THE WORLD BANK W O R L D B A N K O P E R A T I O N S E V A L U A T I O N D E P A R T M E N T Brazil: Forging a Strategic Partnership for Results An OED Evaluation of World Bank Assistance OED PUBLICATIONS Study Series 2003 Annual Review of Development Effectiveness: The Effectiveness of Bank Support for Policy Reform Agricultural Extension: The Kenya Experience Assisting Russia's Transition: An Unprecedented Challenge Bangladesh: Progress Through Partnership Bridging Troubled Waters: Assessing the World Bank Water Resources Strategy The CGIAR: An Independent Meta-Evaluation of the Consultative Group on International Agricultural Research Debt Relief for the Poorest: An OED Review of the HIPC Initiative Developing Towns and Cities: Lessons from Brazil and the Philippines The Drive to Partnership: Aid Coordination and the World Bank Financial Sector Reform: A Review of World Bank Assistance Financing the Global Benefits of Forests: The Bank's GEF Portfolio and the 1991 Forest Strategy and Its Implementation Fiscal Management in Adjustment Lending IDA's Partnership for Poverty Reduction Improving the Lives of the Poor Through Investment in Cities India: The Dairy Revolution Information Infrastructure: The World Bank Group's Experience Investing in Health: Development Effectiveness in the Health, Nutrition, and Population Sector Jordan: Supporting Stable Development in a Challenging Region Lesotho: Development in a Challenging Environment Mainstreaming Gender in World Bank Lending: An Update The Next Ascent: An Evaluation of the Aga Khan Rural Support Program, Pakistan Nongovernmental Organizations in World Bank­Supported Projects: A Review Poland Country Assistance Review: Partnership in a Transition Economy Poverty Reduction in the 1990s: An Evaluation of Strategy and Performance Power for Development: A Review of the World Bank Group's Experience with Private Participation in the Electricity Sector Promoting Environmental Sustainability in Development Reforming Agriculture: The World Bank Goes to Market Sharing Knowledge: Innovations and Remaining Challenges Social Funds: Assessing Effectiveness Uganda: Policy, Participation, People The World Bank's Experience with Post-Conflict Reconstruction The World Bank's Forest Strategy: Striking the Right Balance Zambia Country Assistance Review: Turning an Economy Around Evaluation Country Case Series Bosnia and Herzegovina: Post-Conflict Reconstruction Brazil: Forests in the Balance: Challenges of Conservation with Development Cameroon: Forest Sector Development in a Difficult Political Economy China: From Afforestation to Poverty Alleviation and Natural Forest Management Costa Rica: Forest Strategy and the Evolution of Land Use El Salvador: Post-Conflict Reconstruction India: Alleviating Poverty through Forest Development Indonesia: The Challenges of World Bank Involvement in Forests Uganda: Post-Conflict Reconstruction Proceedings Global Public Policies and Programs: Implications for Financing and Evaluation Lessons of Fiscal Adjustment Lesson from Urban Transport Evaluating the Gender Impact of World Bank Assistance Evaluation and Development: The Institutional Dimension (Transaction Publishers) Evaluation and Poverty Reduction Monitoring & Evaluation Capacity Development in Africa Public Sector Performance--The Critical Role of Evaluation Multilingual Editions Allègement de la dette pour les plus pauvres : Examen OED de l'initiative PPTE Appréciation de l'efficacité du développement : L'évaluation à la Banque mondiale et à la Société financière internationale Determinar la eficacia de las actividades de desarrollo : La evaluación en el Banco Mundial y la Corporación Financiera Internacional Côte d'Ivoire : Revue de l'aide de la Banque mondiale au pays Filipinas: Crisis y oportunidades Reconstruir a Economia de Moçambique : http://www.worldbank.org/oed W O R L D B A N K O P E R A T I O N S E V A L U A T I O N D E P A R T M E N T Brazil: Forging a Strategic Partnership for Results An OED Evaluation of World Bank Assistance 2004 The World Bank http://www.worldbank.org/oed Washington, D.C. © 2004 The International Bank for Reconstruction and Development / The World Bank 1818 H Street, NW Washington, DC 20433 Telephone 202-473-1000 Internet www.worldbank.org E-mail feedback@worldbank.org All rights reserved Manufactured in the United States of America First edition July 2004 The findings, interpretations, and conclusions expressed here are those of the author(s) and do not necessarily reflect the views of the Board of Executive Directors of the World Bank or the governments they represent. 