the selection of consultants; c) that a Special Account in a commercial bank would be opened and maintained; d) that Sao Paulo METRO's financial statements, the Special Account and Statements of Expenditures (SOEs) or Project Management Reports (PMRs): (i) would be audited by independent auditors acceptable to the Bank; and (ii) audits would be subrnitted to the Bank by June 30 of each year; e) that: (i) a Project Management Information System to track project expenditures, disbursements and procurement following LACI procedures will be installed in SP METRO not later than one year after effectiveness; and (ii) pre-agreed operational and financial performance targets would be used to measure progress of the Project, and annual progress reports should be sent to the Bank; f) Regulatory Agency: The State will establish an autonomous entity/commission in charge of regulating concessions of metropolitan transport services under its jurisdiction not later than one year after loan signing. g) A Mid-Term Review to take place in July 2003, to review agreed institutional, operational and financial performance indicators, and compliance with covenants. Based on this evaluation, the State will propose a revised action plan and any corrective measures necessary to ensure that the project meets its objectives. h) User Survey: A survey will be undertaken every year during the first five years after the beginning of operations of Line 4 to gauge the satisfaction of the users with the service provided particularly in terms of level-of-service, modal integration and affordability. Surveys will be undertaken beforehand after the completion of Line 4 to measure its effect on real estate prices and on the construction of new housing and establishment of new businesses. i) Retroactive financing of up to US$500,000 will be available for payments made to consultants within 12 months before the date of signing of the Loan Agreement. - 19- H. Readiness for Implementation 0 1. a) The engineering design documents for the first year's activities are complete and ready for the start of project implementation. 0 1. b) Not applicable. Z 2. The procurement documents for the first year's activities are complete and ready for the start of project implementation. X 3. The Project Implementation Plan has been appraised and found to be realistic and of satisfactory quality. L 4. The following items are lacking and are discussed under loan conditions (Section G): - 20- 1. Compliance with Bank Policies 1 1. This project complies with all applicable Bank policies. C 2. The following exceptions to Bank policies are recommended for approval. The project complies with all other applicable Bank policies. jorge M. Rebelo D L iger / I g odThomas eam Leader Sector ManagerlD|re Country Manager/Director - 21 - Annex 1: Project Design Summary BRAZIL: Sao Paulo Metro Line 4 Project More information on Logframes :KeyPerformance Data Collection Strategy Hierarchy of Objectives : ndicators CriticalAssumptions Sector-related CAS Goal: Sector Indicators: Sector/ country reports: (from Goal to Bank Mission) The proposed project is in line That the construction of Line Supervision missions and Expect that Govermment of with the five main pillars of 4 with partial financing from country assistance review. Brazil will continue its efforts the CAS, namely: (a) targeted the private sector will be of public sector reform interventions to reduce successful, therefore starting a through ongoing technical poverty, among others new trend in rail-based mass assistance. through the provision of transit systems in Brazil. urban services to the poor; (b) Expect that the State sustainable fiscal adjustment, That the working ratio of the Government will continue to among others through reform METRO system improves to a strengthen the enabling of public enterprises; (c) level which will increase the environment for private sector renewed growth, among operating surplus of METRO, operators in the urban others through private sector thereby reducing overall transport and railway sectors. participation in infrastructure contributions of the State to provision; (d) improved METRO. government effectiveness; and (e) effective environmental That the low-income classes management. accessibility to work improves and their generalized cost of travel decreases. That the loan disbursement occurs as scheduled and there is no lack of counterpart funds. - 22 - Key Performance ] Data Collection Strategy Hierarchy of Objectives Indicators | Critical Assumptions Project Development Outcome / Impact Project reports: (from Objective to Goal) Objective: Indicators: The main objective of the By the end of the project: See Annex la - table 1 System will not have project is to improve the operating subsidies otherwise quality and long-term 90% of the stations of Line 4 will be a fiscal burden to the sustainability of urban integrated with buses; govermment; transport in the SPMR by interconnecting the existing 10-15% lower average Proposed structural reforms, subway, commuter rail and generalized travel costs i.e., concession to the private bus networks through the (travel times,fares and sector or other PSP construction of METRO's reliability) for users between arrangements will take place. Line 4. Subsidiary objectives Vila S6nia and Luz than are:i) to improve the without Line 4; accessibility of the low-income population who Higher share (23%) of are the main users of the METRO in total urban METRO to employment transport motorized trips and centers and health and reduced bus congestion in education facilities; and ii) to Line 4 corridor; seek private sector participation in the METRO will not require an development of Line 4. operating subsidy for its operation. - 23 - KeyX Performance : Data Collection Strategy Hierarchy of Objectives C Indicators : Al Critical Assumptions Output from each Output Indicators: Project reports: (from Outputs to Objective) Component: No lack of counterpart funds An underground and By the end of the project due to economic crisis; independent line covering (2006): 12.9 kilometers and consisting of double track 12.9 km of an underground No delays in project infrastructure, stations, subway, 5 stations and 13 implementation due to workshops, systems and trainsets delivered and in procurement problems. rolling stock; operation; The integration of the above Physical and fare integration system with other private and of Line 4 with other modes in public modes mainly the at least 50% of the stations of intermunicipal and municipal Line 4; bus system; Overall METRO's working Improvement in the working ratio will be less than one. ratio, i.e. the ratio between operating costs without depreciation and cost of capital and operating revenues of METRO. - 24 - Key Performance Data Collection Strategy Hierarchy of Objectives [ Indicators - Critical Assumptions Project Components I Inputs: (budget for each Project reports: (from Components to Sub-components: component) Outputs) Part A is an Infrastructure and By end of 2003: See Annex la Table 1 Private sector will be enticed Equipment Investment 1/4 of the infrastructure of by the Concession; Component: (i) build Line 4 Line 4 would be built; under a turnkey plus Revenue-sharing mechanisms concession (or other PSP The contracts for rolling stock between METRO and Line 4 arrangement) contract would have been signed; will be agreed; including the transfer stations between the METRO, By end of 2004: The RTCC will be an commuter rail, buses, autos, 2/3 of the infrastructure of the influential forum in transport and non-motorized transport. rail system would be built; coordination of the SMR. Part B is a Technical The financial management Assistance Component to and cost recovery studies of No project cost and time finance: i) the Project METRO would have been overruns; Management and project completed. supervision consultants; (ii) a Environmental License is cost-efficiency study of the By end of 2006: obtained on schedule; Sao Paulo METRO; and (iii) The infrastructure of Line 4 follow-up to the project would be completed; No resettlement Delays; finance studies. The rolling stock and systems Sustainability of the RTCC; would have been delivered and operational tests would No delays in the turnkey and start; operating concession procurement process; The Financial management and cost recovery study would Timely availability of have been completed and its counterpart funds; recommendations approved. Success to concession out the By end of 2006: operations of the system. Line 4 will be operating for revenue service - 25 - Table IA: Monitoring Indicators and Targets By End of the Calendar year 2001 2002 2003 2004 2005 2006 (base) Project Development Objectives Percentage of Line 4 stations integrated 0 0 0 0 0 90 with bus lines (integration related objective) METRO share of urban transport 18 19 19 19 19 23 motorized trips (%) (congestion related objective) _ Generalized cost of travel (travel time 89 89 89 89 89 51 plus fare plus reliability) between Vila Sonia and Luz (accessibility of low-income user related objective) in minutes* METRO's working ratio .98 >1 >1 Project Outputs Physical Implementation _ % of the Infrastructure completed 0 2 25 25 25 23 % of Stations completed 0 2 25 25 25 23 % of System works completed 0 0 0 28 44 28 % of Rolling Stock delivered 0 0 0 0 50 50 Institutional Development Financial Management and cost-recovery Study Recommendatio review of the METRO completed ns Implemented Follow-up study on private sector Study participation completed * (fare + travel time x value of time + (probability of being late x minutes late x value of time) fare is equivalent to 32 minutes is equal to R$1 in 1998 travel time by bus in 1998 is 60 minutes and by metro (in 2006) is 20 minutes value of time is R$1.872/hour - 26 - Annex 2: Detailed Project Description BRAZIL: Sao Paulo Metro Line 4 Project By Component: Project Component I - US$900.90 million (total cost of component) An Infrastructure and Equipment Investment Component (Part A): to build the METRO's Line 4 between Vila S6nia and Luz, including the transfer stations between road and rail based systems. This is an underground rail rapid transit connection which will link CPTM's south line, METRO's Line 1 at Luz Station, METRO's Line 2 at Consolacao Station and METRO's Line 3 at Repuiblica Station. Line 4 of the METRO will be a 12.8 10 km, double track link between the Vila Sonia yard facility located south-west of the Pinheiros river and the Luz station. This component will comprise: a) Civil Works: Line 4 is to be constructed entirely underground from its tail track north-east of Luz Station to the maintenance facility portal at Vila Sonia. Track will be standard gauge. The line sections will consist of: (i)1478m of double track tunnel (one 8.43 m internal diameter tunnel) constructed using the "shield" method in soil between North of Luz station and the 24 de Maio works shaft; (ii) 150 m part in double track tunnel and part in single track ( two tunnels ) constructed by the New Austrian Tunnelling Method (NATM) in soil between 24 de Maio works shaft and Republica station; (iii) 136m of single track NATM tunnelling in soil and 68 m of double track tunnel constructed by cover-and-cut between Repuiblica station and the Hilton works shaft; (iv) 1324 m of double track shield tunnelling in soil from the Hilton works shaft to Cel Jose Eusebio ventilation shaft; (v) 507 m of triple track NATM tunneling in soil between Cel Jose Eusebio ventilation shaft and Paulista station; (vi) 2335 m of double track shield tunnelling in soil between Paulista and Fradique Coutinho stations; and (vii) 5239 m of double track shield tunnel and 354 m of cover-and-cut tunnel both constructed in soil and rock from Fradique Coutinho station to the transition to the surface to access the Vila S6nia yard. At the end of the proposed project there will be 5 completed stations (Butanta, Pinheiros, Paulista, Republica and Luz) and 4 station shells (Faria Lima, Fradique Coutinho, Oscar Freire and Higien6polis). When phase 2 of Line 4 is completed there will be in addition 2 more passenger stations on the line, Morumbi and Tres Poderes. When completed, at the end of phase 2 the project Line 4 will have 11 stations. The stations have off-street entrances and 132 m train platforms. At the end 6 stations would be constructed using NATM and the 5 remaining stations would be constructed using cover-and-cut. b) System-Wide Facilities include the following components: (i) a high and medium-voltage (AC) electrical power system, including one primary substation of 138/88-22 KV, which will support a network of medium voltage, DC traction power substations with their respective rectifiers and transformers; (ii) a DC traction contact line system for distributing 1500 V power to the trains via a overhead conductor system in the tunnel section and via a conventional overhead catenary system in the parking and maintenance yard; (iii) a low voltage electrical system comprising switchboards, transformers, diesel generator group and no break for all electrical systems below 460 V including illumination and cable trays; (iv) a ventilation system in stations and tunnel; (v) elevators for physically disadvantaged and escalators for passengers; (vi) auxiliary systems such as pumps, fire detection, illumination, panels, etc.; (vii) a telecommunication system, data transmission, voice and video; (viii) a communications based train control system for signaling; (ix) on-board equipment for signaling; (x) a passenger and fare control system; (xi) a supervisory and control system for traffic, energy and auxiliary; (xii) all system facilities for the Vila S6nia maintenance and parking yard shall be provide including electrical power supply, - 27 - telecommunications, signaling and auxiliary systems. c) Roiling Stock comprising a fleet of 16 trainsets to operate this line in phase 1 and additional 8 trainsets to complete 24 trainsets to operate this line in phase 2. As in the existing METRO system, these trains will operate under ATC. The maintenance facility at Vila S6nia will accommodate up to 25 trainsets. Maintenance shop facilities, including all equipment for maintaining the revenue and non-revenue vehicles, will be part of the yard complex. Project Component 2 - US$33.00 million (total cost of component) A Technical Assistance Component (Part B) to finance : (a) the Project Management Oversight consultant (PMOC) who will assist the Project Coordination Unit; and the supervision of the works and goods financed under the project ; b) a financial management and cost recovery study (including recommendations on tariff structure) designed to propose far reaching cost cutting measures and revenue maximization to improve METRO's working ratio by 2006; and c) a follow-up of the project finance studies. Summary of Concession Design Risks and Risk Mitigation 1. The State of Sao Paulo decided that Line 4 must be operated by the private sector through a long-term concession at a tariff set by government. It also decided that this will be positive concessions, i.e., there will be no operating subsidies paid by the State to the concessionaire. It is, however, willing to finance most of the infrastructure and equipment components, leaving the remaining investment to be done by the private sector at a level which will still produce an acceptable return on equity to the concessionaire. In order to ensure that the tariff would not be a burden for the low-income users, the State decided at the outset that the fares in Line 4 will be the same as in the rest of the system and will be set by the State in the concession contract. Subsequent adjustments will take place according to a formula included in the concession contract. 2. Financial Advisors (IFC corporate services and Fundacao Getilio Vargas) were hired by the State to evaluate the options for the concession and prepare a preliminary background memorandum, a transaction report and an information memorandum for several options including: a) a full Build-Operate-Transfer in which the State would finance part of the investment and the other part would be financed by the private sector concessionaire. Line 4 would be operated by the concessionaire during a 25 year term; b) an installment method in which the State would finance the civil works and systems investment and the private sector would finance the rest of the systems and rolling stock. The private sector concessionaire would operate the line during 25 years but would be paid an installment, independent of the traffic demand, which would be paid by METRO on a monthly basis; c) a traditional method in which the State with or without the help of export credits would build and operate the Line. Subsequently, in view of the budgetary restrictions imposed by the significant changes in market conditions, another BOT type option was evaluated: the civil works and part of the system would be bid as a turnkey and built by the lowest evaluated price; the rest of the systems and the rolling stock would be financed by the private sector concessionaire who would operate the Line during 25 years. This investment would be partially financed by the State, who would define the investments to be made by the private sector and the maximum amount of - 28 - funds made available by the State for that investment as well as the minimum concession fee required. The bidder with the highest net present value of the concession fee and the difference between what it will require and the maximum amount of funds made available by the State would be the winner. 