PROJECT INFORMATION DOCUMENT (PID)
                                APPRAISAL STAGE
                                                                              Report No.: AB4234
 Project Name                  Rio de Janeiro Sustainable Rural Development Project
 Region                        LATIN AMERICA AND CARIBBEAN
 Sector                        General agriculture, fishing and forestry sector (80%); Other
                               social services (20%)
 Project ID                    P101508
 Borrower(s)                   State Government of Rio de Janeiro
 Implementing Agency           State Secretariat of Agriculture, Fisheries, and Rural Development
 Environment Category          [ ] A [X] B [ ] C [ ] FI [ ] TBD (to be determined)
 Date PID Prepared             January 15, 2009
 Date of Appraisal             December 17, 2008
 Date of Board Approval        July 7, 2009

1. Country and Sector Background

Overall Context. During 15 years of working in Southern and Southeastern rural Brazil, the Bank
has supported a number of projects that fit into a strategy where operations have evolved along
the following continuum: (i) initially, a narrow focus on soil conservation; (ii) a more
comprehensive focus on land management (soil and water) and farmer organization within
micro-watersheds; (iii) adding the dimension of environmental sustainability, including
biodiversity conservation and river basin management; (iv) combining the previous activities
with a more proactive approach emphasizing poverty reduction and social services; and (v) using
the capacity built at the local level to leverage the coordination, integration, and sustainable
development impact of the project and other programs. Throughout this time, a serious
commitment to, and support for, local-level capacity building for participatory rural development
and environmental management has been a central pillar of rural operations in Brazil.

Previous rural interventions have proven very effective in achieving important social gains. In
particular, increased awareness among beneficiaries about key productive and environmental
issues that affect their livelihoods, as well as improved social cohesion and increased power for
communities to be active participants in local decision-making and development processes, are
key successes. In recent years, however, the need to concentrate related interventions within a
market-driven approach to agricultural development has become evident, and new projects
should use and expand the productive and social base to allow for this sharper focus in support of

The Rio de Janeiro Sustainable Rural Development Project (the “Project”) will be the first large-
scale Bank-supported rural intervention in the SoRJ. The Rio de Janeiro Sustainable Integrated
Ecosystem Management in Production Landscapes of the NNWF GEF Project (Rio GEF
Project), which became effective in 2006, is ongoing and will effectively complement activities
of the new operation, as it has now entered the phase of full-fledged field investments after
completing the organizational and planning phase. As a result, the design of the Project reflects
the lessons of prior experiences in Brazil. Specifically, the Project will focus on enhancing the
entrepreneurial capabilities of, and opportunities available to, small farmers for sustained
improvements in their socioeconomic conditions via a participatory and decentralized
organizational framework. Within this approach, the Project will build on the local and central
institutional structures established under the Rio GEF Project to offer comprehensive and
innovative support that addresses key rural sector challenges in the SoRJ. To this end, the Project
will introduce and mainstream a new, integrated, and coordinated approach to public and private
interventions within the core agricultural areas of the SoRJ to maximize the impact and
sustainability of activities supported.

Agricultural Sector Context. The SoRJ is one of Brazil’s 26 states and is located in the
geopolitical region of the Southeast. The state has a total area of 43,864 square kilometers with
approximately 15.4 million inhabitants.1 The state economy is driven by the industrial and
service sectors, which contribute to 51% and 42% of state gross domestic product (GDP),
respectively. Overall the SoRJ accounts for 15% of national GDP (US$139.0 billion in 2006).

Although a comparatively small proportion of state GDP (0.5%), the agricultural sector is
important to the SoRJ’s economy. Outside of the metropolitan area of the city of Rio de Janeiro,
agriculture’s contribution to GDP rises to nearly 5%, and when included with agro-industrial
activities, agriculture represents over 25% of state GDP. The importance of agriculture is further
demonstrated in terms of rural employment (it accounts for over 40%) and land use (more than
60% of total state area is dedicated to agricultural activities).

