96680 v1 Metropolitan Governance in Brazil METROPOLITAN GOVERNANCE IN BRAZIL: Inputs for an Agenda and Strategy May 2015 1 METROPOLITAN GOVERNANCE IN BRAZIL: Inputs for an Agenda and Strategy May 2015 Metropolitan Governance in Brazil This material is a product of the staff of the International Bank for Reconstruction and Development (The World Bank). The fin- dings, interpretations, and conclusions expressed in it do not necessarily reflect the views of the Executive Directors of The World Bank or the governments they represent. The World Bank does not guarantee the accuracy of the data in- cluded in this work and accepts no responsibility whatsoever for any consequence of their use. The boundaries, colors, denomi- nations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank con- cerning the legal status of any territory or the endorsement or acceptance of such boundaries. 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All other queries on rights and licenses, including subsidiary rights, should be addressed to the Office of the Publisher, The World Bank, 1818 H Street, NW, Washington, DC, 20433, USA; fax: 202-522-2422; email: pubrights@worldbank.org. © 2015 The International Bank for Reconstruction and Develop- ment / The World Bank 1818 H Street, NW Washington DC 20433 Telephone: 202-473-1000 Internet: www.worldbank.org Email: feedback@worldbank.org All rights reserved 6 Metropolitan Governance in Brazil Abbreviations and Acronyms BH Belo Horizonte BNH Banco Nacional da Habitação (National Housing Bank) CAF Comitê de Articulação Federativa (Committee for Federal Articulation) CETESB Companhia Ambiental do Estado de São Paulo (Environment Company of the State of São Paulo) CONDEP/ Agência Estadual de Planejamento e Pesquisa de Pernambuco (State Agency of Planning and Research of Per- FIDEM nambuco) FGTS Fundo de Garantia por Tempo de Serviço (National Pension Fund) FPM Fundo de Participação dos Municípios (Fund of Municipal Participation) CONISUD Consórcio Intermunicipal da Região Sudoeste da Grande São Paulo (Inter-municipal Consortium of the Sou- theast Region of Greater São Paulo) DNER Departamento Nacional de Estradas e Rodagem (National Department of Highways) EMPLASA Empresa Paulista de Planejamento Metropolitano (Metropolitan Planning Company for the Greater São Paulo Metropolitan Area) FGTS Fundo de Garantia por Tempo de Serviço (National Pension Fund) FUNDEB Fundo de Manutenção e Desenvolvimento da Educação Básica (Fund for the Development of Basic Education) GDP Gross Domestic Product IBGE Instituto Brasileiro de Geografia e Estatística (Brazilian Institute of Geography and Statistics) ICMS Imposto sobre Circulação de Mercadorias e Prestação de Serviços (State Value-Added Tax) IPEA Instituto de Pesquisa Econômica Aplicada (Institute of Applied Economics Research) IPTU Imposto sobre a Propriedade Predial e Territorial Urbana (Municipal Property Tax) ISS Imposto sobre Serviços MR Metropolitan Region MRBH Metropolitan Region of Belo Horizonte MRSP Metropolitan Region of São Paulo MTE Ministério do Trabalho e Emprego (Ministry for Labor and Employment) OECD Organisation for Economic Co-operation and Development ONG Non-governmental organization PAC Programa de Aceleração do Crescimento (Growth Acceleration Program) PDDI Plano Diretor de Desenvolvimento Integrado (Participatory Metropolitan Master Plan) PLAMBEL Planejamento da Regiao Metropolitana de Belo Horizonte (Planning of the Metropolitan region of Belo Horizonte) PMCMV Programa Minha Casa Minha Vida (My House My Life Program) PNAD Pesquisa Nacional por Amostra de Domicílios (National Household Sample Survey) PPP Public Private Partnership RSLs Registered Social Landlords RIDE Região Integrada de Desenvolvimento Econômico (Integrated Economic Development Region) RIDE DF Região Integrada de Desenvolvimento do Distrito Federal e Entorno (Integrated Development Region of the Federal District) ZEIS Special Zones of Social Interest (Zonas Especiais de Interesse Social) 7 Metropolitan Governance in Brazil Foreword In less than fifty years, Brazil evolved from a predominantly rural society and economy to a highly urbanized country in which 85 percent of its people now live in urban areas and more than 90 per- cent of the country’s GDP is generated in the cities. This rapid urbanization process was characte- rized by a lack of planning and an enduring framework of inequality, resulting in high degrees of concentrated poverty in the urban areas. Much of this urbanization has taken place in metropolitan regions (MRs). MRs have grown more rapidly than the rest of the country, both in population and in GDP terms. In 2010, per capita GDP was higher in MRs than in the rest of the country and metropolitan economies accounted for 70% of GDP. At the same time, half of the Brazilian poor and 90 percent of the people living in subnor- mal conditions were found in metropolitan regions. MRs present diverse realities. To