Document of The World Bank FOR OFFICIAL USE ONLY Report No: 20596 IMPLEMENTATION COMPLETION REPORT (COFN-03950; CPL-37130; CPL-37140; CPL-37150) ON THREE LOANS IN THE AMOUNT OF US$ 220 MILLION TO THE STATES OF MARANHAO, PIAUI AND TOCANTINS - BRAZIL FOR A STATE HIGHWAY MANAGMENT II PROJECT June 23, 2000 Finance, Private Sector & Infrastructure Latin America and the Caribbean Region This document has a restricted distribution and may be used by recipients only in the performance of their |official duties. Its contents may not otherwise be disclosed without World Bank authorization. CURRENCY EQUIVALENTS (Exchange Rate Effective July of each year) Currency Unit = Real R$ R$ 1.0 = US$ 0.56 US$ 1.0 = R$ 1.80 1994 US$ I = R$ 0.90 1995 US$ I = R$ 0.92 1996 US$ I = R$ 1.00 1997 US$ 1 = R$ 1.07 1998US$ 1 =R$ 1.15 1999 US$ 1 = R$ 1.80 FISCAL YEAR January I December 31 ABBREVIATIONS AND ACRONYMS ADT Average Daily Traffic CAI Core Accountability Implementation Completion Report CAS Country Assistance Strategy CD Country Director DER Departamento de Estradas de Rodagem (Highway Department) DER-MA Departamento de Estradas de Rodagem do Estado do Maranhao Highway Department of the State of Maranhao DER-PI Departamento de Estradas de Rodagem do Estado do Piaui Highway Department of the State of Piaui DERTINS Departamento de Estradas de Rodagem do Estado do Tocantins Highway Department of the State of Tocantins DNER Departamento Nacional de Estradas de Rodagem National Highway Department HDM Highway Design and Maintenance Standards Model IERR Internal Economic Rate of Return ICR Implementation Completion Report IRI International Roughness Index MTR Mid-term Review NBF Not Bank Financed NPV Net Present Value PCD Project Concept Document SAR Staff Appraisal Report SEINF Secretaria de Infra-Estrutura (do Estado do Tocantins) Infrastructure Secretariat of the State of Tocantins TL Team Leader TT Task Team Vice President: David de Ferranti Country Manager/Director: Gobind T. Nankani Sector Manager/Director: Jeffrey Gutman Task Tean Leader/Task Manager: Jacques Cellier FOR OFFICIAL USE ONLY BRAZIL STATE HIGHVWAY MANAGEMENT II PROJECT CONTENTS Page No. 1. Project Data 1 2. Principal Performance Ratings I 3. Assessment of Development Objective and Design, and of Quality at Entry 1 4. Achievement of Objective and Outputs 3 5. Major Factors Affecting Implementation and Outcome 6 6. Sustainability 7 7. Bank and Borrower Performance 8 8. Lessons Learned 9 9. Partner Comments 9 10. Additional Information 12 Annex 1. Key Perfornance Indicators/Log Frame Matrix 13 Annex 2. Project Costs and Financing 14 Annex 3. Economic Costs and Benefits 1 5 Annex 4. Bank Inputs 16 Annex 5. Ratings for Achievement of Objectives/Outputs of Components 17 Annex 6. Ratings of Bank and Borrower Performance 18 Annex 7. List of Supporting Documents 19 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not be otherwise disclosed without World Bank authorization. Project ID: P006555 Project Name: STATE HIGHWAY MANAGEMENT II Team Leader. Jacques L. Cellier TL Unit: LCSFT ICR Type: Core ICR Report Date: June 20, 2000 1. Project Data Name: STATE HIGHWAY MANAGEMENT II L/C/TFNumber: COFN-03950; CPL-37130; CPL-37140; CPL-37150 Country/Department: BRAZIL Region: Latin America and Caribbean Region Sector/subsector: TH - Highways KEY DATES Original Revised/Actual PCD: 03/03/92 Effective: 06/28/94 05/05/94 Appraisal: 05/17/93 MTR: 12/30/96 05/25/97 Approval: 03/15/94 Closing: 12/31/99 12/31/99 Borrower/lImplementing Agency: STATE GOVERNMENTS/STATE ROADS DEPARTMENTS IN PIAUI, TOCANTINS AND MARANHAO Other Partners: Eximbank of Japan (Tocantins) STAFF Current At Appraisal Vice President: David De Ferranti Hussain, Shahid Yusuf Country Manager: Gobind T. Nankani Steckan, Rainer Sector Manager: Jeffrey S. Gutrnan Asif Faiz Team Leader at ICR: Jacques L. Cellier Jacques L. Cellier ICR Primary Author: Gerard L. Liautaud 2. Principal Performance Ratings (HS=Highly Satisfactory, S=Satisfactory, U=Unsatisfactory, HL=Highly Likely, L=Likely, UN=Unlikely, HUN=Highly Unlikely, HU=Highly Unsatisfactory, H=High, SU=Substantial, M=Modest, N=Negligible) Outcome: S Sustainability: L Institutional Development Impact: SU Bank Performance: S Borrower Performance: S QAG (if available) ICR Quality at Entry: S Project at Risk at Any Time: No 3. Assessment of Development Objective and Design, and of Quality at Entry 3.1 Original Objective: The project aimed to check further deterioration of the state road networks in Maranhao, Piaui, and Tocantins and improve their serviceability. To this effect, it would specifically: (a) ensure adequate priority and funding for the maintenance, rehabilitation and upgrading components of the state road programs; (b) implement appropriate road maintenance, rehabilitation and upgrading strategies and programs and improve the management of maintenance activities; and (c) develop and improve compliance with environmental standards for state roads. The project was also expected to help establish an institutional and technical framework for maintenance and upgrading of state roads nationwide. The ultimate objective was to contribute to the resumption of economic growth by reducing the cost of road transport on the state highway networks. 3.2 Revised Objective: The project objectives and description were not revised during implementation, but two of the three loans (Maranhao and Piaui) were amended in 1995 (see section 3.4). 3.3 Original Components: Originally the project consisted of three similar subprojects in the borrower states, each supported by a separate Bank loan. Each subproject included the following components: (A) a policy and institutional development program to: (a) prepare and annually update the state's pluriannual and annual road expenditure and funding programs, in accordance with policies and economic criteria satisfactory to the Bank, thereby strengthening the state road agency's planning system; (b) develop and monitor efficient maintenance, rehabilitation and upgrading strategies and programs, and strengthen the agency's contract and project management systems; and (c) develop appropriate capability in the Government to implement and enforce environmental standards and guidelines for state roads; and (B) a rehabilitation and maintenance program consisting of rehabilitation, resurfacing and periodic and routine maintenance components of the State's 1994-98 road program; and (C) an upgrading program consisting of the highest-priority upgrading and paving components of the State's 1994-98 road program. The three subprojects combined would have a total scope of 1,500 km for rehabilitation and resurfacing, 18,500 km for periodic and routine maintenance, and 2,650 km for upgrading and paving. The original total cost of the project was estimated at about US$602.8 million equivalent, including US$563.4 million for road works, US$2.3 million for laboratory and office equipment and software, and US$37.1 million equivalent for engineering, technical assistance and staff training. The costs of the individual subprojects were as follows: Maranhao, US$209.5 million; Piaui US$140.9 million; and Tocantins, US$252.4 million. The project would be financed from the proposed three Bank loans totaling US$220 million (or 36% of the project cost) and from the respective State's own resources for US$382.8 million (or 64% of the project cost). The three loans would help finance road rehabilitation, resurfacing, and upgrading works, engineering, technical assistance and training of staff. Routine and periodic maintenance would be fully funded from state resources. 