Agriculture is especially vital to economic and social well-being in the three administrative
regions that constitute the agricultural powerhouse of the state. These include: the North and
Northwest administrative regions, also known as “North and Northwestern Fluminense”
(NNWF), and the Serrana administrative region. These three regions house more than half of the
state’s rural population (about 300,000 out of a state total of 550,0002) and are responsible for
60% of agricultural employment in the state. They also have the state’s largest concentration of
family farms (an estimated 37,000 out of a state total of 42,9003) whose main occupation and
source of income is agriculture. Furthermore, small family farms represent some 80% of total
land holdings in the NNWF and Serrana regions, over half of which correspond to holdings of
ten hectares (ha) or less.

Despite its importance, the agricultural sector in the SoRJ faces a number of pressing challenges,
including: low productivity, poor linkages to markets with high demand for agricultural products,
a weakened natural resources base, poverty, and the inability of public institutions to adapt to the
evolving demands of the rural sector (see Annex 1 for details). The factors commonly attributed
to this situation are largely interrelated and include, inter alia: weak farmer organization; the
widespread use of inefficient and unsustainable agricultural practices; poor infrastructure; the
incipient nature of regional industrialization, markets, and agro-industrialization processes; and
the limited scope of public policy in rural areas.

  Estimated Population Count 2007. Brazilian Institute of Geography and Statistics (IBGE).
  Estimated Population Count, 2007, Brazilian Institute of Geography and Statistics (IBGE).
  Family Agriculture Data Bank. National Institute of Agriculture Reform (INCRA).
The Project is designed to address these aforementioned challenges by supporting interventions
to improve small farmer productivity, enhance linkages with local and national markets,
strengthen the natural resources base, enhance the living conditions and incomes of small
farming families, and improve the ability of public institutions to adapt to the evolving demands
of the rural sector (see Section II B below for details).

Government Strategy. Brazil’s state and federal governments have established a policy agenda
that supports rural poverty reduction by integrating sustainable environmental and social
practices and increasing the agricultural production and diversification of family farming. The
Government of Rio de Janeiro (GoRJ) has recognized the importance of supporting small-scale
agriculture in the context of increased competitiveness and market access. This is especially
relevant to the NNWF and Serrana regions which produce the majority of the state’s agricultural
goods. For this reason, the GoRJ grants significant and increasing shares of its supply of
agricultural credit (46%) and agricultural TA (38%) to these regions.

The GoRJ has recently taken actions to put its rural development strategy into practice by
implementing the Rio GEF Project (P075379). The US$14.95 million4 operation was designed to
support pilot activities that promote the long-term conservation and rehabilitation of agro-
ecosystems, as well as the implementation of sustainable land management practices that provide
environmentally-sustainable economic opportunities for rural communities. After a slow initial
start-up period following its effectiveness in 2006, the Rio GEF Project has achieved solid
advances in community organization and is now beginning to implement local development
plans and investment subprojects. The GoRJ is also implementing a number of other programs in
support of its rural development strategy, including: (i) the State Credit Program for Agricultural
Production and Diversification (Moeda Verde), (ii) the State Microcatchment Program for
Sustainable Rural Development (Rio Rural), and (iii) the National Smallholder Agriculture
Program (PRONAF).

2. Objectives

The project development objective is to increase the adoption of integrated and sustainable
farming systems approaches and improve livelihoods in rural communities of the State of Rio de
Janeiro (SoRJ). Activities supported by the Project will contribute to the higher-order objective
of increasing small-scale farming productivity and competitiveness in specific territories of the

The key impact indicators at the beneficiary level will measure increases in: (i) small farmers in
targeted areas transitioned towards more productive farming systems; (ii) product quality; (iii)
farmers included in (or with improved links to) at least one value chain; (iv) small farmers
targeted agricultural lands under improved production systems; (v) length of tertiary roads
restored and maintained. Indicators will be measured in beneficiaries participating in (or areas
related to) project-supported activities versus control groups (or areas) according to baseline
studies carried out before and after the implementation of all activities.

