Document of The World Bank Report No: 18773 BR PROJECT APPRAISAL DOCUMENT ONA PROPOSED LOAN AN THE AMOUNT OF US$150 MILLION TO THE FEDERATIVE REPUBLIC OF BRAZIL FOR THE SALVADOR URBAN TRANSPORT PROJECT May 14, 1999 Finance, Private Sector and Infrastructure Unit Brazil Country Department Latin America and the Caribbean Regional Office CURRENCY EQUIVALENTS Currency Unit = Brazilian Reais (R$) US$1 = 1.70R$ (March 1999) WEIGHTS AND MEASURES Metric System FISCAL YEAR January 1 - December 31 PRINCIPAL ABBREVIATIONS AND ACRONYMS ANTP - National Association for Public Transport (Associa,co Nacional de Transportes Publicos) BOT Build-Operate-Transfer CBTU - Brazilian Urban Train Company (Companhia Brasileira de Trens Urbanos) CEPRAN State Council for Environmental Protection (Conselho Estadual de Proteg5o Ambiental) CONDER Salvador Metropolitan Region Development Company (Companhia de Desenvolvimento da Regiao Metropolitana de Salvador) COFIEX Commission for External Financing CRA State Environmental Resource Center (Centro de Recursos Ambientais) CTS Salvador transport Company (Companhia de Transportes de Salvador) EMU - Electric Multiple Units FB - Fixed Budget GSB - Government of the State of Bahia ICB - International Competitive Bidding IERR - Internal Economic Rate of Return LCS - Least Cost System METROSAL Proposed name of future Salvador Metrorail system NCB - National Competitive Bidding NPV - Net Present Value PAR - Performance Audit Report PCR - Project Completion Report PCU - Project Coordination Unit PIU Project Implementation Unit PS Salvador Municipality (Prefeitura de Salvador) QCBS - Quality Cost-Based System RTCC - Regional Transport Coordination Commission SPE - Special Projects Secretariat of the Salvador Municipality (Secretaria da Prefeitura de Salvador para Projetos Especiais) SMR - Salvador Metropolitan Region SB State of Bahia SM Municipality of Salvador (Prefeitura de Salvador) STU/SAL CBTU's Salvador subdivision Vice President: Shahid Javed Burki Country Manager/Director: Gobind T. Nankani Sector Manager/Director: Danny Leipziger Task Team Leader/Task Manager: Jorge Rebelo iii Federative Republic of Brazil Salvador Urban Transport Project CONTENTS Page Number A. Project Development Objective 2 1. Project development objective and key performance indicators 2 B. Strategic Context 2 1. Sector-related CAS goal supported by the project 2 2. Main sector issues and Government strategy 3 3. Sector issues to be addressed by the project and strategic choices 6 C. Project Description Summary 6 1. Project components 6 2. Key policy and institutional reforms supported by the project 6 3. Benefits and target population 7 4. Institutional and implementation arrangements 7 D. Project Rationale 7 1. Project alternatives considered and reasons for rejection 7 2. Major related projects financed by the Bank and/or other development agencies 8 3. Lessons learned and reflected in proposed project design 8 4. Indications of borrower commitment and ownership 9 5. Value added of Bank support in this project 9 E. Summary Project Analyses 10 1. Economic 10 2. Financial 10 3. Technical 10 4. Institutional 11 5. Social I 1 6. Environmental assessment 12 7. Participatory approach 13 F. Sustainability and Risks 13 1. Sustainability 13 2. Critical risks 13 3. Possible controversial aspects 15 iv Page Number G. Main Loan Conditions 15 1. Effectiveness conditions 15 2. Other 15 H. Readiness for Implementation 16 I. Compliance with Bank Policies 16 Annexes Annex 1. Project Design Summary 17 Annex 2. Detailed Project Description 21 Amnex 3. Estimated Project Costs 24 Annex 4. Cost-Benefit Analysis Summary, or 25 Cost-Effectiveness Analysis Summary Annex 5. Financial Sumiiary for Revenue-Earning Project Entities, or 28 Financial Summary Annex 6. Procurement and Disbursement Arrangements 30 Table A. Project Costs by Procurement Arrangements 31 Table Al. Consultant Selection Arrangements 32 Table B. Thresholds for Procurement Methods and Prior Review 33 Table C. Allocation of Loan Proceeds 34 Annex 7. Project Processing Budget and Schedule 35 Arnnex 8. Documents in Project File 36 Annex 9. Statement of Loans and Credits 37 Annex 10. Country at a Glance 41 Map IBRD 30090 Federative Republic of Brazil Salvador Urban Transport Project Project Appraisal Document Latin America and the Caribbean Regional Office Country Management Unit 5 Date: May 6, 1999 [ ] Draft [x] Final Task Manager: Jorge M. Rebelo Country Manager: Gobind T. Nankani Prcject ID: BR-PE-48869 Sector: Transport Lending Instrument: Sector Investment Loan PTI: [ ] Yes [xl No Project Financing Data [x] Loan [] Credit [ ] Guarantee [ Other [Specify] For Loans/Credits/Others: Amount: US$150 million Proposed Terms: l Multiple currency [x ] Single currency Grace period (years): 5 [3 Standard variable [I Fixed [XI LIBOR-based Years to maturity: 15 Commitment fee: 0.75% Service charge: 0% Front-end Fee: 1% Financing plan (US$ million): Source Local Foreign Total IBRD (including front end fee of 2 148 150 1%) Government of Brazil 40 40 State of Bahia/ 68 68 Private Sector 44 6 50 Total 154 154 308 Borrower: Federative Republic of Brazil Guarantor: n.a. Responsible agencies: Companhia Brasileira de Trens Urbanos (CBTU), State of Bahia represented by the Special Projects Secretariat of the Salvador Municipality Estimated disbursements (Bank FY/US$ million): 2000 2001 2002 2003 2004 Annual 25 50 50 20 5 Cumulative 75 125 145 150 For Guarantees: [ ] Partial Credit [ ] Partial risk Proposed coverage: Project sponsor: Nature of underlying financing: Terms of financing: Principal amount (US$) Final maturity Amortization profile Financing available without guarantee?: []Yes []No If yes, estimated cost or maturity: Estimated financing cost or maturity with guarantee: Expected effectiveness date: December 1999 Closing date: December 31, 2003 O0,D PAD Form: July 30. 1997 Page 2 A: Project Development Objective 1. Project Development Objectives: (see Annex 1 for key performance indicators) a The objectives of the proposed project are : (a) to improve the quality of public urban transport in the SMR by enhancing the development of a fully integrated urban transport system, under the coordination of a regional transport coordination commission; and (b) to transfer from the Federal Government to the State of Bahia and Municipality of Salvador, the ownership and management of the Salvador subdivision of the CBTU system. Objective (a) would be achieved by financing infrastructure and equipment which are necessary to build a rail-based system under a BOT type project, fully operated by the private sector, in the corridors which are justified, and ensuring its integration with buses, ferryboats and non-motorized transport; and by setting up the regional transport coordination commission in charge of coordinating and recommending common policies on pricing, financing, and project evaluation in the SMR. Objective (b) would be achieved by assisting CBTU in all the steps required to transfer to the State of Bahia and Municipality of Salvador the operations, management and ownership of its Calgada-Paripe line so that it can be adequately integrated with the new metrorail and bus system. Subsidiary objectives would be the improvement of the mobility of the low-income population who are the main users of public transport and the reduction of the environmental impacts (mainly air quality and noise) on the SMR due to road-based vehicles use. B: Strategic Context 1 Sector-related Country Assistance Strategy (CAS) goal supported by the project (see Annex 1): CAS docurment number: Report No. 16582-BR Date of latest CAS discussion: June 2, 1998 7 ie current Bank's assistance strategy to Brazil was endorsed by the Board on June 12, 1997 and progress reports on its implementation were discussed by the Board on June 2, 1998 and December 14, 1998. The thrust of the strategy continues to be : to support policies and investments which will encourage economic growth and social development in a context of macroeconomic stability. The emphasis is on efficient resource allocation, increased efficiency in the public sector and the appropriate targeting and delivery of support systems to the poor. The proposed project objectives are in line with the CAS four main drivers, namely: (a) development and implementation of structural reforms, through increased private sector participation in the investment and operation of the Metrosal system; (b) fiscal improvement to reduce Government subsidies through adequate tariff policies and improved financial management; (c) contribution to poverty reduction by increasing job accessibility for low-income classes; and (d) satisfactory portfolio performance. Through its involvement in the project, the Bank has already helped accelerate the discussion of the role of the private sector in urban transport in the Salvador Metropolitan Region, and will stimulate a thorough review and improvements of sub-sector policies-- particularly tariff and modal integration--at the state and municipal levels. The proposed project is also a follow-up to the efforts started in 1992 with the CBTU Transport Decentralization Program which aims at decentralizing the federally-owned CBTU's Salvador subdivision to the State to allow for more effective modal and tariff integration, without burdening the State with additional operating subsidies. 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; and 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 c) the ESW on metrorail systems prepared by TWUTD (TWU-28) and the experience accumulated worldwide in the financing of rail transit 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. Page 3 2. Main sector issues and Government strategy: Main Sector Issues and Government Strategy: Background: The Salvador Metropolitan Region (SMR), with 2206.45 km2 and 2.5 million inhabitants spread irregularly over 10 individual municipalities is dominated by the Salvador Municipality (SM) with 2.3 million inhabitants. The SMR concentrates roughly 21% of SB's population on just 0.4% of its territory. SM alone has 19.4% of the population of the state and 62% of the income of SMR. SM generates roughly 37% of SB's income and jobs. Each day, 3.7 million person trips take place in the SMR of which 81% are home-to-work trips. Of the total trips 54.7% are by public transport, 14.4% are by auto, 28.9% are by foot and the remaining 2% by other modes. Of the public transport trips 98% are by bus (mostly private operators), 0.7% by suburban train (STU/SAL), 0.5% by ferry and .8% by other modes. Of the 1.9 million trips by public modes, about half use more than one vehicle, requiring some sort of modal transfer to be completed. This level of urban transport activity, dominated by the road-based motorized modes has significant impacts on the SMR's environment. The poor condition and lack of integration with other modes in most of the existing CBTU line discourages more rail trips from the Suburbio area, in favor of buses and the automobile creating heavy congestion during peak hours thereby significantly increasing home-to-work trip time. Salvador's geography and topography with its hills is prone to traffic congestion, especially when accidents occur and/or cars breakdown. There is limited space for fully segregated busways. It is estimated that a "Salvador inhabitant" wastes 5 days a year more in travel time than it would if traffic congestion was not so high. Several bus corridors have already more than 15,000 passengers/hour/direction, a level beyond which safety and efficiency of segregated busways decreases quite rapidly leading to higher travel times, lower reliability and more accidents. The main users of the public transport system are from the Miolo and Suburbio neighborhoods and bear the brunt of these problems: (i) shortage of capacity at peak hours resulting in overcrowded buses, (ii) long work journeys (2.5-3 hours/day for a round trip) from the metropolitan periphery to the urban centers, with often more than two modal transfers; and (c) paying over a fourth of their income towards fares. Lack of coordination between the 2 levels of government responsible for urban transport, particularly between the SB and the SM, has led to poor tariff and modal integration, lack of prioritization in urban transport investments and no common policy on pricing and subsidies. Finally, SMR needs to modernize its traffic engineering and control technology and introduce traffic area restraint measures to be able to cope with the present and growing number of road-based vehicles and introduce policies which will discourage the use of the rapidly growing use of the automobile for home-to-work trips. In view of the above, the SB and SM administrations have decided that improving metropolitan transport is one of their main priorities. In urban transport, the main goals of this administration are: to build the basic "rail-based" network in corridors where bus solutions are not feasible, transforming one link of the suburban rail system into a modern Metro like operation, increasing the participation of the private sector in the operation and investment of all urban transport systems to improve productivity and reduce costs and introducing policies which will promote the use of urban transport. SB/SM approached the Bank for a loan which will help in achieving those objectives. The loan received COFIEX approval in July 1997. Key Issues * 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 SMR. 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 governments and a clear definition of their respective roles in the financing, planning and operation of urban transport services in accordance with the 1988 Constitution; and (b) the appropriate modification of regulations, including the elimination of regulatory barriers which might prevent free entry and/or competition in the Page 4 market for provision of public transport services. The Government's strategy is to create a formal regional coordination entity empowered by the SMR for planning, coordinating and setting priorities for new investments and modal integration. This establishment of the RTCC was a condition of appraisal of the proposed project. A proposal for the establishment of the RTCC was discussed with the Bank during preparation and resuited in the establishment of a formal RTCC in August 1998. For regulatory purposes, however, the Bank has suggested that a multisectoral regulatory body be established. The State will undertake to maintain the RTCC. e 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. To help achieve these goals, the Government of the State of Bahia (GSB) has embarked on an aggressive campaign to promote private sector participation in the urban transport sector and will carry out the turnkey cum concessioning of the new rail based system. GSB was recently successful in concessioning out the ferryboat system to the private sector. Environmental Issues. Air pollution, noise, traffic congestion, and road accidents are major environmental issues to be addressed in the SMR. 