3.4 Revised Components: In November 1995, the Bank agreed to revise the scope of the physical components of the two subprojects in Maranhao and Piaui, and to amend the two loans accordingly. This decision was taken after it became clear that, as a result of Brazil's "Plano Real" stabilization program, the two states no longer had the financial capacity to carry out their subprojects in accordance with the agreed implementation targets. The amendments involved: (a) a reduction of the scope of the two subprojects, reducing the road upgrading and rehabilitation investment targets but maintaining the maintenance targets; (b) an increase of the disbursement percentages for civil works from 50% to 75%, and for consultants and training from 50% to 100% of local expenditures; (c) the cancellation of an amount of US$18 million equivalent from each loan (originally US$79 million for Maranhao and US$54 million for Piaui); and (d) action programs with specified benchmarks and remedies, to be completed before the mid-term review of the project scheduled for the end of 1996. The targets for rehabilitation and upgrading were reduced as follows: in Maranhao the upgrading and paving component was reduced from 750 km to 605 km and the targets for rehabilitation remained unchanged at 650 km; - 2 - in Piaui, the target for rehabilitation was reduced from 600 km to 53 5 km and the target for paving was reduced from 900 km to 350 km. As a result, the estimated costs of the two subprojects decreased as follows: Maranhao from US$209.5 million to US$123.2, and Piaui from US$140.9 million to US$72.2 million. The loan amounts were reduced from US$79 million to US$61 million in Maranhao, and from US$54 million to US$36 million in Piaui. No significant adjustments were made to the other performance indicators and targets. The implementation schedule was extended for six months, albeit without changing the original closing date. The State of Tocantins, with the concurrence of the Federal Government, negotiated a loan of US$48 million equivalent with the Export-Import Bank of Japan in 1996, in order to help finance the remaining part of the subproject and to alleviate counterpart fund requirements. Although the Tocantins subproject was not formally revised, the JEXIM loan, which was signed in March 1997, enabled the state to undertake additional upgrading works and to exceed the negotiated target of 1,000 km by about 20%. The resulting project outputs are shown in section 4.2. 3.5 Quality at Entry: The quality at entry of the project has been given a satisfactory rating because the project objective was in line with the government priority to implement a broad administrative decentralization in the road sector and to promote greater participation of the states in the management of the highway system. Consistent with the decentralization objective, the project as designed would help prepare the three states to accept and carry out the transfer of operation and maintenance responsibilities of a portion of the federal network, and assist them in the implementation of their own road maintenance and rehabilitation mandates, using adequate policies and planning tools. Even though the risk of insufficient provision of budgetary resources by the states was indeed recognized at appraisal, it is only after the implementation of the stabilization program that it became clear that the states of Maranhao and Piaui would not be able to provide all the necessary funds. 4. Achievement of Objective and Outputs 4.1 Outcome/achievement of objective: The main objective of the project, which was to check further deterioration of the states' road networks and improve their serviceability, was achieved. At completion, nearly one third of the paved networks in the three states had been rehabilitated or resurfaced. In addition, about 15% of the unpaved networks have been upgraded and paved. These achievements combined with the efforts made by the States on routine maintenance, helped to significantly improve the condition of the states' highway networks. The overall proportion of paved roads in poor condition at appraisal in 1993 was in the order of 31% (1,250 km over a total of 3,970 khi). With the project, the proportion of roads in poor condition, i.e. with a roughness above 5 IRI, fell to about 13% at mid-term (1995-96) and ultimately to about 10% at completion (778 km over a new total of about 7,600 km of paved roads). In parallel, the proportion of roads in good to excellent condition increased from 29% in 1993 to 47% in 1996, and to 62% in 1999. Likewise, the condition of the unpaved networks was substantially improved: at appraisal, 80% of that network showed a roughness of less than about 12 to 15 IRI. At closing, 80% of the unpaved networks showed much improved conditions with a roughness of less than 8 to 9 IRI. The ultimate objective of the project, which was to contribute to the resumption of economic growth by reducing the cost of transport on the state road networks, also seems to have been achieved. No indicators were defined to monitor and evaluate such impact. But reports indicate that the potential for agricultural expansion in the three states, particularly southern Maranhao, southeastern Piaui, and Tocantins, which was identified in the SAR (Annex 2) substantially materialized as a result of the road improvements made under the project. There has been large private investments in these areas. The production of soybeans, corn and rice increased rapidly. The expansion of agriculture also seems to have induced a rapid growth of the service sector in the region. 