,> 3 YdD P4!> - Document of The World Bank FOR OMCIAL USE ONLY MICROFICHE COPY Report No. P- 5695-BR Type: (PM) LEL BAROUD/ X31916 / I 7041/ LAIEI MEMORANDUM AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN IN AN AMOUNT EQUIVALENT TO US$50 MILLION TO BANCO NACIONAL DE DESENVOLVIMENTO ECONOMICO E SOCIAL WITH THE GUARANTEE OF THE FEDERATIVE REPUBLIC OF BRAZIL FOR THE NATIONAL INDUSTRIAL POLLUTION CONTROL PROJECT APRIL 20, 1992 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. CURRENCY EOUIVALENTS Currency Unit = Brazilian Cruzeiros (Cr$) US$ = Cr$1,800 Cr$ = US$0.00056 FISCAL YEAR January 1 - December 31 WEIGHTS AND MEASURES Metric System ABBREVIATIONS AND ACRONYMS BNDES Banco Nacional de Desenvolvimento Economico e Social F! Financial Intermediary SEPA State Environmental Protection Agency TR Taxa Referencial; an Interbank average interest rate paid on certificates of deposit FOR OFFICLU USE ONLY BRAZIL PRESIDENT'S REPORT NATIONAL INDUSTRLAL POLLUTION CONTROL PROJECT LOAN AND PRO=ECT SWUMARY Borrower. Banco Nacional de Desenvolvimento Economico e Social (BNDES) Guarantor. The Federative Republic of Brazil Intmediaries: Eligible commercial, inmestment and development banks. Beneficia ies: Industrial enterprises participating in the project and State Environmental Protection Agencies (SEPAs). Amount: US$50 million equivalent Interest at Bank's standard variable rate, plus standard comrmitment fee. Maturity 15 years, including 5 years grace. Relending Terms: Loan funds will be passed on by BNDES directly or through other financial intermediaries (Fls) to industrial firms eligible to participate in the Project. Interest rate to final beneficiaries would range between 9 and 12 percent per annum in real terms. The terms of the sub-loans would be up to 8 years with a 6-month grace period. Financing Plan: IBRD: US$ 50.0 million BNDES: US$ 25.0 million Industry: US$ 25.0 million Japanese Grant: US$ 0.5 million TOTAL US$100.5 million Economic Rate of Return: NA Staff Appraisal Report: Report No. 10180-BR M-ap: Map Number IBRD 22413R-BR Program Objective Category. Environment This document has restricted distribution and may be .sed b) recipients only in the performance of their offcial duties. Its contents may not otherwise he tiiclos id without World 8ank authorization. MEMORANDUM AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO BANCO NACIONAL DE DESENVOLVIMNTO ECONOMCO E SOCIAL WITH THE GUARANTEE OF THE FEDERATIVE REPUBUC OF BRAZIL FOR THE NATIONAL INDUSTRIAL POLLUTION CONTROL PROJECI 1. I submit for your approval the foowing memorandum and recommendation oa a proposed ILan to Banco Nacional de Desenvolvimento Economico e Social (BNDES) of Brazil for US$50 million equalent wt the guarantee of the Federative Republic of Brazil The proposed Loan would be repayable in 15 yea=s on a fixed amortization schedule, including 5 years of grace, at the Bank's standard varable interest rate and would help finance mdustnal pollution control .nv, tments in Brazil 2. . Background Industrial pollution is perasive in Brazil, particularly in the heavily indusalzed eastern and southeastern states. The industrial pollution is serious enough in several Brazilian states to affect the health and well-being of significant portions of the population. Unhealthy air quality, contaminated waters and/or exposure to hazardous waste are quite common in these states. As in many other countries, the intense industralization process of the last thirty years in Brazil did not take into consideration preserving the environment. It was not until the late Seventies that some Brazilian states, commencing with Sao Paulo, began serious and systematic efforts to clean up the environment and attempt to prevent its further deterioration. 3. Control of industrial pollution in Brazil is primarily the responsibility of individual State Environmental Protection Agencies (SEPAs) whose abilities and resources to deal effectively with these problems vary widely from state to state. In SIo Paulo and, to a large extent, Rio de Janeiro, SEPAs have adequate staffing and resources to effectively evaluate levels of air and water pollution, and identify the specific industrial sources responsible for emissions. In Parana, Santa Catarina and Espuito Santo, the SEPAs are smaller and newer, but have developed some good capabilities. Unfortunately, SEPAs in most other states do not have sufficient resources to make pollution assessments. In some cases, reasonable efforts for water pollution control have been undertaken, but effective characterization and control of air pollution lags behind. Moreover, in all industrialized states, including Sao Paulo and Rio de Janeiro, hazardous waste problems have not been adequately characterized. 