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 de facto government subsidies to polluters. The contribution of this project to improvement of air quality related to transport is modest. However, it will lay the foundations for future work. Transport Planning Issues. The need to strengthen SMR's transportation planning, traffic data base, traffic management, and economic and financial evaluation of new investments could be met if there is a formal coordinating agency for urban transport in the metropolitan region. This agency should be 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 should be designed and periodically revised. The institutional component of the proposed project has provisions to finance this type of modes and supporting studies. Government Strategy The Federal Government strategy insofar as the CBTU is concerned, is to transfer the ownership, management and responsibility of that system to the respective states where CBTU's subdivisions are located. This is a program started in 1992 with Bank financing and is in line with the Brazilian constitution which states that all urban transport should be the responsibility of the local (State or municipal) authorities. In return for the transfer of the system to the States, the Federal government is willing to contribute to its rehabilitation and finance extensions or a new system which will allow the State to serve a growing urban transport demand at the lowest or no subsidy. The State's strategy for the SMR is anchored in 4 pillars: a) to establish with the municipalities, operators and users a regional transport coordination commission; 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. The rationale for State's support to the SMR is the following: The Salvador Metropolitan Region Page 5 is the 6th biggest city of the country in terms of population and is already experiencing traffic congestion problems in several of its corridors . The SMR was the beneficiary of some of the early busway projects financed by the Bank , which were very successful. Now, the reserved busway solution is not sufficient in those corridors and other options including fixed guideway systems must be evaluated wherever peak hour traffic demand already exceeds 15,000 passengers/hour/direction. Given that the State Government and the Prefeitura of Salvador are both from the same party, this is a unique opportunity for the establishment of a regional transport coordination commission which will have the responsibility of integrating all modes, implementing tariff policies which are cost-based, agreeing on subsidies if need be and ensuring that technological improvements such as automatic ticketing will be compatible in all modes. At the same time, the Federal government is decentralizing its STU/SAL subdivision to the State as part of the program initiated with Bank financing in 1992. The opportunity here to build, under a BOT type concept, a rail-based system which will be operated under concession by the private sector, and to privatize other modes which serve the SMR is in agreement with the Urban Transport Strategy prepared by the Bank in 1992 and updated annually since then. Furthermore, the overall program of which this project is a subset, will allow the implementation of an integrated urban transport, air quality and land use strategy and will focus resources on traffic management and area traffic restraint policies which may help in controlling the explosive automobile traffic growth. Institutional Framework There are at present three main government bodies dealing with the urban transport sector in the SMR: (a) the State Secretary of Energy, Transport and Communications (Secretana de Estado de Energia, Transportes e Comunicagoes -SETC) which is responsible for regulating (market entry and exit, tariff setting, safety and quality control) all passenger transport which operates in more than one municipality as well as the State roads department. It oversees the intermunicipal bus lines, intercity bus terminals and the ferry-boats. This regulatory function was recently delegated to the Regulatory Agency for Energy, Transport and Communications (Agencia de Regulag3o de Servigos de Energia, Transportes e Comunicag6es-AGERBA); (b) the Municipal Secretary of Urban Transport (Secretaria Municipal de Transportes Urbanos-SMTU) which has a Superintendence of Public Transport (Superintendencia de Transporte Publico -STP). SMTU through STP regulates (market entry and exit, tariff setting, safety and quality control) all the municipal bus transport, taxis and elevators; and the Superintendence for Traffic Engineering (Superintendencia de Engenharia de Trafego- SET) which is responsible for all the traffic management and control in the metropolitan region. Also involved in metropolitan transport planning and project implementation are two other agencies: a) The State Secretary of Planning and Development ( Secretaria de Planejamento e Desenvolvimento) through the Regional Development Company (Companhia de Desenvolvimento Regional-CONDER); and the Municipal Secretary of Special Projects (Secretaria Municipal de Projetos Especiais- SPE) which is involved in the implementation of most transport infrastructure investments such as roads, busways, elevator rehabilitation and the proposed metrorail in the Municipality. Finally CBTU, a federal enterprise under the Ministry of Transport runs the existing commuter rail system (STU/SAL). Since three levels of government have been formulating policies and regulating urban transport without a formal coordinating arrangement, there has been a lack of consistency in the fares charged by similar or competing modes, duplication of investments, absence of criteria to prioritize investments, and only embryonic modal integration of the urban transport system. This has led to bus services continuing to operate in trunk corridors where the railway is more suited, the lack of promotion of hub-and-spoke services so as to encourage feeder services, and disparate subsidy policies which are often based on non-economic considerations. This project will be one more step towards effective integration of the systems. The Government of the State has decided to delegate to the Prefeitura of Salvador (through a legal instrument) the regulation of the Metrosal system and the CBTU system after decentralization. A number of major steps to bring all urban transport under one umbrella have been given. These are described in detail in reference 13 in the project file. Page 6 3. Sector issues io be addressed by the project and strategic choices: e institutional Issues. A Regional Transport Coordination Commission (RTCC) was created under the proposed project, as a condition of appraisal by State decree #7417 of August 19,1998. An informal forerunner to the RTCC already existed and will be strengthened from a forum for the discussion of regional transport issues to a coordinating body empowered to guide transport planning and coordination for the SMR. The first year's agenda for the RTCC was discussed with the Bank at appraisal and confirmed prior to negotiations. * Environmental Issues. The proposed project's increased use of rail-based transport and decreased use of road-based transport would improve air and noise pollution in the project area and lead, most likely, to a reduction in accidents and less traffic congestion in the area of influence of the system. * Cost Recovery and Financial Management Issues. The proposed project would integrate bus passenger to the rail systems and hence would increase both revenue and cost recovery for CBTU . The concession of the operations and maintenance of the system to the private sector will reduce the operating subsidies presently paid by the Government. The objective of the GSB is not to pay operating subsidies. GSB will be willing to increase its share of investment in the system if necessary to ensure that, with the proposed tariff, the private sector can have an acceptable return on equity. C: Proje&f Description Summary 1. Project components (see Annex 2for a detailed description and Annex 3for a detailed cost breakdown): 1. Project components (see Annex 2 for a detailed description and Annex 3 for a detailed cost breakdown): Component Category %of Bank- %ofBank [Total Total Financing financing (US$M) Part A is an Infrastructure and Equipment Investment Physical and 99% 148.1 49% 305.5 I Component to (i) build the Salvador surface metrorail others j (METROSAL) under a Build-Operate-Transfer type concept; (ii) build/rehabilitate the transfer stations between the trains, metrorail, buses and ferries; and build the housing for j resettlement; and finance the Project Management Oversight Consultant and project supervision consultants Part B is an Institutional and Policy Development institution- 1% .4 40% 1 Component to help in financing: a) the preparation of an Building integrated Transport Policy, Land Use and Air Quality Management strategy for the SMR to meet both transport and | air quality targets and to introduce sound cost-recovery, tariff, regulatory and subsidy policies; and (b) undertake a comprehensive traffic management review of the SMR. Front End Fee (1% of loan) 1.5 100% 1.5 Total 150 49% 308 _~~ ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~. _ _ _ _ _ _ _ _ _ 2. Key'p5ofcy 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 metrorail line under a BOT type scheme. 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. o The other key policy reform supported by the project addresses the issue of modal integration under a regional transport coordination commission. Furthermore, it uses this unique opportunity to ensure that the institutional framework for metropolitan transport in the SMR is shaped in a way that promotes coordination of policies, safeguards private sector concessionaires, promotes continuing strategic air quality, urban transport and land use planning and forges financial mechanisms to improve sustainability of the urban transport systems in the long-run. Page 7 3. Benefits and target population: The main quantifiable benefits will be travel time savings and operating cost savings (see Annex 4). A major non-quantifiable benefit is the structuring effect of the metrorail line in the SMR, increasing accesibility to city sub-centers and the development of new housing poles. A description of other non- quantifiable benefits is also given in Annex 4. Beneficiaries are the residents of the Salvador Metropolitan Region (SMR), particularly low-income households (earning up to three minimum salaries) who are major users of public transport. The users of private autos will most likely benefit from less bus congestion. The Government of Brazil will also benefit from the concession of the STU/SAL system to the private sector because it will eliminate the subsidies which it pays to that operating agency. 4. Institutional and implementation arrangements: The overall coordination, implementation and supervision of the proposed project rests with Municipality of Salvador, which has established a Project Coordination Unit (PCU); and with CBTU which will help in the implementation of the project through its own existing Project Implementation Unit, particularly with the STU/SAL line. The PCU will be supported by a Project Management Oversight Consultant (PMOC) and supervision consultants financed by the project. The Municipality and CBTU have agreed that the entity which will carry out the project will be the Companhia de Transportes de Salvador (CTS), a company controlled by the Municipality of Salvador which will own and manage the Metrosal and the STU/SAL after its transfer to the State/Municipality. D: Project Rationale 1. Project alternatives considered and reasons for rejection: Salvador was the beneficiary of some of the earlier busway projects financed by the Bank in the 1970s. The basic underlying justification to finance segregated busways was (and still is) that they can adequately serve peak-hour traffic up to 18,000 passengers per peak-hour per direction (ppphd), although beyond 15,000 ppphd they start losing their effectiveness. Introduction of busways would postpone costly investments in fixed guideway systems, such as a metrorail system, which can handle more adequately peak-hour demands above 18,000 passengers. Twenty five years later, the most important busway in Salvador ( Bonoc6 avenue ) is almost saturated and will be unable to handle effectively the traffic forecast for 2001 and beyond. Before examining the proposed metrorail system, the project team reviewed several alternatives to handle the proposed traffic forecast. After examining the several corridors involved it was decided to compare the following alternatives: (a) do-nothing; (b) introduce 2 segregated busways; and (c) build the metrorail system as proposed. The metrorail based system mostly at-grade and elevated, was selected as the best alternative in an incremental cost-benefit analysis in which it was compared with high performing segregated busways with articulated buses. One of the main disadvantages of the introduction of two segregated busways is that they would require a substantial amount of expropriation and resettlement as opposed to the metrorail alternative which can handle the very high levels of demand forecast using the space required for one busway. Indeed, part of the right-of-way of the proposed metrorail system is the existing Bonoco busway which is presently almost saturated. Traffic demand levels were estimated by consultants through a demand simulation using the TRANPLAN model, which tested several scenarios. After several iterations, the selected alternative consists of the metrorail line from Lapa to Piraja as the main trunk corridor (See map attached). 