    US$6.75 million from the GEF and US$8.2 million in counterpart funds.
The target population consists of approximately 37,000 small-farming families (some 150,000
people in total) in the SoRJ. This corresponds to roughly 30% of the total rural population in the
state. The target population primarily resides in three main regions that include the North, the
Northwest,5 and Serrana administrative regions, which represent a total area of about 23,000
square kilometers (53% of the total area of the state). Replication activities will also be carried
out in clusters of municipalities located in other administrative regions of the SoRJ (see map in
Annex 15). Overall, interventions will concentrate in nine municipalities in the North, 13
municipalities in the Northwest, and 14 municipalities in the Serrana; replication activities will
be carried out in 23 municipalities located across the four other administrative regions.6 As a
result, the Project will impact a total of 59 municipalities (out of 92 in the SoRJ). The selection
and prioritization of municipalities, as well as participating communities within those
municipalities, will be based on production potential, poverty, and environmental criteria (see
Appendix 1 to Annex 4 for details). Eighty-six percent of project funds (or US$67.9 million) will
be directed to small farmers within the selected communities via planning, capacity building, and
investment activities.

Project components have been designed to address, either separately or in synergy with one
another, each of the key agricultural sector challenges in the SoRJ (as outlined earlier in Section
I A and detailed in Annex 1). Specifically, the Project will support:
    - extension/technical assistance and adaptive research activities (1.1 and 2.3) and financial
       incentives (subcomponent 1.2) to improve small farmer productivity;
    - investment planning and implementation for the development of value added and
       inclusion in value chains7 (1.2), improved rural roads networks (1.2), and the
       coordination and alignment of public policies in support of territorial development8 (2.1)
       to enhance market linkages;
    - productive and environmental planning and training (1.1), as well as investments in agro-
       ecological and natural resource management activities (1.2), to strengthen the longer-
       term impact on sustained productivity at a larger scale; and
    - institutional changes, including more demand-driven and flexible arrangements (2.1), a
       systemic/multi-sectoral vision and commitment (2.1), and a broader dialectic approach
       that fosters the participation of local actors in the design and implementation of rural
       development policies (2.1 and 1.1), as well as the creation of a long-term financing

  The North and Northwestern administrative regions are also known as the “North and Northwestern Fluminense”
(NNWF). The NNWF is the target area of the Rio GEF Project and its two administrative regions overlap with
existing territories already established by the Ministry of Agrarian Development (MDA). Each MDA territory
consists of a cluster of municipalities that share cultural and socioeconomic similarities. Given that territories are
social constructions, the Project is adopting a similar concept by defining the territory as a system of various levels
(community/microcatchment, municipal, and regional) where different actors compete and eventually cooperate and
negotiate. See Appendix 2 to Annex 4 for details.
  The other administrative regions include: South, Coastal Floodplains, Metropolitan, and Paraíba River Middle
  For purposes of the Project, a value chain is defined as: the sequence of activities performed to design, produce,
market, deliver, and support a product or service, whereby the chain of activities gives the product or service more
added value than the sum of added values of the separate activities.
  The Project is not invoking a typical European LEADER-type multi-sectoral territorial development approach. On
the contrary, the Project will promote a focused rural-only territorial development approach in areas of the SoRJ that
share common economic and resource base characteristics. See Appendix 2 to Annex 4 for details.
       mechanism to support SRD activities (2.2), to improve the ability of public institutions
       to adapt to the evolving demands of the rural sector.

A Participatory and Negotiated Territorial Development (PNTD) approach will be used
(and adapted whenever required) to improve regional dialogue and management to unleash the
agricultural production potential and competitiveness in targeted regions of the SoRJ while
promoting sustainable practices and improving the socioeconomic conditions of small farming
communities. This approach is predicated on comprehensive diagnostic and planning exercises
across different levels (i.e., local, municipal, and regional) with a wider scope beyond project
activities. Because decentralization of planning and decision-making responsibilities is
fundamental to the PNTD approach, the Project will build on the strategy currently being
implemented by the Rio GEF Project, which is characterized by a participative municipal and
microcatchment-level planning model, as well as the full involvement, empowerment, and self-
management of community-based organizations (which includes the active participation of
women and youth). The Project will therefore continue to consolidate these processes. It will also
promote complementary strategies focused on promoting productivity, value added, and
increased market access for small farmers, as well as on strengthening institutional capacity and
networking to more effectively and efficiently respond to the arising, better articulated, and
integrated demands at the local level.