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All other queries on rights and licenses, including subsidiary rights, should be addressed to the Office of the Publisher, World Bank, 1818 H Street NW, Washington, DC 20433, USA, fax 202-522-2422, e-mail pubrights@worldbank.org. Cover photo by Julio Pantoja. Children study in the public school, Luciliio Da Souza Resi in Juliana in the Amazon region of Brazil near Manaus. ISBN 0-8213-5908-8 e-ISBN 0-8213-5909-6 Library of Congress Cataloging-in-Publication data has been applied for. World Bank InfoShop Operations Evaluation Department E-mail: pic@worldbank.org Knowledge Programs and Evaluation Capacity Telephone: 202-458-5454 Development (OEDKE) Facsimilie: 202-522-1500 E-mail: eline@worldbank.org Telephone: 202-458-4497 Facsimilie: 202-522-3125 Printed on Recycled Paper Contents v Acknowledgments vii Executive Summary, Résumen, Résumé Analytique xvii Acronyms and Abbreviations 1 1 Purpose and Background 1 Long Period of Growth Followed by the "Lost Decade" 5 2 World Bank Assistance to Brazil, 1990­02 7 The First Phase (1990­94): Contraction of Lending and Shift to the Social Sectors and the Environment 9 The Second Phase (1995­98): Recovery of Lending, Consolidation of the Strategy, Initial Support to Structural Reforms 11 The Third Phase (1999­02): Further Expansion of Lending and Shift to Adjustment Lending in Support of Stabilization and Structural Reforms 13 3 Assessment of Bank Products and Services 13 Assessment of Analytical and Advisory Services 15 Assessment of Lending Services 15 Factors that Contributed to Improved Project Performance 17 Assessment of the Bank's Role in Aid Coordination 19 4 Assessing the Development Impact of the Bank's Assistance 19 Assessing the Relevance and Consistency of the Bank's Strategy 22 Assessing the Contribution of the Assistance Program to Poverty Alleviation 27 Assessing the Contribution of the Bank's Program to Sustainable Growth 31 Assessing the Overall Impact of the Assistance Program 33 Assessing the Sustainability of the Positive Outcomes 35 Assessing the Bank's Performance 36 The Counterfactual and the Bank's Relevance 39 5 Lessons and Recommendations 43 Annexes 45 A: Reference Tables 77 B: Summaries of Sector Evaluations 91 C: An Evaluation of MIGA Activities in Brazil, 1994­02 i i i B R A Z I L : F O R G I N G A S T R AT E G I C PA R T N E R S H I P F O R R E S U LT S 95 D: Government Comments 97 E: Management Action Record 99 F: Chairman's Summary: Committee on Development Effectiveness (CODE) 101 Endnotes 103 Bibliography Box 14 3.1 Examples of Outstanding ESW Figures 8 2.1 World Bank Lending, 1980­01 16 3.1 Projects at Risk, 1990-02 23 4.1 Poverty Ratios and Income Growth by Deciles 25 4.2 Selected Education and Health Indicators 29 4.3 GDP Growth, 10-Year Moving Averages (% p.a.) and Real Fixed Investment (% of GDP), 1965­01 Tables 2 1.1 Selected Economic Indicators, Annual Averages, 1950­02 6 2.1 Size of World Bank Lending, 1980­01 7 2.2 Sectoral Composition of Bank Loans, 1980­02 9 2.3 Sectoral Composition of Bank Loans, 1990­02 13 3.1 QAG Evaluation of ESW: Share of Satisfactory ESW, 1996­02 15 3.2 OED Evaluation of Closed Projects: Share of Projects with Satisfactory Outcomes, 1980­02 16 3.3 QAG Evaluation of Ongoing Projects: Share of Satisfactory Projects, 1996­02 18 3.4 Average Lending Costs, by Project and Commitment, 1990­02 21 4.1 Poverty and Social Indicators, 1990­01 28 4.2 GDP Growth Rates in Brazil and Selected Comparators, 1990­02 31 4.3 Environmental Indicators, 1980s and 1990s 34 4.4 Brazil's Progress in Meeting the Millennium Development Goals i v Acknowledgments T his evaluation was prepared by Roberto Universidade Federal Fulmínense); Ronaldo Rocha (Task Manager, Country Evalua- Seroa da Motta (Instituto de Pesquisa Econom- tion and Regional Relations, OED), with ica Aplicada ); Armando Castelar Pinheiro (Banco assistance from John Heath (Sector and The- Nacional de Desenvolvimento Economico e So- matic Evaluation, OED); Andre Averbug (Coun- cial); Eustaquio Reis (Instituto de Pesquisa Eco- try Evaluation and Regional Relations, OED); nomica Aplicada); Alberto Mello e Sousa Dariush Akhavan, Kaizo Iwakami Beltrão (Insti- (Universidade Federal do Rio de Janeiro); and tuto de Pesquisa Economica Aplicada and In- William Tyler (Universidade do Estado do Rio de stituto Brasileiro de Geografia e Estatistica); Janeiro). The evaluation also benefited from Regis Bonelli (Instituto de Pesquisa Economica project audits prepared by Helen Abadzi and By- Aplicada); Claudio Moura Castro (Pitagoras Uni- niam Reja (Sector and Thematic Evaluation, versity); Peter Knight, Rosane Mendonça (In- OED). Caroline McEuen edited the manuscript stituto de Pesquisa Economica Aplicada and for publication. Director-General, Operations Evaluation: Gregory K. Ingram Director, Operations Evaluation Department: Ajay Chhibber Senior Manager, Country Evaluation and Regional Relations: R. Kyle Peters Task Manager: Roberto Rocha Peer Reviewer: René Vandendries Peer Reviewer: John Johnson External