4. In general, the federal legal framework is designed to provide overall guidance and to set broad ambient quality objectives and minimum compliance standards for polluters. All * states use federal ambient quaUlty standards, with some states having their own legslation that sets more strict standards. Legislation explicitly recognizes the power of states to set tighter pollution control standards or to issue supplemental state legislation. Most of the supervisory and enforcement functions including licensing, monitoring and fines against violators are left to the states. Only a few states, however, have the necessary monitoring capability to ensure that these standards are met. 5. There are substantial variations among different states on the enironment regulatory framework, but these are not a constraint for attaining ambient quality goals. Enforcement of the law, however, varies widely from one state to another and depends on the state's political commitment and resources. Sbo Paulo has enacted vy strict measures and does 2 have the insdtutional capability as well as the political support to enforce these measures. Minas Gerais, on the other hand, has fairly lenient legslation and has only recently begun to allocate necessary resources to ensure that industry follows the limited regulations in effect. 6. Bank's Strategy and Actions for the Environment The Bank's development assistance strategy to Brazil has three long-term objectives: (1) private sector development and public sector reform; (2) increang productivity and improving the living conditions of the poor; and (3) protecting the environment and public health. Ihe Banks medium-term objective in deaing with e nal issues is to ufilize its operational program to help Brazil develop a rational policy frmework as weR as effective institutions and instruments for dealing with environmental protection issues, resource management and the problem of protecting the vulerable population. In order to meet this objectnie, the Bank is assisting the Government in developing policies and programs for a) support of biodiversity and combatting Amazon deforestation; b) pollution control; c) soil erosion; and d) natural resource management. The National Envionmental Project was approved in 1990 to support the national environmental plan and provide a framework for federal and state programs and protection of critical ecosystems. The Bank's study of Amazonian environmental issues wil be the basis for policy dialogue and wil contrbute to comprehensive regional policies. The Bank has several operations to support sustainable Amazon regional development while protecting the rain forest. In the area of poilution control, the Bank is using lending to strengthen institutions, to improve policies and regulations, and to france industrial and urban pollution control. In natural resource management, the Bank has projects on soil erosion and institutional frameworks for watershed management and forestry. The Bank recently approved a natural resource management project for Rondonia in the Amazon region to incorporate agro-ological zoning with policy and institutional refiorms, and is discussing projects in other states in the Amazon. At the request of the Group of Seven Countries (G-7), the Bank is administering a piot program to conserve Brazil's tropical rain forests financed by donor contributions to a multflateral trust fund and by bilateral associated cofinancing. The pilot program will support projects in several areas including natural resources policies development, protected areas management, scientific research, and grass roots intiatives. 7. The Bank has assisted Brazil in developing institutions to improve environmental management in the power and transport sectors The Bank has supported the Government's efforts in developing programs for local, regional, and sectoral environmental institutional development and plans; power conservation; environmental programs in roads and irrigation; and water resource planning. Presently the Bank is developing a series of state-level water pollution control and management projects. & Lessons from Previous Bank Involvement The Bank supported Sio Paulo's efforts through two consecutive Loans for industrial pollution control in 1980 (Sio Paulo Industrial Pollution Control Project - Loan 1822-BR), and in 1987 (Ihe Second Industral Polution Control Project - Loan 2831-BR). Loan 1822-BR suffered implementation delays because of its initial complicated design, which was simplified later and the project area expanded. This proved to be a turning point and Loan funds were disbursed rapidly thereafter. Also, Loan 1822-BR was able to reduce industrial dust emissions significantly. Yet Sao Paulo's dust levels remained unchanged because of the transport sector which was identified subsequently as the main source of dust rather than industry. The overall success of Loan 1822-BR led to a second operation; however, the latter Loan encountered serious implementation problems. Despite strong demand for Loan resources, the Brazilian Federal Government (the Borrower) and BNDES (its Fnancial Agent) blocked the flow of resouces to the State of SAo Paulo (the 3 Subborrower), because of overdue debt by the State to the Federal Govemment and BNDES. This problem was finally resolved in January 1992. The proposed Loan would avoid these design problems experienced in the first two Loans by having BNDES, as the Borrower, working with a network of financial intermediaries, to