4.2 Outputs by components: a. Policy and Institutional Development Component. - 3 - The three state governments and their highway agencies have achieved several important institutional objectives: * the highway agencies have developed and implemented efficient pavement management systems supported by road databases on network condition and traffic, and have developed optimized highway expenditure programs using the Highway Design and Maintenance Standards Model (HDM); * the highway agencies have established improved computerized systems for contract management, project accounting and monitoring, and, in the case of Piaui, an entire computer network with various administrative applications and management information systems, and trained their staff to operate these systems; * the routine maintenance activities have been contracted out on the entire network in the State of Maranhao from 1996-1998, but a broad reorganization of the entire administration of the state disrupted the program in early 1999. In Piaui and Tocantins, the agencies have been outsourcing some services, but overall there is still much room for improvement in the way maintenance activities are carried out, with a greater participation of the private sector, possibly through long-term performance-based contracts; o the three highway agencies have developed and are implementing satisfactory environmental standards and guidelines for state roads, which have been prepared and disseminated with technical assistance and training services financed under the project; in particular, the Secretariat of Infrastructure in Tocantins has built an environmental division with four experienced specialists who effectively manage the environmental aspects of all the state's infrastructure programs; * in Tocantins, the Planning and Environment Secretariat has, under the project, strengthened its Environment Division and its State Environmental Agency (Naturatins), and prepared an atlas and an agro-ecological zoning of the state which are now used as a basis for the preparation of the govermnent plans and programs, and for environmental monitoring. In Maranhao, the state environmental agency was strengthened to carry out a socio-economic evaluation and land use mapping of the southern region of the state, and to prepare for regular monitoring of the environmental and socio-economic impacts of this and other projects. Also, environmental protection areas have been established under the project in Piaui and Tocantins. * the government of Tocantins established the state highway department DERTINS as a separate agency within the jurisdiction of the Infrastructure Secretariat in order to allow for increased management autonomy and operational efficiency in maintaining the road network; * the staff of the road agencies in all three states has been downsized through voluntary separation programs below the agreed targets: 1,347 permanent staff are presently employed versus an agreed target of 2,150 in the three agencies; and * training programs have been implemented in the three states to support the above institutional objectives, but the training targets were only partially met, by approximately 65%. b. Rehabilitation and Maintenance Component. The appraisal targets were to rehabilitate or resurface about 1,550 km of paved roads, and to maintain the paved and unpaved networks in the three states. The rehabilitation and resurfacing targets were slightly reduced to 1,485 km in aggregate as a result of the restructuring of the subprojects in Piaui and Maranhao, but the routine maintenance targets remained unchanged. At completion, a total of about 1,443 km of paved sections had been rehabilitated or resurfaced, representing 93% of the appraisal target. The following table also shows these results by state. The routine maintenance targets have, by and large, been met or exceeded. Annex 1 shows the results by state for each indicator. -4 - Rehabilitation Targets and Outputs by State 1993 Appraisal 1996 Revised Targets Final Outputs Final Outputs State Targets (km) (km) (kmn) (as a % of targets) Appraisal Revised Maranhao 650 650 568 87% 87% Piaui 600 535 661 110% 124% Tocantins 300 300 214 71% 71% Total 1550 1485 1443 93% 97% c. Upgrading Component. The appraisal targets were to upgrade or pave a total of about 2,650 km of gravel or earth sections in the three states. The upgrading and paving targets were substantially reduced in Piaui and, to a lesser extent in Maranhao as part of the project restructuring in these two states; the revised aggregated target was 1,955 km. At completion, a total of about 2,018 km of earth or gravel roads were upgraded or paved, which represents about 76% of appraisal target and 103% of the revised target. The following table shows these results by state. Upgrading Targets and Outputs by State 1993 Appraisal 1996 Revised Targets Final Outputs Final Outputs State Targets (km) (kin) (ki) (as a%oftargets) Appraisal Revised Maranhao 750 605 611 81% 101% Piaui 900 350 219 24% 63% Tocantins 1000 1000 1188 119% 119% Total 2650 1955 2018 76% 103% Since the project objective and main outputs have been substantially achieved, the project outcome is rated as satisfactory 4.3 Net Present Value/Economic rate of return: The economic analysis carried out at appraisal on a sample of 1,165 km of roads (28% of the total length to be rehabilitated and upgraded), indicated that the rehabilitation and paving components of the project (representing 56% of total base cost) had an estimated overall Internal Economic Rate of Return (IERR) of 30% and-an estimated Net Present Value (NPV) of US$146 million. Ex-post analyses were performed on the same sample of subprojects following the appraisal methodology based on the HDM3 Model (Annex 14 of SAR). The ex-post IERR was estimated at 43% and the ex-post NPV at about US$ 117 million equivalent. The ex-post economic return of the project is therefore very satisfactory. 