Peer Reviewer: Eliana Cardoso, Georgetown University v E X E C U T I V E S U M M A R Y EXECUTIVE RÉSUMEN RÉSUMÉ SUMMARY ANALYTIQUE ~NOL A ENGLISH ESP FRANÇAIS Brazil entered the 1990s suffer- Brasil comenzó los años no- Le Brésil est entré dans les an- ing the consequences of a "lost venta sufriendo las consecuencias de nées 90 affaibli par les séquelles d'une decade" of high inflation and slow una "década perdida" de elevada in- décennie « perdue » de forte inflation growth. Between 1980 and 1990, per flación y lento crecimiento. Entre 1980 et de faible croissance. Entre 1980 et capita income declined in real terms, y 1990, el ingreso per cápita disminuyó 1990, le revenu par habitant, en valeur and the share of the population in ex- en términos reales y la proporción de réelle, a chuté, et le taux de la popu- treme poverty rose from 16.5 to 19 per- la población que vivía en la pobreza lation en situation d'extrême pauvreté cent--and from 36 to 42 percent in the extrema aumentó del 16,5% al 19%, y est passé de 16,5 % à 19 % -- et de Northeast. Income distribution wors- del 36% al 42% en el nordeste. La dis- 36 % à 42 % dans le nordeste. La ré- ened. Key social indicators improved lit- tribución del ingreso empeoró. Los partition des revenus s'est détériorée. tle, particularly in the Northeast. These principales indicadores sociales me- Les principaux indicateurs sociaux ne adverse conditions persisted in the joraron muy poco, menos aún en el se sont guère améliorés, en particulier early 1990s because the government nordeste. Estas condiciones desfavo- dans le nordeste. Ce contexte défavo- failed to stabilize the economy and to ar- rables se mantuvieron en los primeros rable a perduré jusqu'au début des an- ticulate a development agenda. Condi- años del decenio de 1990 porque el nées 90, le Gouvernement n'ayant pas tions improved only with the success of gobierno no logró estabilizar la eco- réussi à stabiliser l'économie, ni à ar- the 1994 Real Plan. Stabilization con- nomía y elaborar un programa de de- ticuler un programme de développe- tributed to a decline in poverty and en- sarrollo. Las condiciones sólo ment. Il a fallu attendre la réussite du abled the government to articulate a mejoraron con el éxito del Plan Real Plan real de 1994 pour enregistrer une development agenda with clear goals de 1994. La estabilización contribuyó a amélioration. La stabilisation a favorisé for education and other sectors during reducir la pobreza y permitió a las au- un recul de la pauvreté et a permis au the remainder of the 1990s. toridades trazar un programa de de- Gouvernement de dresser un pro- sarrollo con objetivos claros en la gramme de développement guidé par Key Aspects of the Bank's esfera de la educación y otros secto- des objectifs clairs, entre autres, dans Program res en lo que quedaba de la década. le domaine de l'éducation, pour la se- conde moitié de la décennie. · The alleviation of poverty was the Principales aspectos del central objective of the Bank's as- programa del Banco Aspects fondamentaux du sistance to Brazil in the 1990s and Programme de la Banque early 2000s. Growth was an inter- · El alivio de la pobreza fue el ob- mediate objective and a means to jetivo fundamental de la asis- · La réduction de la pauvreté a achieve the final objective of tencia que el Banco prestó a été l'objectif premier de l'assis- poverty alleviation. Brasil en los años noventa y prin- tance fournie par la Banque au · The Bank's strategy was devel- cipios del decenio de 2000. El cre- Brésil pendant les années 90 et oped in a period when the insti- cimiento fue un objetivo au début des années 2000. En tution became less important as intermedio y un instrumento para tant qu'objectif intermédiaire, la a source of finance to Brazil. alcanzar el fin último del alivio de croissance a été mise au service Bank disbursements accounted la pobreza. de la cause de l'allègement de la for 16.5 percent of total financing · El Banco formuló su estrategia pauvreté. to Brazil in the 1980s, but only 6.5 en un período en el que la fun- · La stratégie de la Banque a été percent in the 1990s. ción de la institución como définie alors que l'Institution ne v i i B R A Z I L : F O R G I N G A S T R AT E G I C PA R T N E R S H I P F O R R E S U LT S ·The strategy became more fuente de financiamiento de figurait plus aux premiers selective, focusing on the poor Brasil perdió importancia. rangs des sources de finan- Northeast and on activities ~NOL Los desembolsos del Banco cement du Brésil. Si dans les expected to address directly A representaron el 16,5% del années 80 les décaissements the roots of poverty. Priority total del financiamiento reci- de la Banque représentaient ENGLISH was given to education and ESP bido por Brasil en los años 16,5 % du total des finance- FRANÇAIS health (their share in total ochenta, pero sólo el 6,5% en ments consentis à ce pays, commitments increased from los años noventa. leur part n'était plus que de 5 percent in the 1980s to around · La estrategia se tornó más selec- 6,5 % dans les années 90. 