04-21-05 Rio de Janeiro Project Document-PAD

Document Sample
04-21-05 Rio de Janeiro Project Document-PAD Powered By Docstoc
					                            Document of
                         The World Bank



                                                         Report No:




                       PROJECT DOCUMENT

                               ON A

                   PROPOSED GRANT FROM THE
            GLOBAL ENVIRONMENT FACILITY TRUST FUND

                IN THE AMOUNT OF USD 6.75 MILLION

                             TO THE
                     STATE OF RIO DE JANEIRO

                              FOR A

  RIO DE JANEIRO SUSTAINABLE INTEGRATED ECOSYSTEM MANAGEMENT IN
PRODUCTION LANDSCAPES OF THE NORTH-NORTHWESTERN FLUMINENSE (GEF)
                               PROJECT

                           April 12, 2005
                  CURRENCY EQUIVALENTS

            (Exchange Rate Effective January 31, 2004)


                 Currency Unit = Real (R$)
                       R$1.00 = US$0.36
                      US$1.00 = R$2.80


                         FISCAL YEAR
                    January 1 – December 31

             ABBREVIATIONS AND ACRONYMS
CAS          Country Assistance Strategy
CEDRUS       State Sustainable Rural Development Council (Conselho Estadual de
             Desenvolvimento Rural Sustentável)
CEPF         Critical Ecosystem Partnership Fund
CI-Brasil    Conservation International (Brazil branch)
CMDR         Municipal Rural Development Council (Conselho Municipal de
             Desenvolvimento Rural)
Coppetec     Foundation for Project Coordination, Technological Studies and
             Research (Fundação Coordenação de Projetos, Pesquisa e Estudos
             Tecnológicos)
DPGE         Public Defender (Defensoria Pública Geral do Estado)
DRM          State Mineral Resources Department (Departamento de Recursos
             Minerais)
EA           Environmental Assessment
ECC          Statutes of Community Conduct for the Responsible Use of Natural
             Resources (Estatuto de Conduta Comunitário)
EMATER       State Rural Extension Agency (Empresa de Assistência Técnica e
             Extensão Rural do Estado do Rio de Janeiro)
EMBRAPA      Brazilian Agricultural Research Enterprise (Empresa Brasileira de
             Pesquisa Agropecuária)
EMP          Environmental Management Plan
FAO          Food and Agriculture Organization of the UN
FAT          Worker’s Protection Fund (Fundo de Amparo ao Trabalhador)
FC           Federal Constitution of the Republic of Brazil
FEEMA        State Environmental Management Foundation
FETAG        Federation of Agricultural Workers (Federação dos Trabalhadores na
             Agricultura)
FMR          Financial Management Report
FNMA         National Environmental Fund (Fundo Nacional de Meioambiente)
FUNBIO       Brazilian Biodiversity Fund (Fundo Brasileiro para a Biodiversidade)
FUNDES       State Social and Economic Development Fund (Fundo de
             Desenvolvimento Econômico e Social)
GEF          Global Environment Facility
GoB          Government of Brazil
GoRJ         Government of the State of Rio de Janeiro
IA           GEF Implementing Agency
IBAMA                National Institute of Environment (Instituto Brasileiro do Meio
                     Ambiente e dos Recursos Naturais Renováveis)
IBRD                 International Bank for Reconstruction and Development
IDB                  Inter-American Development Bank
IEF                  State Forestry Institute (Fundação Instituto Estadual de Florestas)
IEM                  Integrated Ecosystem Management
IPCC                 Intergovernmental Panel on Climate Change
IUCN                 The World Conservation Union
LCSES                WB Environmentally and Socially Sustainable Development Unit
MDA                  Ministry of Agrarian Development (Ministério do Desenvolvimento
                     Agrário)
M&E                  Monitoring and Evaluation
MIS                  Management Information System
Moeda Verde          State Credit Program for Agricultural Production and Diversification
NNWF                 North and Northwestern Fluminense regions of the State of Rio de
                     Janeiro
NR                   Natural Resources
NRM                  Natural Resources Management
OP                   GEF Operational Program
PA                   Protected Area
PCD                  Project Concept Document
PID                  Individual/Farm-level Development Plan (Plano Individual de
                     Desenvolvimento)
PEM                  Microcatchment Development Plan (Plano Executivo da Microbacia)
PES                  Payments for Environmental Services
PESAGRO              State Agricultural Research Enterprise (Empresa de Pesquisa
                     Agropecuária do Rio de Janeiro)
PMR                  Project Management Report
POA                  Annual Operation Plan (Plano Operativo Annual)
PPG7                 Pilot Program to Conserve the Brazilian Rain Forest
PRONABIO             National Program for Biological Diversity (Programa Nacional da
                     Diversidade Biológica)
PRONAF               National Smalholder Agricultural Program (Programa Nacional de
                     Fortalecimento da Agricultura Familiar)
QAT                  Quality Assurance Team
Rio Rural            Microwatershed State Program for Rural Sustainable Development
SEAAPI               State Secretariat of Agriculture, Fisheries and Rural Development
                     (Secretaria Estadual de Agricultura, Abastecimento, Pesca e
                     Desenvolvimento do Interior)
SEINPE               State Secretariat of Energy, Naval Industry and Petroleum (Secretaria
                     de Estado de Energia, da Indústria Naval e Petróleo)
SEMADUR              State Secretariat for Environment and Urban Development (Secretaria
                     de Estado de Meio Ambiente e Desenvolvimento Urbano)
SEP                  Project Management Unit (Secretaria Executiva do Projeto)
SLM                  Sustainable Land Management
SMH                  SEAAPI´s Directorate of Microwatershed Development
                     (Superintendência de Microbacias Hidrográficas)
SoRJ                 State of Rio de Janeiro
SOS Mata Atlântica   SOS Mata Atlântica Foundation (NGO)
UNDP                 United Nations Development Program
UNFCCC               UN Framework Convention on Climate Change
WB            The World Bank
WMS           Watershed Management Strategies




                Vice President:      Pamela Cox
      Country Manager/Director:      Vinod Thomas
               Sector Manager:       Abel Mejía
             Task Team Leader:       Alvaro J. Soler
                                        BRAZIL
 Rio de Janeiro Sustainable Integrated Ecosystem Management in Production Landscapes
                      of the North-Northwestern Fluminense (GEF)
                                       CONTENTS
                                                                                 Page

A.        STRATEGIC CONTEXT AND RATIONALE ................................................................. 2

     1.      Country and sector issues.................................................................................................... 2
     2.      Rationale for Bank involvement ......................................................................................... 4
     3.      Higher level objectives to which the project contributes .................................................... 5

B.        PROJECT DESCRIPTION ................................................................................................. 6

     1. Lending instrument ................................................................................................................. 6
     2. Project development objective and key indicators.................................................................. 6
     3. Project environmental objectives and key indicators ............................................................. 7
     4. Project components ................................................................................................................. 7
     5.      Lessons learned and reflected in the project design .......................................................... 10
     6.      Alternatives considered and reasons for rejection ............................................................ 11

C.        IMPLEMENTATION ........................................................................................................ 11

     1.      Partnership arrangements (if applicable) .......................................................................... 11
     2.      Institutional and implementation arrangements . .............................................................. 12
     3.      Monitoring and evaluation of outcomes/results ............................................................... 13
     4.      Sustainability & Replicability ........................................................................................... 13
     5.      Critical risks and possible controversial aspects ............................................................... 14
     6.      Loan/credit conditions and covenants ............................................................................... 15
D. APPRAISAL SUMMARY .................................................................................................... 15
     1. Economic and financial analyses ......................................................................................... 15
     2. Technical ............................................................................................................................... 16
     3. Fiduciary .............................................................................................................................. 16
   4. Social .................................................................................................................................... 17
   5. Environment .......................................................................................................................... 18
   6. Safeguard policies ................................................................................................................. 19
   7. Policy Exceptions and Readiness.......................................................................................... 20

Annex 1: Country and Sector or Program Background ......................................................... 21

Annex 2: Major Related Projects Financed by the Bank and/or other Agencies ................. 25

Annex 3: Results Framework and Monitoring (LogFrame) ................................................... 27

Annex 4: Detailed Project Description ...................................................................................... 39

Annex 5: Project Costs ............................................................................................................... 54

Annex 6: Implementation Arrangements ................................................................................. 57

Annex 7: Financial Management and Disbursement Arrangements ..................................... 63

Annex 8: Procurement ................................................................................................................ 70

Annex 10: Safeguard Policy Issues ............................................................................................ 75

Annex 11: Project Preparation and Supervision ..................................................................... 78

Annex 12: Documents in the Project File ................................................................................. 79

Annex 13: Statement of Loans and Credits .............................................................................. 84

Annex 14: Country at a Glance ................................................................................................. 88

Annex 15: Incremental Cost Analysis ....................................................................................... 90

Annex 16: STAP Roster Review ................................................................................................ 98

Annex 17: Maps - Map 1: Project Area .................................................................................. 104
Additional Annex 18: Summary of the Social Assessment ……………………………...…105
Additional Annex 19: Environmental Issues and Project Strategies………………………110
                                          BRAZIL

     BRAZIL – RIO DE JANEIRO INTEGRATED ECOSYSTEM MANAGEMENT IN
    PRODUCTION LANDSCAPES OF THE NORTH-NORTHWESTERN FLUMINENSE

                                  PROJECT DOCUMENT

                           LATIN AMERICA AND CARIBBEAN

                                           LCSEN

Date: April 12, 2005                               Team Leader: Alvaro Soler
Country Director: Vinod Thomas                     Sectors: General agriculture, fishing and
Sector Manager/Director: Abel Mejía                forestry sector (80%); other social service
Project ID: P075379                                (10%); sub-national government
Focal Area: OP 12/Integrated Ecosystem             administration (10%)
Management                                         Themes: Biodiversity (P);Land Management
Lending Instrument: Specific Investment Loan       (P); Participation and Civic Engagement (P);
                                                   Other Environment and Natural Resources
                                                   Management (P)
                                 Project Financing Data
 [ ] Loan       [ ] Credit   [X] Grant     [ ] Guarantee            [ ] Other:
For Loans/Credits/Others:
Total Project Cost (US$m.):             14.95
Cofinancing:                             8.20
Total Bank Financing (US$m.):            0.00
                                   Financing Plan (US$m)
                  Source                       Local               Foreign            Total
BORROWER/RECIPIENT                                    6.31                0.00               6.31
GLOBAL ENVIRONMENT FACILITY                       (*) 6.75                0.00            (*)6.75
OTHER COFINANCIERS                                    1.89                                   1.89
Total:                                              14.95                  0.00             14.95
(*) does not include Block B grant
Borrower:
State of Rio de Janeiro

Responsible Agency:
State Secretariat of Agriculture, Fisheries and Rural Development (SEAAPI)
Address: Alameda São Boaventura 770, Niterói, RJ, Brazil
Contact Person : Secretary Christino Áureo da Silva
Tel: 55 21 2627-1400 / 2627-2231          Fax: 55 21 2627-1490     Email:
christino@seaapi.rj.gov.br
Project Implementation Period:
Start: June 1, 2005 End: May 31, 2010




                                               1
A. STRATEGIC CONTEXT AND RATIONALE

1. Country and sector issues
Environmental Issues. The Atlantic Forest or Mata Atlântica stretches along Brazil's Atlantic
coast, from the northern state of Rio Grande do Norte south to Rio Grande do Sul. It boasts
20,000 plant species, 40 percent of which are endemic. Yet less than 10 percent of the forest
remains. More than two dozen Critically Endangered vertebrate species are clinging to survival
in the region, including three species of lion tamarins and six bird species. There are also many
unique species including the red-billed curassow, the Brazilian merganser, and numerous
threatened parrot species.

Long isolated from other major rainforest blocks in South America, the Atlantic Forest has an
extremely diverse and unique mix of vegetation and forest types. The region has been losing
habitat for hundreds of years, first to sugarcane plantations and later to coffee plantations. The
State of Rio de Janeiro (SoRJ), with a territory of approximately 44,000 km2 and a population of
14.4 million people, is unique in Brazil for having the highest percentage of the Atlantic Forest
biome with respect to total area of all Brazilian states. The project area, the North and
Northwestern Fluminense (NNWF) administrative regions, encompasses 22 municipalities (with
one million inhabitants, 17 percent of whom are rural, comprising some 30,000 family farms)
and an area of 15,000 km2, have the largest stands of remaining forest in the State. While a few
of these forest tracts are already being conserved in protected areas, most are not and are
dispersed throughout the region and located mostly on private lands.

Despite its global importance, the Atlantic Forest in the NNWF region is under severe pressure.
Main current threats include: (i) deforestation related to land conversion and charcoal
production, and (ii) soil erosion caused by deforestation, overgrazing, and inappropriate
agricultural practices. Indeed, from 1990-2000 the SoRJ had the highest rate of deforestation
(16.7 percent) of all the Brazilian states covered by Atlantic Forest, most of which occurred in
the NNWF regions.

Agricultural and Socioeconomic Issues. Agriculture is the main occupation and source of income
for a significant portion of the NNWF population. The sector has been characterized by
extensive low technology and low productivity cattle raising and by “boom and bust” cycles of
sugarcane and coffee plantations which have resulted in deforestation and large tracts of
degraded areas. Pasture degradation, soil erosion, and reduced availability of water resources
have resulted in low productivity which, coupled with increased competition from other regions
and countries and the ensuing falling prices paid to producers, has resulted in a progressive loss
of competitiveness.

These issues particularly affect the NNWF region because it is primarily composed of small
family farms. In recent years, both rural poverty and out-migration have increased significantly.
Socioeconomic indicators, such as for those income, education, and infant mortality, are the
lowest in the State. Most small farms generate very low incomes and are characterized by
dependence on manual labor and little use of corrective measures to address deteriorated soil
fertility. In addition, there is relatively low organizational capacity among producers and limited
use of technical assistance and rural extension.



                                                 2
Given the existing potential for improved land use systems, the need to significantly increase
carbon storage in the NNWF agro-ecosystems, the significance the Atlantic Forest biome and
associated agro-ecosystems for the conservation and sustainable use of biodiversity considered to
be of global importance, and the growing threats to the remaining habitats affected by land
degradation, urgent interventions aimed at integrated ecosystem management (IEM) and
improved sustainable land management (SLM) are warranted.

However, a number of key constraints impede progress toward the adoption of a comprehensive
and cross-sectoral approach to IEM and SLM in the NNWF and reduce the potential for the
provision of environmental services in those regions. They include:

   i)      Insufficient human and institutional capacity and weak community organizations at
           the local and state levels;
   ii)     Lack of producer capital to undertake the relatively heavy upfront investments
           necessary to adopt SLM practices;
   iii)    Limited number of SLM practices adapted to the specific agroecological conditions
           of the NNWF area; and
   iv)     Insufficient systematized data and information necessary for decisionmakers to
           incorporate ecosystem-level considerations into production activities.

Nonetheless, despite this context, the NNWF regions are the largest producers of agricultural
products and, given recent stepped-up efforts by the GoRJ, now receive the largest share of
agricultural credit (46 percent) and agricultural technical assistance (38 percent) in the State.
Thus, while it is clear that the NNWF regions are in serious need of environmentally and
socioeconomically sustainable management of their natural resources, the State government is
taking steps to improve this situation, and these steps form the basis upon which the proposed
project would carry out its activities.

Government Strategy. In response to the abovementioned concerns, the State and Federal
governments have established a policy agenda that specifically reflects increased agricultural
production and diversification. These include: (i) the State Credit Program for Agricultural
Production and Diversification (Moeda Verde), (ii) the State Microcatchment Program for Rural
Sustainable Development (Rio Rural) which provides rural extension and infrastructure to
rehabilitate microcatchment resources (e.g., erosion control for rural roads); and (iii) the National
Smallholder Agriculture Program (PRONAF) which provides credit and assistance for
smallholders to facilitate conditions for increasing productive capacity. In addition, non-
government initiatives are being implemented to support State Protected Areas including: (i) the
KfW-supported Pro-Atlantic Forest Program which focuses on strengthening protected areas
(PAs) in the NNWF; (ii) the GEF-supported Critical Ecosystem Partnership Fund (CEPF) which
provides support to the establishment of private protected areas located in the Serra do Mar
Corridor, and research efforts for in situ conservation of threatened species.

Despite these efforts, much remains to be done, specifically on two fronts. The first involves the
need to foster a comprehensive and cross-sectoral approach to ecosystem management to ensure
ecosystem integrity, in order to leverage the positive environmental impact of ongoing activities.



                                                 3
In this regard, the project would employ an IEM approach (which emphasizes the linkages
among people, natural systems, and ongoing activities dealing with NRM issues in the region) to
the planning and implementation of SLM activities.

The second involves fostering increased public awareness of the importance of SLM activities in
the conservation of natural resources, and strengthening the demand for such activities (and for
other “off-farm” activities that would also support the integrity of important ecosystems) as well
as for the adaptation of SLM practices to the specific agroecological conditions of the project
area.

GEF support would seek a balance between both fronts through: (a) an enhanced “top-down”
approach that would promote improved support instruments and strengthened institutions to
create an enabling environment for the adoption and long-term sustainability of IEM and SLM
concepts within a broader local and statewide rural development approach; and (b) a
strengthened “bottom-up” approach that would be focused at the microcatchment level and
would: assist in sustainable land management planning activities; provide technical and financial
assistance to the transition to sustainable productive livelihood activities; support adaptive
research for more environmentally sustainable land management techniques; work to increase
community organization and capacity to manage natural resources; and train technical assistance
providers in environmental matters and in a more inclusive, participatory approach to rural
extension, so they may become agents of change with regard to the public’s recognition of the
value of environmental conservation. The project, proposed as a replicable demonstration
project, would strive to leverage the impact of ongoing efforts and promote the active
involvement of community organizations to both increase the project’s impact and sustainability
given its limited funding, and to build on the promising state, federal, and non-government
programs underway.

Country Eligibility. Brazil ratified the Convention on Biological Diversity on June 13, 1994 and the
Framework Convention on Climate Change on February 28, 1994.

Project Fit with National or Sector Development Plans. The proposed project’s focus on
sustainable land management (SLM), integrated ecosystem management (IEM), and biodiversity
conservation fits well with national and sectoral development plans for the region, as outlined in
the Government Strategy above. The project would contribute to the implementation of the
National Biodiversity Policy (Decree Nº 4.339 of August 22, 2002) and meets the eligibility
criteria for GEF funding in accordance with guidelines set by the National Commission on
Biodiversity (CONABIO) in Decision Nº 12 of March 25, 2004, outlined in the document,
“Brazilian Strategy for the GEF.” The project also fits within the World Bank’s broader regional
program that covers South-Southeast Brazil, by continuing and strengthening its current
coordination with the ongoing World Bank–supported microcatchment projects in that region.

2. Rationale for Bank involvement
For many years, rural poverty reduction and natural resources management have been key
elements of the World Bank's Country Assistance Strategy for Brazil, mainly through the
financing of specific investment projects as well as economic and sector work. As these themes




                                                4
have emerged as national priorities in Brazil in recent years, the Bank has facilitated the
incorporation of international experience into the design of policies and programs.

The proposed project would complement the strategies of the KfW, ongoing GEF projects, and
ongoing government programs (PRONAF, Moeda Verde and Rio Rural) in the Atlantic Forest. It
has already begun coordinating closely with them and would continue to do so by building on the
existing activities of a number of them, e.g., by using PRONAF guidelines to determine
subproject beneficiaries and eligible subproject categories;1 working with the State Rural
Extension Agency (EMATER) for improved rural extension work; and providing support to the
formulation of (i) sustainable land management plans for the microcatchments (PEMs), (ii)
Individual/Farm-level Development Plans (PIDs) which could later be submitted as subproject
proposals for project financing, and (iii) Statutes of Community Conduct for the Responsible Use
of NR (ECCs), which would build on ongoing stakeholder training activities.

The Bank’s involvement in supporting the proposed project would provide the SoRJ with greater
access to the broad spectrum of Bank–supported, community–based natural resources
management programs. In addition, the proposed project would also benefit from Bank
experience in the preparation and implementation of completed and current land management or
GEF projects in other Southern Brazilian states (São Paulo, Santa Catarina, Paraná, and Rio
Grande do Sul), as well as projects in other Latin American countries that address issues related
to payments for environmental services. It would also help to ensure broader dissemination of
results to the extensive network of Bank–supported rural development programs worldwide.).
Perhaps of even greater importance, Bank and GEF involvement in the proposed project would
provide the opportunity to enhance the development, demonstration, and evaluation of
mechanisms to mainstream a new, sustainable approach to rural development. In addition, GEF
support would help secure the protection of important global biodiversity resources and the
enhancement of carbon sequestration in the agricultural landscape through effective management
of critical ecosystems within the Atlantic Forest biome.

3. Higher level objectives to which the project contributes
Through an IEM approach to the conservation of the Atlantic Forest, the proposed project would
contribute to the long-term conservation and rehabilitation of agro-ecosystems, and would
include the development and implementation of sustainable land management (SLM) practices
that provide environmentally sustainable economic opportunities for rural communities.

Fit to the Bank Country Assistance Strategy. The proposed project is consistent with the current
Country Assistance Strategy (CAS), in support of “A More Equitable, Sustainable, and
Competitive Brazil,” and would help strengthen one of the five pillars for development identified
in the CAS, that of Environment and Natural Resources Management, and is relevant to each of
the three specific themes identified under this pillar: (1) natural resources management; (2)
environmental protection and management; and (3) global environmental externalities, including
carbon sequestration and biodiversity. In addition, the proposed project would contribute to more
sustainable land management, one of the long-term country goals identified in the CAS.
Furthermore, the project is fully consistent with the CAS’s emphasis on the importance of
coupling conservation strategies with efforts for poverty reduction and sustainable growth.
1
    See Annex 4, Appendix 2 for a table showing these categories.


                                                          5
Fit to GEF Operational Programs and Priority Strategies. The proposed project is also
consistent with the GEF Operational Strategy and specifically with its Operational Program on
Integrated Ecosystem Management (OP 12), in that it would promote the adoption of
comprehensive land and ecosystem management interventions that integrate ecological,
economic, and social goals to achieve long-term protection and sustainable use of biodiversity,
the reduction of net emissions and increased storage of carbon in terrestrial ecosystems, and the
conservation and sustainable use of watersheds, providing benefits at the local, national, and
global levels. It is also consistent with the Sustainable Land Management Operational Strategy
(OP 15), as it would address land degradation issues and support the adoption of SLM practices.

Moreover, the project would fit with the GEF Strategic Priorities for (i) biodiversity (BD-SP2), by
facilitating the mainstreaming of biodiversity objectives within production systems and the development
of market incentive measures; and (ii) sustainable land management (SLM-SP1), as it includes a heavy
focus on capacity building for SLM.

B. PROJECT DESCRIPTION

1. Lending instrument
The US$14.95 million project would be partially financed by a full-sized, stand-alone GEF grant
in the amount of US$6.75 million. While no Bank loan isdirectly associated with it in the SoRJ,
the project would complement activities from ongoing programs in the sector and region2 and
leverage their cofinancing. Confirmed cofinanciers include: (i) the GoRJ (US$6.31M of which
US$4.0M in cash), (ii) the Federal Government (US$1.1M in credits and in kind), (iii) two
NGOs: CI-Brasil and SOS Mata Atlântica (US$20,000 in kind); (iv) beneficiaries, i.e., rural
producers and community organizations (US$761,000 in kind as labor); and (v) FAO
(US$20,000 in kind for technical support). Total cofinancing equals US$8.20M equivalent.

2. Project development objective and key indicators (For details, see Annex 3)
The development objective of the proposed project is to promote an integrated ecosystem
management (IEM) approach to guide the development and implementation of sustainable land
management (SLM) practices in the North and Northwest (NNWF) regions of Rio de Janeiro
State. The desired principal outcomes for the primary target group (smallholder families and
communities) are: (i) improved capacity and organization for NRM, and (ii) increased adoption
of IEM and SLM concepts and practices. Progress toward the project’s development objective
would be measured according to indicators associated with the main minimum expected project
outcomes and impacts, i.e.:
     IEM/SLM practices adopted by at least 1,900 farmers in 40 communities in at least as
        many microcatchments by PY5 (80 percent of the project target), thereby reverting land
        degradation and improving rural livelihoods; and
     Coordinating bodies with significant stakeholder representation from microcatchment and
        municipal levels active at the regional and local levels (1 regional committee [COREM]

2
 The Bank currently finances projects in NRM in the states of São Paulo, Santa Catarina, Paraná, and Rio Grande
do Sul. Similarly, it is implementing a GEF Full-Size project in Paraná and preparing GEF projects in São Paulo and
Rio Grande do Sul. The proposed project is part of this set of regional activities dealing with NRM and development
and environmental conservation.


                                                        6
       by PY1; at least 40 local committees [CMDRs] by PY2) to integrate project concepts and
       activities into ongoing rural development efforts.

3. Project environmental objectives and key indicators (For details, see Annex 3)
The global environmental objectives are to: (i) address threats to biodiversity of global
importance, (ii) reverse land degradation in agricultural landscapes, (iii) enhance carbon
sequestration, and (iv) increase awareness at all levels of the value of adopting an IEM approach
in the management of natural resources. The desired principal outcomes for the global
environment are: (i) conservation and sustainable use of biological diversity, and (ii) increased
carbon storage in terrestrial ecosystems. Progress toward the project’s environmental objectives
would be measured according to indicators associated with the main expected project outcomes
and impacts, i.e.:

      Change in total land area characterized by biodiversity-friendly agricultural practices that
       enhance soil structure stability in microcatchments(32,000 ha by PY5);
      Total area of riparian and other indigenous forests rehabilitated for biodiversity
       conservation and hydrology stabilization objectives (1,440 ha by PY5);
      Area of biodiversity conservation-friendly land use mosaics established on private lands
       supporting corridor connectivity in project watersheds (1,240 ha by PY5);
      Reduction in erosion (50 percent by PY5) and downstream sedimentation (50 percent by
       PY5) in at least 3 microcatchments; amount of CO2 sequestered (1.5 tons of CO2/ha by
       PY5);
      Education and training of beneficiary stakeholders (1,900 by PY5), project executors
       (150 by PY4), and schools (25 by PY4).

4. Project components
The project objectives would be achieved by supporting the promotion of integrated ecosystem
management by means of the following four components. For details, see Annexes 3 and 4.

Component 1 – Planning for Integrated Ecosystem Management Actions (US$0.94 million,
6.0 percent of total project cost): Through studies to be developed and the lessons gathered from
the adoption of local land management planning and investment activities, this component would
influence policymaking, thus contributing to providing national and beneficiary stakeholders
(especially policymakers in the SoRJ and the NNWF farming communities) with a strengthened
framework at the state and local levels to facilitate the adoption and sustainability of IEM
principles and SLM practices.

Subcomponent 1.1–Strengthening of IEM Incentive Structure and Ecosystem Planning Systems:
would include (i) the design of a support system for SLM to facilitate financial sustainability
beyond the project period; (ii) a study to identify specific actions and institutional arrangements
to implement the Serra do Mar Biodiversity Corridor in the project area; (iii) the updating of
existing Watershed Management Strategies (WMSs); and (iv) a pilot land suitability analysis at
the microcatchment level as a contribution to improve livelihoods and to protect ecosystem
functions and services.




                                                7
Subcomponent 1.2–Local Land Management Planning: would include the preparation of (i)
Microcatchment Development Plans (PEMs); (ii) Individual/Farm-level Development Plans
(PIDs); and (iii) Statutes of Community Conduct for the Responsible Use of Natural Resources
(ECCs).

Component 2–Support Systems for the Adoption of IEM/SLM practices (US$8.80 million,
57.4 percent of total project cost): This component would provide technical and financial support
to small farmers and other natural resource managers (individually and in groups) to shift from
existing nonsustainable agricultural practices to sustainable livelihood activities which enhance
biodiversity, reduce or reverse land degradation, and increase carbon sequestration within an
IEM framework.

Subcomponent 2.1–Financial Support for Sustainable Natural Resources Management: would
provide technical and financial support to farmers to carry out subprojects to assist in the
transition to sustainable livelihood activities which enhance biodiversity conservation and carbon
sequestration in agricultural landscapes.

This subcomponent would include the implementation of small infrastructure and productive
systems funded through ongoing credit and incentive programs, as well as the provision of GEF–
funded financial support to assist in the transition from nonsustainable agriculture practices to
sustainable livelihood activities within the IEM framework.

Subproject proposals eligible for GEF financing would fall under the following five categories:
(i) conservation or sustainable use of biodiversity; (ii) rehabilitation of degraded lands; (iii) water
resources management and protection; (iv) redirection of productive systems toward those that
are socially and environmentally friendly and financially sound; and (v) commercialization of
environmentally sound products.

Subcomponent 2.2–Support to Adaptive Management Practices: would support the demand-
driven adaptation of existing soil management practices and/or adequate technological solutions
to unsustainable land use issues. The activities foreseen under this subcomponent include: (i)
adaptation and validation of cropping, forestry, agroforestry, and pasture management systems to
increase carbon stocks and biodiversity; and (ii) implementation of pilot units to improve the use
of rural space in environmentally fragile and vulnerable areas or in the buffer zones of Protected
Areas.

Component 3–Organization and Capacity Building for Integrated Ecosystem Management
(US$2.47 million, 16.0 percent of total project cost). The objectives of this component would be
to: (i) improve farm- and community-level capacity to manage natural resources by facilitating
the creation of environments favorable to the formation and strengthening of rural organizations;
and (ii) share project implementation experiences and lessons learned with relevant stakeholders
at the local, state, and national levels, thus broadening project impact beyond the local level. It
would support training, education, and associated community efforts designed to promote
biodiversity conservation and the sustainable management of natural resources. It would target
extension staff and residents of project–supported watersheds, including smallholder farmers,
women, youth, and schoolteachers.



                                                  8
Subcomponent 3.1–Community Organization: would encompass training in and application of an
innovative multidisciplinary methodology (incubation or incubagem) for strengthening local
organizations for socioeconomic betterment and improved management of natural resources; and
development and implementation of an interactive project Communication Plan that would
collect and disseminate socioeconomic, environmental, and monitoring data and foster
information exchange with relevant stakeholders.

Subcomponent 3.2–Training of Project Executors: would involve training and environmental
awareness efforts to build management and technical capacity of intersectoral and extension
staff; and project awareness training for members of the project steering committees.

Subcomponent 3.3–Training and Environmental Education of Beneficiaries: would include
training and environmental education efforts to enhance local beneficiary capacity and increase
their support for sustainable NRM. Training under this subcomponent would be oriented toward
making applied technical and scientific knowledge available to diverse groups of stakeholders,
and would include technical training on a demand-driven basis for subprojects under
subcomponent 2.1 and training schoolteachers to prepare environmental education subproject
proposals to submit for project support. This subcomponent would also support field trips and
field training days for smallholder farmers.

Component 4–Project Management, Monitoring and Evaluation (US$2.74 million, 17.5
percent of total project cost). The objectives of this component would be to promote significant
beneficiary and implementation partners’ participation in management and monitoring activities
to leverage implementation impact. It would ensure the effective implementation of project
activities and management of resources, monitor whether or not the project is achieving the
desired results or would need to be adjusted, and disseminate these results and lessons learned at
the local, state, national and international levels.

Subcomponent 4.1–Participatory Management of the Project: would support operational aspects
necessary for the effective implementation of project activities and management of resources,
while at the same time mainstreaming the project approach within the services that project
partners provide to the NNWF’s rural population. In addition to this core executive structure, and
given the importance of leveraging project impact through integration with other ongoing
activities, a participatory, consultative external project coordination structure (Coordination
Forums) would be established at the state, municipal and microcatchment levels.

Subcomponent 4.2–Monitoring and Evaluation: would carry out participatory overall physical
and financial monitoring of the project, socioeconomic and environmental monitoring in pilot
microcatchments, and overall project evaluation including the development and implementation
of a monitoring system.

Subcomponent 4.3–Project Dissemination: would support the design and implementation of the
project information dissemination strategy which would disseminate project implementation
results and lessons learned to all relevant stakeholders, and provide the basis for knowledge




                                                9
transfer, subsequently increasing the potential for replicating implementation experiences and
project lessons learned.

Sector Issues Addressed in the Project. The project is designed to address sector issues by: (a)
supporting the implementation of the Serra do Mar Biodiversity Corridor, through the
development and implementation of an action plan that would identify specific actions,
institutional arrangements, and monitoring tools to support the implementation of the Corridor in
the project area; (b) promoting the conservation and connection of forest remnants in the buffer
zones of existing public protected areas, through provision of technical and financial assistance;
(c) adopting improved agricultural practices that enhance biodiversity and arrest/reverse land
degradation; (d) promoting the sustainable use of agrobiodiversity (e.g., medicinal plants); and
(e) promoting the adoption of improved land management practices.

5. Lessons learned and reflected in the project design
The proposed project would build on lessons learned from the implementation of environmental
and NRM projects in Brazil (see Annex 2 for a list of these projects). Some of the lessons that
would be incorporated in the project are:
                   Lesson Learned                                  How Lesson is Reflected in Project Design
The use of a natural, physical unit, such as the         The proposed project would employ watersheds and
microcatchment, for planning purposes gives viability    microcatchments as the bases for an integrated ecosystem
to conservation measures that produce limited            planning approach to production activities, an approach
impacts on individual farms.                             which treats small and large farmers as complementary
                                                         elements of a single, expanded system.
To be successful, investments in soil conservation       The proposed project intends to focus on technologies that
must be based on technical changes that bring            provide direct benefits to farmers; for this reason, there is
recognizable and early productivity benefits to          little allocation of GEF funds to support investments.
farmers.
Continued political support and integration of project   SEAAPI’s rural development activities have proven
activities with the various rural development            resilient in the face of significant political changes at both
programs enhance project impact.                         the state and local levels. Integrating the proposed project
                                                         activities with these existing programs provides greater
                                                         likelihood of sustainability.
Extensive training and retraining, emphasizing group     Both the ongoing rural development projects and the
and participatory approaches, may be necessary to        proposed GEF–supported program include substantial
change the "mindsets" of public sector research and      training in participatory approaches.
extension staff.
Improved land management generates important             The proposed project includes a strong agro-environmental
external benefits. Project design should ensure the      and socioeconomic monitoring component with ample
inclusion of adequate socioeconomic and                  beneficiary participation for the measurement of project
environmental monitoring activities to provide the       impacts on the generation of externalities, including
necessary basis to quantify these externalities.         national and global benefits.

Past Performance of Projects in the Sector: Besides projects currently under implementation in
São Paulo, Santa Catarina, Paraná, and Rio Grande do Sul, in recent decades the Bank has
financed a series of projects that supported innovative technical approaches to soil conservation
in southern Brazil, including the Paraná Land Management I Project (Loan 3018-BR) and the
Santa Catarina Land Management II Project (Loan 3160-BR). Both projects contributed to an
increase in the adoption of improved practices, thereby increasing productivity and reducing soil
loss. LM II, whose objective was to increase agricultural production and productivity and which
concentrated its efforts in areas with the highest susceptibility to soil erosion, also demonstrated


                                                         10
the effectiveness of a participatory, community-based approach to project implementation with
the microcatchment as the physical planning unit. In addition, it motivated changes in the models
of agricultural research and the provision of rural support services toward more environmentally
friendly and participatory approaches.

6. Alternatives considered and reasons for rejection
The project approach was chosen based on its complementarity with ongoing GoRJ and
nongovernment activities, its potential to influence adoption of the project strategy by such
ongoing efforts, and the potential for later replicability and scaling up of positive project
outcomes.