begin, there are differences between core and peripheral areas in each region, with peripheral areas characterized by lower access to basic infrastructure and ser- vices, mobility, jobs, affordable land, and housing. There are also important differences between MRs, e.g in terms of scale and wealth. Over 19.7 million people lived in the São Paulo MR (one in ten Brazilians) while only 2.1 million people lived in the Belém MR. The São Paulo MR produces almost 1/5 of Brazil’s GDP and, in 2012, generated 1/4 of Brazil’s tax collection; in contrast, the Recife MR makes up 64% of Pernambuco’s GDP but represents only 1.6% of the Brazilian economy. Finally, there are large differences in the racial composition of the MRs with residents of the North and Northeastern cities of predominantly self-identifying as pardos (mixed origin) while residents of the South and Southeastern cities have larger populations that call themselves brancos (white). After years of discussion, the recent approval of a new framework for metropolitan governance in Brazil – the Statute of the Metropolis – creates the opportunity for debate and evolution regarding several key issues. These include: a) placing metropolitan matters at the forefront of the develo- pment arena in Brazil; b) reviewing what has been learned about inter-municipal governance and service delivery; c) estimating resource mobilization needs for metropolitan development; d) coor- dinating metropolitan land use with transport and housing; e) including metropolitan concerns in any revision of fiscal federalism; and f) promoting environmental sustainability, social inclusion and resilience to disasters and climate change plans at the metropolitan scale. The World Bank can be a partner in addressing these issues. In responding to Client demand, the Bank has been providing a range of support to Brazilian states and cities and especially their lo- w-income populations in the areas of infrastructure, social services, slum upgrading, institutional development, river basin management, local economic development, environmental protection, water and sanitation, and transportation. In the future, we hope that this support can increasingly be delivered at the metropolitan level and through metropolitan structures. This work is part of the Bank’s knowledge generation and dissemination agendas. It is aimed at enriching and building a discussion space among our nework of Clients and Partners. 8 Metropolitan Governance in Brazil © Mariana Ceratti 9 Metropolitan Governance in Brazil Acknowledgements The principal authors of this report were Alessandra Campanaro (Senior Urban Specialist, GSURR), Jeroen Klink (Professor, University of ABC) and Mila Freire (Consultant), with consulting support from Leonel de Miranda Sampaio, Ana Akaishi, and Jaclyn Sachs (Urban Analysts). Peer reviewers were Judy Baker (Lead Economist, GSURR), Fernanda Magalhães (Senior Urban Specialist, Inter-American Development Bank) and Victor Vergara (Lead Urban Specialist, GSURR). Additional inputs and revisions were provided by Catalina Marulanda (Lead Urban Specialist, GSURR), Emanuela Monteiro (Urban Specialist, GSURR), Alexandra Panman (Junior Professional Associate, GSURR) and Beatriz Eraso Puig (Extended Term Consultant, GSURR). Translation services were provided by Antonio Ribeiro de Azevedo Santos (Consultant) and design was done by Carlos Eduardo Peliceli da Silva (Consultant). Administrative assistance was provided by Sara Gey Feria (Program Assistant, GSURR) and Karina Marcelino (Program Assistant, LCC5C). Task team leaders for the study over time were Alessandra Campanaro, Catalina Marulanda and Josef Leitmann (Lead Disaster Risk Management Specialist, GSURR). This report received final contributions and was approved by the managerial team composed by Paul Kriss (Program Leader, LCC5C), Anna Wellenstein (Practice Manager, GSURR) and Deborah Wetzel (Country Director, LCC5C). 10 Metropolitan Governance in Brazil © Mariana Ceratti 11 Metropolitan Governance in Brazil © Joaquin Toro 12 Metropolitan Governance in Brazil Executive Summary Brazil urbanized at a very rapid pace: the share As of today, contrasts across metropolitan re- of people living in cities dramatically increased gions are still significant. in the past 40 years, growing from 56 percent in 1970 to 84 percent in 2010. Since the turn of the In this process of spatial change and inclu- century, Brazil’s real GDP per capita has grown sion, what role has metropolitan governance by 32 percent, while official poverty rates have played? Would inequality and access to basic fallen from 25 percent to less than 9 percent. services be improved with a more aggressive Urbanization led to concentration of economic metropolitan collaboration? What can be lear- activity and population in selected areas, mostly ned from metropolitan governance in Brazil around state capitals where infrastructure and and elsewhere? This