20 percent in 1990-02) and to the tiva: se centró en el nordeste, la · Plus sélective, la stratégie de la provision of basic services and as- región más pobre, y en activida- Banque a fait davantage porter sets to the poor (water, sanitation, des que, según se espera, abor- ses efforts sur le nordeste, région rural electricity, land). dan directamente las causas de pauvre du Brésil, et sur les ac- · The growth element of the strategy la pobreza. Se dio prioridad a la tions capables de s'attaquer aux supported the government's de- educación y la salud (su partici- causes profondes de la pauvreté. centralization and privatization pación en el total de compromisos Priorité a donc été donnée à of infrastructure through techni- aumentó del 5% en los años l'éducation et à la santé (sur le cal assistance in regulation and ochenta hasta alrededor del 20% total des engagements, la part selective lending. These actions en 1990­02) y al suministro de consacrée à ces deux secteurs est were expected to promote growth servicios y bienes básicos para la passée de 5 % dans les années 80 by stimulating private investment población pobre (abastecimiento à environ 20 % en 1990-2002), in infrastructure and generating de agua, saneamiento, electrifica- ainsi qu'à la fourniture de ser- efficiency gains. ción rural, tierras). vices et de ressources de base · Assistance to the environment ex- · El elemento de la estrategia vin- aux populations pauvres (eau, as- panded significantly in the 1990s culado al crecimiento respaldó la sainissement, électricité en mi- and focused on green issues. descentralización de la gestión lieu rural, mise à disposition de · At the end of the 1990s the Bank del gobierno y la privatización de terres). shifted to adjustment lending to infraestructura mediante el su- · La croissance visée par cette stra- assist the government in its sta- ministro de asistencia técnica en tégie, sous la forme d'une assis- bilization and reform efforts. The materia de regulación y finan- tance technique en matière de share of adjustment lending in ciamiento selectivo. Se preveía réglementation et de prêts ciblés, total lending increased from 6 per- que estas medidas fomentarían el est venue appuyer la politique cent in the 1980s to 26 percent in crecimiento estimulando la inver- de l'État de décentralisation et de 1990-02 and addressed fiscal and sión privada en infraestructura y privatisation des infrastructures. financial reform and social pro- aumentando la eficiencia. Ces actions étaient destinées à tection. · La asistencia para la protección stimuler la croissance par une re- del medio ambiente aumentó lance de l'investissement privé Key Program Results considerablemente en el decenio dans les infrastructures et par une The Bank's assistance strategy in de 1990 y se centró en cuestiones efficacité accrue. 1990-02 was relevant overall. The ecológicas. · L'aide à l'environnement s'est Bank's strategy was underpinned by · En los últimos años noventa, el sensiblement intensifiée dans les high-quality analytical work on Banco se concentró en el finan- années 90 et a mis l'accent sur poverty and growth, done with sub- ciamiento para fines de ajuste les problèmes écologiques. stantial participation by top Brazilian con el propósito de ayudar al go- · À la fin des années 90 la Banque researchers. The shift to the social bierno en sus actividades de es- a mis l'accent sur les prêts d'ajus- sectors and the focus on the North- tabilización y reforma. La tement pour soutenir la politique east were justified--given the very proporción de los préstamos para de stabilisation et de réforme du weak social indicators in the North- fines de ajuste en el total del fi- Gouvernement. Les prêts d'ajus- v i i i E X E C U T I V E S U M M A R Y east region--as was the shift nanciamiento otorgado se in- tement, qui représentaient to adjustment lending at the crementó del 6% en la década 6 % du total des prêts accor- end of the decade. A crisis ~NOL de 1980 al 26% en 1990­02; dés dans les années 80, ont could have ignited inflation, A los fondos se destinaron a atteint 26 % en 1990-2002 et with negative consequences apoyar la reforma fiscal y fi- ont porté à la fois sur les ré- ENGLISH for the poor. When the Bank ESP nanciera, y a actividades de formes budgétaires et finan- FRANÇAIS made adjustment and tech- protección social. cières et sur la protection nical assistance loans, it main- sociale. tained assistance to the social Principales resultados del sectors. programa Résultats essentiels du The main component of the pro- En términos generales, la