Alternatives considered centered on addressing two categories of issues: (i) limited human
capacity and weak community organization; and (ii) limited or nonexistent adoption of
SLM/IEM techniques associated with the lack of upfront investments to facilitate their adoption.
Originally, the project concept was designed to address the first set of issues through GEF OP 12
(IEM). However, the approval of GEF OP 15 (SLM) opened up additional possibilities to
address both capacity concerns and significant barriers to the adoption of SLM/IEM practices
within the rubric of GEF priorities including through on-the-ground investments, targeted
research, and mainstreaming of SLM practices. Thus, the project team refocused the project as
an OP 12 proposal with special relevance to OP 15.

The GEF proposal was initially conceived as a blended operation to complement a proposed
Bank loan. However, due to the uncertain status of State creditworthiness, the proposed Carta
Consulta to request Federal authorization to solicit Bank financing is pending evaluation. The
Bank confirmed its unconditional support to the project given its strategic value within the
context of similar activities supported by the Bank, the GEF, and other partners in the region.
The Bank has also indicated that it would be prepared to negotiate a loan once the State has
secured Federal authorization to seek Bank support. Therefore, the current proposal is for a
smaller project area than that originally envisioned in the blended operation. However, in view of
the improved macroeconomic situation and given GoRJ’s firm interest in a Bank loan, the
project would emphasize activities that would provide the basis for the scaling-up and replication
of project activities, such as development of replicable sustainable production modules, and the
dissemination of experiences and lessons learned throughout the state.

C. IMPLEMENTATION
1. Partnership arrangements (if applicable)

The United Nations Food and Agriculture Organization (FAO) would assist in project
implementation through the longstanding WB-FAO Cooperative Program under which the FAO
provides technical assistance during the preparation and implementation of rural agricultural
investment projects.

In accordance with the World Bank strategy of working on a regional approach, all ongoing
Bank–financed microcatchment projects in the South-Southeast Region of Brazil are integrated
in an informal/technical manner. The proposed project was integrated into this network during
the preparation phase. Furthermore, the project fits well with the strategies of other agencies



                                                11
supporting Brazil and, in addition to information exchanges, would coordinate with their
activities in a number of concrete ways. These include coordinating with: (i) KfW’s Pro-Mata
Atlântica Forest Program (PMAP) in the Desengano Park by implementing SLM activities in
the Park’s buffer zone, which is located in two of the project’s watersheds; (ii) SOS/Mata
Atlântica and CI-Brasil which would provide cofinancing and contribute to project
implementation through a variety of activities including studies, training, and monitoring
(including monitoring the change in vegetation cover in Permanent Protected Areas); (iii) GEF
by working closely with staff from the FUNBIO Project, by building on the lessons and
experiences of FUNBIO as a basis for the design of a support system for sustainable agriculture
in the SoRJ; GEF’s Paraná and São Paulo projects, where specific project activities identified
during project preparation could benefit from the experience of these two projects, which are
also located in the Atlantic Forest; and the GEF–funded Ecosystem Restoration of Riparian
Forests in São Paulo (WB as Implementing Agency) and the Sustainable Land Management in
the Semi-Arid Sertão (IFAD as Executing Agency) on its payments for environmental services
scheme; and (iv) CEPF activities in the project area.

2. Institutional and implementation arrangements (See Annex 6 for details).
In order to enhance project impact and strengthen the long-term sustainability of project results,
the design of implementation arrangements has prioritized the involvement of agencies and
institutions with a strong presence in the region in project-relevant activities.

SEAAPI would be responsible for overall project management and implementation throughout
the project’s five-year implementation period. However, it is expected that municipal
governments and a broad cross-section of civil society would play an active role in the GEF–
supported activities. A Project Management Unit (SEP) would be established through SEAAPI’s
Microcatchment Directorate (SMH). Through SEP, SEAAPI, as the project executor, would sign
working agreements, as detailed in Annex 6, with agencies and institutions with a strong
presence in the region, for extension and research, monitoring, and other implementation support
activities.

Flow of Funds and Accountabilities (See Annex 7 for details). A special account in US dollars
would be opened for GEF funds. An operational account in Reais would be opened to receive
GEF funds from the Special Account and to make the payments for the activities financed by
GEF. The operational account would not receive State counterpart funds, as the State would pay
directly from its own Treasury account for its share of the project’s costs.

Funds would be transferred from the Operational Account to FUNDES3 to cofinance eligible
subprojects (subcomponent 2.1). These transfers would be made on the basis of a Convênio or
Governor’s Decree specifically to finance part of the project.

SEP would manage and control the investment of the project’s financial resources. All budgeting
and financial transactions would have to be generated and incorporated into the State Budget and
Financial system—SIAFEM4. To this end, SEP would liaise with SEAAPI’s

3
  The State Social and Economic Development Fund (FUNDES) is the existing incentive legislation.
4
 SIAFEM—Integrated Financial Administration System of States and Municipalities (Sistema Integrado de
administração financeira de Estados e Municípios)


                                                     12
Administration/Financial Department to prepare the budgets and request the recording of all
official documents required to make the payments. Counterpart funding would be both in cash
and in kind, and the FM system to be used in the project would have the capability to capture all
the different counterpart contributions. PRONAF credits to beneficiaries would be accounted in
the Management Information System (MIS) through copies of the financing contracts and Banco
do Brasil vouchers received via EMATER, the agent for this type of financing.

3. Monitoring and evaluation of outcomes/results (see Annex 3 for details)
The strategy developed for the project M&E system includes monitoring and evaluation of
project impacts (including indicators for evaluation of achievement of objectives and monitoring
of outputs and outcomes), and tracking of the physical and financial execution of the project
through the installation and implementation of an MIS. Where no baseline information exists,
studies would be undertaken during PY1 to gather it. As project implementation progresses,
information drawn from the MIS system, a midterm evaluation, and field reports from the
participatory monitoring activities would be used to gauge progress toward achievement of
project results and provide feedback related to the achievement of desired project impacts, thus
helping improve project effectiveness.

SEP would be responsible for coordinating monitoring, with other agencies providing support
and technical assistance as necessary. Key groups of stakeholders would also participate actively
in data collection and other sampling activities to monitor social and environmental aspects of
the project as part of project capacity building and M&E.

A project portal would be developed under subcomponent 3.1 to make all project–related
information easily accessible to policymakers on the project steering committees (and to the
general public). In addition, the steering committees would be provided with project updates on a
regular basis which would include M&E information. This flow of information would prove
particularly invaluable to the State Council of Sustainable Rural Development (CEDRUS), the
project’s external coordination forum, in its role in facilitating (i) project integration with the
overall rural development strategy in the state and the country, and (ii) integration among partner
institutions and, in particular, among the State and National programs that are relevant for
coordination and collaboration with the proposed project.

4. Sustainability & Replicability
Indications of borrower and recipient commitment and ownership. During preparation, the State
Government has shown its support through a number of concrete actions including complying
with all issues agreed in the preparation missions’ Aide-Mémoires; rapid approval of the law
which authorized receipt of GEF Block B resources; mobilization of various state agencies’
support; securing cofinancing for project preparation; efforts to systemize existing information;
and preliminary diagnostics and consolidation of a georeferenced project database, with
resources from the State and partners involved in the project; and providing leadership during a
series of project preparation meetings and workshops with stakeholders. The GoRJ’s significant
level of counterpart financing (US$6.31M, of which US$4.00M in cash) is a clear indication of
its commitment to project success.




                                                13
Sustainability. In addition to borrower commitment and ownership, the following elements are key to
ensuring project sustainability over time: stakeholder awareness of, commitment to, and capacity for
improving environmental practices; strong institutions and policies committed to pursuing IEM and
SLM; and sustainable funding beyond the project’s lifetime. The project approach would address these
elements by: (i) creating a collective awareness of global environmental issues and the importance of
IEM/SLM concepts and practices; (ii) contributing to improved policy instruments and strengthened
institutions to facilitate future development and adoption of IEM and SLM concepts and practices; (iii)
contributing to increasing the incomes of small farmers and their families by introducing new production
management models, diversifying economic activities, and adding value to the production, processing,
and commercialization of “environmentally friendly” products; (iv) complementing existing financial
mechanisms to cover transition costs from nonsustainable to sustainable livelihood activities as well as
support to the development of long-term ways to facilitate this transition; and (v) facilitating increased
local empowerment and improvement of the quality of life of smallholders by ensuring access to the
support provided by ongoing programs.

Replicability. The project information dissemination strategy would focus on knowledge transfer
and subsequently increasing the potential for transferring experiences at the state, national, and
international levels and disseminating project lessons learned. Subcomponent 4.3 (Project
Dissemination) and activities in subcomponent 3.1 (Community Organization) specifically
address this issue. They would support the sharing of information both within and outside the
project area, involving those beneficiaries, people, communities, and institutions, governmental
or not, who are interested in the project and who could learn from and make use of the
experience, expanding it and making the idea useful to the public throughout the Atlantic Forest
region and beyond, particularly to other countries in Latin America.

5. Critical risks and possible controversial aspects
The major potential risks that may affect project success and their respective mitigation measures
incorporated into project design are:
                                                                                                      Risk
                                                                                                    Rating w/
               Risks                                Risk Mitigation Measures
                                                                                                    Mitigation
   Integrated ecosystem–based      Addressed through support for participatory, adaptive            M
   watershed and                   management planning of the activities of ongoing programs
   microcatchment                  (Moeda Verde, Rio Rural, and PRONAF) which would be
   management plans do not         broadened as experience is gained during the initial years of
   lead to sufficient individual   project implementation.
   and collective action
   Stakeholder groups and          This would be addressed through participatory and                M
   Government are unable to        decentralized implementation mechanisms and
   work together toward            communications and promotion campaigns to be pursued in
   conservation goals              project areas.
   Political commitment is not     This risk is addressed in that the project reflects national     M
   sustained                       priorities and a national commitment to the protection of
                                   critical watersheds and rural poverty alleviation. The Bank
                                   has verified theGoRJ’s high priority and interest, and ensured
                                   coordination (through the SEAAPI/SMH) with key agencies
                                   working in the five project watersheds.
   Local and institutional         Increasing existing institutional capacity is being addressed    S
   capacity is not sufficiently    by ongoing programs implemented by SEAAPI (with


                                                        14
    developed to manage              municipalities through PRONAF) and State Environmental
    project activities               Agencies. Project implementation would be backstopped by
                                     national and international expertise.
    Project management unit          SEP would be established through the Microcatchment              M
    (SEP) is not able to function    Directorate (SMH), responsible within SEAAPI to coordinate
    in a complex multi-              the Rio Rural Program and other watershed and
    institutional environment        environmental management matters as they relate to rural
                                     development; project management would capitalize on the
                                     existing coordination mechanisms, particularly through the
                                     State and Municipal Rural Development Councils; training,
                                     and technical assistance to SEP.
    The protection and               The issue of sustainability would be addressed through the       M
    conservation of project          development of a proposal for an environmental “goods and
    watersheds is not                services” payment scheme targeting key watersheds and by
    sustainable                      mainstreaming the adoption of win-win practices by farmers
                                     that both benefit the environment and provide increased,
                                     more sustainable income or improved quality of life.
    M&E not taken into account       This would be addressed through the strong participation of      M
    in developing methodology        direct stakeholders and interested agencies in M&E,
    or in building support for       beginning in the early stages of project implementation, and
    approach                         the project’s communication plan.
    Participants in project          This would be addressed by emphasizing a participatory           M
    watersheds are not               approach and extensive training of project participants and by
    sufficiently motivated to        financial support and communication activities. In addition,
    adopt new practices and          the new practices and technologies are intended to enhance
    technologies                     stakeholders’ incomes, which should prove to be a powerful
                                     incentive in itself.
H = High; S = Substantial; M = Modest; L/N = Low/Negligible

No issues have been identified that might be controversial or pose reputational risks to the Bank.

6. Loan/credit conditions and covenants
At present, no exceptional contractual clauses or conditions are foreseen for project effectiveness
or implementation. General Conditions of Effectiveness would include: (i) Recipient’s adoption
of the Operational Manual agreed with the Bank; (ii) establishment of the Project Management
Unit in a form and substance satisfactory to the Bank; (iii) Bank approval of a Project
Implementation Plan and a Procurement Plan for the first 18 months of project execution; (iv)
submission to the Bank by Recipient of draft working agreements, acceptable to the Bank, to be
signed with state and federal agencies, and other nongovernmental organizations for project
implementation as listed in Annex 6; and (v) initiation of implementation of a Bank–approved
MIS.

D. APPRAISAL SUMMARY

1. Economic and financial analyses (See Incremental Cost Analysis in Annex 15)
Given the relatively modest investment of GEF funds proposed, the project does not aim to
finance the actual large scale implementation of IEM in the project target area. The project
would be implemented as a pilot/demostration project, and would emphasize on-the-ground
actions that can be replicated, thereby providing the basis for scaling up project results and
promoting improved policymaking. Thus, while an Economic and Financial analysis would not
be applicable, the design in itself includes cost effectiveness considerations to promote


                                                          15
maximum implementation effectiveness, and replication and impact of project results both within
and outside the project area.

The goal of achieving cost effectiveness and maximum impact underlay the decision to fully
integrate project activities with complementary ongoing public and private efforts, including
those to supply financial support for improved production systems, and supply of technical
assistance through well established mechanisms that would be supported by counterpart funds.
Cost effectiveness considerations also influenced the decision on how to distribute the target
number of pilot microcatchments for development of environmentally and financially sound
demonstration models with maximum representation of the diversity found within the five
intervention watersheds.

Financial sustainability. Project preparation included extensive discussions and studies on the
development of strategies to ensure the long-term sustainability of project–financed activities. It
examined the existing incentive legislation and identified the most appropriate mechanisms to be
used for the provision of the financial support proposed under Component 2 (i.e., through the
State Social and Economic Development Fund - FUNDES), which may provide the basis for
long-term support to overcome the financial constraints to the adoption of financially sustainable
IEM/SLM practices. The project would initially support practices that have proven to be
financially sound and to provide win-win opportunities to beneficiaries and the environment, and
support adaptive research for new ones. A preliminary analysis shows that while selected crops
such as banana, passion fruit, pineapple, and tomatoes may yield an average 5 percent higher net
income under environmentally friendly production systems, they command an average 38
percent higher production cost which represents a significant constraint to the adoption of the
enhanced production system.

The project would also support (under Component 1) the development of a proposal for the
creation of a PES scheme to enhance financial sustainability beyond project implementation.

2. Technical
The project’s technical design is based on the foundation provided by the socioeconomic and
environmental studies undertaken during preparation. The methodology adopted by these studies
identified the relevant environmental issues, their consequences, and key constraints to be
overcome, in order to design the most appropriate way for the project to address them. Key
issues in this regard in the Brazilian context, relevant to the NNWF, center on the relationship
among smallholder agriculture, environmental concerns, and rural poverty. Key constraints and
the project activities that address each one are outlined in detail in Annex 4.

3. Fiduciary (See Annexes 7 and 8 for more information on the Financial Management and
Procurement Assessments, respectively)

In March 2002, a financial management risk assessment was carried out for the PDF Block B
Grant. This FM Assessment was reviewed and expanded in December 2004 and March 2005 with
the objective of determining whether the financial management and disbursements arrangements
proposed by the Grantee—the State of Rio de Janeiro—through its Implementing Agency would
be acceptable to the Bank once they are in place and fully operational.



                                                16
The FM assessment concluded that the proposed financial management arrangements for the
project would satisfy the Bank’s minimum requirements and that the proposed financial
management systems would effectively control and monitor the project and provide with
reasonable assurance, accurate and timely information on the progress of project implementation.

The FM assessment rated the Financial Management risk associated with the project as
substantial and recommended that project implementation and counterpart funding be closely
monitored in order to mitigate this risk. It further recommended that audit of project accounts be
procured following Bank guidelines and that audit costs be included in the Bank’s financing
portion. The implementation of the Action Plan and the Procurement Plan discussed in Annex 8,
along with the centralization of financial management and procurement activities within SEP,
would help minimize existing risks.

4. Social (See summary of social assessment in Annex 18)
While environmental awareness and concern have been growing in communities in recent years,
a major challenge for the project would be to overcome traditional resistance to the introduction
of new technologies and practices, which in turn is derived from cultural factors, risk aversion,
and previous, less than positive experiences with more traditional top-down models of rural
extension. However, it is important to work with communities to overcome this challenge
especially in light of the social assessment’s conclusion that many traditional productive
activities have destructive effects on the environment due to inadequate soil preparation and poor
land management techniques. The project would seek to overcome this traditional resistance by
utilizing a highly participatory and agroecological approach to extension, which would
emphasize the strengthening of local organizations, equality of learning exchanges with farmers,
and empowerment.

Stakeholder Participation. Stakeholders would include national and beneficiary stakeholders.
National stakeholders would comprise the following: state institutions (Environment,
Agriculture, Water Resources, Public Defender's Office, and Universities); federal institutions
(EMBRAPA, National Water Agency, Ministries of Environment and Agrarian Development,
and universities); municipal organizations (Sustainable Rural Development Councils, Municipal
Secretariats of Agriculture and Environment), national and local NGOs; and the private sector.
Key beneficiaries would include small- and medium-size farmers, rural youth, school teachers,
and community leaders.

During project preparation, national and beneficiary stakeholders were identified and
participated in numerous consultations associated with the Socioeconomic and Environmental
Diagnostic Studies and the Social Assessment. In addition, the project team organized a series of
project preparation meetings and workshops with key state, municipal, and beneficiary
stakeholders. During project implementation, national stakeholders would participate through
representation on the Project Steering Committees (external coordination forums) to be
established at state, regional, municipal, and microcatchment levels (see Annex 6). In addition,
participation of key municipal and beneficiary stakeholders and NGOs would be ensured through
project support for two major activities: (i) participation in the review and updating of existing
Watershed Management Strategies (WMSs) which were prepared, with stakeholder involvement,


                                               17
during project formulation; and (ii) preparation and collective implementation of PEMs. The
preparation of PEMs and endorsement of group and individual PID–based subproject proposals
stemming from the PEMs would be carried out by new or existing microcatchment groups,
consisting of local stakeholders.

Participation of Civil Society. Key stakeholders (national and state agencies, producer
representatives, NGOs) were involved in the discussion and preparation of the initial project
concept, consultative workshops, and development of criteria for selection of project areas.
Further collaboration with NGOs and producer groups organizations would take place: (i) as
intermediaries between government and beneficiaries in implementation of field activities; (ii) in
M&E activities; and (iii) through the existing coordination mechanisms that would be capitalized
upon by the project, particularly the State and Municipal Rural Development Councils
(Municipal Councils are the advisory bodies of the PRONAF project). In addition, two NGOs—
SOS Mata Atlântica and CI-Brasil—which participated in the preparation of the Socioeconomic
and Environmental Diagnostic Studies and related Watershed Strategies, are proposed in the
project management structure as project executors/partners.

Social Issues Important in the Project. There will be some differential access to project benefits.
Based on the type of producer (e.g., size of landholding, market-oriented or family farmer) as
well as the category of subproject chosen, the maximum amount of project support would vary.
These guidelines have been adopted to ensure support to individuals who most need it (thus the
decision not to provide financial support to larger farm holdings), while at the same time,
through the capacity-building, proposal, and selection processes, ensuring that grantees have the
capacity to develop and implement successful, replicable subprojects. Nonetheless, all those
living in the selected microcatchments would benefit from the project in the form of improved
management of the microcatchments’ natural resource base and through the eventual scaling up
of the project strategy and activities.

Monitoring of Social Impacts. The proposed approach for the project M&E system includes
measurements of impacts on people and on institutional performance. Social and economic
baseline information has been developed for the MIS for purposes of periodic tracking and
monitoring. Local stakeholders would participate in carrying out some aspects of monitoring and
analysis.

In addition, the project’s Annual Operating Plans (POAs) would be prepared by SEP and
submitted to the Bank for no objection. Semi-annual progress reports would be prepared and
submitted to the Bank in advance of Bank supervision missions and would be combined into a
single Annual Progress Report. A Midterm Review (MTR) and Implementation Completion
Report (ICR) would be carried out, at which time stakeholder workshops would be held to share
and review project progress and outcomes/impacts, including social outcomes. When necessary,
modifications based on monitoring and evaluation recommendations would be made to the
Project Operational Manual.

5. Environment
Environmental Issues Important in the Project. Enhancing livelihoods of the poor through
improved management of natural resources is an integral element of the project design. The



                                                18
project’s organization and capacity building component is designed to increase community
organization and the ability for self-management of natural resources. Through this component
as well as through the adoption of sustainable SLM activities planned under the PIDs,
beneficiaries would be trained in improved management and acquire on-the-ground experience
in activities designed to conserve natural resources while simultaneously improving livelihoods.

6. Safeguard policies
    Safeguard Policies Triggered by the Project                                              Yes                    No
    Environmental Assessment (OP/BP/GP 4.01)                                                 [X ]                   []
    Natural Habitats (OP/BP 4.04)                                                            [X ]                   []
    Pest Management (OP 4.09)                                                                 []                   [X ]
    Cultural Property (OPN 11.03, being revised as OP 4.11)                                   []                   [X]
    Involuntary Resettlement (OP/BP 4.12)                                                     []                   [X]
    Indigenous Peoples (OD 4.20, being revised as OP 4.10)                                    []                   [X]
    Forests (OP/BP 4.36)                                                                     [X ]                   []
    Safety of Dams (OP/BP 4.37)                                                               []                   [X]
    Projects in Disputed Areas (OP/BP/GP 7.60)*                                               []                   [X]
    Projects on International Waterways (OP/BP/GP 7.50)                                       []                   [X]

Environmental Rating: B–Partial Assessment
The Project is designated a Category B project, based on the above assessment of potential
impacts. On July 24, 2003, the Bank PCD (which forms the basis for this document) was
reviewed by the QAT, which agreed with the proposed environmental Category B and S2
safeguard ratings, and confirmed that the project design did not trigger any of the Bank’s social
safeguards. The QAT also agreed that the project would be highly positive from an
environmental standpoint if implemented as planned. For details regarding the triggering of
safeguard policies concerning Environmental Assessment, Natural Habitats, Pest Management,
and Forests, see Annex 10. All relevant QAT documents can be found in the project files.

Project Compliance with applicable safeguard policies
Environmental Assessment. The project was classified as a Category B. It was designed to
ensure compliance with the requirements of the Bank umbrella policy on Environmental
Assessment (OP 4.01). Despite the largely positive or neutral project impacts anticipated,
submission of an EA and EMP was considered prudent to ensure conformity with OP 4.01. The
GoRJ submitted the final draft EA/EMP report in November 2004. This draft was then submitted
to the LCSES QAT for review on January 21, 2005.

Natural Habitats. The project would support natural habitat conservation and improved land use
by integrating the conservation of natural habitats and the maintenance of ecological functions
into regional development programs and by promoting the rehabilitation of degraded natural
habitats. Project activities would not significantly modify or degrade natural habitats. In terms of
policy dialogue, the project would assist the GoRJ in incorporating an analysis of any major
natural habitat issues into its rural development strategies, including identification of important
natural habitat sites, the ecological functions they perform, the degree of threat to the sites,
priorities for conservation, and associated recurrent funding and capacity building needs.

*
 By supporting the proposed project, the Bank does not intend to prejudice the final determination of the parties' claims on the
disputed areas


                                                               19
Forestry. The proposed project would primarily support environmentally protective activities
and those which are supportive of small farmers (e.g., farm and community forestry).

7. Policy Exceptions and Readiness

The proposed project does not require any exceptions from Bank policies.




____________________         _________________________         ________________________
Alvaro J. Soler                      John R. Redwood                       Vinod Thomas
Task Team Leader                  SMU Director, LCSES                      Director, LCC5




                                              20
Annex 1: Country and Sector or Program Background
  BRAZIL: Rio de Janeiro Sustainable Integrated Ecosystem Management in Production
                   Landscapes of the North-Northwestern Fluminense (GEF)
Bio-Physical Characteristics of the Project Area
The Atlantic Forest is one of the five biodiversity "hottest hotspots" among the world’s 25 top
priority conservation areas, and the State of Rio de Janeiro holds the highest percentage of
Atlantic Forest with respect to total area among all of the country’s states. Within the State, the
most threatened fraction of primary vegetation can be found in the North and Northwestern
Fluminense administrative regions (NNWF). Together these two regions encompass 22
municipalities and an area of 15,000 km2, with an altitude ranging from sea level to 1,750 masl
which in part contributes to the diverse habitats and rich biodiversity of the regions, which are
characterized by a number of distinct natural aquatic and terrestrial habitats, endemic
biodiversity and the occurrence of the Brazilian Coastal Atlantic forests and the Brazilian
Interior Atlantic forests, two of the 55 ecoregions in the LAC region designated as maximum
prioirity for biodiversity conservation. Several species of plants, birds and fish are endemic to the
NNWF regions.5
Two major typologies of forest formations are found in the NNWF regions,
dry/deciduous/seasonal and humid/ombrophyle forests. Seasonal deciduous formations include
fragments of tableland forests in the North Fluminense, with the best preserved being Mata do
Carvão in the municipality of São Francisco do Itabapoana, whose drainage constitutes one of
the watersheds targeted by the project. This area was identified as being of high biological
importance by National Program for Biological Diversity (PRONABIO) due to its populations of
the red-browed Amazon parrot. The last tableland forest within the territory of the State, this area
is considered the boundary for the distribution of Amazon rainforest plant species, with wood
species such as peroba being important for conservation purposes. This classification also
includes semi-deciduous dry forest to the North/Northwest of the edges of Desengano State Park,
in the municipalities of Campos and São Fidélis, running along the boundaries of the states of
Minas Gerais and Espírito Santo. Formations to the Northwest in Laje do Muriaé and Miracema
were listed by PRONABIO as being highly important because they are home to the globally
endangered species plumbeous antvireo and the buffy tufted-ear marmoset.
Humid formations encompass the edges of Desengano State Park to the south in the watersheds
of the Imbé and Macabu Rivers. The region also contains the variations in altitude existing in
this typology, encompassing marshy (alluvial) forest and lowland forests up to cloud formations
and altitude “fields.” The amount of area covered is residual at low altitudes, increasing as the
terrain becomes dynamic and unsuitable for agricultural use. These areas are of extreme
biological importance, with over 18 species of globally endangered animal species6. The
watershed of the Doce River is a plant mosaic of small marshlands and forest regenerations of
restinga and dry forest. Waterlogged areas form part of the lagoon complex of the North

5
  For example, a number of endemic fish species which survive in the dried mud for long periods of drought,
endemic species of orchids, bromeliads and other plant species, endangered birds, endemic and endangered species
of primates, arboreal species of Amazonian genera distributed throughout Brazil, and rare endangered plant species,
including the Brazil wood (after which the country is named), as well as five of the seven mangrove species
occurring in Brazil.
6
  This includes the maned three-toed sloth, the wooly spider monkey, the red-browed Amazon parrot, the black-
headed berryeater and the solitary tinamou.


                                                        21
Fluminense, important as a resting and feeding place for northern migratory birds such as
maçaricos (shore birds) and marrecas (wild ducks). In addition to forest habitats, this region
holds one of the best-preserved restingas of Brazil (Jurubatiba), which also supports important
endemic populations. The Jurubatiba National Park is considered a refuge for species already
extinct in other regions of Rio de Janeiro state where restingas are degraded or have already
disappeared.
In addition to wild animal and plant biodiversity, the region’s smallholder agriculture sector
constitutes a rich source of agro-biodiversity in subsistence crops such as manioc, sweet potato,
corn, beans and rice. Due to tradition and their relative geographic isolation, some rural
communities maintain rare varieties of such crops that may be resistant to emerging pests and
diseases.
The Atlantic forest also plays an important role in the global carbon cycle. The total land area
under the remaining Brazilian Atlantic forest is about 8 million hectares (of which 841,000 ha
are located in the Rio de Janeiro State). The protection of this forest would serve to store a
significant amount of carbon and thus reduce the net emission rate of CO2 into the atmosphere.
In addition to the forest, other natural systems and productive landscapes (e.g., lands subject to
such sustainable agriculture practices as crop rotation, mulching, no-tillage, etc.) and improved
agro-sylvo-pastoral systems, can make substantial contributions to carbon storage. According to
the Intergovernmental Panel on Climate Change (IPCC), the net annual gain in carbon
sequestration from e.g., improved grazing land management, or from land-use change to
agroforestry, exceeds the potential gain from other improved land management or land-use
change options, including forest management and rice paddies.
Biodiversity Threats
Considered one of the three most threatened ecosystems on Earth, Brazil's Atlantic Forest has
been reduced to less than 7.5 percent of its original area of 110 million ha. The major threats to
Brazil's Atlantic Forest are deforestation (for logging and charcoal production) and agricultural
expansion. A recent study carried out by the Fundação SOS Mata Atlântica (the main NGO
acting for the protection of the forest) in collaboration with the National Institute for Space
Research (INPE), identified an area of deforestation amounting to an estimated 1,000,000 ha
between 1990 and 2000. During this time, the State of Rio de Janeiro had the highest
deforestation rate (16.7 percent) of the nine states studied, almost 40 percent higher than that of
the second-ranked state. Moreover, the NNWF are the State's administrative regions that suffered
the most deforestation over this period of time.

Despite the characteristic richness of the region’s agrobiodiversity, the smallholder agricultural
sector also poses a threat to the biome’s biodiversity. The major threats associated with the
smallholder agriculture are: (i) deforestation of the floodplain forests and grasslands attributable
to the introduction of conventional monocropping agriculture (mainly sugar cane), and
consequent loss of soil fertility and soil erosion; (ii) deforestation of the remaining tropical semi-
deciduous forests associated with the advance of the agricultural frontier into marginal areas
(slash and burn, fuelwood and logging), and subsequent erosion of agricultural lands (mainly due
to overgrazing); (iii) unsustainable and illegal forest exploitation (fuelwood, logging and
extraction of ornamental species and herbs) and poaching (as a means of complementing the diet
of rural families) in the remaining tropical moist broadleaf forests and montane grasslands; (iv)
deforestation of restingas (sand formations) and mangroves and subsequent advance of the


                                                 22
agriculture frontier into these and other coastal ecosystems, through the introduction of irrigated
horticulture by small farmers; and (v) inappropriate agricultural practices leading to loss in soil
biodiversity.

Socioeconomic Consequences
One major factor which has contributed to the present situation are past rural policies, which
were historically aimed at assigning priority to mono cropping of coffee and sugar cane and
extensive cattle-raising. Smallholder agriculture in the NNWF is suffering the effects of these
policies that have significantly increased rural poverty in the region.

With its decline, the environmental and socioeconomic consequences of monocropping became
clearer. This situation is evidenced by the precarious nature of basic infrastructure, high degree
of erosion, lack of rural sanitation, progressive decline in family income, persistent illiteracy, and
intensification of the rural exodus. The incidence of poverty among rural households in the State
of Rio de Janeiro is about 27 percent (440,000 people), or about 2.5 times the poverty levels
found in urban areas. This percentage increases to 35-39 percent in some municipalities in the
NNWF regions of the State, levels similar to those found in some of the poorest parts of the
country (e.g., the Northeast). With regard to environmental degradation, the Northwest region in
particular exhibits dramatic environmental degradation, with generalized removal of forest cover,
even in a large part of the mountain areas, a situation that is aggravated by the insufficient and
irregular rainy season, which causes severe water deficits. It should be noted that 80 percent of
this region’s land has suffered a moderate to severe degree of erosion, with frequent occurrence
of deep rills and moderately deep gullies throughout the rural landscape.

The loss of the original vegetation cover in these regions and unmanaged occupation of land
have resulted in millions of hectares of impoverished soils. It has also resulted in the loss of
habitat for native fauna and has disrupted the water flow levels in watersheds, which is thought
to have contributed to an increase in flooding, changes in the dynamics of water springs and
alterations in the local climate. Another effect of deforestation has been the decrease in carbon
stocks in the soil and the biomass. Soil fertility has fallen abruptly, and consequently so has
productivity, generating a movement to clear additional forested area to increase productivity
rapidly, if unsustainably. Slash and burn, which is unsustainable in light of land fragmentation
and diminishing forested lands, is the only "technology" adopted by rural communities as a
means of compensating for soil acidity and low fertility.

SEAPPi is focusing on reverting the environmental and social consequences of past
developments efforts through new instruments that focus on diversification and enhanced
economic sustainability of productive endeavors. Although issues of sustainability and natural
resources management are explicitly identified as significant elements of SEAAPI's rural
development projects, the activities undertaken so far have generally targeted the farm or sub-
community levels, with little effort to link these activities within a broader planning framework
based on an ecosystem approach. However, based on experience gained from natural resource
management projects in other regions in Brazil, the State Government recognizes the need and
the value of using integrated and cross-sectoral approaches that would lead to sustainable
landscapes and support the implementation of sustainable rural development activities, adopting
the microcatchment as a physical unit for planning purposes.



                                                 23
The strategic focus of the proposed project would be to develop mechanisms that would
complement specific components of projects already underway. These incremental activities
would introduce a broader, ecosystem-focused approach to development. Because it is expected
that many of the investment activities have the potential to produce local as well as global
benefits, GEF funding would be limited to developing the enabling conditions (information,
experimentation, collective action, access to technical assistance and inputs, monitoring and
evaluation) that would allow farmers to make more informed decisions on management systems
capable of reducing biodiversity loss and land degradation.
Project interventions would take place at three levels:

(i)     Watershed level: including: development of watershed management strategies; support to
        the implementation of the Serra do Mar biodiversity corridor in the NNWF; and
        monitoring and evaluation and project dissemination;

(ii)    Municipal level: where the following activities are proposed for the 24 municipalities
        found in the NNWF region: implementation of training and environmental education
        programs to enhance local capacity and increase public support for conservation and
        sustainable use of natural resources, and the formulation of a proposal for the creation of
        an support system for SLM;

(iii)   Microcatchment level: in PY1 approximately 50 pilot microcatchments within the five
        project watersheds would be selected (covering 15 percent of the total watershed area).
        Within these target microcatchments, on a demonstrative basis, activities would include
        the development and implementation of Microcatchment Development Plans (PEMs) and
        Individual/Farm-level Development Plans (PIDs); and financial support for the adoption
        of improved management practices; applied research to support the adaptation of existing
        soil management practices and technological solutions to local agro-ecological
        conditions; training of producers and other local stakeholders. The provision of financial
        support (credits and grants for technical assistance and small investments) would be
        demand-driven and a consequence of the PEMs and related individual/thematic plans.


Selection of target watersheds and microcatchments. Targeting of project watersheds and
microwatersheds is based on the application of criteria that combines social and environmental
considerations.
Watershed selection criteria include: environmentally sensitive or critical areas, particularly
those which are highly vulnerable to erosion; land use patterns; presence and size of sites
considered national conservation priorities; presence of Protected Areas; natural vegetation
cover; rural poverty; percentage of rural population; and the percentage of small producers
among all producers.
Microcatchment selection criteria include: significance of the microcatchment’s biodiversity;
presence of springs or other sources of surface or ground water critical to the protection of the
microcatchment; concentration of small producers; existing level of community organization;
and land use and soil management aspects.