3. It has been decided that the best way to proceed with the procurement of the project is a BOT type project with a bid for the turmkey for the civil works and fixed installations followed by a bid for the concession and provision of rolling stock and remaining systems. This option will minimize the risks of construction of the infrastructure and provide sufficient time for the market to prepare the concession. The private sector is expected to finance approximately 20% of the cost of the Bank-financed project. The project procurement would consist in one single bid for civil works, systems, rolling stock and the concession to operate the system for 25 years at a tariff set by the State. The State will define the maximum investment per year over the project implementation period which will be able to finance and the minimum concession fee required. The bidders will bid on the amount of investment required and the concession fee. The bid for investment cannot exceed the value set by the State and the concession fee proposed by the bidders must exceed the minimum required. The bidder with the highest net present value of the concession fee and the difference between what it will request and the maximum investment made available by the State, would be the winner. A Project Management Oversight Consultant hired by the State will supervise the construction. 4. The Concession contract indicated above will also give the Line 4 concessionaire the right to operate intennunicipal buses in the areas between Vila S6nia and Embu and Taboao da Serra. This will ensure that the bus/metro integration will take place either by agreement with existing operators or with its own buses or by contract with legalized van service. 5. A detailed information memorandum will be annexed to the pre-qualification bid documents for the concession. 6. As mentioned above, the State's mandate is to provide a system affordable to the users, without State's operating subsidies. Therefore, the design of the concession had to take into account these two constraints and yet provide the necessary incentives and mitigation measures to create the enabling environment for the private sector to participate in the investment on rolling stock and systems and have a satisfactory return on its investment. User surveys indicated their willingness-to-pay for an integrated metro/bus fare at least 10% more than the fare they are presently paying for a metropolitan bus, because of Line 4 higher speed and reliability. At present, in Sao Paulo, the tariff charged by any metropolitan bus which parallels Line 4 is $R 2.5 (a flat rate, i.e., it does not vary with distance or time of day). METRO's flat fare at present is $R1.4 without discount but when bought in multiples of ten (the most common ticket) comes down to R$1.2. 7. A detailed financial analysis is presented in the Transactional Structure Report which is available in the Project Files. - 29 - 8. The specific risks identified in this concession design are: Risk Mitigation measure Further Foreign Exchange Devaluation and Impact A reserve account will be established by the State with the revenues on Imported Equipment obtained from the concession fee. The funds provided by the Banks will offset part of the burden caused by future devaluation Compensation for government mandated discounts State will enact legislation indicating that it will ("gratuidades") imposed by State/Municipality compensate for these discounts. This is already the practice in the State of Sao Paulo. Bus feeder routes are not concessioned out as agreed State will indicate in the concession contract when and how is going to concession out feeder routes as per plan included in the concession contract. Sale of monthly passes/ special tickets A system for selling these monthly passes and special tickets will be agreed and included in the concession contract Delays in the completion of the civil works Penalties to be paid to the State by turnkey contractor could be put in escrow to pay any concessionaire claims due to delays. Delays by the State in providing the funds agreed will also be subject to penalties in favor of the concessionaire Revenue-Sharing since Line 4 is a bridge between Revenue-sharing mechanisms in which the portion paid in Line 4 is several lines fully compensated will be clearly specified in the concession contract and will be introduced in the smart card - 30 - Annex 3: Estimated Project Costs BRAZIL: Sao Paulo Metro Line 4 Project Local Foreign Total Project Cost By Component US $million US $million US $million Infrastructure and Equipment Component (Part A) 0.00 Project Design 24.80 0.00 24.80 Expropriations 46.00 0.00 46.00 Civil Works 194.90 129.80 324.70 Permanent Way 7.80 44.20 52.00 Systems 39.10 117.40 156.50 Rolling Stock 39.40 114.80 154.20 Technical Assistance Component (Part B) 0.00 0.00 Administration/Supervision 15.20 15.20 Technical Assistance 8.90 8.90 17.80 Total Baseline Cost 376.10 415.10 791.20 Physical Contingencies 31.30 32.51 63.81 Price Contingencies 36.50 40.30 76.80 Total Project Costs' 443.90 487.91 931.81 Front-end fee l_______ 2.09 2.09 Total Financing Required 443.90 490.00 933.90 Identifiable taxes and duties are 125.6 (US$m) and the total project cost, net of taxes, is 808.3 (US$m). Therefore, the project cost sharing ratio is 25.86% of total project cost net of taxes. - 31 - Annex 4: Cost Benefit Analysis Summary BRAZIL: Sio Paulo Metro Line 4 Project Present Value of Flows g10% Fiscal Impact Economic Financial Analysis Taxes and Duties Subsidies Analysis Benefits:(in mil US$) 1,750 806 Travel Time Sav. 1,298 Oper. Cost Sav. 296 Other 156 Costs: (in mil us$) 1,195 1,272 125.6 Investment 716 Operating 479 Net Benefits 554 (466) IRR 17.7% -4.2% The results presented above for the economic analysis are conservative since they assume the most pessimistic scenario for operating costs; in addition the investment costs avoided due to the construction of Line 4 were not considered, again to be conservative. The results of the financial analysis presented compare the revenues at the social tariff against the financial costs (i.e., including taxes and duties). Summary of Benefits and Costs: Cost-Benefit Analysis An incremental cost-benefit analysis of the proposed metrorail line was undertaken to evaluate the economic feasibility of the project. The methodology used consisted in comparing the situation with and without project and quantifying the benefits due to time savings for users of all modes, operating cost savings for all modes, road maintenance cost savings, accident savings, air pollution savings and the investment and operating costs. The demand for each mode was determined using a demand model which estimated the passenger-hours and passenger-kms saved by mode with the project.The main benefits considered were: Operating cost savings (these are savings resulting from the lower costs of operating all modes with and without the project-. The demand model estimates the passenger-kms with and without the project and these are multiplied by the respective estimated operating costs); Travel time savings - These are estimated by determining the passenger-hours saved, by type of trip (home-to-work, business or other) and multiplied by the value of time for each type of trip. Again the demand model estimates the passenger-hours with and without project per mode; Reduction of accidents-These are estimated by multiplying the average cost per accident per 1000 passenger-kms with and without project. This reduction of accidents is normally a function of the number of bus-kms saved (minor); Reduction in road maintenance costs due to the reduction of bus-kms with the project (minor); Reduction of air pollution costs due to reduction in bus-kms with project (minor); - 32 - To be conservative the costs of avoided investments in the do-nothing situation were not considered. The main costs considered were: a) The investment costs and b) the operating costs of Line 4. Note that this line is 100% underground except for the Vila S6nia yard. The project will decrease the number of bus-kms traveled on the urban network through the construction of the metrorail based system and the re-routing of the buses to the main stations. The bus-kms saved per year are estimated by the demand model. The main beneficial impacts of the project under evaluation are reduced congestion (mainly due to less buses on the street), reduction in traffic-related accidents, reduced vehicular air pollution, reduced noise due to less buses on the street and economic savings from lower operating costs and reduction of travel time. The above are all quantifiable and were used in the economic analysis. There are, however, a great number of non-quantifiable benefits which cannot be captured in a standard cost-benefit analysis but are worth noting: Accessibility and creation of new opportunities: 1. Promotes the interconnection between residential and employment areas and social equipment (hospitals, schools) facilities; 2. Strengthens existing sub-centers; 3. Creates new employment poles in the periphery; 4. It favors the development of new housing poles; 5. It will encourage new sub-centers of economic activity which otherwise would not be started. Land Use and Value: 1. It increases land values due to lower generalized travel costs by public transport and by auto even without changes in the zoning law; 2. It increases the dynamics of the real estate market which is reflected by the occupation of empty lots and the renewal of older building in the area of influence of the metrorail. Employment Generation: It will promote the creation of jobs with multiplier effects in several sectors of the economy. A detailed economic evaluation report can be found in the Project File. Traffic Demand Analysis Demand analysis was undertaken by two different specialized consultants based on the data provided by a comprehensive 1997 Origin -Destination Survey which collected data in 389 zones, interviewed close to 26,065 households and 97,760 people. Traffic demand levels were estimated by consultants through a demand simulation using separately the TRANPLAN and EMME/2 models, which tested several scenarios with different combinations of tariffs, travel time and reliability. Emme/2 uses the 4 step approach of the Urban Transport Planning System, namely Traffic Generation, Traffic Distribution, Modal Split and Traffic Assignment. Both models are the most commonly used traffic demand package in the U.S.A. After several iterations, the selected alternative consists of the metrorail line from Luz to Vila S6nia as the main trunk corridor. The alternative analysis then focussed on the optimization of the number of stations required from the start of operations and those that could be deferred. In 2006, the peak-hour traffic for Line 4 in the most heavily travelled direction was estimated to be 60,200 passengers per hour per direction (955,400/day) increasing to 71,000 pphpd in 2015 (1,018,000/day). Fixed guideway systems of the type proposed are worth considering when the peak-hour demand exceeds 15,000pphpd in the first year which is clearly the case. A detailed demand analysis report can be found in the Project File. - 33 - Main Assumptions: Sensitivity analysis / Switching values of critical items: ITEMS IRR NPV(1) B / C i=10% i=10% BASE CASE 10% 17.7 555 1.46 Discount Rate 12% 17.7 341 1.32 15% 17.7 124 1.14 BENEFITS Time Value 10% Higher 19.2 685 1.57 10% Lower 16 425 1.36 30% Lower 12.5 165 1.14 50% Lower 8.4 -94 .92 Operating Cost Savings 10% Higher 18 587 1.49 10% Lower 17.3 523 1.44 50% Lower 15.7 395 1.33 100% Lower 13.5 235 1.20 Construction Costs 50% Higher 12 196 1.13 COSTS 100% Higher 8.6 -161 .92 Operating Costs of metro 100% Higher 11.1 75.56 1.05 SWITCHING VALUES Reduction of Travel Times 34% Lower 10 0 1 and Operating Costs Benefits Reduction of travel time 43% Lower 10 0 1 Construction Costs 77.5% Higher 10 0 1 - 34- Annex 11 evaluates the impact of the Line 4 project on poor households and indicates the main municipalities which will benefit from the project. Beneficiaries are the residents of the Sao Paulo Metropolitan Region (SPMR), particularly low-income households (earning up to three minimum salaries) who are major users of public transport. Residents of the Embu and Taboao da Serra areas, one of the poorest of the SMR, will be the main beneficiaries of the system which will cut their travel time in half (for trips between Vila S6nia and Luz) and increase travel reliability, comfort and safety. The reduction in travel time and the improvement in reliability when compared to a bus operation, are the main reasons why populations are willing to pay a higher tariff. The users of private autos will probably benefit from less bus congestion in the main streets at least while the space freed by the bus re-routing is not taken by more automobiles. - 35- Annex 5: Financial Summary BRAZIL: Sao Paulo Metro Line 4 Project sAo PAULO METRO BALANCE SHEET 2001 - 2021 PRESENT SYSTEM + NEW PROJECTS US$ Million Base Year | 2000 2,001 | 2005 2007 2008 2010 2015 2021 ASSETS Current Assets 88.1 157.0 273.3 318.8 318.8 307.1 295.5 295.5 Non-Currents Assets 4.3 4.3 4.3 4.3 4.3 4.3 4.3 4.3 Permanent Assets 3,744.6 4,073.3 7,001.1 6,801.7 6,691.4 6,477.6 5,980.4 5,446.6 Net Fixed Assets 3,431.2 3,522.8 5,259.7 7,053.8 7,082.6 6,844.7 6,292.6 5,703.1 . Fixed Assets 4,123.3 4,288.8 6,354.9 8,383.0 8,534.6 8,534.6 8,534.6 8,534.6 . Less: Accum. Dep. -692.1 -766.0 -1,095.2 -1,329.2 -1,452.0 -1,689.9 -2,242.0 -2,831.5 . Construction in Progr 167.5 402.8 1,613.4 -379.3 -530.9 -530.9 -530.9 -530.9 Net Defered Charges 145.8 147.7 128.0 127.3 139.7 163.8 218.7 274.4 Defered Charges 220.5 237.7 309.8 345.9 363.9 400.0 490.2 598.4 Less: Accum. Defer. -74.7 -90.0 -181.8 -218.6 -224.2 -236.2 -271.5 -324.0 TOTAL ASSETS 3,837.0 4,234.6 7,278.7 7,124.8 7,014.5 6,789.0 6,280.2 5,746.4 LIABILITIES & EQUITY Current Liabilities 249.7 249.1 336.8 433.3 433.3 412.6 328.4 173.1 Domestic ST Loans 40.6 40.9 81.5 81.5 81.5 72.5 Foreign ST Loans 0.1 0.1 58.8 155.3 155.3 155.3 155.3 Account Payable 106.8 106.3 94.7 94.7 94.7 83.0 71.3 71.3 Other 102.2 101.8 101.8 101.8 101.8 101.8 101.8 101.8 Nons Current Liabilities 514.8 682.9 2,324.8 1,889.4 1,652.8 1,188.3 250.1 134.6 Domestic ST Loans 378.6 547.4 560.1 397.2 315.7 161.8 Foreign ST Loans 0.8 0.7 1,630.1 1,357.6 1,202.3 891.8 115.5 -0.1 Other 135.4 134.8 134.6 134.6 134.8 134.7 134.6 134.7 Stockholders Equity 3,072.6 3,302.6 4,617.2 4,802.0 4,928.4 5,188.1 5,701.7 5,438.7 Capital 4,316.4 4,663.1 6,828.6 7,545.2 7,988.8 8,860.0 10,710.3 11,352.3 Accumulated Losses -1,243.8 -1,360.5 -2,211.4 -2,743.2 -3,060.4 -3,671.9 -5,008.6 -5,913.6 TOTAL LIABILITIES & EQUITY 3,837.1 4,234.6 7,278.8 7,124.7 7,014.5 6,789.0 6,280.2 5,746.4 DF/GOC/OEF-CEC P/75/CEC/4° linha - atualiza(ao appraisal/balanso projetado - 36 - sAo PAULO METRO INCOME STATEMENT 2001 - 2021 PRESENT SYSTEM+ NEW PROJECTS US$Million ._____________ _ 2000 2001 2005 2007 2008 2010 2015 2021 OPERATING STATISTICS Passengers (Trips) - Million 486 474 680 740 741 742 758 763 Paying Passengers - Million 423 436 625 681 681 683 698 702 OPERATING REVENUES Paying Passengers - Mil 273.8 261.8 375.5 361.5 361.0 360.2 366.5 366.4 Subsidy for Non-Paying Passengers 31.0 38.2 54.7 59.6 59.7 59.8 61.1 61.4 GESP Reimbursement - Line 4 49.2 50.1 51.7 54.5 57.1 Total Operating Revenue 304.8 300.0 430.2 470.3 470.8 471.7 482.1 484.9 NON-OPERATING INCOME 10.2 13.5 14.1 14.2 14.2 14.2 14.6 14.7 CONCESSION FEE - - 10.2 16.8 17.3 18.2 19.0 Total Income 315.0 313.5 444.3 494.7 501.8 503.2 514.9 518.6 OPERATING COSTS Personnel 197.2 204.9 290.0 297.4 319.6 319.6 319.6 319.6 Materiais 11.6 10.0 16.3 16.8 18.5 18.5 18.5 18.5 Other (incl. Energy Contracts) 54.0 79.7 115.2 118.1 126.7 126.7 126.7 126.7 Total Working Costs 262.8 294.6 421.5 432.3 464.8 464.8 464.8 464.8 Depreciation 69.0 76.7 96.8 124.7 122.8 117.7 105.8 93.1 Deferred Costs 17.9 15.6 27.8 5.3 5.6 6.2 7.7 9.6 Total Operating Costs 349.7 386.9 546.1 562.3 593.2 588.7 578.3 567.5 Financial Charges 56.9 48.3 187.4 154.5 158.9 147.4 110.1 - Total Expenses 406.6 435.2 733.5 716.8 752.1 736.1 688.4 567.5 Net Operating Income (44.9) (86.9) (115.9) (92.0) (122.4) (117.0) (96.2) (82.6) Net Income (91.6) (121.7) (289.2) (222.1) (250.3) (232.9) (173.5) (48.9) Working Ratio 86% 98% 98% 92% 99% 99% 96% 96% Operating Ratio 115% 129% 127% 120% 126% 125% 120% 117% Working Cost Coverage (%) 120 106 105 114 108 108 111 112 - 37 - SAO PAULO METRO SOURCES AND APPLICATIONS OF FUNDS 2001 - 2021 PRESENT SYSTEM + NEW PROJECTS US$ Million 2000 2001 2005 2007 2008 2010 2015 2021 SOURCES Internal Cash Generation 42.0 5.3 8.9 38.0 6.0 6.9 17.4 20.1 Net Operating Revenue -44.9 -87.0 -115.7 -92.0 -122.4 -117.0 -96.1 -82.6 Net Non- Operating Income Depreciation 69.0 76.7 96.8 124.7 122.8 117.7 105.8 93.1 Defered Expenses 17.9 15.6 27.8 5.3 5.6 6.2 7.7 9.6 Net Borrowing 16.8 211.3 698.1 BIRD 52.7 JBIC 505.7 BID 103.2 BNDES - New Financing 52.3 BNDES - Other Projects 147.2 36.5 BNDES - Contracted 16.8 11.8 Govermment's Contribution for New Investment Programs 100.4 275.6 275.8 24.7 24.7 24.7 24.7 24.7 Operational Support 23.5 Interest Payment Support 41.6 48.3 187.4 154.5 158.9 147.4 110.1 Total Sources 224.3 540.5 1,170.2 217.2 189.6 179.0 152.2 44.8 APPUCATION Investment 122.3 481.5 1,009.1 18.0 18.0 18.0 18.0 18.0 Line 4 - Morumbi / Luz 239.8 Other Projects 122.3 481.5 769.3 18.0 18.0 18.0 18.0 18.0 Interest Payment 41.6 48.3 187.4 154.5 158.9 147.4 110.1 Amortization 37.4 40.6 80.0 217.7 236.7 236.7 195.7 Change in the Working Capital 23.0 -29.9 -106.3 -173.0 -224.0 -223.1 -171.6 26.8 Total Application 224.3 540.5 1,170.2 217.2 189.6 179.0 152.2 44.8 DF/GOCIOEF-CEC Pf75CECjo5o/4LINHA aprovado GESP/balanWo projetado 26-Jun-01 - 38 - SAO PAULO METRO LINE 4 INCOME STATEMENT 2005 - 2035 US$Million 2,005 2,007 2,010 2,015 2,020 2,025 2,030 2,035 (+) Net Income - 84,720 143,375 151,342 157,203 158,080 158,080 158,080 (-) Costs . 