estrategia Programme de la Banque gram, comprising roughly half of de asistencia del Banco en 1990­02 La stratégie d'assistance menée par total lending, addressed the roots of fue acorde con las necesidades. La la Banque entre 1990 et 2002 a dé- poverty through human resource estrategia del Banco se sustentó en montré globalement son utilité. development and access to basic excelentes análisis de la pobreza y el Cette stratégie a été étayée par des services. This component produced crecimiento, realizados con impor- études de qualité sur la pauvreté et satisfactory results. Education gains tante participación de investigado- la croissance, réalisées en grande were impressive. The net enrollment res brasileños de primera línea. El partie avec l'aide d'éminents cher- rate in primary education increased desplazamiento hacia los sectores cheurs brésiliens. Les orientations from 84 to 96 percent nationally, and sociales y la atención dispensada al prises en faveur des secteurs sociaux from 72 to 93 percent in the North- nordeste se justificaban en vista de los et du nordeste -- région affichant east. The youth illiteracy rate de- deficientes resultados que arrojaban des indicateurs sociaux foncière- clined from 9.8 to 4.2 percent los indicadores sociales en esa re- ment faibles -- se sont révélées jus- nationally, and from 22.7 to 9.6 per- gión, así como se justificó el viraje tifiées, comme l'a été le choix de cent in the Northeast. The Bank's hacia el financiamiento para fines de privilégier les prêts d'ajustement à la program contributed to these out- ajuste en los últimos años del dece- fin de cette décennie. Une crise au- comes by providing infrastructure nio. Una crisis podría haber desatado rait pu déclencher une poussée in- and education materials, strength- la inflación, con consecuencias ne- flationniste, avec les conséquences ening state secretariats of education gativas para los pobres. Cuando el désastreuses que cela suppose pour (so they could manage higher stu- Banco otorgó préstamos para ajuste les populations pauvres. Lorsque la dent enrollments), and implement- y asistencia técnica, mantuvo la ayuda Banque a accordé des prêts d'ajus- ing information and evaluation para los sectores sociales. tement et d'assistance technique, systems for primary education and El principal componente del pro- elle a maintenu son aide aux sec- minimum operational standards in grama, que comprendía aproxima- teurs sociaux. all schools. The decline in infant damente la mitad del total del La principale composante du mortality was also pronounced, par- financiamiento, abordaba las cau- Programme, à laquelle a été consa- ticularly in the Northeast--from 48 sas de la pobreza mediante el desa- crée près de la moitié du total des to 29 per 1,000 live births nation- rrollo de los recursos humanos y el prêts, a permis de s'attaquer aux ally, and from 73 to 44 per 1,000 live acceso a los servicios básicos. Este causes profondes de la pauvreté en births in the Northeast. Other key componente produjo resultados sa- favorisant le développement des health indicators, such as life ex- tisfactorios. Los beneficios obtenidos ressources humaines et l'accès aux pectancy and communicable disease en el campo de la educación fueron services fondamentaux. Cette com- incidence/mortality, improved sig- extraordinarios. La tasa neta de ma- posante a obtenu des résultats sa- nificantly. The Bank's program con- triculación en la escuela primaria au- tisfaisants. Les résultats dans le tributed to these outcomes by mentó del 84% al 96% en todo el país domaine de l'éducation ont été spec- combating communicable diseases y del 72% al 93% en el nordeste. La taculaires. Le taux net de scolarisa- and providing health infrastructure. tasa nacional de analfabetismo de los tion en primaire est passé de 84 % Finally, the program helped expand jóvenes disminuyó del 9,8% al 4,2%, à 96 % à l'échelon national et de i x B R A Z I L : F O R G I N G A S T R AT E G I C PA R T N E R S H I P F O R R E S U LT S basic infrastructure to the mientras que en el nordeste 72 % à 93 % dans le nordeste. poor through its projects in pasó del 22,7% al 9,6%. El pro- Parmi les jeunes, le taux rural poverty alleviation, ~NOL grama del Banco contribuyó a d'analphabétisme a chuté de water, sanitation, and urban A estos resultados mediante el 9,8 % à 4,2 % au niveau na- transport. suministro de infraestructura tional et de 22,7 % à 9,6 % ENGLISH A second component of ESP y material didáctico, el forta- dans le nordeste. Le Pro- FRANÇAIS the program--designed to lecimiento de las secretarías gramme de la Banque a par- stimulate investment, eco- de educación de los estados ticipé à cette amélioration de nomic efficiency, and growth--pro- (para que pudieran hacer frente al diverses manières : en fournissant duced mixed results. The