INTERNATIONALBANK FOR WORLD BANK R E T C N O E N STRUCTION PM AND DEVELO October 2002 No.11 A regular series of notes highlighting recent lessons emerging from the operational and analytical program of the World Bank`s Latin America and Caribbean Region RURAL DEVELOPMENT AND POVERTY ALLEVIATION IN NORTHEAST BRAZIL Luis Coirolo and Tulio Barbosa The Northeast region of Brazil has long been the single ground. The APCR, with a total allocation of US$106 mil- largest pocket of rural poverty in Latin America. With a lion, represented one of the most significant attempts by the combined area of 1.6 million square kilometers--16 Bank to make rural development projects more participa- percent of Brazil's total--the Northeast is home to 45 tory. The APCR fund made matching grants of up to million people, 28 percent of Brazil's total population , of US$10,000 to community associations in towns of less than whom 5.4 million people live on about $1 a day and a total 5,000 inhabitants. of 10.7 million on $1.60 or less per day. Nearly half of all rural communities are in the interior, semi-arid zone Following the establishment of the new Brazilian Federal characterized by poor soil and severe, frequent drought. Constitution of 1988 the trend was toward increasing The rural poor are small farmers, tenants, sharecroppers decentralization of fiscal resources, priority setting and and landless laborers. They face an uncertain climate and implementation from the Federal Government to the state, fluctuating markets. Their access to land is skewed and municipal, and local levels. For the NRDP, it created the there is almost no rural financial system for their needs. enabling environment to undertake the quite radical They rely on subsistence cropping of basic foods, small- reformulation of the program in 1993. scale animal husbandry, some cash crops (mainly cotton and cashew), casual agricultural and non-agricultural work, When evaluation showed the pilot was successfully getting pensions, and remittances from family members living in resources directly to organized community associations, the cities. with greater impact, cost-effectiveness and prospects for sustainability, it was decided in 1993 to reformulate the Testing New Approaches under Decentralization overall program, i.e., its 10 constituent projects, essentially by scaling up the pilot and dropping all the other components. The poorest communities received financing Community-based activities were first introduced to to implement, operate, manage and maintain investment Northeast Brazil in 1985 as a pilot component of the Bank- subprojects of their choosing and to contract technical financed Northeast Rural Development Program (NRDP). assistance directly as needed. Participatory Municipal For several years following effectiveness1, this community Councils (FUMAC) were introduced as a pilot, comprising based component - Apoio ás Pequenas Comunidades representatives from the community, civil society and Rurais (APCR)­ was the only component under the NRDP municipal government. As the reformulated NRDPs closed to disburse effectively and achieve positive results on the they were replaced by a set of eight Rural Poverty A Women's Initiative in Socorro Brings Water In the municipality of Alagoinha, in Pernambuco, the Women's Association of the community of Socorro provided the leadership for the community's 3,500 people to resolve their water supply problems. By exploiting an already existing well, they obtained financing from the RPAP for a R$41,500 subproject, consisting of a water tank capable of storing 20,000 liters, a public fountain and desalinization equipment with a daily capacity of 4,000 liters, which supplies water to the whole community. Before the subproject, the community obtained its water mainly from water trucks sent by the municipal or state governments. Two or three water trucks would come each week, each one with 7,000 liters and costing R$45 to R$60 per truck. On average, each family had the right to only 30 liters per week, a very small quantity for the needs of a household. 1 Alleviation Projects (RPAPs) for which state governments Councils that performed well. The State Technical Unit borrowed directly from the Bank. Following the strategy of (STU) establishes an annual budget envelope according to a continuous piloting, testing, and expansion, the RPAPs distribution formula based on clear and measurable criteria mainstreamed the Municipal Councils and introduced a new (rural population, poverty levels and previous year's perfor- variant (see FUMAC-P below) which assigned not only mance). Based on this budget, selected Municipal Councils resource allocation decisions but also funds management submit an Annual Operating Plan for review at the State responsibilities to Councils that performed well. level. Upon approval, the funds are transferred to the Council which is then responsible for managing their distri- The projects which make up the Rural Poverty Alleviation bution to community associations and assisting them in Program (RPAP) cover eight states in Northeast Brazil with implementing their subprojects. This model accounted for loans totaling US$444 million, became effective from 1995 10 percent of total component costs in the projects in Bahia to 1998. Six of the eight projects have now closed with the and Ceará, Sergipe, and Rio Grande do Norte. rest due to close by June 2002. This note provides an overview of how this model for community participation and poverty reduction evolved and highlights some of the Box 1 - Subproject Cycle lessons learned. 