63,008 96,331 100,754 75,630 79,919 81,026 75,673 Operatng Costs 41,772 59,079 59,079 59,079 59,079 59,079 59,079 Depreciation - 21,236 37,252 41,675 16,551 20,840 21,947 16,594 (-)Financial Costs 8,457 20,688 33,052 11,095 (-) Concession Fee (*) - 10,205 17,270 18,230 18,936 19,042 19,042 19,042 (=)Profit bef.taxes (8,457) (9,181) (3,278) 21,263 62,637 59,119 58,012 63,365 (-)Prov. for Taxes 5,048 21,283 20,088 19,711 21,531 Social Sec. 1,340 5,637 5,321 5,221 5,703 Income Tax 3,708 15,646 14,767 14,490 15,828 (=)Oper. Results (8,457) (9,181) (3,278) 16,215 41,354 39,031 38,301 41,834 DF/GCT 6/21/2001 - 39 - Sao Paulo Metro Line 4- Traffic Forecast (in 1000's) 2006 2007 2008 2009 2010 2015 2021 PAYING PASSENGERS 131,658 204,121 280,760 285,203 289,577 305,719 319,530 METRO ONLY 122,259 189,548 260,716 264,842 268,903 283,893 296,718 Exclusive 112,819 174,912 240,585 244,392 248,141 261,972 273,805 Students 9,440 14,635 20,130 20,449 20,763 21,920 22,912 INTEGR. WITH OTHER MODE 9,399 14,573 20,044 20,362 20,674 21,826 22,812 BUS SERVICE 7,212 11,181 15,379 15,622 15,862 16,746 17,503 Oneway 4,300 6,666 9,169 9,314 9,457 9,984 10,435 Return 2,912 4,515 6,210 6,308 6,405 6,762 7,067 TROLLY BUS 369 572 786 799 811 856 895 Oneway 158 245 337 342 347 367 383 Return 211 327 449 456 463 489 511 CPTM EAST 1,619 2,510 3,452 3,507 3,560 3,759 3,929 Oneway 860 1,333 1,833 1,862 1,891 1,996 2,086 Return 759 1,177 1,619 1,644 1,669 1,762 1,842 CPTM WEST 200 311 427 434 441 465 486 Oneway 132 204 281 285 290 306 320 Return 69 107 147 149 151 160 167 LEGALLY EXEMPT 2,573 3,988 10,349 10,513 10,674 11,270 11,762 TOTAL TRIPS 134,231 208,109 291,109 295,716 300,251 316,989 331,292 GOC OEF CET 031\REC\FINANC\BCOMUNDIAL\BIRD_L4_REV5 -40- Annex 6: Procurement and Disbursement Arrangements BRAZIL: Sao Paulo Metro Line 4 Project Procurement Bank procurement guidelines for goods and works will be applied (Guidelines-Procurement under IBRD Loans and IDA Credits, January 1995, revised January and August 1996, September 1997, and January 1999). There will be one ICB for the construction of infrastructure and fixed installations and provision of some system-wide facilities.This will be procured through no more than three lump-sum turnkey contracts, with one pre-qualification. Because the Bank will not be financing the concession or other PSP arrangements, the Borrower will follow its own procedures, which should be satisfactory to the Bank, and subject to the Bank's prior review. The procurement documents to be used will be an adaptation of the standard bidding documents for supply and installation and major works. Consultant services will be selected in accordance with Bank guidelines (Guidelines- Selection and Employment of Consultants by World Bank Borrowers, January 1997, revised September 1997 and January 1999), under QCBS procedures. A procurement capacity assessment was carried out. METRO has a procurement department with a good number of engineers and procurement specialists very qualified to carry out procurement. The risk assessed was AVERAGE due to the excellent experience of the unit but considering the large size of the bidding package. To reduce risks the Borrower has advanced procurement actions and the prequalification documents are ready, and the Bank is carrying out a close contact with the borrower in the preparation of the bidding package. The frequency of supervision required will be very tight during the bidding process and every six months during the first 2 years after starting works and yearly after that. - 41 - Procurement methods (Table A) Table A: Project Costs by Procurement Arrangements (in US$ million equivalent) Expenditure Procurement Method Total Cost Category (including contingencies) ICB NCB Other N.B.F 1. Works Turnkey Contract 495.33 495.33 (201.91) (201.91) 2. Goods under the 357.48 357.48 concession (4) 2. Consulting Services a. PMOC & 15.2 15.2 Supervision (1.00) (1.00) b. Technical 17.8 17.8 Assistance (4.0) (4.0) 3. Expropriation 46 46 4. Front end fee 2.09 2.09 . _______________ (2.09) (2.09) Total 497.42 _ 33.0 403.48 933.9 l_______________ (204) (5.0) (0) (209) Note: N.B.F. = Not Bank-financed (includes elements procured under parallel cofinancing procedures, consultancies under trust funds, any reserved procurement, and any other miscellaneous items). Other- Consultant services to be procured under QCBS -42 - Table Al: Consultant Selection Arrangements (optional) (US$ million equivalent) Selection Method Consultant Services Expenditure Category QCBS QBS SFB LCS CQ Other N.B.F. Total Cost A. Firms 33.00 0.00 0.00 0.00 0.00 0.00 0.00 33.00 (5.00) (0.00) (0.00) (0.00) (0.00) (0.00) (0.00) (5.00) B. Individuals 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 (0.00) (0.00) (0.00) (0.00) (0.00) (0.00) (0.00) (0.00) Total 33.00 0.00 0.00 0.00 0.00 0.00 0.00 33.00 (5.00) (0.00) (0.00) (0.00) (0.00) (0.00) (0.00) (5.00) 1\ Including contingencies Note: QCBS = Quality- and Cost-Based Selection QBS = Quality-based Selection SFB = Selection under a Fixed Budget LCS = Least-Cost Selection CQ = Selection Based on Consultants' Qualifications Other = Selection of individual consultants (per Section V of Consultants Guidelines), Commercial Practices, etc. N.B.F. = Not Bank-financed Figures in parenthesis are the amounts to be financed by the Bank Loan. Prior review thresholds (Table B) Prior review thresholds were revised by the Regional Procurement Adviser to reflect the experience of METRO with procurement. TableB: Thresholds for Procurement Methods and Prior Review' Description Type of Prior Review Limit Contract Value Procurement 1. Works Turnkey Contracts ICB All ICB No threshold 2. Goods ICB All >350,000 (not applicable.Shown NCB First Two Contracts 100,000 to 350,000 as reference) Shopping None <100,000 3. Consulting QCBS TORs, short list, > $100,000 Services technical and Firms financial evaluation and contract -43 - Disbursement Allocation of loan proceeds (Table C) All disbursements should be made on the basis of full documentation. Table C: Allocation of Loan Proceeds Expenditure Category Amount in US$million Financing Percentage 1.Goods and Works under the Turnkey 201.91 50% contract 2. Consulting Services 5.00 50% Total Project Costs 206.91 Front-end fee 2.09 Total 209.00 Use of statements of expenditures (SOEs): Special account: To expedite project execution, a Special Account would be opened in a commercial bank under terms and conditions acceptable to the Bank with an authorized allocation of US$20.0 million. If the State opt for PMR-based disbursements, the Authorized Allocation will be increased to US$30 million This account would be replenished for the amount of withdrawals on account of eligible expenditures. Retroactive financing of up to US$500,000 is authorized for consultant services payments made within one year before the date of the Loan Agreement. Financial Management Capacity The project financial management specialist reviewed the financial management system relating to this project. The objective of the review was to determine whether the project has in place an adequate financial management system as required by the Bank/IDA under OP/BP 10.02. The review, which included a visit to Companhia do Metropolitano de Sao Paulo - METRO, was based on the Bank's guidelines for "Review of Financial Management System", and focused on the assessment of the project's accounting system, internal control mechanisms and financial reporting system, as well as the format and content of the Project Management Report (PMR) to be submitted by the borrower in support of Withdrawal Applications. It is - 44 - confirmed that the project satisfies the Bank's minimum financial management requirements. However, the project does not have in place an adequate project financial management system that can provide, with reasonable assurance, accurate and timely information on the status of the project (PMRs) as required by the Bank/IDA for PMR-Based Disbursements. An action plan has been agreed with the borrower to adequate the system from current to desirable to generate the PMRs not later than one year after loan effectiveness. Audits The Special Account and Statement of Expenditures (SOEs) or Project Management Reports: i) will be audited by independent auditors acceptable to the Bank; and (ii) audits will be submitted to the Bank by June 30 of each year. - 45 - Annex 7: Project Processing Schedule BRAZIL: Sao Paulo Metro Line 4 Project Project Schedule Planned Actual Time taken to prepare the project (months) 12 15 First Bank mission (identification) 09/23/2000 09/23/2000 Appraisal mission departure 07/23/2001 07/22/2001 Negotiations 11/30/2001 11/21/2001 Planned Date of Effectiveness 03/30/2002 Prepared by: Bank staff with the assistance of Sao Paulo Metro staff and the Sao Paulo Secretary of Metropolitan Transport. Preparation assistance: The environmental analysis of the SPMR was facilitated by a PHRD grant TF25255. Bank staff who worked on the project included: Name Speciality Jorge M. Rebelo Task Manager/Lead Transport Specialist Jose Augusto Carvalho Lead Counsel Pierre Graftieaux Transport Economist Moazzam Mekan Project Finance Specialist Paula Pini Environment and Resettlement Specialist Armando Arauijo Build-Operate-Transfer Procurement William Dillinger State Financial Analysis TuIlio Correa Financial Management Specialist Antonio Estache Peer Reviewer Ken Gwilliam Peer Reviewer Solange Van Veldhuizen Staff Assistant Hennrque Cruz Civil Works Infrastructure Consultant Luiz Queiroz Finance and Project Finance Consultant Protran Engenharia Environmental Consultants Fundacao Getu5lio Vargas Project Finance Advisors -46 - Annex 8: Documents in the Project File* BRAZIL: Sao Paulo Metro Line 4 Project A. Project Implementation Plan 1. Linha 4-Amarela - Project Implementation Plan, July 2001- Prepared by the Sao Paulo Metro Company. 2. Linha 4-Amarela - Apresentacoes - Meeting of October 10, 2000 -Prepared by the Sao Paulo Metro Company. B. Bank Staff Assessments C. Other 1. Sao Paulo Integrated Urban Transport Project, Staff Appraisal Report, February 1995. 2. Mexican Automotive Market and Replacement Program, The Mexican Automobile Market, - Draaisma, Mr. Joost. 3. Study of Mass Rapid Transit in Developing Countries - Transport and Road Research Laboratory/Halcrow, Fox and Associates. 4. Dados Gerais Sobre Transporte P'iblico na Regiao Metropolitana de Sao Paulo - Coordenadoria de Planejamento e Gestao/Diretoria Tecnica de Planejamento - Governo do Estado de Sao Paulo, Secretaria dos Transportes Metropolitanos, Novembro de 1992. 5. 0 Transporte Metropolitano por Onibus na RMSP, Aspectos Gerais e Resumo de Dados T6cnicos - Novembro de 1992. 6. Sistema de Transportes de Sao Paulo - Um Esboco de Visao Global. 7. Re-Evaluating Mass Transit in Setting the Policy Agenda for Developing Cities, World Bank Seminar - Allport, Roger, J., Director - Halcrow Fox and Associates. 8. A Importancia da RMSP, Tables etc. 9. The Performance and Impact of Rail Mass Transit in Developing Countries - Transport and Road Research Laboratory, Department of Transport - Fouracre, P., Allport, R.J. & Thomson J.M. 10. Sao Paulo Urban Trains System - Implementation Program - General Description, December 1992 - Secretaria Transportes Metropolitanos, Governo de Sao Paulo. 11. Sistema de Trens Urbanos de Sao Paulo - Programa de Intervenc6es, Relat6rio Sintese, Dezembro de 1992 - Secretaria Transportes Metropolitanos, Governo de Sao Paulo. 12. Relat6rio de Visita do Banco Mundial, 11/11/92 - Emprestimo 2857-BR. 13. Relat6rio Especial - Privatizacao e Terceirizacao, Empresa Metropolitana de Transportes Urbanos de Sao Paulo, S.A. - EMTU. 14. Ligacao Pinheiros-Clinicas - Alternative Corredor de Onibus - TTC. 15. Procurement Technical Note (PTN N° 0.00) on Procurement in Cofinanced Projects - Pease, Peter P. OPRPR. 16. Sao Paulo Urban Transport Integrated System - Review of Infrastructure Design, TTCL C007/93, Knight, Kenneth., - Toronto Transit Consult. 17. Sao Paulo Integrated Urban Transport Project - Zimmerman, S., TWUTD. 18. Projecao de Receitas e Despesas Estaduais, Assessoria de Projetos Especiais - Govemo de Estado de Sao Paulo - Secretaria de Estado de Planejamento e Gestao. - 47 - 19. Sao Paulo Integrated Urban Transport Project - Financial Evaluation and Private Sector Development Review - Porter, Benjamin. 20. Comissao Regional de Planejamento de Transportes - CRPT, Documento de Trabalho N° 1 31/5/93. 21. Transporte Urbano (Municipal e Metropolitano) Quem Decide? 22. Remodelacao e Melhoria do Transporte Coletivo na RMSP, Secretaria dos Transportes Metropolitanos, Companhia do Metropolitano de SAo Paulo. 23. Relat6rio de Impacto Ambiental - Estudo Preliminar para o Banco Mundial - Linha 4 - Vila Sonia-Tatuape, Setembro de 1993. 24. Analise Tecnica, Econ6mica e Financeira da LigacAo Roosevelt - Barra Funda - Versao 2. 25. Use of Consultants in LAC's Lending Operations - Latin America and Caribbean Region. 26. Tables: Populacao, Niumero de Viagens, etc. 27. Plano Diretor de SAo Paulo, Propostas para os Transportes - Prefeitura do Municipio de Sao Paulo. 28. Analise Tecnica, Econ6mica e Financeira da Ligacao Paulista - Pinheiros - Versao 3. 29. Estudo de Viabilidade do Modelo de Parceria Estado - Iniciativa Privada - Terminais do Metr6 - Companhia Paulista de Desenvolvimento - CPD. 30. Estudo de Viabilidade do Modelo de Parceria Estado - Iniciativa Privada - Esta,ces da FEPASA, Marco/93 - Arq. Pedro Taddei e Associados - Companhia Paulista de Desenvolvimento - CPD. 31. The Partnership System, the Role of CPD - Companhia Paulista de Desenvolvimento - CPD. 32. Sao Paulo Metropolitan Region, Major Issues in the Urban Transport Sector. 33. Metr6 - Alternativas Tecnol6gicas - Estudo Comparativo (Resolucao STM-188 de 26/01/93) - Roteiro dos Estudos. 34. Poli 100 Anos - Ciclo de SeminArios - Escola Politecnica da Universidade de Sao Paulo EPUSP. 35. The Sao Paulo Urban Trains System Program - Inception Report (Draft Version) October 1992. 36. Thailand: Bangkok Rapid Transit Project. 37. Rapport D'Evaluation A Posteriori de la Construction du Metro du Caire - Note de Synthese. 38. The Sao Paulo Integrated Urban Transport Pro'ect - Creating Opportunities for Private-Sector Participation. 39. Analise Econ6mica da Ligacao Paulista-Pinheiros - Informacoes Complementares, Abril/93 - Sistema Integrado de Transporte Urbano da Regiao Metropolitana de Sao Paulo - SITU/RMSP Sistema de Trens Urbanos de Sao Paulo - Programa de Intervencoes. 40. Analise Economica da Ligacao Roosevelt-Barra Funda - AnAlise Complementar, Abril/93 - Sistema Integrado de Transporte Urbano da Regiao Metropolitana de Sao Paulo - SITU/RMSP Sistema de Trens Urbanos de Sao Paulo - Programa de Interven,ces. 41. Reorganizacao do Sistema de Transporte Coletivo Sobre PNEUS - Regiao Sudoeste, Junho/93 - Secretaria Municipal de Transportes. 42. Apresentacao Campo Limpo - Sistema de Trens Urbanos de Sao Paulo - Secretaria dos Transportes Metropolitanos - Govemo de Sao Paulo. 43. Sistema de Trens Urbanos de Sao Paulo - Secretaria dos Transportes Metropolitanos - Govemo de Sao Paulo. 44. Esclarecimentos da AENFER sobre a Estadualizacao da CBTU. 45. Brazil - Sao Paulo Integrated Urban Transport Project - Environmental Component and Terms of Reference for Consultants to Assist in Developing a Vehicle Inspection and Maintenance Program for the SAo Paulo Metropolitan Region. 46. Novas Engenharias Financeiras Para o Sistema de Saneamento - Os Desafios do Saneamento Ambiental - Regulamentacao e Padroes de Financiamento - Luiz Carlos Cintra. - 48 - 47. Programa de Implanta,co de Corredores de Transporte Coletivo no Municipio de Sao Paulo Outubro de 1993 - Prefeitura do Municipio de Sao Paulo - Secretaria Municipal de Transportes. 48. Linear Induction Motor (LIM) - The Scarborough Intermediate Capacity Transit System Vehicle - Sao Paulo - Toronto Transit Commission. 49. Projeto de Reformula,ao do Sistema Semaf6rico da Cidade de Sao Paulo - Companhia de Engenharia de Trafego - CET. 50. Remodela,co e Melhoria do Transporte Coletivo na RMSP - Secretaria dos Transportes. 51. Relat6rio de Pesquisa Sobre - Aferi,co da Mobilidade na Regiao Metropolitana de Sao Paulo Instituto Gallup de Opiniao Puiblica - Abril de 1993. 52. Plano Metropolitano de Transporte Integrado (PMTI) - Relat6rio Sintese - Secretaria de Transportes Metropolitanos. 53. Cons6rcio Regional de Planejamento de Transportes (CRPT) - Documento de Trabalho No 4. 54. Metro de Sao Paulo. 55. Nova Midia Metr6 - Estudos Tecnicos e Estimativas de Potencial de Faturamento - Companhia do Metropolitano de Sao Paulo - METRO. 56. Cronograma de Implanta,cao da Linha 4 - Sistemas/Obras Civis - Trecho Operacional Vital Brasil/Paulista com Patio Vila Sonia - Preliminar - Companhia do Metropolitano de Sao Paulo -METRO. 57. Atendimento as Questoes Colocadas Pela Missao Preparatoria de 28/7 a 9/7 de 1993 Companhia do Metropolitano de Sao Paulo - METRO. 58. Analise Econ6mica da 4a Linha do Metro - Trecho Operacional Paulista-Vital Brasil (com Patio Vila S6nia). 