average aumento de la matrícula escolar) y la des moyens d'infrastructure et des growth rate between 1990 and 2002 implementación de sistemas de in- supports éducatifs, en renforçant (2.5 percent yearly) was higher than formación y evaluación para la ense- les secrétariats de l'éducation au ni- in the 1980s (1.5 percent yearly) and ñanza primaria y normas mínimas de veau des États (pour pouvoir gérer surpassed the Latin American aver- funcionamiento en todas las escuelas. l'augmentation du nombre d'enfants age in recent years, but remained La disminución de la mortalidad in- scolarisés) et en mettant en place disappointing. The Bank's program fantil también fue muy marcada, es- des systèmes d'information et d'éva- strengthened the capacity of Brazil- pecialmente en el nordeste: las luation pour l'enseignement pri- ian states to manage their own in- defunciones cada 1.000 niños naci- maire ainsi que des normes frastructure, increased private sector dos vivos pasaron de 48 a 29 en todo d'exploitation minimales dans toutes participation in infrastructure, and el país y de 73 a 44 en el nordeste. les écoles. La mortalité infantile a built regulatory capacity in energy Otros indicadores sanitarios de im- également enregistré un net recul à and water. The program generated portancia clave, como la esperanza l'échelon national, baissant de 48 % efficiency gains, but did not succeed de vida y la incidencia de las enfer- à 29 % pour 1 000 naissances vi- in removing critical bottlenecks that medades transmisibles y la mortalidad vantes, et plus encore dans le nor- continue to constrain public and pri- derivada de ellas, mejoraron nota- deste où ce taux a été ramené de vate investment and to affect eco- blemente. El programa del Banco con- 73 % à 44 % pour 1 000 naissances nomic performance. Regulatory tribuyó a esos resultados, al ayudar a vivantes. D'autres indicateurs de deficiencies remain. Key reforms combatir las enfermedades transmi- santé importants, tels que l'espé- supported through adjustment lend- sibles y suministrar infraestructura rance de vie et la mortalité/consé- ing (social security, financial sector) para los sistemas de salud. Por úl- quences dues aux maladies started late in the decade and have timo, el programa ayudó a ampliar transmissibles, se sont nettement not been completed. Pension ex- las obras de infraestructura básica améliorés. En participant à la lutte penditures and deficits remain large para los pobres mediante sus pro- contre les maladies transmissibles (12 and 5 percent of GDP, respec- yectos relacionados con el alivio de la et à la mise en oeuvre de l'infra- tively), burdening public finances pobreza rural, el abastecimiento de structure de santé, le Programme and depressing savings and invest- agua, el saneamiento y el transporte de la Banque a contribué à cette ment. Interest spreads remain high urbano. avancée. Enfin, il a permis d'étendre and access to credit curtailed be- Un segundo componente del pro- l'infrastructure de base destinée aux cause of weak creditor rights and grama --destinado a fomentar la pauvres par le biais de projets axés heavy taxes on financial intermedi- inversión, la eficiencia económica sur la réduction de la pauvreté en mi- ation. These reforms will need to y el crecimiento-- produjo resulta- lieu rural, la fourniture d'eau, l'as- be concluded to improve growth dos dispares. La tasa media de creci- sainissement et les transports performance. miento entre 1990 y 2002 (2,5% urbains. A third component of the pro- anual) fue más alta que la de los años La deuxième composante -- vi- gram, involving support to the en- ochenta (1,5% anual) y superó al pro- sant à stimuler l'investissement, l'ef- vironment, produced satisfactory medio latinoamericano de los últi- ficacité et la croissance -- a obtenu results. The Bank played a critical mos años, aunque siguió siendo des résultats inégaux. Entre 1990 et role in building environmental in- decepcionante. El programa del 2002, le taux de croissance moyen x E X E C U T I V E S U M M A R Y stitutional capacity and in Banco reforzó la capacidad (2,5 % l'an) a été supérieur à helping the Brazilian gov- de los estados brasileños para celui des années 80 (1,5 % ernment address many im- ~NOL administrar su propia infra- l'an) et a dépassé celui ob- portant challenges. Brazil's A estructura, aumentó la parti- servé ces dernières années environment indicators still cipación del sector privado en Amérique latine, mais il ENGLISH lag those of developed coun- ESP en infraestructura y fortale- est resté malgré tout déce- FRANÇAIS tries, but improved during ció la capacidad de regulación vant. Le Programme de la the decade. Average annual en los sectores de la energía Banque a consolidé les capa- rates of deforestation are still high, y el agua. El programa permitió me- cités