The operational strategy is as follows. First, the Project will establish an institutional
framework in support of PNTD and environmental awareness, and promote decentralized and
multi-sectoral interventions to increase the organization and capacity of local farmers. Second,
the Project will support, based on the above, the transition to more efficient production systems,
the sustainable use and conservation of the natural resources base, and social development
through financing different categories of investment proposals and facilitating multi-sectoral
coordination and interventions. Lastly, the Project will promote the replication of this
methodology throughout the SoRJ by intervening in areas outside of the targeted priority regions
(i.e., the NNWF and Serrana regions) with the aim of mainstreaming public policies in support of

3. Rationale for Bank Involvement

There are four main reasons that justify Bank involvement in the Project. Foremost is its
knowledge and experience with international best practices. The valued added that the Bank
provides is based on an array of subject matters acquired through its analytical and project work
both in Latin America and other regions of the world. Among topics central to the Project
include: small farmer productivity, value added, market linkages, Payment for Environmental
Services (PES), decentralization, social accountability, and long-term financing instruments for
SRD activities.

A second reason for Bank involvement is its in-country knowledge and experience. The Bank
has acquired knowledge of local and participatory development in Brazil through both economic
sector work and project implementation, particularly in South, Southeast, and Northeast Brazil.
A third reason for Bank involvement is government interest. The GoRJ considers that the
Bank’s technical expertise and involvement will enhance the opportunity to test and mainstream
the development, demonstration, and evaluation of mechanisms to adopt a more integrated
territorial approach to rural development in specific areas of the SoRJ. This includes a number of
organizational, productive, and environmental innovations for which it has requested Bank

Bank involvement is further justified to complement and build on ongoing activities in the
SoRJ. These include pilot activities supported under the GEF, donor-funded rural and
environmental operations (i.e., KfW’s Pro-Atlantic Forest Program, SOS Mata Atlântica
Foundation, Conservation International-Brasil, and the Critical Ecosystem Partnership Fund),
and state-funded programs (i.e., Rio Rural and Frutificar e Cultivar Organico). As this list
demonstrates, there is an overwhelming focus on natural resources management and
environmental protection activities within the donor community and initiatives supported by the
SoRJ. Consequently, the Project has a unique opportunity to complement these strategies with a
producer-focused, strongly market-oriented, agricultural operation that simultaneously supports
the protection of important global biodiversity resources.

4. Description

The Project will be implemented over a period of six years and will have the following three
components to achieve its objectives: (1) Support to Small-farmer Production and
Competitiveness, (2) Institutional Frameworks, (3) Capacity Building for Territorial
Development, and (4) Project Coordination and Information Management.

Component 1: Support to Small-farmer Production and Competitiveness (US$66.1 million). The
objective of this component is to support changes in small farmer production processes within a
framework of market-driven agricultural development focused on sustainable and increased
productivity, value added, and market linkages. To do so, this component will begin by working
with community groups across local, municipal, and regional levels to increase local
organization and participation for project implementation via capacity-building and planning
activities. As part of this process, individuals and groups will identify and diagnose, based on
their initial status, key production challenges to transition towards more profitable and
sustainable farming systems and develop proposals to overcome those with the support of project
extensionists. Once the proposals are approved, eligible beneficiaries will receive grants to
implement demand-driven investments. Activities under Component 1 will be carried out
through two subcomponents: (1.1) Pre-Investment and (1.2) Investments.

Subcomponent 1.1: Pre-Investment will strengthen organization and capacity for agricultural
productivity-focused and market-driven development across community, municipal, and regional
levels, thus serving as the basic building block for investments supported under subcomponent
1.2. Specifically, this subcomponent will prepare beneficiaries and project staff for the
implementation of the project’s technical strategy through training and planning activities. The
strategy builds on existing institutional structures and activities being carried out in the 24
municipalities in the NNWF that are participating in the Rio GEF Project. All activities will be
demand-driven and articulated by different stakeholder committees with a focus on promoting
the adoption of agricultural activities aimed at increasing productivity, value added, and market
insertion. Whereas specific training activities will be directed towards project managers, project
technicians, strategic stakeholders, and beneficiaries, specific planning activities will involve the
establishing and/or strengthening of different stakeholder committees, which will ultimately
serve to identify and elaborate investment proposals with special emphasis on production and
competitiveness-related themes.