59. Sistema Integrado de Transporte Urbano da Regiao Metropolitana de Sao Paulo - SITU/RMSP - Projeto Integra,co Centro - Volume I - Analise Funcional. 60. Sistema Integrado de Transporte Urbano da Regiao Metropolitana de Sao Paulo - SITU/RMSP - Projeto Integra,co Centro - Volume II - Memorial Descritivo. 61. Sistema Integrado de Transporte Urbano da Regiao Metropolitana de Sao Paulo - SITU/RMSP - Projeto Integrac,o Centro - Volume III - Anexos - Desenhos. 62. Sistema Integrado de Transporte Urbano da Regiao Metropolitana de Sao Paulo - SITU/RMSP - Projeto Integra,co Centro - Volume IV - Planilhas de Quantidades e Pre9os. 63. Sistema Integrado de Transporte Urbano da Regiao Metropolitana de Sao Paulo - SITU/RMSP - Projeto Integra,co Centro - CPTM - Projeto Funcional de Sinalizacao. 64. Sistema Integrado de Transporte Urbano da Regiao Metropolitana de Sao Paulo - SITU/RMSP - Projeto Integra,co Centro - CPTM - Detalhamento dos Custos. 65. Passenger Control Systems on Sao Paulo Metropolitan Region - INECO. 66. Review of Demand Analysis for Sao Paulo Integrated Urban Transport Project - Final Report Tranplan Associates. 67. Sistema de Trens Urbanos de Sao Paulo - Programa de Intervencoes - Projeto Integra,ao Paulista/Pinheiros - METRO - Vialbilidade Tecnica, EconOmica e Financeira - Janeiro 1993. 68. Sistema de Trens Urbanos de Sao Paulo - Programa de Intervenicoes - Financiamento do Setor de Transportes - Analise do Or,amento Metropolitano de Transportes - Janeiro 1993. 69. The Sao Paulo Urban Trains System Program - Inception Report (Draft Version) - Oct 1992. 70. Sao Paulo Urban Transport Integrated System - Analysis of the Adequacy of the Demand, March 1993 - SOFRETU. 71. Environmental Profile of Sao Paulo-Case Study (DRAFT) - Urban Management and the Environment - Leitmann, J. 72. Air Quality Benefits of Proposed Sao Paulo Integrated Urban Transport Project - Engine, Fuel and Emissions Engineering, Inc. (EF & EE) - Weaver, C.S. - 49 - 73. Air Quality Benefits of Proposed Sao Paulo Integrated Urban Transport Project - Memorandum - Vehicle Emission Technology Department - CETESB - Branco, G.M. 74. Sao Paulo Integrated Urban Transport Project (SITU) - Updating Report on Project Evolution, July - October 1993 - CETESB's Actions. 75. Sao Paulo Urban Transport Integrated System - Pre-Appraisal Mission - Discussion Topics - Knight, K.G. 76. Terceira Reuniao do Grupo de Trabalho para Desenvolvimento de Projetos de Parceria com o Setor Privado e Fontes Alternativas de Financiamento do Transporte Coletivo Publico - Secretaria de Estado dos Transportes Metropolitanos. 77. Law N° 2377 - July 27, 1980. 78. Estac6es do Trecho Paulista/Vital Brasil da 4a Linha do Metro de Sao Paulo. 79. The Paulista - Vila S6nia Link: Cost Risk Analysis, January 1994 and June 1994, LAIIN. 81. Acidentes de Transito em 1991 para a Municipalidade de Sao Paulo, CET, 1992. 80. Review of Final Basic Engineering, Design Metro Line N° 4, Paulista - Vila S6nia Metro Link -TTCL. 81. Linha 4 - Amarela: Estudos Complementares para Atendimento as Solicita,oes do Banco Mundial - Companhia do Metropolitano de Sao Paulo - METRO - Junho 1994. 82. Efeitos da Insercao da Linha 4-Amarela na Regiao Metropolitana de Sao Paulo - Companhia do Metropolitano de Sao Paulo - METRO - Julho 1994. 83. Reorganizacao do Transporte Coletivo por Onibus com Corredor Troncal e sem a Linha 4 do Metr6 - Companhia do Metropolitano de Sao Paulo - METRO - Agosto 1994 84. Informac6es Adicionais Sobre o Projeto Metro/CPTM: Assessoria de Projetos Especiais, Sao Paulo, Secretaria de Estado de Planejamento e Gestao, 6 de dezembro de 1993. 85. Inventario de Emissao Veicular - 1992: Metodologia de Caculo - CETESB - Julho 1994 86. Impacto do Programa de Controle de Ruido Veicular, Schmidt, Daniel Egon; Szwarc, Alfred; de Melo, Olimpio Jr. - CETESB. 87. Caracterizac,o S6cio-Econ6mica das Areas Afetadas pelo Projeto Sul - Trem Metropolitano da STM - Transporte SIM - Fevereiro 1994. 88. Urban Air Pollution in Megacities of the World - United Nations Environment Programme - World Health Organization. 89. Population Growth and Policies in Mega-Cities: Sao Paulo - United Nations, Department for Economic and Social Information and Policy Analysis. 90. Por Dentro da Grande Sao Paulo - Governo de Sao Paulo, EMPLASA. 91. Perfil das Viagens Diarias da Populacao da Metr6pole - Companhia do Metropolitano de Sao Paulo - METRO. 92. Consideracoes sobre a Importancia do Salario Minimo - Grande Sao Paulo 1989-1993 - SEADE - April 1994. 94. Plano de Relocacao de Popula9ao Vols. 1, 11 e Anexos - Secretaria de Estado Dos Transportes Metropolitanos. 95. Estudo de Impacto Ambiental Vols. I, II, III - Secretaria de Estado Dos Transportes Metropolitanos. 96. Relat6rio de Impacto no Meio Ambiente - Secretaria de Estado Dos Transportes Metropolitanos. *Including electronic files - 50 - Annex 9: Statement of Loans and Credits BRAZIL: Sio Paulo Metro Line 4 Project Difference between expected and actual Original Amount in US$ Millions disbursements' Project ID FY Purpose IBRD IDA GEF Cancel. Undisb. Orig Frm Rev'd P050772 2001 LAND-BASED POVERTY ALLEViATION I 202.10 0.00 0.00 0.00 204.19 0.00 0.00 P059565 2001 BR- BA BASIC EDU PROJECT (PHASE I) 69.60 0.00 0.00 0.00 69 60 1.00 0.00 P059566 2001 BR- CEARA BASIC EDUCATION 90.00 0.00 0.00 0.00 90.00 0.00 0.00 P060575 2001 PRGM.FISCAL REFORM SAL 757.58 0.00 0.00 0.00 757.58 0.00 0.00 P039199 2000 PROSANEAR2 30.30 0.00 0.00 0.00 30.00 -0.30 0.00 P006449 2000 CEARAWTR MGT (PROGERIRH) 136.00 0.00 0.00 0.00 131.65 27.16 0.00 P047309 2000 BR ENERGY EFFICIENCY (GEF) 0,00 0.00 15.00 0.00 14.11 0.83 0.00 P062619 2000 INSS REF LIL 5.05 0.00 0.00 0.00 3.61 1.73 0.00 P035741 2000 NATLENV2 15.00 0.00 0.00 0.00 13.40 2.17 1.10 P050776 2000 NE Microfinance Development 50.00 0.00 0.00 0.00 42.00 -8.00 0.00 P039200 2000 ENERGY EFFICIENCY (ELETROBRAS) 43.40 0.00 0.00 0.00 42.97 2.23 0.00 P050763 1999 BR- Fundescola 2 202.00 0.00 0.00 0.00 77.07 -49.20 0.00 P054120 1999 BR- AIDS & STO Control li 165.00 0.00 0.00 3.50 87.49 55.16 0.00 P055388 1999 ANIMAL&PLANT DIS. CO 44.00 0.00 0.00 0.00 44.00 19.87 0.00 P043874 1999 BR- DISEASESURVEILLANCE-VIGISUS 100.00 0.00 0.00 0.00 8266 66.83 0.00 P058129 1999 BR EMER. FIRE PREVENTION 15.00 0.00 0.00 0.00 12.15 11.49 2.63 P048869 1999 SALVADOR URBAN TRANS 150.00 0.00 0.00 0.00 136.45 53.12 0.00 P050762 1998 BR- Fundesoola I 62.50 0.00 0.00 0.00 0.78 -2.96 0.00 P042565 1998 PARAIBA R.POVERTY 60.00 0.00 0.00 0.00 32.53 7.57 0.00 P043420 1998 WATER S.MOD.2 150.00 0.00 0.00 0.00 148.29 123.23 83.15 P043421 1998 RJ M.TRANSITPRJ. 186.00 0.00 0.00 17.17 150.97 164.23 0.00 P048357 1998 CEN.BANKTAL 20.00 0.00 0.00 0.00 7.31 7.31 0.00 P038947 1998 BR- SC. &TECH 3 155.00 0.00 0.00 0.00 128.13 118.13 0.00 P006474 1998 BR LAND MGT 3 (SAO PAULO) 55.00 0.00 0.00 0.00 53.00 27.34 12.33 P038895 1998 FED.WTR MGT 198.00 0.00 0.00 0.00 128.69 98.81 23.69 P057910 1998 BR PENSION REFORM LIL 5.00 0.00 0.00 0.00 3.33 3.33 -1.59 P035728 1998 BAHIAWTR RESOURCES 51.00 0.00 0.00 0.00 32.81 26.41 0.00 P051701 1998 MARANHAO R.POVERTY 80.00 0.00 0.00 0.00 15.78 -13.35 0.00 P006559 1998 (BF-R)SP.TSP 45.00 0.00 0.00 0.00 41.96 41.30 0.00 P048870 1997 BR MT STATE PRIV. 45.00 0.00 0.00 0.00 5.00 5.00 1.87 P038896 1997 R.POVERTY(RGN) 24.00 0.00 0.00 0.00 3.83 3.83 0.00 P046052 1997 CEARA WATER PILOT 9.60 0.00 0.00 0.00 4.77 477 1.22 P006562 1997 BAHIAMUN.DV 100.00 0.00 0.00 0.00 68.05 56.39 -3.14 P006475 1997 LAND RFM PILOT 90.00 0.00 0.00 0 00 24.23 21.91 0.00 P034578 1997 RGS HWY MGT 70.00 0.00 0.00 0.00 54.97 43.97 20.64 P006532 1997 FED HWY DECENTR 300.00 0.00 0.00 0.00 157.25 157.25 0.00 P042566 1997 R.POVERTY(PE) 39.00 0.00 0.00 0.00 5.76 5.76 0.00 P043873 1997 AG TECH DEV. 60.00 0.00 0.00 0.00 37.82 30.64 9.24 P043871 1997 (PIAUI)R.POVERTY 30.00 0.00 0.00 0.00 2.28 2.28 . 0.00 P043868 1997 RGS LAND MGTIPOVERTY 100.00 0.00 0.00 0.00 70.47 37.59 0.00 P006210 1996 NATL BIODIVERSITY 0.00 0.00 10.00 0.00 3.83 4.93 5.55 P006554 1996 BR- HEALTH SECTOR REFORM - REFORSUS 300.00 0.00 0.00 0.00 159.84 160.28 0.00 P040028 1996 RAILWAYS RESTRUCTURG 350.00 0.00 0.00 50.00 43.42 93.42 43.42 P044597 1996 BR BIODIVERSITY FUND 0.00 0.00 20.00 0.00 8.19 9.97 0.00 P037828 1996 BR (PR)R.POVERTY 175.00 0.00 0.00 0.00 103.07 92.94 0.00 P038882 1995 RECIFE M.TSP 102.00 0.00 0.00 0.00 47.17 46.17 0.00 P006436 1995 Ceara Urban Development & Water Resource 140.00 0.00 0.00 0.00 23.64 23.64 2.69 P006564 1995 BELO H M.TSP 99.00 0.00 0.00 0.00 26.61 25.61 0.00 P035717 1995 RURAL POV. (BAHIA) 105.00 0.00 0.00 0.00 1.66 1.66 0.00 P006558 1994 BR- PARANA BASIC EDUC 96.00 0.00 0.00 0.00 5.87 5.87 0.00 P006543 1994 BR- MINAS GERAIS BASIC EDU. 150.00 0.00 0.00 0.00 10.68 10.68 0.00 P006524 1994 BR MINAS MNC.DEVELOPMT 150.00 0.00 0.00 9.70 20.75 30.45 25.45 P006522 1994 ESP.SANTO WATER 154.00 0.00 0.00 54.00 18.29 72.29 3.07 P006541 1993 BRWTRQ/PLN(SP/PR/FED) 245.00 0.00 0.00 3.15 8.05 11.20 0.37 - 51 - Difference between expected and actual Original Amount in US$ Millions disbursements Project ID FY Purpose IBRD IDA GEF Cancel. Undisb. Orig Frm Rev'd P006454 1992 RONDONIA NTRL RES. M 167.00 0.00 0.00 0.00 25.66 25.66 0.00 P006505 1992 MATO GROSSO NAT RES 205.00 0.00 0.00 0.00 34.36 34.36 0.00 Total: 6448.13 0.00 45.00 137.53 3557.85 1803.79 231.50 - 52 - BRAZIL STATEMENT OF IFC's Held and Disbursed Portfolio May-200 1 In Millions US Dollars Committed Disbursed IFC IFC FY Approval Company Loan Equity Quasi Partic Loan Equity Quasi Partic 1987/96 Perdigao 21.88 0.00 0.00 8.00 21.88 0.00 0.00 8.00 1989/95 Politeno Ind. 8.77 0.00 0.00 0.00 8.77 0.00 0.00 0.00 1994/00 Portobello 16.00 0.00 0.00 0.00 15.29 0.00 0.00 0.00 2000 Puras 5.00 0.00 0.00 0.00 5.00 0.00 0.00 0.00 1998 Randon 7.00 0.00 3.00 0.00 7.00 0.00 3.00 0.00 1991 Rhodia-Ster 1.43 5.95 0.00 0.00 1.43 5.95 0.00 0.00 1995 Rhodiaco/PTA 12.50 0.00 0.00 9.00 12.50 0.00 0.00 9.00 1990 Ripasa 0.00 5.00 0.00 0.00 0.00 5.00 0.00 0.00 1997 Rodovia 31.11 0.00 0.00 63.60 31.11 0.00 0.00 63.60 S.A.I.C.C. 0.00 0.00 6.87 0.00 0.00 0.00 6.87 0.00 1994/96 SP Alpargatas 20.00 0.00 5.00 0.00 20.00 0.00 5.00 0.00 1987/97 Sadia 24.00 0.00 8.00 128.00 24.00 0.00 8.00 128.00 1994/95/97 Samarco 13.50 0.00 0.00 9.33 13.50 0.00 0.00 9.33 1997 Samaritano 20.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 2000 Saraiva 12.69 3.00 0.00 0.00 12.69 3.00 0.00 0.00 1998 Sucorrico 10.50 0.00 0.00 0.00 10.50 0.00 0.00 0.00 1997 TIGRE 17.31 0.00 5.00 10.68 17.31 0.00 5.00 10.68 1996 TRIKEM 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 1992/93 Tecon Rio Grande 7.50 0.00 5.50 18.00 6.65 0.00 5.50 15.95 1998 Votorantim 5.86 0.00 0.00 0.43 5.86 0.00 0.00 0.43 1993 Vulcabras 20.00 0.00 0.00 0.00 20.00 0.00 0.00 0.00 1999 Wembley 0.00 10.00 0.00 0.00 0.00 10.00 0.00 0.00 1997 Wiest 0.00 0.00 8.00 0.00 0.00 0.00 8.00 0.00 1999 Arteb 20.00 7.00 0.00 20.00 20.00 7.00 0.00 20.00 1998 AutoBAn 35.00 0.00 0.00 31.00 22.84 0.00 0.00 20.23 1999 BACELL 6.00 15.70 0.00 16.20 6.00 15.70 0.00 16.20 1993 BBA 40.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 2000 BSC 11.53 0.00 0.00 6.18 11.53 0.00 0.00 6.18 1998 Bahia Sul 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 1990/91/92 Banco Bradesco 13.00 0.00 0.00 16.77 13.00 0.00 0.00 16.77 1996 Bompreco 20.83 0.00 5.00 0.00 20.83 0.00 5.00 0.00 1997 Bradesco-Bahia 1.50 0.00 0.00 0.00 1.50 0.00 0.00 0.00 1991 Bradesco-Eucatex 5.00 0.00 0.00 0.00 5.00 0.00 0.00 0.00 1991 Bradesco-Hering 7.50 0.00 0.00 0.00 7.50 0.00 0.00 0.00 1995 Bradesco-Petrofl 7.50 0.00 0.00 0.00 7.50 0.00 0.00 0.00 1991 Bradesco-Romi 0.00 0.40 0.00 0.00 0.00 0.40 0.00 0.00 1991 Brahma - BRA 12.50 0.00 5.00 12.30 12.50 0.00 5.00 12.30 1995 CEVAL 0.00 10.00 0.00 0.00 0.00 10.00 0.00 0.00 1993/96 CHAPECO 15.00 0.00 0.00 5.00 15.00 0.00 0.00 5.00 1994/96 CODEMIN 0.00 0.40 0.00 0.00 0.00 0.40 0.00 0.00 1973/78/83 CRP-Caderi 0.00 0.68 0.00 0.00 0.00 0.68 0.00 0.00 1992 Cambuhy/MC 11.25 0.00 0.00 0.00 11.25 0.00 0.00 0.00 1995 Copesul 30.00 0.00 0.00 128.57 30.00 0.00 0.00 128.57 1997 Coteminas 0.00 0.53 0.00 0.00 0.00 0.53 0.00 0.00 1993/97/00 Total Portfolio: 763.81 145.07 132.21 852.27 667.74 117.01 128.91 809.80 - 53 - Approvals Pending Commitmnent FY Approval Company Loan Equity Quasi Partic 2000 Sepetiba 27.00 000 6.00 18.00 2001 Tecon Salvador 3.50 0.00 1.00 5.00 2000 BBA 0.00 0.00 0.00 50.00 1997 CTBC 35.00 0.00 0.00 150.00 1999 Cibrasec 0.00 0.00 7.50 0.00 1998 FSA 35.00 10.00 0.00 45.00 1996 Globocabo II 0.00 0.00 0.00 38.00 1998 Ipiranga-RI 2 0.00 0.00 0.09 0.00 1999 MBR LTDP 20.00 5.00 0.00 115.00 Total Pending Commitment: 120.50 15.00 14.59 421.00 - 54 - Annex 10: Country at a Glance BRAZIL: Sao Paulo Metro Line 4 Project Latin Upper- POVERTY and SOCIAL America middle- Brazil & Carib. lnco4ne Development diamond' 1999 Population, mid-year (millions) 168.1 509 573 Life expectancy GNP per caDita (Atlas method, US$) 4,420 3,840 4,900 GNP (Atlas method, USS billions) 742.7 1,955 2,811 Average annual growth, 1993-99 Population (%) 1.4 1.6 1.4 Labor force I(%) 2.1 2.5 2.1 GNP Grosa per primary Most recent estimate (latest year available, 1993-99) capita N enrollment Poverty (% of population below national poverty line) Urban population (% of total populalion) 81 75 76 Life expectancy at birth (years) 67 70 70 Infant mortality (per 1,000 live births) 33 31 27 Child malnutrition (% of children under 5) 6 8 7 Access to safe water Access to improved water source (% of population) .. 75 78 Illiteracy (% of population age 15+) 15 12 10 Gross primarv enrollment (% of school-aoe Population) 125 113 109 -Brazil Male .. ,. .. Upper-middle-income group Female KEY ECONOMIC RATIOS and LONG-TERM TRENDS 1979 1989 1998 1999 Economic ratios* GDP (US$ billions) 225.0 448.8 787.1 791.4 Gross domestic investment/GDP 22.8 24.8 21.3 21.0 Trade Exports of goods and services/GfDP 7.1 8.2 7.4 9.7 Gross domestic savings/GDP 20.7 28.0 18.6 21.7 Gross national savinoslGDP 18.0 25.0 16.3 18.8 Current account balancelGDP -4.7 0.4 -4.3 3.1 Domestic " Interest paymentslGDP 2.1 0.9 1.4 1.5 Investment Total debtlGDP 27.3 25.5 29.5 28.0 Savings I Total debt service/exports 62.8 36.3 73.5 120.8 Present value of debt/GDP . .. 27.9 Present value of debtlexports .. .. 337.5 Indebtedness 1979-89 1989-99 1998 1999 199903 (average annual growth) GDP 2.9 2.6 -0.1 1.0 4.0 -B razil GNP Der capita 0.9 0.7 -1.4 -2.6 2.8 Upper-middle-income group Exports of qoods and services 8.9 4.2 0.2 -6.5 5.6 STRUCTURE of the ECONOMY 1979 1989 1998 1999 Growth of investment and GDP (%) (% of GDP) Aqriculture 11.0 8.5 8.4 8.4 10 Industry 40.6 42.7 28.8 31.7 s Manufacturing 31.0 29.5 22.7 22.7 Services 48.3 48.8 62.8 59.9 - 96 97 Private consumption 69 5 57.8 63.6 62.8 -10 General qovernment consumption 9.7 14.3 17.8 15.6 -GDI - GDP Imports of qoods and services 9 2 5.0 10 1 9.0 1979-89 1989-99 1998 1999 Growth of exports and imports (%) (averaqe annual arowth) Agriculture 3.4 2.9 0.0 9.5 40 Industry 2.3 2.1 -1.3 -1.7 Manufacturing 1.9 1.1 -2.0 -0.7 20 Services 3.4 2.7 0.8 1.3 Private consumption 1 9 5.8 -3.4 9.4 o - < General qovernment consumption 6.4 -2.0 2.1 -9.3 Gross domestic investment -0.1 2.4 0.1 -6.9 20 Imports of aoods and services -1.4 12.4 8.9 -17.4 poExports :Impons Gross national product 2.9 2.2 0.0 -1.3 Note: 1999 data are preliminary estimates. The diamonds show four kev indicators in the countrv (in bold) compared with its income-grouo averaqe. If data are missinq, the diamond will be incomplete - 55 - Brazil PRICES and GOVERNMENT FINANCE 1979 1989 1998 1999 Inflation (%) Domestic prices250 (% chanqe) 2.7 8.6 25000 Consumer Prices ..13.1. . ,00 Implicit GDP deflator 56.5 1,322.5 3.9 11.3 1,500 1,005 Government rinance 50s (% of GDP, includes current qrants) o Current revenue .. .. 20.4 21.9 94 95 96 97 go 99 Current budget balance .. .. 4.4 -5.2 - GDP deflator CPI Overall surplus/deficit .. .. -5.5 -6.2 TRADE 1979 1989 1998 1999 Export and import levels (USS mill.) (US$ millions) Total exports (fob) .. 34,375 51,140 48,011 75,000 Coffee .. 1,803 2,576 2,441 Soybeans .. 3,647 4,755 3,784 W Manufactures .. 17,575 31,964 30,251 Total imports (cif) .. 18,264 57,733 49,219 L d _ _ Food .. 1,249 3,057 2,078 25,000 Fuel and energy .. 3,753 1,965 2,169 _ I _ 1 _ Capital goods .. 4,873 25,283 21,157 o _ _ _ _ _ _ _ 93 94 95 96 97 99 99 Export price index (1995=100) .. 98 92 86 Import price index (1995=100) .. 85 84 89 n Exports * Imports Terms of trade (1995=100) .. 