4.4 Financial rate of return: Not Applicable 4.5 Institutional development impact: The establishment of pavement management systems, including the use of the HDM model for analysing expenditure programs under budget constraints, and the joint reviews of the state highway expenditure programs, have substantially strengthened the state highway agencies' capacity to prepare and monitor efficient programs on the basis of technical and economic rather than political criteria, and to obtain improved funding for maintenance. The project had directly contributed to the contracting out of the maintenance of the entire road network in - 5 - Maranhao, resulting, together with the rehabilitation and resurfacing component, into a very satisfactory condition of the network. Although the contract maintenance program has been disrupted with the above-mentioned reorganization of the state administration and the termination of the DER, it is expected that the program will be restarted in the near future. The project contributed to improving various management and administrative systems in the three highway agencies, and in particular in Piaui where an entire computer network and various technical and administrative systems were established and had a clear impact on staff motivation and effectiveness. The project was instrumental in developing and implementing appropriate environmental safeguards under the state road programs, and more broadly in developing effective environmental planning and monitoring instruments, such as the agro-ecological zoning of the entire state of Tocantins and the strengthening of the state environmental agencies. By providing training opportunities which were generally not available, the project also contributed to the development and motivation of the staff of the states' highway and environmental agencies. For these reasons, the institutional impact of the project has been rated as substantial. 5. Major Factors Affecting Implementation and Outcome 5.1 Factors outside the control of government or implementing agency: The following two factors outside the control of the state governments adversely affected the implementation of the project: * the implementation in 1994 of Brazil's new stabilization program called the "Plano Real"seriously affected the states' finances, in particular by preventing state governments from taking advantage of inflation to balance their accounts. This situation led to the restructuring of the project in the two states of Piaui and Maranhao, as previously indicated. 3 the existing conflicts between Brazil's procurement law and the Bank's procurement and consultant guidelines led to numerous questions on the part of state administrations and their auditors such as Tribunal de Contas, which resulted in implementation delays in the early phases of the project. However, in the end all accepted the view that the Brazilian law authorizes the executing agencies of Bank-financed projects to follow the Bank's guidelines. 5.2 Factors generally subject to government control: The provision by the governments of Maranhao and Piaui of counterpart funds to the project has not been timely, and this has affected project performance throughout the implementation period, albeit to a lesser degree in Maranhao after the restructuring of the project. The broad reorganization of the entire administration of the state in January 1999 negatively affected the project outcome in Maranhao. As part of the reorganization, the state highway agency was eliminated. Its central functions and staff were transferred to a newly created Infrastructure Secretariat (GEINFRA), and its decentralized district functions and staff transferred to 18 newly-created Regional Secretariats. The project coordinator was changed and little transition occurred with the previous coordinator. As a result, the project was practically stalled for one year, until closing in December 1999. The maintenance contracts were not renewed, and the network surveys were not contracted as scheduled. 5.3 Factors generally subject to implementing agency control: The disappointing performance of some of the consulting firms or agencies contracted to assist the states' highway agencies also affected both implementation performance and outcome. The development of pavement management systems and the preparation of pluriannual road expenditure programs were delayed as a result of the consultants' inability to propose adequate systems adapted to the needs and capabilities of these highway administrations. Their implementation was affected by the DERs' lack of involvement in the development process and failure to provide full-time competent counterpart staff. The transfer of knowledge and technology from the technical assistance - 6 - team was, at times, below expectations, and there was room for improvement in the use of consultants. The geoprocessing work, land use mapping, and socio-economic analysis of the southern region of Maranhao, which were to be carried out by the State University of Maranhao, was subsequently contracted to private consultants since the University has been unable to deliver most agreed products. 5.4 Costs andfinancing: The actual/latest total cost of the project is US$510.9 million equivalent, which is 15% below the appraisal estimate of US$602.8 million equivalent. The difference is essentially due to the restructuring of the project. The actual cost is also 14% higher than the revised cost of US$447.8 million estimated at project restructuring, but this revised estimate did not take into account the increased scope of the Tocantins subproject which was made possible through cofinancing from JEXIM, nor the last section of BR-230 in Maranhao, which was to be partly funded from Federal transfers. The Bank loans contributed to 83% of the appraisal estimate, while the Government contributed to 74%. Project cost details are given in Annexes 2a (Project Costs by Component), 2b (Project Costs by Procurement Arrangements) and 2c (Project Financing by Component). 6. Sustainability 6.1 Rationalefor sustainability rating: Project sustainability is rated likely overall. However, while it is likely in Tocantins and Piaui, it is uncertain in Maranhao. In Tocantins, the planning, management and particularly the environmental management capacities developed under the project have been firmly established within the state administration, which, because of the recent creation of the state, is formed by a majority of young, fast-learning professionals. Also, a follow-up rural infrastructure project is being prepared, which, if approved by the Bank, would contribute to the sustainability of the completed project. In Piaui, although the state administration's planning and management capacities are very weak overall, the new planning tools, the computerized management and administrative systems, the technical standards and the environmental norms introduced by the project have clearly renewed the highway administration and motivated the staff. The priority given to maintenance and rehabilitation over new construction now has broad support from decision makers. In Maranhao, many of the institutional achievements of the project seem, at this time, to have been lost with the administrative reorganization initiated in early 1999 and the termination of the highway agency. However, the rehabilitation and contract maintenance components of the projects, which have been very successful in improving the condition of the entire road network, have had a broad demonstration effect which is expected to lead to a resumption of the policies and programs advocated by the project in the near future. 