                                                 24
       Annex 2: Major Related Projects Financed by the Bank and/or other Agencies
 BRAZIL: Rio de Janeiro Sustainable Integrated Ecosystem Management in Production
             Landscapes of the North-Northwestern Fluminense (GEF)

                                                                                              Latest Supervision
             Sector Issue                                   Project                              (PSR) Ratings
                                                                                        (Bank-financed projects only)
                                                                                        Implementati Development
Bank-financed                                                                            on Progress Objective (DO)
                                                                                             (IP)
Biodiversity conservation: GEF-            Paraná Biodiversity Conservation Project            S              S
financed                                   (70552-BR)
                                           Brazilian Biodiversity Fund –FUNBIO               S
                                           (44597-BR)
                                           The Critical Ecosystem Partnership Fund           S               S
                                           (A Global Development Fund executed by
                                           Bank, GEF and CI—73195)
Biodiversity protection (financed by the   Ecological Corridors Project - Rain Forest        S               S
Rain Forest Trust Fund, the German         Pilot Program PPG7 (6572-BR)
government and the European
Commission)
Community-based rural development          Land Management III São Paulo (6474 -             U               S
and natural resources management           BR)
                                           Rural Poverty and NRM Project-Paraná              S               S
                                           (37828-BR)
                                           Natural Resources Management and Rural            S               S
                                           Poverty Reduction - Santa Catarina
                                           (43869-BR)
                                           NRM and Rural Poverty Project-Rio                 S               S
                                           Grande do Sul (43868-BR)
Strengthen environmental institutions      NEP I Project (6446-BR)                           S              HS
                                           NEP II Project (35741-BR)                         S              HS
Strengthen agricultural research           Agricultural Technology Development               S              S
institutions, and develop and transfer     Project for Brazil (43873-BR)
agricultural technology


Other development agencies
KfW (Biodiversity)                         Pro-Atlantic Forest Program (Programa
                                           Pró-Mata Atlântica) – Strengthening of the
                                           Desengano State Park, Mata do Carvão
                                           reserve (proposed PA) and Três Picos
                                           State Park
IFAD/GEF                                   Sustainable Land Management in the
                                           Semi-Arid Sertão




                                                       25
UNDP/GEF            Pilot Program for Reforestation of the
                    Atlantic Forest in Eastern Minas Gerais
UNDP/GEF            Conservation of the Interior Atlantic
                    Forest in São Paulo State
IDB (Environment)   National Environment Fund




                                26
                      Annex 3: Results Framework and Monitoring (LogFrame)
  BRAZIL: Rio de Janeiro Sustainable Integrated Ecosystem Management in Production
              Landscapes of the North-Northwestern Fluminense (GEF)


    Results Framework                          Outcome Indicators                         Use of Outcome
Project Development Objective                                                              Information
 (PDO)/Global Environmental
          Objective

Project Development Objective         - IEM/SLM practices adopted by at least
Promote an integrated ecosystem       1,900 farmers (in 40 communities in as        PY2 gauge engagement of
(IEM) approach to guide the           many 40 microcatchments) by PY5,              farmers and rural communities
development and implementation        thereby reverting land degradation and        with the project; re-evaluate
of sustainable land management        improving rural livelihoods;                  strategy if less than 50% of
(SLM) practices while providing                                                     farmers are adopting improved
environmentally and socially          - Coordinating bodies with significant        practices
sustainable economic                  stakeholder representation from
opportunities for rural               microcatchmentand municipal levels            PY5 determine whether new
communities living in the North       active at the regional and local levels (1    instruments are enough to
and Northwest Fluminense              regional committee (COREM) by PY 1; 40        induce farmers to adopt more
administrative regions of the State   local/microcatchment committees               sustainable practices
of Rio de Janeiro (SoRJ).             (COGEM) by PY2)



Project Global Environmental             Change in total land area characterized
Objectives: (i) to address threats    by biodiversity-friendly agricultural         PY2-PY3: low levels of
to biodiversity of global             practices that enhance soil structure         adoption of improved practices
importance, (ii) reverse land         stability in microcatchments (32,000 ha by    may flag either poor training,
degradation in agricultural           PY5)                                          weak extension services or
landscapes, (iii) enhance carbon       Total area of riparian and other            inadequate and/or inefficient
sequestration, and (iv) increase      indigenous forests rehabilitated for          financial support system
awareness at all levels of the        biodiversity conservation and hydrology
value of adopting an IEM              stabilization objectives (1,440 ha by PY5)    PY3: confirm if results from
approach in the management of          Area of biodiversity conservation-
                                                                                    environmental monitoring of
natural resources                     friendly land use mosaics established on
                                                                                    pilot microcatchments is
                                      private lands supporting corridor
                                                                                    detecting improvements in
                                      connectivity in project watersheds (1,240
                                      ha by PY5)                                    erosion levels and
                                       Reduction in erosion (50 % by PY5)
                                                                                    sedimentation; if not, it may
                                      and downstream sedimentation (50 % by         gauge inadequate monitoring or
                                      PY5) rates in at least 3 microcatchments;     scattered provision of support
                                      Amount of CO2 sequestered (1.5 tons of        which would not lead to
                                      CO2 per ha by PY5)                            concrete results at the landscape
                                       By PY4, 40 rural community                  level
                                      organizations created that have adopted
                                      and implemented IEM strategies in 40
                                      microcatchments;
                                       Education, training and awareness of
                                      beneficiary stakeholders (1,900 by PY5),
                                      project executors (150 by PY 4), and
                                      schools (25 by PY4);


                                                         27
                                          Best practices and lessons learned
                                       disseminated through workshops/events in
                                       the NNWF region (30 by PY 5), national
                                       workshops (4 by PY5), media campaign (3
                                       by PY5) and a homepage (1 by PY 1).
    Intermediate Results                   Results Indicators for Each                      Use of Results
       by Component                                Component                                 Monitoring
Component One:                         Component One:                                Component One:
1. Planning for IEM Actions
                                       Output 1.1                                    Output 1.1
Output 1.1. A strengthened policy
and legal institutional framework
                                       ·Five Watershed Management Strategies         Confirm if WMS identify
at state and local levels to support   (WMS) developed (Block B phase and            appropriate actions by PY1
IEM approaches designed to             update by PY3)
promote sustainable rural              ·A actions to support implementation of       Ascertain if activities to
development and the protection of      the Serra do Mar Biodiversity Corridor in     implement biodiversity corridor
critical ecosystems                    project watersheds identified by PY2          are identified by PY2 and
                                                                                     incorporated into PEMs by end
                                       ·A support system of sustainable              of PY2
                                       agriculture and Environmental Services        Confirm if support system is
                                       Fund designed by PY3                          designed in PY3, otherwise
                                                                                     review design strategy.
                                       ·Aland suitability analysis study at the
                                       microcatchment level carried out              Confirm if study is carried out in
                                       ·Microcatchment Development Plans             PY3.
                                       (PEM) and related farm-level plans
                                       (PIDs) developed in at least 40               Verify whether at least 20 PEMs
                                       microcatchments                               are prepared by PY1 and 20 by
                                                                                     PY2. If not, flag possible
                                       · ECCs developed in at least 10               problems associated with
                                       microcatchments                               participation in Microcatchment
                                                                                     diagnostic analysis or other
                                                                                     possible problems in PEM
                                                                                     preparation

                                                                                     Review strategy for developing
                                                                                     ECCs if less than 5 under
                                                                                     development by PY 3

Component Two:                         Component Two :                               Component Two:
 2 Systems for the Adoption of         Output 2.1                                    Output 2.1
 IEM/SLM practices                                                                   PY2: if less than 10
Output 2.1 Adoption of IEM
                                       ·Technical assistance and financial support   microcatchments under
                                       for on the ground investments (through        implementation, gauge adequacy
principles and Sustainable Land
                                       FUNDES) received by rural producer and        of i) incentive system
Management (SLM) practices
                                       stakeholder groups leading to the adoption    (FUNDES) or ii) strategy and
facilitated in pilot
                                       of improved production and environmental      implementation efficiency of
microcatchments
                                       management practices (and certified           components 1 (PEMs) and/or 3
                                       products), in at least 40 project             (capacity building)
                                       microcatchments (at least 1,000
                                       producers/150 groups)                         PY5: evaluate ecological and
                                                                                     economic potential for large-
                                                                                     scale adoption of improved
                                                                                     practices implemented during
                                                                                     PY1-4



                                                           28
Output 2.2. Adaptive research to   Output 2.2
overcome specific technical and    At least 10 improved agro-ecosystem         Review adaptive research
environmental constraints          management practices tested and validated   strategy if less than 5 practices
developed in project               (average of 10 producers/test), including   are tested and validated by PY2
microcatchments                    those addressing human settlements in
                                   fragile and vulnerable areas

Component Three:                   Component Three:                            Component Three:
3. Organization and Capacity
Building for IEM                   Output 3.1                                  Output 3.1
Output 3.1 Increased local         ·By PY4, 40 rural community                  PY2: if less than 50% of
organizational capacity for                                                    targeted stakeholders are
                                   organizations created that have adopted
adopting self-management of                                                    participating in training,
                                   and implemented IEM strategies in 40
natural resources                                                              environmental education and
                                   microcatchments
                                                                               community organization
                                   ·Two Regional Information Centers and
                                                                               activities, re-evaluate strategy
                                   Project Portal established by PY2
                                                                               for component implementation
                                   ·Information and communication system
                                   implemented in at least 5                   PY3: Confirm that Information
                                   microcatchments before end of PY3           Centers and Portal are in place

                                                                               PY4: gauge demand for
                                                                               activities and information on
                                                                               sustainable land management
                                                                               practices coming from groups
                                                                               outside the pilot areas

                                   Output 3.2                                  Output 3.2
Output 3.2. Increased managerial                                                Confirm that relevant project
and technical capacity of local    ·At least 200 project executors trained     executors are trained as planned
and state officers and NGOs to     throughout the life of project
manage natural resources

Output 3.3 Improved farm- and      Output 3.3                                  Output 3.3
community-level capacity to
manage natural resources           ·At least 3,000 participants in             Confirm that stakeholders are
                                                                               trained as planned
                                   environmental education events, including
                                   stakeholders from 5 project watersheds
                                                                               Review strategy for
                                   (24 municipalities)                         environmental projects if less
                                   ·At least 3,000 stakeholders trained,       than 30% are implemented by
                                   including farmers, municipal and            PY3
                                   community leaders, technicians

                                   ·Minimum of 25 environmental projects
                                   prepared in local schools before end of
                                   PY3
Component Four:                    Component Four:                             Component Four:
4. Project Management and
M&E                                Output 4.1                                  Output 4.1
Output 4.1. Adoption of IEM        ·Project Management Unit established in     Confirm if efficient project
principles in other relevant                                                   management is in place to
                                   SEAAPI/SMH, effectively facilitating
programs                                                                       ensure high-quality
                                   project implementation by PY1
                                                                               implementation by PY1
                                   ·Coordinating bodies with significant
                                   stakeholder representation from             PY2: gauge creation of


                                                      29
                                   microcatchment and municipal levels           coordinating bodies and
                                   active at the regional and local levels [1    participation of partner
                                   regional committee (COREM) by PY 1; 40        institutions – if fewer than 10
                                   local/microcatchment committees               microcatchment committees
                                   (COGEM) by PY2]                               (COGEM) and 5 institutions by
                                                                                 PY1, re-evaluate dissemination
                                                                                 and management strategies

Output 4.2. Project progress and   Output 4.2                                    Output 4.2
impacts monitored and evaluated
                                   ·Project reports prepared and submitted on    PY2: project monitoring
                                   a timely basis over the life of the project   program under full
                                                                                 implementation

                                   ·Work plans, procurement and budgets
                                   prepared on a timely and systematic basis

                                   ·Establish and operate effective M&E
                                   system
                                                                                 Output 4.3
Output 4.3. Project information    Output 4.3
disseminated
                                                                                 Confirm that dissemination
                                   · Best practices and lessons learned          strategy is implemented as
                                                                                 planned
                                   disseminated through state (30 by PY5)
                                   and national (4 by PY5)workshops/events
                                   (5 by PY3) and homepage (1 by PY 1)




                                                       30
                                                              Arrangements for results monitoring
                                                                 Target Values (cumulative)                           Data Collection and Reporting
      Outcome Indicators              Baseline          YR1       YR2       YR3       YR4         YR5     Frequency and       Data Collection        Responsibility
                                                                                                             Reports            Instruments             for Data
                                                                                                                                                       Collection
- IEM/SLM practices adopted        To be undertaken                                                     PY1: baseline      M&E reports and          SEP (SEAAPI)
                                   in PY1                        190       980           1,900                                                      Partner
by at least 1,900 farmers (in 40                                                                        study              recording of all
communities in as many 40                                                                                                  planned and              institutions
microcatchments) by PY5;                                                                                                   executed activities,     Consultants
                                                                                                                            withdrawn from MIS      ICR: World
- Creation of 1 COREM by PY                           1 COREM;                                                                                      Bank
1 and 40 COGEM by PY2.                                20         20
                                                      COGEM      COGEM


Change in total land area
characterized by biodiversity-                                   3,200     16,500        32,000         Yearly              Socio-economic
friendly agricultural practices                                                                         cumulative          assessments and
that enhance soil structure                                                                             Project             independent
stability in microcatchments                                                                            Management          evaluations,
(32,000 ha by PY5)                                                                                      Reports (PMRs)      involving structured
                                                                                                        and M&E reports     interviews and
                                                                                                                            questionnaires
Total area of riparian and other                                                                        Reports from
indigenous forests rehabilitated                                                                        mid-term-review     Remote sensing
for biodiversity conservation                                    140       750           1,440          and ex-post         (local,
and hydrology stabilization                                                                             evaluation          catchment/ecosystem
objectives (1,440 ha by PY5)                                                                                                level) and field
                                                                                                                            reports
Area of biodiversity                                                                                    World Bank
conservation-friendly land use                                                                          Implementation
mosaics established on private                                                                          Completion
lands supporting corridor                                                                               Report; Monthly
connectivity in project                                          120       635           1,240
                                                                                                        monitoring of
watersheds (1,240 ha by PY5)                                                                            sedimentation
                                                                                                        and annual
                                                                                                        monitoring of
                                                                                                        erosion




                                                                                    31
Reduction in erosion (50 % by                                     10%                      50%       Annual             Field surveys for
PY5) and downstream                                                                                  monitoring of      monitoring
sedimentation (50 % by PY5)                                                                          vegetation cover   sedimentation and
rates in at least 3                                                                                  and land-use       erosion; satellite
microcatchments                                                                                      mosaics            imagery of
                                                                                                                        vegetation coverage
                                                                                                                        in Permanent
                                                                                                                        Protected Areas.



Additional annual amount of                                       9,000                    34,000    Annual reports     Other field surveys
CO2 sequestered in the project                                                                       from Carbon        (carbon-
area (by PY5)                                                                                        sequestration      sequestration, socio-
                                                                                                     monitoring         economic data, etc.
   By PY4, 40 rural
community organizations have                            5         20             40
adopted and implemented IEM
strategies in 40
microcatchments;

   Education, training and                  300        700       1,100          1,500     1,900
awareness of beneficiary
stakeholders (1,900 by PY5),                 60         120       150
project executors (150 by PY
                                             10         25
4), and schools (25 by PY4);

    Best practices and lessons                                   10             20        30
learned disseminated through
workshops/events in the                                           1              2         4
NNWF region (30 by PY 5),
                                                                  1              2         3
national workshops (4 by
PY5), media campaign (3 by
PY5) and a homepage (1 by                       1
PY 1).                                       homepage
    Results Indicators for Each   Baseline     YR1          YR2       YR3            YR4       YR5    Frequency and        Data Collection      Responsibility
            Component                                                                                    Reports            Instruments           for Data
                                                                                                                                                 Collection



                                                                            32
Component One :
Output 1.1                                                                                         PY1: baseline      M&E reports and        SEP (SEAAPI)
                                                                                                   study              recording of all       Partner
·        Development of 5         3 WMSs                    5    upd     upd           upd   upd
                                                                                                                      planned and            institutions
Watershed Management                                                                               Project            executed activities,   Consultants
Strategies (WMS) (Block B                                                                          Management         withdrawn from MIS
phase and update (upd) by                                                                          Reports (PMRs)
PY3                                                                                                and M&E reports
·       Design of support
system of sustainable NRM         None                            1                                Report from mid-
                                                                                                   term-review
by PY2
·       Development of a                                                                           Bi-annual M&E
Land Suitability Analysis at      None                                    1                        reports
the Microcatchment level by
PY3
·        Identify actions to
implement the Serra do Mar                                        1
                                  None
Biodiversity Corridor in
project watersheds by PY1

Output 1.2
·        Development of at
least 40 PEMs and related                                        40
farm-level plans (1,900 PIDs)                        20 PEMs    PEMs
in at least 40                                         and       750    1,450
                                                     150 PIDs   PIDs    PIDs
microcatchments

·       Development of
                                                                  3
                                                                          3             3    10
ECCs in at least 10
microcatchments

Component Two :
Output 2.1                                                                                         Twice a Year :     M&E reports and        SEP (SEAAPI)
                                                                                                   PMRs (including    recording of all       Partner
·       4,400 on-the-ground       To be undertaken   ----       455    2,270         4,400         recording of all   planned and            institutions
investments supporting the        in PY1
                                                                                                   planned and        executed activities,   Consultants
implementation of SLM                                                                              executed           withdrawn from MIS
objectives in at least 40 pilot                                                                    activities and


                                                                                33
microcatchments                                                                              disbursement
                                                                                             records ref. sub-
·         Technical assistance      None                                                     component/
and financial support in at least                      ----   150 p   5750p        1,450 p                       M&E reports and
                                                                                             FUNDES)             recording of all
40 project microcatchments -                                  15 g    75 g         150 g                                                SEP (SEAAPI)
at least 1,450 producers (p) /                                                                                   planned and            Partner
                                                                                             Twice a Year :      executed activities,   institutions
150 groups (g)                                                                               PMRs                withdrawn from MIS     Consultants
Output 2.2
                                                                                             Report from mid-
At least 10 improved agro-          To be undertaken   1      5       10                     term-review
ecosystem management                in PY1
practices tested and validated
                                                                                             Bi-annual M&E
                                                                                             reports

                                                                                             PY 3:
                                                                                             Proceedings of
                                                                                             workshop with
                                                                                             Research
                                                                                             Community to
                                                                                             evaluate results
                                                                                             of validated
                                                                                             practices
Component Three:                                                                             PY1: baseline       M&E reports and        SEP (SEAAPI)
      By PY4, 30 rural              To be undertaken   ----   10      20           30                                                   Partner
                                                                                             study               recording of all
                                    in PY1                                                                                              institutions
    community organizations                                                                                      planned and
    have been strengthened and                                                               Twice a Year :      executed activities,   Consultants
    adopted NRM self-                                                                        PMRs                withdrawn from MIS
    management initiatives in
    30 microcatchments                                                                       Report from mid-
                                                                                             term-review
Two Regional Information
  Centers and Project Portal                                                                 Bi-annual M&E
                                    None                      2
  established by PY2                                                                         reports

·      Information and
communication system                                          2       5
implemented in at least 5
microcatchments before end



                                                                              34
of PY3
·        At least 3,000          None
                                        400            1,100   1,900        2,600   3,000
participants in environmental
education events (24
municipalities)
·       At least 3,000
                                 None
stakeholders trained,                   400            1,100   1,900        2,600   3,000
including farmers, municipal
and community leaders,
technicians
·       Minimum of 25
                                 None
environmental projects                  ---            5       15           25
prepared in local schools
before end of PY3
Component Four:                                                                             Twice a Year :     M&E reports and
                                                                                            PMRs               recording of all
         Project Management     None                                                                          planned and
                                                                                                                                      SEAAPI
                                        1
Unit established in                                                                         Report from mid-   executed activities,
SEAAPI/SMH, effectively                                                                     term-review        withdrawn from MIS
facilitating project
implementation by PY1                                                                       Bi-annual M&E
                                                                                            reports
·        Project management
reports (PMRs) prepared and
                                 None
submitted on a timely basis                    2       4       6            6       10
over the life of the project
                                                                                                                                      SEP (SEAAPI)


·       Work plans,
procurement and budgets                      3 (1 of   6       9            12      15
                                 None
prepared on a timely and                    each/yr)                                                                                  SEP (SEAAPI)
systematic basis


·        Establish and operate
                                                                                                                                      SEP (SEAAPI)
                                 None
effective M&E systems



                                                                       35
                      Monitoring and Evaluation Aspects of the Project
The project’s M&E system would use participatory mechanisms to enable stakeholders to share
their feedback. SEP would be responsible for coordinating monitoring, with EMATER and other
co-executing agencies providing support and technical assistance as necessary. Key groups of
stakeholders, particularly those small farmers living in the pilot microcatchments, would also
participate actively in data collection and other sampling activities to monitor social and
environmental aspects of the project.

In addition to support to monitoring and evaluation of results and impacts, the project would also
include the installation and implementation of a Management Information System (MIS) to track
the physical and financial execution of the project. To facilitate interface between the project,
service providers and beneficiaries, the project MIS would be web-based and designed to be
performance-oriented and user-friendly. In addition, given the decentralized nature of the project,
and to ensure timely budgetary and expenditure information to the Bank and other stakeholders,
the MIS would incorporate internal controls, records of project assets, procurement, accounting,
auditing and means to reconcile the project’s Special Account that would conform with the
Bank’s Financial Accounting, Reporting and Auditing Handbook (1995), the Bank’s Operation
Policy and Procedures 10.02 (July 1996) and revised financial management standards as in
OP/BP 10.02 (August 1997). The MIS design would also include the following capabilities:

      Reporting from project staff (particularly extensionists) who would monitor the
       implementation of productive, social, and environmental improvements;
      Reports from beneficiaries, in particular communities and rural producers;
      Recording of all planned and executed activities (physical, financial, and procurement
       information), in accordance with the directives in the Operational Manual, at all levels
       (state, regional, municipal, and microcatchment);
      Financial Management Reports (FMR) from periodic audits and other relevant PMRs;
       and
      Partner and independent institutions that would undertake project impact evaluations.

Monitoring results would be inserted into the MIS, thus allowing a real-time tracking of
microcatchment plans and related subprojects being implemented on the ground.

Given that Component 2 constitutes the bulk of project expenditures (US$8.80 million), with a
GEF contribution of US$2.92 million, the monitoring of this component would be more detailed
and intense. Based on input and output indicators, the monitoring activities would track a number
of features related to the implementation of subprojects financed under this component. Progress
reports specific for the support system would be available for the various features that may be
deemed necessary, e.g., by geographical distribution, land surface, etc.

In addition to physical/project-based and financial monitoring and related MIS, the M&E
subcomponent (subcomponent 4.2) would also support the continuous qualitative monitoring of
socioeconomic and environmental aspects in pilot monitoring microcatchments. It would include
monitoring of: (i) water quality and quantity; (ii) other environment-related indicators:
vegetation cover, pesticide use reduction, soil-water content, soil biodiversity, and adoption of


                                                36
agriculture conservation practices by farmers; (iii) socioeconomic aspects (see Appendix 1 to this
Annex for social indicators): effective participation and empowerment of communities in
project-related decisionmaking process, farmers’ perceptions of environmental issues,
improvement in family living conditions; and (iv) additional qualitative and quantitative
parameters to compute the economic value of external impacts of SLM (both national and global
impacts), such as the value of increased CO2 stored, reduced sedimentation, reduced threats to
biodiversity, reduced pesticide runoff and other environmental impacts on downstream users.

Moreover, M&E would involve two levels: internal and external. At the first level, rural
communities and producers organizations within each of the selected microcatchments would
assess the implementation of project activities at the microcatchment level, and evaluate the
achievement of objectives and environmental impacts (on water and soil quality, presence of
wildlife, etc.).

At the second level, progress reports (or PMRs) would be prepared at least twice a year as an
input for the project manager’s supervision. This external evaluation would include:
determination of benefits provided by the project in terms of quantity and quality, effect of the
project on community organizations, the level of awareness of sustainable land management (and
global environmental issues) and adoption of new technologies.

In addition, specific input, output and impact indicators would be reviewed by the benefited
communities upon selection of microcatchments in PY1. However, a number of social
development indicators have been identified during project preparation (see Appendix 1 to this
Annex). They are the basis for measuring the broader indicators of social impact of the project
specified in the Results Framework.

Finally, project impact evaluations would complement the above-mentioned monitoring
activities (which would allow the measurement of actual performance with expected
performance) by measuring the effectiveness of actual performance (i.e., impact), hence
providing feedback and helping improve the effectiveness of the project.

M&E would include ex-ante (year 1), mid-term (year 3) and ex-post (year 5) evaluations and
Bank supervision missions, the latter of which would review project implementation at least
every six months on the basis of approved annual operating plans and semi-annual progress
reports.


                      Annex 3: Appendix 1: Indicators of Social Impact

Specific input, output and impact indicators would be reviewed by the benefited communities
upon selection of microcatchments in PY1. However, the following monitoring indicators are
recommended, as a result of consultations made during project preparation. They are the basis
for measuring the broader indicators of social impact of the project specified in the Results
Framework:

      Number of farms adopting socio-environmentally suitable natural resources



                                               37
    management practices and productions systems (changes in the pattern of soil use
    and production techniques);
     Number of "demonstration units" implemented and intensity of the process of
    locally replicating these endeavors;
     Increase in the marketing of products with certifications of origin;
     Changes in agricultural and livestock yields;
     Income generated by on-farm (agricultural and livestock) and off-farm activities;
     Changes in access to and demand for technical assistance;
     Changes in socially-shared perceptions regarding rural areas (from a view that
    these areas are experiencing decay, lack of opportunities to earn a living, and
    abandonment, to a view that that they are good places to work and live);
     Changes in socially shared perceptions regarding environmental protection
    policies: (a) from a perception that government agencies are punitive, to one in
    which they are educational and collaborative; and (b) from a view that local
    stakeholders are hurt by environmental protection policies, to a view that
    stakeholders can take an active role in these policies;
     Increase in local populations' participation in grassroots community organizations
    (size of institutional network, quality or intensity of participation, engagement in
    community activities related to decisionmaking and social control of public policies,
    etc.).


In addition, a specific set of monitoring indicators7 has been developed for M&E of the
strengthening of local organizations for improved sustainable self management of natural
resources (see Subcomponent 3.1). It includes a series of monitoring indicators focused on
environmental perceptions and actions, socioeconomic indicators, economic viability of
activities, degree of participation, self-management and collective action, and decisionmaking.
These indicators are included to allow for relatively frequent and close monitoring of the process
of social change, specifically attitudinal and socioeconomic and environmental related
behavioral change, that would in turn provide feedback allowing for adjustments and
modifications in project activities as specific challenges or obstacles are identified, and for
broader dissemination of successful activities. In addition, the aforementioned series of
monitoring indicators would provide information that would allow for the measurement of the
indicators of social impact in the above box.




7
 These indicators and the specific M&E methodology are described in the Project document, Proposta de
Construção de um Sistema de Monitoramento e Avaliação do Fortalecimento das Organições Comunitarias para
Autogestão Sustentavel dos Recursos Naturais, December 2004.



                                                    38
                             Annex 4: Detailed Project Description
  BRAZIL: Rio de Janeiro Sustainable Integrated Ecosystem Management in Production
              Landscapes of the North-Northwestern Fluminense (GEF)

Project components have been designed to directly address, as outlined below, each of the
following constraints which limit or prevent the adoption of improved SLM approaches thereby
affecting the integrity and stability of the Atlantic Forest ecosystems and associated agro-
ecosystems: These constraints and project strategies to address them include:

(i) insufficient human and institutional capacity and community organization to create the
enabling environment needed to support IEM and SLM to address land degradation at the local
and state levels: the capacity to overcome this knowledge barrier would be built through education
and training of project executors (subcomponent 3.2) and beneficiaries (subcomponent 3.3) which
would also be directed toward the provision of training and technical assistance necessary for
effective on-the-ground investments in concrete projects in the community (component 2);
institutional and community-level capacities would be improved through various project
interventions: under subcomponent 1.1, the project would develop studies to enhance the incentive
framework and carry out detailed planning for specific IEM activities (e.g., a biodiversity corridor
and updates to watercatchment plans to improve them and align them with an IEM approach); also,
through subcomponent 3.1, the project would seek to foster community organization through
training and the application of an innovative multidisciplinary methodology (incubation) designed
specifically to strengthen local organizations; the project would also assist rural extension agents to
mainstream an IEM approach into EMATER’s extension work (subcomponent 1.2).

(ii) lack of producers’ financial capacity to undertake heavy upfront investments necessary to
adopt the existing, but limited, SLM pilot experiences that, if expanded, could promote
permanent public policies to support IEM/SLM in the Atlantic Forest ecoregion: To overcome
this financial barrier, the project would support the strengthening of the existing incentive
structure (subcomponent 1.1), including designing a Payment for Environmental Services (PES)
proposal for one or more environmental services identified in the project area for possible future
implementation; under subcomponent 2.1, the project would provide matching grants to small
farmers and other eligible ecosystem managers to move from conventional, unsustainable
smallholder agriculture to sustainable livelihood activities (SLM practices) which enhance
biodiversity and carbon sequestration in the agricultural landscape;

(iii) limited number of IEM/SLM practices adapted to the specific agro-ecological conditions of
the NNWF area: On a demand-driven basis, the project would support the development of
farmers’ adaptive field research trials (subcomponent 2.2) to tailor the existing stock of cost
effective technical solutions for IEM/SLM practices to the specific conditions of the region
while at the same time lowering the relative weight of upfront investments.

 (iv) insufficient systematized data and information necessary for decisionmakers to incorporate
ecosystem-level considerations into production activities: The project would address this
constraint through the implementation of a system to monitor and evaluate project impacts,
including GIS tools to support planning and monitoring (subcomponent 4.2); it would also
implement a strategy to disseminate project results and lessons-learned (subcomponent 4.3) and


                                                 39
implement a communication system for community networking, to allow exchange and
dissemination of project information and coordination with ongoing programs at the state,
regional and local levels (subcomponent 4.1).

Component 1 – Planning for Integrated Ecosystem Management Actions (US$0.94 million,
6.0 percent of total project cost)

This component is intended at providing national stakeholders (state institutions) and
beneficiary stakeholders (producers and rural communities at large), with a strengthened
framework at state and local levels to support IEM approaches aimed at promoting sustainable
rural development and the protection of critical ecosystems.
The main subcomponents and activities foreseen (described below) cover support for a
strengthened support framework and planning for IEM, the former as studies and the latter as
action planning of IEM/SLM activities to be carried out in Component 2. Activities of ongoing
programs in support of this component would include those by the State Rural Extension Regular
Program (executed by EMATER) and others in biodiversity conservation, protected areas,
environmental legislation enforcement and environmental monitoring.

 Subcomponent 1.1: Strengthening of IEM Incentive Structure and Ecosystem Planning Systems
 (US$0.15 million, 0.9 percent of total project cost). SEP would have overall responsibility for
 the implementation of this subcomponent. It would support studies and workshops to provide
 inputs to develop the basis for strengthening of existing incentive and planning structures for
 sustainable land and ecosystem management in the NNWF. Specifically, it would support the
 development of the following activities:
a)       Design of an enhanced financial support system for sustainable land management to
facilitate sustainability of financial support systems beyond the project period. It would promote
alternative sustainable funding options for selected services by building upon existing financial
mechanisms, as well as by developing new ones, to channel funds to farmers for the adoption of
on-and-off-farm practices which enhance the conservation and sustainable use of watershed
resources, foster biodiversity and increase carbon sequestration.

At one level, enhancement of supply and demand of financial support for IEM/SLM through
ongoing programs would be sought. Building on project on-the-ground participatory planning
activities (subcomponent 1.2), a higher, more rational demand for credit and other sources of
funding to support the implementation of IEM-related SLM practices would be promoted.
Building on project experiences with current government financial services and credit lines such
as PRONAF, Moeda Verde, and Rio Rural, development of guidelines for improved institutional
and technical arrangements for the long-term support of IEM/SLM practices by those and
possibly other programs would be carried out.

On another level, an option identified during project preparation is the design of a Payment for
Environmental Services (PES) proposal for one or more potential services identified in the
project area, including a PES for biodiversity protection, carbon sequestration and/or for water
protection services, for possible future implementation. Such a system might include: i) a
mechanism to disburse financial incentives related to the level of environmental services
provided by sustainable land use practices which address land degradation, water and/or


                                                40
biodiversity issues; and ii) on a pilot basis, support to the preparation of selected carbon projects
on a demand driven basis, in line with preparation guidelines of the potential carbon buyer
(predominantly international private sector and NGOs); and iii) market assessment studies for
developing commodity markets for indigenous (medicinal plants) and organic products.

b)      Development of a study to identify specific actions, institutional arrangements and
monitoring tools to support implementation of the Serra do Mar Biodiverisity Corridor in the
project area. The implementation of the resulting plan, to be carried out by Conservation
International,would be supported by project activities in other subcomponents, including:
training by CI-Brasil of about 180 project technicians in biodiversity conservation strategies,
with a specific module for biodiversity corridor and connection of forest fragments; and
providing training , technical assistance and grants to beneficiaries in support of biodiversity-
related activities in microcatchments located at the Corridor area, including activities to
rehabilitate degraded riparian forests, hilltops to connect fragments, and to protect water
springs. In addition, through the support to the preparation and implementation of Statutes of
Community Conduct for the Responsible Use of NR – ECCs (subcomponent 1.2), the project
would promote full compliance with environmental legislation, including those regulations
related to control of illegal poaching and forest fire.

 The project activities in support of the corridor would complement the above mentioned Pro-
Atlantic Forest Program and the CI-Brasil executed CEPF, which provide technical assistance to
establish private protected areas, and support studies and research for in-situ conservation of
threatened species.

c)     Update and fine-tuning of Watershed Management Strategies (WMSs) in the five priority
watersheds. Five WMSs developed during project preparation would be updated based on the
outcomes of the 20 Microcatchment Development Plans (PEMs) to be developed during PY1
(Subcomponent 1.2); and

d)      Land suitability analysis at the microcatchment level as a contribution to improve
livelihoods and to protect ecosystem stability, functions and services. This study would be
carried out in two microcatchments with existing Agrarian Reform Settlements.

Subcomponent 1.2: Local Land Management Planning. (US$0.78 million, 5.1 percent of total
project cost). This subcomponent, to be implemented by EMATER and the Public Defender’s
Office, would orient intervention efforts and the adjustment of conduct by rural producers
regarding preservation of natural resources and ecosystem management. Implementation of these
activities would be done with ample participation of rural communities, seeking their
involvement in all phases of project execution. Activities under this subcomponent would cover
50 microcatchments and would include: (i) formulation of Microcatchment/Community
Development Plans (PEMs); (ii) preparation of Individual/Farm-based Land Use Plans (PIDs), a
number of which will be selected for implementation as subprojects under the proposed project;
(iii) participatory preparation and implementation of Statutes of Community Conduct for the
Responsible Use of Natural Resources (ECCs) to promote community participation in legislation
enforcement by implementing ECCs in ten of the project selected microcatchments.



                                                 41
Responsibilities for preparation, approval and implementation of PEMs. For each
microcatchment, a draft PEMs would be prepared by the local/microcatchment EMATER
technician, and presented to COGEM for discussion and endorsement. The endorsed PEM
would be submitted by the local EMATER office to the concerned SER for analysis and
consolidation of the plan. SER would submit the consolidated PEMs to COREM for review and
approval. Approved PEMs would be sent to SEP for inclusion in the pipeline. PEMs would be
collectively implemented by the microcatchment beneficiaries, and monitored by SER. With
regard to PIDs developed under the PEMs, responsibilities for their selection and approval are
presented below (subcomponent 2.1)

Responsibilities for the formulation of ECCs. The formulation of ECCs (and related capacity
building) would be under the responsibility of the Public Defender’s Office in close coordination
with the COGEM.and technical support from the local EMATER technician responsible for
facilitating the PEM formulation process. The ECCs would be formulated with and validated by
the microcatchment stakeholders, who would commit to adopting these actions over time. The
ECCs would include, e.g., measures to improve biodiversity conservation, adopt sustainable land
management and prevent and control water pollution. These measures would be initially
identified by the communities during the PEM process, and would be legally regulated through
the adoption of ECCs.