115 108 97 BALANCE of PAYMENTS 1979 1989 1998 1999 Current account balance to GDP (%) (US$ millions) Exports of goods and services 16,708 36,394 69,650 51,887 1 Imports of goods and services 21,724 21,486 69,650 57,516 93 - * * Resource balance -5,016 14,908 -14,177 -5,6291 * 1 Net income -5,479 -13,265 -21,217 -20,786 -2 Net current transfers 5 249 1,778 2,040 -3 -1| Current account balance -10,490 1,892 -33,616 -24,375 3 - Financing items (net) 7,703 -7,087 16,331 13,634 Chanqes in net reserves 2,787 5,195 17,285 10,741 5 i Memo: Reserves including gold (USS millions) 9,045 7,672 43,971 35,725 Conversion rate (DEC, local/US$) 9.79E-12 1.03E-6 1.1 1.3 EXTERNAL DEBT and RESOURCE FLOWS 1979 1989 1998 1999 (USS millions) Composition of 1999 debt (USS mill.) Total debt outstandinq and disbursed 61,327 114,532 232,004 221,792 IBRD 1.790 8,311 6,298 6,822 A: 6,822 IDA 0 0 0 0 :2,4C 122 D:11,610 Total debt service 11,310 14,122 47,887 73,694 E: 9,804 IBRD 234 1,475 1,373 1,380 IDA 0 0 0 0 Composition of net resource flows Official grants 10 44 97 Official creditors 436 223 4,911 -1,077 Private creditors 5,236 -3,716 21,930 -15,796 Foreign direct investment 2,419 1,267 31,913 26,916 Portfolio equity 0 0 542 3,234 F: 157,433 World Bank program Commitments 674 933 1,290 1,465 A- IBRD E - Bilateral Disbursements 302 819 1,240 1,533 B- IDA D- Other multilateral F - Private Principal repayments 74 871 995 952 C - IMF G - Short-term Net flows 228 -52 245 580 Interest payments 160 604 378 428 Net transfers 67 -656 -133 153 Development Economics 8/25/00 - 56 - Additional Annex 11 BRAZIL: SAO PAULO METRO (LINE 4) PROJECT THE IMPACT OF LINE 4 ON POVERTY IN THE SAO PAULO METROPOLITAN REGION (SPMR) This annex describes an evaluation of the impacts of Line 4 on poverty in the Sao Paulo Metropolitan Region (SPMR) prepared jointly by the Borrower's and Bank staff. Over the last decade, income poverty has fluctuated considerably. Using a relatively high poverty line, and even considering the positive effect of economic stabilization in 1994, the total number of poor in 1997 was 22% higher than in 1987 and reached 5.2 millions in 1997. The inequality gap is widening. Low mobility, partly explained by unsatisfactory public transport supply, is one of the symptoms of the poor's overall exclusion and reflects their weak involvement in the social, cultural and economic life of the SPMR. Geographical exclusion is worsening: the poor are either priced out of the central areas and endure long trips or move into central favelas to avoid spending too much time and money in traveling. Transport has a key role to play to address these issues and reintegrate the poor in the society by providing them with access to the job market and to the SPMR services and opportunities at affordable prices and reasonable travel times. Line 4, through a widely spread catchment area which covers some of the poorest municipalities of the SPMR, and thanks to good physical and fare integration with the suburban rail lines which serve the low income areas, will open the metro network to low-income users and will help unlock the city's opportunities to the poor. Twenty-two per cent (22 %) of Line 4 future users are from poor households which earn less than US$ 2/day/capita while approximately 50 % of the estimated users belong to households which earn less than US$ 4/day/capita. Because it interconnects so many existing rail and road -based systems, Line 4 will bring to the poor enhanced accessibility to health, education and education facilities, increased job opportunities, shorter travel times, better door-to-door affordability, potential economic revitalization of their neighborhoods and positive environmental impacts. Finally, Line 4 is expected to increase the labor market size and therefore allow a better "matching" of jobs and workers thereby positively impacting the output of SPMR and generating a trickle-down effect that will most likely have a very positive impact on the poor. In accordance with Sonia Rocha's definition of the poverty line, i.e. for the Sao Paulo Metropolitan Region, R$152.51 per capita, in 1997 R$ (IPEA). The methodology differs from the one used in other Bank studies, for example "Fighting Brazil's Poverty" Report No 20475-BR, June 2001, which uses a poverty line less than half that level. - 57 - Introduction A reliable, fast and efficient urban transport system does contribute to economic welfare and growth. This issue was studied by Prud'homme and Lee: "A key notion to explore this relationship is the effective size of the labor market for a given city. Consider a city with 1,000,000 jobs and workers (assuming away unemployment, for the sake of simplicity). From the viewpoint of workers, the effective size of the labor market will not be 1,000,000 jobs. Workers living at one end of the city do not have access at a reasonable cost in time and money to the jobs located at the other end of the city; for these workers, the effective size of the labor market may be only 500,000 jobs. For other workers, located in the center of the city, the effective size of the labor market will be higher, perhaps equal to 900,000 jobs. This size can be calculated for each zone of the city. An average can be calculated for the entire city, weighting the size of each zone by the number of workers in each zone. From the viewpoint of workers, the average effective size of the labor market in our city may thus be equal to 700,000 jobs. A similar calculation can be made from the viewpoint of enterprises. It will show that the effective size of the labor market is equal to, say, 800,000 workers." That means that Line 4, by reducing substantially the travel times for public transport users, increases the effective size of the labor market. More jobs will be accessible in less than a given amount of time from most neighborhoods in the metropolitan region. Theoretically, one must also take into account the out-of-pocket cost of the trip, which may be high enough to deter potential workers to commute from their place to a potential workplace but, one can assume in a first approximation that the Vale-Transporte makes work-related transport affordable to most of the poor (even though informal workers don't benefit from it). Since the State has decided that Line 4 will have the same tariff as the rest of the public network, one can assume that time is the only constraint to consider. According to Prud'homme and Lee, the effective size of the labor market is one of the factors which explain the productivity of cities: "The larger the effective size of the labor market, the greater the probability that a given enterprise will find exactly the workers it needs, and the greater the probability that workers will find exactly the jobs they want. A larger labor market makes it possible to better adjust the supply and the demand of labor. This better "matching" of workers and jobs is a source of efficiency". The effective size of the labor market is of course closely related, among other factors, to the urban transport characteristics and to the quality of the public transport system. There is therefore a close link between urban transport and productivity, and hence between urban transport and general welfare. The map below displays the location of jobs in the SPMR and shows that Line 4 serves the densest areas in terms of jobs. "Size, Sprawl, Speed and the Efficiency of Cities", R6my Prud'homme and Chang-Woon Lee, November 1998, Observatoire de L'Economie et des Institutions Locales, IUP, Universit6 de Paris XII. Mechanism created in 1985 and which functions as follows: every employee can opt for a deduction of 6% of his/her wages in exchange for transport tickets paid by his/her employer for his/her journey to work and back. Obviously, only formal workers benefit from this measure - 58 - Figure 1: Jobs location in the SPMR H < < S De~~~~~~~~~~~~~~~~~~~~~~~~~ns i prEgwos na RMSP Linhas de Metr8 nh La1 -i A& Un- 43 - VameUu -Linhu2 - VeNe Fe.mvss k. da AbrIng5n da Unha 4 (K fl.l/SnSo M8n48..dI.4*d. W.WOR 1 Poverty in Sao Paulo L.A. 5.2 million poor in Sao Paulo: substantially more than 15 years ago In Brazil as a whole, thirty-four per cent (34 %) of the population are still living below the poverty line (600 R$ per month per household)4. In the Brazilian Metropolitan Regions, the poor represent 29.8 % of the population. The number of low-income households has been increasing, both in relative and absolute terms5 from 1987 to 1997. It's in the Sao Paulo Metropolitan Region (SPMR), that the sharpest poverty increase was experienced. The SPMR concentrates more than 25 % of the Brazilian favelas. Using a povery line of R$ 600 per month and per household, the percentage of poor in the SPMR increased from 20% in 1990 to 32,09 % in 1997. Approximately equivalent to US$2-3 per day per person. According to the revenue distribution surveys carried out during the last decade by the Brazilian Institute of Statistics (IBGE). - 59 - Table 1: the poor in Brazil Absolute number of poor Proportion of poor (x 1.000) households Metropolitan Areas 15,435.0 29.8% Urban Areas 23,896.1 46.1% Rural Areas 12,504.0 24.1% Total Brazil 51,836.0 100.0% Source: data from PNAD, reviewed by IPEA Poverty line definition based in POF/IBGE From 1995 to 1997, the absolute increase of the number of poor in the metropolitan Region of Sao Paulo, was close to 1 million. Since then, even though more recent data are not available, one can reasonably assume that the poor are still worse off, especially since 1999 when a large number of low-skilled workers were made redundant. These low-skilled workers represent one fourth of the active population in the Brazilian Metropolitan Regions and their overall revenues are estimated to have plunged by a further 11 % since 1999. To end with, the distribution of poverty within the SPMR is uneven: the poor reside mainly on the outlying fringes of the metropolitan regions but many poverty pockets are dotting the central areas as well, as shown on Figure 2: Figure 2: Low income households location -n^,< i, -§^> AO ,. 4 __ ] _~~~~~~~~~~~~~~~~~~__ I.B A wieigieult a Th fo_lsco noe(o eeu)eouin ewe 97ad19 nteSM hw sustnta inraeo h vrg omlicm e oshl,fo ,1 oR ,6 Er ot bewen oioecnoi lyes_n bewe th different muicomite of 6 th SPM. Tirot a =__ / 20 a 20 (74)~~ 60 conicenitrated in the central municipalities. t'he average formal revenues tor those who experienced the highest populatioin increase, i.e. the peripheral municipalities, have been declining" tIhis brings to light a wvorrisomc phenoejcnon and shows, that even thotgh the total revenues of the poor may have decreased less than that, lack of job security and of formal employment is manifest, as shown on ihe chart below, on a population breakdo-iwn by deciles: Figure 3: Formal-sector income variation by deike between 1987 and 1997 in tile SPMR Average household revenues 20% - - ---- ...... 15% 10% > 0% I-5 00 i -15% - -20% -25% Breakdown by deciles People whose reveniues in 1 9X7 were below average are now carning less than ten years ago whiereas fonial revenLIC growth benefitedl to the segments oQi the population above the average revenue level. Trhe poorer people are, tihe more their formal revenues decreased, by more than 20% for the lowest decile. Ilhe ineequality oap has been getting wider and wider for the last ten years and poverty is increasing in the SIPMR, especially in the peripheral miunicipalities which bear the brunt of poverty. According to data 1romii the Monthil lEmployment Survey from 113(iE, the richest one percent of the SP'MR population get revenues (12.1 I _ o " the total Si'PMR revenues) whiich are almost equal to the iticomne of the poorest Sf) % (15.6 %). 2 Access to Transport in the SPMR 2-4. The poor's mobiity: low and repressed Ithe mioility of the poor in Sao laulo is very low, either because they cani't afford public transport fares, or because travel times are so long that the number of opportunities within their reach is rather small or simply because they are unemployed and have not many reasons to travel for. 'Ihese reasonis are intertwuiied : lonig travel tinmes and/or relatively high fares reduce considerably the lLumber of jobs they coukl apply lor, and reciprocally, unemployment excludes them from the Vale-Transporte progratim adti henice fromn transport subsidies. rhese families are either cornered in remote suburbs where housing is cheap or live in unhealthy and unsafe lhvelas in order to be closer to the center. 'I'hat locks them ivto a non-e(ldinug spiral ot cxclusion by severing ithem from the job opportuniities and services oftered by thie Metropolitan Region. ii may1 he dtfficult to Comparue 1097 and 1997 data, since the share of fomial revenues in the total household rcvcinucs decrcased subsmantially during thlus pcriod and thalt the abovc-mentioned figures are based on formal revenues. - 61 - Differences in mobility between the rich and the poor are impressive: according to the two last OD surveys, those living with less than R$250 per family and per month make 1.16 trip per person per day, whereas the average mobility in the SPMR in 1997 was 1.87 (and 2.64 for the richest). Lack of reliable and rapid public transport infrastructure, combined in some places with lack of fare integration and the exclusion of the unemployed and of informal workers from the Vale-Transporte, represses the poor's mobility. In addition, worsening traffic conditions, unemployment, and insecurity have further pushed down the mobility in the SPMR in general and of the poor in particular. It's worth noticing that the upper socio-economic layer's overall mobility is 2.27 times higher than the lower socio-economic layer's. When considering only motorized trips, this ratio goes up to 4.66. Table 2: 1997 Mobility rate by income levels Income level in R$ per month All trips Motorized trips Less than 250 1.16 0.49 250 3.600 TOTAL Public 4% 15% 23% 31% 20% 7% 100% Private (motorized) 2% 5% 11% 23% 32% 28% 100% Walk 7% 20% 25% 28% 15% 5% 100% Total of the population who 4% 13% 20% 27% 22% 13% 100% travels Total of the 100% population in the 7% 17% 22% 26% 19% 10% SPMR I_I Source: 1997 OD Survey 2.B. Two alternatives for the poor to choose from :a remote and badly accessible but relatively decent house, or a closer-in but hazardous living environment in afavela? A two-fold phenomenon is worth mentioning when dealing with the quality of the public transport system and its impact on the location of poor households: - Increasingly, the poor are being priced out of central areas with good accessibility to jobs. They are obliged to move to peripheral municipalities with cheap housing but lower quality of services, especially when it comes to public transport. This translates into long and sometimes expensive trips to and from work, which of course negatively impact the quality of life of those who are squeezed out of the central municipalities. - On the other hand, nowadays, an ever-increasing number of low-middle class households decide to abandon their relatively decent dwellings in areas poorly served by public transport to move to favelas located much closer to the central neighborhoods (such as Parais6polis, the largest one in the SPMR with 18,000 dwellers) which provide better accessibility to places where the labor market offers them the jobs they need and they are qualified for.These families are faced with a painful trade-off between travel times and costs, and housing quality. Year 2000 census showed a dramatic increase of the number of dwellings built outside the formal real estate market, i.e. illegal settlings in unhealthy favelas, where living conditions are hazardous. During the last decade, the number of favelas in the SPMR increased by 19,5 %. In most of the central areas regarded as middle or high income neighborhoods, the percentage of poor living in small and segregated poverty pockets can be as high as 10 to 20 %. In some specific cases such as the Parque Sao Pedro and the Praca Joao Mendes neighborhoods, this figure can go up to 35 %. In addition to this, current public investments to rehabilitate some of these deteriorated areas aim at maintaining this social mix and avoid pricing the poor out. This may partly explain why, although Line 4 will be built in the metropolis center, no fewer than 50,000 people living below the poverty line are housed less than 2 km away from Line 4. - 63 - 3 Line 4: its zone of influence and its benefits 3.A. A catchment area8 spread all over the SPMR Line 4 catchment area is not limited to the neighborhoods directly served by its stations. Its "missing link" role between the suburban railway and the METRO network makes it attractive to a huge number of transit users. The number of poor living in Line 4 catchment basin amounts to 3.15 million persons (and 1.28 million jobs), i.e. 79 % of the overall poor population in the SPMR. This line will be significantly used by users from the poor municipalities located at the periphery and connected to the Metropolitan Area center by suburban railway lines serving overwhelmingly low-income people, or by bus feeder lines. Line 4 will not only increase the number of jobs accessible from the periphery but also improve the travel conditions of public transport users. Figure 4: Line 4 catchment area J~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~Pt 2020:\ MetLe IUnha - IVe Reh. 3A b Ied UF.2-V.dee < / > : : 9 X v ~~~~~~~~~~~~~~~~~~~~~~~~Pitu 2020 R.& Abd.'B (0JMi.SnhP- WW4waam-o2 WOF) The catchment area is the union of the zones of the Origin-Destination survey from which depart or to which go the users of Line 4. - 64 - The following table displays the proportion of poor households in the municipalities which are part of Line 4 catchment basin: Table 5: Poor families in Line 4 catchment basin Poor families Municipalities Indigent Poor Total within the catchment area (up to (from R$250 Poor families R$250,00) to R$600,00) Taboao da Serra 4,336 9.0 8,767 18.2 13,103 27.1 Embu 3,298 6.5 12,429 24.6 15,727 31.2 Cotia 2,377 7.6 6,223 19.9 8,599 27.5 Embu Guacu 1,463 12.6 3,647 31.3 5,110 43.9 lltapecerica da Serra 3,065 10.2 7,941 26.4 11,006 36.5 Juquitiba 1,570 30.0 1,194 22.8 2,764 52.8 Sao Lourenco 530 21.4 531 21.4 1,061 42.8 Vargem Grande Paulista 444 6.1 1,502 20.7 1,946 26.8 Total: 17,083 9.1 42,234 22.6 59,316 31.8 Source: 1997 OD survey The following figure shows the overall itineraries of the trips made on Line 4 during morning peak hours and brings to the fore the use of Line 4 by residents of poor areas such as Juquitiba, Sao Lourenco, Taboao, Embu, etc, which present the highest concentration of poor in the SPMR. Figure 5: trips origins and itineraries on Line 4 65 - Even though Line 4 is located in the southwestern quadrant of the SPMR, trip origins are far from being restricted to this area: as an example, 20 % of the trips on Line 4 are originated in the peripheral districts of the eastern part of the SPMR (which are amongst the poorest areas in the SPMR), thanks to the good connection between the rail network and Line 4. 