Subcomponent 1.2: Investments will implement demand-driven investments identified and
developed in the context of different planning activities under subcomponent 1.1. Through the
use of grants, investments will be financed to directly support improvements in farming systems
and production processes within a framework of market-driven agricultural development. In
most cases, the Project will finance a maximum of 80% of investments, as beneficiaries will be
eligible to apply for project resources based on beneficiary typology and activity to be supported.
Three types of individual and group subprojects will be eligible for support: (i) productive,
which includes activities to increase sustainable productivity (on-farm focus), promote value
added, and develop value chains9 (off-farm focus); (ii) environmental conditioning of productive
units, which includes complying with environmental laws and adopting environmentally-sound
and agro-ecological practices; and (iii) rural roads-related logistical bottlenecks, which includes
erosion control, rehabilitation, and maintenance works to improve input/output flows via year-
round transitability of key stretches of rural roads.

Component 2: Institutional Frameworks (US$5.2 million). The objective of this component is to
improve the medium to long-term policy and institutional frameworks supporting market-driven
agricultural development in the SoRJ. Specifically, Component 2 seeks to: enhance the ability of
rural development-related institutions and their staff to adapt to the evolving paradigm of market,
environmental, and social interactions; contribute to multi-sectoral coordination and consultation
mechanisms for territorial development promoted by the GoB through the MDA; promote
improved access to long-term financing mechanisms for small farmer activities; and establish a
new, more efficient and proactive operational approach to conduct agri-food systems-related
research.. These will be carried out through three subcomponents: (2.1) Strengthening Rural
Institutions and Coordination Mechanisms, (2.2) Improving Public and Private Financial
Support Mechanisms, and (2.3) Participatory Research.

Subcomponent 2.1: Strengthening Rural Institutions and Coordination Mechanisms seeks to
strengthen the capacity of SEAAPA and its agencies to more quickly and effectively respond to
rural sector demands through improved services provision and better coordination of activities
with other public and private sector stakeholders. Through the development of an Institutional
Sustainability Plan (ISP), SEAPPA will align its organizational and budget structures with its
institutional priorities, missions and objectives, and assess and address the efficiency of its
methods in order to achieve the desired results. The project will support the implementation of
  Based on a study carried out during preparation, the Project will initially look at the whole product chain of six
pre-identified production chains (involving both market studies and adaptive research activities) as mentioned
above, and the Project will support the inclusion of small farmers within those chains to increase the efficiency and
quality of production. Moreover, the financing of investment proposal under this category will serve as seed money
for entrepreneurs to take risks at all stages of the value chain. As a result, in addition to the pre-identified value
chains, a flexible design will allow for the financing of other entrepreneurial ideas that may arise during
implementation (i.e., artisan products and tourism).
specific activities identified through an Institutional Sustainability Plan (ISP) and implemented
through subprojects based on the ISP, including improvements to internal management
instruments and staff skills, which promote increased efficiency of internal processes and
effectiveness of service delivery.

In addition, this subcomponent will contribute to the implementation of a national policy in
support of territorial development, promoted by the National Ministry of Agrarian
Development’s (MDA) Sustainable Development of Rural Territories Program (PRONAT).
This is a new policy instrument that is predicated on elaborating Rural Territorial Development
Plans in regions that are dominated by small farmers. This subcomponent will complement
PRONAT by feeding beneficiary diagnosis and planning activities into Rural Territorial
Development Plans, and by promoting synergy, coherence, and complementarity of actions
between different state government sectors and actors that intersect in the rural ambient.

Subcomponent 2.2: Improving Public and Private Financial Support Mechanisms will facilitate
linkages between the supply and demand of financial resources for SRD activities through the
development of an Economic Sustainability System (ESS). The objective of the ESS is to:
promote awareness of (and access to) the existing supply of public and private financial support
resources by small-farmers; promote a better flow of this supply of financial resources in support
of small-farmers activities; and; facilitate the exchange of information between the parties
involved to gradually induce a shift towards more receptive financial support arrangements for
small-farming demands. By doing so, this subcomponent will promote sustained support to SRD
activities beyond the life of the Project.