channel the Loan resources to the ultmate beneficiaries in various Brazilian states, without financial involvement of the state governments. Further, by concentrating support under the proposed Project on areas where industrial emissioi! predominates, the anomalies experienced in Loan 1822-BR could be avoided. Loan 2831-BR has a component for diagnosing the industrial pollution problem in 12 Brazitian states. These diagnostic studies formed the basis of the proposed Loan. 9. Rationale for Bank nvolvement Ihe proposed project for the reduction of industrial pollution would contribute primarily to the third objectie of the Bank's strategy in Brazil, namely; protecting the environment and public health. The Bank has been involved in industrial pollution control in Brazil since the late 1970s, mainly in SPo Paulo. Ihe Bank helped Sao Paulo establish an integrated appmach for dealing with pollution, combining long-term resources for financing pollution control investments with the regulatory and institutional aspects of the pollution abatement efforts. Thi approach has proved to be successful and several other Brazilan states have requested similar Bank support to combat industral pollution. 10. The BNDES would be the Borrower and the main implementing agency. BNDES, as the main source of long-term credit in Brazil, disburses roughly US$4.5 bilion a year. The Bank has made several loans to BNDES, the most recent being the 1990 Private Sector Fmance Loan (Loan 3268-BR). BNDES' assets represent 25% of the assets of the federally owned banks in Brazil and 12% of total assets of the Brazilian banking system. In addition, BNDES' equity represents 45%o of the total equity of the federally owned banks and 25% of total equity of the Brazilian banking system. BNDES began restructuring itself with its most recent strategic plan to better serve the needs of private sector borrowers BNDES' fundamental objective since the restructuring is to competitively integrate Brazil's markets with those of the global economy. To accomplish this objective, BNDES in mid-1989 underwent a sweeping reorganization which featured policy reforms. These reforms, which are being supported by Loan 3268-BR, included a) a switch from public sector to prvate sector orentation; b) implementation of an independent credit policy, c) rationalization of interest rates; d) improvements in profitability and portfolio quality; and e) a reduction in directed credit. BNDES is meeting its targets under the Loan on all the agreed reforms. 11. Project Objectives The main project objective would be to improve the public health and livng conditions of the population concentrated in and around industnalized areas, particularly the urban poor. The Project would also familiarize the banking system with financing freestanding pollution control investments and hence allow industry to have easier access to this type of loan through a variety of intermediaries or directiy through BNDES. The Project would also enhance BNDES' capability to understand pollution control problems, seek possible solutions, and process loans of this nature. Fnally, the Project would assist in strengthening institutional capacities of the most active SEPAs in monitoring and analyzing environmental problems, leading to a greater level of enforcement. 12. rjectD ption The Project would consist of three components: a) a credit line for industral pollution control investments; b) technical assistance for BNDES; and c) institutional strengthening for the SEPAs. 4 13. a) Pollution Control Inestment Through the first component, the Project would finance investments by Brazilian and foreign owned firms to control all types of existing industtial polution. Al investment subprojects included in a State pollution control strategy approved by the Bank would be automatically eligible for financing up to a free limit of US$5 million. Subprojects greater than US$5 million of Bank financing, or those which are not included in a Bank-approved State strategy, would require prior Bank approval. In order to be eligible to receive subproject financing in the state, each SEPA will have to s.n an agreement with BNDES based on a Bank-approved State poflution control strategy or based on an approved plan of action to prepare such a strategy. 14. SEPAs' pollution control strategies are designed to effect overall improvements in enviomental quality (air, water, and soil) in specific regions identified as havng critical pollution problems. For each region a rank-ordered list of industrial polluters has been prepared based upon criteria which include: (i) type of pollution; (ii) relative contnbution from the industrial sector versus other sectors (mun*ipaL transport, agricultural); and (iii) assimilative capacity of receiving mediums (eg. discharge into small stream versus the ocean). The strategic approach will be to concentrate project resources in areas where industrial pollution is a major contributor to overall environmental degradation. In this manner, more cost effective environmental improvement can be obtained. This strategy improves on that of the fist Bank Polution Control Project in Sao Paulo (Loan 1822-BR), which focused on industrial pollution controL but without targeting areas where it was the principal pollution source in relative terms. 