report is a contribution economic growth acted as a magnet to private to this discussion. Drawing from literature and investment and job creation. Metropolitan areas1 data from Brazil, the report reviews the main were formed through aggregation of municipali- concepts related to metropolitan governance, ties of different sizes and levels of specialization, presents international examples, and discusses linked by connectivity, labor flows and economic ideas relevant to the Brazilian case. The report exchanges. The metropolitan areas in Brazil to- is organized in seven sections: (i) principles and gether account for half of the population, about framework for metropolitan governance; (ii) 60 percent of national GDP, and most of the cou- metropolitan evolution in Brazil; (iii) economic ntry’s economic and urban growth. and spatial dynamics of 15 selected metropoli- tan regions; (iv) case studies of three metropo- The rapid economic development of the last de- litan areas (São Paulo, Recife e Belo Horizonte); cade led to deep spatial transformation. Cities (v) financing; (vi) the new framework for me- grew rapidly, but access to services was biased tropolitan governance in Brazil – the Statute against the periphery where the new migrants of the Metropolis (Estatuto da Metrópole); and were settling. Restrictive federal land use poli- (vii) observations and suggestions for the short cies, lack of resources and insufficient planning and medium terms. lead to unresponsive supply of affordable hou- sing in the proximity of labor markets. Low and Analytical framework middle income households settled in the outs- The literature on metropolitan governance kirts, mobility became difficult and commuting discusses criteria and modalities for efficient, times long. Economic geography dictates that equitable and accountable public service pro- during the early phase of urbanization, diffe- vision. While there are large variations across rences in income and services across regions countries and metropolitan regions, and it is are likely to increase. Core cities typically have well accepted that there is no one-size-fit-all higher incomes and better services than peri- model, some basic modalities for metropolitan pheral areas. As mobility increases and edu- governance can be defined, notably: jurisdic- cation and health levels improve, both income tional fragmentation (or fragmented one-tier and access to services become more equally model), amalgamation (or one-tier consolida- distributed. This convergence process is under- ted model), two-tier government model, special way in Brazil, but it will take time to complete. purposes agencies, and voluntary cooperation. 1. The Brazilian Observatorio das Metrópoles defines metropolitan areas as “conurbanated areas that are functional and integrated under the influence of a core city”. 13 Metropolitan Governance in Brazil The most typical model in highly decentrali- work for metropolitan governance, i.e., it did zed countries is jurisdictional fragmentation, not lay out cooperative mechanisms to mana- where local governments are responsible ge metropolitan regions or specific resources for delivering and financing public services. to finance them. Amalgamation and two-tier models enlarge the size of the jurisdiction and enable greater The discussion of metropolitan coordination efficiencies in service delivery, at the cost of has been quite active since early 2000s. The merging several local governments. Horizon- new millennia brought the approval of the tal collaboration can take the form of volun- City Statute (Estatuto da Cidade , in 2001), the tary agreements or special purpose agencies creation of the Ministry of Cities (in 2003), and that execute specific function on behalf of lo- the approval of the Law of Public Consortia cal governments. (in 2005), the later responsible for legalizing contractual arrangements among local gover- nments for the delivery of services. The long The evolution of metropolitan debate about metropolitan governance has governance in Brazil resulted, more recently, in the enacting of the Statute of the Metropolis in January 12, 2015. The model of metropolitan governance in The Statute lays out basic principles aimed at Brazil has evolved since the 1970s. Several improving coordination at metropolitan level, metropolitan areas gained legal status in the outlining responsibilities and proposing mo- 1970s when the central government created dalities for metropolitan governance. nine metropolitan regions (MRs). Their func- tion was mainly to channel investment for in- Tension between state governments and frastructure in support of the industrial policy municipalities, lack of resources and conti- of the country. Financing was provided by na- nuing regional inequalities have increased tional financing institutions such as the Natio- the complexity of metropolitan governance. nal Housing Bank ( Banco Nacional da