6.2 Transition arrangement to regular operations: In order to ensure the sustainability of the projects' investments and institutional achievements, several actions or transition arrangements to regular operations are needed: 1. necessary funds must be transferred in a timely manner to the highway agencies for the maintenance and rehabilitation of the states' road networks, which must be given priority over new construction projects; 2. adequate design and maintenance standards and methodology should continue to be used to prepare economically sound road expenditure programs based on updated road network condition and traffic surveys and appropriate technico- economic analyses using the HDM or similar models; 3. procurement of works must be based on transparent and competitive bidding; 4. adequate staff training and development programs should continue to be provided to highway agency staff; 5. the maintenance of the road network should increasingly be contracted out, preferably through performance-based contracts, and the network condition should be regularly monitored; and 6. the environmental and socio-economic impacts of the project should be regularly monitored on the basis of the - 7 - criteria and methodologies developed under the project. The project can be monitored and evaluated in the future using the performance indicators shown in Annex I and the monitoring systems in place in the three states. 7. Bank and Borrower Performance Bank 7.1 Lending: The Bank's performance during identification , preparation and appraisal was satisfactory on the whole. Its involvement in the project was consistent with the government's strategy on decentralization and supportive of the country objective to resume economic growth, including the provision of efficient and reliable transport services to targeted sectors of the economy as well as the promotion of the private sector operations in transport. The appraisal team had a good skill mix of a highway engineer, a transport economist, an environmental specialist and an organizational consultant. Project design was simple and consistent with the agencies' implementation capacity overall. Risks were adequately recognized and performance indicators appropriately defined. 7.2 Supervision: The Bank's supervision performance was satisfactory, albeit with some shortcomings. On average, the project was supervised twice a year and implementation progress and ratings adequately reported. On recognizing the state's financial difficulties in 1994-95, the Bank approved the needed restructuring of the project and this was instrumental in bringing about the successful achievement of project objectives. In order to strengthen its supervision of the highway projects and its support to executing agencies, the Bank hired a full-time Transport Operations Officer in the Brasilia office. However, field supervision efforts have sometimes been insufficient to ensure an effective control of the quality of the designs and works, particularly in Piaui where the highway agency needed effective technical support. 7.3 Overall Bank performance: Overall, Bank performance was satisfactory. Borrower 7.4 Preparation: Fully committed to the project objectives, the Borrowers participated actively in the preparation of the project. Government staff prepared all the technical and financial aspects of the project, while economic, environmental and institutional aspects were discussed and defined in close participation with the Bank. 7.5 Government implementation performance: Government implementation performance was satisfactory overall. All three state administrations were committed to the project and assigned experienced managers to coordinate its implementation. Less satisfactory was the provision of counterpart funds, particularly in Piaui where the fiscal situation was the most difficult. 7.6 Implementing Agency: Implementing agencies' performance was satisfactory. However, in all three states the technical assistance could have had better results if more experienced counterpart staff - 8 - had been assigned to work full time with the consultants. 7.7 Overall Borrower performance: The overall performance of the Borrowers was satisfactory. 8. Lessons Learned 1. This project has shown that the implementation of an optimized network rehabilitation and maintenance strategy can effectively bring an entire road network back into satisfactory condition over a period of a few years and at a reasonable cost; 2. For networks or portions of networks with low traffic, as was the case in all three states, surface condition targets could be set lower i.e. with roughness thresholds above 5 , possibly up to 6 or 7 IRI; 3. With modern geo-processing and imaging techniques, a comprehensive atlas and geographic information system to effectively support environmental and land management at the level of an entire state of the size of Tocantins can be created in about one year at a very reasonable cost (about R$1.0 million); 4. The results of the technical assistance components depend more on the technical experience and inter-personal skills of the specialists assigned to the specific tasks than on the experience records of the contracted consulting firms, which are at times deficient in controlling the quality of their services; 5. Proactive supervision and restructuring of the project as soon as critical assumptions have changed (in this case the funding capacities of the states following the establishment of Brazirs stabilization program) are essential to achieve the development objective; 6. The increase of the Bank's share for civil works from 50% to 75% drastically improved the attractiveness of the loans. The Bank could consider offering better cost-sharing arrangements, particularly in the poorest states of Brazil; 7. The grouping of two or more similar subprojects under one "umbrella" project can lead to some savings at the project processing stage. But since there are few economies of scale in supervision, each subproject should be adequately funded to allow for effective supervision, including field visits of the works; 8. Since the grouping of such projects into one project also renders the preparation of PSRs and ICRs difficult and their average ratings somewhat meaningless, each subproject should preferably be treated as a separate project. 