3.B. A wide list of benefits for the poor Recent surveys and traffic forecasts demonstrate that 22 % of future Line 4 users are living below the poverty line. The benefits for them are high, especially through: * Enhanced accessibility to the main service centers and job opportunities of the SPMR through improved overall connectivity of the urban transport network and increase in the so-called grid effect. In particular, Line 4 will put more low-skilled jobs within reach for the low-income populations. The decrease of the lowest quintile average revenue over the 1987-1997 period is explained, amongst other factors, by the scarcity of unskilled jobs in the area, which strikes predominantly the less educated people. Out of the 1.28 million jobs which are located within Line 4 catchment area, 29.5 %, i.e. 350,000 jobs, are for low-skilled workers. This betterment in accessibility derives mainly from two factors: - affordability: although the families living with less than R$250 per month are traveling much less than the wealthier socio-economic layers, they are dedicating up to 30 % of their revenues to transportation. Those living with less than R$600 per month are spending 18 % of their revenues on transportation. Line 4 will alleviate this financial burden and/or make more trips affordable to the poor by promoting tariff integration between the suburban train network and the METRO network. Today, the poor living in the suburban areas pay R$ 2.5 per trip on the intermunicipal buses. There is a strong commitment to keep the future integrated tariff (train + metro) below this figure. - shorter travel times: in addition, low income users are expected to save more time and travel distance than the average Line 4 user because Line 4 roughly rectilinear alignment will shorten their itineraries compared to their current tortuous bus trips and offer much higher commercial speed. Table 6: pass-km saved on Line 4 by socio-economic layer Socio-economic layer Pass-km saved 1997 R$ per month On L4 (%) Up to 600 R$ 44 From 600 to 1800 34 From 1800 to 3600 15 More than 3600 6 Source: Line 4 traffic forecasts based on the 1997 OD survey * Positive environmental impacts: being usually more exposed to noise and air pollution than the rest of the population, the poor will be the biggest beneficiaries of the overall environmental improvement brought about by Line 4. * A social equalizer role: sprawl and spatial growth in the RMSP have increased trip distances, which adversely affects the poor who reside on the outlying fringes .of these metropolitan regions. When - 66 - these trips became too long to be made by non-motorized modes such as walking or bicycling, the poor ended up captive of road-based public transport modes. Road vehicles such as buses suffer disproportionately from increasing congestion due to their larger size which reduces their maneuverability, and to the need to stop to pick up and drop off passengers. Thanks to relatively high speed and segregated right-of-way, METRO line 4 equalizes accessibility between car drivers and public transport users and does have a substantial positive impact on the quality of life of those who are captive to public transport, notably the poor. * Direct jobs for the poor: the implementation of Line 4 - Yellow will generate around 30,000 person-year over four years in the areas of civil engineering, manufacturing and assemblage of rolling stock and electromechanical systems. From this total, approximately 16,000 are related with civil construction activities and will employ mainly low-skilled workers. At the operation stage, one can expect an estimate of 1,500 permanent jobs (train operation and maintenance, fare collection and management), out of which a substantial share will be occupied by low-skilled workers. * Economic revitalization in the catchment basin of Line 4: the other impact that one can expect from Line 4 is the creation of a more favorable environment for investors to locate new businesses in these areas and launch a process of economic vitalization. To really benefit the poor, this impact will have to be accompanied by some land use regulations which would reserve a number of dwellings for the poor to avoid that the resulting gentrification ends up expelling the low-income households. 3.C. More poor than on any other metro line Presently, those living below the poverty line approximately represent 19 % of public transport users and 13 % of metro users. As much as 22 % of future Line 4 users are living below the poverty line, and, given that most of them travel on longer distances than average, 24 % of the passenger-km on Line 4 will be attributed to poor users. This is slightly higher than the share of bus users who are poor (21 %), although the bus network catchment area covers the SPMR more extensively than the METRO network, and especially the most remote and poorest municipalities. In addition, the poor will get 28 % of the overall time savings, mainly because the poor travel on longer distances. For example, for someone going from Vila Sonia to Luz by bus today, the trip time will be reduced at peak hour from 60 minutes to 20 minutes by metro. Given that these figures are based on traffic forecasts that assume no change in mobility (no additional trips are generated by the model), these calculations are a lower bound estimate, since the poor are today the likeliest to be restrained in terms of mobility due to the present lack of affordable and reasonably rapid means of transport. Line 4 is expected to trigger part of this repressed demand. Line 4 will help "democratize" the metro network and will increase the participation of the poor in the metro ridership and making this highly regarded public transport system more accessible to the poor and low-middle class than it is today. 3.D. How to maximize these benefits: affordable fares and tariff integration To make all these benefits accessible to the poor, it is essential that fares on the metro system be lower or equal to what buses charge today, especially since the road-based public transport system will be partially restructured to feed the metro. A narrow focus on cost-recovery aiming primarily at assuring the financial sustainability of this new line may harm the poor if the issue is not systemically approached. Fare integration between buses and metros and trains and metros is a prerequisite to succeed in meeting poverty alleviation objectives. - 67 - Additional Annex 12 BRAZIL: SAO PAULO METRO (LINE 4) PROJECT FISCAL IMPACT Sao Paulo State Fiscal Situation: At present, Sao Paulo is in a sound fiscal position. Having rescheduled over R$50 billion in outstanding debt to the federal government on favorable terms and significantly reduced spending on active personnel, the state ran an operational surplus in 2000 (excluding capitalized interest) and will be capable of doing so over the project implementation period. Revenues: Sao Paulo derives 75% of its gross revenues from taxes, the vast majority of them from a state value added tax (ICMS). Transfers from the federal govemment account for another 10% of current revenue. Interest income, rents, service charges, and other miscellaneous sources make up the remainder. Table 1: Trends in Current Revenues (Rs Mn of July 2000) 1997 1998 1999 2000 Current revenue 36967 38738 38913 42626 ICMS 26299 25063 26438 29508 other taxes 3143 3747 3255 3963 transfers 2807 3509 4413 4172 other 4718 6420 4807 4983 Source: ExecuSao orgarnentdria 1997-2000. Figures for 2000 annualized based on results through November. Index: IPCA ICMS: As shown in table 1, the state's current revenues grew only modestly over the period 1997-1999. The performance of the ICMS was particularly disappointing. Revenues in 1999 were virtually unchanged from 1997. The principal cause was slow growth in the state's economy. The ICMS is imposed on ad valorem basis on the sale or distribution of merchandise and on selected services (principally telecommunications, electric energy and intercity bus transportation). Tax rates on interstate sales are set by the federal government. Rates on sales within the state are set by the state government, subject to parameters fixed at the federal level and agreements with other states. - 68 - Trends in Economic Activity 0.20 3 0.10 / GDP Brasil so 0.05 -A / INA Sao Paulo A, --- industrial sales-SP n 0.05 ) 0--- NA S Pu (0.05) -- u cs u0 u) ui c (0.10)- The base of the ICMS declined during the late 1990's. As shown in the chart above, the Central Bank's index of economic activity for Sao Paulo (INA) indicates an absolute decline in the economic activity from 1997 to 1999. Similarly, the index of industrial sales in Sao Paulo showed no growth in those two years. What growth did occur in the ICMS base was due not to economic expansion but to Federally mandated price increases on fuels and electricity, two principal components of ICMS revenues. ICMS revenues in 2000 show considerable improvement. Revenues through November of 2000 were 12% higher in real terms than in the equivalent period in 1999. Although a tax amnesty accounts for 15% of the increase, the remainder appears to reflect an economic recovery. In 2000, the index of economic activity (through September) was six percent higher than the equivalent period one year earlier. The index of industrial sales grew 13 percent. If these trends continue, ICMS revenues should continue their upward direction. Intergovernmental transfers: Intergovernmental transfers account for only ten percent of Sao Paulo's current revenues-the lowest proportion in Brazil. Federal revenue sharing-the mainstay of poorer states-is not a significant revenue source. Instead, most of Sao Paulo's federal transfers are derived from (1) the retention of the federal income tax liabilities of state employees; (2) fixed shares of the federal education-salary tax; (3) payments by the national health insurance system (SUS), and (4) compensation for federally imposed tax exemptions. Transfer revenues grew by about 15% per year in real terms between 1997 and 1999. This was largely due to increases in SUS transfers, income tax withholding, and federal tax compensation. Expenditures :With revenues stagnating during the late 1990's, Sao Paulo tightly controlled expenditures in order to maintain fiscal equilibrium. This has principally involved large cuts in personnel and the refinancing of its considerable stock of debt. Personnel:Personnel is the largest single item of state expenditure in Sao Paulo. Staff costs were equal to 64% of net current revenues in 1997. Of this, active staff (including benefits and social contributions) accounted for roughly 60%, with payments to retirees and dependent survivors comprising the remainder. The state's ability to control personnel costs is constrained by the 1988 Constitution, which limits its authority to dismiss staff or reduce nominal salaries, and mandates generous pension benefits. Within the framework of existing legislation, Sao Paulo has done a considerable amount. Between 1995 and 1998, the state instituted three programs of voluntary separation, resulting in a reduction of 15,000 staff. The state has also instituted an across-the-board hiring freeze and a policy of not renewing the contracts of fixed - 69 - term staff. This was facilitated by a new federal program-Fundefe. Under Fundefe, fixed shares of state and municipal revenues are pooled and then reallocated among state and municipal primary schools on the basis of enrollment. Because the state government was the predominant provider of primary education throughout the Sao Paulo, it stood to capture the majority of Fundef funds. To avoid the loss of revenues, the municipalities opted to take over state primary schools, shifting students-and a corresponding number of teaching slots--off the state system. As a consequence, the number of active teachers on the state payroll dropped from 245,000 in 1994 to 204,000 in 2000. It has dismissed staff employed under private sector labor law (particularly in state enterprises that are fiscally dependent on the treasury). The result was a 21% reduction in the number of active staff between 1994 and October of 2000. The state has also been conservative in granting wage increases. Nominal wage increases have been largely confined to health workers, teachers, and the police. As a result, the total wage bill of active staff is only about six percent higher in 2000 than it was in 1997. Pension costs: Sao Paulo nevertheless faces growing personnel expenditures, in the form of payments to retirees. Between 1994 and October 2000, the number of retirees eligible for state-financed pensions increased by 26%. Total spending on retirees and dependent survivors jumped 18 percent in real terms between 1997 and 2000, and consumed 22% of net current revenues in the latter year. Given the age profile of Sao Paulo's staff, these costs are likely to increase. The pension problem arises from two facts. First, the majority of pensions are unfunded. Except for staff employed under private sector legislation, retirement benefits are paid directly out of current general revenues. Staff employed under private sector legislation are paid by the federal social security system, to which the state contributes 21% of wages. Second, the level of benefits is untenable. Under federal law, benefits are fixed at 100% of exit salaries, and are subject to indexation. Recent changes in the federal Constitution will allow the state to reduce its pension obligations in the long run. The 19th Amendment allows the state to hire staff under private, rather than public sector law, shifting the eventual burden of their retirement onto the federal social security system. The 20th Amendment toughened retirement criteria for statutory employees. Neither amendment will hLve an immediate impact, however, as both apply only to newly hired staff. As documented in recent Bank sector work, the solution to the pension problem lies in reducing the benefit levels now guaranteed to existing active staff. This will require further changes in the federal Constitution. Debt service: Sao Paulo has a considerable amount of debt. In principle, debt service should be making a major claim on revenues. As shown in Table 2, the state's contractual and debt (excluding accounts payable) totaled roughly R$70 billion as of November 2000, equal to 2.1 times estimated net current revenues for 2000. Table 2: Trends in Stock of Debt (RS Mn) 1997 1998 1999 2000 Domestic 51311 50953 59664 66856 National treasury 51099 50680 59321 66458 Bonds (precatorios) 212 273 343 398 Foreign contractual debt 454 820 1459 1736 Total** 521011 52650 62184 69652 *as of Dec 31, except 2000 (November 30)**Excluding accounts payable - 70 - The largest block of debt-accounting for 87% of the total-had its origins in bonds and debt to the state's two commercial banks. The state ceased servicing both types of debt in the early 1990's. Interest was instead capitalized into principal. In 1997, the state sought debt relief from the federal government. Under the resulting agreement, the federal government agreed to refinance 87% of the total, at a concessionary real interest rate of six percent. The state was required to liquidate the remainder through the transfer of assets. The refinancing agreement also established a cap on debt service. This applied not only to the rescheduled bonds and state bank debt, but to all previously rescheduled debt-virtually all of Sao Paulo's domestic obligations. For 2000 and all subsequent years, the cap is fixed at 13% of net current revenues. Any debt service in excess of the ceiling is capitalized into the stock of debt. The cap substantially reduces Sao Paulo's inmmediate debt service obligations. Without a cap, it is estimated that interest payments in 2000 would equal 20% of net current revenues. With debt service confined to 13% of net current revenue, however, interest will continue to capitalize, adding to the stock of debt. Debt not subject to the cap is a small proportion of the total and is likely to remain so. The state's refinancing agreement with the federal govermment sets a schedule for annual declines in the state's debt:revenue ratio, and prohibits new borrowing if the state fails to achieve the scheduled targets. (An explicit exemption is given for the METRO loan currently under consideration and for the final disbursements of ongoing IDB and Caixa-financed projects.) Due to the capitalization of interest on the state's rescheduled debt, the stock of debt is likely to grow on its own, leaving little room for new borrowing. Other expenditures: Sao Paulo's two other major items of expenditure-operating expenditures (custeio) and capital works--have remained roughly constant as a percentage of net current revenues. Operating costs have averaged 20% of net current revenues over the last three years; capital spending has ranged from ten to twelve percent of net current revenues. Given the constraints on state borrowing, capital spending is not expected to increase above the level permitted by operational surpluses. Prognosis: Over the past three years, this combination of restraint on personnel spending and debt rescheduling permitted