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. The decision of the State to concession out the operation of the system to the private sector was also another feature of the project that made it more attractive. To define the type of "BOT" type concept which was most appropriate for this project, the project team, supported by a project finance consultant, reviewed the world and Brazilian experiences with similar modes, compared the risks and returns involved in each of them and decided which ones would yield the most attractive return to the private sector and could be implemented faster. Page 8 2. Major related projects financed by the Bank and/or other development agencies (completed, ongoing and planned): Sector Issue Project Latest Supervision (Form 590) Ratings (Bank-financed projects only) Implementation Development Progress (IP) Objective (DO) Bank-financed Decentralization of rail services from Sao Paulo Metropolitan S S federal to state government with system Transport rehabilitation Decentralization (Ln. 3457-BR) Decentralization of rail services from Rio de Janeiro S S federal to state government with system Metropolitan Transport rehabilitation Decentralization (Ln. 3633-BR) Decentralization of rail services from Recife Metropolitan S S federal to state government with system Transport extension Decentralization (Ln. 3915-BR) Decentralization of rail services from Belo Horizonte S S federal to state govemment with system Metropolitan Transport extension Decentralization (Ln. 3916-BR) Other development agencies IDB-financed improvements of stations S. Paulo's Metro's Fifth of ex-FEPASA South line, acquisition Line of rolling stock and construction of Metro's Fifth Line IP/DO Ratings: HS (Highly Satisfactory), S (Satisfactory), U (Unsatisfactory), HU (Highly Unsatisfactory) 3. Lessons learned and reflected in the project design: Initial Bank support for the urban transport sector in Brazil was provided through four urban transport projects totaling US$540 million, of which the First, Second and Third Urban Transport Projects (Loans 1563-BR, 1839-BR, 1965-BR) have been completed. The Fourth Urban Transport Project was canceled because the government abolished the federal agency in charge of urban transport (EBTU). Additional Brazilian urban transport projects financed by the Bank (Loans 3457-BR and 3633-BR for US$126 million and US$128 million respectively) support the rehabilitation and decentralization of the CBTU subdivisions from the Federal to the State governments in Sao Paulo and Rio de Janeiro. Loan 3457-BR (Sao Paulo) became effective on February 3, 1993. Loan 3633-BR (Rio de Janeiro) became effective March 14, 1994. Loan 3457-BR closed on March 31, 1998 and has met its main objectives. Loan 3633- BR is expected to close on December 31, 1999. In June 1995, the Board approved two more loans (Lns. 3915-BR and 3916-BR) for US$102 million and US$99 million to finance the decentralization of the Recife and Belo Horizonte urban rail systems from the Federal Government to the States. These loans were declared effective in 1996 and are progressing satisfactorily. Page 9 To build upon the experience of past urban transport projects for the design of the proposed project, an analysis of "lessons learned" was undertaken. The review was based on Project Completion Reports and Performance Audit Reports (PCR/PAR) in urban transport and urban development worldwide. Recognition was made of trends and changes in project design since 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. Dated loan covenants would be included in the proposed project for the creation of the RTCC and completion of critical studies. * Lack of 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 adequate provision of counterpart funds are included in the annual budgets of federal and state enterprises. The State of Bahia has included the project in its CY99 and CYOO budgets, and has the reputation of making available, on a timely basis, the counterpart funds required for all Bank-financed projects. • Slow implementation has been a frequently occurring theme. The reasons have included a lack of familiarity with Bank procedures, over-optimistic scheduling at appraisal, lack of final engineering designs at appraisal, changes in political commitment, and lack of counterpart funds. These problems were mitigated in the proposed project by such measures as: strengthening capacity of operating agencies for financial management and application of Bank procedures; and requiring at least final engineering design of the first year's works prior to negotiations, for which technical assistance was contracted as needed. * Rail Decentralization. Experience in both ongoing Lns. 3457-BR and 3633-BR suggest that the decentralization of systems from the federal to the state level must be followed by complete reorganization of the companies preferably with concessioning of the operations and maintenance of the systems to the private sector. Otherwise, there is little motivation for government-appointed managers to reduce working subsidies and improve the level of service offered by the systems. 4. Indications of borrower commitment and ownership: The Government of the State of Bahia and Prefeitura de Salvador have, through the creation of a Secretary for Special Projects and CTS, 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 signing an agreement with the Federal Government for the transfer of the federally-owned and operated CBTU Salvador subdivision and by agreeing to integrate it with the urban and metropolitan bus. The decision of the State to commit its own funds to the project, its willingness to accept a public/private partnership in the construction and operation of the system and introduce the institutional and policy framework required before loan effectiveness, are indications that this is a priority project for the SMR. Finally, efforts made by the State and Municipality during preparation to ensure the most adequate institutional framework is in place before the concession, have been noteworthy. 5. Value added of Bank support in this project: The main value added by the Bank in this project, is its role as promoter of physical and tariff integration in the SMR and as an honest broker to provide more credibility and ensure accountability in the BOT type concession process. Bank's experience with the Rio de Janeiro metrorail concessions was also an asset in preparing this project. Also, the Bank's experience in the other CBTU decentralization projects will help guide the State of Bahia in its takeover of the STUISAL system. Page 1 0 E: Summary Project Analysis (Detailed assessments are in the project file, see Annex 8) 1. Economic (supported by Annex 4): [x] Cost-Benefit Analysis: NPV=US$ 527 million; ERR= 25% [] Cost Effectiveness Analysis: [] Other (Specify) 2. Financial: NPV=US$ 1198million; FRR= 25% Fiscal impact: Since the Borrower is the Federal Government, the impact of the US$150 million loan plus its US$8 million per year counterpart fund obligation (over five years) on the Federal finances has been analyzed by COFIEX and by the Federal Ministry of Finance, before the project was submitted to the Bank, and also as part of the Federal/State debt rescheduling agreements. This loan is a grant from the Federal Government to the State because the latter agreed to take over the ownership and management of the Salvador subdivision of CBTU (STU/SAL), as part of the decentralization program mandated by the Brazilian constitution and initiated in 1992. When the transfer of this subdivision is completed, the Federal Government will save US$10 million/year in operating subsidies to the STU/SAL. Since the State will be responsible for providing up to US$118 million (of which US$50 million are expected to come frorn the private sector concessionaire) in counterpart funds for the project, over five years, an evaluation of the fiscal impact of this obligation on the State's finances was undertaken by the State Secretary of Planning and by the Federal Ministry of Finance. It was concluded that even in the worst scenario, i.e., if the private sector does not provide the US$50 million it is expected to provide as part of the concession, the proposed project, as compared with other infrastructure alternatives which would require investments in roadways, busways and expropriation would have a lesser negative impact on the finances of the State over the life of the project, as long as the new metrorail system would have no operating subsidies. This is the main reason why the metrorail system will be concessioned out to the private sector without operating subsidies. The State of Bahia earned a 'BB' foreign currency issuer credit rating from Standard and Poor's in March 1998, constrained by the 'BB' rating of the Federative Republic of Brazil. Given the relative strength of state's fiscal indicators, it would likely earn a rating at par with the Federative Republic's even today. The State's cashflow position has benefited from efficient financial management and the proceeds of a number of successful privatizations of state-owned companies, which suggest that State counterpart funds will be provided as required. Once the project is completed, the fiscal revenues to be generated by the proposed project due to the real estate development and changes in zoning laws in the area of influence of the metrorail system (betterment tax) are estimated conservatively at US$15 million per year, to be split by the State and Municipality. Based on experiences with other similar systems and the Bonoc6 busway in Salvador, it is expected that additional sales tax revenues estimated at US$15 million per year will be generated by the easier access to shopping centers and other commercial establishments in the metrorail's area of influence. Since there is no investment or counterpart funds obligation on the Municipality, the expected fiscal impact on its finances will be positive due to the additional sales and property taxes revenues generated by the project. Finally, the irnpact of the recent devaluation of the Brazilian currency was positive for the project since it brought the size of the loan required to the level authorized by COFIEX. 3. Technica/: Compared with other alternatives such as reserved or exclusive busways, this is a sound project from a technical standpoint because by building only 11.9 km of metrorail line, it will allow the SMR to have a trunk corridor with high capacity at peak hour on the highest demand corridor of the city, with minimum resettlement and environmental impact. The construction methods proposed are well known and the technology required is widely available. The Bank project team and State/CBTU staff reviewed alternative alignments for the Initial Operating Segment (IOS) of the Metrosal's network. They also evaluated several options to procure this project including a) a single Build-Operate-Transfer type bid with all infrastructure, equipment and operating concession included; b) two bids: a turnkey bid for the infrastructure and fixed installation systems; and a second bid for the operating concession weUn preovision of rolling stock and other systems by the private sector; and c) a traditional procurement with several bids for each main component and support from export Page 1 1 credit agencies. The State/CBTU project team selected option b). The selected alternative was considered the most cost-effective, viable and fastest to secure the highest private sector participation in the project without jeopardizing its main objective. The disadvantages and risks of the selected alternative were carefully evaluated and discussed and risk mitigation mechanisms proposed. This process has forced the State/Municipality to re-energize their transport planning, economic evaluation and financial engineering capabilities because they know that any investment by the private sector will be carefully scrutinized. Furthermore, the State/Municipality and CBTU are equipped to implement this project and have the capability to provide a quality service on the overall network. 4. Instfitutional: a. Executing agencies: The implementing agencies are the Municipality of Salvador (SM) and CBTU through CTS. SM and CBTU will conduct with the help of consultants the turnkey and concession process. SM and CBTU will be responsible for the actual supervision of the project also with the help of consultants. b. Project management: SM will establish and maintain a Project Coordination Unit (PCU) headed by a Project Coordinator, to manage the implementation of the several components of the Bank-financed project. The Project Coordinator would report directly to the Secretary of Special Projects of SM and would participate in Loan Contract negotiations. Project Management Oversight (PMO) consultants financed under the project would act as full time advisers to the Project Coordinator to provide the technical support and international experience required for managing the project. In addition to the Project Coordinator, who will be responsible for the overall financial management of the project, the PCU will include: a) an engineer, with experience in procurement, to coordinate Part A of the project; and (b) a management information systems specialist responsible for the reporting and supervision of the project. The PCU will be supported by a multidisciplinary group (including an environmental engineer and a resettlement specialist) and a small secretariat which will include an accountant responsible for project accounts and disbursements. c. Procurement Capacity- The procurement preparation, evaluation, management and monitoring will be undertaken jointly by SM and CBTU. CBTU has extensive experience in Bank procurement guidelines and SBDs and is rated as one of our best borrowing agencies in this area. The Regional Procurement Advisor undertook a procurement capacity assessment of CBTU and concluded that this agency is procurement proficient. d. Financial Management . Both the State/Municipality and CBTU 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. CBTU will be the agency responsible for loan disbursements because this is a loan to the Federal Government. A financial management specialist reviewed CBTU's financial management systems (accounting and disbursement) and project management information systems (physical progress and procurement) and concluded that they are adequate to document and justify the present disbursement by SOEs and to provide all the information required to prepare manually the Project Management Reports (PMRs), in the format proposed in the LACI implementation handbook of September 1998. He also concluded that in order to computerize the production of PMRs, CBTU must prepare a software to integrate its two existing systems. CBTU has presented a time-bound action plan to the Bank to integrate the existing systems so that it can become eligible for PMR-based disbursements. 