9. Partner Comments (a) Borrower/implementing agency: Comments from the Piaui State Highway Department The principal objective of the project was to provide, during the 1994-1999 period, the necessary technical and financial support to reduce the deterioration of the state highway network and at the same time, to improve the road network condition. This would also contribute to the development of the state economy through a reduction in transport costs on the state highway network. Another program objective was to assist in the consolidation of the State of Piaui's institutional and technical structures with regard to the maintenance, rehabilitation and improvement of the road network. Another valuable contribution of the program was to raise the consciousness regarding the need to integrate envirommental concems during project design and execution of highway works. The project showed that the implementation of a highway network maintenance and rehabilitation strategy could effectively return a network to satisfactory condition in a period of a few years and at a reasonable cost. One of the problems that most affected the execution of the civil works between 1994 and 1999 was the -9- unavailability of counterpart funds. At the end of 1995 it was established that the state of Piaui did not have the financial capacity to execute the project, due to the implementation in 1994 of the new economic stabilization plan "Plano Real". Because the Bank agreed to reformulate the project, reducing the need for counterpart funds, the reformulation had a positive as well as a substantial impact on the achievement of the project results and objectives. Facing the difficult financial situation, but aiming to assure the sustainability of the program, the state took steps to balance the budget through various mechanisms such as: reduction of high salaries, reduction of operational expenses and centralized control of capital expenses, reduction of the state bureaucracy, support for fiscal reform, rescheduling of the debt together with other Northeastern states, and the decision to raise the percentage of the ICMS tax for fuels and lubricants from 17% to 25%, through the State Law No. 4892 enacted on December 5, 1996. With these and other actions managed by a new economic team (formed in January 2000), the state managed to comply with the commitment undertaken during the last Bank mission, where the government was committed to settle all arrears until the end of April. These factors associated with the intensification of highway maintenance by the private sector, under maintenance contract, will contribute to ensure that the current performance level of the state in this area will be maintained during the next period. DER/PI is giving continuity to outsourcing the execution of routine maintenance services for the state highways. The knowledge obtained by the technicians of DER-PI during the elaboration of studies, tasks, works and services realized in the context of the program, contributed towards DER-PI's improved organization to perform its functions. In addition, DER has given continuity to improving the capacity of its technical staff, and their efficiency in managing their work. For example, DER is currently financing the participation of a technical staff in an Environmental Sciences post graduate course for 10 months at the Federal University of Piaui. In this context and taking into account that adequate models and pavement standards, such as HDM, should continue to be used to prepare and prioritize economically highway programs and expenditures based on the condition of the highway network and traffic, DER-PI recently sponsored the participation of two technical staff in the latest version of the Highway Design and Maintenance Standards Model - HDM-4 seminar promoted by DNER with support from the World Bank. Despite the deficiencies, the program achieved the majority of its objectives and can be classified as satisfactory to DER-PI. Due to the importance to the state of the Highway Development Program - PRODER I now concluded, and considering that there are still bottlenecks in the transport infrastructure, the government of the state of Piaui, through DER, intends to begin a second prograrn. DER-PI understands that the continuation of a financed project would guarantee and consolidate the benefits from this project, as well as increase the probability of sustainability. Followinz is the original Portuguese Text O principal objetivo do Programa PRODER/BIRD foi fomecer ao Estado Piaui, durante o periodo de 1994 a 1999, o suporte tecnico e fmanceiro necessario para verificar e reduzir a evolucao da deterioracao da rede rodoviaria estadual e assim, melhorar as condic6es de sua utilizacao, contribuindo desta forma para incrementar o desenvolvimento econ6mico do Estado, atravds da reducao do custo de transporte na rede rodoviaria estadual. 0 programa teve como alvo contribuir para consolidar as estruturas institucionais e tecnicas do Estado do Piaui voltadas para a manutencao, reabilitacao e melhoramento de rodovias. Outra contribuicao valiosa do Programa foi brotar a plena consciencia da crescente necessidade de preservacao e integra9ao da rodovia com o meio ambiente, quando da elaboracao de projetos e execuca de obras rodoviarias. O projeto mostrou que a implementacao de uma estrategia de manuten9co e reabilitacao da rede rodoviaria pode efetivamente trazer de volta uma rede de rodovias em condic6es satisfat6rias em um periodo de poucos anos a - 1 0 - um custo razoavel. Um dos problemas que mais afetaratn a execu,co das obras civis entre 1994 e 1999, foi efetivamente a indisponibilidade do aprovisionamento de fundos de contrapartida. Diante desta constata,co, no final de 1995, que o Estado do Piaui nao teria capacidade financeira para executar seu projeto, devido a implementa,cao em 1994 de un novo plano de estabilizacao dentro do Plano Real, o Banco concordou em reformular o projeto a fim de reduzir as necessidades de fundos de contrapartida, e dessa maneira teve um positivo e substancial impacto na realizacao dos resultados e objetivos do projeto. Diante da dificil situacao financeira mas com o objetivo de dar sustentabilidade ao programa, o Estado emanou esforcos para equilibrar as receitas atraves de varias medidas, tais como: reducao de altos salArios, conten,co de despesas operacionais e controle centralizado de despesas de capital, reducao do uncionalismo estadual, apoio a reforma fiscal, reescalonamento da divida juntamente com outros estados do Nordeste, bem como, com a decisao de elevar o percentual do imposto ICM sobre combustiveis e lubrificantes de 17% para 25%, atravds da Lei Estadual n° 4892 de 05 de dezembro de 1996. Isto posto, somando-se as acoes gerenciadas por uma nova equipe econ6mica de govemo (composta em jan/2000), o Estado conseguiu cumprir o compromisso assumido durante a ultimna Missao do Banco, na qual o governo se comprometia a saldar todas as dividas ate o final de abril. Esses fatores associados com a intensificacao da manutenao rodoviaria atraves do setor privado, por contrato de manutencao, contribuirao para que o atual nivel de performance do Estado, nesta area, possa ser assegurado para o pr6ximo periodo. 