Component 2 - Support Systems for the Adoption of IEM/SLM practices (US$8.80 million,
57.4 percent of total project cost)
This component aims to provide technical and financial support to small farmers and other
relevant ecosystem managers at the microcatchment, municipal and watershed levels to move
from conventional, unsustainable smallholder agriculture to sustainable livelihood activities
which enhance biodiversity and carbon sequestration in the agricultural landscape. It would
support demonstrative investments to facilitate the adoption of IEM principles and SLM
practices in at least 40 microcatchments. It would finance technical assistance, investments and
targeted research demands identified in the WMSs, PEMs, Individual/Farm-level Development
Plans (PIDs) and the PID-derived subproject proposals. GEF would finance incremental
resources to support this transition. It is expected that once the transition has been achieved with
the help of GEF resources, outputs from activities would contribute to ensuring ongoing
financial support to sustainable activities which create significant environmental benefits at the
local, regional and global level without further GEF involvement (GEF funds would not be used
on a recurrent basis, but would help jump start the enhancement of current financial support
systems and provide the basis for other possible self-sustaining financial mechanisms, e.g.,
PES). About 70 percent of the cost of this component would be financed (and earmarked) under
the ongoing state programs Rio Rural and Moeda Verde and the federal program PRONAF (for
cofinancing details, see Incremental Cost Matrix in Annex 15).

Subcomponent 2.1: Financial Support for Sustainable Natural Resources Management (US$8.43
million, 55.1 percent of total project cost).
This subcomponent aims to provide technical and financial support to small farmers and other
relevant ecosystem managers at the microcatchment, municipal and watershed levels to carry
out subprojects which would assist them to move from conventional, unsustainable smallholder
agriculture to sustainable livelihood activities which enhance biodiversity conservation and



                                                42
carbon sequestration in agricultural landscapes. The support provided would be the vehicle to
partially share costs to farmers of complying with environmental legislation while at the same
time achieving the project’s global environmental benefits. This subcomponent would finance
subproject proposals requesting support services and environmentally appropriate investments
identified in the PEMs and PIDs.

The GEF-supported portion of the financial assistance for the transition to sustainable agriculture
would operate under the existing incentive legislation (State Socio and Economic Development
Fund – FUNDES) under which Moeda Verde operates.

Sources of funding. This subcomponent includes the implementation of two activities financed
by two major types of funding: i) Activity 1 would be financed under the ongoing state and
federal credit and other incentive programs. It would encompass implementation of small
infrastructure (such as erosion control in rural roads and small sustainable irrigation schemes)
and productive systems on farms and in microcatchments supported by the project; and ii)
Activity 2, to be supported by GEF funds, would provide financial support to the transition from
non-sustainable agriculture practices to sustainable livelihood activities within the IEM
framework (See Annex 4, Appendix 2 for examples of subprojects proposed for GEF funding).

Categories of subprojects eligible for grants. Proposals eligible for GEF-financing through
FUNDES (Activity 2) would fall under the following five categories: (i) conservation or
sustainable use of biodiversity, such as reforestation for protection of ground water recharge
areas, protection and development of existing agro-biodiversity resources or other schemes to
increase biodiversity, including reforestation with native species followed by forest
management; (ii) rehabilitation of degraded lands, such as green and organic manure, zero and
minimum tillage, contour planting and crop rotation; (iii) water resources management and
protection, such as rehabilitation of degraded natural riparian forests, protection of water
sources, biological control of pests and integrated pest management practices to reduce pesticide
use and encourage animal waste treatment and disposal (the latter as compost); (iv) redirection
of productive systems toward those that are socially and environmentally-friendly, such as agro-
forestry, bee-keeping and pasture management; and (v) commercialization of environmentally
and socially sound products, such as handicrafts, certification of “ecosystem-friendly” products,
and post-harvest value-added from environmentally-friendly agricultural products (honey,
marmalades, etc). A complete list of types of subprojects for each of these categories has been
included in the Project Operational Manual.

All activities supported under the financial support component would have a demonstrative
effect and would be representative of one or more of the four major ecosystems of the project
area.

Number of subprojects (PIDs). Use of grants would be demand-driven, and stem from the
microcatchment/community development plans and individual plans developed by beneficiaries
with the participation of the municipal and regional decisionmaking bodies. It is estimated that
about 1,900 subprojects or PIDs (comprising 4,400 specific individual and group investment
proposals, benefiting 1,900 families) would be supported under this subcomponent, within the
five categories and respective types of financial support mentioned above: (i) 980 proposals



                                                43
funded to recover land degradation; (ii) 510 for conservation or sustainable use of biodiversity
purposes; (iii) 1,340 for water resources management and protection purposes; (iv) 420 for
redirection of productive systems toward socially and environmentally-friendly ones; and (v)
1,150 oriented toward the commercialization of environmentally and socially sound products.

Technical assistance. Technical assistance would be provided mostly by EMATER, or by hired
technicians where necessary, to microcatchment groups to prepare PEMs and PIDs through the
funds allocated to Subcomponent 1.2, in particular to target group members (see below). While
EMATER would fund infrastructure, staff salaries, vehicles, and similar costs, GEF would
cofinance operational costs.

Responsibilities for selection, approval, implementation and monitoring
Grant applications (up to R$6,000 per beneficiary smallholder family and up to R$4,000 for
other types of beneficiaries) would be assembled and evaluated initially by COGEMs. Endorsed
proposals would be consolidated at the municipal level (by the local EMATER office and
CMDRs) and submitted to SEP through the SER for final approval and processing of grants.
Disbursement would normally be against submitted receipts (payment modalities “reembolso na
proposta” and “reembolso pós-proposta”), although regulations would allow pre-financing of
small amounts (20 percent of total proposal cost) for the poorest applicants (modality “liberações
parceladas”). The component would be coordinated by a grant administrator in SEP. Once
awarded, grant funds would be transferred directly to beneficiaries. COGEMs and staff from the
executing offices at municipal, regional and state level would be responsible for monitoring the
use of the grants.

Requirements for eligibility and subsequent selection of grant proposals

Proposals for financial support should follow the project guidelines and be geared toward the
carrying out of environmental services by farmers with a consequent improvement in the quality
of life of the beneficiaries and the community. To be eligible, specific investment proposals in
subproject proposals must correspond to activities designated as priorities in the PEM and PIDs
and fit under the categories of subprojects (e.g., crop rotation, forestry management, organic
disposal and compost, etc.) deemed eligible in the Operational Manual. For a detailed list of
those activities to be financed by this component under the eligible subproject categories, see
Appendix 2 of this annex.

Subproject Beneficiaries
Within microcatchments, all residents (and grassroots associations with office/sede located in
microcatchments) would be encouraged to participate, with the support of the project’s TA, in
the development of PEMs, PIDs and the individual and community subprojects stemming from
them.

In most cases, the grant would finance between 50 percent and 80 percent of investments
included in the GEF portion of the subproject. Grantees would provide in-kind contribution to
cover the rest.

Criteria for eligibility of beneficiaries. Grant beneficiaries would be eligible for grant support
either individually or in groups based on the following broad criteria:


                                               44
1. Individuals
They would comprise family farmers and market-oriented farmers, as defined by PRONAF, who
meet the following requirements:
       Hold ownership, possession or renting rights to the land or be partners or concessionaires
        of Agrarian Reform;
       Reside on the property or in a nearby settlement; and
       Family members comprise the productive unit’s primary workers.

Individual beneficiaries who hold and produce on a maximum of four fiscal modules 8 of land, or
on 6 fiscal modules in the case of family cattle farms, would be eligible to receive a maximum
grant amount of R$6,000 to undertake a subproject in any of the 5 subproject categories (see
Appendix 2 of this annex for a table of subproject categories).

Individual beneficiaries who hold and produce on more than four fiscal modules of land, or 6 in
the case of family cattle farms, (and, thus, are not eligible under PRONAF criteria) would be
eligible to receive a maximum grant amount of R$4,000 to undertake pure conservation
subprojects (i.e., those in categories 2 and 3).

2. Group of beneficiaries: Groups of farmers would eligible for grants when: they comprise at
least 3 members of different families; all members are family farmers; have an internal
regulation establishing participatory and equal decision making between all members; are
registered as a formal association, cooperative society or joint ownership; and have an ongoing
productive undertaking implemented in the productive unit belonging to the group or to which
the groups holds a contract for use for a minimum of 20 years.

Groups of beneficiaries would receive the maximum grant amount established for each category
of eligible subproject as detailed in the Operational Manual.

Further Criteria for selection of eligible beneficiaries. In order to be eligible to receive project-
funded benefits, beneficiaries or their formal or informal organizations should both reside and
have their productive units or a branch of the organization located in the project
microcatchments. Farmers, in order to be eligible, must meet this criterion as well as the
following ones:

       Sign Terms of Commitment to execute the activities, practice or undertaking that is the
        object of the financial support;
       Actively participate in the definition of priorities of the PEM.
       Elaborate the PID.
       Undertake the practices and investments agreed in the PID and in the financial support
        requests to Moeda Verde, Rio Rural, PRONAF and the project.
       Abide by the guidelines defined in the CMDRS and COGEM.
       Provide control of the use of resources and the execution of the proposed
        activities/practices.

8
 According to Brazilian regulations, fiscal module size varies from 5 to 35 hectares – most common fiscal module
size in the project area is 10 hectares.


                                                       45
      Participate in courses, trainings, meetings, and events aimed at their training as well as at
       community development.
      Agree to permit the use of the productive unit for the diffusion of the practices carried
       out.
      Demonstrate the possibility of securing resources complementary to the implementation
       of practices and activities.
      When benefited as part of a group, commit to developing actions in the productive unit
       that will lead to sustainable management of natural resources.
      When benefited as part of a group involved in commercialization, guarantee, as a group,
       the production of a minimum of 70 percent of the prime material required by the
       undertaking.

Subcomponent 2.2: Support to Adaptive Management Practices (US$0.38 million, 2.4 percent of
total project cost). This subcomponent would support the adaptation of existing soil
management practices and/or adequate technological solutions to unsustainable land use issues
identified by the farming community at the microcatchment level. The activities foreseen under
this subcomponent include: (i) improvement and validation of practices for the integrated
management of natural resources; (ii) adaptation and validation of cropping, agroforestry and
pasture management systems to increase carbon stocks and biodiversity; and (iii)
implementation of pilot units to improve the use of rural space in environmentally fragile and
vulnerable areas or in the buffer zones of Conservation Units.
Demand for adaptive research would be identified during formulation of the PEMs and
respective Annual Operational Plans (POAs). Under this subcomponent, GEF funds would
support technical assistance, equipment and studies for the identification and adaptation of
existing appropriate technologies and systems to respond to different land uses, consistent with
improved agro-ecosystem management. An estimate of at least 10 adaptive research trials is
foreseen under this component.
Research demands would be submitted to COREM for review and prioritization, and
subsequently, sent to SEP for TOR preparation and contracting (for such, a PESAGRO officer
would be outposted at SEP). Upon Bank non-objection of TORs, SEP would proceed with the
contracting of research services. Depending on the characteristics of each demanded research,
adaptive research would be carried out directly through PESAGRO in areas where PESAGRO
has an identified advantage/expertise or, where this is not the case, may be contracted to
PESAGRO in association with a university, NGO or other similar institution.
Component 3 – Organization and Capacity Building for Integrated Ecosystem
Management (US$2.47 million, 16.0 percent of total project cost)
This component would include training, education and community engagement efforts to
facilitate the formation and strengthening of rural organizations for self-management of natural
resources. They would complement productive and commercialization group activities
encouraged by the ongoing Rio Rural and PRONAF programs. Direct beneficiaries would be
approximately 6,000 intersectoral technicians, smallholder farmers, rural youth and residents of
project-supported watersheds, which would be trained in management of natural resources and
participate in the implementation of rural pilot collective undertakings to promote the
socioeconomic development of beneficiaries, based on the production and delivery of
environmentally sustainable goods and services.


                                                46
Initiatives for the capacity building and organization of the local rural population would
generate: empowerment of communities and increased, more effective participation in local
management decisions; higher adoption of sustainable environmental techniques; improved
smallholder producers’ organizations for purposes of self-management; and pursuit of increased
income-generation opportunities.
Capacity building and rural organization are being implemented through the ongoing programs,
Rio Rural and PRONAF. The GEF would finance the incremental costs associated with work to
support rural organization, which would place emphasis on the integrated management of
natural resources, particularly dealing with issues related to biological diversity, climate change,
and land degradation.
Subcomponent 3.1: Community Organization (US$0.43 million, 2.7 percent of total project
cost). Under this subcomponent, qualified professionals in a variety of fields would be
mobilized to undertake diagnostic studies of the existing community organizations and to
facilitate the development and implementation of pilot community self-management activities
focused on the production and delivery of environmentally sustainable goods and services.
This subcomponent would support the application of an innovative multidisciplinary
methodology (incubation or incubagem) for strengthening local organizations through collective
action and self management for socioeconomic betterment and improved management of natural
resources. The activities would include special training and support for extension agents (training
of trainers or multiplier agents) in how to more effectively assist beneficiaries in the formation
and strengthening of local organizations such as associations, cooperatives and microcatchment
committees with emphasis on participatory techniques for diagnostics, planning, implementation
of activities and monitoring and evaluation. Under the project at least two rural incubator centers
would be established, one in each region, likely to be physically located with the two planned
Information/Communication Centers (see next paragraph on the Communication Plan), which
would serve as resource centers. The methodology, fine-tuned to the objectives of this specific
project, is based on World Bank-award winning programs developed by ITCP (Technology
Incubator for Popular Cooperatives) at the Federal University of Rio de Janeiro that have shown
considerable success in establishing viable and sustainable collective enterprises and networks.
In addition to its training aspect, this subcomponent would also support the application, by
trained extension agents, of the incubation methodology in at least 14 microcatchments in PY1
and in an additional 16 in PY2.

Additionally, this subcomponent would support the development and implementation of an
interactive project Communication Plan that would both collect and diffuse socioeconomic,
environmental and monitoring information. The specific monitoring plan for this subcomponent,
whose social impact indicators are briefly outlined in Appendix 1 of Annex 3, would be designed
for continuous feedback to and the fine-tuning of the incubator initiatives allowing for the
delivery of enhanced targeted support to local and regional organizations as challenges arise. As
resources for the general public, a project portal would be established on the web, and two
Information/Communication Centers would be established, one in each region, that would
provide access to multimedia resources and the internet and would support distance learning. In
addition, direct community access to and dissemination of relevant environmental and project-
related information would be supported on a pilot basis. In this regard, five project
microcatchments would be selected to pilot community-based computers for broader access to


                                                47
the portal and the internet. Once the pilots are evaluated, it is expected that community-based
internet access would be expanded. In addition, five existing community radio stations would be
strengthened in terms of the content of programming for dissemination of environmental issues
and equipment (computer with broad-band).

Subcomponent 3.2: Training of Project Executors (US$0.41 million, 2.7 percent of total project
cost). Through training and environmental awareness efforts (including national, and a few
international, fieldtrips) for relevant intersectoral and extension staff, this subcomponent would
implement management and technical capacity building programs, involving about 420 staff. It
would also carry out specific capacity training to support the implementation of socio-
environmental actions, on-farm, and in microcatchments. It would also provide technical
training on project-related issues and general project awareness training to members of the
project steering committees (COGEM, CMDR, COREM, CEDRUS).

Subcomponent 3.3: Training and Environmental Education of Beneficiaries (US$1.63 million,
10.6 percent of total project cost). Under this subcomponent, training and environmental
education efforts would be carried out among beneficiaries to enhance local capacities and
increase support for sustainable natural resources management. Training would be oriented
toward making environment-related applied technical and scientific knowledge available in an
integrated manner to diverse groups of rural producers and residents of project-benefited
watersheds. It would complement training carried out by the base programs on agroprocessing,
improved cropping, animal health and aquaculture systems.

In support of environmental education efforts foreseen under this subcomponent, the project
would also train one schoolteacher from each of the project supported microcatchments in
environmental issues relevant to the project area. With the support of this teacher, each school
would then prepare an environmental education subproject proposal to submit for project
support (e.g., a photography kit for documentation of biodiversity and cultural heritage of the
community, organic horticulture, water monitoring, planting of seedlings in the school area, etc.)

This subcomponent would also provide technical training on a demand-driven basis in the five
broad areas foreseen for grant support under subcomponent 2.1 mentioned above.


Component 4 – Project Management, Monitoring and Evaluation (US$2.74 million, 17.5
percent of total project cost)
Subcomponent 4.1: Participatory Management of the Project (US$1.81 million, 11.5 percent of
total project cost). This subcomponent would support technical assistance, office equipment,
administrative and operational aspects necessary to ensure the effective implementation of
project activities and management of resources. The structuring and implementation of a Project
Management Unit (SEP) under the aegis of SEAAPI, is proposed through its Directorate of
Microcatchment Development (Superintendencia de Microbacias - SMH). In addition to this
core executive structure, and given the importance of leveraging project impact through
integration with other ongoing activities, a participatory, consultative external project
coordination structure (Coordination Forums) would be established at the state, municipal and
microcatchment levels.



                                                48
Subcomponent 4.2: Monitoring and Evaluation (US$0.72 million, 4.6 percent of total project
cost). This subcomponent would be under the responsibility of SEP and would be implemented
through overall physical and financial monitoring of the project, socioeconomic and
environmental monitoring in pilot microcatchments and overall project evaluation. To
complement the Rio Rural impact monitoring program in pilot microcatchments, the GEF would
support the development and implementation of a monitoring system whose objectives would be
to: (i) provide continuous monitoring the results of project actions, through previously
established indicators; (ii) evaluate, with the assistance of CI-Brasil and SOS Mata Atlântica, the
positive impacts of the integrated management of ecosystems on the increase in regional
biodiversity and carbon stocks in agricultural and livestock; (iii) support planning, and when
necessary reorient actions; (iv) provide information necessary for the intermediate and final
evaluation of the project; and (v) form a database that shows the program’s evolution and
improvement.
Continuous project monitoring would measure trends over time which would provide the basis
for a series of adaptive and systematic project evaluations, and for two overall project
evaluations. These evaluations, along with a baseline study to be carried out, would provide
feedback to adjust both the project interventions and future management interventions. The
project’s M&E system would use participatory mechanisms to enable stakeholders to share their
feedback.

Subcomponent 4.3: Project Dissemination (US$0.21 million, 1.4 percent of total project cost).
This subcomponent would support the design and implementation of the project information
dissemination strategy, providing the basis for knowledge transfer and, subsequently, increasing
the potential for transferring experiences and disseminating project lessons learned. It would
include the sharing of information both within and outside the project, involving those people
and institutions who are interested in the project and who can learn from and make use of the
experience, expanding it and making the idea useful to the public throughout the Atlantic Forest
region and beyond, particularly to other Latin American countries.




                                               49
                                          Annex 4, Appendix 1
                      Building on Existing Programs: Project–Cofinanced Activities
                                   and GEF Complementary Support

    Activities Supported by PRONAF,                        Activities Supported by GEF Resources
           Moeda Verde, and Rio Rural
Component 1: Planning for Integrated Ecosystem Management Actions
Subcomponent 1.1: Strengthening of IEM Incentive Structure and Ecosystem Planning Systems
- Market studies to guide the production     - Studies and workshops to:
and selling of agroecological goods and           design a support system for SLM including a proposal for a
services                                           possible PES scheme (e.g., for biodiversity protection, carbon
- Soil and erosion studies for improved            sequestration, and/or water protection services)
land use planning                                 identify specific actions, institutional arrangements, and
                                                   monitoring tools to implement the Serra do Mar Corridor in
                                                   the project area
                                                  update and fine-tune the Watershed Management Strategies
                                                  land use sustainability analysis at the microcatchment level as
                                                   a contribution to improve livelihoods and to protect
                                                   ecosystem stability, functions and services
Subcomponent 1.2 Local Land Management Planning
- Community mobilization for formulation - Support to the formulation of PEMs, PIDs, and ECCs, through
of PEMs                                      financing of workshops, focus groups, and participatory rural and
- Technical assistance for the formulation environmental diagnostic assessments of project–supported
of PEMs and PIDs                             microcatchments within an IEM approach
Component 2: Support Systems for the Adoption of IEM/SLM practices
Subcomponent 2.1: Financial Support for Sustainable Natural Resource Management
- Provision of credit (Pronaf and Moeda      - Incentives/grants for the adoption of IEM/SLM practices aimed
Verde): e.g., reforestation for commercial at: (i) rehabilitation of degraded lands (e.g., green manure, zero
purposes; establishment of irrigation        tillage, contour planting, and crop rotation); (ii) conservation or
systems associated with fruit production     sustainable use of biodiversity (e.g., reforestation for protection of
systems; recurrent costs for                 groundwater recharge areas); seed retrieval and seedling production
implementation and maintenance of            for forest management and protection purposes; (iii) water
conventional agricultural systems and        resources management and protection, such as rehabilitation of
poultry production; investment; and small degraded natural riparian forests and protection of water sources;
agroindustries promoting added value to      (iv) redirection of productive systems toward those that are socially
fruit and milk products                      and environmentally friendly, such as agroforestry, beekeeping,
                                             and pasture management; and (v) commercialization of
- Provision of grants (Rio Rural), e.g., for environmentally and socially sound products, such as handicrafts,
erosion control in rural roads, and seedling certification of “ecosystem friendly” products, and post-harvest
production for commercial purposes           value-added from environmentally friendly agricultural products
Subcomponent 2.2: Support to Adaptive Management Practices
- Agricultural research to support new       - Participatory research for adapting existing soil management
production systems for smallholder           practices to local agroecological conditions and/or adequate
agriculture                                  technological solutions to unsustainable land use issues identified
                                             in the project area by the farming community at the
                                             microcatchment level
Component 3: Organization and Capacity Building for IEM
Subcomponent 3.1: Community Organization
- Training of municipal leaders (CMDR        - Training for the application of an innovative multidisciplinary
members) in local rural development and      methodology (incubation) to strengthen local organizations in


                                                          50
collective productive activities            community self-management of natural resources
                                            - The implementation, by trained extension agents, of the
                                            incubation methodology in 50 microcatchments with technical
                                            support from UFRJ to prepare and implement small business plans
                                            - Development and implementation of an interactive project
                                            communication plan
Subcomponent 3.2: Training of Project Executors
- Training of technicians (mainly extension - Training of project executors (extension and management staff)
staff) in soil conservation and management for adoption of SLM/IEM methodologies and practices
and and use of geoprocessing techniques in
microcatchment planning
Subcomponent 3.3: Training and Environmental Education of Beneficiaries
- Training of producers in (i) food/milk    - Training and environmental education targeted at local
processing; (ii) design of agroprocessing   beneficiaries (farmers, community members, rural youth, women)
units, (iii) sustainable aquaculture (Rio   to enhance local capacities and increase support for sustainable
Rural); (iv) sustainable cropping systems   natural resources management
for fruit, grain, vegetable, and coffee
production; and (v) animal health practices
Component 4: Project Management, Monitoring and Evaluation
 Subcomponent 4.1: Participatory Project Management
- Provision and maintenance of physical     - Design, implementation, and maintenance of an MIS system for
infrastructure (and staff) for use by       physical and financial monitoring of the project
proposed GEF Project                        - Coordination and administration of the project, including
                                            technical assistance, office equipment, organization of steering
                                            committee meetings, and other management activities needed to
                                            ensure the effective implementation of project activities
                                            - Technical training on a demand-driven basis in the five broad
                                            areas foreseen for grant support under subcomponent 2.1
Subcomponent 4.2: Monitoring and Evaluation
- Provision of field and laboratory         - Socioeconomic and environmental monitoring in pilot
equipment for soil and water monitoring in microcatchments; and overall project evaluation
project watersheds

Subcomponent 4.3: Project Dissemination
Production of promotional and teaching     - Organization of events, media campaigns, and production of
materials for dissemination of existing    materials to disseminate project results and lessons learned
cofinancing programs




                                                       51
                                      Annex 4, Appendix 2
                 Subprojects foreseen for financing under the redirected baseline
                       programs and those to be financed by GEF funds
     Illustrative types of subprojects foreseen for
  financing under the redirected baseline programs                   Types of subprojects proposed for GEF
   (PRONAF, MOEDA VERDE, RIO RURAL)                                                 funding

Subproject category 1–Conservation or sustainable use of biodiversity
 Reforestation for commercial purposes
                                                                   Forestry management
                                                                   Reforestation of groundwater recharge areas
                                                                   Protection of groundwater recharge areas
                                                                   Isolation and rehabilitation of recharge areas
Subproject category 2–Rehabilitation of degraded lands
 Use of fertilizers and corrective measures for soil fertility     Organic manure
 restoration                                                       Green manure
                                                                   Minimum and zero tillage
 Erosion control on rural roads                                    Grass bund
                                                                   Contour cropping
                                                                   Terrace planting
                                                                   Crop rotation
                                                                   Cover crops
 Conventional machinery and equipment for use in
 conventional productive systems                                   Equipment for soil conservation and management

 Soil preparation practices (ploughing in terraces)                Mechanical erosion control
Subproject category 3–Water resources management and protection
Small water supply dams                                          Restoration of native riparian forests
 Capturing and distribution of water for irrigation               Protection of springs
                                                                  Production of organic pest control substances
                                                                  (agrobio, etc.)
                                                                  Biological pest control system
 Conventional pest control                                        Organic disposal and composting
                                                                  Underground water barriers
                                                                  Small tanks for production of organic manure
                                                                  Measures to ensure cattle water supply while
                                                                  rehabilitating riparian forests
 Subproject category 4–Redirection of productive systems toward those that are socially and
environmentally friendly
 Conversion of properties to more appropriate crops (fruits,
                                                                  Improved pasture management practices
 etc.) for improved soil management
 Recurrent costs for cropping systems and pastures                Agroforestry systems
 Conversion of conventional cultivation systems to organic        Organic coffee and coffee plantations that result in
 ones                                                             increased soil cover
 Diversification of food production for food security             Reorientation from conventional to sustainable farm
                                                                  systems (medicinal plants, organic tomato, etc.)
                                                                  Beekeeping kits




                                                           52
Subproject Category 5–Commercialization of socially and biodiversity friendly products
Implementation of small conventional agroindustries        Certification of socially and biodiversity friendly
                                                           products

Investment costs to provide vehicles for market support    Implementation of small group agroprocessing units
                                                           Implementation of small individual agroprocessing
                                                           units
Seedling nurseries for exotic forest essences              Seedling nurseries for native Atlantic forest and other
                                                           Atlantic forest bioactive rich species
                                                           Group handicraft production
                                                           Individual handicraft production**
                                                           Group procurement of honey production equipment




                                                      53
                                          Annex 5: Project Costs
  BRAZIL: Rio de Janeiro Sustainable Integrated Ecosystem Management in Production
              Landscapes of the North-Northwestern Fluminense (GEF)




                                 Baseline and Total Costs by Component
      Project Cost By Component/Subcomponent                           (US$'000)                 %        %
                                                                                               Foreign   Total
                                                            Local      Foreign     Total
                                                                                              Exchange   Costs
1. Planning for IEM Actions
1.1 Strengthening of IEM Incentive Structure and
Ecosystem Planning Systems                                    151.3        -         151.3       -        1.0
1.2 Local Land Management Planning                            781.6       2.8        784.4       -        5.2
Subtotal Planning for IEM Actions                             932.9       2.8        935.7       -        6.3
2. Support Systems for the Adoption of IEM/SLM
practices
2.1 Financial Support for Sustainable Natural Resources
Management                                                   8,429.4       -        8,429.4      -       56.4
2.2 Support to Adaptive Management Practices                   371.8      3.5         375.5      1        2.5
Subtotal Financial Support for Sustainable NRM               8,801.2      3.5       8,804.8      -       58.9
3. Organization and Capacity Building for IEM
3.1 Community Organization                                     423.1      3.0         426.3      1        2.9
3.2 Training of Project Executors                              410.4       -          410.4      -        2.7
3.3 Training and Environmental Education of Beneficiaries    1,631.4       -        1,631.4      -       10.9
Subtotal Organization and Capacity Building for IEM          2,388.8      3.0       2,468.1      -       16.5
4. Project Management, M & E
4.1 Participatory Management of the Project                  1,805.3     16.6       1,787.9      1       12.1
4.2 Monitoring and Evaluation                                  720.3     15.7         703.9      2        4.8
4.3 Project Dissemination                                      214.6      4.5         209.9      2        1.4
Subtotal Project Management, M & E                           2,740.3     36.8       2,701.6      1       18.3

                                      Total Project Costs   14,900.7     48.2      14,948.9      -       100




                                                      54
          Total project costs by component including GEF financing (includes contingencies)
                                         Indicative         GEF      % of                      Cofinancing
              Component                    Costs    % of financing   GEF              GoRJ         Fed.    Other
                                         (US$'000) Total (US$'000) Financing                       Gov.
1. Planning for IEM Actions                 935.7   6.3    632.6      9.4             299.5
1.1 Strengthening of IEM Incentive
Structure and Ecosystem Planning
                                           151.3
Systems                                                1.0       151.3         2.2
1.2 Local Land Management Planning         784.4       5.2       484.9         7.2    299.5
2. Support Systems for the Adoption
of IEM/SLM practices                      8,804.8      58.9      2,922.8      43.3    4,096.8    1,024.4 760.9
2.1 Financial Support for Sustainable                                                 4,096.8    1,024.4 760.9(1)
                                          8,429.4
NRM                                                    55.1      2,547.3      37.7
2.2 Support to Adaptive Management
Practices                                  375.5       2.5       375.5         5.6
3. Organization and Capacity Building
for IEM                                   2,468.1      16.0      1,618.3      24.0    849.8
3.1 Community Organization                  426.3       2.9       426.3        6.3
3.2 Training of Project Executors           410.4       2.7       410.4        6.1
3.3 Training and Environmental
Education of Beneficiaries                1,631.4      10.9       781.6       11.6     849.8
4. Project Management, M & E              2,740.3      18.3      1,572.8      23.3    1,062.1      86.6       18.7
4.1 Participatory Management of the                                                    936.7
                                          1,805.3
Project                                                12.1      868.6        12.9
4.2 Monitoring and Evaluation              720.3        4.8      489.6         7.3    125.4        86.6      18.7(2)
4.3 Project Dissemination                  214.6        1.4      214.6         3.2

                    Total Project Costs 14,948.9       100      6,750.1       100    6,308.3     1,111.0     779.6
(1)
    Beneficiaries
(2)
    NGOs

                                           Financial Summary
                               FY2006        F2007            FY2008       FY2009    FY2010         Total
Total PROJECT COSTS            2,162.3       4,045.9          3,983.4      3,646.9   1,110.3      14,948.9
Total Investment               1,540.5       3,318.3          3,200.1      2,902.5    320.0       11,281.5
Total Recurrent Costs           621.8         727.6            783.3        744.4     790.3        3,667.5
Financing Sources
GovRJ                           559.3        1,770.3          1,798.4      1,702.6    477.6        6,308.3
Federal Government               67.7         342.6            360.0        318.5      22.1        1,111.0
GEF                            1,490.2       1,692.3          1,581.8      1,380.2    605.6        6.750.1
Beneficiaries                    40.3         237.8            240.2        242.6       0.0         760.9
NGOs                              4.8          2.9              3.0          3.0        5.0          18.7
% of total project costs
GovRJ                           25.9%        43.8%            45.1%        46.7%     43.0%           42.1%
Federal Government              3.1%         8.5%             9.0%         8.7%      2.0%             7.4%
GEF                             68.9%        41.8%            39.7%        37.8%     54.5%           45.2%
Beneficiaries                   1.9%         5.9%             6.0%         6.7%      0.0%             5.1%
NGOs                            0.2%         0.1%             0.1%         0.1%      0.5%             0.1%




                                                       55
                                             Project Cost by Category
                                                Total
                                                                                         Local (Excl.    Duties &
        Project Cost by Category               Amount            %         For. Exch.
                                                                                           Taxes)         Taxes
                                              (US$'000)
 I. Investment Costs
A. Investment categories
1. Goods
a. Vehicles                                     65.4            0.4          13.0            52.3           9.8
b. Equipment                                   355.7            2.4          35.2           320.5          53.3
Subtotal Goods                                 421.0            2.8          48.2           372.8          63.1
2. Consulting Services and Studies            1,757.7          11.7           -            1,757.7        281.2
3. Subprojects (subcomponent 2.1)             8,531.4          56.9           -            8,531.4           -
4. Training and Workshops                      489.1            3.3           -             489.1            -
5. Other Services                               82.3            0.5           -              82.3          13.2
Total Investment Costs                       11,281.5          75.3          48.2         11,233.2        294.4
II. Recurrent Costs
A. Recurrent costs categories
1. Materials                                   129.2             0.9          -             129.2          14.2
2. Salaries                                    938.8             6.3          -             938.3         234.7
3. Subsistence Allowances                      205.1             1.4          -             205.1          22.6
4. O & M                                       103.8             0.7          -             103.8          11.4
5. Other recurrent*                           2,290.5           15.3          -            2,290.5        251.9
Total Recurrent Costs                         3,667.5           24.5          -            3,667.5        534.8
Total                                        14,984.9          100.0         48.2         14,984.9        892.3

 * Correspond to incremental variable costs associated with the preparation of the PEMs, PIDs (EMATER) and
 ECCs (DPGE), adaptive research (PESAGRO and other research institutions), and monitoring (water quality, soil,
 socioeconomic, biodiversity, and participatory monitoring), to be carried out with FEEMA, EMBRAPA, EMATER,
 DRM, CI/Brasil, SOS-Mata Atlântica , and the beneficiaries.
1
  Identifiable taxes and duties are US 892,300; the total project cost, including taxes, is US$14,984,900. Therefore,
taxes amount to 6% of total project cost.




                                                          56
                           Annex 6: Implementation Arrangements

  BRAZIL: Rio de Janeiro Sustainable Integrated Ecosystem Management in Production
              Landscapes of the North-Northwestern Fluminense (GEF)

Implementation period. The proposed project would be implemented over a period of five years.

Project Management Structure (see Figure 1 below).
Project oversight, management, and interagency coordination. Project management and
implementation would be the overall responsibility of SEAAPI. A Project Management Unit
(SEP) would be established through SEAAPI’s Microcatchment Directorate (SMH); the latter
would be responsible for the preparation of general guidelines and procedures for project
implementation while SEP would oversee, coordinate, administer, and monitor the project.
Through SEP, SEAAPI as the project executor would sign working agreements with
implementation partners with a strong presence in the region. These arrangements would serve
the dual purpose of leveraging the operational capacity of the project execution structure, while
at the same time mainstreaming the project approach within the services the partners provide to
the NNWF’s rural population.

Given the importance of developing broader community consensus in the development and
implementation of watershed and microcatchment development plans and consistent with
SEAAPI's current programs, it is expected that municipal governments and a broad cross-section
of civil society would play an active role in the GEF–supported activities.

The project’s execution would be decentralized and supported through the regional and local
offices of the aforementioned implementation partners. In addition to this core executive
structure, given the importance of leveraging project impact through integration with other
ongoing activities, a participatory, consultative project external coordination structure
(Coordination Forums) would be strengthened or established at the state, regional, municipal,
and microcatchment levels.

Project Executive Structure (see Figure 2 below).