5. Social: Most of Metrosal users are low-income and live in the suburbs of the greater SMR. Improving suburban and metrorail services in general would enhance the access of this low-income segment of the population to employment centers, health and educational facilities and other public services. Transport Users Associations have often stressed to Bank missions and to the precursor of 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 by the State and Municipality through the Secretary of Special Projects. Requests from some of the neighborhoods such as Suburbio and Miolo for better transport were taken into account as well as requests from users associations which wanted the bus and Metrosal systems connected. Suggestions received after the public presentations of the system were also incorporated. There is a consensus that this project furthers the beneficiaries main goal: integration with other modes and between the suburban rail line and the Metrosal system. No negative social impacts are expected from the proposed project. A cross-section of the potential users is available with statistics on their average income, travel time, mode preferences, etc. A willingness-to-pay survey of vulnerable segment of the market was also undertaken Page 12 to help in the design of the tariff system. All this information was collected as part of the demand analysis and is available in the Project File as reference 17. 6. Environmental assessment: Environmental Category [X] A [ B lI C 6.1 The project is expected to have a net beneficial impact on the environment. The new metrorail 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 occasion some minor and localized negative environmental and social impacts. An Environmental Impact Statement was completed by specialized consultants and is available in the project file. A resettlement consultant also produced a comprehensive report on the resettlement impacts of the proposed project (see below). LCSES provided comments to the EA and Resettlement reports and requested some additional information which was provided. After approval by LCSES, an executive summary of the EA and Resettlement reports was circulated to the Board and 2 copies of the full report were sent to the Infoshop prior to appraisal. Here are some highlights: 6.2 The proposed routing of the "at grade" (5.8 km) and elevated (4.7 km) sections of the METROSAL line were studied by the resettlement and environment consultants with a view to minimize resettlement, adverse noise, visual intrusion, cornmunity division impacts and negative impacts on old historical buildings. The use of tunneling as the method of construction of one segment of the line (1.4 km) will minimize environmental impacts during construction in a densely populated area. This tunnel was selected mainly to avoid negative impacts in an area with a number of well-known landmarks and to minimize resettlement. General impacts on "at-grade" and "elevated" sections are expected to consist essentially oF limited expropriation of land for stations, limited noise, vibration, some visual intrusion. Dust, traffic disruption and limited disruption to underground utilities and services are expected during construction. Additional negative impacts during construction will occur due to haulage and final disposal of excavated materials from the construction sites. Measures to mitigate such impacts are clearly specified in the EA's detailed action plan and in the bidding documents for works and for the concession. A package of mitigatory actions, as well as public information, monitoring and evaluation programs recommended by the EA consultants were included in the bidding documents for the turnkey construction and the operating concession. A Manual with best practices on mitigation actions for the expected impacts has been prepared and will be made available to contractors. 6.3 Land and/or property expropriation are limited to the areas close to the metrorail yard and to some stations. A survey apd cadastre has been recently conducted for the full extension of the line. Affected properties (512 units in all) will be expropriated. Residential units (490) and commercial establishments (22) will be compensated for lost assets and assisted in relocating, through grants and services to be provided by SM with the assistance of the existing State "Viver Melhor' Program. For those families who select that option, some 250 units of repiacement housing will be built in the vicinity of their former dwellings. The site tentatively selected is adjacent to a future metro station. Valuation criteria and expropriation. procedures are clearly defined for such cases. The expropriation decrees for the PiraWtLapa segment were signed by Salvador's Mayor in March 1999. A Resettlement Plan, including 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 in November 1998 and approved by the SM in December 1998 for the Piraja- Lapa segment. An official public audience took place on December 22, 1998. The resettlement process in each link of the Piraja-Lapa segment will be completed prior to the start of any works in that link. A monitoring and evaiuation program has also been designed and will be undertaken by the SM. The estimnated budget for the Resettlement Plan is approximately US$16 million and will be totally financed by the State! Municipality and the Bank loan (housing). 6.4 It was a condition of appraisal that the Final Environmental Assessment Report and the detailed Resettlement Plan (prepared according to Bank guidelines) be approved by the SM and submitted to the State licensing authority (CEPRAM/CRA). It was a condition of negotiations that the land for the construction of housing for the popuiation who must resettle be identified and suitable mechanisms for purchase and construction are in place. Evidence that the Environmental Assessment has been approved and that the appropriate license to initiate the works has been issued by CEPRAM/CRA on April 23, 1999 and was submitted to the Bank at negotiations. Page 13 7. Participatory approach [key stakeholders, how involved, and what they have influenced; if participatory approach not used, describe why not applicable]: a. Primary beneficiaries and other affected groups: The primary beneficiaries of the project are the low-income users of the Miolo and Suburbio areas who will be able to reduce substantially their travel time commute downtown using a bus-metro combination and integrated fare. The fare system is being designed in a way to ensure that the out-of-pocket costs to be paid by the users will not be significantly higher than those paid today. The Associa,ao Nacional de Transportes Publicos (ANTP) which represents users and operators was involved in the preparation of the program. The association is very supportive of the project. In most cities where a metrorail system of this type is introduced there is a structuring effect whose benefits are difficult to quantify but which, in general, are very positive for the urban setting in which the system is inserted. Stations become in general main commercial hubs and real estate develops much faster in the corridor served by the line. Real estate prices before and after implementation will be carefully monitored by the Municipality. b. Other key stakeholders: Other key stakeholders are the municipalities of the SMR which are served by the system. In general, there is a consensus that the Metrosal project is long overdue and will represent a major gain for the users of the system in terms of travel time, reliability and quality of life. 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 SMR's urban transport system. The RTCC is already in operation. The concession of STUISAL is under study and is expected to eliminate 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 Bahia Legislature by December 2000. In this project, the State continues its strategy towards sustainability of the urban transport sector by granting a concession of the Metrosal which will not require operating subsidies. 2. Critical Risks (reflecting assumptions in the fourth column of Annex 1): Risk Risk Rating Risk Minimization Measure Annex 1, cell "from Outputs to Objective" Project cost and time overruns. Modest to Use of well-known technology, Substantial available from many sources. The civil works will be carried on a turnkey lump sum basis, except for the tunnel and foundations .State will cover any unexpected cost overruns due to unidentified geological conditions missed during preparation. Page 14 Risk Risk Rating Risk Minimization Measure Low EA was submitted on schedule to En ihreunen.al License is not obtained on local authorities and all steps were Sc' isefdfule. taken to give ample time for obtaining the necessary licenses; bidding documents include generic language on compliance with environmental safeguards. Resettlement Delays. Modest All expropriation decrees will be signed prior to negotiations and negotiations for expropriation completed by effectiveness. Fu'rthe, Foreign Exchange Devaluation. Modest to Introduce in the tariff mechanisms Substantial safeguards which will not discourage potential foreign investors. Shift the burden of risk to the State. Unsustainability of the RTCC. Low Negotiations between the State I and Municipal Governments have I { | progressed very well for modal and tariff coordination. f 4- L ' ys in the turnkey and operating Low Delays were minimized by starting , nession procurement process. at pre-appraisal the pre-qualification for the turnkey and by requiring the l l borrower to produce the major tender documents by negotiations. D?e ays in the decentralization of CBTU. Modest State has already signed a "convenio" to start joint I management of the STU/SAL. Decentralization will depend on CBTU compliance with some actions which are underway. INo tirmely availability of counterpart funds. Modest to Counterpart funds are included in Substantial the Federal and State CY99 and CYOO budgets and future budget projections. Bus ee rou:tes are not concessioned out as Modest to Municipality will indicate inthe agreefi. Substantial concession contract when and how it is going to concession out feeder routes as per plan agreed with the Bank. FailuVre to concession out tLhe operations of the Low to Modest Alternative options to operate the system. system under agreement with an existing metro operator will be studied. Failure to obtain private sector financing or Low to Modest The State has agreed to finance the higher construction costs due to unexpected gap. soil conditions. I_____ Ow -ra'I Risk Rating Modest Risk Rating - H (High Risk), S (Substantial Risk), M (Modest Risk), N (Negligible or Low Risk) Page 15 3. Possible Controversial Aspects: There are no controversial aspects G: Main Loan Conditions 1. Effectiveness Conditions: (a) the approval of the Loan Agreement by the Government of the Federal Republic of Brazil; (b) the approval of the State Agreement by the Government of the State of Bahia; (c) the approval of the Project Agreement by CBTU and the Municipality of Salvador; and (d) the duly registration of the Loan by the Central Bank of Brazil. 2. During Negotiations, the following aspects were confirmed: (a) that the Project Coordination Unit (PCU ) would be structured and adequately staffed (including a resettlement specialist) and otherwise supported in the implementation of its responsibility under the project. SM/CBTU provided the Bank with the names and curricula vitae of the project coordinator assigned to the PCU; (b) that procurement would be carried out in accordance with Bank guidelines, including: (i) the use of standard bidding documents for the procurement of goods and works, under NCB and ICB procedures; (ii) use of Bank's guidelines for the selection of consultants; and (iii) the procurement limits; (c) that a Special Account in a commercial bank would be opened and maintained; (d) that the Special Account, project accounts, and Statements of Expenditures (SOEs) or Project Management Reports (PMRs): (i) would be audited according to procedures by independent auditors acceptable to the Bank; and (ii) audits would be submitted to the Bank by June 30 of each year; (e) that: (i) that a Project Management Information System similar to the one presently used by CBTU for ongoing loans be installed within 90 days after loan signing by the Municipality of Salvador; and (ii) pre-agreed operational and financial performance targets would be included in the semi-annual progress reports to the Bank; (f) that the Action Plan recommended in the EA is being duly carried out and the project will be executed, and subsequently operated in accordance with environmental practices satisfactory to the Bank; (g) that implementation of the Resettlement Plan is taking place in accordance with the timetable and procedures agreed with the Bank; (h) that final engineering and technical specifications of works and goods for the first year of the program were completed and reviewed by the Bank prior to negotiations. Resettlement Plan and EA Action Plan: (a) the RP and the EA Action Plan will be implemented in accordance with the timetable and procedures agreed with the Bank; (b) relocation of families and commercial activities for each link will have concluded before the service order to initiate construction for that link is signed. Annual and Mid-Term Review: (a) at each annual review, SM/CBTU will present the program for the following year and seek approval from the Bank before proceeding with its preparation and implementation; and (b) a Mid-Term Review to take place 24 months after loan effectiveness, to review agreed institutional, operational, and financial performance indicators, and compliance with covenants. Based on this evaluation, SM/CBTU will propose a revised action plan and any corrective measures necessary to ensure that the project meets its objectives. It is a condition of disbursement for Part 1 of the project that the pre-qualification documents for the operating concession have been issued. Page 16 Some important dated covenants included in the Legal Agreements are: (a) SM will establish an autonomous entity in charge