15. The states whose industrial pollution control strategies have already been approved by the Bank are Sao Paulo, Rio de Janeiro, Santa Catarina, Parana, Minas Gerais and Espirito Santo. The priority polluting enterprises in each of these states have already been identified, and are lsted in Annex m of the SAR. The Bank may approve, at any stage of project implementation, any new state pollution control strategy which would allow the projects included in that strategy automatic eligibility for financing under the Loan. Approval of a given state strategy would be condidonal upon the institutional capability of the SEPA and its ability to enforce pollution controL For states without an approved pollution control strategy, participation is still possible if a) it can be demonstrated that proposed subprojects wIll eliminate or significantly reduce an eonmental tbreat or health hazard, - these will be evaluated by the Bank on a case-by-case basis, and b) the State has an approved plan of action to prepare such a strategy. 16. b) BNDES Technical Assistance: BNDES would receive a small component of the Loan (US$50,000) to develop its professional staff skills in environmental assessment, ewironmental project analysis, and analytical frameworks for dealing with the economics of pollution control regulations. The funds would be used for training of BNDES staff and for hiring specalized consultants. 17. c) SEPAs Institutional StrentheninIg: In order to motivate the SEPAs to enforce pollution control more vigorously, and in support of strengthening their institutional capabilty, BNDES will pass on to the SEPAs a grant equivalent to 0.2 percent of the value of any BNDES subloan. A Loan component of US$150,000 has been allocated to cover this grant In addition, a Japanese grant (US$500,000 equivalent) will supplement this fee (by providing to the SEPA 0.8 percent of the value of any BNDES subloan). Thus, a total of 1 percentage point (02 percent from BNDES and 0.8 percent from the Japanese Grant) would be paid to any SEPA when a BNDES pollution control loan is granted to a fiin within that SEPA's state. SEPAs will use these funds to: (a) develop pollution control strategies, including specialized studies on market-based pollution control mechanisms; and (b) acquire laboratory and pollution-monitoring equipment, and upgrade their staffs' technical capability. Additional grant funds are being sought. 18. Japanese Exdm Bank is considering cofinancing in the amount of US$50 million, to be disbursed on a pari passu basis with Bank funds. In this event, the Loan Agreement would be modified to incorporate this cofinancing, and the Bank will be responsible for monitoring and supervising the Project on behalf of the Japanese Exim Banl. 19. The Project is estimated to require four years to be implemente4, at a total cost of US$1005 million equivalent. Retroactive financing for US$ S million wil reimburse BNDES for its financing of industrial pollution control investments from the date of the appraisal mission of May 1991. A breakdown of costs and financing plan is shown in Schedule A. Amounts and methods of procurement and of disbursements, and the disbursement schedule are shown in Schedule B. A timetable of key project processing events and the status of the Bank group operations in Brazil are given in Schedules C and D, respectively. The Staff Appraisal Report No. 10180-BR dated April 20, 1992 is being distnlbuted separately. 20. Project Implementation The Borrower would be BNDES. The Federative Republic of Brazil would be the Guarantor. BNDES would onlend the Loan resources through eligible financial intermediaries (FIs), or directly to the enterprses. The Loan would be committed on a first-come first-served basis; there would be no pre-allocation of Loan resources to any particular state. This would help ensure that the Project would serve the most active states in enforcement. Each subloan application would have to be endorsed technically by the SEPA. The grant to be passed on to SEPAs would be an incentivt; to step up their enforcement program in order to receive the maximum benefit of available financing as well as technical assistance 21. The Loan resources would be onlent to the polluting firms at BNDES' standard interest rates (currently between 9 and 12 percent above TRI' depending on each operation and company). BNDES onlending terms are modified from time to time to reflect the economic conditions in Brazil and the international markets. The firms must finance at least 25 percent of the cost themselves in accordance with BNDES policy. BNDES would protect itself against the foreign exchange risk following its normal "poolinge practices, acceptable to the Bank BNDES may lend the resources either directly or through an FL However, because BNDES policy is to not lend directly for smaller operations (US$1 million equivalent and less), and since the average loan size is