1. Community Associations decide their most Program Structures pressing investment needs and with help, which they contract, prepare subproject proposals for investment financing. Three different delivery mechanisms distinguish how com- 2. Subproject proposals from community associa- munity subprojects are approved and the respective financ- tions are submitted to respective project Munici- ing arranged. pal Councils (MCs) with majority representation of beneficiaries) where proposals are prioritized State Community Schemes (PAC). Under the PAC subpro- and approved, based on indicative resource en- gram, rural communities submit their investment proposals velopes (FUMAC) or actual budget allocations directly to a State Technical Unit (STU) which screens, ap- (FUMAC-P) and the Council members' local proves and releases funds to the beneficiary associations. knowledge of relative need (i.e. how funds While this was the dominant arrangement under the R- should be targeted).. This step does not occur NRDP projects, it has receded in importance as decentraliza- for PAC, where community associations submit tion from State to local levels has progressed and FUMAC subproject proposals directly to the STU for re- councils have been established in a majority of the munici- view. palities. At appraisal2 of the RPAP, PAC was expected to 3. The STU and Municipal Councils in the case of make up about one third of community proposals, but the FUMAC-P technically evaluates and approves actual share decreased steadily. While PAC has been re- subprojects and confirms compliance with sub- tained in all the new rural poverty projects, it is viewed as project guidelines before releasing funds. residual and designed to surmount certain circumstances in a 4. Subproject agreements are signed between the municipality which might delay or prevent formation of a State level units and the community associations FUMAC Council. (in the case of PAC and FUMAC) or between the STU and Municipal Councils (in the case of Municipal Community Schemes (FUMAC). Under this sub- FUMAC-P). program, decision-making on investment proposals is del- 5. Resources for subproject implementation are egated by the State to Municipal Councils (MC) composed then transferred directly from the project to the of community members and representatives of civil society, and municipal authorities. At least 80 percent of voting members are drawn from actual or potential beneficiary communities. The MCs discuss, seek to build consensus on priorities and approve community proposals in the context Results on the Ground of an indicative annual budget amount determined by the State. After the Councils' recommendations are reviewed for consistency with guidelines in the project Operational · Cumulatively, the reformulated NRDP and the RPAP Manual, funds are disbursed directly to the community asso- have disbursed a total of approximately $900 million, to ciations. This became the dominant subprogram under the more than 50,000 sub projects--69 percent infrastruc- RPAP accounting for 80 percent of total community sub- ture, 26 percent productive and 5 percent social. project costs. Through June 2002, the combined program had sub- projects implemented in over 1,600 municipalities. Pilot Municipal Community Funds (FUMAC-P). The FUMAC ­P mechanism is a more decentralized variant of · Ninety three (93) percent of the resources reach the com- FUMAC and was piloted under the RPAP with Municipal munities (compared with 20-40 percent in other 2 programs with 7 percent being provided for technical as- beneficiaries from decision-makers. Under the new ap- sistance and administrative costs. proach, the decentralization of fiscal and investment deci- sion-making--from federal to state to local governments · The combined programs have benefited approximately and ultimately community organizations--ensures efficient 1.7 million families (about 7.5 million people), net of re- program administration and superior outcomes. peat families--those benefiting from more than one sub- project. This represents 53 percent of the total target Decision-making should be kept transparent at all levels. population for the eight RPAP projects in aggregate, and Transparency was also strengthened by setting clear rules for about 25 percent of all rural families in these states. the composition and modus operandi of councils with 80 per- cent of members coming from community representatives and · Infrastructure projects are 40 percent cheaper when local civil society. Transparency was promoted through a sys- implemented by the communities. tem of operational incentives and penalties--incentives for positive performance and penalties against departures from · project guidelines. The investments have generated 100,000 additional per- manent jobs and increased the areas cultivated by 80,000 Communities should be involved in financing and managing ha. investments. Greater participation in the financing of sub- projects generates a sense of ownership and a willingness to · The Program has provided 7,000 communities with wa- share responsibility for the operation and management of ter systems , operated and maintained by the communi- project investments. Beneficiary participation in the selection, ties themselves, with 600,000 families with access to wa- financing, execution, operation and maintenance of project in- ter which is generally of good quality. This has reduced vestments ensures that they reflect community needs, generate the incidence of water-borne diseases and infant mortal- cost savings, and increase local accountability. ity and has increased the time available for income generating Poverty targeting mechanisms should be activities. simple, explicit and measurable. The tar- geting mechanisms should be based on ob- · The sustainability of these invest- jective criteria, foster greater transparency, ments remains high. About 90 minimize political interference, and ensure percent of the projects receiving that project resources reach the poorest funding between 1995 and 1997 communities. In the Brazil program, the under the Rural Poverty Allevia- priority setting carried out by Municipal tion Program remain fully opera- Councils is the basis for project targeting tional today. since the communities themselves, through their majority participation in the councils, · Electricity, rural water supply and determine where project funds should be productive subprojects enabled families to take better ad- applied based on their knowledge of local socio-economic condi- vantage of available productive resources than families tions and investment needs. not participating, increasing the availability of food and consumer goods. Dissemination of best practices such as experiences with NGOs in Rio Grande do