of regulating concessions of urban transport services under its jurisdiction prior to awarding the concession of Metrosal. (b) SM through CTS will be managing jointly with CBTU, the CBTU's subdivision of Salvador not later than 3 months after the signing of the loan. Not later than 24 months after the signing of the loan, SB will assume full responsibility for the ownership and operations of the STU/SAL subdivision. (c) Retroactive financing of up to US$15 million equivalent (10 percent of loan funds) for expenditures made after July 1, 1998 (or one year before loan signing, whichever is later) is recommended because certain project activities, such as the preparation of final engineering designs, the installation of the project management information systems, were already undertaken or should be carried out immediately. H. Readiness for Implementation [xl The engineering design documents and specifications for the first year's activities are complete and ready for the start of project implementation. [1 Not applicable. [x] The procurement documents for the first year's activities are complete and ready for the start of project implementation. [x] The Project Implementation Plan has been appraised and found to be realistic and of satisfactory quality. [ I The following items are lacking and are discussed under loan conditions (Section G): I. Compliance with Bank Policies [x] This project complies with all applicable Bank policies. [ ] f[The following exceptions to Bank policies are recommended for approval: . The project complies with all other applicable Bank policies.] [signature] Task Team Leader/Task Manager: S uorge M. Rebelo jsignature1 SectorM.fanager/Director: y e pz e (signaturej Country Manager/Director: * 4Vd Page 17 ANNEX I Federative Republic of Brazil Salvador Urban Transport Project PROJECT DESIGN SUMMARY Narrative Summary Key Performance Monitoring Critical Assumptions and Indicators and Risks Supervision CAS objective(s) supported by the * That the (CAS Objective to Bank Mission) project: decentralization of Not * Expect that Government of The Bank's assistance strategy in CBTU and the BOT and applicable Brazil will continue its Brazil, discussed by the Board on concession of the efforts of public sector June 12, 1997 and updated on June metrorail system is reform through ongoing :2, 1998 is to support policies and successful. technical assistance. iinvestments that will encourage * That the system does e Expect that Federal and economic growth and social not require subsidies State Governments will dievelopment in a context of from the government continue to strengthen the macroeconomic stability. Our and its fiscal impact on enabling environment for emphasis is on efficient resource the finances of the private sector operators in allocation, increased efficiency in the State is not negative. the railway sector. public sector and the appropriate * That the low-income 8 After the February 1999 targeting and delivery of support classes accessibility to devaluation, the exchange systems to the poor. The proposed work improves and their rate will stabilize at the 1.7- project objectives are in line with the generalized cost of 2.R$ per US$1 range. CAS four main drivers, namely: (a) travel decreases. development and implementation of * That the loan structural reforms, through the disbursement occurs as decentralization of the CBTU system scheduled and there is and the concession of the new no lack of counterpart metrorail system to the private funds. sector; (b) fiscal improvement to reduce Government subsidies through better tariff policies and improved financial management; (c) to contribute to poverty reduction by increasing job accessibility for low- income classes; and (d) satisfactory portfolio performance. . Page 18 Ns. ra:.iv Ka~m ey Performanc -a ndicators Monitoring Critical Assumptions and and Risks _______ ________ ____ -___________________ Supervision I P ie Deiolpment By the end of the project: (Development Objectives to Objectives See attached CAS Objective) The obectives of the proposed 50% of stations of the rail- Table 1A System will not have proJect are: 1,R) to improve the based system integrated with operating subsidies quality of pUDiic irban transport buses. otherwise will be a fiscal in the SMf by enhancing the e 10-40% lower average burden to the government. development oF a fully generalized travel costs ( Proposed structural integrated urban transport travel times, fares and reforms, i.e., concession to system, under the coordination reliability) for users between the private sector will take of a regional transport Miolo and CBD than without place. coordinatior? commission; and system. (b) to transfer from the Federal i Higher share (8%) of rail in Government to the State of total urban transport trips Bahia ard Municipality of and reduced bus congestionr. Salvador the Salvador e Urban transport coordination subdivisior or the CBTLi and planning in the SMR system, wiil be in place. Project ro't By the end of the project I (Outputs to Development ie:' ifviy operationa. 11 9 km of a metropolitan See Attached Objectives) inatror olitar rail-based rail systerr built and 1 Table IA Assumptions systen, integrated integrated with other modes. o Private sector will be physically and tariff wvise 7.he conrcession for operation 1 enticed by the with other mnodes and t an:,d maintenance of that I BOT/Concession. operated under a long- ! system to the private sector. Federal/State relations will ternr oncession by U.e A forrnai regional transport speed up CBTU's private sector. coordination commission for decentralization. A R aegiona| the SMR will be in place. The RTCC will be an T nsra o ri influential forum in transport Coordination Comrnissiorn coordination of the SMR. in arge of coordinating Critical Risks al metropolitan transoort 1 Project cost and time in the ISMR. overruns. e The tmnsfer of the 1 * Environmental License is not STU/SAl subdivision from obtained on schedule. th ,o Federal to the State a Resettlement Delays. G Tirnmeit. Further Foreign Exchange Devaluation. Unsustainability of the RTCC Delays in the turnkey and operating concession I t tprocurement process. Delays in the decentralization of CBTU. I No timely availability of counterpart funds. * Bus feeder routes are not concessioned out as agreed. * Failure to concession out the operations of the system. Failure to obtain private sector financing or higher ! construction costs due to il ____________________________ !______________ unexpected soil conditions. Page 19 Narrative Summary Key Performance Monitoring Critical Assumptions and Indicators and Risks Supervision F'roject Components (Components to Outputs) T1he project would comprise three * The cost of Part A is See attached iinter-related components: estimated at US$305.5 Table 1A * No lack of counterpart * Part A is an Infrastructure million. funds due to recent and Equipment Investment * The cost of part B is austerity measuresl Component to (i) build the estimated at US$1 Salvador surface metrorail million. * No delays in project (METROSAL) under a Build- By end of 2000: implementation due to Operate-Transfer type concept; * 1/5 of the infrastructure procurement problems. (ii) build/rehabilitate the of the rail system would STU/SAL transfer stations be built; between the trains, metrorail, * The RTCC would have buses and ferries; build the been established; housing for resettlement; and * The transfer of the finance the Project STU/SAL to the State Management Oversight Government would Consultant and project have been completed. supervision consultants. . Part B is an Institutional and By end of 2001: Policy Development * 2/3 of the infrastructure Component to help in (a) of the rail system would preparing an integrated be built; Transport Policy, Land Use and * the RTCC would have Air Quality Management been meeting regularly; strategy for the SMR to meet * the inspection and both transport and air quality maintenance vehicle targets and to introduce sound program would have cost-recovery, tariff, regulatory been awarded to the and subsidy policies; and (b) private sector; undertake a comprehensive * the integrated land use, traffic management review of urban transport and air the SMR. quality strategy would have been completed and discussed in the RTCC. By end of 2002: * the infrastructure of the rail system would be completed; * the rolling stock and systems would have been delivered and operational tests would start; * The STU/SAL rail link would be rehabilitated and connected to the bus system. Page 20 Table IA: Monitoring Indicators and Targets By End of the Calendar Year | 1999 2000 2001 2002 1 2003 Project Development Objectives Percentage of rail stations integrated with bus lines 0 0 0 0 50 (integration related objective) Rail share of urban transport motorized trips (%) .14 .14 1.1 1.1. 7.8 (congestion related objective) Generalized cost of travel (travel time plus fare 96.4 97.1 97.8 98.4 53 plus reliability) between Piraja and Lapa in minutes (accessibility of low-income user related objective) Project Outputs Physical lmpinpeientation _ l % of the Permanent Way W,iorks completed | 15 | 55 95 100 . _ I ! _ % of other Civil ' orks complefed 15 55 95 100 % of System works completed 0 40 85 100 = of rehabilitation of STU/SAL 40 100 100 100 Institutional Develop-ment Concession related process Modeling Concession System in ______________________________ __ _ completed completed operation Integrated Urban Transport, Land Use and Air Draft Draft Final Quality Strategy Report Report completed discussed in a participatory ___________________________ __ _ _ _style Establishment of Regulatory entity j Prepare Established I _ _ _ _ _ _ _ _ _ _ _ __ L _ proposals Page 21 Annex 2 Salvador Urban Transport Project Project Description Project Component (Part A) - US$305.5 million (total cost of component) An Infrastructure and Equipment Investment Component (Part A): to build the Metrosal's Initial Operating Segment between Piraja and Lapa including the transfer stations between road and rail based systems. This is a rail rapid transit line 11.9 km in length, with roughly 5.8 kin at grade, 4.7 km elevated and 1.4 km in tunnel. This component iincludes: (a) Civil Works including the Lapa - Pirajd Line to be constructed in the following way. The rail line will go through a 65m2 cross section, rock tunnel, 35m below ground level, and Campo da Polvora will be an underground in-rock station. Lapa Terminal, below the existing bus terminal of the same name, will be constructed using the cut and cover method, and will also house Metrosal's Main Offices and the Operational Control Center within the, to be refurbished, existing building. From the end of the tunnel, the track will continue along a pre-stressed, pre-cast, elevated concrete guideway over Vasco da Gama Avenue, and under an existing road bridge up to Brotas Station, which will be constructed against a hillside. The elevated guideway then continues over Mario Luis Ferreira Avenue, descending to the right-of-way of the existing, at- grade, central busway, which it will follow to the end of the avenue, including the Bonoc6, at-grade, station. The track then continues on elevated concrete guideway for another 620m, to the Acesso Norte station. From Acesso Norte station to Piraja station, the track will be laid on various at-grade, cut-and-fill, or elevated sections, including the viaduct over the BR324 Federal Highway. This section includes 2 elevated stations as well as the Piraja Terminal. The main (130,000m2) maintenance depot will be at Piraja,. The total length of each type of section is: (a) tunnel - 1.4 km, (b) elevated guideway (4.1 kmn); at grade (6.4 km). There will be 8 stations of which: Underground stations (2); Elevated stations (4); At grade stations (2). The tunnel sections, constructed using the New Austrian Tunneling Method (NATM), will consist of 366 m of tail track in rock tunnel, , south of Lapa Terminal, and 1,034 m of double track tunnel in rock, including the 2 underground stations. There will be 8 passenger stations on the line, at Lapa, Campo da P6lvora, Brotas, Bonoc6, Acesso Norte, Retiro, Jua and Piraja. The stations have off-street entrances and 136 m train platforms. Rehabilitate the STU/SAL link between Calgada e Paripe. (b) System-Wide Facilities include the following components: (i) a high voltage electrification system, including three primary 69 kV substations with respective rectifiers and transformers; (ii) a traction power system for distributing 3 kV power to the trains via an overhead catenary system; (iii) a low voltage electrical system for illumination and all electrical systems below 380 V and cable trays; (iv) a system for passenger control and ticket collection; (v) auxiliary systems, including support areas such as punmps, panels, etc.; (vi) escalators and elevators for physically handicapped passengers; (vii) a telecommunications system, including radio, telephone, data transmnission, time transmission, and closed circuit television; (viii) a central control system, and Automatic Train Control (ATC) on-board equipment; and (ix) air conditioning, ventilation, fans, louvers and ancillary equipment. (c) Rolling Stock comprising a fleet of ten trainsets to operate this link. These trains will operate under ATC. The maintenance facility at Piraja will be able to handle the ten trainsets of the initial fleet and the six additional trains when the line is extended to Pau da Lima Station. Maintenance shop facilities, including all equipment for maintaining the revenue and non-revenue vehicles, will be part of the yard complex. (d) Resettlement Housing to partially finance the construction of houses required to lodge part of the resettled population. (e) Project Management and Supervision to finance (i) the Project Management Oversight Consultant (PMOC) who will assist the Project Coordination Unit; and (ii) project supervision consultants. Project Component (Part B) - US$1 million (total cost of component) An Institutional and Policy Development Component to help in financing (i) consultants to prepare an integrated Transport Policy, Land Use and Air Quality Management strategy for the SMR to meet both transport and air quality targets and to introduce sound cost-recovery, tariff, regulatory and subsidy policies; and (b) undertake a comprehensive traffic management review of the SMR. Page 22 Concession Design 1. The State of Bahia and Municipality of Salvador decided that the Metrosal and other urban transport systems in the SMR must be operated by the private sector through long-term concessions at a tariff set by government. They also decided that these will be positive concessions, i.e., there will be no operating subsidies paid by the State or Municipality. They are, 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. 