Habita- The Constitutional arrangement in Brazil pre- ção, BNH) and the Transportation Department. cludes the use of governance models existing The 1988 Constitution transferred the power in other countries and described in this re- to create metropolitan regions from the cen- port. The provision of services at a metropo- tral government to the state governments, in litan scale tends to either be the outcome of line with the decentralization trend. Munici- inter-municipal cooperation or upper-level palities were granted full federal status and (federal or state) policy decisions, as is the made responsible for providing and funding case in education and health. Health is the basic services at the local level. Investment sector with the largest number of coopera- for infrastructure became scarce due to the tion agreements, as states and the federal go- fiscal crisis and several adjustment plans were vernment encouraged consortia among local necessary to control inflation. Per constitutio- governments to speed the implementation of nal amendments in 1995 and 1996, pro-poor the National Health System. Other municipal national policies were implemented in sectors agreements have been promoted by the fede- such as education and health, with state and ral government, such as inter-municipal con- local roles clearly defined, including the share sortia, which are increasingly being used for of revenues to be allocated to these sectors. a wide range of services. The new Constitution did not provide a frame- 14 Metropolitan Governance in Brazil © Joaquin Toro Economic and spatial dynamics of the 1990s. Higher wages in the core cities at- selected metropolitan regions tract skilled workers. However, while the abso- lute number of high-income skilled workers in MRs are engines of economic growth, but so- MRs increased from 2000 to 2010, their share in cio-spatial disparities persist. MRs have gro- total employment decreased. By 2010, half of wn more rapidly than the rest of the country, the Brazilian poor and 90 percent of the people both in population and in GDP terms. In 2010, living in subnormal conditions were found in per capita GDP was higher in MRs than in the metropolitan regions. Socio-spatial disparities rest of the country. In terms of concentration of persist, both in terms of income and access to high paid jobs, core cities concentrate a higher basic services. share of people earning more than 10 minimum wages and with higher education degrees. Ba- The provision of basic services is gradually im- sed on Census data from 2000 and 2010, Gini proving in metropolitan regions, but inequali- coefficient values estimated for the core cities ties between the core and the periphery persist. of São Paulo, Vitoria, Recife, Rio de Janeiro and Although data show a clear trend of improved Porto Alegre demonstrate a consistent increase service provision in urban areas, particularly in in income inequality during 2000-2010. While the Southern and Central-West Regions, access some improvement was observed in Campinas, to basic infrastructure (particularly sewage) re- Manaus, Brasília, Goiânia, Belém and Curitiba, mains deficient, primarily in peripheral muni- it was not enough to compensate for the exa- cipalities. Growing and new population cannot cerbation of income inequality that occurred in afford the prices of land serviced with infras- 15 Metropolitan Governance in Brazil tructure or close to the core city. Lack of ade- quate land use planning and absence of pro-ac- tive slum prevention characterizes most of the MRs, especially in the periphery. Housing units have grown in areas with relatively poor infras- tructure, and slums have grown in the outskirts of metropolitan areas, aggravating mobility issues in already congested urban areas. This indicates the low elasticity of land supply for housing and shelter and shows the dynamics of the informal markets to answer a very clear de- mand for affordable land and shelter that is not adequately being addressed. Case Studies: São Paulo, Recife and Belo Horizonte Three selected case studies - São Paulo, Recife and Belo Horizonte - offer an in-depth, qua- litative look at metropolitan governance in Brazil and reflect the absence of a unique one- size-fits-all model of metropolitan governan- ce. The experiences show distinct approaches to metropolitan governance currently in place in these three MRs, which have taken an active role in shaping their institutional and policy structure. They exemplify the dynamism of metropolitan governance, whether led by the state or by municipalities, and offer an oppor- tunity to extract lessons that could be of use in other MRs. São Paulo presents a compelling case due to the sheer scale of its challenges, the number of metropolitan initiatives that have taken place, as well as its experimenta- tion with inter-municipal consortia and other forms of metropolitan governance. Recife’s historic legacy of metropolitan planning sheds light on innovative participatory planning ini- tiatives. Belo Horizonte is an interesting case study for demonstrating how civil society can contribute to metropolitan institutions. 