expectd to be less than US$1 million equivalent, the majority of the subloans are expected to be channeled through Fls. BNDES has established eligibility criteria for banks which could qualify as FIs for BNDES funds, based on solvency and project evaluation capabilities. Over 150 bank have already qualified. FIs would have a spread of up to 3 percentage points The subloan repayment period would be up to 8 years, including a 6-month grace period. BNDES will inform Fls, no later than 75 days after Loan effectiveness, that thiese funds are available and the conditions of their use. 22. Proec-t Monitoring In order to estimate impact of the Project during implementation, two sets of monitoring data will be required: (a) pollution discharge data (gaseous emissions and liquid effluents) from the industrial facility; and (b) ambient data on air/water quality in the environment under the influence of the industrial facilities' pollution discharge Pollution indicators will include, but would not be limited to, the following ar-S02, noxious dust, odors (primarily volatile organics containing sulfur, nitrogen, and/or oxygen); water- JV TR or TT dIs an Imtwa wage raw or intere pa on Cerdkaw of DepsL 6~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ BODs (biological cygen demand 5-day test), suspended solids, toxic organies and heamy metals; solids-hazardous wastes (primarily toxic organics and toxdc non-organics). 23. CoLlection and reporting of pollution discharge data to the SEPAs will be the responsibility of the ultimate borrower (the polluting industry). This data will provide SEPAs with necessary enforcement information regarding compliance with state and federal pollutant discharge regulations and standards. Overall, it will provide Bank supervision missions with information regarding the success of subproject implementation as well as SEPAs' enforcement practices. As a condition of subproject approval, the borrower must provide a SEPA with an appropriate monitoring plam 24. Collection of ambient air and water quality data will be the responsibility of the SEPA. This data wil provide SEPAs and Bank supervision missions with information on how effective the strategies are in improving overall air and water quality in critically polluted areas. As necessary, it will also allow mid-course corrections of strategies to meet acceptable air or water quality standards more effectively. 25. SEPAs would demonstrate to Bank supervision missions that they either have an ambient monitoring network available to collect appropriate air and water quality data in the vicinty of the pollution control subproject, or that proceeds of the technical assistance to be received will be utilized to provide that portion of the network. Bank supervision missions will also review ambient environmental data and emissions data to ascertain that pollution control standards meet pertinent state and/or federal standards, and to determine the degree to which subprojects are consistent with overall project objectives and SEPA strategies. Supervision missions will also review the effectiveness of technical assistance programs to both BNDES and the SEPAs to ensure that they are in concert with project objectives. 26. A mid-term review will be carried out no later than two years after the Effective Date of the Loan, to review the progress of Project implementation, the performance of the Borrower and each SEPA and state as regards their participation in the Project, and the achievement of project objectives, including preparation and implementation of state strategies. The Bank intends to car out such review any time before the specfied deadline when half of the Loan resources have been committed. 27. hPject Sustainabiity It is expected that the Project benefits will be sustainable given that: a) the imestment financing would be based on approved strategies, and that the ability to prepare these strategies indicates a reasonable level of competence and commitment on the part of the SEPAs; b) the Project will provide support for institutional strengthening of the SEPAs, which should ensure that they will continue to monitor pollution levels and enforce industy compliance with established norms; and (c) enterprises, once having made the investments, and subject to SEPA supervision, will have an economic interest in maintaining compliance at lowest possible costs. 