Sao Paulo to run a substantial current account surplus. (See chart below.) The state's overall balance was substantially negative in 1998 and 1999. The resulting deficit was financed not through borrowing but through the sale of assets. The state's debt stock nevertheless increased by R$ 6 billion over the three-year period, due to the capitalization of interest. Results through November of 2000 suggest improvement in the state's finances. Due largely to growth in the ICMS, the state is projected to run a current account surplus equal to 13% of net current revenues in 2000. Based on seasonally adjusted capital spending, it is projected to run a small overall surplus. The outlook for the state's finances beyond 2000 depends largely on two factors. The first is the rate of growth in the state's economy. With little flexibility to increase the rate of the ICMS, the state will largely depend on growth in the underlying tax base to increase its resources. Transfers, as a relatively small contributor to revenues, would not be expected to affect the outcome. The second is the state's ability to resolve its pension liabilities. While the costs of active personnel have been substantially reduced, the state still confronts looming pension liabilities. Given the present Constitutional guarantees on pension benefits, there is little the state can do to address this problem on its own. Because state pension funding is a problem throughout Brazil, some form of resolution at the federal level is not out of the question. - 71 - Trends in fiscal indicators 20% - 1, 15% - 8 -10% cmNNN 10% r0:l current surplus 2 5% 4 ID 0% o-- operational surplus *projected To estimate the state's fiscal prospects over the implementation period of the project and its ability to service the resulting debt, a medium term fiscal projection was prepared. The projection is based on estimated results for 2000, and assumes: (1) 4% annual growth in net current revenues; (2) no growth in spending on active personnel; (3) 4% annual growth in spending on retirees; (4) interest on rescheduled debt limited to 13% of net current revenues, with the remaining interest capitalized into the stock of debt; and (5) operating costs and capital expenditure fixed at 20% and 10% of net current revenues, respectively. (All growth rates are in real terms. Inflation is projected at 4% periyear.) Proceeds from privatization after 2000 are assumed to be nil. The proposed project is assumed to cost U$ 900 million (R$ 1.8 billion in prices of December 2000), with the World Bank and the Japanese governmnent financing US$ 200 million each. The remainder would be financed from general revenues of the state. The results, illustrated in the chart above, are promhising. Both the current account surplus and the operational surplus would continue to grow over the projection period (with the latter presumably used to finance additional capital works).While the state's debt stock would continue to grow, the debt revenue ratio would decline gradually, reaching 1.56 times revenue by 2006. The project itself would have only a minor impact on the state's finances. Counterpart financing would equal eight percent of projected capital spending during the implementation period. Annual interest on the two loans (in nominal terms) would total about R$ 67 million once they are fully disbursed, or less than 0.1% of net current revenues. - 72 - Additional Annex 13 BRAZIL: SAO PAULO METRO (LINE 4) PROJECT ENVIRONMENTAL ASSESSMENT An environmental impact assessment of the Sao Paulo Metro's Luz-Vila S6nia link undertaken by independent consultants was required by Brazilian law. During pre-appraisal, the following information was made available: (a) a typology of the affected population and of proposed solutions; (b) the institutional matrix, which supports the expropriation process, specifying for each activity the responsibilities of the METRO's various units as well as those of other agencies and the relationship of social and environmental management within the overall project coordination arrangements; (c) a chronogram of all activities pertaining to expropriation and related activities to be carried out by the METRO or other agencies; including consultations with affected population and the possibilities of delays in beginning of construction if compensation offered to the affected population were to be rejected; and (d) a budget estimate and sources of funds required for expropriation and other related activities. The project would have a net beneficial impact on the environment. The new subway link would help relieve congestion in major transport corridors and central areas, resulting in lower emission of pollutants per vehicle-kilometer. Junction improvements and pedestrian overpasses will improve safety and quality of life. The proposed underground routing of the Metro line and use of tunneling rather than cut-and-cover for its construction will minimize environmental impacts, which are expected to consist essentially of limited expropriation of land for stations, and noise and traffic disruption during construction. The design of the underground stations is innovative and makes full use of the advantages of the Tunnel Boring Machine (TBM) and New Austrian Tunneling Method (NATM) methods of construction. The environmental impact of station construction is minimized, with the major part of the stations constructed completely underground. This is expected to eliminate disruptions to street traffic and underground utilities and services. Some negative impacts during construction will occur during haulage of excavated materials from the construction sites and along disposal routes. The subway works may have localized adverse impacts, mainly related to excavation for construction materials and disposal of work site wastes. The problems of excavated material are likely to be less severe than if cut-and-cover methods were to be used. Measures to mitigate such impacts will be specified in the bidding documents for works. Land and/or property expropriation are limited to the areas close to the Vila Sonia subway yard and to some stations. Evidence that the Installation Licence (supported by the appropriate technical documentation) was requested to the Sao Paulo State environmental licensing authority was provided to the Bank prior to negotiations. Bidding documents for the construction and operation of Metro Line 4 will include the METRO's Internal Complementary Instruction IC-4.00.00.00/3N4-001 which spells out very clearly the implementation procedures for mitigating any adverse environmental impacts. To ensure that environmental impacts are properly evaluated and adequate mitigating measures are proposed, METRO's planning division is staffed with experienced environmental/resettlement specialists in charge of reviewing the final engineering design from the environmental standpoint and clear the project - 73 - for implementation; and supervise the implementation of the project to ensure that the participating operating agencies carry it out in accordance with the design approved by STMSP. This project has been rated "A" by the Bank for environmental assessment (EA) purposes. In accordance with Brazilian legislation, a full EA was prepared. TORs were developed by METRO in consultation with the state licensing agency (Secretaria do Meio Ambiente). A final draft was discussed by the QAT (LCSES) whose comments were subsequently incorporated. A summary of the full report was prepared and circulated to the Board on July 27, 2001. METRO is an experienced company and engineering designs are very advanced.Underground construction methods will be used along the full extent of the line, significantly reducing expropriation requirements and environmental impacts as compared to traditional cut-and-cover methods. Stations have similarly been designed with special attention to reducing above-ground space requirements. Whereas the initial layout of the Vila S6nia maintenance yard called for acquisition of more than 300 buildings and plots, alternative sites and designs were sought in an attempt to minimize public acquisition. The current proposal has managed to minimize project impact. In total, for the full extension of the Bank-financed segment, 274 buildings will be affected, of which 77 residential and 197 non-residential. All those properties have legal titles and are located in regular and planned urban settlements, rated as middle and upper class areas. Physical characteristics of current housing are, i.e., two-story, single family, middle-to-low income residences. As to the business, their predominant typology, is of single small/medium enterprises, at the address for more than five years. The area has been undergoing rapid transformation from one and two-story structures to high-rise buildings. Sampling conducted during origin-destination studies within a 1 km strip along the corridor indicate an average turnover of five years per resident.Given the relative high value of the affected construction, as well as their regular titling condition, construction of replacement housing is not called for. Nevertheless, national counterpart funds (US$64 million) are ensured to allow for the compensation of all the affected constructions. METRO's usual practice in the past has been to expropriate at market value, which is established according to criteria defined by ABNT (Associa,do Brasileira de Normas Tecnicas), taking into account local real estate transactions. The METRO's Civil Works Department follows a standard set of internal procedures, comprising preparation of a physical cadastre, calculation of the asset's value, and presentation of METRO's purchase proposal to the proprietor. The Legal Department carries out the purchase if the stipulated price is accepted by the proprietor, or takes the case to court if an agreement is not reached. Over the past 25 years, METRO has carried out over 10,000 expropriations. In roughly 70% of these, the proposed buying price was accepted. The adequacy of compensation at market value is difficult to establish since monitoring and evaluation studies to verify how the affected population relocated, were not carried out for the three metro lines which are in operation. The company also provides assistance in finding replacement housing, logistical support for moving, legal support to regularize property titles, relocation grants and other services. In the case of Line 4, the company proposes to revert to land acquisition procedures it adopted during implementation of Line 1, i.e., negotiated settlements, avoiding judicial process. A social assessment of the affected population was conducted. The expropriation decrees have been signed by the State Governor. A cadastre of physical assets to be expropriated has been carried out. Valuation and title verification are concluded. A Relocation Plan, comprising guidelines and specific detailed options, has been approved by the METRO's Board of Directors. In addition to cash compensation, the plan includes the use of indexed letters of credit (for proprietors), facilitated access to lines of credit (for non-proprietors) and other grants (mainly for renter and very small business) and services (such as legal assistance) which the company will make available to the affected population. Institutional arrangements, timetables and budgets required for - 74 - the implementation of relocation options and services have been worked out. The Bank has reviewed and commented on the drafts, final versions and updated resettlement documents. An ad hoc Relocation Task Force has been created by the Board of Directors to guarantee appropriate coordination of asset expropriation and population relocation with other project activities. Meetings with the affected population at Vila S6nia and other sites were held to present and discuss project characteristics, expropriation requirements, expropriation procedures and timing, proposed valuation criteria and other forms of compensation and assistance. Minutes of these meetings were sent to the Bank. A monitoring and evaluation plan has been designed and will be implemented until at least six months after conclusion of the relocation. The updated cadastre of the affected constructions, as well as the updated social-economic analysis of the affected families, reviewed and approved by the Bank and the Brazilian authorities was provided prior to negotiations. - 75 - Additional Annex 14 BRAZIL: SAO PAULO METRO (LINE 4) PROJECT SOCIAL-ECONOMIC CHARACTERISTICS OF THE SAO PAULO METROPOLITAN REGION Socioeconomic characteristics, land use and travel patterns of Sio Paulo, Brazil Abstract The Sao Paulo metropolitan region has been experiencing intense growth in the last decades: the population doubled and the motorized vehicle fleet was multiplied by six from 1970 to 1996. The region has consolidated itself as the most important economic and political region in the country, with the tertiary sector corresponding to 70% of jobs. Average income, although high for Brazilian standards, is relatively low, with 58% of people earning less than U$500 a month (and highly skewed towards the upper strata).The region has also experienced increasing transportation problems, that are unevenly distributed among social groups and classes, considering those with and without access to private transportation. Most of the problems are related to the sharp increase in the use of private transportation and the corresponding decrease in the use of public transportation: the percentage of congested roads in the afternoon peak is currently 80% and average bus and auto speeds are very low (12 km/h and 17 km/h respectively). Severe congestion is causing a waste of 300 million passenger-hours per year in the city (for bus and auto trips), and atmospheric pollutant concentration is inadequate in 10% of the days. In addition, the city of Sao Paulo presents some of the highest traffic accident figures among large cities in the developing world, with 60,000 injured people and 2,300 fatalities in 1995. Current problems are challenging the region's economic efficiency and its position as a candidate world city and have also been promoting an intense debate on alternative transportation solutions, that include the coordination of urban, transport and traffic problems at the metropolitan scale, the provision of high quality public transportation and the restraint to the use of private transportation. Introduction The Sao Paulo metropolitan region is the largest in Brazil and in South America as well, with an area of 8,051 km2 and an estimated population of 16.6 million in 1996. It is formed by 39 cities, with the city of Sao Paulo being the largest and most important in economic and political terms, with a population of about 10 million people in 1996 (see figure 1). The paper describes the main social and economic characteristics of the region and the transport demand as well. The paper is divided into 4 parts: Part 1 makes a brief description of the social and economic development of the region and the associated transport development. Part 2 describes current social and economic conditions. Part 3 describes current transport and traffic conditions. Part 4 sumnmarizes main conclusions and recommendations. - 76 - Urban development and transport policies in Sao Paulo In last century, the city of Sao Paulo and its metropolitan region experienced large physical, economic and social changes, reflecting the major changes at the country and world levels. At the metropolitan scale, the first large transformation initiated in the 30's, when the coffee based economy began to be replaced by the industrial economy. In the two following decades, the region would consolidate as the most important industrial area in the country, with the city of Sao Paulo itself occupying a prominent position. Nearby cities known as the "ABC region" would in the 50's concentrate large investments in the newly organized Brazilian automotive industry and the related supply industries. The large industrial development would place the region, in this period, as responsible for 35% of the country's industrial production (Emplasa, 1994). In the 70's, the large growth of Brazilian economy was paralleled by important changes in the region's economy, with a sharp increase in the overall economic output and in the tertiary sector as well: the region consolidated itself as the most important financial and technological center of the country. During the 80's, the region suffered from the economic recession in the country and the industrial sector experienced negative growths in production and employment around -1% to -2% a year, while the overall economy was influenced by the decrease in average income. In the same period, the first industrial decentralization started to occur, with the nearby countryside in the state of Sao Paulo receiving large investments and increasing its share in the overall industrial output. However, the metropolitan region and the city of Sao Paulo never lost their prominent position as centers of strategic decisions. With transport policies, the first major plans and investments initiated in the 30's, when the Prestes Maia arterial system started to be built. in the 40's, the main public transportation system provided by the Canadian Light & Power street cars started to be replaced by diesel buses, in a movement that would last until the 70's, when the last street car line was terminated. The buses, initially operated by many small private firms, were eventually run also by a special public (city) company created in 1947, the Cia Municipal de Transportes Coletivos, CMTC, which shared the market with private operators. Between 1960 and 1980, mobility increased, road capacity was greatly improved and efficient traffic operation was organized, while keeping public transportation in poor conditions (Vasconcellos, 1997). Space was occupied in conflicting ways - often irregularly - and the urbanized area increased rapidly. Conurbation began to spread, however without changing the dominant role of Sao Paulo. In the 1980's, following the economic depression that reduced activities, mobility decreased and the fiscal crisis of the state deeply reduced investment capacity, making mass transportation infrastructures even less viable. No special policy was adopted and average transportation conditions remained the same. Democratization of the political system in 1982 helped little to alleviate poor transport conditions, in face of diminishing state resources and high inflation rates. Recently, as the new "Real" economic plan succeeded in lowering inflation, the country and the region experienced an intense traffic growth, with parallel high increases in the number of automobiles (see table 5). Mobility conditions started to deteriorate rapidly, with major daily congestion becoming the normal rule, followed by severe environmental pollution and by a steady decrease on overall transport efficiency, for both people and merchandise. The evidence of the crisis brought about a public discussion about alternative transportation policies, which is still under way. - 77- FIGUPE 1 SAO PAULO MFTPoPOLAN RGON .. ~~~~~~~~~~~~~~~~~67 NA0'-7s.0om 1. ,$t, 0 > 2 hP' i - -:10 Km 197 ;t0 8,139,73:0 tt 510 461 e .