16 Metropolitan Governance in Brazil © Joaquin Toro 17 Metropolitan Governance in Brazil Financing ments, Concession Contracts, etc.); (iii) defines arrangements for metropolitan governance; In the comprehensive literature on Brazilian and (iv) defers to states, through specific regu- metropolitan governance, financing of metro- lating laws, the responsibility of detailing such politan structures and/or services is rarely ad- arrangements. In particular, the Statute of the dressed. The discussion often revolves around Metropolis reaffirms the central government’s the best form that metropolitan committees responsibility to define a general policy fra- can assume or who can mandate policies or mework for metropolitan areas.. States would investment decisions that have impacts at the continue having the responsibility of creating territorial level. However, the definition of fun- metropolitan areas, and establishing the guide- ding mechanisms, which is central to ensuring lines and criteria for MR creation. However, and that metropolitan policies and investments can within the proposed governance structure, they be implemented, is often lacking. At present, are now obliged to develop integrated plans for there is no legal or institutional framework metropolitan development. Cities, on the other for metropolitan regions to access resources. hand, shall articulate their master and land use This topic is beyond the scope of this work, and plans with the integrated state and metropoli- therefore the report is limited to summarizing tan plans. By Constitution, cities will continue secondary sources of relevant fiscal data. Ho- to be autonomous and free to enter into any wever, an in-depth review of this issue is ne- metro arrangement they choose. cessary to advance the metropolitan agenda in Brazil. The existence of reliable and predicta- Althought the proposed legislation is a wel- ble financial resources is an essential feature come development in Brazil’s metropolitan of any metropolitan arrangement that aims at policy, it does not fully address a critical as- planning and implement development projects, pect, which is the financing of the metropoli- including infrastructure and long-term spatial tan agenda. The principles are a solid point of development. departure from the past and reflect the preoc- cupation of the country to improve service de- The New Statute of the livery, reduce poverty and accelerate growth. Metropolis The proposed development of a national policy framework for metropolitan areas is commen- Following several years of discussion, in Ja- dable and very useful. While the statute opens nuary 2015 the Statute of the Metropolis2 was the possibility of financial support from the enacted. This new law presents an opportunity central government, its actual provisions are to review metropolitan issues in Brazil and look not so clear about it, as the original article on at the most appropriate models and typology. It: the creation of an specific fund for integrated (i) sets up general principles and guidelines for urban development was vetoed. At the state le- the planning, management and implementation vel, the idea of using criteria for the establish- of metropolitan-related matters of common so- ment of new MR is practical, and used widely in cial interest; (ii) encourages collaboration and the US and Europe. Experience shows that it will partnerships for shared metropolitan manage- be better to keep the number of criteria small ment and governance across the various tiers to reduce the bureaucracy in establishing new of governments, through existing instruments governance modalities. The mandatory prepa- (such as Public Private Partneships – PPPs, Con- ration of metropolitan plans is another positive sortia, Urban Operations, Cooperation Agree- development. Integrated plans are useful and 2. Law no. 13.089/ January, 2015. 18 Metropolitan Governance in Brazil © Joaquin Toro 19 Metropolitan Governance in Brazil urgent to define land-use and other regulations are unlikely to be a reality in Brazil, as they to manage the location of new settlements. Fi- would require approval of the merged munici- nally, information on metropolitan and regio- palities that would be losing their authority and nal economy will be the basis of analysis and taxing powers. The present system of one-tier or good policy. Therefore, attention should be gi- jurisdictional fragmentation is likely to continue, ven to: (i) the definition of data and diagnosis on with local governments taking care of provision economic and social patterns of metropolitan of services at local level, and re-distribution and areas as an input to the long-term planning and equity being the function of the