de gestion des États brésiliens but declined to 16,800 km2 in the jorar la eficiencia, pero no logró eli- eu égard à leurs infrastructures, a 1990s, down from 20,300 km2 in the minar serios cuellos de botella que permis d'accroître la participation 1980s; the size of protected areas continúan limitando la inversión pú- privée dans le secteur des infra- increased from 2.4 to around 6.5 blica y privada y afectando el de- structures et a renforcé les capacités percent of the national territory; and sempeño de la economía. Todavía réglementaires dans les domaines pollution in large cities such as São existen deficiencias normativas. Las de l'eau et de l'énergie. Il a aussi Paulo declined. Average carbon diox- principales reformas respaldadas por permis des gains d'efficacité, mais ide emissions rose from 1.4 to 1.6 los préstamos para fines de ajuste n'est pas parvenu à supprimer les metric tons per capita between the (seguridad social y sector financiero) obstacles majeurs qui continuent two decades, but this also happened se iniciaron muy avanzada la década d'entraver les investissements pu- in other regions, and average emis- y aún no han concluido. El gasto y el blics et privés et de nuire à la per- sions in Brazil remained substan- déficit provocados por el sistema de formance de l'économie. Des vides tially below the corresponding pensiones, que no han dejado de ser réglementaires demeurent. Les ré- averages for Latin America (2.4), elevados (12% y 5% del PIB, respec- formes de fond engagées à la fin de North America (19.2), and the Or- tivamente), constituyen una carga la décennie, qui ont été soutenues ganisation for Economic Co-opera- para las finanzas públicas y reducen par des prêts d'ajustement (sécurité tion and Development (OECD) el ahorro y la inversión. Los márge- sociale et secteur financier), n'ont (12.1). nes de interés continúan altos y el ac- pas été menées à leur terme. Tou- Adjustment loans had variable ceso al crédito se ve limitado por la jours considérables, le service des impacts. The fiscal reform loans escasa protección de los derechos retraites et les déficits (respective- achieved their main objectives--the de los acreedores y los fuertes im- ment 12 % et 5 % du PIB) pèsent reform of the public sector and the puestos a la intermediación finan- sur les finances publiques et freinent imposition of hard budget con- ciera. Para mejorar las tasas de l'épargne et l'investissement. Les straints at all levels of government. crecimiento será preciso llevar a buen marges d'intérêt restent élevées, et The social protection loan also término estas reformas. l'accès au crédit, limité du fait des achieved its objective of preserving Un tercer componente del pro- droits restreints des créanciers et de critical social programs during fis- grama, orientado a la protección del la lourde taxation de l'intermédia- cal adjustment. The social security, medio ambiente, produjo resultados tion financière. Ces réformes devront financial sector, and energy loans satisfactorios. El papel del Banco fue être menées à bien pour améliorer supported important reform steps, decisivo tanto para fortalecer la capa- les résultats de la croissance. including changes in the pension cidad institucional de abordar cues- La troisième composante, à sa- benefit formula for private sector tiones ambientales como para ayudar voir le soutien à l'environnement, workers, restructuring and privatiz- al gobierno brasileño a tratar de solu- a produit des résultats satisfaisants. ing numerous insolvent state banks, cionar muchos problemas importan- En renforçant les capacités des ins- and reforming energy tariffs. How- tes. Los indicadores brasileños titutions brésiliennes en charge de ever, these reforms started late in the relacionados con el medio ambiente l'environnement et en aidant le Gou- decade and have not gone far todavía van a la zaga de los de los pa- vernement à résoudre bon nombre enough. Limited progress in re- íses desarrollados, pero han mejorado de questions délicates, la Banque a forming the pension system (espe- durante la década. El promedio anual joué un rôle crucial. Les indicateurs x i B R A Z I L : F O R G I N G A S T R AT E G I C PA R T N E R S H I P F O R R E S U LT S cially for public sector work- de las tasas de deforestación concernant l'environnement ers) compromised the coun- aún es alto, pero retrocedió au Brésil dénotent encore un try's performance by ~NOL de 20.300 km2 en los años retard par rapport à ceux des constraining the availability A ochenta a 16.800 km2 en los pays développés. Ils ont tou- of resources for investment años noventa; la superficie de tefois progressé au cours de ENGLISH and better-targeted social ESP las zonas protegidas aumentó la décennie. Les taux moyens FRANÇAIS programs. del 2,4% a aproximadamente el de déforestation sur