2. Financial Advisors (Fundagao Getfilio 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. 3. It was decided that the best way to proceed with the procurement of the project was to split it in two bids: a turnkey 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. The second bid will include an entity called "project integrator" who will act as a supervisor of the civil works bid on behalf of the concessionaire and the State, under the oversight of the Project Management Oversight Consultant. 4. Furthermore, amongst the options considered in the second bid were :a) Metrosal only; and b) Metrosal plus main feeder bus lines. The second option was found to be politically unfeasible and was discarded. The feeder bus routes would have to be concessioned out separately according to a route reorganization plan agreed with the Municipality. 5. The financial advisor has prepared a preliminary background memorandum, a transaction structure report and an information memorandum. The latter will be annexed to the pre-qualification bid documents for the concession. 6. A willingness-to-pay survey took place and concluded that the users would be willing to pay today up to 1R$ fare as compared to today's 0.70 R$ flat fare. 7. 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. 8. At present, in Salvador, the tariff charged by any bus is $RO.70 (a flat rate, i.e., it does not vary with distance or time of day). The same ticket (only at Piraja station) allows users to use more than one bus to arrive at their destinations, at any time of the day. This integrated flat fare system is one feature of the present system which the State and Municipality want to maintain after the introduction of the metrorail system. The Municipality pays the buses on a vehicle-kilometer basis ard per passenger transported. The remuneration per vehicle-kilometer is set by a standard cost spreadsheet which is periodically revised and discussed with the bus owners syndicate. The Municipality established a clearing house (Fundetrans) which receives all the revenues from passes and special tickets (mainly students) and pays (through electronic transfers) the bus owners within 3 days of the actual date in which they receive the tickets or coupons from the vale-transporte. Bus owners keep the revenues for tickets sold and collected on the buses. All bus owners, to be licensed bus operators in Salvador, must belong to Fundetrans by municipal law. Fundetrans is supervised by the municipality (Municipal Secretary of Transport) which also supervises the statistics on bus vehicle-kilometers produced and passengers carried. The actual staff of Fundetrans is from the private sector and all paid by the fund. What this fund allows is that buses which have shorter and denser routes (with high demand) compensate for longer routes imposed by the municipality which Page 23 serve in general low-income people who live further from the employment centers. So some users are paying much more than the actual cost while others are paying less than the cost. This is a system used throughout Brazil and reflects the concept of total transport cost for the SMR. There are no public subsidies to the Fundetrans. 9. The financial advisors proposed that the metrorail system be included in the Fundetrans. This proposal was accepted by the Municipality. That way the objectives of having a flat fare which would allow for modal integration and would still be within the upper limits of the willingness-to-pay exercise would be met. The distributive impacts of this system were evaluated to see who were the gainers and losers. The option calls also for a remuneration tariff (the tariff to be paid by Fundetrans to the metrorail concessionaire) for the metrorail system which will be different from the tariff charged to the users. If that remuneration tariff bid by the bidders is higher than the tariff paid by the users (which will be set by the Municipality), Fundetrans will pay the difference to the concessionaire. A maximum remuneration tariff to be paid by Fundetrans as well as the tariff to be charged to users will be set in the bidding documents by the Government. 10. Other than the discount on the remuneration tariff which will be multiplied by a weight set in the bidding documents, the bidders will also have to bid on the amount of the discount on the total funds made available by the State for investment in rolling stock and systems (with a minimum required of 50% of the estimated investment); and the concession fee to be paid in equal installments during the term of the concession. The bidder with the highest net present value of: a) the difference between the maximum remuneration tariff and its proposed remuneration tariff; b) its proposed discount on the investment in rolling stock and systems; and c) its concession fee during the term of the concession, will be the winner. A detailed analysis is presented in the Transactional Structure Report which will be available in the Project Files. More details are not given here because of the public nature of this PAD. 11. 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 Not being accepted by the Fundetrans Amendment of Municipal Law to include metrorail in Fundetrans Compensation for government mandated discounts Municipality will enact legislation indicating that it will compensate (gratuidades) imposed by State for government mandated discounts (gratuidades) .Bus feeder routes are not concessioned out as agreed Municipality will indicate in the concession contract when and how is going to concession out feeder routes as per plan agreed with the __________________________________ Bank 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 Page 24 Annex 3 Salvador Urban Transport Project Estimated Project Costs This table has been intentionally deleted at the request of the Borrower under the Bank's disclosure policy. Page 25 Annex 4 Salvador Urban Transport Project Economic Evaluation of the Project Cost Benefit Analysis Summary (Values are indicated in US$ million) 'ITXEMS Preet Vale of Flows R_a tp EdronoMic Y FinciaI T .xes Subsidies Analys An:ysis., Benefits 1,079.7 1,198.5 119.0 12.0 Costs . 231.6 257.1 25.7 2.6 Net Benefits (NPV) 527.0 585.0 58.5 5.8 IRR (%) 25.4 25.4 - - 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) To be conservative the costs of avoided investments in the do-nothing situation were not considered. The main costs considered were: The investment costs of the system and the operating costs of the metrorail system. Note that this line is 49% at-grade, 39% elevated and 12% underground. 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: Page 26 * 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 specialized consultants (PROTRAN) based on the data provided by a comprehensive 1995 Origin -Destination Survey which collected data in 235 zones , interviewed close to 12,000 households and 52,000 people. Traffic demand levels were estimated by consultants through a demand simulation using the TRANPLAN model, which tested several scenarios with different combinations of tariffs, travel time and reliability. Tranplan uses the 4 step approach of the Urban Transport Planning System, namely Traffic Generation, Traffic Distribution, Modal Split and Traffic Assignment and it is the most commonly used traffic demand package in the U.S.A. After several iterations, the selected alternative consists of the metrorail line from Lapa to Piraj6 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. Peak-hour traffic estimated for 2002 is 20,000 passengers per hour per direction (200,000/day) increasing to 26,000 pphpd in 2005, 29,826 pphpd in 2010 and 32,661 pphpd in 2015 (350,000/day). As mentioned above, busways are very effective up to 15,000 pphpd, but start losing their reliability and decrease their speed beyond that level, with a high potential for accidents especially when the operation exceeds 300 buses/hour. The full demand analysis was reviewed by independent international consultants. Fixed guideway systems of the type proposed are worth considering when the peak-hour demand exceeds 1 5,000pphpd in the first year. A metrorail system can, with the adequate signalling systems which allow 90 seconds headways, transport up to 60,000pphpd. A detailed demand analysis report can be found in the Project File. Page 27 Sensitivity Analysis/Switching Values/Risk Analysis IITEMS IRR NV1) B IC i=10% i=10% IBASE CASE 25,4% 2,9 527.016 Discount Rate 12% 25,4% 2,4 377.178 15% 25,4% 1,9 223.080 BENEFITS Time Value 10% Higher 28,8% 3,1 522.821 10% Lower 23,9% 2,6 466.913 50% Lower 17,6% 1,8 226.500 90% Lower 9,4% 1,0 (13.913) Reduction of Operating 10% Higher 25,9% 2,9 Costs 548.340 10% Lower 24,8% 2,8 507.692 50% Lower 22,7% 2,5 430.395 100% Lower 20,0% 2,2 333.773 Rate of Demand 50% Lower 14,7% 1,5 Growth 133.246 COSTS Construction Costs 50% Higher 18,3% 1,9 384.918 100% Higher 14,2% 1,4 242.820 Operating Costs of 100% Higher 23,5% 2,6 Metro 460.652 200% Higher 22,1% 2,4 408.238 SWITCHING VALUES Reduction of Travel Times and Operating Costs Benefits 66.20 % Lower Ridership Growth Rate 85.4% Lower Construction Costs 185 % Higher Risk Analysis: Probability of 91.5% for a IRR between 10% and 28% (1) Thousands of US current dollars Beneficiaries are the residents of the Salvador Metropolitan Region (SMR), particularly low-income households (earning up to three minimum salaries) who are major users of public transport. Residents of the Miolo area, 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 Lapa and Piraja) 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 ANNEX 6 SALVADOR URBAN TRANSPORT PROJECT FINANCIAL SUMMARY FOR REVENUE EARNING PROJECT ENTITIES Calendar Years 2000 through 2024 All figures, except Daily Ridership, in Millions of Current US Dollars 1'~~~~~~~~~~~~~~~~~~~~~~~~~~--- I _ Avr _gd-nna ITEMS 2000 20 2003 2004 2005 20101 2011 2012 2015 2024|Growth Income Statement Items Daily Ridership (Passengers / day) Metro 0 0 194,246 198,908 203,682 208,570 311,059 318,213 324,259 343,095 400,473 3.1% Revenues (Year) 0.00 0.00 15.87 32.50 33.28 34.08 50.83 51.99 52.98 56.06 65.44 3.1% Operating Income 0 00 0,00 15,87 32.50 33.28 34.08 50.83 51.99 52.98 56.06 65.44 31% Non Operating Income 0.00 0.00 0.00 0.00 0.00 0,00 0.00 0.00 0.00 0.00 0.00 Net Income Before Tax -27.13 0.00 3.78 10.62 11.12 11.63 23.01 23.78 24.43 28.47 35.02 Funds Statement Items Net Profits after Income Tax plus Depreciation -27.13 0.00 4.16 8.88 9.22 9.58 18.15 18.68 19.13 21.92 26.04 Borrowings 4.14 10.59 9.82 1.88 7.53 3.14 0.00 0.00 0.00 0.00 0.00 Equity Investments (+) or Profits available to shareholders(-) 28.90 4.54 0.05 -4.57 -2.49 -4.73 -16.36 -16.89 -17.34 -21.92 -26.04 Total Sources 5.91 15.13 14.03 6.20 14.26 7.99 1.79 1.79 1.79 0.00 0.00 Capital Expenditures 5.91 15.13 14.03 2.69 1076 4.48 0.00 0.00 0.00 0.00 0.00 Working Capital Increase or Decrease (-) 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Interest During Construction 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Debt Amortization 0.00 0.00 0.00 3.51 3.51 3.51 1.79 1.79 1.79 0.00 0.00 Total Applications 5.91 15.13 14.03 6.20 14.26 7.99 1.79 1.79 1.79 0.00 0.00 Oq Total Debt Service (interest plus amortization plus commissions) 0.00 0.00 0.00 7.32 7.32 7.32 3.82 3.82 3.82 0.00 000 00 Financial Indicators IRR of Shareholders (Return on Equity) 20.0% IRR of Project (Retum on Assets) 17.5% Operating Income as a % of Revenues - 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 Net Income as a % of Revenues - - 24% 33% 33% 34% 45% 46% 46% 51% 54% Debt Service Coverage - - 2.21 2.26 2.31 5.75 5.89 6.01 - - Main Assumptions Concession penod: 25 years (From the begin of 2000 to the end of 2024) User tariff of US$ 0,52 ( R$ 0,85 ) / passenger, without difference between the single and the integrated tariff. Remuneration Tariff of Metro: US$ 0,64 ( R$ 1,06 ). Discount over remuneration tariff: 0% Concession Fee (Canon ): US$ 27 millions Working Capital was not computed, since it is not very significant in this activity (the revenues will be "cash" Concessionaire will be responsible for 50% of the initial investment in rolling stock and controlling systems. A loan from BNDES was considered to finance initial investments in rolling stock and Systems, covering 70% of the total expenditures. A NNIEX 6 SALVADOR URBAN TRANSPORT PROJECT FINANCIAL SUMMARY FOR REVENUE EARNING PROJECT ENTITIES Calendar Years 2000 through 2024 All figures In Millions of Current US Dollars 2000 20011 20021 203 204 20 20061 20071 2020 009 201 201 212 21 20141 200 21 07 21 09 22 01 22 0231 2024 Assets CmnenAsses EA A 000 4.AC 0.0 0.22 9.58 1352 14.00 14.00 10.00 18.15 18.68 19.13 2009 21.45 21.92 22.40 22.80 23.30 23.81 24.33 24.83 25.23 25.63 26.04 Net Fixed Assets 5.91 21.04 33.53 34.08 43.90 46.85 44.59 42.33 40.07 37.81 0.055 33.29 31.03 28.79 26.52 24.26 22.00 26.65 24.69 22.72 20.76 21.14 19.27 17.41 15.54 TotalAssets 5.91 2104 37.69 43.56 5312 56.42 58.11 5633 54.07 52.81 93.70 51.98 00.19 49.76 47.90 46.18 44.40 49.45 47.99 46.54 45.09 45.97 44.50 43.04 41.59 Debts 4.14 14.73 24.55 22.92 26.94 26 57 21.29 15.98 10.68 5.38 3.59 1 79 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 o 00 0.00 0.00 0.00 0.00 Equ;ly 1.77 6.31 13.14 2046 26.18 29.85 36.83 40.35 43.89 47.43 50.12 50.18 50.16 49.70 47.96 46.19 44.40 49.45 47.90 46.54 45.09 45.07 44.50 43.04 41.59 TotalD& E 5.91 21.04 37.69 43.05 53.12 56.42 58.11 96.33 64.57 52.81 53.70 51.98 50.16 49.76 47,96 46.19 44.40 49.45 47.99 46.54 49.09 45.97 44.50 43.04 41.50 Maln Assumptions Conoesnon pened 25 years (From the btgin of2000 tothe end of 2024) User tiaff of USS 0,52 ( RS 0,85 I / passenger, without dlfference betowen the single end the integrated tarif. Remuneration Taif of Metro: US$ o64 ( R0 1,06 ). Discount over remureation ta0ff: 0% Concession Fee ( Canon ): US$ 27 millens ( not considOrOd as Capital ) Wordng Capital was not computed, sicoe i is not very nigniftcnt in this activity (the revenues cit be 'cash ) Ccn.esnioaloev/9 he tespvnssih 10 S0q% ot Wwe watlhlestmt ir roiling stock and scotrolilOt systems. A loan from BNDES was considered to fiance initial inveStments in rotirg stoc0 and Systems, oovenng 706, of the total expenditures. 