28 Agreed Action During the Loan negotiations, BNDES and the Bank agreed that: (i) Loan resources wil be onlent to industry, directly or through PIs, for pollution control investments at BNDES' standard interest rates; BNDES' onlending terms are modified from time to time to refect the economic conditions in Brazil and the international markets. Agreement was reached that the index used by BNDES will reflect and correct fully for inflation, and will ensure ful adjustment on the principal of BNDES Loans; (ii) BNDES will inform Fls, no later than senty-five days after Lon effectiveness, of the availability of the Lan funds and the 7 conditions of their use; (iii) Pollution control subprwjects not included in a Bank.sapproved blate strategy or those requiring greater than US$5 million Bank financing would require prior Bank approval; (iv) BNDES will pass on to SEPAs as a grant 0.2 percent of the value of any subloam for pollution control financed by BNDES and originating from that particular SEPAUs state; (v) any new state strategy fbr air or water pollution control, or for hazardous waste management, may be appxved by the Bank during project implementation. Investments under US$5 milion included in such a strategy would qualify for automatic Bank approval, provided they are approved by BNDES; (vi) BNDES will have agreements with all participating SEPAs in which the SEPA will undertake to (a) review and approve the technical feasibility and the adequacy of the prposed ivestments for controlling pollution, each within its jurisdiction; (b) prepare semi- annual progress reports for BNDES and the Bank on ambient quality and the impact of project ivestments on the environment; (c) prepare progress reports on the institutional development resulting from the use of technical assistance resources provided by BNDES; and d) develop a strategy ff it does not yet have an approved one; (vii) the Bank will carry out a mid-term review of the project's progress nG later than two years after the Loan Effectiveness Date; and (ix) BNDES subloans will be on average equivalent to at least 60 percent of the subproject cost. 29. Project Benefits Economic benefits of the Project cannot be meaningf(lly quantified. Benefits in terms of improved air or water quality as a function of investment cost are measurable at the subproject level. The Project's main benefit will be an imprvement m the quality of the environment and, hence, the health conditions of the population living in the vicinity of industrialized areas in Brazil, most of whom are the urban poor. The Project will help to increase life expectancy and will reduce health care expenses and costs associated with lost productivity due to poor health. Other benefits resulting from a less-polluted environment would include improved agricultural products and higher land values, and overall better quality of life because of cleaer air, cleaner soil and cleaner bodies of water 30. The Project would also help to build up the SEPAs' capabilities and equip them with long-term rational pollution control strategies that take into account not only the benefits, but also the costs, of alternative courses of regulatory pollution control actions. 31. Erpje2 Risks The risks of this Project are mimal Project implementation could become sluggish if macroeconomic conditions deteriorate to the point where firms are struggling to survie; enforcement efforts might then be reduced, and SEPAs' pressure on industries may ease up. Slow commitment and disbursement could result from weak enforcement efforts or small demand for Loan resources. If such a sGenano should materalize, industrial pollution will remain at present levels or will be reduced only slightly. However, the more likely scenario is that enforcement efforts will continue at different levels in the various participating states, and that demand for pollution control resources will continue to be present. The risk of slow Loan utilization is mitigated by the fact that the Loan amount is small compared to the estimated demand for pollution control resources amounting to almost US$600 million. The retactive financing to May 1991, provided for under the Loan Agreement, should further minimze the rik of low utilization of Loan resources. It is expected that the Loan would be fully committed within two years. 8 32. R!mmdat I am satisfied that the proposed Loan would comply with the Articles of Agreement of the Bank and I recommend that the Executive Directors apprve the proposed Loan. Lewis T. Preston President Attachments Washington, D.C. April 20, 1992 9 BRAZIL NATIONAL INDUSTIAL POLLUTION CONROL PROJECr Wmated Costs tnd FmmNW&in P-lan U$ )Thouans) BANK BNDES IQ1inti T LMa BNDES direct loans or throug inad inteauedlarlesFxed assets and reiated woring capital gad nsultant fees for desig. 49,800 25,000 - 25,000 99,800 Techdca Assistace toBNDES 50 - - - 50 stitutonal Buidin to SEPAs 150 500 - 650 TOTAL 50,OOO 2,S000 So0 2,000 100,S00 =. .. 10 BRAZIL NATIONAL INDUSTRIAL POLLUTION CONTROL PROJECr Procurement and Disbursement Procunrement: The project will finance a wide range of equipment such as: advanced combustion equipment, fabric filters, scrubbers, electrostatic precipitators, water pretreatment facilities and primary and secondary water treatment facilities, incinerators, landfill preparation equipment, equipment related to change of process, and recovery and recycling equipment. For procurement of machinery and equipment costing less than US$3 milion, normal commercial practices would be followed. International shopping procedures (including at least three bids, of which at least two bids will be from foreign suppliers) would be required for contract values equal to or higher than US$3 million but lower than US$5 million, and international competitive bidding (ICB) would be required for contract values of US$5 