The ESS will be based on facilitating access by small farmers to resources from four funding
areas: (i) multi-sectoral initiatives (i.e., public resources and budgets, and grant programs); (ii)
PES, which includes resources to compensate individuals/groups that “provide” environmental
services; (iii) agricultural credits (public and private); and (iv) private initiatives (i.e., social-
environmental responsibility programs). Moreover, the ESS will consist of advisory and
operational bodies to guide the design and development of the ESS; an external entity to analyze
potential opportunities, bring relevant actors together, and catalyze resources for SRD
investments; and the PIU, which will oversee the FM of loan resources mobilized through the
ESS, carry out viability studies, and monitor investments supported through the ESS.

Subcomponent 2.3: Participatory Research will establish a new, more practical and effective
operational system to conduct agriculture-related research and induce innovation, that more
efficiently fills key information and communication gaps by promoting the interaction of
different research bodies and stakeholders in the identification, discussion, and prioritization of
key issues in the agri-food sector in the SoRJ. This will be achieved by establishing a state-wide
Innovation, Technology, and Sustainable Services Research Network System (RNS) involving
key research institutions and extension agencies. Ultimately, the RNS will support the
development/adaptation of effective technical changes that improve production chains and
processes. The RNS will also be responsible for systemizing technologies in a Technical Manual
to be used by project technicians for investment planning and implementation activities
supported under Component 1. Once topics are defined through a participatory process involving
the different territorial levels of the Project, the RNS will support 37 short-term and five medium
to longer-term adaptive research activities, the former to improve the types of investments
supported under subcomponent 1.2 and the latter to overcome bottlenecks in key value chains in
the SoRJ.

Component 3: Project Coordination and Information Management (US$7.7 million). This
component will support overall project management and coordination, the M&E of project
activities, outputs, and outcomes, and the dissemination of key SRD information. Specifically, it
will: promote the effective management of the Project by expanding the existing organization
and operation structures of the Rio GEF Project to meet the demands required by the new and
expanded activities under the Project; expand the decentralized and participatory management
model established by the ongoing Rio GEF Project across different territorial levels to guarantee
the achievement of the project’s objectives; develop and implement a Management Information
System (MIS) that ensures widespread access and adequate information flows to impact
stakeholder decision making in support of SRD; and promote the use of digital and other ICT
tools among project beneficiaries. Related activities will be carried out through two
subcomponents: (3.1) Project Coordination and (3.2) Information Management.

5. Financing

Source:                                                                          ($m.)
Beneficiaries                                                                     10.2
Borrower                                                                          29.3
International Bank for Reconstruction and Development                             39.5
                                                                      Total       79.0

6. Implementation

Overall project management and implementation will be the responsibility of the SEAPPA,
which will act as the Director of the Project and will delegate implementation responsibilities to
its Sustainable Development Superintendence (Superintendencia de Desenvolvimento
Sustentável) where the PIU will be established. Within SEAPPA, the State Extension
(EMATER) and Research (PESAGRO) agencies will play an active role in the implementation
of project activities, being primar implementers in the areas of management, capacity building,
rural extension, and research and studies. in partnership with key rural development and
environmental institutions, including the State Secretariats of Environment (SEA), Health
(SESDEC), Education (SEEDUC), Economic Development (SEDEIS), and EMBRAPA, will be
important implementing partners for coordinated activities under Component 2 (subcomponent
2.1) along with EMBRAPA for Component 3 (subcomponent 3.2). SEAPPA will sign
cooperative agreements with these institutions no later than six months after Loan Effectiveness.
The Project will also develop partnerships with civil society organizations and municipal
governments in the project area to implement key collective activities foreseen under the Project.