Project oversight, management, and interagency coordination. Project management and
implementation would be the overall responsibility of SEAAPI. A Project Management Unit
(SEP) would be established through SEAAPI’s Microcatchment Directorate (SMH). SMH’s
responsibilities would include the preparation of general guidelines and procedures for project
implementation. SEP would be responsible for the overall management of project execution
activities. SEP would have two small departments dealing with technical management and
administration (financial management and procurement) and the operation of the Financial
Support Program. SEP would be staffed mainly by secondment of senior staff from the
implementation partners (particularly EMATER), but technical assistance would be contracted
temporarily to strengthen SEP’s capacity. SEP would also maintain small multi-institutional
units consisting of teams representing EMATER and PESAGRO, one in each of the two
EMATER regional offices in the NNWF. EMATER’s regional and municipal offices would
serve as the project’s executive units dealing directly with microcatchment stakeholders.


                                               57
                      Figure 1. Project Management Structure



Level                    Execution                       Coordination
                          Bodies                           Forums



                 Project Management Unit               Project Steering
                          (SEP)                    Committee: State Council
State                                                of Sustainable Rural
                                                   Development (CEDRUS)




                    2 Regional Project             Regional Project Steering
                  Executive Secretariats            Committee: Regional
Regional          (SER-North and SER-                  Microcatchment
                       Northwest)                   Committee (COREM-
                                                      North-Northwest)




                                                     Municipal Council of
Municipal            EMATER and                       Sustainable Rural
                      Municipality                      Development
                                                         (CMDRS)




                    Microcatchment                    Microcatchment
Microcatchment       Extensionist                  Management Committee
                                                        (COGEM)




                                           58
Project Management Unit (SEP). The SEP would carry out overall project oversight,
coordination, administration, and monitoring. Related responsibilities range from generating
budgetary and financial resources to coordinating the COREM and providing financial
statements of accounts to the state government and the Bank. SEP would have two small
departments dealing with technical management and administration (financial management and
procurement), and the operation of the Financial Support Program. Through SEP, SEAAPI as
the project executor would sign working agreements with implementation partners with a strong
presence in the region. These arrangements would serve the dual purpose of leveraging the
operational capacity of the project execution structure while at the same time mainstreaming the
project approach within the services the partners provide to the rural population.

SEP would be staffed mainly by secondment from the implementation partners’ organizations
(particularly EMATER) but technical assistance would be hired to strengthen SEP’s capacity.
The executive branch of project management would also maintain small multi-institutional units
consisting of teams from EMATER and PESAGRO, one in each of the two EMATER regional
offices in the NNWF (SER-North and SER-Northwest). EMATER’s regional and municipal
offices would serve as the project’s executive units dealing directly with microcatchment
stakeholders. These units would be responsible for project monitoring at the municipal and
microcatchment levels, and would prepare and systematize information and reports requested by
the project, and execute and monitor project activities at the microcatchment, municipal, and
regional levels.

Implementation partners include: EMATER, PESAGRO (SEAAPI agencies) for extension and
research; EMBRAPA-Soils (a federal agency), FEEMA (a SEMADUR agency) and DRM (a
SEINPE agency) to support monitoring activities; the Public Defender’s Office (DPGE), and two
NGOs (SOS-Mata Atlântica, and Conservation International/CI-Brasil). COPPETEC, a private
foundation, will carry out community organization and communication activities.

Technical Management Unit at State Level. The project’s Technical Manager would be the
overall coordinator of project components 1, 2, and 3, as well as the M&E subcomponent of
component 4 (each component would also have a person responsible for its day-to-day
operation). Under the coordination of this manager, a small technical department represented by
about six professionals would be established and would work in full coordination with local-
level project implementers.

Administrative and Financial Management Unit. The Administrative and Financial Manager
would be responsible for project administration and for procurement, disbursement, and special
account keeping. The unit would incorporate staff with experience in financial, procurement, and
disbursement matters, and would hire one administrative assistant and two consultants,
specialized in procurement and financial management matters, respectively.




                                              59
                               Figure 2. Project Executive Structure



                                                  PMU
                                            Project Executive
                                            Secretariat (SEP)



                                       Executive Secretary




                  Technical                                            Administrative and
               Management Unit                                        Financial Mgmt Unit




                                                                               Financial, procurement
Component 1 – Subcomponent 1.1                                                   ,and disbursement
Component 2
Component 3 – Subcomponents 3.1, 3.2
Component 4




                 North Region                                         Northwest Region
                 Project Mgmt.                                         Project Mgmt.
                Unit (SER-North)                                         Unit (SER-
                                                                         Northwest)



          North Region Project Mgmt. Unit
                   (SER-North)                                  Northwest Region Project Mgmt.
                                                                     Unit (SER-Northwest)




   Subcomponent 1.2           Support              Subcomponent 1.2
   Subcomponent 3.3          subproject-           Subcomponent 3.3            Support
                             related                                           subproject-
                             procurement                                       related
                                                                               procurement
                                                  60
Project Coordination Forums.

Project Steering Committees. To provide external coordination to facilitate the integration of
project activities with those being carried out by other projects and programs, overall guidance,
and address potential conflicts, the Project would have the support of the following project
steering committees at the various levels of project implementation: (i) the State Council of
Sustainable Rural Development—CEDRUS (state level); (ii) the Regional Microcatchment
Committee—COREM (at the North-Northwestern regional level); (iii) steering committees in
each of the municipalities selected for project implementation, constituted by one existing
municipal council, the Municipal Council of Sustainable Rural Development—CMDRS
(municipal level); and Microcatchment Management Committees—COGEM (local level).

These Steering Committees would play an important role in the project. They would bring their
collective expertise of sectors (at the state, regiona, and municipal levels) and stakeholders to
help ensure that project implementation proceeds toward its objectives, and would also work as
channels for the dissemination (back into the sectors and stakeholder groups represented there)
of experiences and lessons generated by the project.

State Council of Sustainable Rural Development—CEDRUS. At the state level, the choice of
CEDRUS as project steering committee (consultative) is based on: (i) its mandate to guide and
oversee the sustainable development of the state’s rural areas; and (ii) its composition, which
includes representatives from project-relevant key State Secretariats, civil society, and
representatives of farmers and other natural resource users. CEDRUS would oversee general
project implementation progress and would facilitate: (i) the project’s integration with the overall
rural development strategy in the state and the country; and (ii) the integration among partner
institutions and in particular among state and national programs relevant for coordination and
collaboration with the proposed project.

Regional Microcatchment Committee—COREM. At the regional level (NNWF), the COREM
(deliberative role) would monitor and evaluate progress; review and endorse project
implementation policy, priorities, and annual operational plans; and approve fund allocations
proposed by the SEP for each microcatchment. It would also seek to resolve conflicts among
stakeholders and endorse subprojects/grants, and ensure coordination and collaboration among
partner institutions.

Municipal Sustainable Rural Development Councils—CMDRs. The existing CMDRs (created
under PRONAF and functioning in the 24 project municipalities), composed of representatives
from the municipal government, rural communities, NGOs, rural workers’ trade unions, small
farmers’ associations, and rural extension institutions, would endorse the proposed priority
microcatchments to be supported under the project. CMDRs would be regularly informed by
local executing agencies (EMATER and muncipality) on the implementation of the
Microcatchment Development Plans (PEMs) and the selected municipal microcatchments to be
benefited by the project. They would also contribute to the dissemination of the project’s
objectives and results and mediate any potential conflicts among local stakeholders.



                                                61
Microcatchment Management Committees—COGEMs. The COGEMs (one for each benefited
microcatchment) would be represented by members selected by new or existing microcatchment
groups of the local stakeholders (small producers, women, youth, rural workers, etc.). This
committee would be responsible for local planning, management, and actions to achieve project
objectives. More specifically, the COGEMs would be responsible for the approval of the PEMs,
which would be prepared by the microcatchment groups in cooperation with the project
executing institutions. The committee would also approve POAs and ECCs, endorse PIDs, and
manage, monitor, and evaluate PEM implementation.




                                             62
          Annex 7: Financial Management and Disbursement Arrangements
  BRAZIL: Rio de Janeiro Sustainable Integrated Ecosystem Management in Production
              Landscapes of the North-Northwestern Fluminense (GEF)


A. Financial Management Assessment

A financial management risk assessment of the project was carried out in accordance with
OP/BP 10.02 and the Guidelines for Assessment of Financial Management Arrangements in
World Bank–Financed Projects issued by the Financial Management Sector Board on October
15, 2003.

The overall objective of the assessment was to determine whether the financial management and
disbursement arrangements proposed by the Grantee—the State of Rio de Janeiro—through its
Implementing Agency—SEP in SEEAPI, are acceptable to the Bank. These arrangements
include, but are not limited to, its capacity to: (a) properly manage and account for all project
proceeds, expenditures, and transactions; (b) produce timely, accurate and reliable financial
statements and reports, including Financial Monitoring Reports (FMRs) for Project Management
and other Bank purposes; (c) safeguard the project’s assets; (d) provide timely engagement of
independent auditors acceptable to the Bank; and (e) disburse Bank funds in the most efficient
manner, in accordance with applicable Bank rules and procedures.

The assessment addressed: (a) the financial management system to be used for project
accounting, financial administration, controlling, and reporting, as well as a review of the TOR
for the software developer to be engaged for its development; (b) financial staffing, i.e.,
manpower to be engaged and organizational set-up, including training and qualification
requirements; (c) review of funds flow mechanisms; (d) review of internal control mechanisms
and administrative procedures; (e) the disbursement methodology to be used; (f) reporting
requirements, including format, content, and frequency of FMR submission to the Bank; (g)
internal audit procedures; and (h) external audit arrangements and submission of yearly audited
financial statements.

The FM assessment concluded that the proposed financial management arrangements for this
project would satisfy the Bank’s minimum requirements and that the proposed financial
management systems would effectively control and monitor the project and provide, with
reasonable assurance, accurate and timely information on the progress of project implementation.

The Financial Management risk associated with this project is rated as substantial, and adequate
mitigating measures would have to be implemented. The Risk Assessment Matrix below
summarizes the degree of risk of each of the items related to the Financial Management of the
project and shows steps suggested to mitigate these risks.




                                               63
Risk Assessment Matrix
                 Risk              H   S     M    L        Comments/Mitigation measures
    Inherent risk
      * State-specific                 X              Limited experience with Bank–financed
                                                      projects.
     * Entity-specific                 X              Idem
     * Project-specific                X              Project highly decentralized
    Control risk
     1. Implementing Entity            X              Limited experience with Bank–financed
                                                      projects.
      2. Funds Flow                X                  FF highly decentralized and utilization of
                                                      FUNDES (see comment below).
     3. Staffing                       X              SEP must have financial expertise.
     4.Acc.Policies&Procedures               X        State SIAFEM and Project’s MIS.
     5. Internal Audit                 X
     6. External Audit                       X
     7. Reporting and                  X             Financial Reports module to be included in
    Monitoring                                       the FM system.
     8. Information Systems                  X       FM system similar to the SP
                                                     Microcatchment Project and others.
H – High         S – Substantial           M – Moderate         L– Low or negligible


Project implementation would have to be closely monitored in order to mitigate FM risks. The
higher risk is related to flow of funds (see paragraph below). The major component, which
represents some 57 percent of total project costs, is financial support: US$8.4M to which the
Grant would contribute US$2.5M, and the State would contribute US$4.1M through FUNDES.
Grant funds would also be deposited in FUNDES to finance small agricultural entrepreneurs and
farmers participating in the subprojects under subcomponent 2.1. The counterpart funding would
have to be closely monitored. It is recommended that the audit of project accounts be procured
following Bank guidelines and that audit costs be included in the Bank’s financing portion.

Other executing agencies would receive small amounts of funds from the Project. The biggest
one would be to EMATER which would receive US$958,000. PESAGRO and EMBRAPA Soils
would receive approximatelyUS$100,000 each. All executing agencies would be treated as
service providers and would be paid on a cost and billing basis. Moreover, no cash advances
would be made from GEF funds.

B – Financial Management Arrangements

Project Implementation Unit & Staffing
Project implementation would be under the responsibility and coordination of SEP within
SEAAPI. SEP would be formally created through a Governor’s Decree and would articulate and
liaise with all entities participating in the project. SEP would manage all resources, control and
monitor Project execution in all its phases, report back to the State Government and the Bank, do
the accounting and financials, coordinate disbursements of Bank and counterpart funds, prepare
the financial reporting through FMRs, and prepare disbursement documentation to submit to the
Bank. SEP would include an Executive Secretary supported by a Technical Manager and a


                                                 64
Financial/Administrative Manager. The Technical Manager would supervise the technical and
operational coordination of the implementation of all components, and the
Financial/Administrative Manager would be responsible for financial functions, procurement
coordination and administrative support for the entire Project. Two regional Secretariats, one for
the North Region and the other for the Northwest Region, would be responsible for local
implementation. Beginning in the second year of project implementation, these Regional
Secretariats would undertake procurement and certain financial functions, as well as
responsibility for the implementation of subcomponents 1.2 and 3.3. The
Financial/Administrative Manager under SEP would have a staff of five professionals, one of
whom would be a certified accountant, plus a number of consultants to assist primarily with
control of expense reports to be received from the executing agencies. All the staff to be hired
would have a financial background. The SEP consultants would be hired for the first 18 months
of the project, and those in the Regional Secretariats would be hired for the second and third
project years. SEP would also have logistical and operational support from SEAAPI.

Flow of Funds and Disbursement
Total Project cost is US$14.95 million, and the contributions by donors and respective
investments are summarized as follows (in US$ thousand):

                            RJ State   Federal         GEF       Prgr.      NGOs        Total
                             Gov.       Govt.                    Bene-
                                                               ficiaries
          Goods                                         421                              421
          Consultant                                   1,758                            1,758
          Services
          Other Services                                571                               571
          Subprojects (1)    4,097     1,024(2)        2,649      761(4)                 8,531
          Operating Costs    2,211       87(3)         1,351                  19         3,668
          Total Project      6,308      1,111          6,750     761          19        14,949
    (1)
        FUNDES: Incentive transfers. FUNDES is a state fund created to finance various State Investment
    Programs. For this project, FUNDES would finance the subprojects under Subcomponent 2.1 using
    GEF and State funds.
    (2)
        Contribution from PRONAF Program
    (3)
        Contribution from EMBRAPA
    (4)
        In labor

The flow of funds is shown in the attached flow chart. A special account in US$ would be
opened for GEF Funds. An operational Bank account in R$ would be opened to receive GEF
funds from the Special Account and to make payments for the expenses financed by GEF. The
operational account would not receive State counterpart funds, as the State would pay directly
from its own Treasury account for its share of project costs.

Funds would flow as follows:
     GEF – US$6.7 million: US$6.7 million to the Operational Account for payment of Goods,
      Consultants, Services, and Operating Costs to be made by the project, of which: (a)
      US$2.5 million would be transferred from the Operational Account to FUNDES to
      cofinance subprojects eligible for financing under the project; and (b) US$4.2 million


                                                  65
        payment of other goods, consultant services, and operating costs to be incurred by the
        project of which (i) EMATER (US$1.0 million), (ii) PESAGRO (US$0.1 million), and
        (iii) EMBRAPA (US$0.1 million).
      SoRJ – US$5.7 million: (a) US$4.1 million would be transfers made to FUNDES to
        finance the State’s share of subprojects under the project; (b) US$0.7 million would be
        transferred to the Operational Account for payment of goods, consultants, and services;
        and (c) US$0.9 million would be paid directly by the State for operating costs related to
        the project.9
      Federal Funds – US$1.2 million: (a) US$1.0 million of the State’s share of the PRONAF
        Federal Program would be procured by project beneficiaries (small farmers) to cofinance
        subprojects eligible for financing under the project; and (b) US$0.2 million out of the
        federal agency EMBRAPA’s budget would be used for direct payment of EMBRAPA’s
        recurrent costs related to the project.
      Project beneficiaries and NGOs would be paid mostly in labor and small contributions for
        their own recurrent costs.

Transfers of GEF Funds to FUNDES would be made on the basis of a “convênio” or Governor’s
Decree specifically to finance part of the project. The project would be under a “Budget Unit” or
a “Cost Center” called PT10 within the SoRJ’s budgetary/financial system.

Withdrawals from the Operational Account would be made for: (a) payments to the final
beneficiaries (suppliers, consultants, training and workshop costs) for goods supplied and
services rendered; (b) payments to other implementing agencies such as EMATER, PESAGRO,
and EMBRAPA Soils, on the basis of reimbursement of costs incurred; (c) transfers to FUNDES
for financing activities of Subcomponent 2.1 (Financial Support for Sustainable Natural
Resources Management). Management and control of the investment of the project’s financial
resources would be carried out by SEP. All budgeting and financial transactions would have to
be generated and incorporated into the State Budget and Financial System—SIAFEM.11 To this
end, SEP would liaise with SEEAAPI’s Administrative/Financial Department to prepare the
budgets and request the recording of the Commitment Bills (Notas de Empenho), Disbursement
Programming (PD—Programação de Desembolso), and Payment Bills (Notas de Liquidação),
which are the official documents required to make the payments. Counterpart funding would
generally be in cash and would come from different sources. In some instances, as for NGOs,
counterpart would be represented by labor and own recurrent costs. The FM system to be used in
this project would have the capability to capture all these different counterpart contributions. The
share of PRONAF to be commited by beneficiaries would be accounted in the MIS through
copies of the financing contracts and Banco do Brasil vouchers received via EMATER, which is
the agent for this type of financing.




9
  Alternatively the amounts under II b) and II c) totaling US$1.6 million would be paid directly by the State from its
Treasury account.
10
   PT – Plano de trabalho (Work Plan)
11
   SIAFEM – Integrated System of Financial Administration of States and Municipalities (Sistema Integrado de
Administração Financeira de Estados e Municípios)


                                                          66
   Disbursement would use the transaction-based methodology—SOE. The SoRJ would advance a
   limited amount of its own funds for the start-up of the project. Documentation of SOEs would be
   as follows:
       a) Goods, consultants, training, and other services, and other operation costs: Bills, receipts
           and invoices committed, processed, and paid through SIAFEM;
       b) Subprojects financed from FUNDES would be documented by the financing contracts
           approved and paid, eligible under the project in the agreed proportion of financing
           between GEF and State funds.

   The usual initial allocation of 10 percent would be made to the Special Account.

Accounting Policies and Procedures, FM system, Internal controls
  The Project’s and SEP’s budgeting and accounting would be part of the overall State FM system
  and therefore all transactions would go through the public State accounting system—SIAFEM.
  All payments would follow the official commitment (empenho) and payment (liquidação) and
  PD “Disbursement Programming” routine. These functions are performed by SEAAPI’s
  Administrative and Financial Department. Individual project transactions are usually performed
  under a Work Plan (PT12) within SIAFEM, which is a Cost Center specifically designated for a
  given project. All project costs are recorded according to the State Code of Accounts which
  enables a comparison and reconciliation with each project’s own controls. The project would be
  included in SEAAPI’s PT. The subprojects eligible for financing under the project’s terms would
  be recorded in the MIS. It must be noted that SIAFEM is not a Project Management System, and
  therefore it cannot be used for monitoring and controlling the project, nor can it produce the
  required financial reporting.

   Considering that this is a multi-donor project, with some non-cash contributions and even
   contributions from entities outside the State Budgetary System, such as the Federal Program
   (PRONAF), EMBRAPA, and NGOs, and with several different money outflows, a parallel
   tailor-made FM system (MIS) would have to be procured to manage, account, and monitor the
   project’s physical and financial execution. All these “outside” contributions would be
   documented and relevant data captured through inputs into the MIS. There are systems already
   implemented for projects with similar characteristics and demands for the MIS. The system to be
   acquired would be an adaptation of the one used for the São Paulo Microcatchments Project (Ln.
   4238-BR), which is very similar to this one. The Bank reviewed and assessed the system used in
   that project and rated it as satisfactory. The MIS would do the budgeting, accounting, financial
   reporting, and monitoring of the project, and control counterpart contributions and investments.
   It would be accessed via the Internet by all implementing agencies for direct data input,
   accounting, preparation of cash forecasts and reports. The system would have a code of accounts
   specifically for the project on the basis of the expenditures to be incurred in each component,
   subcomponent, and activity. The basic code of accounts for primary costs (insumos) would be
   the State’s SIAFEM code of accounts. SEP, through its Financial Department, would be able to
   consolidate all data for purposes of disbursement and reporting to the Bank. At Appraisal the
   procurement of MIS was somewhat delayed due to State bureaucracy. The Financial Manual,
   which is part of the Operational Manual, would contain detailed procedures and guidelines for
   disbursements, payments, approvals, commitment and payment bills, and FMR preparation.

   12
        PT – Programa de Trabalho


                                                   67
Financial Reporting (FMR), Supervision
According to the Bank’s financial reporting requirements, all projects should be monitored
through three sets of FMRs: Financial, Physical Progress, and Procurement. The following
FMRs were agreed to during the FMA Mission:
        FMR1 – Source and Application of Funds. Sources by donors and applications by
           cost categories as per the Grant Agreement. This report would include opening and
           closing balances of the Special and Operational Accounts.
        FMR2 – Application of funds by Components and Subcomponents.
        FMR3 – Reconciliation Statement with the Bank’s Client Connection site.
        FMR4 – Reconciliation Statement of Special and Operational Bank Accounts.

All reports would be denominated in R$ and prepared on a quarterly basis, containing forecasts
and actual figures: (i) for each quarter, (ii) accumulated for the year, and (iii) accumulated for the
project life.

It is recommended that at least one FM supervision mission per year be carried out during project
implementation.

Internal Audit
The project would be subject to internal audit by the State General Auditor’s office, which is part
of the Finance Secretariat Organization, and externally by the State Court of Accounts (TCE 13).
However, the SoRJ’s TCE is not accredited by the Bank to certify Project Financial Statements;
thus the project would require an external audit by an independent, qualified audit firm.

External Audit – Audit Reports
An external audit would follow the Bank’s new audit policy and guidelines issued by the Financial
Management Sector Board on June 30, 2003. The project’s accounts and financial statements
would be audited by an independent audit firm, selected from a pre-approved shortlist of three to
six candidates, and under Terms of Reference previously reviewed and approved by the Bank.
Audit costs would be included in the cost share to be financed by the Bank and follow Bank
guidelines to ensure the necessary qualifications of auditors. In addition, the hiring process should
begin immediately following the signing of the Grant Agreement. The audit report would include a
single opinion on the Project’s Financial Statements. As part of their work, the auditors would
prepare a management letter identifying any internal control weaknesses and areas of improvement
and recommendations thereof. Fourth-quarter FMR cumulative financial reports, if acceptable to
the World Bank, would provide the basis for the annual financial statements on which auditors
would express their independent opinion. The auditors’ report would be submitted to the World
Bank no later than six months after the closing of each fiscal year.




13
     TCE – Tribunal of State Accounts (Tribunal de Contas do Estado)


                                                        68
                                        GEF


                                                         1 - Incentive           $8.5
                                    World Bank
                                                         . State/Fundes         $4.1
                                          (1)$2.6        .Government/Pronaf      $1.0
                                          (2)$4.1        . GEF                   $2.6
                                                         . Beneficiaries         $0.8
                                  Special Account

                                          (1)$2.6        2 - GEF (except incentive)     $4.1
                                          (2)$4.1        .Consult., Goods, Serv.        $2.9
                                                         . Emater                        $1,0
State of RdJ                   Operational Account
                                                         . Pesagro                       $0.1
      (1)$4.1                             (1)$2.6        . Embrapa                       $0.1
                                          (2)$4.1
 Work Plan
                (1)$2.6 GEF                              3 - C/P State (except incentive)   $2.2
                               Work Plan RIO RURAL
 FUNDES                                                  . Salaries                         $0.8

                                          (2)$4.1        . Operational Costs                $1.4

                              Beneficiaries $2.9
                              Emater $1.0                  4 - C/P Partners                 $0,1
                              Pesagro $0.1
                              Embrapa $0.1

      (1)$2.6 GEF                                                         Pronaf
                                  Work Plan Credit
      (1)$4.1 State                                                         $1.0 (1)
                                           (1)US$6.7                    Beneficiaries
                                    Beneficiaries




                                                    69
                                   Annex 8: Procurement

  BRAZIL: Rio de Janeiro Sustainable Integrated Ecosystem Management in Production
              Landscapes of the North-Northwestern Fluminense (GEF)

Procurement for the proposed project would be carried out in accordance with the World Bank’s
“Guidelines: Procurement Under IBRD Loans and IDA Credits” dated May 2004, and
“Guidelines: Selection and Employment of Consultants by World Bank Borrowers” dated May
2004, and the provisions stipulated in the Grant Agreement. For NCB and contracting of
consulting firms, the Project Management Unit (SEP) would use the standard procurement
documents issued by SEAIN, and for shopping, a standard format for this purpose. The various
items under different expenditure categories are described below. For each contract to be
financed by the Grant, the different procurement methods or consultant selection methods, the
need for prequalification, estimated costs, prior review requirements, and time frame have been
agreed between the Borrower and the Bank project team in the Procurement Plan. The
Procurement Plan would be updated at least annually or as required to reflect the actual project
implementation needs and improvements in institutional capacity.

Goods, Works, and Consultant Services for Subprojects: Represent 57.1 percent of the
project cost. The GEF contribution and current lines of financial assistance would provide
financial support for sustainable natural resources management. Funds would be disbursed by the
Banco do Brasil. SEAAPI would interact with the Bank for disbursements and monitoring.
Procurement to be carried out for works, goods, and services required by farmers and groups of
farmers in dispersed project areas would be carried out under the assistance of EMATER,
through shopping. For purchases costing over US$5,000 equivalent, the presentation of at least
three responsive offers would be required.

Procurement of Goods: Represents 2.8 percent of the project cost. Goods include the purchase
of information equipment, other equipment, and vehicles. Procurement would be done using
shopping procedures.

Selection of Consultants: Represents 11.7 percent of the project cost. Assignments to be
contracted with firms include community organization and training as well as studies. Includes
eight contracts, four by QCBS, and four sole-source as outlined in Attachment 1 to this Annex.
Individual consultants would be selected on the basis of their qualifications. Consultant
assignments with shortlists including international firms are not required. Shortlists of
consultants for services estimated to cost less than US$500,000 per contract may be entirely
composed of national consultants in accordance with the provisions of paragraph 2.7 of the
Consultant Guidelines.

Services: Represent 3.3 percent of project costs. Consist primarily of training, including
preparing and carrying out events, and supplying training materials and equipment. Procurement
would be done using one NCB and a group of shopping processes.

Operating Costs: Represent 24.5 percent of project costs. Incremental operational costs consist
of travel and subsistence expenses of SEP, EMATER, FEEMA, PESAGRO, DER and



                                               70
EMBRAPA staff. In addition, identification of providers of transportation, consumables, and
minor services would be carried out locally by market inquiries. Purchases would be made from
least-cost providers, and market inquiries would be updated periodically.

Procurement Thresholds and Prior Review. The following table summarizes methods and
amounts in each disbursement category.

               Table A.1: Thresholds and Prior Review by Bank (US$ ‘000)
       Category      ICB         NCB         Shopping          Prior Review
        Goods                           >100             <100        All NCBs + first 2 shoppings of
                                                                              each year
        Works                           >100             <100                 All NCBs
       Services                         >100             <100        All NCBs + first 2 shoppings of
                                                                              each year
    NCB = National Competitive Bidding; ICB = International Competitive Bidding


Procurement Review and Methods. The following table summarizes arrangements for the
selection of consultants.

                   Table A.2: Consultant Selection Arrangements (US$‘000)
     Category       QCBS       QBS      SFB       LCS       CQ        Prior Review
                                  Not required in
                                   initial plan
    Companies        >100                                <100          <100                All
    Individuals                                                        >50
    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



The project does not require the use of ICB. The methods would be: NCB over US$100,000 for
goods, same for eventual civil works, and same for services. The thresholds for consultant
services and for firms would be US$100,000 and US$50,000 for individual consultants. The
Bank would carry out a prior review of all NCBs, first two shopping procedures for goods and
services, and all consultant assignments with firms.

B) Assessment of the Agency’s Capacity to Implement Procurement

Project management and implementation would be the responsibility of SEP, and would include
an officer with training in Bank–financed procurement to be responsible for overall procurement
supervision and assistance to executing officers. This officer would coordinate with EMATER
and SEAAPI’s procurement division in the Administration Department. SEAAPI’s procurement
division would be directly in charge of carrying out the procurement processes under the project,
with the exception of investments made by farmers, through lines of financial support, who
would be assisted and supervised by EMATER.

During preparation, an assessment of SEAAPI’s capacity to implement the project’s procurement
was carried out. This assessment determined that while SEAAPI appeared to be experienced in


                                                    71
procurement implementation (according to Law 8666-93) and consistent in the application of
rules and handling of documents, the project is rated as high risk for procurement, because of (a)
the planned decentralization of procurement decisions, (b) lack of the required
administration/information system, which is not yet in place, and (c) SEAAPI staff’s lack of
previous experience with Bank–financed procurement.

The implementation of the following Action Plan was recommended to help minimize the risks
identified:

            DESCRIPTION                                OBJECTIVE                  TIME-FRAME
 Update procurement plan                    Identify events, workflow     Appraisal (completed)
 Prepare Operational Manual                 Define operational rules      Negotiations
 Mgmt. System for Financial Support Lines   Control/monitoring            Disbursement against component
 Project Launch Seminar                     Disseminate rules, training   Prior to disbursement
 Expand file installations                  Keep records                  Disbursement
 Ex post procurement reviews                Supervise compliance          Annually


However, since the aforementioned procurement capacity assessment was carried out, it has been
confirmed (during appraisal) that all procurement other than that involved in the implementation
of subprojects under Subcomponent 2.1 would be carried out by SEP, thereby ensuring the
centralization of procurement decisions. This arrangement, along with the additional training
foreseen for SEP’s Administrative and Financial Management Unit, would substantially mitigate
the risk for procurement.

C) Procurement Plan. SEP has prepared a project implementation schedule covering the period
2005-2009. On the basis of the implementation schedule, SEP prepared a procurement plan
which identifies packages, categories, and methods of procurement, with estimated amounts, and
which was found acceptable to the Bank during appraisal.

D) Frequency of Procurement Supervision. The Bank would carry out ex-post procurement
reviews once a year. The Bank would also review and approve annual procurement plans.


Annex 8, Attachment 1

Details of the Procurement Arrangements Involving International Competition.

   1.       Goods, Works, and Non-consultant Services.

            (a) List of contract packages which would be procured following ICB or direct
                contracting:

            There is no ICB under the project.

            The following sole-source contracts would be made under the project: (i) one with
            COPPETEC in the amount of US$300,000 for community organization and rural


                                                          72
     communication activities; (ii) one with SOS Mata Atlântica in the amount of
     US$55,000 for the development and production of kits for monitoring activities; (iii)
     one with the firm finally chosen to develop software in the amount of US$118,000 for
     web hosting and maintenance of the management information system; and (iv)
     multiple contracts totaling US$55,000 to be signed with various organizations for
     satellite and Internet connection.

     b) All NCB packages would be prior reviewed.

2.   Consulting Services.

     (a) Consultant assignments with shortlists including international firms: are not
         required.

     (b) Consultancy services estimated to cost above US$100,000 per contract and
         single-source selection of consultants estimated to cost US$50,000 would be
         subject to prior review by the Bank.

     (c) Shortlists composed entirely of national consultants: shortlists of consultants for
         services estimated to cost less than US$500,000 per contract may be composed
         entirely of national consultants in accordance with the provisions of paragraph 2.7
         of the Consultant Guidelines.




                                         73
                        Annex 9: Economic and Financial Analysis

  BRAZIL: Rio de Janeiro Sustainable Integrated Ecosystem Management in Production
              Landscapes of the North-Northwestern Fluminense (GEF)

Economic and financial analyses

Given the relatively modest investment of GEF funds proposed, the project does not aim to
finance the actual large scale implementation of and IEM in the project target area. The project
would be implemented as a pilot/demostrative project, emphasizing activities that could be
replicated and also provide the basis for scaling-up of project results. Thus, while an Economic
and Financial analysis would not be applicable, the design in itself includes cost effectiveness
considerations to promote maximum implementation effectiveness, replication and impact of
project results both within and outside the project area.
The goal of achieving cost-effectiveness and maximum impact underlied the decision to fully
integrate project activities with complementary ongoing public and private efforts, including
those to supply financial support for improved production systems, and supply of technical
assistance through well established mechanisms that would be supported by counterpart funds.
Cost effectiveness considerations also drove the decision on how to distribute the target number
of pilot microcatchments, for development of environmentally and financially sound
demonstrative models with maximum representation of the diversity of situations within the five
intervention watersheds,.

Financial sustainability. Project preparation included extensive discussions and studies on the
development of strategies to ensure the long-term sustainability of project-financed activities. It
examined the existing incentive legislation and identified the most appropriate mechanisms to be
used for the provision of the financial support proposed under Component 2 (i.e., through the
State Socio and Economic Development Fund - FUNDES), which may provide the basis for long
term support to overcome the financial constraints for the adoption of financially sustainable
IEM/SLM practices. The project design would support practices which have been, or prove to
be, financially sound and to provide win-win opportunities to beneficiaries and the environment.
A preliminary analysis showed that while selected fruits and crops such as banana, passion fruit,
pineapple and tomatoes may yield an average 5 percent higher net income under environmentally
friendly production systems, they do command an average 38 percent higher production cost
which represents a significant constraint for the adoption of the enhanced production systems.

The project would also support the development of a proposal for the creation of a PES scheme
to enhance financial sustainability beyond project implementation (under Component 1), as well
as the adaptation to local conditions of adequate technological solutions to unsustainable
production practices, which may yield a decrease in up-front costs (under Component 2).

A full Incremental Cost Analysis is presented in Annex 15.




                                                74
                                      Annex 10: Safeguard Policy Issues

     BRAZIL: Rio de Janeiro Sustainable Integrated Ecosystem Management in Production
                 Landscapes of the North-Northwestern Fluminense (GEF)

     Safeguard Policies Triggered by the Project                                             Yes                     No
     Environmental Assessment (OP/BP/GP 4.01)                                                [X ]                    []
     Natural Habitats (OP/BP 4.04)                                                           [X ]                    []
     Pest Management (OP 4.09)                                                                []                    [X ]
     Cultural Property (OPN 11.03, being revised as OP 4.11)                                  []                    [X]
     Involuntary Resettlement (OP/BP 4.12)                                                    []                    [X]
     Indigenous Peoples (OD 4.20, being revised as OP 4.10)                                   []                    [X]
     Forests (OP/BP 4.36)                                                                    [X ]                    []
     Safety of Dams (OP/BP 4.37)                                                              []                    [X]
     Projects in Disputed Areas (OP/BP/GP 7.60)*                                              []                    [X]
     Projects on International Waterways (OP/BP/GP 7.50)                                      []                    [X]

Environmental Rating: B - Partial Assessment
The project is designated a category B, based on the above assessment of potential impacts. The
Bank PCD (which forms the basis for this document) was reviewed by the QAT on July 24,
2003. The QAT members stated that they “concur with the proposed environmental Category
"B" and [safeguard screening] "S2" ratings, and none of the Bank’s social safeguards are
triggered by the project as currently designed”. The QAT also “agree(d) that the project would be
highly positive from an environmental standpoint, if implemented as planned.14” According to
the QAT review, “the [Environmental Management Plan], part of the EA report, should indicate
the eligibility criteria and screening procedures which the project would use to ensure that the
financial incentives program (Component 2) would support only those rural activities which are
environmentally beneficial or relatively benign.”