million and above, in accordance with "Bank guidelines for procurement" (May 1985). The project will also finance civil works related to the installation of the pollution control equipment. For civil worls, normal commercial practices would be followed for contracts below US$10 mfllion and ICB would be required for contract values of US$10 millon and above. The Bank will conduct prior review of all ICB conttacts. In addition, Bank supervision missions will conduct a post review, on a sample basis, of contracts amounting to about 50% of the value of Bank financed contracts. There will be a 15% margin of preference for the purpose of bid evaluation for Brazilian manufacturers competing under ICB procuirement of goods. Consultants for BNDES' technical assistance would be hired according to Bank guidelines for the use of consultants. Caterv Amount Percent of Expenditures (in US$ thousands) Imported Machinery, Equipment and materials and 100% of foreign expenditures Local Purchase of civfl and works, materials, 50% of total expenditures machinery and equipment 49,800 Consulting Services 50 100% of total expenditures Goods and Services for 150 100% of total expenditures Institutional Building of SEPAs TOTAL: 50,000 Disbursements: Estimated Bank Disbursements (IJS$ Miflions? lBnk i1993 1994 1995 1996 Annual 10 20 15 5 Cumulative 10 30 45 50 11 SCHDUE C BRAZIL NATIONAL MNDUSTRIAL POLLUTION CONIROL PROJECr Mtab of Ke ftec Ping ,vnts a) ISme taken to prepare: 18 months b) Prepared by: BNDES, SEPAs, and IBRD Staff c) Fzrst Bank Mission: May 22, 1989 d) Appraisal Mission Departure: May 1991 e) Negotiations March 1992 f) Planned Date of Effectiveness: July 1992 g) Iist of Relevant PPAR. Sao Paulo Ildustdal Pollution Control Project (Lo 1822BR) 12 S9bedule D Page 1 of 4 THE UTAW 0OF DANK GROU-P O1%=AONS 2 BRAZI A. SUMMaXY STATEMNT OF =LOAN (As of December 31, 1991) Amount less Loan N;o YeX PuMos gwsdacettio4 Undisbsd -(USS milon)- One hundretd and tiurty seven lns filly disbursed 9,53.35 2353 1984 Brazil Agriculture 38.0 4.2 2364 1984 BLETIROBRAS Power 250.0 185 2447 1984 Stae of Sao Paulo Hedth 55.5 5.6 2489 198S Brazl Education 72.0 1.0 2523 198S Brazil Rurd Development 61.3 29.3 2S24 198S Bazil Rural Developnmt 61.4 30.9 2563 198S Brazil Railways , 200.0 83.3 2564 198S ELETROBRAS Power Transmission 400.0 224.2 2565 1985 ELETROBR.AS Power Distrniution 312.0 S5.6 2S93 198S Brazil Land Tenure 100.0 51.6 2623 1986 State of Sntsa Catarina Urban Development 24.S 9.8 2679 1986 Brazil A4griclure 155.0 91.4 2680 1986 BrAZi Inigation ERg. 48.0 16.6 2681 1986 Brazl Urban Developmet 36.6 28.0 2699 1986 Brazil Heath 59.5 38.3 2718 1986 Brazil Rurad Developnt 92.0 43.6 2719 1986 Brmzl Irrigaton S7.0 4.3 2721 1986 BozIl Public Secor 24.0 9.1 2727 1986 Brsz2l Crefdt & Market Rfi - 49S.0 15.0 2761 1987 Brzil Rwrd Deveopmen 171.0 113.6 2762 1987 Bmil Rural Development 780 50.4 2763 1987 Brazil Rurd Developmnt 122.0 83.9 2810 1987 Brazil Education 1S.6 4.6 2830 1987 State of Sao Paulo Sta Highway 174.0 70.3 2831 1987 Bmzil ILdusrld Polution Control 50.0 38.0 2857 1987 FEPASA Raiway Rebabilitaton 100.0 41.2 2860 1987 Brazil Rural Devwelpeant 60.0 39.8 2861 1987 Braz Rurd Developmnt S5.0 41.7 2862 1987 BrazIl Rural Developmnut 84.0 61.7 2863 1987 Bmzil urai Ddvelopmnat 42.0 31.3 2864 1987 Brazil ivesckDisee Control 51.0 41.4 2883 1988 Centrais Eletics Brasileiras SA Resetmentu and Irrigapion 132.0 8.4 289S 1988 Stae of Mines Gerais Forestry Devopment 48.S 29.7 2931 1988 Brazi Dieas Control 89.0 60.3 2950 1988 Brazil Irigoato Subsctor 195.0 148.5 2960 1988 Brazl Agro-dustries CredW 300.0 51.6 13 . A. SUMARY STATEMta QF LOF AN (continued) k#utD (As of December 31, 1991) Page 2 of 4 Amount less Loan Dig Yea ,Borrowe hXp* anclt Undisbusd -(USS million)-- 2971 1988 Brazil Agricltul Credit 300.0 21.1 2975 1988 CEF Rio Flood Reconstmuction 175.0 73.8 2983 1988 CEF Municipal & Low-Icme 80.0 59.2 3013 1989 Brazil Irrigation 71.0 57.6 3018 1989 State of Pamsaa Land Management 63.0 41.0 3043 1989 Cia. de Gas Sao Paulo Naturl Gas Distrbution 94.0 77.3 3072 1989 Bmrz-l Amazon Basin Malaria Control 82.9 48.9 3100 1989 Stae of Pauana Municipal Development 100.0 - .8S.4 3102 1989 Cia. Saneamento asiAco Sao Paulo Water Sector 280.0 235.1 3129 1990 Stae of Rio Grande do Sul Municpa Developnwt 100.0 90.9 3130 1990 Brazil Agpiculual Research 47.0 42.2 3135 1990 Brazl Basic Hedth 267.0 243.0 3160 1990 Stae of Sants Catarina Land Management 33.0 29.8 3169 1990 BraZI Highways Mgmt & Rehalit"ion 310.0 265.4 3170 1990 Brazil Irigaton 210.0 203.0 3173 1990 Brazil Envirnmeta 117.0 105.1 2883-1k' 1990 ELETRODRAS Resetemnt & Irgion 100.0 100.0 32271' 1990 ELETOBRAS Power TranOs. & ConseVation 385.0 38S.0 3268 1991 BNDES Private Sectr 300.0 185.6 3269 1991 Brazil Education 150.0 132.0 33751' 1991 Stat of Sao Paulo Educton 245.0 245.0 3376 1 1991 Petroleo Brasileiro S.A. Hydrocarbon Tnspot & Pocessig 260.0 260.0 Total O 17,602.1S Of which ha been repaid to the Bak 6 Total now ounding . 