0o0 t'i 0 Page 30 Annex 6 Salvador Urban Transport Project Procurement and Disbursement Arrangements Procurement Procurement methods (Table A) Bank procurement guidelines for works, goods and services 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 two main ICB bids with pre-qualification in this project: A) A lump-sum turnkey bid for the provision of the infrastructure and fixed installations of the metrorail system; and B) a bid for the operating concession of the metrorail system including provision of rolling stock and systems. A) will be categorized under works and will be a lump sum contract except for the foundations and parts of the tunnel which will be costed using unit prices. The procurement documents used will be an adaptation of the standard bidding documents for supply and installation and major works. B) will use a specific bidding document to reflect the operating concession and the supply of metrorail rolling stock and systems. There will be smaller NCB bids for the STU/SAL rehabilitation and housing. Consultant services will be hired in accordance to Bank guidelines (Guidelines- Selection and Employment of Consultants by World Bank Borrowers, January 1997, Revised September 1997 and January 1999). Consultant Services for project management, supervision of works and the integrated Transport Policy will be undertaken under QCBS procedures. Consultant services for support of the implementation unit will be hired under SFB procedures. Prior review thresholds (Table B) Prior review thresholds were revised by the Regional Procurement Adviser to reflect the experience of CBTU with procurement. Disbursement Allocation of loan proceeds (Table C) All disbursements under contracts of less than US$10 million for works, such as systems, permanent way, and assembly of rolling stock, and of less than US$350,000 for goods would be made on the basis of certified statements of expenditure (SOEs) prepared by CBTU/SM. SOE limits for consultant service contracts would be US$100,000 for firms and US$50,000 for individuals. Supporting documentation for the SOEs would be retained by CBTU and made available for examination by Bank staff during supervision missions . Once CBTU/SM complete the requirements to be eligible for PMR-based disbursements, the disbursements will be based on the PMRs. 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 up to US$15.0 million equivalent. This account would be repienished for the amount of withdrawals on account of eligible expenditures. Authorization is sought for retroactive financing of up to US$15 million (10 percent of loan funds) in accordance with the Bank's standard guidelines. This retroactive financing would be for expenditures made twelve months prior to loan signing and cover items such as the preparation of final engineering designs and the project management information system. The disbursement arrangements were discussed and agreed upon during negotiations. Page 31 Annex 6, Table A: Project Costs by Procurement Arrangements' (in US$million equivalent) Expenditure Category Procurement Method Total Cost (including contingencies) ICB NCB Other N.B.F 1. Works a.. Turnkey Contract 204.8 204.8 (116.4) (116.4) b. Metrorail Systemsl 26.0 26 l. Systems (22.1) (22.1) 2. Rolling Stock 53.4 53.4 c. CBTU Rehabilitation 11.1 11.1 (2.0) (2) 2. Consulting Services a.. PMOC & Supervision 8.6 8.6 (6.8) (6.8) b. Technical Assistance 0.7 0.7 (0.5) (0.5) 3. Resettlement Housing a.. Housing 1.6 1.6 (0.7) (0.7) 4. Front end fee 1.5 1.5 (1.5) (1.5) Total 230.8 12.7 10.8 53.4 307.7 (138.5) (2.7) (8.8) (0.0) (150) Note: N.B.F. = Not Bank-financed (includes elements procured under parallel cofinancing procedures, consultancies under trust finds, any reserved procurement, and any other miscellaneous items). The procurement arrangement for the items listed under "Other" and details of the items listed as "N.B.F." need to be explained in footnotes to the table or in the text. Figures in parenthesis are the amounts to be financed by the Bank loan/IDA credit. Front End Fee was not included here 1 included in the concession contract and bid in accordance with paragraph 3.13 (a) of the World Bank Procurement guidelines. For details on presentation of Procurement Methods refer to ODI 1.02, "Procurement Arrangements for Investment Operations." Details on Consultant Services can be shown more easily in the Table Al format (additional to Table A. where applicable). Page 32 Annex 6, Table Al: Consultant Selection Arrangements (optional) (in US$million equivalent) Selection Method Total Cost Consultant Services (including Expenditure Category contingencies) QCBS QBS SFB LCS CQ Other N.B.F. A. Firms 9.0 0.2 9.2 (7.0) (0.2) (7.2) B. Individuals 0.1 0.1 ______________________________ ______ _______ ______ _______ (0. 1) _____ (0.1) Total 9.0 0.2 0.1 9.3 Total (7.0) (0.2) .(0.1) (7.3) Note: QCBS = Quality- and Cost-Based Selection QBS Quality-based Selection SFB = Selection under a Fixed Budget LCS = Least-Cost Selection CQ = Selection Based on Consultants' Qualifications Other = Selection of individual consultants (per Section V of Consultants Guidelines), Commercial Practices, etc. N.B.F. = Not Bank-financed. Figures in parenthesis are the amounts to be financed by the Bank loan. Page 33 Annex 6, Table B: Thresholds for Procurement Methods and Prior Review' Table 6B: Procurement Thresholds (US$ '000) Description Type of Procurement Prior Review Limit Contract Value 1. WORKS Turnkey Contract ICB All ICB No Threshold Systems plus R. Stock and ICB/NCB ICB>10,000 concession NCB 350 to 10,000 CBTU Rehabilitation NCB First NCB contract < 10,000 Price Quotations from at least None < 350 three Bidders , ....................I...................-............... ............ ........ ............................................................................................... .......................................... 2. GOODS ICB All > 350 (Not applicable. Shown as reference) NCB First two contracts 100 to 350 Shopp..ing None <100 3. CONSULTING SERVICES Firms TORs, short list, > 100 QCBS technical evaluation and contracts CQS TORs, short list, >50 Individuals and contracts CQ TOR, CV, contract <50 1. A Procurement Capacity Assessment of CBTU was undertaken using the appropriate survey forms and CBTU was considered procurement-proficient by the regional procurement advisor. The thresholds for prior review were set based on CBTU's prior experience with Bank Procurement. 2. There will be two main bids in this project: a) A lump-sum turnkey bid for the provision of the infrastructure and fixed installations of the metrorail system; and b) a bid for the operating concession of the metrorail system including the provision of rolling stock and systems. There will be smaller bids for the STU/SAL rehabilitation 3. There will be 2 major QCBS request for proposals for the PMOC and engineering supervision. Thresholds generally differ by country and project. Consult OD 11.04 "Review of Procurement Documentation" and contact the Regional Procurement Adviser for guidance. Page 34 Annex 6, Table C: Allocation of Loan Proceeds Expenditure Category Amount in Financing Percentage US$million (%) 1. Turnkey contract First Contribution 9.92 65% Second Contribution 9.92 65% Third Contribution 9.92 65% Fourth Contribution 9.92 65% Fifth Contribution 9.92 65% Sixth Contribution 9.92 65% Seventh Contribution 9.92 65% Eight Contribution 9.92 65% Ninth Contribution 9.92 65% Tenth Contribution 9.92 65% 2. Works A. Metro Rail Systems 20.96 100% B. CBTU Rehabilitation 1.72 20% C. Resettlement Housing 0.61 50% 3. Consulting Services 9.3 86% 4. Front End Fee (1%) 1.50 100% 5. Unallocated 16.71 Total 150.00 Page 35 Annex 7 Salvador Urban Transport Project Project Processing Budget and Schedule A. Project Budget (US$000) Planned Actual (At final PCD stage) 180 B. Project Schedule Planned Actual (At final PCD stage) Time taken to prepare the project (months) First Bank mission (identification) 09/23/1997 09/23/1997 Appraisal mission departure 10/30/1998 10/23/1998 Negotiations 01/30/1999 05/11/1999 Planned Date of Effectiveness 06/30/1999 _/J/19 Prepared by: Prefeitura de Salvador and CBTU Preparation assistance: Canadian Trust Fund, U.S. Trade Development Fund, French Government Bank staff who worked on the project included: Name Specialty Jorge Rebelo (Task Manager and Principal Transport Specialist), David Hughart Principal Transport Economist Armando Araiijo Advanced Procurement Specialist Jose Carvalho Sr. Counsel Daniel Gross Resettlement Specialist Tulio Correa Financial Management Specialist John Flora Peer Reviewer Kenneth Gwilliam Peer Reviewer Ant6nio Estache Peer Reviewer Isaac Popoutchi Extemal Peer Reviewer Allison Turner Staff Assistant Jeremy Coon Staff Assistant Consultant staff who worked on the project included: Oliver S. de Lima Metro/CBTU Systems Specialist Kenneth Knight Metro Infrastructure Specialist Pedro Benvenuto Institutional Specialist Benjamin Darche Project Finance Specialist Systra Consultants Project Reviewers Projob Consultants Metro Systems Design Specialists Higesa Consultants Environmental Specialists Avante Consultants Resettlement Specialists Fundac,o Getuilio Vargas Project Finance Consultants TC/BR EPC consultants Page 36 Annex 8 Salvador Urban Transport Project Documents in the Project File* A. Project Implementation Plan, Salvador Municipality/CBTU, November 1998 B. Bank Staff Assessments 1. Elementos Complementares do Estudo de Demanda e da Avaliacao Financeira, Prefeitura Municipal de Salvador, Coordenadoria de Projetos Especiais, September 1998 2. Relat6rio PROJOB, Etapa 1, Projeto de Metro de Salvador, PROJOB Engenharia S/C Ltda, September 10, 1998 3. Metr6 de Superficie de Salvador, Avaliaq&o Economica, Prefeitura Municipal de Salvador, Coordenadoria de Projetos Especiais, June 1998 4. Metr6 de Superficie de Salvador, Avaliacao Financeira Preliminar da Concessao, Documento Intemo para Discussao, Prefeitura Municipal de Salvador, Coordenadoria de Projetos Especiais, Novembro 1997 5. Estrategias para os Transportes Urbanos, Regiao Metropolitana de Salvador, Programa de Descentralizaqao do Trem Metropolitano de Salvador, Estudos de Demanda, CBTU, Protran Engenharia; September 1997 6. Estrategias para os Transportes Urbanos - Regiao Metropolitana de Salvador, Programa de Descentraliza9co do Trem Metropolitano de Salvador, Estudos de Demanda, Executive Summary; CBTU, Protran Engenharia, January 1997 7. Estudo de Demanda de Transporte Coletivo de Salvador, Versao Preliminar, TC/BR, June 1996 8. Salvador Urban Transport Project Metro Alignment Alternatives and Technology Selection., Preparation Mission, Kenneth Knight, May 1998 9. "Salvador Urban Transport Project Metro Design, Costs and Procurement Options", Pre-Appraisal Mission, Kenneth Knight, July 1998 10. "Salvador Urban Transport Project Metro Design, Costs and Procurement Options", Pre-Appraisal Mission, N° 2, Kenneth Knight, August 1998 11. Projeto do Metr8 de Salvador, Avaliacao dos Estudo de Demanda, SYSTRA, April 1998 12. Projeto de Descentralizacao dos Trens Metropolitanos de Salvador, Arcabouco Institucional, Pedro Benvenuto, March 1998 13. Metro de Salvador de Bahia, Etude Institutionnelle et Financiere, SYSTRA, September 1998 14. Estudos de Impacto Ambiental e Relat6rio de Impacto Ambiental para Implantac,o dos Corredores do Sistema Metr6 de Salvador, Sumario Executivo, Versao Portugu6s, HIGESA Engenharia Ltda, June 1998 15. Environmental Impact Assessment (EIA) and Environmental Impact Report (RIMA) for the Implementation of an Integrated Transportation System - The Salvador Metro, Executive Summary, English Version, HIGESA Engenharia Ltda, June 1998 16. Transporte Coletivo-Habito de Uso e Valor da Tarifa - Pesquisa de Opiniao, P&A-Instituto de Pesquisa e Analise, Salvador, Bahia, Janeiro de 1999. 17. Memorando de Informacoes- 0 Projeto e o Concessionrario, Funda,ao Getulio Vargas, Abril de 1999 Page 37 MOP Schedule D Brazil STATEMENT OF IFC's Committed and Disbursed Portfolio As of 31-Mar-99 (In US Dollar Millions) Committed Disbursed IFC IFC FY Approval Company Loan Equity Quasi Partic Loan Equity Quasi Partic 1973/78/83 CODEMIN 0.00 4.34 0.00 0.00 0.00 4.34 0.00 0.00 1975/96 Oxiteno NE 25.00 0.00 0.00 0.00 25.00 0.00 0.00 0.00 1980/87/97 Ipiranga 40.00 6.32 0.00 150.00 40.00 6.32 0.00 150.00 1980/88 OPP 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 1980/92 DENPASA 0.00 1.00 .12 0.00 0.00 1.03 .05 0.00 1981 Brasilpar 0.00 .04 0.00 0.00 0.00 .04 0.00 0.00 1982/84/86 PISA 0.00 3.90 0.00 0.00 0.00 3.90 0.00 0.00 1983 SOCOCO 0.00 0.00 2.50 0.00 0.00 0.00 2.50 0.00 1987/92/96 MBR 7.02 0.00 10.00 6.23 7.02 0.00 10.00 6.23 1987/96 Perdigao 28.44 10.00 0.00 14.00 28.44 10.00 0.00 14.00 1987/96/97 Duratex 22.00 0.00 0.00 78.00 22.00 0.00 0.00 78.00 1987/97 SP Alpargatas 25.00 0.00 5.00 0.00 25.00 0.00 5.00 0.00 1989/95 Politeno Ind. 14.62 0.00 0.00 0.00 14.62 0.00 0.00 0.00 1990 ENGEPOL .88 0.00 0.00 0.00 .88 0.00 0.00 0.00 1990 Ripasa 2.86 5.00 0.00 0.00 2.86 5.00 0.00 0.00 1990/91/92 Bahia Sul 7.14 20.97 0.00 0.00 7.14 20.97 0.00 0.00 1991 Bradesco-AL 26.03 0.00 0.00 0.00 0.00 0.00 0.00 0.00 1l991 Bradesco-Bahia 3.75 0.00 0.00 0.00 3.75 0.00 0.00 0.00 1991 Bradesco-Eucatex 7.50 0.00 0.00 0.00 7.50 0.00 0.00 0.00 ]1991 Bradesco-Petrofl 7.50 0.00 0.00 0.00 7.50 0.00 0.00 0.00 1[991 Bradesco-Romi 1.59 .40 0.00 0.00 1.59 .40 0.00 0.00 :1991 Rhodia-Ster 7.14 5.95 0.00 0.00 7.14 5.95 0.00 0.00 [L992 CRP-Caderi 0.00 1.93 0.00 0.00 0.00 .68 0.00 0.00 1992/93 TRIKEM 0.00 12.86 0.00 0.00 0.00 12.86 0.00 0.00 1993 BACELL 11.00 10.70 0.00 16.20 11.00 10.70 0.00 16.20 1993 CEBRACTEX .60 0.00 0.00 0.00 .60 0.00 0.00 0.00 1993 Macedo Alimentos 14.50 0.00 0.00 0.00 14.50 0.00 0.00 0.00 1993 Votorantim 13.00 0.00 0.00 1.00 13.00 0.00 0.00 1.00 1993/96 CEVAL 49.00 20.00 0.00 105.00 49.00 20.00 0.00 105.00 1994 GAVEA 9.69 0.00 5.50 0.00 9.69 0.00 5.50 0.00 1994 GP Capital 0.00 14.04 0.00 0.00 0.00 14.00 0.00 0.00 1994 ParaPigmentos 30.00 0.00 9.00 33.02 25.50 0.00 9.00 27.77 1994 Portobello 13.36 5.00 0.00 0.00 13.36 5.00 0.00 0.00 1994/95/97 Sadia 47.00 10.00 9.67 189.78 47.00 10.00 9.67 189.78 1994/96 CHAPECO 25.00 0.00 0.00 5.00 25.00 0.00 0.00 5.00 1994/96 S.A.I.C.C. 0.00 7.85 6.87 0.00 0.00 7.70 6.87 0.00 1995 Bradesco-Hering 7.50 0.00 0.00 0.00 7.50 0.00 0.00 0.00 1995 Brahma- BRA 27.50 0.00 0.00 61.50 27.50 0.00 0.00 61.50 1995 Cambuhy/MC 18.75 0.00 0.00 0.00 18.75 0.00 0.00 0.00 1995 Lojas Americana 26.00 0.00 5.00 14.00 26.00 0.00 5.00 14.00 1995 LATASA - Brazil 14.33 0.00 0.00 2.50 14.33 0.00 0.00 2.50 1995 Rhodiaco/PTA 20.00 0.00 0.00 18.00 20.00 0.00 0.00 18.00 1995/96/98 Globocabo 35.00 27.97 0.00 118.00 35.00 27.97 0.00 118.00 1996 Banco Bradesco 40.00 0.00 0.00 54.36 15.23 0.00 0.00 22.84 1996 Mallory 7.27 0.00 0.00 0.00 7.27 0.00 0.00 0.00 1996 TIGRE 25.00 0.00 5.00 19.23 25.00 0.00 5.00 19.23 1996/97 Lightel 25.00 18.17 0.00 0.00 25.00 18.17 0.00 0.00 Generated by the Operations Information System (OIS) on 05/17/99 Page 38 MOP Schedule D Committed Disbursed IFC IFC FY Approval Company Loan Equity Quasi Partic Loan EqiyQai Pri 1997 Bompreco 25.00 0.00 5.00 0.00 25.00 0.00 5.00 0.00 1997 Copesul 40.00 0.00 0.00 180.00 40.00 0.00 0.00 180.00 1997 Guilmana-Amorim 29.47 0.00 0.00 86.21 29.47 0.00 0.00 86.21 1997 Rodovia 35.00 0.00 0.00 79.50 30.02 0.00 0.00 68.18 1997 Samarco 16.20 0.00 0.00 13.33 16.20 0.00 0.00 13.33 1997 Sucorrico 15.00 0.00 0.00 0.00 15.00 0.00 0.00 0.00 1997 Wembley 0.00 10.00 0.00 0.00 0.00 10.00 0.00 0.00 1997/93 Coteminas 15.00 4.00 0.00 20.00 15.00 4.00 0.00 20.00 1998 Arteb 20.00 7.00 0.00 20.00 14.00 7.00 0.00 14.00 1998 BSC 14.00 0.00 0.00 7.50 14.00 0.00 0.00 7.50 1998 Dixie Toga 0.00 15.00 0.00 0.00 0.00 15.00 0.00 0.00 1998 Empesca 5.00 0.00 10.00 0.00 5.00 0.00 10.00 0.00 1998 Fras-le 10.00 10.00 0.00 0.00 0.00 0.00 0.00 0.00 1998 Icatu Equity 0.00 30.00 0.00 0.00 0.00 .19 0.00 0.00 1998 Randon 7.00 0.00 3.00 0.00 7.00 0.00 3.00 0.00 1998 Saraiva 15.00 3.00 0.00 0.00 15.00 3.00 0.00 0.00 1998 TRG (Tecon Rio) 7.50 0.00 5.50 18.00 0.00 0.00 0.00 0.00 1999 Vulcabras 20.