Project Compliance with applicable safeguard policies
Environmental Assessment. The project was classified for a Category B designation. It is
designed to ensure compliance with the requirements of the Bank umbrella policy on
Environmental Assessment (OP 4.01). Despite the largely positive or neutral project impacts
anticipated, submission of an EA and respective EMP was considered prudent to ensure
conformity with the aforementioned Bank policy. The GovRJ submitted the final draft EA/EMP
report in November 2004. This draft was submitted to the LCSES Quality Assurance Team
(QAT) for review on January 21, 2005.
Following QAT review recommendations, mitigation measures have been integrated into the
screening, evaluation, approval, and monitoring procedures for small investments/subprojects
supported under Component 2 (see EA/EMP report). The EMP also included specific
responsibilities for EA and institutional arrangements, as well as provisions for strengthening EA
capacity within SEAAPI and to establishing mechanisms to monitor implementation and

*
 By supporting the proposed project, the Bank does not intend to prejudice the final determination of the parties' claims on the
disputed areas.
14
     QAT Memo dated July 24, 2003.


                                                               75
measure impacts. The EA/EMP report is available to the public through three public libraries of
the State: Environmental Management Foundation (FEEMA), SEAAPI and State Forest Institute
(IEF).

Natural Habitats - The proposed project would support natural habitat conservation and
improved land use by integrating the conservation of natural habitats and the maintenance of
ecological functions into regional development programs as well as by promoting the
rehabilitation of degraded natural habitats. Project activities would not significantly modify or
degrade natural habitats. In terms of policy dialogue, the project would assist the GoRJ in
incorporating an analysis of any major natural habitat issues into its rural development strategies,
including identification of important natural habitat sites, the ecological functions they perform,
the degree of threat to the sites, priorities for conservation, and associated recurrent-funding and
capacity-building needs.
The proposed project would take into account the views, roles, and rights of groups, including
local non-governmental organizations and local communities, affected by the project, and would
involve these stakeholders in planning, designing, implementing, monitoring, and evaluating the
project.
Forestry - The proposed project primarily supports environmentally protective activities and
those which are supportive of small farmers (e.g., farm and community forestry).

Pest Management - The project does not require a separate Pest Management Plan, given that
there are no significant pest management issues, and procurement of substantial quantities of
pesticides is not foreseen. Whenever possible, the project would adopt IPM measures.
Nevertheless, in a few very specific situations, the short-term use of small amounts of pesticides
may be necessary, where allowed by Brazilian legislation, to implement subprojects under
Subcomponent 2.1 in relation to: (i) control of leaf-cutter ants during the first two years of
seedling establishment in severely degraded riparian areas, and (ii) control of invasive grasses in
riparian areas under restoration, especially areas previously converted to pastures (however,
manual weeding would be the preferred option, instead of herbicides); (iii) in productive areas,
control of invasive grasses during the implementation of zero tillage systems (with "capina
manual" as the preferred option, instead of herbicides). The above mentioned relevant pest and
pesticide management issues have been identified and are addressed in the Operational Manual,
and specific mitigation measures associated with the use of pesticides would be adopted. The
hazards associated with the storage, handling, use, and disposal of pesticides were identified and
assessed, and the project Operational Manual includes measures (in compliance with Law
7802/89) to reduce these hazards to a level that can be managed by the users of such products. In
addition to the adoption of IPM and compliance with the above law, the Operational Manual
establishes that the use of pesticides, whenever needed, should be limited to low toxicity
products according to Class IV of Decree 98816/90, which is equivalent to WHO Class "U"
(unlikely to present acute hazard in normal use) or, if appropriate "U" products are not available,
use of Class III products (slightly hazardous) may be necessary.

Social Assessment and Stakeholder Involvement– A comprehensive social assessment and
consultation process was carried out in the project target area and is summarized in Annex 18.
The main SA findings are also summarized in Section D.4 of the PAD main text. Section D.4



                                                76
also lists the main stakeholders, how they have been involved in project design and how they
would participate in project implementation.




                                              77
                    Annex 11: Project Preparation and Supervision

  BRAZIL: Rio de Janeiro Sustainable Integrated Ecosystem Management in Production
                  Landscapes of the North-Northwestern Fluminense (GEF)
                                              Planned                  Actual
 PCN review                                                          07/24/2003
 Initial PID to PIC                                                  08/27/2003
 Initial ISDS to PIC                                                 10/07/2003
 Appraisal                                                           03/07/2005
 Negotiations                               04/11/2005
 Board/RVP approval                         05/31/2005
 Planned date of effectiveness              08/31/2005
 Planned date of mid-term review            12/20/2007
 Planned closing date                       05/31/2010

Key institutions responsible for preparation of the project:
International Bank for Reconstruction and Development, Secretary of Agriculture, Fisheries and
Rural Development (SEAAPI), Brazilian Agricultural Research Enterprise (EMBRAPA)

Bank staff and consultants who worked on the project included:
         Name                                          Title                             Unit
Alvaro Soler             Task Team Leader (from July 2003): Sr. Rural Dev Specialist    LCSER
Graciela Lituma          Task Team Leader (until July 2003): Consultant                 LCSER
Maria Isabel Braga       Environmental Specialist                                       LCSEN
Judith Lisansky          Sr. Anthropologist                                             LCSEO
Claudio Mittelstaedt     Financial Management Specialist                                LCOAA
Emilio Rodriguez         Procurement Specialist                                         LCOPR
Keiko Ashida             Operations Analyst                                             LCSES
Dana Frye                Junior Professional Associate                                  LCSER
Janice Molina            Language Program Assistant                                     LCSER
Karen Ravenelle-Smith    Language Program Assistant                                     LCSEN
Susana Amaral            Financial Management (and Disbursement Specialist)             LOAG3
Ethel Sennhauser         Peer Reviewer: Sr. Natural Resources Management Specialist     SASDR
Elizabeth Monosowski     Peer Reviewer: Sr. Environmental Specialist                    LCSEN
Nadim Khouri             Peer Reviewer: Sr. Natural Resources Management Specialist     LCSER
Kátia Medeiros           FAO Sr. Environmental Specialist
Nestor Bragagnolo        FAO/CP, Agronomist and Microcatchment Specialist, Consultant
Francisco Guimarães      FAO/CP, Rural Economist, Consultant
Waldir Pan               FAO/CP, Agronomist, Consultant
Marta Irving             FAO/CP, Environmental Education Specialist, Consultant
Arthur Sofiatti          FAO/CP, Historian and Ecologist, Consultant

Total Bank funds expended to date on project preparation:
   1.     US$191,500 (GEF resources)

Estimated Approval and Supervision costs:
    1. Remaining costs to approval: $20,000
    2. Estimated annual supervision cost: $60,000


                                              78
                           Annex 12: Documents in the Project File

 BRAZIL: Rio de Janeiro Sustainable Integrated Ecosystem Management in Production
             Landscapes of the North-Northwestern Fluminense (GEF)
A. Project Implementation Plan
          The Project Implementation Plan can be found in the Project Operational Manual
           (draft version available in the Project file)
B. Assessments by Bank Staff
          Drafts of Project Concept Document (PCD) and Request for a PDF Block B Grant for
           Preparatory Assistance
          Project Appraisal Document
          Project Brief
          Project Executive Summary
          Operational Manual and Annexes
          Monitoring and Evaluation Plan
          Institutional Assessment
          Social Assessment
          Environmental Assessment (includes Environmental Management Plan)
          Financial Management Assessment
          Microbasin and Sub-basin Diagnostics
          Community Statutes
          Technological Stock
          Management System
          Incentive System
          Communication System
          Community Organization System
          System for Payments for Environmental Services
          Information Interchanges (Registry of interchange seminars, visits, workshops,
           discussions, etc.)
          Inventories
C. Other
          GEF Seminar Documents



                                              79
                                                                       Annex 12 - Appendix 1

                                                    List of Meetings and Events Related to the Project

 DATE        INTERCHANGE EVENT                             OBJECTIVE                                           INSTITUTION                                  LOCAL
March       Workshop to debate the Paraíba           Discuss the methodological                                    IBAMA RJ                            Rio de Janeiro, RJ
15-17,       do Sul River riparian forest         approach for restoration of riparian
2004             restoration project                            forests.
March 23,   Meeting with the Intermunicipal             Propose the integration of            Inter-Municipal District Consortium of Lagos/São João     Silva Jardim, RJ
 2004       Consortium of Lagos/São João             Consortium and SEAAPI/SMH                   Watershed, Fluminense Federal University (UFF)
                   River Watershed                  activities through the adoption of
                                                   the watershed as the management,
                                                  monitoring, and intervention area of
                                                              the Consortium.
 April 1,     Water Use Fees Workshop in           Discuss the strategy for water use         Committee for the Integration of Paraíba do Sul River     Teresópolis, RJ
  2004         Paraíba do Sul River Basin           fees in the Paraíba do Sul River                  Watershed (CEIVAP), EMATER
                                                    basin (where the largest project
                                                     watershed/Muriaé sub-basin is
                                                                located) .
April 12,     Meeting with the preparation          Debate interchange strategies              Secretariat of Environment of São Paulo (SEMA SP)         São Paulo, SP
 2004       coordination staff of São Paulo’s      between the two GEF-supported
               Ecosystem Restoration of                       projects.
              Riparian Forests GEF Project
April 12,   Meeting with SOS Mata Atlântica             Define the bases for the                         SOS Mata Atlântica Foundation                   São Paulo, SP
 2004           NGO coordination staff            establishment of partnerships in Rio
                                                           Rural/GEF Project.
April 17,      Field day to disseminate           Discuss the technical strategies on          EMBRAPA SOILS, Brazilian Agroforest Network               Itaperuna, RJ
 2004            RADEMA Project’s                  degraded land rehabilitation and        (REBRAF), PESAGRO, EMATER, Rural Federal University
             (PRODETAB/WB supported)              agroforesty systems adopted by the                    of Rio de Janeiro (UFRRJ),
                        results                       RADEMA Project and their                            Town halls and farmers
                                                     feasibility for family farmers.

 May 5,        Visit to a subterranean dam         Examine the requirements, costs                Secretariat of Environment of Iguaba Grande          Iguaba Grande, RJ
 2004          project in family farm area        and results of the project in Rio de
                                                             Janeiro .State
 May 7,         Visit to the Ururahy River             Identify an experience in          Rural Federal University of Rio de Janeiro (UFRRJ) and Dom     Campos dos
 2004         environmental education and            environmental education and                                Otaviano School                         Goytacazes, RJ
            riparian forest restoration project     riparian forest restoration to be



                                                                                         81
 DATE        INTERCHANGE EVENT                              OBJECTIVE                                              INSTITUTION                                     LOCAL
                                                    strengthened in the project area.
May 25 &        Workshop on interchange            Enable interchange of experiences           SEMA/SP, Project for Environmental Recovery and Support        Grussaí, São João
26, 2004       ofexperiences in community           between governmental and non-               to Small Farmers (PRAPEM) Watershed Project of Santa            da Barra, RJ
                       organization               governmental projects, support the           Catarina State, Watershed Project of São Paulo State, MRA5
                                                   project’s community organization             Consortium (Rio Macabu), Consortium Itabapoana River,
                                                  strategy, and identify possible local           Catholic Pastoral Committee (CPT), COAGRO, North
                                                      initiatives to be supported or           Fluminense State University (UENF), Center of Alternative
                                                                replicated.                       Technology of Zona da Mata (CTA-ZM), PESAGRO,
                                                                                                                       EMATER
June 24,        Workshop to interchange           Discuss existing PES initiatives in           Floresta Viva Institute, PROAMBIENTE/MMA, Brazilian           Grussaí, São João
  2004         experiences in payment for         Brazil and support the design of the           Association for Leadership Improvement(ABDL), Post-            da Barra, RJ
              environmental services (PES)               project’s PES strategy.               Graduate Program in Development, Agriculture, and Society
                                                                                                 (CPDA/UFRRJ), Coppetec, UERJ, EMBRAPA SOILS,
                                                                                                                EMBRAPA Agrobiology
June/July      Communications (email and             Discuss possible exchange of               The Nature Conservancy and SPVS (Society for Wildlife               N/A
  2004      phone calls) with the local team of   experiences among the two projects;                  Research and Environmental Education)
             the Protection of Biodiversity in      Plan and schedule a field trip to
             the Brazilian Atlantic Rainforest    Guaraqueçaba, Parana State, to visit
               (Guaraquecaba) UNDP-GEF                       both projects.
                          Project
 July 2,        Workshop to integrate GEF         Disseminate Rio Rural/GEF Project            EMBRAPA SOILS, DRM, UFRJ, State University of Rio de             EMBRAPA
  2004       initiative and EMBRAPA Soils’          and propose the integration of                             Janeiro (UERJ)                                  SOILS, Rio de
               projects in the NNWF region              EMBRAPA Soils and
                                                      SMH/SEAAPI initiatives.                                                                                   Janeiro, RJ
July 28,         Meeting to interchange              Collect information about the                          MRA5 Consortium (Rio Macabu)                      Rio das Ostras, RJ
 2004       information about Macabu River            Macabu River watershed.
                       watershed
August 3    State workshop on the territories     Integrate PRONAF initiatives with            Ministry of Agrarian Development/Secretariat for Territorial
                                                                                                               Development (MDA/SDT)
                                                                                                                                                              Superintendence
& 4, 2004    involved with PRONAF in the           GEF’s incremental actions in the                                                                           of INCRA/RJ, RJ
                 state of Rio de Janeiro                      territories.
 Sept. 2,    Exchange of Project documents           Forward Project documents to                                      SEMA SP                                  São Paulo, SP
  2004        with the Sao Paulo Ecosystem             SEMA-SP as requested.
             Restoration of Riparian Forests
             GEF Project coordination staff
                       (SEMA-SP)
Sept. 14,     Workshop to discuss the new         Present the project proposal to focus                Ministry of Agrarian Development (MDA)                  Teresópolis, RJ
 2004           federal policy on technical            work on rural extension in
              assistance and rural extension                   watersheds.



                                                                                          82
 DATE        INTERCHANGE EVENT                             OBJECTIVE                                               INSTITUTION                                  LOCAL
Sept. 22,        PRONAF’s workshop in             Present the GEF initiative in the                                    MDA/SDT                               Miracema, RJ
 2004         Northwest Fluminense region,       region as a way to boost PRONAF
             including a presentation of GEF                investments.
                          Project
Sept. 23,    Meeting with the Consortium of      Approve Consortium resources for                             Lagos/São João Consortium                     Silva Jardim, RJ
 2004        the Lagos/São João Watershed         intervention in a microcatchment
                                                 involved in RIO RURAL in the São
                                                        João River watershed.
Oct. 13 &     Workshop to validate project          Discuss and validate project           EMATER staff from NNWF, local municipalities, national           Grussaí, São João
14, 2004      management, monitoring, and            strategies on participatory           environmental NGOs, PESAGRO, ITCP/Coppetec, State                  da Barra, RJ
                financial support system          management, monitoring, and the          University of the North Fluminense
                                                 support system to promote the IEM
                                                              approach.
Oct. 26,        Correspondence sent to the        Establish contact with the project                       Dom Helder Câmara Project/MDA                       Recife, PE
 2004         coordinator of the SLM in the        co-coordinator to interchange
                 Semi-Arid Sertão Project         documents and to visit the Dom
               (MDA/FIDA – PDHC/GEF)                  Helder Câmara Project.
Oct. 27,     Workshop by UNIG Itaperuna          Present and discuss Rio Rural/GEF               Industry Federation of Rio de Janeiro (FIRJAN)/ Iguaçu       Itaperuna, RJ
 2004        (University of Nova Iguaçu)                      Project.                                             University (UNIG)
Oct. 28,    Meeting on participatory planning       Meeting with several people            EMBRAPA Soils, EMBRAPA Vegetables, Municipal Council             São José de Ubá,
 2004             of Aqüíferos Project             involved in the tomato product           of Agriculture de São José de Ubá, Ministry of Agriculture             RJ
                  (PRODETAB Fund)                chain in São José de Ubá municipal             (DFA), farmers, and representatives of community
                                                               district                                            associations
Oct. 28,     Meeting with the staff of the       Present the GEF Project and discuss            Municipal Secretary of Agriculture and the Environment       Miracema, RJ
 2004           Municipal Secretary of             the PRONAF projects and other
            Agriculture and the Environment             municipal initiatives.
                      of Miracema
Oct. 29,        Visit to the riparian forest       Discuss the operational strategy of          Secretariat of Agriculture and Environment of Porciúncula   Porciúncula, RJ
 2004       restoration project and support to    the Carangola River riparian Forest
                productive beekeeping in           restoration project (FNMA Funds)
                        Porciúncula              and the infrastructure for benefits to
                                                 the Cooperative of Honey Producers
                                                              (FAT Funds).
Nov. 22     Workshop on project’s monitoring       To discuss project’s monitoring              EMBRAPA Soils, EMBRAPA Agrobiology, State Mineral                Niteroi
 & 23,                   plan                      methodologies and institutional             Resources Department, EMATER, FEEMA, ITCP/Coppetec,
 2004                                             arrangements with key executors                           University of Rio Janeiro State




                                                                                          83
                                         Annex 13: Statement of Loans and Credits
             BRAZIL: Rio de Janeiro Sustainable Integrated Ecosystem Management in Production
                         Landscapes of the North-Northwestern Fluminense (GEF)

                                                                                                                             Difference between
                                                                                                                             expected and actual
                                                                Original Amount in US$Millions                                 disbursements
Project ID    FY     Purpose                                 IBRD       IDA        SF       GEF         Cancel.   Undisb.   Orig.     Frm. Rev’d
P049265       2003   BR-RECIFE URBAN UPGRADING                46.00        0.00     0.00         0.00     0.00     45.54      1.54         0.00
                     PROJECT
P070827       2003   BR-2nd APL BAHIA DEV.                    60.00        0.00     0.00         0.00     0.00     60.00      0.00         0.00
                     EDUCATION PROJECT
P054119       2003   BAHIA DEVT (HEALTH )                     30.00        0.00     0.00         0.00     0.00     30.00      0.00         0.00
P074777       2003   BR-Municipal Pension Reform TAL           5.00        0.00     0.00         0.00     0.00      5.00      1.53         0.00
P076977       2003   BR-Energy Sector TA Project              12.12        0.00     0.00         0.00     0.00     12.12      0.84         0.00
P078310       2003   BR-CAIXA Water                           75.00        0.00     0.00         0.00     0.00     75.00      2.67         0.00
P080400       2003   BR-AIDS & STD Control III               100.00        0.00     0.00         0.00     0.00    100.00      0.00         0.00
P057665       2002   BR-FAMILY HEALTH EXTENSION               68.00        0.00     0.00         0.00     0.00     65.82     35.29         0.00
                     PROJECT
P057653       2002   BR- FUNDESCOLA IIIA                     160.00        0.00     0.00         0.00     0.00    178.34    -18.30         0.00
P055954       2002   GOIÁS STATE HIGHWAY                      65.00        0.00     0.00         0.00     0.00     50.73     39.06         0.00
                     MANAGEMENT
P043869       2002   BR SANTA CATARINA NATURAL                62.80        0.00     0.00         0.00     0.00     61.00      8.99         0.00
                     RESOURC & POV.
P051696       2002   SÃO PAULO METRO LINE 4 PROJECT          209.00        0.00     0.00         0.00     0.00    206.38    110.14         0.00
P074085       2002   BR Sergipe Rural Poverty Reduction       20.80        0.00     0.00         0.00     0.00     16.01      4.91         0.00
P073192       2002   BR TA Financial Sector                   14.50        0.00     0.00         0.00     0.00      9.30     -1.81         0.00
P070552       2002   GEF BR PARANA BIODIVERSITY                0.00        0.00     0.00         8.00     0.00      8.44      2.45         0.00
                     PROJECT
P066170       2002   BR-RGN 2ND Rural Poverty Reduction       22.50        0.00     0.00         0.00     0.00     20.47      4.96         0.00
P060221       2002   FORTALEZA METROPOLITAN                   85.00        0.00     0.00         0.00     0.00    111.47     34.35         0.00
                     TRANSPORT PROJECT
P050880       2001   BR Pernambuco Rural Poverty Reduction    30.10        0.00     0.00         0.00     0.00     23.87     12.27         0.00
P050875       2001   BR Ceara Rural Poverty Reduction         37.50        0.00     0.00         0.00     0.00     24.27      9.27         0.00
                     Project
P050881       2001   BR PIAUI RURAL POVERTY                   22.50        0.00     0.00         0.00     0.00     15.35      8.68         0.00
                     REDUCTION PROJECT
P057649       2001   BR Bahia Rural Poverty Reduction         54.35        0.00     0.00         0.00     0.00     33.27     11.89         0.00
                     Project
P059566       2001   BR- CEARA BASIC EDUCATION                90.00        0.00     0.00         0.00     0.00     79.01    -10.99         0.00
P073294       2001   BR Fiscal & Fin. Mgmt. TAL                8.88        0.00     0.00         0.00     0.00      7.23      5.61         0.00
P050772       2001   BR LAND-BASED POVRTY                    202.10        0.00     0.00         0.00     0.00    208.53    172.30         0.00
                     ALLEVIATION I (SIM)
P035741       2000   BR NATL ENV 2                            15.00        0.00     0.00         0.00     2.32      7.64      8.95         7.63
P062619       2000   BR INSS REF LIL                           5.05        0.00     0.00         0.00     0.00      0.36     -0.14         0.67
P039200       2000   ENERGY EFFICIENCY                        43.40        0.00     0.00         0.00     0.00     42.97     39.83         0.87
                     (ELETROBRAS)
P039199       2000   BR PROSANEAR 2                           30.30        0.00     0.00         0.00     0.00     29.21     27.21         0.00
P006449       2000   BR CEARA WTR MGT PROGERIRH              136.00        0.00     0.00         0.00     0.00     92.10     50.00         0.00




                                                                      84
                    SIM
P050776      2000   BR NE Microfinance Development               50.00          0.00     0.00        0.00           0.00         33.11       -16.89                0.00
P047309      2000   BR ENERGY EFFICIENCY (GEF)                    0.00          0.00     0.00       15.00           0.00         15.01       12.98                 5.51
P058129      1999   BR EMER. FIRE PREVENTION (ERL)               15.00          0.00     0.00        0.00           0.00          6.38           6.38              2.35
P043874      1999   BR- DISEASE SURVEILLANCE -                 100.00           0.00     0.00        0.00          25.00         25.71       50.71                 0.00
                    VIGISUS
P048869      1999   BR SALVADOR URBAN TRANS                    150.00           0.00     0.00        0.00           0.00         94.23       92.57                 0.00
P050763      1999   BR- Fundescola 2                           202.00           0.00     0.00        0.00           0.00         17.58       10.92                 0.00
P038895      1998   BR FED.WTR MGT                             198.00           0.00     0.00        0.00           0.00     101.30         101.30            101.30
P038947      1998   BR- SC. & TECH 3                           155.00           0.00     0.00        0.00           0.00         98.69       98.69                 0.00
P006559      1998   (BF-R)SP.TSP                                 45.00          0.00     0.00        0.00           0.00          3.88           3.88              0.00
P051701      1998   BR MARANHAO R.POVERTY                        80.00          0.00     0.00        0.00           0.00          0.64           0.64              0.00
P006474      1998   BR LAND MGT 3 (SAO PAULO)                    55.00          0.00     0.00        0.00           0.00         50.03       45.43                 2.61
P043421      1998   BR RJ M.TRANSIT PRJ.                       186.00           0.00     0.00        0.00          17.17     118.25         135.42                 0.00
P057910      1998   BR PENSION REFORM LIL                         5.00          0.00     0.00        0.00           0.00          2.50           2.50              1.77
P043420      1998   BR WATER S.MOD.2                           150.00           0.00     0.00        0.00      125.00            20.86      145.83                 0.30
P035728      1998   BR BAHIA WTR RESOURCES                       51.00          0.00     0.00        0.00           0.00         14.06       14.06                -2.37
P042565      1998   BR PARAIBA R.POVERTY                         60.00          0.00     0.00        0.00           0.00         18.64       18.64                 0.00
P006532      1997   FED HWY DECENTR                            300.00           0.00     0.00        0.00           0.00     125.90         125.90                72.88
P006562      1997   BAHIA MUN.DV                               100.00           0.00     0.00        0.00           0.00         34.25       34.25                34.25
P034578      1997   BR RGS Highway MGT                           70.00          0.00     0.00        0.00           0.00         46.77       46.77                46.77
P043873      1997   BR AG TECH DEV.                              60.00          0.00     0.00        0.00           0.00         21.34       21.34                21.34
P043868      1997   BR RGS LAND MGT/POVERTY                    100.00           0.00     0.00        0.00           0.00         31.68       31.68                31.68
P006210      1996   GEF BR-NAT'L BIODIVERSITY                     0.00          0.00     0.00       10.00           0.00          2.38           3.24              0.00
P006554      1996   BR- HEALTH SECTOR REFORM -                 300.00           0.00     0.00        0.00          21.12         39.64       60.76                 0.00
                    REFORSUS
P037828      1996   BR (PR)R.POVERTY                           175.00           0.00     0.00        0.00           0.00         58.02       58.02                58.02
P006436      1995   Ceara Urban Development & Water            140.00           0.00     0.00        0.00           3.00          5.83           8.83              8.83
                    Resource
P038882      1995   BR RECIFE M.TSP                            102.00           0.00     0.00        0.00           0.00          9.23           9.23              0.00
P006564      1995   BELO H M.TSP                                 99.00          0.00     0.00        0.00           0.00         12.70       12.70                 0.00
                                                      Total:   4,658.90         0.00     0.00       33.00      193.61        2,628.04      1,697.28           394.41




                                                                BRAZIL
                                                       STATEMENT OF IFC’s
                                                      Held and Disbursed Portfolio
                                                       In Millions of US Dollars

                                                                    Committed                                               Disbursed
                                                                  IFC                                                      IFC
      FY Approval      Company                       Loan        Equity         Quasi     Partic.     Loan             Equity            Quasi          Partic.
      2001             AG Concession                 0.00         15.00          15.00      0.00            0.00           4.29           0.00            0.00
      1996/97          Algar Telecom                 0.00           8.17          0.00      0.00            0.00           8.17           0.00            0.00
      2002             Amaggi                        30.00          0.00          0.00      0.00        30.00              0.00           0.00            0.00
      2002             Andrade G. SA                 40.00          0.00          0.00     20.00        22.50              0.00           0.00          15.00
      2001             Apolo                         8.00           0.00          0.00      0.00            5.50           0.00           0.00            0.00
      1998             Arteb                         20.00          7.00          0.00     18.33        20.00              7.00           0.00          18.33




                                                                           85
1999            AutoBAn            27.60    0.00         0.00    23.72   27.60    0.00    0.00    23.72
1993/94/96      BACELL             0.00     0.00         0.00     0.00    0.00    0.00    0.00     0.00
1998            BSC                7.41     0.00         0.00     3.97    7.41    0.00    0.00     3.97
1993/96         BUNGE/CEVAL        0.00     8.06         0.00     0.00    0.00    8.06    0.00     0.00
1990/91/92      Bahia Sul          0.00     0.00         0.00     0.00    0.00    0.00    0.00     0.00
1996/03         Banco Bradesco     10.00    0.00         0.00    60.00   10.00    0.00    0.00    60.00
1988/03         Banco Itau         25.00    0.00         0.00   175.00   25.00    0.00    0.00   175.00
1997            Bompreco           10.42    0.00         5.00     0.00   10.42    0.00    5.00     0.00
0               Bradesco-Hering    7.50     0.00         0.00     0.00    7.50    0.00    0.00     0.00
0               Bradesco-Petrofl   7.50     0.00         0.00     0.00    7.50    0.00    0.00     0.00
1994/96         CHAPECO            17.85    0.00         0.00     5.26   17.85    0.00    0.00     5.26
2002            CN Odebrecht       51.78    0.00        20.00   113.57   51.78    0.00   20.00   113.57
1973/78/83      CODEMIN            0.00     0.40         0.00     0.00    0.00    0.40    0.00     0.00
2003            CPFL Energia       40.00    0.00         0.00     0.00    0.00    0.00    0.00     0.00
1992            CRP-Caderi         0.00     0.51         0.00     0.00    0.00    0.51    0.00     0.00
1995            Cambuhy/MC         1.88     0.00         0.00     0.00    1.88    0.00    0.00     0.00
                Copesul            0.00     0.00         0.00     0.00    0.00    0.00    0.00     0.00
1997
0/97/00         Coteminas          0.00     0.53         0.00     0.00    0.00    0.53    0.00     0.00
1980/92/93      DENPASA            0.00     0.00         0.00     0.00    0.00    0.00    0.00     0.00
1995/96/98/02   Distel Holding     0.00     0.00         0.00     0.00    0.00    0.00    0.00     0.00
1998            Dixie Toga         0.00    15.00         0.00     0.00    0.00   15.00    0.00     0.00
1987/96/97      Duratex            8.33     0.00         0.00    25.67    8.33    0.00    0.00    25.67
1999            Eliane             25.60    0.00        13.00     0.00   25.60    0.00   13.00     0.00
1998            Empesca            5.00     0.00        10.00     0.00    5.00    0.00   10.00     0.00
2001/02         Escola             0.00     0.28         0.00     0.00    0.00    0.25    0.00     0.00
2000            Fleury             7.71     0.00         6.00     0.00    7.71    0.00    6.00     0.00
1998            Fosfertil          7.58     0.00         0.00    35.34    7.58    0.00    0.00    35.34
1998            Fras-le            8.00     0.00        10.00     0.00    8.00    0.00    6.70     0.00
1994            GAVEA              3.75     0.00         5.50     0.00    3.75    0.00    5.50     0.00
0               GP Cptl Rstrctd    0.00     9.67         0.00     0.00    0.00    9.48    0.00     0.00
2001            GPC                9.00     0.00         0.00     0.00    9.00    0.00    0.00     0.00
1997/98         Guilman-Amorim     0.00     0.00         0.00     0.00    0.00    0.00    0.00     0.00
1998            Icatu Equity       0.00    19.60         0.00     0.00    0.00   12.48    0.00     0.00
1999            Innova SA          16.25    5.00         0.00    45.00   16.25    5.00    0.00    45.00
                Ipiranga           0.00     0.00         0.00     0.00    0.00    0.00    0.00     0.00
1980/87/97
1999            Itaberaba          0.00     5.34         0.00     0.00    0.00    5.34    0.00     0.00
                Itau-BBA           40.00    0.00         0.00     0.00   20.00    0.00    0.00     0.00
0/00/02
1999            JOSAPAR            7.57     0.00         7.00     0.00    2.57    0.00    7.00     0.00
1995            Lojas Americana    8.00     0.00         5.00     0.00    8.00    0.00    5.00     0.00
1987/92/96/99   MBR                20.00    0.00         0.00     0.00   20.00    0.00    0.00     0.00
2002            Macae              75.00    0.00         0.00     0.00   75.00    0.00    0.00     0.00
0               Macedo Nordeste    1.58     0.00         5.00     0.00    1.58    0.00    5.00     0.00
2002            Microinvest        0.00     1.25         0.00     0.00    0.00    0.00    0.00     0.00
0/02            Net Servicos       0.00     5.00         0.00     0.00    0.00    4.65    0.00     0.00
1975/96         Oxiteno NE         2.50     5.00         0.00     0.00    2.50    0.00    0.00     0.00
1994            Para Pigmentos     15.05    0.00         9.00     0.00   15.05    0.00    9.00     0.00
1987/96         Perdigao           8.75     0.00         0.00     0.00    8.75    0.00    0.00     0.00



                                                   86
1989/95      Politeno Ind.                      1.46         0.00          0.00     0.00      1.46       0.00          0.00     0.00
1994/00/02   Portobello                         0.00         1.15          0.00     0.00      0.00       1.15          0.00     0.00
2000         Puras                              3.73         0.00          0.00     0.00      3.73       0.00          0.00     0.00
2003         Queiroz Galvao                     40.00        0.00          0.00     0.00     10.00       0.00          0.00     0.00
1998         Randon                             5.13         0.00          3.00     0.00      5.13       0.00          3.00     0.00
1990         Ripasa                             0.00         5.00          0.00     0.00      0.00       5.00          0.00     0.00
             Rodovia                            0.00         0.00          0.00     0.00      0.00       0.00          0.00     0.00
1997
1987/97/03   SP Alpargatas                      30.00        0.00          0.00     0.00      5.00       0.00          0.00     0.00
1994/95/97   Sadia                              8.50         0.00          5.33    92.83      8.50       0.00          5.33    92.83
1997         Samarco                            9.00         0.00          0.00     2.67      9.00       0.00          0.00     2.67
1998         Saraiva                            6.92         3.00          0.00     0.00      6.92       3.00          0.00     0.00
2003         Satipel                            25.00        0.00          0.00     0.00     25.00       0.00          0.00     0.00
0            Seara Alimentos                    0.00         3.88          0.00     0.00      0.00       3.88          0.00     0.00
2000         Sepetiba                           27.00        0.00          5.00     8.00     12.00       0.00          5.00     8.00
1997         Sucorrico                          3.00         0.00          0.00     0.00      3.00       0.00          0.00     0.00
1999         Sudamerica                         0.00        15.00          0.00     0.00      0.00      15.00          0.00     0.00
0            Suzano                             0.00         1.27          0.00     0.00      0.00       1.27          0.00     0.00
2001         Synteko                            18.00        0.00          0.00     0.00     18.00       0.00          0.00     0.00
1996         TIGRE                              7.69         0.00          5.00     0.00      7.69       0.00          5.00     0.00
0/92         TRIKEM                             0.00         0.00          0.00     0.00      0.00       0.00          0.00     0.00
1998         Tecon Rio Grande                   5.76         0.00          5.50    11.13      5.76       0.00          5.50    11.13
2001/03      Tecon Salvador                     0.00         0.56          0.00     0.00      0.00       0.55          0.00     0.00
2002         UP Offshore                        11.60       10.00          0.00    30.00      0.00       0.00          0.00     0.00
0/88/02/03   Unibanco                           25.00        0.00          0.00   275.00     25.00       0.00          0.00   275.00
1999         Vulcabras                          11.67        0.00          0.00     0.00     11.67       0.00          0.00     0.00
1999         Wiest                              0.00         0.00          8.00     0.00      0.00       0.00          8.00     0.00
                             Total portfilio:   814.07    145.67         142.33   945.49    647.47     111.01        124.03   910.49




                                                                             Approvals Pending Commitment
             FY Approval          Company                                Loan      Equity      Quasi       Partic.
             2003                 Amazonas Water                    0.02            0.00        0.00        0.00
             2002                 Andrade                           0.00            0.00        0.00        0.10
             2000                 BBA                               0.01            0.00        0.00        0.00
             2002                 Banco Itau-BBA                    0.00            0.00        0.00        0.10
             2001                 Brazil CGFund                     0.00            0.02        0.00        0.00
             1999                 Cibrasec                          0.00            0.01        0.00        0.00
             2003                 Duratex IV                        0.00            0.00        0.00        0.01
             2002                 Macae                             0.00            0.00        0.00        0.28
             2002                 Net Servicos 2                    0.05            0.00        0.00        0.00
             2004                 QGP Swap                          0.00            0.00        0.00        0.00
             2002                 Suape ICT                         0.01            0.00        0.00        0.00
             2004                 TermoFortaleza                    0.06            0.00        0.01        0.11
             2002                 Unibanco-CL                       0.00            0.00        0.00        0.15
                                       Total pending committment:        0.15       0.03        0.01        0.75