0 DER/PI esta dando continuidade a terceirizacao da execugcao dos servi9os de manutencao rotineira das rodovias estaduais. Os conhecimentos obtidos pelos tecnicos do DER-PI durante a elaboracao dos estudos, trabalhos, obras e servicos realizados no contexto do Programa, contribuiram e contribuiram para que o DER/PI se tome um 6rgao melhor estruturado, para o exercicio de suas funcoes. Consciente disto, o DER tem dado continuidade a capacitacao de seus tecnicos, no sentido de melhorar a eficiencia de gerenciamento de seus trabalhos. Podemos exemplificar essa preocupacao citando, que atualment esta fmanciando a participac§o de um tecnico do 6rgao no Curso de Especializacio em Ciencias Ambientais, a nivel de p6s-graduagao, com 10 meses de durarao, ministrado pela Universidade Federal do Piaui. Neste contexto e tendo em vista que adequados modelos e padr6es de pavimento como os do HDM devem continuar a ser usado para preparar e priorizar economicarnente prograrnas e despesas com rodovias aseados na condicao da rede rodoviaria e contagem de trafego, o DER-PI, recentemente, patrocinou a articipacao de dois tecnicos no Seminario sobre a ultima versao de Projeto e Manutencao de Rodovia Modelo HDM-4 promovido pelo DNER, com apoio do BIRD. Apesar das deficiencias constatadas, o Programa atingiu a maior parte dos seus objetivos e pode ser classificado como satisfat6rio para o DER-PI. Devido a importancia para o Estado do Programna de Desenvolvimento Rodoviario PRODER 1, ora concluido, e tendo em vista que persistem carencias em termos de infra-estrutura viaria e que o Govemo do Estado do Piaui, atraves do DER, pretende viabilizar um segundo programa. 0 DER-PI, entende que com o prosseguimento do projeto financiado, garantiria a consolida,cao dos beneficios deste projeto, bem como aumentaria a probabilidade de sustentacao. Comments from the Infrastructure Secretariat of the State of Tocantins In response to your request regarding the Implementation Completion Report for Loan 3714-BR, between the State of Tocantins and the Bank, we have the following cornments: I) The report presents in a succinct and general form thevarious phases of the project, but this type of approach makes it difficult to analyze each project in depth; - 1 1- 2) The economic stabilization plan (Plano Real), as it is emphasized in the report, was a complicating factor for the states, including the state of Tocantins. Still, the maintenance of the original appraisal targets for our Project, including the fact that they were exceeded during execution, demonstrates that the Government of Tocantins assigned a high priority to the Project and was always committed to its execution. Following is the original Portuguese Text Conforme solicita,ao feita atraves de e-mail datado de 05/23/2000 e fax de 05/06/2000, referente a "Implementation Completion Report" sobre o fechamento do Contrato de Emprestimo n° 3714/BR, firmado entre o BIRD e o Estado do Tocantins, temos os seguintes comentarios a fazer: i ) 0 Relat6rio em referencia abordou de uma maneira geral e suscinta todas as fases da implementa,co do Projeto, no entanto, este tipo de abordagem dificulta a analise pontual de cada Projeto; ii) Como bem colocado pelo Banco, realmente o plano de estabilizacao econ6mica ( Plano Real), foi um fator complicante para os Estados, inclusive o Tocantins. Nao obstante a manuten,cao das metas do "appraisal" para o nosso Projeto, inclusive a supera,co das mesmas quando da execu,co, demontra que o Governo do Tocantins elegeu este Projeto como prioritario e esteve sempre comprometido com a sua execu,ao. (b) Cofinanciers. (c) Other partners (NGOs/private sector): 10. Additional Information - 12 - Annex 1. Key Performance Indicators/Log Frame Matrix Item Year 1994 1995 1996 1997 1998 1999 Total App. Revd. Achd. App. Revd. Achd. App. Revd. Achd. App. Revd. Achd. App. Revd. Achd. App Revd Achd. App. Revd Achd. Rehab. Km Executed. Maranhao 200 150 200 150 150 416 100 150 50 150 76 76 650 650 566 Piaui 137 35 35 200 0 183 100 50 80 200 52 200 456 68 600 535 661 Tocantins 60 125 60 0 100 0 60 0 20 36 9 300 300 214 1550 1485 1443 Routine Mainten. Patch 1000 cu.m Mararahao 2 2 2 4 1.5 1.5 0.4 1 1 0.8 0.5 0.5 2.7 0.3 0.3 3.3 0.02 5 5 10 Piaui 1.2 1.2 0.6 1 1 0.4 1 0.8 0.6 0.5 0.5 0.65 0.3 0.3 0.6 0.3 4 4 3 Tocantins 1.1 0.5 1 0.14 0.9 0.35 0.8 1.18 0.7 1.5 0 96 5 5 5 14 14 17 Grading 1000km Mararnao 5 5 18 6 6 0.3 7 7 0.6 7.5 7.5 1.5 8 8 3.3 0.17 34 34 10 Plaui 9.5 9.5 1.6 10 10 0.2 10.5 10.5 0.2 10.5 10.5 0.27 11 11 0 0 52 52 3 Tocantins 16 16 18 12.7 18 30 18 25 1B 37 31 90 90 152 175 175 164 Regravel 1000 cu.rn Maranhao 300 300 400 340 340 70 380 380 150 400 400 271 400 400 750 27 1820 1820 1641 Piaui 400 1800 450 1680 470 1094 480 871 500 1371 500 2300 2300 7316 Tocantins 700 600 700 1212 700 1500 700 1099 700 2072 2172 3500 3500 8655 7620 7620 17612 Paving Executed, km Mararnhao 150 30 25 200 100 50 200 145 0 100 18O 387 100 150 66 63 750 605 611 Piaui 118 0 185 0 257 0 170 200 93 170 150 126 900 350 219 Tocantins 200 51 300 243 200 274 200 427 100 193 1000 1000 1188 2650 1955 2018 No. trainee-week Maranhao 140 140 0 260 260 273 200 200 54 200 200 18 200 200 0 2 1000 1000 345 Piaui 150 150 11 200 200 162 250 250 123 200 200 661 200 2300 31 14 1000 1000 1002 Tocantins 200 51 250 162 250 198 200 30 100 49 99 1000 1000 589 3000 3000 1936 No. of Staff Maranhao 750 750 700 700 850 650 441 800 600 380 550 550 276 139 750 750 139 Piaui 1000 1000 903 900 900 863 800 800 643 700 700 613 600 600 583 551 1000 1000 583 Tocantins 1200 1113 1150 1113 1100 808 1050 789 1000 840 630 1200 1200 840 2950 2950 1562 Maint Expend. US$M Maranhao 9.3 9 3 9.9 9.5 1 108 10 1.4 11.6 11 9 12.5 12 8 0.8 54 52 22 Piaui 56 5 65 6.2 6 3.1 6.8 6.5 2.4 7.4 7 1.6 8.5 8 8 14 35 33 23 Tocantins 14.4 16 15.4 13 16.1 12 17 18 17.4 19 14.1 80 80 92 Sub-total 169 164 138 Reh.