~~~~~~~~~ . Population Table 1: Population increase, Sao Paulo Metropoitan Region,1970-96. Year Metropolitan Region1 City of Sao Paulo | Population Increase Population Increase __ __ _ (%) _ _ __ (%) 1980 12,588,725 54.7 8,493,226 43.3 1991 15,416,416 22.5 9,626,894 13.3 1996 16,583,234 7.3 9,836,129 2.2 Metropolitan population doubled from 1970 to 1996. The city of Sao Paulo has grown more slowly and its population has recently stabilized (tablel1). The annual average growth has also been different among the subregions. Between 1980 and 1991, the North and Southwest areas grew at around 5% a year, while the metropolitan region and the city of Sao Paulo grew, respectively, at 1.9% and 1.2% a year. - 78 - Age distribution Table 2: A e distribution, Sio Paulo Metropolitan Re on, 1996. Age (years) People % 0- 9 2,927,972 17.7 10- 19 3,297,009 20.8 20 - 29 3,153,404 19.1 30 - 39 2,781,154 16.7 40 - 49 2,011,669 12.1 50-59 1,172,410 7.1 60 - 69 749,879 4.5 > 69 489,737 3.0 Total 16,583,234 100.0 Table 2 shows that the population is relatively young, with 58% of people with less than 29 years of age. Employment In face of the described deep changes in the economic structure, the tertiary sector (commerce, services) is the dominant employer. Its share has grown from 62% in 1985 to 70% in 1992 (table 3) and it is estimated that it has already reached the 77% level (CMSP, 1998). Table 3: Employ ent sector, Sao Paulo metropolitan region, 1985/1992. Sector Employment (%) 1985 1992 Primary 0.9 0.5 Secondary 36.9 29.1 ITertiary 62.2 70.4 Ref: Emplasa (1994) - 79 - Income Table 4: Avera e Family income, Sao Paulo metropolitan region, 1997. Family Monthly % Income (R$ 1997) Up to 250 6,9 250 - 600 17,0 600- 1.000 21,9 1.000- 1.800 26,1 1.800 - 3.600 18,7 > 3.600 9,6 Total 100,0 (2) Ref Origin-Destination Survey, 1997. The IPEA survey on family monthly income yields different results,with a higher share of households living below the poverty line (32.09%). The poverty line is set at less than R$ 600 per month. Average income, although high for Brazilian standards, is relatively low, with a median income around R$1000. Income is badly distributed, highly skewed towards the upper strata: the poorest 50 % of families in the scale receive just 15.6% of all income, while the richest 1 % receives 12.1% (IBGE, 1998). Vehicle ownership The number of motorized vehicles in the city of Sao Paulo was multiplied by six from 1970 to 1996 (table 5). From 1980 to 1995, the number of persons per vehicle has decreased from 5.4 to 2.1 (CET, 1998 a). Table 5: Growth in the number of motorized vehicles, city of Sio Paulo, 1970 -1996. Year Motorized Increase (%) Vehicles(1) 1970 731,728 _ 1980 1,585,986 117 1990 3,421,059 116 1996 4,671,362 36 (6 years) (1): automobiles, buses, trucks, motorcycles, vans; Ref: CET, 1998a. - 80 - Travel Patterns Table 6: Social and transport characteristics, Sao Paulo metropolitan region, 1967 - 1997. Subject 1967 1977 1987 1997 Population (1,000s) 7,097 10,273 14,248 16,792 Annual pop. growth(%) 3.77 3.33 1.66 Motorized trips (1,000s) 7,163 15,758 18,749 20,267 Mobility rate ' 1.01 1.53 1.32 1.21 Automobile fleet (1,000s) 493 1,384 2,014 3,436 Automobile rate 2 70 135 141 205 Jobs (1,000s) 3,960 5,647 6,920 School enrollments (1,000s) 1,088 2,523 3,676 4,986 (1) motorized trips per person, per day. (2) Automobiles/i,OOO people. Ref: CMSP, 1998. Data from the household travel surveys (table 6) show that the metropolitan overall population more than doubled in 30 years, however with decreasing rates. The mobility rate presented sharp changes and is currently at the 1.2 level. Automobile fleet was multiplied by seven. The use of transport modes The use of motorized transport modes has changed dramatically in the last three decades, with the major change occurring with the use of private transportation, that increased from 26% in 1967 to 48% in 1997. Accordingly, bus use has decreased from 59% to 39% in the same period. The subway, which was opened in 1974 with its first line (10 km), progressively enlarged its network (although slowly) to the current 45 km. The subway attracted a higher share of the trips. The train system, subjected to decreasing investments and offering low levels of service, remained serving a small part of the demand (table 7). Table 8 compares the share of foot trips to those by motorized travel. Table 7: Change in the use of motorized transport modes, 1967-1997. Transport mode Trips/day (%) 1967 1977 1987 1997 Public 63.5 60.7 54.8 50.8 Train 4.4 3.2 4.4 3.2 Subway -- 3.4 7.6 8.3 Bus 59.1 54.1 42.8 39.3 (1) Private (auto and taxi) 25.9 34.8 41.9 47.3 Other 10.6 4.4 3.3 0.9 Total 100.0 100.0 100.0 100.0 (I) includes 1% of declared trips on illegal minivans. Ref: CMSP, 1998. - 81 - Table 8: Share of foot and motorized trips, Sio Paulo metropolitan region, 1977-1997. Mode Trips (%) 19771 1987 1997 Motorized 74.8 64.0 65.6 Foot2 25.2 36.0 34.4 Total 100.0 100.0 100.0 (1) the 1967 survey did not include foot trips. (2) trips longer than 500 meters only. Ref: CMSP, 1998. Current division of daily trips according to mode is shown in table 9. It can be seen that public modes, private modes and foot trips account each for approximately one third of trips. With respect to trip purposes, work and school are the dominant ones. Considering just non-home trips, these two motives account for 74% of all trips (table 10). Within work trips, 61% are related to the service sector, 22% to commerce and 17% to industry jobs. Ta 9: Trs mode) Sio Paulo metropolitan region, 1997. Main mode Trips per day Number (1,000s) % Public 10,307 33.4 Bus 2 7,965 25.8 Subway 1,688 5.5 Train 654 2.1 Private3 9,578 31.0 Other4 382 1.2 Motorized - total 20,267 65.6 Foot 10,615 34.4 Grand total 30,882 100.0 (1) the mode of highest capacity within all modes used (in combined trips). (2) includes regular transit, hired buses, hired school buses and 200,000 trips per day on illegal minivans. (3) automobile and taxis. (4) motorcycle and bicycle. Ref: CMSP, 1998. - 82- Table 10: Purpose of trips, Sao Paulo metropolitan region, 1997. Purpose Figure Trips/day (1,OOOs') Share in all Share without trips (%) home trips (%) Work 6,874 22.2 41.0 School 5,525 17.9 32.9 Shopping 746 2.4 4.5 Health 637 2.1 3.8 Leisure 1,145 3.7 6.8 Other 1,852 6.0 11.0 Home 14,103 45.7 Total 30,882 100.0 100.0 Ref: CMSP, 1998. Travel conditions a) Traffic speeds and congestion Automobile speeds increased from 25 km/h in the last years of the 70's to 27-28 km/h in the 1980 -1984 period and then dropped to less than 20 km/h in the 90's. Currently it is 17 km/h in the PM peak and 27 km/h in the AM peak (IPEA/ANTP, 1998). The declining trend of the latest years is directly related to the sharp increase in the automobile fleet that followed the success of the "Real" economic plan. In the afternoon peak, total length of congested roads tripled between 1992 and 1996 - from 39 km to 122 km - (CET, 1998a) and the percentage of congested roads in the main system is currently 80%. Automobile speed in the main arterial system in the afternoon peak hour is 17 km/h and bus speed is 12 km/h (IPEA/ANTP, 1998). It is estimated that 3,000 among the 11,000 buses used could be taken out of service if severe congestion was eliminated, and that this extra supply causes an extra cost of 16% on bus fares. Congestion under such conditions is causing a waste of 316 million passenger-hours per year in the city, for bus and auto trips (ANTP/IPEA, 1998). b) Travel times and access to transport The occupation of the outskirts of the city increased average travel distances. The bus system was not expanded into the outskirts quickly. In addition, tight fare controls led private operators to constantly adapt supply to ensure minimum profitability, often at the expense of service frequency and service to low density areas. Suburban railways offered extremely low levels of service, reproducing the same conditions found in other Brazilian towns. The result was a poor public transportation system, characterized by service irregularity, unreliability and discomfort, and with very limited integration. A sharp contrast with respect to private transportation was clear. Public transportation users also faced traffic problems. Most of the new arterial streets did not have any special physical and operational devices to ease the circulation of buses, and few special traffic priority schemes were organized to improve bus operation. Some of the resulting differences in the quality of public and private transportation may be seen on table 11. - 83 - Table 11: Access and travel times to transportation, Sao Paulo, 1997. Mode Access time Travel time (min) (1) (mi) (2) Automobile 1 29 Bus 6 57 Metro 7 77 Train 11 93 (1) walking (one-way); (2) one-way, from origin to destination (includes walking links) Ref: CMSP (1997) c)Traffic safety The city of Sao Paulo presents some of the highest traffic accident figures among large cities in the developing world. The yearly number of fatalities has been falling around the 2,500 level since 1980 and the majority is composed by pedestrians (table 12). In 1995, there were about 60,000 victims of these accidents. Among them, it is estimated that 9,000 were seriously injured and that 6,000 remained with permanent injuries (CET, 1996). Currently there are more than 200,000 accidents per year (94% vehicular accidents) (table 13). Table 12: Traffic fatalities, 1980 - 1997, city of Sao Paulo. Year Vehicle Pedestrians Total Fatalities/ occupants |_15 pop 1980 750 1,580 2,330 27.4 1985 1,044 1,515 2,559 27.8 1990 1,094 1,621 2,715 28.3 1995 846 1,432 2,278 23.0 1996 906 1,339 2,245 22.4 1997 933 1,109 2,042 20.4 Ref: Cia. de Engenharia de Trafego - CET (1996 and 1 998b) - 84 - Table 13: Traffic accidents by type, city of Sao Paulo,1997. Type of accident Number % Vehicle-only 189,911 94.1 | Pedestrian 11,876 5.9 Total 201,787 100.0 Ref: Cia de Engenharia de Trafego - CET (1998b) Tables 12 and 13 show that streets are inherently dangerous to pedestrians (Vasconcellos, 1996). As most of pedestrian trips are made by the lowest income levels, this extremely grave externality is mostly imposed by the few with access to vehicles on the majority. d) Pollution The air in the city of Sao Paulo also shows high concentration levels for some important polluters (table 14). In addition to long term effects to the atmosphere, pollutants in Sao Paulo have already shown a negative effect on people's health: air pollution and mortality of elderly people (over 65 years) were found statistically associated with respirable particles (Saldiva et all, 1995). In addition, a plausible relationship between child poverty-related malnutrition and respiratory diseases was found in the city (Saldiva et all, 1994). Table 14: Days with inadequate pollutant concentration, 1994. Days with inadequate Pollutant concentration (%) Carbon monoxide (city average) 13.1 Nitrogen oxides (city average) 26.2 All pollutant (metropolitan area average) 10.8 Ref: Cetesb, 1994. Summary and conclusions The Sao Paulo metropolitan region has been experiencing intense growth in the last decades and has consolidated itself as the most important economic and political region in the country. In parallel, the region has been experiencing increasing transportation problems, related to accessibility, speed, safety, comfort and environment conditions. These conditions are unevenly distributed among social groups and classes, in face of the large social and economic differences among social strata. While private transportation users are supported by a series of transport policy actions, public transportation captive users face unfavorable travel conditions, characterized by discomfort, unreliability and inefficiency. Current conditions are deteriorating quickly, in face of diminishing investments in subway and trains, lack of proper priority treatment for buses and increasing automobile based congestion, leading to high travel times and excess pollution. Current problems are challenging the region's economic efficiency and its related position as a candidate world city and have been promoting an intense debate on alternative transportation solutions. - 85- The experience of the region leads to some basic recommendations. First, at the institutional and organizational sides, decisions on land use, transport and traffic are highly interdependent and agencies in charge of these affairs have therefore permanent crossing paths. Therefore, major efforts should be taken to supersede the historic disconnection between the metropolitan-scale transport actions and local transport policies. Also, inside the cities themselves, urban, transportation and traffic actions should be permanently coordinated. In the same token, it is important to work in order to avoid the occupation of the outskirts or developing areas without adequate urban planning for job and public service location, and provide good public transportation provision. Second, the supply of large, integrated public transportation means should be promoted, offering high quality services. Accordingly, road construction should be reassessed, in order to examine who is going to pay and benefit from it. Third, at the operational side, the management of the bus service has to be greatly improved, by organizing surveillance systems to control service quality in a comprehensive and permanent way and by offering different services to different market sectors. Fourth, at the social side, the irresponsible and uncivilized use of the space by motorized transportation - specially the automobile - has to be reversed, trough better traffic management, pervasive enforcement on user behavior and vehicle pollutant emission, fiscal and economic deterrents to automobile use and large scale traffic educational programs. - 86 - References CET - Cia de Engenharia de Trafego (1996), Vitimas de acidentes de transito - pesquisa, Sao Paulo. (1 998a), Operacdo horairio de pico - relat6rio de avaliaydo, Sao Paulo. (1998b), Fatos e estatisticas de acidentes de trdnsito em Sdo Paulo, 1997, Sao Paulo. Cetesb - Cia de Tecnologia Ambiental (1994) Relat6rio de qualidade do ar no estado de Sdo Paulo - 1994, Sao Paulo. CMSP, Cia do Metropolitano de Sao Paulo (1988) Pesquisa OD/1987, Sao Paulo. (1 998)Pesquisa OD/1997 1997, Sao Paulo. Emplasa, Empresa Metropolitana de Planejamento (1994) Plano metropolitano da Grande Sdo Paulo 1994/2010, Sao Paulo. IBGE - Instituto Brasileiro de Geografia e Estatistica (1991), Censo geral do Brasil, Brasilia. (1996), Pesquisa domiciliar, Brasilia. IPEA/ANTP (1998), Redu,do das deseconomias urbanas com a melhoria do transporte puTblico, relat6rio sintese, Brasilia. Saldiva et all (1994) Association between air pollution and mortality due to respiratory diseases in children in Sao Paulo, Brazil: a preliminary report, Environmental Research 65, pp 218- 225. (1995) Air pollution and mortality in elderly people: a time-series study in Sao Paulo, Brazil, Archives of Environmental Health 50 (2), pp 159-163. SEADE (1996), Censo demografico de Sao Paulo, Sao Paulo Vasconcellos, E. A., (1996) Reassessing traffic accidents in developing countries, Transport Policy 2 (4) pp 263-269. (1997) The making of the middle class city: transportation policy in Sao Paulo, Environment and Planning A 29:293-310. -87- MAP SECTION Sao (duo t JUNDIAI b,~~emaf,ond j ~BRAZIL SAO PAULO 9 AZLD ERMETRO LINE 4 LINHA A - CPTM 1 PO ECT Tucu ruvi AZUL- DO METR6 * LINHA F CPTM CALMON VIANA Ceasa . \ t . Brus _ * LlNHA 3 >; Gusisnazes~~~INHA CPT ~~~~~~:~~AU DOlhet METROb i aTtup EMEH OMER 4 6 8 OSASCO LINHA 6 Ric) Tietd6 kpa Barra LARANJA DO METRO g U~LNHAB -CPTM Fuio,4 siwlco~~~~~ G- 6alberto 7 a 0 ltaquer~~~~~~~~~~a ESTUDANTES Gua anazesa Jatio~~~eis Vila 56niali *r6 LINHA 3 0_ f siclente 1. 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