                                                                    87
                                                        Annex 14: Country at a Glance

BRAZIL: Rio de Janeiro Sustainable Integrated Ecosystem Management in Production
            Landscapes of the North-Northwestern Fluminense (GEF)
                                                                                            La t in            Lo we r-
  P O V E R T Y a nd S O C IA L                                                         A m e ric a           m iddle -
                                                                               B ra zil & C a rib.            inc o m e      D e v e lo pm e nt dia m o nd*
  2002
  P o pulatio n, mid-year (millio ns)                                             174.5               527         2,411                       Life expectancy
  GNI per capita (A tlas metho d, US$ )                                           2,830             3,280        1,390
  GNI (A tlas metho d, US$ billio ns)                                             494.5             1,727        3,352
  A v e ra ge a nnua l gro wt h, 19 9 6 - 0 2
  P o pulatio n (%)                                                                     1.3           1.5            1.0
  Labo r fo rce (%)                                                                     1.7           2.2            1.2     GNI                                       Gro ss
                                                                                                                             per                                      primary
  M o s t re c e nt e s t im a t e ( la t e s t ye a r a v a ila ble , 19 9 6 - 0 2 )                                        capita                                enro llment
  P o verty (% o f po pulatio n belo w natio nal po verty line)                          22              ..            ..
  Urban po pulatio n (% o f to tal po pulatio n)                                         82            76            49
  Life expectancy at birth (years)                                                       69            71            69
  Infant mo rtality (per 1 ,000 live births)                                             30            27            30
  Child malnutritio n (% o f children under 5)                                             6             9            1 1          A ccess to impro ved water so urce
  A ccess to an impro ved water so urce (% o f po pulatio n)                             87            86             81
  Illiteracy (% o f po pulatio n age 15+)                                                 12            1 1           13
  Gro ss primary enro llment (% o f scho o l-age po pulatio n)                          162           130            11
                                                                                                                      1                B razil
      M ale                                                                             166           1 31            1
                                                                                                                     11                Lo wer-middle-inco me gro up
      Female                                                                            159           128             1
                                                                                                                     10

  KE Y E C O N O M IC R A T IO S a nd LO N G - T E R M T R E N D S
                                                                    19 8 2       19 9 2             2001         2002
                                                                                                                             E c o no m ic ra t io s *
  GDP (US$ billio ns)                                                281.7        390.6             509.0        452.4
  Gro ss do mestic investment/GDP                                     21.1          18.9             21.2          19.3
                                                                                                                                                      Trade
  Expo rts o f go o ds and services/GDP                               7.6           10.9             13.2          15.8
  Gro ss do mestic savings/GDP                                       20.4           21.4             20.2          21.5
  Gro ss natio nal savings/GDP                                       15.3           20.1             16.6          18.0
  Current acco unt balance/GDP                                       -5.8            1.6             -4.6           -1.7     Do mestic
  Interest payments/GDP                                               3.4           0.7               3.0           3.0                                            Investment
                                                                                                                             savings
  To tal debt/GDP                                                    33.3          33.0              48.3          51 .3
  To tal debt service/expo rts                                       81.9           21 .1            76.4          70.2
  P resent value o f debt/GDP                                           ..             ..            52.6          58.4
  P resent value o f debt/expo rts                                      ..             ..           334.2              ..
                                                                                                                                                Indebtedness
                                                 19 8 2 - 9 2 19 9 2 - 0 2       2001           2002 2002-06
  (average annual gro wth)
                                                                                                                                           B razil
  GDP                                                    2.6           2.7               1.4          1.5           3.4
  GDP per capita                                         0.7           1.4               0.1          0.2           2.2                    Lo wer-middle-inco me gro up
  Expo rts o f go o ds and services                      6.9           6.5               1
                                                                                        1 .2          7.8           5.4
  S T R UC T UR E o f t he E C O N O M Y
                                                                    19 8 2       19 9 2             2001         2002        G ro wt h o f inv e s t m e nt a nd G D P ( %)
  (% o f GDP )
                                                                                                                             15
  A griculture                                                        9.0           7.7               6.1            6.1
                                                                                                                             10
  Industry                                                           45.6          38.7              22.3          21 .0
                                                                                                                              5
    M anufacturing                                                   34.6          24.7              14.0          13.2
                                                                                                                              0
  Services                                                           45.4          53.6              71.6          72.9
                                                                                                                             -5       97         98      99   00    01       02
  P rivate co nsumptio n                                             69.6           61.5             60.6          59.3     -10
  General go vernment co nsumptio n                                  10.0           17.1             19.2          19.3
  Impo rts o f go o ds and services                                   8.3            8.4             14.2          13.6                               GDI          GDP


                                                               19 8 2 - 9 2 19 9 2 - 0 2            2001         2002        G ro wt h o f e xpo rt s a nd im po rt s ( %)
  (average annual gro wth)
                                                                                                                            20
  A griculture                                                         2.5              3.5           5.7           5.8
  Industry                                                             1.6              2.3          -0.7           1.5      10
    M anufacturing                                                     0.5              1.8           1.4           1.4
                                                                                                                             0
  Services                                                             3.2              2.8           1.9           1.5
                                                                                                                                      97        98      99    00    01       02
                                                                                                                            -10
  P rivate co nsumptio n                                               0.7              3.9           0.8           0.4
  General go vernment co nsumptio n                                    7.1              0.9           1.0           1.0     -20
  Gro ss do mestic investment                                          4.1              2.1           -1.1         -5.2
                                                                                                                                                 Exports           Imports
  Impo rts o f go o ds and services                                    3.9              7.6           1.2         -12.8




                                                                                               88
                                                                                                                                                                   Brazil
P R IC E S a nd G O V E R N M E N T F IN A N C E
                                                     19 8 2     19 9 2      2001      2002       Inf la t io n ( %)
D o m e s t ic pric e s
                                                                                                 20
(% change)
Co nsumer prices                                     100.5      951.6          7.7       7.7     15
Implicit GDP deflato r                               104.8      968.5          7.5       8.5     10

G o v e rnm e nt f ina nc e                                                                       5
(% o f GDP , includes current grants)                                                             0
Current revenue                                           ..         ..      22.7        24.1               97             98         99         00           01         02
Current budget balance                                    ..         ..       3.0         3.1
                                                                                                                       GDP deflator                       CPI
Overall surplus/deficit                                   ..         ..       3.8           ..

TRADE
                                                     19 8 2     19 9 2      2001      2002
                                                                                                  E xpo rt a nd im po rt le v e ls ( US $ m ill.)
(US$ millio ns)
To tal expo rts (fo b)                                    ..   35,793      58,223     60,362     75,000
 Co ffee                                                  ..    2,534       2,932      3,049
 So ybeans                                                ..    2,696       2,726       2,199
                                                                                                 50,000
 M anufactures                                            ..   23,787      32,901     33,001
To tal impo rts (cif)                                     ..   20,554      55,572     47,21 9
 Fo o d                                                   ..      850        1 69
                                                                              ,1        1,085    25,000

 Fuel and energy                                          ..    3,069       6,276       6,281
 Capital go o ds                                          ..    6,335      14,808       1
                                                                                       1 ,593         0
                                                                                                           96         97         98        99    00       01        02
Expo rt price index (1995=100)                          73         92          94         95
Impo rt price index (1995=100)                          65         63          14
                                                                                1          1
                                                                                          15                                Exports                   Imports
Terms o f trade (1995=1 00)                             12
                                                        1         147          82         82

B A LA N C E o f P A Y M E N T S
                                                     19 8 2     19 9 2      2001      2002
                                                                                                  C urre nt a c c o unt ba la nc e t o G D P ( %)
(US$ millio ns)
Expo rts o f go o ds and services                   21,967     38,999      67,545     69,968     0

Impo rts o f go o ds and services                   24,761     25,717      72,653     61,863          96         97         98        99        00       01        02
                                                                                                 -1
Reso urce balance                                   -2,794     13,282       -5,108     8,105
Net inco me                                           3,51
                                                    -1 0        -9,382    -19,743       8,1
                                                                                      -1 91      -2
Net current transfers                                     2      2,243       1,638     2,390
                                                                                                 -3
Current acco unt balance                           -16,302       6,143    -23,213     -7,696
                                                                                                 -4
Financing items (net)                                 1 01
                                                     1 ,1        8,926     19,795     -3,570
Changes in net reserves                              5,201     -15,069      3,418       1
                                                                                       1 ,266    -5

M emo :
Reserves including go ld (US$ millio ns)              3,994    23,754      35,866     37,823
Co nversio n rate (DEC, lo cal/US$ )               6.52E-11    1.64E-3         2.4        2.9

E X T E R N A L D E B T a nd R E S O UR C E F LO WS
                                                   19 8 2       19 9 2      2001      2002
(US$ millio ns)                                                                                  C o m po s it io n o f 2 0 0 2 de bt ( US $ m ill.)
To tal debt o utstanding and disbursed            93,932       129,060    245,844    232,075
  IB RD                                            2,694         7,238      7,963      7,710                       G:             A: 7,710         C:
  IDA                                                   0            0          0          0                     23,395                          20,827
To tal debt service                                   9,21
                                                     1 5        8,647      54,322     51,636
                                                                                                                                                         D: 17,722
 IB RD                                                  41 1     1 3
                                                                  ,91       1,362        ,51
                                                                                       1 8
 IDA                                                      0          0          0           0
                                                                                                                                                              E: 10,094
Co mpo sitio n o f net reso urce flo ws
 Official grants                                        24         38           81          0
 Official credito rs                                   966       -936       2,742         916
 P rivate credito rs                                 7,580      5,888       -1,781     -9,541
 Fo reign direct investment                          2,910      2,061      22,636           0
 P o rtfo lio equity                                     0      1,704       2,482           0
                                                                                                                   F:
Wo rld B ank pro gram                                                                                           152,327
 Co mmitments                                        1,090       1,344      1,624      1,276     A - IBRD                                             E - Bilateral
 Disbursements                                         623         581      1,639      1,384     B - IDA         D - Other multilateral               F - Private
 P rincipal repayments                                 215       1,266        828      1,063     C - IM F                                             G - Short-term




                                                                          89
                              Annex 15: Incremental Cost Analysis

  BRAZIL: Rio de Janeiro Sustainable Integrated Ecosystem Management in Production
              Landscapes of the North-Northwestern Fluminense (GEF)

    Baseline Scenario
The calculation of the baseline was based on an initial screening of on-going and future
programs/projects (scheduled for implementation in the next 3-6 years) relevant to the proposed
project objectives. Once identified, their activities relevant to the proposed project objectives
were evaluated, costed and and included as part of the baseline. Identified funding included: (i)
public resources (national and state); (ii) bi-lateral financing, and (iii) NGOs. Baseline activities
by component are outlined below.

1. Planning for IEM Actions
Although not part of the baseline scenario, the KfW-supported Pro-Mata Atlântica (US$6.9
million) would finance technical assistance and other investments to protect the Desengano Park
and Mata do Carvão Reserve’s biodiversity and their ecosystem services. CI-Brasil and SOS
Mata Atlântica would carry out studies to assist in the design of the implementation strategy for
the Serra do Mar corridor in NNWF. Under the baseline scenario, some enforcement and
monitoring (financed by GoRJ) would be undertaken under the State Environmental and Forestry
institutions FFEMA/IEF’s regular programs. The baseline costs for these activities are calculated
at US$35,000.

2. Support Systems for the Adoption of IEM/SLM practices: Three on-going initiatives are
relevant to introduce sustainable improvements in the rural landscape: the Moeda-Verde, Rio
Rural and PRONAF. Rural infrastructure, credit for on-farm and other investments at community
level would be supported under these programs to increase productivity and commercial values
of agricultural products. The baseline costs for these activities are calculated at US$28.55
million.

3. Organization and Capacity Building for Integrated Ecosystem Management
Some local organizational capacity would be developed in the Rio Rural project-supported
microcatchments, and training in agro-business would be supported under the PRONAF.
Training of Park field staff would be provided under the Pro-Mata Atlântica. The baseline costs
for these activities are calculated at US$250,000.

4. Project Management, Monitoring and Evaluation
Management and monitoring activities would be undertaken by SEAAPI for the implementation
of the Moeda Verde, Rio Rural and PRONAF programs, as well as by FEEMA to undertake its
regular program of water quality monitoring. The baseline costs for these activities are calculated
at US$75,000.

Summary Baseline Costs and Benefits



                                                  90
Baseline Costs. In the absence of additional GEF funding, the implementation of the
aforementioned on-going and planned programs/projects would contribute to the project goal.
The estimated costs of baseline activities amount to US$29.74 million. Sources of assistance
vary and consist of State Government funds (in cash, in kind and as financial assistance to
producers provided by Moeda Verde and Rio Rural), Federal Government funds (as financial
assistance to producers provided by PRONAF Credit and Infrastructure), private sector
(Coppetec) and NGOs (CI-Brasil and SOS Mata Atlântica) .

Baseline Benefits. The baseline program would mainly achieve benefits at the national level
including the adoption of more sustainable land and water management practices that would
translate into reduced degradation of natural resources for productive purposes, and increased
beneficiary incomes. It would finance technical assistance, rural infrastructure, support for land
regularization and credit for initial capital, small infrastructure and services to small farmers.
However, the baseline would not address more far-reaching interventions funded by global
transfers, as it would not support e.g., the generation of global benefits by increasing biological
diversity of soils, enhancing carbon sequestration in productive lands, conserving biological
diversity in PAs, the rehabilitation and restoration of non-productive fragile lands within the
watersheds, and the connection of fragments of natural forest across the landscape.

GEF Alternative

The Project would achieve significantly greater protection of endangered biodiversity of global
importance in selected watersheds representative of the four major ecosystems of the Atlantic
forest in the NNWF. Increased community participation and organization which supports SLM
objectives and compliance with environmental legislation fostered by the alternative strategy
would in turn increase sustainability of interventions. The benefits of supporting the transition to
livelihood options built on biodiversity friendly activities increased carbon sequestration in
terrestrial ecosystems, and enhanced protection of ecosystems of global importance, occur
predominantly at the global level and therefore warrant GEF funding. The Project would reorient
the agricultural baseline through the introduction of a cross-sectoral approach in support of
sustainable land use practices defined within an ecosystem framework. It would include i) the
rehabilitation and restoration (with native species) of non-productive public and/or fragile lands,
ii) the implementation of carbon sequestration strategies supporting the protection of whole
watersheds containing remnants of Atlantic forest, and iii) the concept of an integrated system of
connected large natural areas to protect biological diversity.

GEF resources would cover the incremental costs associated with: (i) the development of
appropriate strategies for the adoption of integrated and cross-sectoral approaches that would
lead to sustainable landscapes and promote integrated ecosystem management; (ii) the inclusion
of climate change and biodiversity issues in the microcatchment planning process, and
consequently in the small farmers’ routine activities; (iii) education and community engagement
efforts to facilitate the creation of environments favorable to the formation and strengthening of
rural organizations for self-management of natural resources; (iv) building of increased capacity
among technicians and local leaders, project managers and executors, focusing on the
internalization of global environmental concepts; (v) the design of a financial support system for
SLM, and provision of incremental resources to support the transition to sustainable livelihood



                                                 91
activities financed by the program; (vi) applied research for the identification and development
of alternative and appropriate technologies and systems to respond to different sustainable land
uses, consistent with improved agro-ecosystem management; and (v) monitoring and evaluation
activities which demonstrate results and benefits to local as well as regional, national and global
stakeholders.

Costs. The total cost of the Project is estimated at US$43.87 million, detailed as follows: (i)
US$0.94 million for the Planning for IEM Actions; (ii) US$38.54 million for Support Systems
for the Adoption of IEM/SLM practices; (iii) US$2.47 million for Organization and Capacity
Building for Integrated Ecosystem Management; and (iv) US$2.74 million for Project
Management, M&E.

Benefits. Under the Project, the GoRJ would be able to undertake a challenging program
encompassing both national and global benefits. It would enhance protection of vulnerable and
globally important ecosystems and assist the country with the effective implementation of its
existing/revised sustainable rural and environmental policies. Benefits generated from this
comprehensive approach would include national benefits - such as increased sustainability and
improved management of aquatic and terrestrial resources, and improved information flow from
project and other rural landscapes located in the Brazilian Atlantic Forest (see complete list of
national benefits in the Incremental Cost Matrix below), as well as to other South American
countries - as well as global benefits.
Global benefits include: (i) increased carbon sequestration in terrestrial ecosystems, which would
be primarily achieved through the adoption of improved land management (to a lesser extent,
carbon would also be sequestered through the restoration and further protection/conservation of
degraded natural forests, and hence increasing forest biomass, particularly degraded riparian
forests); (ii) conservation and sustainable use of biological diversity, by (a) supporting the
implementation of the Serra do Mar Biodiversity Corridor through the adoption of IEM and
SLM in selected watersheds; (b) promoting public and private protected areas and conditions for
their sustainable management in sites containing remnants of the Atlantic Forest biome; (c)
adopting improved agricultural practices that enhance soil biodiversity (non-till systems, legume
crop rotation, mulching, and other conservation agriculture practices); and (d) promoting
conservation of agrobiodiversity; (iii) protection of watersheds in areas of global importance; (iv)
improved funding for controlling land degradation, hence reducing pressure on ecosystem
integrity in areas of globally significant biodiversity, and enhancing carbon sequestration and
storage in the agricultural landscape; improving sequestration of soil carbon and reduction of
dioxide emissions; (v) increased opportunities for generating income while at the same time
reducing pressure on biological resources; and (vi) transition to more sustainable livelihoods by
supporting pilot activities in agro-ecosystem management and outreach and involvement of civil
society and the private sector in the planning, management and sustainable use of natural
resources. The funding from NGOs (CI-Brasil and SOS Mata Atlântica) and private sector
(Coppetec) would partially cover incremental costs of technical assistance, training, workshops,
equipment, and subsistence allowances in support of project Components 1, 3 and 4.




                                                92
Incremental Costs

The difference between the costs of the Baseline Scenario (US$28.92 million) and the GEF
Alternative (US$43.87 million) is an estimated US$14.95 million (including taxes and physical
and price contingencies). The matrix below summarizes the baseline and incremental
expenditures during the five year project implementation period. Cofinancing of this increment
has been mobilized as follows2: (i) US$6.31 million from the State Government of the Rio de
Janeiro (US$4.10 million from Moeda Verde program); (ii) US$1.11 million from the Federal
Government (from the PRONAF Credit and Infrastructure and EMBRAPA Soils, the latter as in-
kind contribution of US$0.09 million)15; and (iii) US$0.02 million from NGOs (CI-Brasil and
SOS Mata Atlântica) and private sector (COPPETEC); and (iv) US$0.76 million from project
beneficiaries/producers.

The total requested GEF contribution amounts to US$6.75 million (excluding the Block B
donation). Out of this total US$0.64 million would contribute to Planning for IEM Actions in the
NNWF region; US$2.92 million would contribute to Support Systems for the Adoption of
IEM/SLM practices in five watersheds representative of the four major ecosystems of global
significance in the Atlantic Forest biome situated in the NNWF; US$1.62 million for
Organization and Capacity Building for Integrated Ecosystem Management; and US$1.57
million to support Project Management, M&E. The aforementioned GEF-support would cover
incremental costs of technical assistance, training, workshops and other services such as public
awareness media campaigns, small infrastructure, minimum equipment and travel and
subsistence allowances.




15
    Based on the GEF Cofinancing Guidelines (GEF/C.20/6/Rev.1), the project team determined that a small part of
the financing for baseline activities under Moeda Verde, Rio Rural and PRONAF,could be included as cofinancing
(i.e., incremental), given that they are essential for achieving the GEF objectives. The total amount coming from
these three programs which remains as baseline has been estimated at around US$29 million, mostly applied in rural
infrastructure (road construction, etc.), rural credit in order to increase productivity and commercial values of
agricultural products, and about US$5.1 million has been “re-directed” as cofinancing (US$4.1 million from Moeda
Verde and Rio Rural, and US$1.0 million from PRONAF), and would include support to more sustainable land
management systems (such as zero tillage) in the project area, on a demand-driven basis.


                                                       93
                                                          Incremental Cost Matrix
  Component         Cost         US$               Domestic Benefit                                        Global Benefit
                  Category      Million

Comp 1             Baseline      $0.04     Increased (though limited) capacity   Limited global benefit.
Planning for                               for local land use planning, at the   Increased conservation of biodiversity within PAs of the NNWF
Integrated                                 microcatchment level.                 regions
Ecosystem
Management                                 Though with limited scope, there
(IEM) Actions                              has been improvement in policies
                                           that promote sustainable
                                           development and SLM.
                  With GEF       $0.98    An improved legal, policy and          Land degradation issues mainstreamed into the local and national
                  Alternative             planning/institutional framework for   development process. An improved approach developed to plan and
                                          SLM management, providing the          promote more sustainable land use, hence reducing pressure on
                                          basis for the effective adoption of    ecosystem integrity, through the establishment of an improved legal,
                                          more sustainable on-farm practices     policy and planning framework.
                                          and off-farm interventions.
                                          Increased community commitment in    Conservation and sustainable use of biological diversity, by (a)
                                          the responsible use of natural       supporting the implementation of the Serra do Mar Biodiversity
                                          resources.                           Corridor through the adoption of studies for implementation of the
                                                                               Corridor, adopting SLM and IEM in selected watersheds; (b)
                                          Sustainable land management fully    promoting public and private protected areas and conditions for
                                          integrated into wider environmental  their sustainable management in sites containing remnants of the
                                          management programs locally and      Atlantic Forest biome (through watershed and microcatchment
                                          nationally.                          planning and development of community statutes of conduct, on a
                                                                               IEM approach)
                  Incremental    0.94     Note: GEF contribution of US$0.64; GoRJ of $0.30
Comp 2              Baseline    $28.55     Increased demand for activities     Limited control of land degradation and limited biodiversity
Support                                    promoting enhanced productivity     conservation (partial conservation of globally significant
Systems for the                            and yields in selected areas of the biodiversity).
Adoption of                                North-Northwest Fluminense.
IEM/SLM                                    Attempts at poverty reduction.      Constrained funding for addressing land degradation and protecting
practices                                  Limited experience on               biodiversity threatens globally important ecosystems.
                                           identification and adoption of
                                           sustainable land management         Increased storage of greenhouse gases in terrestrial ecosystems,
                                           practices that reduce pressure on   which would be primarily achieved through the adoption of
                                           natural resources.                  improved land management



                                                                      94
                                                                               Carbon sequestration through the promotion of incentives to restore
                                                                               and further protec/conserve degraded natural forests (and hence
                                                                               increasing forest biomass), particularly degraded riparian forests
               With GEF      $37.35   Same as above, though with               Transition to more sustainable livelihoods by supporting pilot
               Alternative            significant number of rural              activities in sustainable land management.
                                      communities and NGOs developing
                                      experience in the sustainable use of     Improved funding for controlling land degradation, hence reducing
                                      natural resources for economic           pressure on ecosystem integrity in areas of globally significant
                                      revenues. Closer linking of natural      biodiversity, and improving sequestration of soil carbon and
                                      resource condition / considerations to   reduction of dioxide emissions.
                                      development priorities.                  Increased opportunities for generating income while at the same
                                                                               time reducing pressure on biological resources.

                                                                              Conservation and sustainable use of biological diversity, by
                                                                              adopting improved agricultural practices that enhance soil
                                                                              biodiversity (non-till systems, legume crop rotation, mulching, and
                                                                              other conservation agriculture practices), and promoting
                                                                              conservation of agrobiodiversity.
               Incremental   $8.80     Note: GEF contribution of US$2.92; GoRJ of $4.10 (Rio Rural and Moeda Verde programs); Fed. Gov of
                                      $1.02 (Pronaf Credit & Infrastructure); and Beneficiaries of $0.76.
Comp 3          Baseline     $0.25     Limited and ad hoc adoption of         Some Limited awareness of importance of environmental protection,
Organization                           participatory methods and              including broad knowledge of major land degradation issues.
and Capacity                           community organization activities.
Building for                           There has been increased though
IEM                                    limited awareness of
                                       environmental issues through
                                       various programs;
                                       Better trained staff, though skills in
                                       state agencies need strengthening;
                                       Limited project management skills
                                       in national resource management
                                       agencies;
                                       Uncoordinated and fragmented
                                       training; limited and inadequate
                                       training provided; target groups for
                                       training tend to be restricted to
                                       public sector agencies.



                                                                   95
               With GEF      $2.72    Preparation of a broad range of        Improved understanding and appreciation for biodiversity
               Alternative            stakeholders for SLM and               conservation and mitigation of climate change issues and livelihood
                                      improved livelihood opportunities.     opportunities available from such conservation and mitigation.

                                      Development of appropriate tools       Improved protection of biodiversity, sequestration of soil carbon and
                                      and techniques for SLM in priority     reduction of dioxide emissions.
                                      ecosystems of global importance.

                                      Increased national and local
                                      awareness of the ecological,
                                      economic and social significance
                                      of natural resources.
               Incremental   $2.47   Note: GEF contribution of US$1.62; GoRJ of $0.85
Comp 4           Baseline    $0.08    Limited capacity to manage
Project                               agricultural and natural resources
Management,                           management projects.
Monitoring &
Evaluation                            Inadequate monitoring and
                                      evaluation undertaken at the local
                                      and state levels.

                                      Water quality database maintained
                                      (and ad hoc collection of info on
                                      fauna and flora), and use of
                                      information to guide water quality
                                      management and conservation
                                      decisions.

                                      Local communities are infrequent
                                      target groups for awareness
                                      campaigns.
               With GEF      $2.82   Improved Project and Management       Increased capacity for effective facilitation of SLM for control of
               Alternative           skills at local and national levels;  land degradation, biodiversity conservation, and mitigation of
                                     monitoring and evaluation system in climate change issues.
                                     place and operational, and project
                                     results, best practices and lessons
                                     learned disseminated.
               Incremental   $2.74   Note: GEF cont. of US$1.57; GoRJ of $1.06; Fed. Gov of $0.09; $0.02 from NGOs.



                                                                  96
           Baseline                29.74

    With GEF Alternative           43.87
                  Incremental      14.95    Note: GEF contribution of US$6.76 million; GoRJ of $5.73; Fed. Gov of $1.20; Beneficiaries of $0.79 and
Totals                                      $0.002 from the NGOs

  Endnotes
  1 Activities financed by the KfW-supported Pro-Mâta Atlantica program (US$6.9 million) are mentioned in this analysis to indicate the full extent of
  activities underway in the NNWF region; nonetheless, they are not considered part of financing of the Baseline Scenario.




                                                                        97
                               Annex 16: STAP Roster Review
  BRAZIL: Rio de Janeiro Sustainable Integrated Ecosystem Management in Production
              Landscapes of the North-Northwestern Fluminense (GEF)

A) STAP EXPERT REVIEW AND PROJECT TEAM RESPONSE

The project team is grateful to the STAP reviewer for comments to strengthen the contents and
presentation of this proposal. Below is a description of specific actions taken in response to the
STAP comments (answers in italic following the original STAP comment).

STAP reviewer: Mr. Luiz Antonio Barreto de Castro, Ph.D., Member of the Brazilian Academy
of Sciences.

Comments by the STAP Reviewer
Introduction
The Project Developmental Objectives are: to promote the sustainable management of natural
resources and to improve the subsistence level of the family based rural communities in the
regions North and Northwestern of the State of Rio de Janeiro.

The Project Global Objectives are: (i) to address threats to biodiversity of global importance (ii)
enhance carbon sequestration and (iii) reverse land degradation in public and/or fragile lands.
The project presents Socioeconomic, Environmental & Legal Diagnostic related to the process
which through centuries gradually contributed to the deforestation of the Mata Atlantica in the
State of Rio de Janeiro; not different from what has taken place in other eastern States; to the
point that from 110 million hectares, the Atlantic Forest is now reduced to 7.5 percent of this
original area, around 8.5 million km2. Many activities contributed to this actual level of
ecosystem degradation: uncontrolled agriculture and animal husbandry expansion, logging for
lumber, charcoal and other products, urban demographic pressure and lack of adequate legal
enforcement are amongst the most significant ones. To have a historical view of this process we
recommend Biodiversidade População e Economia – Uma Região de Mata Atlântica
(Universidade Federal de Minas Gerais , Julho, 1997).

Strong Aspects of the Project
The objectives are consistent with the Convention of Biological Diversity (CDB), UN
Framework Convention on Climate Changes (UNFCCC) and GEF Operational Strategies,
particularly its Operational Framework on Sustainable Land Management (OP15), irrespective of
the maximum world priority given to conserve the Brazilian Atlantic Forest, recognized as one
of the richest biological diversity regions of the planet. The State of Rio de Janeiro is unique for
having the highest percentage of Atlantic Forest with respect to the total area among all country
states (841,000 hectares) and simultaneously the most threatened fraction of the remaining
primary vegetation, encompassing an area of 15,000 km2 and a population of 1 million
inhabitants.

Despite of all ongoing efforts in the State of Rio de Janeiro, from 1990 to 2000, deforestation
was particularly aggressive and estimated by the National Institute for Space Research (INPE) to


                                                 98
be of the order of 1 million hectares, the highest deforestation rate (16.7 percent) among nine
case studies analyzed, almost 40 percent higher than the second ranked. Associated and at the
root of this problem is rural poverty. The project mentions that 440,000 people, 27 percent of the
total rural State population, are poor (twice the level verified in urban areas of the State) and in
the Project areas considered this percentage rate rises to almost 40 percent. Reduction of poverty
can be an important instrument to revert deforestation.

So, it is unquestionable the need for an urgent, innovative, financially, sustainable action to
address this issue, which is believed by the authors to be approached by this Proposal. The
project aims to apply and overall US$14.59 million during five years (from 2005); US$6.73
million of this total, proposed as a grant from the Global Environment Facility.

The Annex 1 – Project Design Summary – properly presented in a Log Frame format, has its
highest hierarchic Goal: Rural poverty and inequality reduced through a selective focus on
environmental sustainable development. The Project Development Objectives would, according
to the authors, be accomplished through: integration, monitor & evaluation of ongoing State
actions (extensively described in the Proposal), capacity building, incentives and education.
Planning of Sustainable Land Management is basic for this strategy, translated in the Outputs of
the Project.

Although these activities are necessary on a long term basis to revert the deforestation process of
the Atlantic Forest we believe and will argument next that they are not innovative and financially
sustainable and as such they are insufficient to revert the deforestation process and reduce
poverty in the region, major goal of the project, and as such the strongest element to accomplish
the Project Development Objective.

Weak Aspects of the Project
Biological Diversity Conservation is extremely expensive and it is unfortunate to verify that the
world is gradually losing the battle that leads to deforestation of the planet. A clear indication of
this fact was the effort by the Biological Diversity Convention after 1992 which emphasized the
term sustainable implying the need for long term strategies to revert this scenario. This is
demonstrated by the pilot scope of the project which will cover only 100,000 hectares, 15
percent of the total 5 watersheds. The NNWF region as mentioned covers an area of 15,000 km2,
with a population of 1 million inhabitants. This pilot effort will be applied to 4,000 rural
families; 16,000 people: a demonstrative strategy.

The poverty of these families result from the fact that they essentially depend on crops that have
no aggregate value: cassava; sweet potato; corn; beans and rice. These are subsistence crops
which will never constitute a solid financial means to revert the poverty situation experienced by
these families. Unless there is an alternative to additionally aggregate value to the products
coming from the populations residing in Atlantic Forest, deforestation can not be reverted.
Incentives and education are important but are not enough.

I will mention a couple of examples of products with aggregate value which are gradually
reverting the poverty of other rural populations in Brazil, particularly in the Northeast of Brazil,
which might be considered by the project. One is honey and sub products. The city of Picos, in



                                                 99
the State of Piaui, became a large honey producers exporting extensively. Organic honey is very
appealing in Europe and Brazil is benefiting from the fact that insecticide was found in honey
coming from other market suppliers. The biological diversity richness of the Atlantic Forest
opens a good possibility for this area. Another is mushroom. The Genetic Resources and
Biotechnology (CENARGEN) center at EMBRAPA in Brasilia offers freely courses to train
small family business entrepreneurs on the Juncao Technology we introduced from China. A
third one is a palm popularly known as “pupunha“which is being introduced strongly in many
regions of Brazil particularly in the South of Bahia. It is a good alternative for the heart of palm
produced from Euterpe spp, which is being aggressively exterminated from the Atlantic Forest
by the “palm hunters”.

What however is mostly surprising is that the project recognizes the richness of the Atlantic
Forest in terms of Biological Diversity but despite of mentioning repeatedly the need for
conservation makes no proposal for the use of this biological diversity as a major instrument for
long term conservation. In fact, one of the weakest aspect of the project is the almost entire
absence of science and technology as an instrument to revert the poverty and deforestation. The
project ignores the historical scientific competence developed in the State of Rio de Janeiro in
the area of natural resources for pharmacological purposes. The national development of these
areas in Brazil started with Walter Mors who founded The Natural Products Nucleus decades ago
at the Federal University of Rio de Janeiro (UFRJ). Gotlieb and Gilbert, additionally, have
written the history of using bio active substances from the Brazilian Biological Diversity. There
are companies, such as EXTRACTA, being established at the Technological Park at UFRJ,
which are specialized in high throughput screening of bio active substances from plant extracts.
Many other groups are competent in these areas at UFRJ. It is essential that the project open the
possibility for a scientific initiative to identify functionally bio active substances from the
Atlantic Forest, to attract the pharmaceutical private sector to invest and generate a fund to
support biological diversity conservation. This brings innovation to the proposal. This idea is
outlined for the Amazon as a case study in “Sustainable Use Of Biodiversity – Components Of A
Model Project For Brazil” (de Castro, L. A .B. in Brazilian Journal of Medical and Biological
Research; 29(6) 688-699; 1996), which suggests how rural communities can be involved in this
process. This scientific paper offers additional information about other scientific articles on the
use of biological diversity. Bio Keepers Rights a strategy to stimulate “in situ” conservation of
biological diversity is described in de Castro, L. A B. (1997) “Workshop On Transboundary
Movement Of Living Organisms Resulting From Modern Biotechnology: Issues And
Opportunities For Policy Makers”. Aarhus, Denmark, 1996, July 19-20. Proceedings 215 pp.
Edited by Kalemani Mulongoy.47-60. Opportunities for the private sector participation on the
strategy to be built from the project are needed and are the only assurance of financial
sustainability of this investment. The proposal Financial Plan presented excludes the
participation of the private sector. So, in addition to the just mentioned Sc&T project above,
other possibilities should be considered and exist such as: carbon sequestration and ecotourism,
the latter mentioned briefly in the proposal.

These are my comments. The project can be reviewed to include the proposed initiatives.
Luiz Antonio Barreto de Castro




                                                100
                      Response to STAP Comments by the Project Team

1. STAP Comment: Financial sustainability and innovative aspects of the project
The reviewer feels that project activities “are not innovative and financially sustainable and as
such they are insufficient to revert deforestation process and reduce poverty in the region, major
goal of the project, and as such the strongest element to accomplish the project development
objective”.

Response by the Project Team: the project has not been designed to support innovative
technologies (neither to be innovative in the source of financing). However, it does intend to
bring innovations in the establishment of a participatory strategy to implement existing
/adapted/alternative technologies. In other words, one of the major project emphases is the
strengthening of an organizational structure aiming at the self-management of natural resources
by rural communities. It is believed that this self-management approach results in addressing
environmental issues (such as deforestation and erosion/low productivity) through actions that
go beyond the productive and commercial points of view. Rather, by adopting the
aforementioned approach, the project intends to broaden the rural communities perception of
the environment (of e.g., water, soils and biodiversity richness), hence improving natural
resources management (and, indirectly, the commercial and production management in the
small holder’s rural sector).

In addition, the project itself is an innovative initiative of the State Secretariat of Agriculture
(SEAAPI), as it has been designed in close cooperation with the State Secretariat of Environment
and two environmental NGOs (CI Brazil and SOS Mata Atlântica), the latter (NGOs) with strong
biodiversity conservation work in the Atlantic Forest. In addition, the project introduces global
concerns (such as climate change and biodiversity) into the planning and implementation of
sustainable rural development activities at microcatchment level (to address land degradation
and poverty), an approach being successfully implemented in the country for more than two
decades. With respect to financial sustainability of project activities, see also response to
comment 2 below.