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 TotalPortfolio: 960.14 265.44 82.16 1,310.36 856.36 224.22 76.59 1,238.27 Approvals Pending Commuitment Loan Equity Quasi Partic 1996 AGUAS LIMEIRA 17.00 1.00 0.00 23.00 1998 BANCO ICATU 30.00 0.00 0.00 0.00 1999 CIBRASEC 0.00 7.50 0.00 0.00 1997 CTBC 35.00 0.00 0.00 150.00 1998 FOSFERTIL 20.00 0.00 0.00 60.00 1998 FRAS-LE 0.00 0.00 0.00 15.00 1998 FSA 35.00 0.00 10.00 45.00 1996 GLOBOCABO 11 0.00 0.00 0.00 38.00 1999 INNOVA 20.00 5.00 0.00 160.00 1999 INNOVATIVE HS 0.00 0.00 6.25 0.00 1997 IPIRANGA EXPANS. 0.00 0.00 5.00 0.00 1998 IPIRANGA-RI 2 0.00 .09 0.00 0.00 1998 LOJAS RENNER 16.00 4.00 0.00 0.00 1996 OXITENO/ETHYLO 0.00 5.00 0.00 0.00 1998 RANDON 0.00 0.00 0.00 15.00 1997 SP ALPARGATAS II 0.00 0.00 0.00 30.00 1998 TRIKEM II 25.00 0.00 0.00 0.00 1998 UNIBANCO 40.00 0.00 0.00 250.00 1999 WIEST 9.00 0.00 8.00 0.00 Total Pending Comaiitment: 247.00 22.59 29.25 786.00 Generated by the Operations LIformation System (OIS) on 05/17/99 MIOP Schedule D Generated: 053 14'99 Status of Bank Group Operations in Brazil Operations Portfolio As of 10-May-99 Difference Between expected Jriginal Amount in USS Millions and actual Fiscal disbursements a. Project ID Year BoeroWer Purrpose IBRD IDA Canceallations Undisbursed JIig Frm Rev'd llumber of Closed Projects: 194 Active Prsjects BR-PE-43874 1999 G'DVERIIMEIIT CF BRAZIL DISEASE SURVEILLANCE 100. 50 2.1 0.05 11.n 5I 0..0 BR-PE--54129 1999 GOVERNHENT OF BRA2IL AIDS 2 165.. °.rc 0.0 144.99 -6.67 BR-PE-58129 1999 FEDERAL GOVERNMENT EMER. FIRE PREVEIJTIO 15.0 7. IC 0. 15.0'C 9.'0: BR-PE-35728 1998 STATE OF BAHIA BAHIA WTPR RESCURCES 51. .cc 0.C.CG 41.22 19.61 BR-PE-3889Y 1998 GOVERIINEINT 07 BRAZIL FED.WTR MGT 198.Oc 5.00 0.' I 178.73 41.72 5., BR-PE-38947 1999 -OVERIIEIIT OF BRAZIL SC. 8 TECH 3 155. 0 0. 9G G. C 138.99 23.99 ?.5 BR-PE-400'33 1998 THE STATE CF MINAS GERAIS 14G STATE PRIV. 170.1 . I C)oo 1 /0.0GC 133.34 0.0G BR-PE-42565 1998 STATE OF PARAIBA PAPAIBA R.P5VERTY 6 0.GG 90G.00 48.56 1.20 9. Ocg BR-PE-43420 1998 FED. REPUBLIC CF BRAZIL WATER S.1MOD.2 1510, D.J G.0C,0 15. 0I 32.50 Q.00 BR-PE-43421 1998 STATE 9If RIO DE JANEIRO RJ M.TPANSIT PRJ. 186.00 0C 1.1C 186.11 82.32 . BR-PE-48357 1998 REPUBLIC OF BRAZIL CEI. BAIIK TAT 20.C 3. .0'C 00 16.83 8.1C0C0 BF.-PE-50762 1998 GJV. OF BRAZIL FUI4DESC5LA1 62.5 ° °c 0. cl 27.13 -22.886 BR-PE-51101 1998 STATE OF MARANHAO 4ARA71HAG R.PCVKRTY 0.0C0 0.100 .00 69.14 6.84 '. O BR-PE-5791t0 1998 GOVERNMEPIHT OF BP.AZIL PENISIO1N REFORM LIL 5.0C. 0. 0i0 0.00 5.00 5.00 C.00 BR-PE-6474 1998 STATE OF SAO PAULG. LAND MGT 3(SP) 55. C, 0.0 0. U. 51.91 7.84 0.G0 BR-PE-6549 1998 TBG GAS SCTR DEV PROJECT 130.00C 0.0 0.Q0 130.0CO 75.34 0.1 0 BR-PE-6559 1998 THE STATE OF SAO PAULO (BF-R)SP.'TSP 45.00 0.'0C 0.0 45.10 22.17 0.00 t BR-PE-34578 1997 RIO GRANDE DO SUL RGS HWY MGT 70.00 0.00 0. 0 66.70 23.37 0.00 C2 BR-PE-38896 1991 STATE OF RGII R.POVERTY(RGN) 24.CC 0.0' 0.00 15.25 4.29 ,-.rr, BR-PE-42566 1997 STATE OF PERIIAMBUCO R.POVERTY(PE) 39.c 0,.C0 0.,9 16.36 1.01 CO BR-PE-43868 1997 STATE OF RGS RGS LAIND M7GT.POVERTY 100.10 0 11. ^ 0 .00 89.45 19.61 C o C RR-PE-43871 1991 STATE OF PTAUI (PIAUI)R.POVERTY 30. lI .00 0. 00 9.06 -4.10 1 ,r BR-PE-43873 1997 FED.REP.OF BRAZIL AG TECH DEV. 60.C0 0 T.. C I. 219.88 16.69 0.00 BR-PE-46052 1997 CEARA WTR PILOT 9.60 0.01' . (90 7.89 7.89 ,.o BR-PE-48870 1997 THE STATE OF MATO GROSSO MT STATE PRIV. 45.0 0G.00 0.'0 45.00 38,34 0.00 BR-PE-6475 1997 FED. REP. OF BRAZIL LAIID RFM PILOT 90.10 0.00. 0.00 61.25 16.51 0.0 BR-PE-6532 1997 FEDERAL GOVER71MENT FED H19WY DECENTR 30C.500 C.0CC '.CO 261.02 91.03 0. 00C. £R-PE-6562 1997 STATE OF BAHIA BAHfIA MUN.DV lOC.nC, 0.00 10 C 98.26 34.60 1.0Q BR-PE-37828 1996 STATE OF PARAINA (PR) R. POVERTY 175.C,9 .11 00 U. 141.71 91,64 0.00 BR-PE-40028 1996 FEDERATrVE REPUBLIC OF BR RAILWAYS RESTRUCTURG 350 . 0..00 50.00 37.42 4l'.71 0.00 BR-PE-6S12 1996 'VRD ENV. CONS (CVRD) 5C, C.I 0C00 23.16 12.85 0.0 n BR-PF-6551 1996 FED. REP. OF BRAZIL HITH SCTF. REFORMt 300.01 0. Iu I C, 226.55 137.37 BR-PE-35717 1995 GsVT OF BRAZIL RURAL POV. (BAHIA) 1050 C'-,JC 0.00 43.12 13.81 BR-PE-38882 1995 FED REPOsBLIC OF BR.A_IL FECIFE M.TSP 102,00 C .0 I I.0 71.95 45.64 30 BP.-PE-38884 1995 G,OVT IF BRAZIL RURAL POV.- CEARA 1G, 0. 0 0. O 22.41 1.01 .,C 8P-PE-38885 2995 GDVT -F BRAZTL RUPAL POV.-SERGIPE 360 ' CJ0 11.37 .67 00 BF-PE-6436 1815 STATE -F CEARA CIT. CEARA UR.DV/WATER CO II0. 0. , r ,o 61.27 52. 9 - 17,75 BR-PE-6164 1995 FEE REPIJRLIC BFPAZIL BELO H M.TSP 99 10 0.J 3 o0 44 .07 29. a 0 0 BR-PF.- 6452 1194 MJIIIISTRY GO EDUCATIOII IIE BASIC EDUC III 2 06,,. IF. .0 23.63 21.30 .0' BR-PE-6522 1994 ST.OF ESPIRITO SAINTO ESP.SA7TO WATER ' , O, 72.97 1 .14.13 BR-PE-6524 1994 ST.OF MINAS GEPAIS IIT7IAS 1-1IRC.DEVEL6PMT 5. ; . C 29.44 34.41 2 a.47 PR-PE-6543 1994 GrCVERIIMEIIT 11. GERAIS BASIC EDUC l50.,s ) ,- C.2r.31 14.31 .. I, BY-PE-655 1994 S-TATE GVTS STE HNY MGT TI 220,.0 .C0 36,S7 6.2' 36.19 6.19 Generated by the Operations Information System (OIS) MOP Schedule D Generated: 05'14/99 t-ifference Retw-ee,o expected nDrigiral Amount in US$ Millions and actual Fiscal disbursements a Project ID Year Borro rer Purpose IBRD IDA Cancellations Undisbursed Crig Frm Rev d BR-PE-6558 1994 REPUBLIC oF BRAZIL PARANA BASIC FDUC 96.00 0C.0 o.00 19.44 11.11 0.0Q BR-PE-6545 1993 ITIIAS GERAIS ST. WTR D PLN(MINAS GEPA 145. ' C r5 5.cu 2.29 7.28 2.28 BR-PE-6541 1993 S.PAULO PARAMA ITS. XTRP D PLI(SP PARAIIAT 245.10C0 9.30 3-.78 4^ .06 -6.24 BR-PE-6547 1993 FED.REP.oF BPAZIL I4ETRPD TRANSP. RID 128.5G .29 30 . 1 BR-PE-6368 1992 CGDVERNMENT X.ATER SECTOR MIODERNI 210.r 3.25 3.25 BR-PE-6505 1992 GDVERNMENT OF BRAZIL IATO GROSSO NAT RES 205.01 1. C 0.01 62.49 62.49 BR-PE-6453 1991 FEDERATIVE REPUBLIC OF BR IIE IRRIG I 21.61 000 69B. 00 18.61 89.62 18.62 BR-PE-6413 1991 STATE OF SANTA CATARINA 131D MGMT II-S. CATAR 33. 1. 1.09 1.13 1. 13 BR-PE-6370 1989 FEDERATIVE REPUBLIC OF BR FIE IRRI JAIBA 71.01 00 o.Q.-I 1.25 1.27 9 0C, BR-PE-6414 1989 COMGAS, SAO PAULO IITRL GAS DIST 94.1 C 06. G. 0 .04 .92 0.00 Total 6, 3G0 . 2' 1 .11 17.310 3,215.82 1, 511. 51 37.77 Active Projects Closed Projects Total Total Disbursed IIBRD and IDA) 2,906.-8 17,967.G9 20,873.11 of which has been repaid: 261.42 3 5 13,666.42 Total now held b, IBRD and IDA: 5,60. 41 4,659.93 10,520.40 Amount sold : 1.10 45.83 45.83 of which repaid : 0.00 45.83 45.83 Tctal Undisbursed : 3,215.82 97.83 3,313.65 a. Intended disbursements to date minus actual disbursements to date as projected at appraisal. Note: Disbursement data is updated at the end of the first week of the month and is currently as of 30-Apr-99. Generated by the Operations Infonnation System (OIS) Page 41 Brazil at a glance 9/16/98 Latin Upper- POVERTY and SOCIAL America middle- Brazil & Carib. income Development diamond* 1997 Population, mid-year (millions) 163.5 494 571 Life expectancy GNP per capita (Atlas method, US$) 4,720 3,880 4,520 GNP (Atlas method, US$ billions) 771.9 1,917 2,584 T Average annual growth, 1991497 Population (%) 1.4 1.7 1.5 GNP Grs Laborforce (%) 1.7 2.3 1.9 per primary Most recent estimate (latest year available, 1991-97) capita enrollment Poverty (% of population below national poverty line) 1/ 17 Urban population (% of total population) 80 74 73 Life expectancy at birth (years) 67 70 70 Infant mortality (per 1,000 live births) 34 32 30 Child malnutrition (% of children under 5) 7 .. .. Access to safe water Access to safe water (% of populaton) 72 73 79 Illiteracy (% of population age 15+) 17 13 15 Gross primary enrollment (% ofschool-age population) 112 111 107 Bmzi Male .. .. .. Upper-middle-income group Female .._.._.. KEY ECONOMIC RATIOS and LONG-TERM TRENDS 1976 1986 1996 1997 Economic rattos* GDP (US$ billions) 152.7 268.1 774.9 820.3 Gross domestic investment/GDP 23.1 19.1 20.7 22.8 Trade Exports of goods and services/GDP 7.0 8.8 7.1 6.2 Gross domestic savings/GDP 20.7 21.6 18.6 20.6 Gross national savings/GDP 19.2 17.1 17.3 18.6 Current account balancelGDP -4.3 -1.9 -3.1 -4.1 Domestic l Interest payments/GDP 1.1 2.4 1.1 1.1 o ves Investment Total debt/GDP 21.8 40.7 23.1 23.6 Savings Total debt service/exports 37.9 46.8 41.7 45.2 \ Present value of debt/GDP .. .. 21.8 Present value of debt/exports .. .. 280.8 .. Indebtedness 197646 1987-97 1996 1997 1998-02 (average annual growth) GDP 2.9 1.9 2.8 3.2 3.5 BrazD GNP per capita 0.2 0.0 1.8 1.9 2.0 - Upper-middle-income group Exports of goods and services 10.3 5.4 6.1 1.8 5.0 STRUCTURE of the ECONOMY 1976 1986 1996 1997 Growth rates of output and investment (%) (% of GDP) Agriculture 13.0 11.2 14.4 12.7 Industry 39.7 45.2 36.4 37.8 lat- Manufacturing 30.4 33.0 22.9 23.4 a -- Services 47.3 43.7 49.2 49.5 0- -, Private consumption 68.8 67.8 62.2 61.9 5 o_}2 93 94 95 95 97 General government consumption 10.5 10.7 19.2 17.5 GDI e GD Imports of goods and services 9.4 6.4 9.2 8.5 I (average annual growth) 1976-86 1987-97 1996 1997 Growth rates of exports and imports (%) Agriculture 3.7 2.5 2.2 2.4 40 Industry 2.7 0.1 3.0 3.8 Manufacturing 2.3 -0.2 2.9 3.8 20 Services 2.9 3.1 3.1 3.5 Private consumption 2.5 3.4 4.6 4.5 a 94 ' 9 ' 97 General government consumption 2.1 -1.6 9.8 8.0 Gross domestic investment -2.1 1.2 -0.2 6.2 -20 Imports of goods and services -3.3 12.1 5.9 13.9 - Exporls i Imports Gross national product 2.4 1.5 3.2 3.3 Note: 1997 data are preliminary estimates. 1/ Poverty estimate is from 1990. The diamonds show four key indicators in the country (in bold) compared with its income-group average. ff data are missing, the diamond will be incomplete. Page 42 Brazil PRICES and GOVERNMENT FINANCE 1976 1986 1996 1997 'Inflaton (%) Domestic pricesI (% change,i 2,500 Consumer prices .. 147.1 15.6 69 2000. Implicit GDP deflator 47.6 145.3 17.2 7.8 1500° 1,9000 Govemment finance son (% of GDP, includes current grants) a Current revenue . 22.3 31.3 32.1 92 93 94 95 99 97 Current budget balance .. -5.0 -1.2 -1.6 GDP deflator c P Overall surplus/deficit .. -13.3 -5.9 -6.1 TRADE 1976 1986 1996 1997 Export and import levels (US$ millions) (IJSS milllons) Total exports (fob) .. 22,394 47,747 52,986 75°000 Coffee .. 2,360 2,095 3,094 Other food .. 1,562 4,458 5,729 5 0090 Manufactures .. 11,839 29,676 32,732 Total imports (cif) 14,044 53,301 61,358 Food . . 329 390 25.9000u Fuel and energy .. 3,541 3,459 3,220 Capital goods .. 3,464 20,188 26,232 o 91 92 93 94 95 96 97 Export price index (1995=100J .. 68 100 96 Import price index (1995=100) .. 85 103 95 CExports fllmporns Terms of trade (1995=100) .. 80 97 101 ---_ ,= . . BALANCE of PAYMiENiTS (11S$ n7tflion,n) 1S76 1986 1996 1997 currentaccountbalancetoGDPratio(%) Exports of goGds and services 10,848 23,870 51,853 56,827 2 imports of goods and senrices 14,687 16,576 64,958 74,158 Resource balance -3,839 7,294 -13,105 -17,331 ° 91 92 4 Net income -2,719 -12,259 -14,141 -18,329 Net current transfers -3 -26 2,899 2,220 -2 Current account balance -6,561 -4,991 -24,347 -33,439 | t Financing items (net) 9,233 -319 33,364 25,629 Changes in net reserves -2,672 5,310 -9,017 7,810 -6 Me0mo: Reserves including gold (US$ millions) 6,542 5,907 60,089 51,729 Conversion rate (DEC, local/US$) 3.88E-12 4.97E-9 1 r 1.1 EXTERNAL OEiT and RESOURCE FLOWS 1976 1986 1996 1997 (US$ millions) Composition of total debt, 1996 (US$ millions) Total debt outstanding and disbursed 33,340 109,026 179,047 193,598 IBRD 1,172 7,546 5,876 5,743 A: 5,876 6s8| I DA 0 0 0 0 o:3~3 Ds 3,550 Total debt service 4,278 11,616 25,091 30,000 E: 16,803 IBRD 130 1,164 1,638 1,428 IDA 0 0 0 0 Cornposition of net resource flows Official grants 6 30 80 Official creditors 384 1,152 -514 -1,786 Private credirors 5,215 -444 14,514 17,238 Foreign direct investment 1,555 320 9,889 Portfolio equity 0 0 3,981 . | F: 117,311 World Bank program Commitments 486 1,620 858 1,104 A-lBRD E-Bilateral Disbursements 173 1,619 1,500 1,416 B-IDA D-DOtherrmultilteral F-Private Principal repayments 45 608 1,222 1,049 C- IMF G - Short-termr Net flows 128 1,011 278 368 Interest payments 85 556 416 380 Net transfers 43 455 -138 -12 Development Economics 9116/98 IBRD 30090 . O'G602GUYANA 40° PARIPE \VENEZUELA>/ SURINAME BRAZIL *M /5 FRENCH GUIANA \AI COLOMBIA oo 'PERIPERI SALVADOR URBAN TRANSPORT PROJECT LAPA-PIRAJA METRORAIL UNE O INTEGRATION STATIONS PER B BRA I * INTERMEDIATE STATIONS 20' /20- - AJOR HIGHWAYS BRASIA Svijador Ir s >@ >< J , /CBTU-SA RAILROAD UNE ARGENTtNA.A \ OC~4 \RO' URUGUAY' I 7 & 4 / ZEIR~~~~~oCJAEIAS DO0TANQUE CALCADA JUA 4~U E MENINOS BONCDO RIO , z L , TL\ D BARRA ~ ' ' oA PITUA MUSRNA This maop non pro&sced by the Map Design Unit of The WorddBonk, The b--dores, oolors. denso,ielions and my other samsonio o &sip - do notply,o on t port of Theo Wldo ek Grop, any Iocbmet on the legal stats oeny esitoy, or any endoersement or accepfavoseof- b-/shssat.ses. JUNE 1999