The PIU will be the central executive structure; it will be headed by a Project Manager and
composed of a team of qualified professionals that mostly belong to the cadre of SEAPPA staff.
The PIU will be an expansion of the existing PIU of the Rio GEF Project, with the addition of
new staff needed to cover new and expanded activities. Specific responsibilities will be delegated
to four units in the PIU, including the Institutional Coordination Unit, the Technical
Coordination Unit, the Information Management Unit, and the Administrative and Financial

The project’s central executive structure will be supported by implementation structures across
regional, municipal, and local levels. Regional Project Implementation Sub-units will be directly
linked to the PIU and responsible for implementing project activities at the regional level. In
addition to the two established under the Rio GEF Project in each of the NNWF administrative
regions, three more will be created for the other targeted administrative regions. At the municipal
level, EMATER, through its local offices, and municipal governments will be responsible for
implementation activities with specific obligations to be defined via agreements to be signed in
PY1. At the local level, rural extensionists will support the implementation of project activities in
each of the 270 participating microcatchments.

To complement the aforementioned implementation structures, the Project will support a series
of coordination structures across different territorial levels. The existing State SRD Council
(Comitê Estadual de Desenvolvimento Sustentável) will be responsible for strategically
articulating the Project within the overall rural development process at state and country levels.
Regional Development Committees, consisting of representatives from participating
municipalities, will be responsible for coordinating project activities at the regional level. In
addition to the two established for the Rio GEF Project in the NNWF administrative regions,
three more will be created for the other targeted regions. Existing MuDCs, which were created
under PRONAF in all of the 59 municipalities targeted in the Project, will be responsible for
coordinating project activities at the municipal level. And MDCs in the 270 participating
microcatchments will coordinate the elaboration of different development plans and the
implementation of subprojects at the local level.

7. Sustainability

The Project has incorporated an array of mechanisms to achieve sustainable impacts. These are
described in the following.

Borrower Commitment. The GoRJ has demonstrated its commitment for the Project through a
number of concrete actions during preparation, which include: complying with all issues agreed
in Aide-Memoires from preparation missions, mobilizing the support of various state agencies,
securing co-financing for project preparation, systemizing existing information and diagnostics,
consolidating a geo-referenced project database, and providing leadership during a series of
project preparation meetings and workshops. Moreover, the GoRJ has confirmed that improving
small farmer productivity, within a participatory framework of poverty reduction and
environmental protection, is a key government priority both through the implementation of the
ongoing Rio GEF Project, as well as through its prioritization of the Project (i.e., it was included
in SIGEN as the most important rural initiative in the SoRJ which ensures increased monitoring
of activities and the availability of budget resources). The operation is part of a longer-term
strategy concentrated in specified territories with state-wide replication activities, which, based
on performance, could be scaled up.
Design of Outcomes. The Project builds on the lessons learned from other rural development
operations in Brazil, as well as the experiences of the ongoing Rio GEF Project. By doing so, the
design incorporates key success factors, which include: (i) increasing the capacity and
knowledge of small farmers and beneficiary organizations; (ii) providing direct financial support
to beneficiaries and ensuring their access to resources beyond the life of the Project; (iii)
empowering beneficiaries through their participation in the design of all project-supported
activities; (iv) supporting new production management models, diversified economic activities,
value added, and increased market access to augment rural income; (v) implementing a
participatory adaptive research system focused on family farmers; (vi) capitalizing on existing
municipal and state-level institutions to organize, coordinate, and implement multi-sectoral
interventions in targeted areas; and (vii) decentralizing project implementation and supervision
responsibilities to local levels. See also lessons learned in Section II D.

Technology. The Project will build on the innovative productive and conservationist
technologies being piloted under the Rio GEF Project, which will result in the wide-spread
adoption of more environmentally-friendly practices while lowering production costs, increasing
productivity, and, ultimately, leading to more sustainable production systems (to be implemented
under subcomponent 1.1). In addition, ICT tools will be made available to small farmers to
improve their access to market information and enhance their digital capabilities.

Environmental Focus. The Project will improve the environmental management of targeted areas
and, hence, the environmental sustainability of the Project through, inter alia: enhanced
environmental awareness among beneficiaries (subcomponent 3.1), improved policy instruments
and strengthened institutions to facilitate the adoption of sustainable land management concepts
and practices (subcomponent 2.1), financial mechanisms to promote the transition to sustainable
livelihood activities as well as support to the development of long-term strategies to facilitate this
transition (subcomponent 1.1), increased erosion control along rural roads (subcomponent 1.2),
and the development of an operational base for PES (subcomponent 2.2).