11,110.09 Amount sold 45.83 Of which has ben repaid _il Total now held by Bank Totl undisusedbu 1 Not yet effetive I No IDA credits have been mde to Brazil Note: The stus of the poects 1ted in Part A is described in a separot repot on a Bank/IDA financed pSjects in exeuton, which is updaed twice yearly and cXulatd to tm Executive Directos an Apr1 30 and October 31. 14 Schedul c Pa 3 of B.~~Z STsNTOF I: Nz (As f Dceber 31. 1991) 1USS MmWn go Oblior Tvoe of Bush s Lo E V D 1957 Silmens do Basil Cif do El_owwIdo HEbedl Epumnt 2.86 2.6 1958 OInkrA S.A. Clulo a Pspal Pulp Nd Par 2.16 - 2.16 I9s5 D.LIL Plals do Drull. S-A Automoie Pu 0.45 - 0.45 1958 WUlys alnd do BtaiL S.A.4ud. * Comeato Fabeb tu Pdo 2.4 2.45 1959 Co Mi do Cib*Mo hoiad, S. A Cemnt 2.40 - 2.40 1959 ChampIo Ce1m, 3.A Pulad Papsr 4.00 4.00 1966149/89 PCC- Catrn Pulp ad Paer 19.06 8.86 27.91 1966/A72*A ViUas. S.A. Sta 8.0 1.94 9.94 194772 Ultr&ztil, S.A.4nd . Comeroo do PFuantm FPeelne A; Pestdes 8.22 4.05 14.27 1949 Perquin Unao, S.A PS."s 5 5.76 11.2 1970 Poliebfs. SlA. 1Au Comeeo P e s 5.50 5.55 11.05 1971 Osido. 3A. tndust a Comereo patoohmoalb 4.60 2.68 7.8 1971 Rio Gune- ComWpana doCeluose do Su Pulp and Pr 4.90 - 4.90 197275/8/8 Cis. de Chuento Naloul do lia - CMIS CAene 199.14 13.32 212.46 1973741m7S71 3 Cis. SideGsica do Ow bam- COSIG1A Soeld 76.97 27.08 104.05 1973 Cpl Makt Develoment Fund.-PUNCAP Capl Maket Devolpet 5.00 - 5.00 1973n78m3 Emp. Demvolvimemu de Reou Mituals.COIDBIN Nickel MInui & Refinig 85.00 8.74 93.74 1974 Indumula Villaru S.A EA1o & Ind. 1quIpme 6.00 6 C.00 1974/88 Fabri do Toldo Tabp, SA Textils 39.80 - 39.80 19759 Capuava Cubooa ndusua Ltd ChemIcs A Feteoohmb 6.18 2.03 821 1975 Onkeo Nordem. S.A. PCtrhmlkab 10.00 - 10.00 1976 Sa.6*a Indusua - Temil do Nordoe, LA. Tmttila 6.45 4.0 7.45 1976M80 Teesn"rL - Tentia Catanmaaedo Noral Textile 16.20 - 16.20 1977 - M l.A. Pid )odtugoos Mo & Aumdm Caidogs 20.0 - 20.00 1977 : Mlnaqao Rio do Not A. Mining 15.00 - 15.00 19781S4 cimt S i, SLA 1o Sl 838 6.00 14.38 1979183/ Volvo do Bras Moom e VeulosLA. MotorVehiles 60.00 11.95 71.9 1980 Hedag do Nordea. S-A. - Mais Ready-mae Gamea 2.00 - 2.00 1980 Deade do PAM SA - Deepen. Ap abuim * duata Cemedo d s Ok&sbno AgSr. A Uvesco Poduct 3.50 16 5.46 1980 Vmam Inugis de Bae, S.A - VIBA Ion Ud S -- 5.00 - 5.00 198a PPM - Compahia Industris deoolpo pile Chemicl Petoobemicul 31.00 3.64 34.64 1980 Desill Cianotw. S.A. Chemcal & Pw Meals - 0.25 0.25 .983 Sotov A ia Qmica a Mial S.A F aetilur . 35.00 9.97 44.97 198181/87 PoIeA Peoquim Cemicl & Pakanls - 43.00 11.00 S4.00 198t Builpr Monw &Clwwi Mbm 2.69 2.69 ;98 Cmpai BraSiS do Agrppusuas - COBRAbo Food A Food Poaslng 5.50 3.00 850 ;981187 Tdu Chemicls A P: bIRAl 46.00 7.07 53.07 .98VD57 Ciment. Uqrjl CCMe &A Construc bnar 40.00 8.2 48.24 1982 Agin Sn. SA. My & Capil MMu - 0.90 0.90 198 PLANIBAC OAM) Lsing Companies 30.00 - 30.00 :983 Ch.C R;sgudee do PaSWleia (CR) Moneo & CapR Msa * 0.01 0.01 :983 Al Fdgodfio Agil & Liestock Phrodct. 13.00 - 13.00 :983 Compa_l Dad. do Amop (CODBPA) Vegabl & Ania 0i1 4.10 - 4.10 983/8588 PISA - Pae do bnpreaa SA- Plp & PapPdu 82.00 123 94.3 983 Socoa. S.A. Fortry 3.00 250 5.50 983 CMAGC CeMe * Connaden Mu.zI 3S.00 - 35.00 986188 Mtolor Podut Daa A Medine 3.00 1135 14.35 984 Compah Alcoouimic Naclo- ALQUID Chemicas & PA _dbmIaI 20.00 7.72 27.72 985 Quindm d Bha C & _ 3.0 3.28 4.77 .987 110 Palo ApaW_ Rudy-Made GArm 30.00 * 30.00 987 Amapa FloW C CIduo - AUCBL Pulp ad Ppr 14.00 - 14.00 1.5 ighedute Pag 440f 4 B. ST1 MEN4T OF IFC SIMEM (continued) (As ofDocemnber3l, 1991) u Date Oblio Tye of Businga La Ea = 1988 Fb1ca Caioca de Caafsador - FCC Chemicals 20.50 - 2050 i988 Equity Fund of Bnzil Capil auet Aitios - . 20.77 20.77 1988 S.A. Comedio a indusil - PERDICAO Apic. & Livesmck Prducs 20.00 - 20.00 1988 Sanco Bozmal Small & Medium Etraprs 20.00 - 20.00 1988 Banco Itau Smll & Medium Entevpises 30.00 - 30.00 1988 Minensqoe Brasilou= Rowidos - MDR mining 20.00 - 20.p0 1988 Unbanco - Unilo do Sanws Brasirs Small & Medium Entprise 30.00 - 30.00 1988 Durate. SA. Pulp and Paper Producs 137 - 7.37 1988 Ceba Glass and Gls Poducts 40.00 5.00 45.00 1988 Brasltal Textiles and Fibens 0.10 - 0.10 1988 Baser Taxtiles sAd Fibers 3.20 1.30 4.50 1988 Mohho Sanst Textils and Fies 4.00 - 4.00 1988 Toalih Tectibes and Fies 1.90 - 1.90 1989190 COPEa E Chemicals 50.00 - 50.00 1989 ELUIMA Imoa and Steol 15.00 - 15.00 1989 POLITUNA Chemcias and Petochmicas 18.50 6.50 25.00 1990191 Bahia Sul Pulp and Paper 40.00 21.00 61.00 1991 SaMarina Cemnt 25.00 - 25.00 1991 RIPASA Pulp and Paper 20.00 5.00 2S.00 1991 Engepol Plastic Poducts 3.50 - 3.50 1992 Btazil Investmet Fund Securite Mathes FnAnOin 3.00 3.00 1992 Pastc Product 20.00 5.00 25.00 Total Gross CoWUSS 1,463.81 254.49 1,718.36 Less Cuanelations, Tminatons, Rcpaymott end Sales . 1 Ll2. Total Commiments Now Had by IFC 457.74 107.67 565.41 Total Undisbunsod 320 1JR > . sRa~~~~~~~~~~~~~~~M 224 31 VENEZUElA (f , REN'CH x 5 S~0 .uRINMruAA B R A Z I L C O LO M B I At- &W-1t 1, h%h' NAt , X\'TIO,NAL INDUSTRIAL _,<, ;R-RORAA > .r 9 > AMAA POLLUTIlON CONTROL PROJECT ) \ < . zU Op r N¢J , A A M ARANHA E <> . f .r,4 X R ( yf f' fi ? 't ~~~~~~~~P I A U i & i P E R U <_ T 0 CEI5< B' EGP \ } \-f l ~~~~~ ~~~G s\ a- 4p U5T.°