2. STAP Comment: Need for long-term conservation strategies to address biodiversity
Issues
The reviewer feels that, “despite of mentioning repeatedly the need for conservation, [the
project] makes no proposal for the use of this biological diversity as a major instrument for long
term conservation. In addition, also related to this subject, he noted that “one of the weakest
aspects of the project is the almost entire absence of science and technology as an instrument to
revert poverty and deforestation”.

Response by the Project Team: This point has been made more explicit in the document (further
information has been provided in Annex 4). The team would like to stress that, particularly two
of the project elements (Subcomponent 3.1 on capacity building for community organization and
Subcomponent 1.1’s activity on the design of a new incentive system) incorporate the
aforementioned view of a long-term conservation strategy.




                                               101
Capacity building for community organization and self-management of NR will be implemented
through a methodology developed by a private non-profit foundation attached to the Federal
University of Rio de Janeiro (UFRJ), who is a project partner and will collaborate with the
implementation of this activity. This is one of the examples where the project will i) count on
scientific and technological (S&T) support (in this case, support to community organization),
and ii) will implement a process of community organization which is not linked to the
government administration period of fours years.

The new incentive system to be designed under Subcomponent 1.1 would ensure ongoing
financial support for sustainable activities which create significant environmental benefits at the
local, regional and global levels without further GEF involvement (GEF funds would not be used
on a recurrent basis, but would help jump start other self-sustaining financial mechanisms.). In
addition, the incentive system will seek to reduce financial dependence on government resources,
(and also on government schedules and deadlines).

3. STAP Comment: Need for increased post-harvest value-added from agro-ecological and
non-wood forest products. The reviewer commented that “unless there is an alternative to
additionally aggregate value to the products coming from populations residing in the Atlantic
Forest, deforestation can not be reverted. Incentives and education are [important] but are not
enough.”

Response by the Project Team: Agreed. This point had already been incorporated into project
design but perhaps it was not clearly presented. It has been addressed and made more explicit in
the document (further information has been provided in Annex 4). Subcomponent 2.1 on
Incentive System for Integrated Ecosystem Management had already included incremental
actions that will include technical assistance, small investment and information needed to
increase post-harvest value-added from agro-ecological and non-wood forest products. These
actions will complement and improve the current production systems supported by the baseline
programs, which are based on the following systems prevalent in the region: (i) conventional
systems: sugar cane, coffee, extensive livestock, manioc, corn, beans and rice; (ii) recently
introduced systems: fruit production and olericulture/vegetable growing. The incremental
activities would support the integration and harmonization of local development and productive
support for the planning of the same farms and microcatchments supported under the baseline
programs, aimed at the sustainable management of natural resources. These activities are also
aimed at ensuring that practices linked to the principal lines of action are effectively
implemented. They are: a) recovery of degraded lands; b) redirection of productive systems
toward systems that are socially and environmentaly friendly; c) commercialization of products
that are recommended in social and environmental terms; d) management of water resources;
and e) sustainable use and management of biodiversity. For each pilot microcatchment, these
practices would be defined in a participatory way, during the preparation of the Microcatchment
(PEM) and Individual/farm level (PID) Plans. For the purposes of budget and concept
formulation, the project team has prepared a preliminary proposal of eligible activities for
support under Subcomponent 2.1 (see Figure 1 on next page). The team consider eligible all the
examples suggested by the reviewer: for example, incentives to the production of organic honey
would fit under organic agriculture type of activity; of “pupunha” palm, under agroforestry
systems; of post-harvest value-added from agro-ecological and non-wood forest products, under



                                               102
certification of agricultural products; and the production of bio active substances, under
sustainable use and management of biodiversity.

                                                  Figure 1: Fluxogram


                                              Financial Incentive Program for
                                                  Sustainable Agriculture




                                                                                    Carbon Storage
                                                       Provision of
                                                      Environm ental                     Water
                                                        Services
                                                                                      Biodiversity




                                                                                     Redirection of
                                                                                                             Commercialization of
                                                    Sustainable use and            productive systems
      Recovery of        Water resources                                                                      products that are
                                                      management of              toward those that are
     degraded lands       management                                                                        recommended in social
                                                       biodiversity             social and environmental
                                                                                                           and environmental terms
                                                                                         friendly



     Soil conservation      Protection of                   Forest                     Agroforestry              Certification of
         practices             springs                   rehabilitation                  sy stem s            agricultural products
                          and groundwater                                                                      produced through
                           recharge areas                                                                     sustainable practices
     Rehabilitaion of                                 Actions to connect                 Organic
     vegetation cover                                  forest fragm ents                agriculture
                          Rehabilitation of                                                                        Marketing
                           riparian forest                                                                          studies
      Rehabilitaion of                                   Production of                  Sustainable
        soil fertility                               bio-active substances               livestock
                            Reduction in                                               m anagem ent         Post-harvest value-added
                           water pollution                                                                  from agro-ecological and
                                                                                                            non-wood forest products


                                                                                                                Cooperativism in
                                                                                                               production sy stem s




                                   Target research and studies




                                                                   103
                                        Annex 17: Maps - Map 1: Project Area

BRAZIL: Rio de Janeiro Sustainable Integrated Ecosystem Management in Production
            Landscapes of the North-Northwestern Fluminense (GEF)

                                                                                             Kilometers                                                              ESPI RI T U
                                                                                                                                                                      SAN T O
                                                                                     0                    100

                                                                                                                                                     N orthwestern
                                                                                                                                                         Region
                                                                                                                                 S
                                                                                                                              AI
                                                                                                                     ER                                              N orthern
                                                                                                                 S G
                                                                                                              NA                                                      Region
                                                                                                          M I
                                                                                                                                                          O
                                                                                                                                                     EI R
                                                                                                                                              JA N
                                                                                                                                      DE
                                                                                                                          RI O
                                                                                                                       OF
                                                                                                                  TE
                                                                                                           ST A




                                                                                                                                                                              n
                                                                                                                                                                              a
                                                                                     SÃO
                                                                                                                Rio de                                                    e
                                                                                    PAU LO                      Janeiro                                               c
                                                                                                                                                               O
                                                                                                                                                         c
                                                                                                                                               t     i
                                                                                                                          A   t   l   a   n

                                                         Ita
                                                               a poa na Riv
                                                           b



                                                                           er
           N O R T H E R N
             R E G I O N

                                            1                                                 2

                                    r                                                                             Atlantic
                                ive
                              lR
                    a   d o Su
             a ib                                                                                                      O cean
           ar
       P




                                                N O R T H W EST ER N
                                                     R EG I O N
                                        3
                                                                                                     5

                                        4

                                                                                         Regional boundary

                                                                                         W atersheds:

                                                                                1        M uriaé W atershed (378,423 ha)

                                                                                         Coastal W atersheds around
                                                                                2
                                                                                         “M ata do Carvão” Forest (39,765 ha)

                                                                                3        Imbé W atershed (93,659 ha)
                                                                                                                                                                                   TCI103-16/BRZ-M ED EIR-2




                                                                                4        M acabu W atershed (110,890 ha)
                                                 20 Km                          5        D oce W atershed (34,219 ha)



                                                                       104
                    Additional Annex 18: Summary of the Social Assessment16
     BRAZIL: Rio de Janeiro Sustainable Integrated Ecosystem Management in Production
                 Landscapes of the North-Northwestern Fluminense (GEF)

Introduction. The project would cover the watersheds of the rivers Imbé, Doce/Quitingute,
Macabu, Muriaé and Costeira do Entorno da Mata do Carvão which are mainly in the
North/Northwest Fluminense (NNWF) regions, and also including a small part of the Serrana
region which is similar socioeconomically to the NNWF. This annex summarizes the main
findings of the social assessment17

State Context.          Covering an area of 43,864.3 km2, the State of Rio de Janeiro has 91
municipalities, distributed among 6 meso-regions, with a population of 14,391,282 (2000
Demographic Census); it has a demographic density of 328.1 inhabitants per km2 and one of the
country’s highest urbanization rates, equivalent to 96 percent. Its urban population is 30,821,466
and the rural population is 569,816. In the past decade (1991 to 2000) the population growth rate
in the State of Rio de Janeiro was lower than that of the rest of the country. Although in the
previous decade the HDI of the State of Rio de Janeiro improved (from 0.750 to 0.802) there
remains a wide gap between urban and rural areas in terms of education, health, housing,
sanitation and income indicators, with rural areas significantly disadvantaged.

The agrarian structure of the State of Rio de Janeiro is characterized primarily by smaller family
farms – for example, 53 percent of establishments are less than 10 ha in size – but larger
agribusinesses control the majority of the farmland. Family farms tend to be more dependent on
manual labor, employing roughly twice the people as larger establishments, and have less access
to electricity and technical assistance, lower indices of the use of fertilizer and corrective
practices, and less access to organized institutions (associations and cooperatives) than estate
farms. While agribusinesses show higher profits and are responsible for a more significant
percentage of gross production value (GPV), family farmers produce more income and profit per
unit area (a difference of 47.8 percent). This suggests that Fluminense family agriculture is
competitive in relation to estate farms.

Regional Context. The project target area includes the North and Northwest Fluminense regions
as well as part of the Serrana region. The North Fluminense region includes 9 municipalities18
covering 9,767.0 km2 with a population of 698,783 inhabitants who are 4.9 percent of the State’s
total population but 18.3 percent of the State’s rural population. The Northwest Fluminense
region includes 13 municipalities19 covering 5,385.6 km2 with a population of 297,696
inhabitants who are only 2.1 percent of the State’s population but 10.9 percent of the rural

16
   The complete social assessment in Portuguese and English is available in the project files.
17
   The social assessment is based on an analysis of secondary data, as well primary data, including structured
interviews and communities meetings in the Imbé watershed with a sample of eleven communities.
18
   Municipalities are: Campos dos Goytacazes, Carapebus, Cardoso Moreira, Conceição de Macabu, Macaé,
Quissamã, São Fidélis, São Francisco do Itabapoana and São João da Barra.
19
   Municipalities are: Aperibé, Bom Jesus do Itabapoana, Cambuci, Italva, Itaocara, Itaperuna, Laje do Muriaé,
Miracema, Natividade, Porciúncula, Santo Antônio de Pádua, São José de Ubá and Varre-Sai.


                                                       105
population. The project target area also includes two rural municipalities in the Serrana region 20
with a total population of 20,514.

Values of socioeconomic indicators – including those for education, infant mortality, and income
- for the project target area are the worst in the State, and are worse in the rural than in the urban
areas. Factors contributing to poor indicators and substandard living conditions are the lack of
dynamism of the agricultural sector, use of inadequate technologies, relatively little
industrialization and agro-industrial processing, and the opening of agricultural markets in Brazil
since the 1990s to competition from heavily subsidized foreign imports. Hence, it is not
surprising that during the past decade, the project target area has experienced considerable
depopulation of the countryside where living conditions are highly precarious, and concomitant
population increases in provincial urban places.

Regional agriculture, the main occupation and source of income for a significant portion of the
population in the project target area, is predominantly characterized by: (a) boom and bust cycles
of sugar-cane and coffee monocropping that stimulates both deforestation during booms and
abandonment of degraded areas during busts; and (b) extensive cattle raising that incorporates
few new technologies, resulting in the progressive loss of competitiveness due to low
productivity, falling prices paid to producers, competition from other regions and countries, lack
of pasture recovery, non-introduction of new types of animal feed, and the effects of natural and
environmental factors, especially reductions in the availability of water resources21.

The agrarian structure is the same as for the State overall (see above) with even higher
concentrations of small family farms. Many of these small farms generate very low monetary
incomes, and are characterized by dependence on manual labor, minimal access to electricity,
little use of fertilizers or corrective measures, and little use of technical assistance and rural
extension, as well as weak organization through relatively few associations or cooperatives.

The project target area is also characterized by low rainfall and high evaporation rates and in
places, the annual water balance can even be negative, with more evaporation than rainfall. The
terrain is rugged, with strong slopes, which, due to inadequate planting and soil management
systems, show signs of degradation, with eroded and impoverished soils. Anthropic interventions
such as improper waste disposal, deforestation, improper agricultural practices and excessive use
of agrochemicals contribute to environmental problems such as pollution of waterways,
accelerated soil erosion, and contamination, among others.




20
  Municipalities are: Trajano de Moraes and Santa Maria Madalena
21
  Vanessa Lopes Teixeira, Pluriatividade e Agricultura Familiar na Região Serrana do Estado do Rio de Janeiro,
Masters Dissertation. RJ, ICHS/UFRRJ, 1998. Paulo Roberto Alentejano, Reforma Agrária e Pluriatividade no Rio
de Janeiro, Master’s Thesis, RJ, CPDA/UFRRJ, 1997. Elizabeth Linhares et al., Conhecendo Assentamentos Rurais
no Rio de Janeiro, RJ, CPDA/UFRRJ, 2002. Sérgio Gomes Tosto et al., Diagnóstico Sócio-Econômico dos
Municípios da Região Noroeste do Estado do Rio de Janeiro, RADEMA/PRODETAB/EMBRAPA Project. Nelson
Furtado, “Um Rumo para o Norte”, Boletim de Economia Fluminense.


                                                     106
The Imbé Watershed Case Study. The Imbé Watershed case study covered eleven rural
communities22. Most of the small family farmers interviewed raised a combination of the
following: bananas, and other fruit, eucalyptus, vegetables, manioc (cassava), corn, beans,
poultry and pigs, dairy and beef cattle, and sugar cane. Coffee and bananas were important crops
in the past. In some communities alternative income generation opportunities existed in
commerce, the civil service, and work in the oil fields. Also, many people work as day laborers,
or cover part of their subsistence needs from pension payments Outmigration, especially by
young people, is common.

The land drained by the Imbé Watershed encompasses areas traditionally used for extensive and
semi-intensive dairy and beef cattle, the extraction of forest resources, coffee plantations (in the
Serrana region) and sugar cane (Campos dos Goytacazes). At first, coffee and sugar cane were
grown mainly on large plantations using slave labor during the 19th century, although these large
farms coexisted with a social minority of small farmers who combined coffee crops with the
production of subsistence goods in various sharecropping arrangements. In recent years, many of
the old mills have been taken over by larger mills or closed, so that coffee and sugar production
is now carried out by a smaller number of companies. The recent mechanization of the sugar
cane economy helped to increase production capacity, led to the concentration of production on
large plantations and decreased the number of people who made their living full-time through
agriculture as well as subsistence crops, thus increasing the informal job sector. Factors
contributing to increasing outmigration include worsening conditions for family farmers,
fragmentation of holdings due to inheritance, and land conflicts, especially with absentee
owners.

On larger farms, sugar cane and extensive cattle-raising now predominate; due to the
mechanization of the former and the gradual replacement of dairy cattle with beef cattle in the
latter, there is a decrease in the demand for both full-time and temporary labor, thus contributing
to make local living conditions even more vulnerable and unstable, and increasing the rural
exodus, heightened by the possibility of new job opportunities in the Campos oil fields which are
highly attractive to young, unemployed people from rural areas. The State government’s
incentive program for fruit production has had an impact; some large and small land-owners
have begun a process of diversifying their activities and making them more dynamic.

On small farms, population density is higher and agricultural production and subsistence
strategies are usually more diversified and combined with a wide array of other economic
activities and income sources such as dairy farming, poultry raising, fish, beekeeping, fruit
growing, eucalyptus, processing and marketing of agricultural products, door-to-door sales,
leasing of portions of farm lots, employment and temporary jobs, and pensions. Most small
farms utilize only family labor, and there is a limited availability of machinery and tools; animal
traction is often hired or bartered. For commercial purposes, in some areas the main crops are
bananas and sugar cane, elsewhere dairy farming and sale of milk, and in other areas eucalyptus.

22
   Communities included two agrarian reform communities -- Novo Horizonte (comprised of four
communities) and Santo Inácio (comprised of two communities) -- and five traditional rural communities
located in the mountain municipality of Santa Maria Madalena – Sossego do Imbé, Alto do Imbé,
Cruzeiro, Santo Antônio do Imbé and Dr. Loretti.



                                                 107
Major concerns in the countryside are lack of access to land by colonists and sharecroppers, and
decreasing job opportunities in agribusinesses. People interviewed concurred that outmigration
has increased since the 1980s, especially among young people. The proximity of the oil fields,
with some job opportunities, is attractive and in some areas is an essential part of the income of
families living there. The importance of pensions and of family members working in the civil
service is also growing. In summary, subsistence activities have become diversified, the
importance of the agricultural and livestock sector has decreased, and the importance of
commerce, civil service and the income of residents working in the oil fields has increased.

A key social issue is the growing rural exodus. Residents interviewed expressed strong desires to
motivate their young people to stay but social and economic forces combine to spur
outmigration. Some older residents interviewed felt their way of life was dying out.

Nonetheless, the populations of most of the communities studied tend to think that there has been
a recent improvement in the quality of life at local level, particularly in terms of improvements in
infrastructure and public services. There is greater access to electricity; services improved in the
areas of education, health, transportation and communications. These were accomplished in
many cases at the initiative of the communities (e.g., rural electrification, home improvements,
drainage works), or with the support of government programs (e.g., pest control and adult
literacy courses). The main continuing deficiencies identified are in sanitation and support to
productive activities, both of which would be addressed in the project. In all areas studied, basic
sanitation remains substandard, with few residences having septic tanks and waste being dumped
directly into streams. This situation places serious pressure on natural resources and is
exemplified by the situation in the urban area of the municipal seat of Trajano de Moraes, which
dumps its waste directly into the headwaters of the Imbé River.

Another key social issue, relevant to the project, is the relative weakness of most organized
community associations in the project target area. Strengthening local organizations is a central
activity for the project (subcomponent 3.1).

Environmental issues. An existing study of the impact of traditional productive activities on the
environment in the area of influence of the Imbé River highlights their harmful aspects.23 For
example, the study noted that the continued cultivation of manioc on hillsides, sugar cane in flat
areas, cattle raising, the over-exploitation of areas used for livestock, and soil preparation and
management techniques (utilization of animal traction with oxen and aiveca plows, frequent
grading and hoeing so that crops remain “clean”) contribute to soil erosion because they lead to
heightened soil degradation and exposure, decreased filtration and increased surface runoff.
Deforestation and extensive cultivation were also thought to be contributing to the drying up of
springs and streams. However, these soil degradation problems could be ameliorated by
diversifying commercial crops (introduction of vegetable and fruit crops) which would use more
labor and generate greater yields per unit area.

23
  Martelleto et al (2001) and Helga Restum Hissa Manzatto, André Vieira Ramos de Assis, Carmindo Solís Filho,
Rodrigo P. Demonte Ferraz, Alex Faria de Figueiredo e Genilson Gouveia da Silva, Diagnóstico Ambiental
Microbacias do Baixo Imbé River, Programa Rio Rural, Superintendência de Microbacias Hidrográficas do Estado
do Rio de Janeiro/EMBRAPA/PESAGRO, 2002.


                                                     108
However, in recent years environmental awareness has been growing. In 2003, these
communities have undergone an effective process of becoming aware of the need to protect
forest resources and adopt soil and water conservation practices (protection of springs, incentives
for reforestation, utilization of bio-fertilizers and new cropping and soil management techniques,
etc.). For example, the agricultural practices used in one community recently were transformed
with the replacement of intense use of herbicides, burning and limited soil correction practices
by the use of natural defenses and soil protection techniques, leaving soils fallow, crop rotation,
associating different crops, and green manure.

In other communities there is increasing concern with regard to the reduction in water levels,
which local residents associate with deforestation as well as drainage works in the past, and to
soil fertility which they associate with the long-term use of land for sugar cane. For example, in
one community, residents have noted a major reduction in water levels and an increase in soil
degradation which they associated with the replacement of bananas by pasture in 1985. In
another community, concern regarding the reduction in water levels was seen to be contributing
to leading large land-owners to invest in fish farming, with two complementary objectives:
raising fish and retaining water. In general, observers agree that deforestation and burning have
decreased, and there is growing interest in reforestation and preservation of existing forests.

Perceptions of local residents with governmental environmental agencies is mixed. Federal
agencies, such as IBAMA and the forest police, are viewed as being primarily enforcement
oriented whereas residents expressed great interest in gaining environmental and agricultural
technical assistance, an area to be directly addressed by this project.

A major challenge for the project would be in overcoming traditional resistance to the
introduction of new technologies and practices, which in turn is derived from cultural factors,
risk aversion, and previous poor experiences with more traditional top-down models of rural
extension. The project seeks to overcome this challenge by utilizing a highly participatory agro-
ecological approach to extension, an approach that emphasizes strengthening local organizations,
equality of learning exchanges with farmers, and empowerment.

Monitoring and Evaluation.

The proposed approach for project Monitoring and Evaluation system includes measurements of
impacts on people and on institutional performance. Social and economic baseline information
has been developed for the MIS for periodic tracking and monitoring. See Annex 3 for the
project participatory monitoring and evaluation system and Annex 3, Appendix 1 for a list of
social indicators.




                                               109
                                                   Additional Annex 19: Environmental Issues and Project Strategies
 Thematic Area: Physical Aspects
 Environ-
                                           What has been                                                                                                                      Type of Intervention
  mental            Causes                                               Underlying causes and Constraints                           Strategies for the SLM                     Recommended
                                              done?
 Problem
                  Lack of                   Soil mapping            Absence of instruments to regulate adequate use of          Participatory local planning on
ECO-            integrated,                and soil use             soil in rural area, compatible with local and regional       farms, microcatchments for adoption        Planning for SLM
TECHNICAL       conservation-              planning at              planning                                                     of SLM.                                    Training of technicians
PROCESSES       oriented planning in       regional level             Guidance for producers;                                     Prepare proposed legislation of soil
WITH            critical areas                                        Training of technicians;                                  use in rural areas
IMPACT          (properties and                                       Development of adequate models                              Implementation of socio-technical
(EROSION,       microcatchments)                                                                                                 network to combat land
SILTING,
WASHOUT)
                 Absence of                 Implement-              Unsuitability of conservation practices in light of         Participatory research focused on
                vegetation cover           ation of research        farmers’ socioeconomic conditions                            adaptation of conservation practices       Adaptive research
                                           units to recover           Observance of conservation of APPs and Legal              and optimization of productive
                                           degraded areas           Reserve                                                      systems with species adapted and/or
                                           with improved                                                                         with potential for “cilagem” of water
                                           pastures                                                                              and nutrients already existing in
                                                                                                                                 technological stock.
                 Improper pasture          Introduction of         Unawareness of alternatives to diversify the                 Training in conservation systems        Training
                management                 pasture rotation         productive system with native species and change in          for technicians and farmers                Dissemina-tion of
                (overgrazing)              systems                  pasturage;                                                     Dissemination of good practices           information
                                                                     Guidance for producers
                  Inadequate land           Introduction           Decapitalization of farmers;                                Financial support for
                management and             contour cropping          Guidance for producers;                                    implementation of conservation             Incentives for
                low level of               systems and               Lack of understanding by technical staff of public         practices and recovery of the                 introduction of SLM in
                adoption of                implementation           agencies and others in the context of erosion control;       productive capacity of lands                  socio-environmental
                conservation-              of research units         training events without an integrated focus;                                                             and productive aspects;
                oriented practices         to control erosion        Lack of Conservation Manual;                                 Monitoring of impacts on                M&E;
                                           in critical areas         Unawareness of impacts on soil biodiversity, and of        biodiversity of soils and stability,       Training
                                                                    ecosystem stability, function and services                   functions and services of ecosystems

                                                                                                                                   Training of technicians and
                                                                                                                                 producers
                  Absence of                Mechanized             Unpreparedness of technicians and local                      Training of technicians (public and
                conservation-              patrolling to            governments with regard to conservation-oriented             private) and machinery operators on        Training
                oriented approach in       maintain roads           approaches                                                   conservation-oriented approaches in
                soil preparation and       and prepare soil                                                                      soil preparation and rural road
                in rural road              for planting                                                                          maintenance
                maintenance




                                                                                                 110
                     Expansion of               Environmental         Low aggregated technology and management                     Design of financial support system        Incentives for
                    extraction of              licensing tied to       without business-oriented nature                             for SLM through the use of PRADs              introduction of SLM in
                    ornamental rocks           Environmental                                                                        and of environmental compensations            socio-environmental
                                               Recovery Plan                                                                          Training for self-management.              and productive aspects
                                                                                                                                                                                 Training of executors


   Thematic Area: Physical Aspects
 Environ-
  mental              Causes               What has been done?              Underlying causes and Constraints                Strategies for the SLM               Type of Intervention Recommended
 Problem
                  Water erosion    See previous item (“Erosion”) See previous item (“Erosion”)                            See previous item (“Erosion”)      See previous item (“Erosion”)
WATER             Dumping of           Implementation of            Limitation of private and public                        Local planning for adoption
POLLUTION       household and agro-   individual modules of         financial resources and minimum                          of SLM approach in
                industrial waste;     sanitation, environmental     enforcement structure                                    microcatchments                      Planning for SLM;
                watering of animals   enforcement and educational                                                              Training of local                 Training
                directly in streams   campaigns to raise                                                                     stakeholders for integrated
                and rivers            awareness                                                                              participatory planning of
                                                                                                                             natural resources in
                                                                                                                             microcatchments
                                                                                                                               Design of a regional rural
                                                                                                                             sanitation program
                 Absence of                 Educational campaigns               Absence of financial incentives to          Financial incentives for
                gallery forest             and a few projects in                restore gallery forest vegetation;           implementation of gallery             Incentives for introduction of SLM;
                                           discrete areas for gallery             Action in discrete areas, low diversity   forests                               Planning for SLM
                                           forest revegetation                  of species, and unsuitability of               Implementation of adaptive
                                                                                environmental legislation;                   research units for
                                                                                  Lack of environmentally sustainable       recomposition of gallery
                                                                                agro-silvo-pastoral alternatives.            forest vegetation (with
                                                                                                                             diversity of species);
                                                                                                                               Preparation of community
                                                                                                                             conduct statutes
                 Intensive use of           Implementation of                   Lack of knowledge of agronomic and          Implementation of adaptive
                agrochemicals and          research units with                  economic indicators of integrated            research units for integrated         Adaptive research;
                proper dumping of          agroecological systems and           management systems for pest and              management of pests and               M&E;
                packaging                  MIP                                  disease control and agroecological           diseases and agroecological           Incentives for introduction of SLM ;
                                                                                systems                                      systems
                                                                                                                               Monitoring of performance
                                                                                                                             indicators of productive
                                                                                                                             systems;
                                                                                                                               Study the implementation
                                                                                                                             of a packaging collection and
                                                                                                                             recycling system.




                                                                                                   111
                       Low level of                 Environmental education            Precarious hygiene, health and                  Training in environmental
                     environmental                 in rural schools and hiring of       educational conditions                          primary care and notions of               Training
                     primary care                  community health agents                                                              classes of water, together with           Dissemination of information
                                                                                                                                        schools;
                                                                                                                                          Training of professionals in
                                                                                                                                        guidance to the population.
                       Absence of                  Monitoring of water                 Limited monitoring network with low             Dissemination of SLM’s
                     environmental                 quality by environmental             density of sampling                             good practices                           Dissemination of information
                     quality indicators at         agency                                                                                 Implementation of                     Organizational training
                     regional and local                                                                                                 community monitoring                     Training of technicians
                     level                                                                                                              systems for self-management
                                                                                                                                        of natural resources
                                                                                                                                          Training of microcatchment
                                                                                                                                        population




     Thematic Area: Physical Aspects
Environ-
 mental              Causes                  What has been done?              Underlying causes and Constraints                      Strategies for the SLM               Type of Intervention Recommended
Problem
                 Deforestation in            Control of flow rate,                Lack of understanding of relationship          Implementation of adaptive
WATER          water recharge                permission for deep tubular          of plant cover to the functioning of the        research units for revegetation                 Adaptive research;
SHORTA         areas, excessive              wells and protection of              entire water cycle and consequently to          and/or isolation of water recharge              Incentives for introduction of SLM
GE             drainage of canals            springs                              ecosystems                                      areas and springs with native
                                                                                                                                                                                  M&E
               and unprotected                                                                                                    species
               springs                                                                                                              Financial support for
                                                                                                                                  revegetation of water recharge
                                                                                                                                  areas and springs with native
                                                                                                                                  species
                                                                                                                                    Implementation of system to
                                                                                                                                  monitoring flow rate and surface
                                                                                                                                  and ground water recharge
                 Use of                       Construction of collective          Lack of understanding of impact of             Participatory research units for             Adaptive research;
               unsustainable non-            reservoirs for water storage         interventions on the functioning of             new, alternative irrigated systems              Incentives for introduction of
               irrigation methods              Research units with more          ecosystems                                        Financial incentive to implement              SLM
                                             efficient irrigation systems           Unsuitability of irrigation systems to       alternative irrigation systems
                                                                                  producers’ socioeconomic and                    adjusted to SLM
                                                                                  environmental conditions




                                                                                                           112
                 Disorderly                      Community management                 Low capacity for self-management of           Participatory monitoring of
               intake/dumping in                of local water use conflicts           conflicts over water use                      microcatchments’ water balance           M&E
               water resources                                                          Lack of understanding of types of             Implementation of self-               Organizational training
                                                                                       uses and volumes of water drawn from          management systems in                    Construction of Community
                                                                                       watersheds                                    microcatchments, compatible with          Conduct Statutes for responsible
                                                                                        Lack of financial compensation              the instruments of the National
                                                                                       mechanisms among residents of the             Water Resources Policy
                                                                                                                                                                               use of NR
                                                                                       middle and lower sections of watersheds         Preparation of community              Environmental education
                                                                                                                                     conduct statutes in local
                                                                                                                                     microcatchment planning
                                                                                                                                       Training of conciliators in rural
                                                                                                                                     communities
                                                                                                                                       Design of financial mechanism
                                                                                                                                     for self-management of natural
                                                                                                                                     resources
                                                                                                                                       Public Defenders Course




    Thematic Area: Physical Aspects
 Environ-
                                                                                                                                                                                             Type of Intervention
  mental             Causes                    What has been done?                     Underlying causes and Constraints                           Strategies for the SLM                      Recommended
 Problem
                        Deforestati        Dredging of canals and                 Lack of information on impacts in the                  Financial incentives for reforestation with    Incentives for
FLOODING            on                     drainage of várzeas                     functioning of ecosystems                               native species and/or natural regeneration        introduction of SLM
                        Erosion                                                                                                             Participatory planning of soil and water      Local planning for
                                                                                                                                           use and management on farms and in                use of SLM (soil and
                                                                                                                                           microcatchments, for adoption of SLM;             water);
                                                                                                                                             Implementation of conservation practices
                                                                                                                                                                                            Incentives for
                                                                                                                                           for reduction of surface runoff
                                                                                                                                                                                             introduction of MSR
                        Silting                                                                                                             Implementation of warning system and          Local planning for use
                                                                                                                                           flood map                                         and management of
                                                                                                                                                                                             SRN and soil
                     Improper                                                                                                              Regional and community monitoring              M&E
                    occupation of                                                                                                                                                           Local planning for
                    várzeas
                                                                                                                                                                                             sustainable use and
                                                                                                                                                                                             management of NR




                                                                                                              113
                      Infrastructu
                    re works                                                                                                      Flood control works
                    (poorly-
                    proportioned
                    bridges and
                    culverts clog
                    rivers)

     Thematic Area: Biodiversity
 Environ-
                                                                                                                                                                                    Type of Intervention
  mental             Causes               What has been done?                  Underlying causes and Constraints                         Strategies for the SLM                       Recommended
 Problem
                  Extraction of            Increase in enforcement          Minimal enforcement structure;                      Regional and local planning of priority        Planning for SLM;
DEFORESTA       sawn wood,                actions by government               Limited dissemination of monitoring results       areas for forest replacement;                     Incentives for
TION            stakes and                agencies                                                                                 Incentive for reforestation and/or adoption     introduction of SLM;
                firewood                    Reforestation with exotic                                                           of agro-silvo-pastoral systems;                   Training for
                                          species                                                                                  Training for self-management                    environmental education
                    Bio-piracy             Expansion of protected           Lack of energy alternatives for low-income          Promotion of the creation of RPPN, legal       Incentives for
                                          areas                              populations                                         reserve and APPs                                   introduction of SLM
                  Selective                Monitoring of forest             Lack of financial incentives for                    Validate and promote sustainable               Incentives for
                extraction of             remnants                           implementation of RPPN, Legal Reserves and          alternatives for replacing forest inputs with      introduction of SLM ;
                non-wood                    Educational campaigns           APPs;                                               extractivism;                                     M&E;
                forest resources                                              Little incentive for production of native           Strengthening of monitoring of forest          Training and
                                                                             species;                                            remnants of the Mata Atlântica;                    environmental
                                                                              Lack of training                                    Implement financial mechanism to support        education;
                                                                                                                                 reforestation;                                    Construction of
                                                                                                                                   Incentives for certification of non-wood        Community Conduct
                                                                                                                                 forest products;                                   Statutes for responsible
                                                                                                                                   Training for sustainable management of          use of NR;
                                                                                                                                 forest and lumber products;                       Planning for SLM and
                                                                                                                                   Preparation of community conduct                local institutional
                                                                                                                                 statutes;                                          strengthening
                                                                                                                                   Training of Public Defenders and
                                                                                                                                 Community Conciliators




                                                                                                       114
    Thematic Area: Biodiversity

Biodiversity                                                                                                                                                                               Type of Intervention
  Threat
                        Causes                  What has been done?                  Underlying causes and Constraints                         Strategies for the SLM                        Recommended
                    Drainage of                 Restrictive legislation             Lack of understanding of legislation             Local planning on farms and in                     Planning for SLM
ALTERA-            várzeas                                                            Minimal enforcement structure                  microcatchments, with regard to sustainable
TION OF                                                                                                                               alternatives
HABITATS
                     Structural                 Enforcement of relevant             Lack of understanding of biodiversity            Test sustainable practices for pasture             Adaptive research
                   alteration of forests        agencies                                                                              management agricultural systems
                     Opening of roads                                               Lack of understanding of sustainable         Monitoring of ecosystem function                        M&E
                     Erosion                                                        management alternatives for the
                                                                                     functioning of ecosystems
                                                                                                                                       Dissemination of information on local             Dissemina-tion of
                                                                                                                                        ecosystems in the Mata Atlântica                     information
                     Utilization of fire         Restrictive legislation            Limited enforcement capacity                       Human resources training to combat forest        Training and
BURNING            as a pasture                   Enforcement of relevant            Traditional culture                              fires;                                               Environmen-tal
                   management system            agencies                              Lack of low-cost alternatives                      Adapt technologies and implement                  education;
                   and practice of slash          Study and development                                                                sustainable systems to management and
                   and burn                     of alternatives to use of fire                                                          modify pastures already existing in the
                                                                                                                                                                                            Adaptive research;
                                                in pasture management and                                                               technological stock;                                M&E
                                                conservation                                                                              Monitor burning
                                                                                     Lack of financial incentives for adoption         Implementation of community fire-                Training and
                                                                                     of sustainable practices in pasture                fighting programs                                    Environmen-tal
                                                                                     management                                           Facilitate the sharing of experience and          education;
                                                                                                                                        disseminate technologies
                                                                                                                                                                                            Dissemina-tion of
                                                                                                                                                                                             information
                                                                                                                                       Prepare community adjustment statutes             Construction of
                                                                                                                                                                                             Statutes of
                                                                                                                                                                                             Community Conduct
                                                                                                                                                                                             for responsible use of
                                                                                                                                                                                             NR




                                                                                                          115

				
DOCUMENT INFO
Shared By:
Categories:
Tags:
Stats:
views:371
posted:8/16/2012
language:English
pages:121