* R.M Expend. as a % of total Budget Maranhao 30 30 25 25 28 25 25 32 25 25 47 15 15 12 Piaui 35 35 22 25 30 4 25 25 7 20 20 4 15 15 19 6 Tocantins, US$M 1 2 6 4 6 6 6 6 6 4 Maint. Contracted % Maranhao 30 30 30 40 40 40 50 50 100 80 60 100 70 70 100 10 Ptaui 25 25 29 30 23 35 35 15 40 40 5 40 40 50 17 Tocantins 30 20 40 25 50 50 60 50 70 70 30 Paved Net work Condition, %IRP<4 Maranhao, % with IRI<4 75 75 80 80 92 85 85 90 90 90 90 82 Piaui, % withlRk4 50 50 19 80 20 70 64 80 90 63 Tocantins,80%withlRIc 6 33 5.5 2.9 5 2.8 4.5 3 4 3 3 Unpaved Network Condition, 80%withlRi< Maranhao 14 14 13 13 18 12 12 11 11 10 10 Piaui 11 11 11 11 10.5 10.5 11 10 8 11 9.5 11 9 20 Tocantins 15 14 10 12 8 10 7 9 8 8 Abbreviations. App. = Appraisal, Revd. = Revised, Achd. = Achieved, R.M = Routine Maintenance Nota: In all three States, 100% of Maintenance plus Rehabilitation costs and at least 50% of total road expenditures were recovered from fuel taxes (ICMS) -13 - Annex 2. Project Costs and Financing Annex 2a Project Costs by Component (in US$ million equivalent) Appraisal Revised ActuaVLatest Project Component Estimate Estimate. Estimate % of Appraisal. % of Revised Upgrading&Paving 276.8 197.8 1 289.7 105% 146% 1 Rehabilitation 62.3 69.7 59.3 95% 85% Routine Maintenance 168.8 132.1 141.9 84% 107% Technical Assist.&Training &Goods 33.9 24.2 20 59% 83% Contingencies 61 24 Total 602.8 250 510.9 85% 204% Note :he revised estimate did not consider the increased scope of the component in Tocantins nor the last section of BR-230 in Maranhao. Annex 2b Project Costs by Procurement Arrangements (in USS million equivalent) Expenditure Categories Procurement Method Procurement Method Appraisal estimate ActuaULatest estimate ICB NCB Other NBF Total ICB NCB Other NBF Total 1. Works 189.6 205 168.8 563.4 200.1 145.2 145.6 490.9 2. Goods 2.3 2.3 0.4 0.4 0.8 3. Services 37.1 37.1 3.6 6.8 8.9 19.2 4. Misc. 0 0 jTotal 189.6 205 39.4 168.8 602.8 203.7 152.4 9.3 145.6 510.9 Annex 2c Project Financing by Component (in US$ Million equivalent) Component Appraisal estimate ActuaVLatest Estimate Percentage of Appraisal Bank Govemment Co-financier Bank Govemment Co-financier Bank Govemment Co-financier Upgrading&Paving 152.4 124.3 NA 126.4 119.6 44 83% 96% NA Rehabiliation 34.05 28.25 NA 41.7 17.7 122% 63% NA Routine Maintenance 168.8 NA 141.9 84% NA Services and Goods 20.8 13 NA 13.4 6.5 64% 50% NA Contingencies 11.8 49.2 NA NA Total 219.1 383.6 NA 181.5 285.7 44 83% 74% NA - 14 - Annex 3: Economic Costs and Benefits Annex 3 Cost Benefit Analysis Latest Appraisal Estimate Base year 1993 1996-98 Unit Cost $/km 88,000 72,000 Total Costs, US$M 103 79 IERR, % 30 43 NPV,US$M 146 117 Note: Data for this table came from the Ex-post Economic Analysis for State Highway First-Year Programs (See Annex 7). - 15 - Annex 4. Bank Inputs (a) Missions: Stage of Project Cycle No. of Persons and Specialty Performance Rating (e.g. 2 Economists, I FMS, etc.) nImplementation Development Month/Year Count Spea Progress Objective Identification/Preparation SEPTEMBER 1992 5 ECN, EGR,ENS, PRO, INST MARCH 1993 5 ENC, EGR, ENS, PRO, INST Appraisal/Negotiation MAY 1993 5 ECN, EGR, ENS, PRO, INSI Supervision MAY 1994 4 ECN, EGR, ENS, PRO, S S INST OCTOBER 1994 4 ECN, EGR, ENS, INST S S APRIL 1995 4 ECN, EGR, ENS, INST S S OCTOBER 1995 4 ECN, EGR, ENS, INST U S JANUARY 1996 4 ECN, EGR, ENS, INST U S OCTOBER 1996 4 ECN, EGR, ENS, INST S S MAY 1997 5 ECN, EGR, ENS, PRO, INST S S OCTOBER 1997 4 ECN, EGR, ENS, PRO S S MAY 1998 4 ECN, EGR, ENS, PRO S S NOVEMBER 1998 3 ECN, EGR, ENS S S MARCH 1999 4 ECN, EGR, ENS, PRO S S MAY 1999 2 ECN, PRO S S JUNE 1999 1 PRO S S NOVEMBER 1999 3 ECN, EGR, PRO S S ICR JANUARY 2000 2 EGR, PRO (b) Staff. I Stage of Project Cycle Actual/Latest Estimate ________ _ _ No. Staff weeks US$ (,000) Identification/Preparation 44.7 113 Appraisal/Negotiation 6.6 22.5 Supervision 112.8 373.5 IC R _ _ _ _ _ _ _ _ _ _ Total - 16 - Annex 5. Ratings for Achievement of Objectives/Outputs of Components (H=High, SU=Substantial. M=Modest, N=Negligible. NA=Not Applicable) Rating EJ Macro policies ) H C SU r M O N 0 NA M Sector Policies OH C SU O M O N * NA C Physical H * SU O M A N 0 NA Financial OH * SU C M N ONA O Institutional Developmnent H * SU C M 0 N 0 NA EI Environmental C H 0 SU ) M 0 N 0 NA Social I L Poverty Reduction () H (9 SU 0 M 0 N * NA C Gender OH O SU O M X) N * NA E Other (Please specify) (9 H (C SU 0) M 0 N 0 NA C Private sector development C) H QSU 0 M 0 N 0 NA C Public sector management 0 H C) SU 0 M 0 N 0 NA C Other (Please specify) (> H 0^ SU 0 M C N * NA -17 - Annex 6. Ratings of Bank and Borrower Performance (HS=Highly Satisfactory, S=Satisfactory, U=Unsatisfactory, HU=Highly Unsatisfactory) 6.1 Bank performance Rating E Lending OHS*S Ou OHU l Supervision O HS O S Ou OHU O Overall OHS eS OU O HU 6.2 Borrowerperformance Rating n] Preparation O HS O S O U O HU O Government implementation performance C HS OS 0 U 0 HU I implementation agency performance 0 HS * S 0 U 0 HU E Overall OHS OS C U O HU - 18 - Annex 7. List of Supporting Documents Annex 7 List of Supporting Documents 1. Staff Appraisal report. Brazil. State Highway II Management Project. (States of Maranhao, Piaui and Tocantins) Feb 23, 1994 Report No. 12059-BR 2. Memorandum and Recommendation of the President of the International Bank for Reconstruction and Development to the Executive Directors on three Proposed Loans in a total amount equivalent to US$220 million to the States of Maranhao, Piaui and Tocantins with the Guarantee of the Fedrative Republic of Brazil for a State Highway Management Project. Feb 23,1994 Report No. P-6112-BR 3. Loan Agreement (Maranhao State Highway management Project) between International Bank for Reconstruction and Development and State of Maranhao. Loan Number 3715-BR, Nov.2 1994 4. Loan Agreement (Piaui State Highway management Project) between Intemational Bank for Reconstruction and and Development and State of Piaui. Loan Number 3713-BR, Nov.2, 1994 5. Loan Agreement (Tocantins State Highway management Project) between International Bank for Reconstruction and and Development and State of Tocantins. Loan Number 3714-BR, June 24,1994 6. Quarterly Progress Reports from the fourth quarter of 1994 to the fourth quarter of 1999 7. State Highway Management Project, Supervision Reports (Forms 590), or Project Status reports from May 1994 to Nov.1999. 8. Relatono de Encerramento do Projeto de Gerenciamento da Matha Rodoviara do Estado do Tocantins, SEINFITO-BIRD, March 2000 (2 volumes) 9. Relatoro Final de Avaliacao do Componente Ambiental de Programma de Gerenciamento da Malha rodoviaria Estadual - Contrato 3714-BIRD, Fev. 2000 10. Relatoro Final de Projeto de Gerenciamento de Estradas do Estudo do Maranhao do Contrato de Emprestimo 3715-BR 11. Avaliacao Socio-Economico da Regiao Sul do Maranhao e Mapeamento Tematico dos Padroes de uso do Solo em 1998 12. Relatorio de Encerramento do Programa de Desenvolvimento Rodoviario - PRODERIPI-BIRD (Minuta) 13. Relatorio Final dos Dados e Avaliacao Tecnico-Economica de Solucoes de Recuperacao para a Rede Basica Estadual do Piaui 14. Aide Memoires of the Completion Mission in Piaui (January 2000), Maranhao (January 2000) and Tocantins (February 2000) 15. Ex-Post Economic Analysis for State Highway First-Year Programs - 19 -