Institutional Strategy. The Rio GEF Project has already had a positive impact on SEAPPA,
especially regarding its experience and mainstreaming of participatory approaches to natural
resources management and environmentally-sustainable productive activities. However, as
further improvements are still required, the Project will devote significant resources to strengthen
key rural institutions, including SEAPPA and its agencies, promote multi-sectoral coordination
mechanisms, and provide technical training to enhance the long-term ability of rural institutions
to effectively respond to changing rural sector demands. In addition, the existing PIU for the Rio
GEF Project, which will be expanded under the Project, is not an isolated entity staffed by
consultants, but rather is integrated within SEAPPA’s Directorate of Sustainable Development
and nearly 100% staffed by civil servants from SEAPPA working at local, regional, and central
levels. Thus, all investments under Component 4 will serve to strengthen SEAPPA’s long-term
institutional capacity. Moreover, long-term institutional structures and financial mechanisms will
be established to ensure stable and continuous support for SRD activities beyond the life of the

Financial Viability. The analysis of expected benefits at the farm level indicates that improved
practices will yield greater returns per ha than traditional ones (see Annex 9). Improved financial
returns, product diversification, and access to new markets will act as important incentives for
farmers to continue employing project-promoted practices indefinitely.

8. Lessons Learned

The Project is designed to reflect a number of lessons from the implementation of Bank projects
in the rural sector in Brazil, especially given the numerous socioeconomic, cultural, and technical
similarities between the project area in the SoRJ and areas targeted by Bank-supported
operations in other Brazilian states. The design also builds on the global lessons compiled in the
Bank’s 2008 World Development Report on “Agriculture for Development.”10 These are
described in the following.

Decentralization. Decentralizing project implementation and supervision responsibilities to the
municipal level can enhance implementation success and the sustainability of investments.
However, the impact of a decentralized strategy depends on effective capacity building and
flexibility that allows greater decision-making authority at local levels, as well as consistency
with rural diversity and specific farmer needs.

Market Orientation. Verifiable market opportunities must underpin support for poor rural
producers. Effective mechanisms to achieve this include: pre-defining markets and value chains
in the eligibility criteria for productive investment subprojects, conducting private sector
consultations during project design, and carefully analyzing areas where the government can
play a catalytic role based on current and future market conditions.

Incentives. Addressing (temporary) market failures through (one-time) matching grants, in
addition to improving the policy environment and investment climate, help economic agents
manage up-front transaction costs and risks associated with technology adoption and
organizational innovation (as in the case of farmers investing in farmer organizations and
agribusinesses in developing value chains). Moreover, such an approach mandates a “positive
list” of well-crafted, practical incentives, which is representative of the real demands of the rural
poor and able to effectively mobilize families, gain their support, and attract indirect
stakeholders (i.e., local governments).

Multi-sectoral Interventions. Continued political support and integration of project activities with
other rural development programs, including the simultaneous promotion of private productive
investments and public socioeconomic investments, enhances project impact and sustainability.

Territorial Approach. A territorial approach that effectively links micro and meso levels
increases the likelihood of successfully overcoming constraints related to standalone, local-level
approaches, including weak linkages to markets, promotion of value added, bottlenecks in key
production chains, sustainable incentives policy, and legal framework. As a result, solutions to
employment and income improvement, as well as to broader economic and social development

   In particular, see Part II of the 2008 WDR, “What Are Effective Instruments for Using Agriculture for
Development?” - Chapter 5 (Bringing Agriculture to the Market) and Chapter 6 (Supporting Smallholder
Competitiveness through Institutional Innovations).
of rural areas, require that local microcatchment and municipal development plans be aggregated
and integrated into a territorial approach.

9. Safeguard Policies

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

10. Contact Point

Contact: Alvaro J. Soler
Title: Sr. Rural Development Specialist
Tel: (202) 473-1985

11. For more information contact:

       The InfoShop
       The World Bank
       1818 H Street, NW
       Washington, D.C. 20433
       Telephone: (202) 458-4500
       Fax: (202) 522-1500

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