central govern- to forecast investment needs; (ii) the collection ment via national norms and policies. Voluntary of data on expenditures by sector and by MR; associations have been successful, in line with (iii) the analysis of the effectiveness and effi- what has happened around the world. Special ciency of spending. purpose agencies to coordinate transport servi- ces and infrastructure, as in the case of São Pau- Final Observations lo and Recife, will have an increasing role to play in extending urgent infrastructure and services. Brazilian MRs are not exploiting the opportuni- ties brought by agglomeration economies3, as The analysis of the Statue of the Metropolis, the evidenced by strong inequalities between the experience of MRs in Brazil and the internatio- core city and the rest of the MR. While strategic in nal experiences, point to a number of priority terms of concentrating opportunities of economic areas for the short and medium term. development and addressing social deficits, MRs traditionally lack an appropriate institutional Short term: framework to guide the planning, management, and finance of their development trajectory. Me- A. Raise the profile of the metropolitan is- tropolitan efforts across levels of government in sue. The Statute of the Metropolis provides an the past decade have been significant – but yiel- opportunity to position the metropolitan matters ded insufficient results. Consequently, the eco- – planning, participation, tools and governance nomic dynamism that is concentrated in MRs has structure – at the forefront of the discussions. It not translated into proportionally better urban would be important for the discussion to include development and housing conditions. Metropo- the identification of key services or inequalities in litan areas are still characterized by intense so- service delivery at metropolitan level, and extend cio-spatial disparities and mismatches between to include issues of economics, competitiveness, land use, the availability of infrastructure, and investment climate and comparative advantages. the degree of accessibility. B. Focus on what has worked. A critical Much has been discussed on whether some for- review of what has been learned with the vo- ms of metropolitan government should be im- luntary collaboration among municipalities is posed as a way to promote forced collaboration urgent and could bring a great deal of ideas. or integration. The federal status enjoyed by Consortia that are effective in providing servi- Brazilian local governments is not compatib- ces at metro or regional level could evolve into le with some forms of metropolitan governan- wider special purpose agencies. ce such as amalgamated or two-tier structures. C. Estimate financing needs and strategies in While these solutions are effective in handling metropolitan areas to mobilize resources. There redistribution in the provision of services, they is a persisting gap which needs to be filled in the 3. Agglomeration economies refer to the the benefits that firms and workers enjoy as a 20 result of proximity (WDR, 2009) Metropolitan Governance in Brazil © Joaquin Toro discussion around economic and financing as- understand if the establishment of a common pects. A multi-source infrastructure fund to leve- framework for the MRs – as set forth in the new rage investment financing should be considered Statute of the Metropolis – is the best option or in the future. This would require defining criteria, if the definition of guidelines for flexible metro- terminology, financial partners, and schemes to politan structures would be more appropriate prepare project finance. in the Brazilian context. D. Instill the need to coordinate land use with F. Include metropolitan concerns in any re- transport and housing in all city and state plans vision of fiscal federalism arrangements that and help cities to raise land-based revenues to may be discussed in the coming years. The finance infrastructure and social development. fiscal federalism in Brazil has been a source of Planning visions for transit and land-use integra- debate in recent years. If eventually a revision tion are crucial, and so is the adequate funding is undertaken by the government, it would be for successful execution. Transit and land-use in- appropriate to include metropolitan finance is- tegration can yield the income needed to expedite sues into the debate. and support the process. G. Address sustainability. Promoting sus- Medium term: tainability, reducing greenhouse gas (GHG) emissions, and preparing resilience plans are E. Evaluate whether a common framework the focus of the international community dea- for all metropolitan regions or flexible struc- ling with cities and metropolitan areas. tures would be more efficient. It is important to 21 Banco Mundial – Brasil World Bank – Washington, DC SCN Quadra 2 – Lote A – Ed. 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