Norte, the State rural extension · The subprojects have also brought considerable health agency in Ceará, FUMAC Councils in Bahia and Sergipe and benefits to families, allowing them to be more produc- FUMAC-P in Pernambuco can hasten learning and reward in- tive, and resulting in significant fiscal savings for states, novation. In the case of Ceará, the extension agency plays an permitting them to devote those savings to other pur- active role in facilitating the project in the countryside, poses. partnering with the Technical Unit through its local offices , thus decentralizing project support. Standardization of subproject documents, technical designs Lessons Learned and unit costs simplifies the subproject preparation and evalu- ation process, improves the quality of subprojects and facili- Important lessons from the R-NRDP and RPAP include the tates the procurement of goods and works, prevents over-de- following: sign and enables participation by poorer communities. Decision-making should be decentralized and involve local Environmental protection criteria: Experience demonstrates authorities. Under the earlier Northeast Rural Development that because of their small scale, most subprojects do not have Program, excessive bureaucracy--both federal and state-- significant effects on the environment. However, the detailed created administrative bottlenecks and obscured account- environmental checklist developed under the RPAP is being ability for project performance by distancing the maintained and updated under the new follow-on program. 3 Technical assistance enhances the ability of community asso- The Program has developed social capital through the work of ciations and MCs to identify, prepare and implement sub- the MCs and the overall participatory process. Thirty (30) per- projects thereby increasing their capacity to compete for in- cent of MCs and 25 percent of community associations are se- vestment funds. This assistance needs to be targeted to weaker curing other sources of financing that they were not able to ac- municipalities to improve their planning, management and fi- cess before. Social capital is also helping the communities to nancial capacity to participate in the program. Locating and/or reach markets. Seven hundred (700) communities are export- developing sources of technical assistance in rural areas re- ing to Europe and the number is increasing. quires significant attention and needs to be monitored at the local level. The new rural poverty projects in Northeast Brazil are seeking to broaden the role of municipal councils in local planning, by Summary promoting greater integration between local governments and project municipal councils, and providing information to coun- cils on other programs and alternative sources of grant and A variety of socioeconomic benefits resulting from the RPAP credit financing. If carefully nurtured, not only with the right projects are having an impact on individual families and their mix of technical assistance, information and funding support, communities. These benefits fall into four main categories: but also by insisting that clear and transparent rules continue improved living conditions, improved health conditions, en- to apply to the functioning of the Councils, this democratic fo- hanced productivity, increased family income, and the cre- rum may well become one of the most valuable and durable ation of jobs, all considered essential for gradually lifting institutions for rural development in the Northeast. families out of poverty. Coffee in Bahia Ensures Income and Better Living Conditions Piatã is a municipality in the region of Chapada Diamantina, whose topography favors the development of temperate ag- ricultural activities. Traditionally, small farmers in this municipality have cultivated coffee in small plots, typically using family labor. The dependence on manual processing of beans had always led to high losses and poor quality. The alter- native, to take the beans to more distant centers that had coffee hullers is too expensive. Many preferred to sell their coffee beans unprocessed, absorbing enormous losses due to the low prices available on the local market. In view of these difficulties, small farmers organized around the Piatã Coffee Growers'Association (ASCAMP) and in 1997 they submitted a request to the RPAP (Programa Produzir) for the implementation of a coffee processing unit that now directly benefits 190 families in the region. This unit is operated by the Association, which charges a fee for the maintenance of the small community industry. This fee in only one kilo of the product per bag processed. Before, farm- ers paid up to 3 kilos per bag to private processors, i.e., a cost 200% higher than now, without counting transportation costs. The waste resulting from hulling, which the processor used to keep, is now used by farmers as organic fertilizer. The introduction of this small-scale agro-industrial unit has brought other benefits. In 1999 there was an expansion of around 470 hectares, equivalent to 1,200,000 coffee plants. With this expansion, it is estimated that 1,175 direct jobs and 2,350 indirect jobs will be created. Today the Piatã Coffee Growers Association, besides having its own headquarters and a well-organized accounting sys- tem, is producing excellent quality coffee that is sought on the regional market. Notes About the Authors 1- the project becomes "effective" following signign of the le- Luis Coirolo is the Bank's Lead Sector Specialist for Rural gal agreement and after the government has satisfactorily ful- Development, focussing on poverty alleviation in Northeast filled any conditions Brazil. He is based in the Bank's Recife Office. Tulio Barbosa 2- Project "appraisal" is the final process by which the Bank is a Senior Operations Officer based in Brasilia. determines the suitability of a project for Bank financing To Subscribe to "en breve" please send an email to Useful Links "en_breve@worldbank.org" or write to: Editor, En breve Learn more about our work in Brazil MSN I6-604 http://www.worldbank.org/br The World Bank ..and in Portuguese 1818 H Street NW http://www.obancomundial.org Washington D.C. 4