une The Bank's assistance 6,5% del territorio nacional, y année restent élevés, mais program for Brazil produced a suf- la contaminación en las grandes ciu- ont été ramenés à 16 800 km? dans ficient mass of positive outcomes to dades, como São Paulo, disminuyó. les années 90, après avoir atteint be rated as satisfactory. In the 1990s Las emisiones de dióxido de carbono, 20 300 km? dans les années 80. La extreme poverty rates declined from como promedio, se incrementaron de superficie des zones protégées a 19 to 14.5 percent in the country 1,4 a 1,6 toneladas métricas per cápita augmenté, passant de 2,4 % à envi- overall, and from 42 to 30 percent in entre las dos décadas, pero lo mismo ron 6,5 % du territoire national. La the Northeast. The program con- ocurrió en otras regiones, y el pro- pollution dans les grandes villes tributed only modestly to the de- medio de emisiones registrado en Bra- telles que São Paulo a quant à elle re- cline in income poverty rates--and sil fue considerablemente inferior a culé. Entre les deux décennies, la gains were brought about primarily los promedios correspondientes a moyenne des émissions de dioxyde by eliminating high inflation (which América Latina (2,4), América del Norte de carbone a été portée de 1,4 à 1,6 disproportionately affected the (19,2) y la Organización de Coopera- tonnes par habitant, phénomène poor)--and the program con- ción y Desarrollo Económicos (OCDE) que l'on observe également dans tributed only indirectly by helping (12,1). d'autres régions. Au Brésil, les émis- the government sustain stabilization Los préstamos para fines de ajuste sions moyennes restent cependant at the end of the decade. But the tuvieron consecuencias variadas. nettement inférieures aux moyennes program made an important con- Los préstamos en apoyo de la re- relevées en Amérique latine (2,4), en tribution to the impressive im- forma fiscal alcanzaron sus principa- Amérique du Nord (19,2) et dans provement in social indicators and les objetivos: la reforma del sector les pays de l'Organisation de co- to the expanded access of the rural público y la imposición de fuertes opération et de développement éco- and urban poor to basic infrastruc- restricciones presupuestarias en nomiques (OCDE) (12,1). ture. All are key preconditions to todos los niveles de gobierno. El prés- Les prêts d'ajustement ont eu des further reductions in poverty and tamo para protección social también répercussions variables. Les prêts à inequality. The education gains are cumplió su finalidad de preservar, l'appui de la réforme budgétaire ont likely to translate into reduced durante el ajuste fiscal, los progra- atteint leurs principaux objectifs : poverty and inequality because in- mas sociales de importancia crítica. réforme du secteur public et res- comes in Brazil are strongly related Los préstamos para la seguridad so- triction des dépenses publiques à to education levels. Expanded ac- cial, el sector financiero y el sector de tous les niveaux de l'État. Le prêt à cess of the poor to infrastructure la energía respaldaron importantes l'appui de la protection sociale a both alleviates poverty directly and medidas de reforma, como la modi- également atteint son objectif en as- creates the conditions for subse- ficación de la fórmula de cálculo de surant la continuité des programmes quent growth in household incomes. las jubilaciones y pensiones de los sociaux les plus importants pendant Going forward, these gains will trabajadores del sector privado, la re- la phase d'ajustement budgétaire. need to be enhanced for Brazil to estructuración y privatización de nu- Les prêts concernant la sécurité so- achieve further reductions in merosos bancos estatales insolventes, ciale, le secteur financier et le sec- poverty and inequality. In the early y la modificación de las tarifas de la teur de l'énergie ont permis de 2000s the country faced volatile cap- energía. Sin embargo, esas reformas franchir des étapes importantes sur ital markets, a difficult external en- no se iniciaron sino en los últimos la voie de la réforme, y compris des vironment, and lingering fiscal años del decenio y no han avanzado changements dans la base de calcul vulnerabilities (a large share of its lo suficiente. El escaso progreso ob- des retraites des employés du sec- x i i E X E C U T I V E S U M M A R Y public debt is indexed to the tenido con la reforma del sis- teur privé, la restructuration exchange rate and short- tema de jubilaciones y pen- et la privatisation des nom- term interest rates). Cur- ~NOL siones (especialmente de los breuses banques d'État en rently (May 2003), market A trabajadores del sector pú- faillite et la réforme de la ta- perceptions about Brazil are blico) comprometió el de- rification de l'énergie. Tou- ENGLISH improving in response to re- ESP sempeño del país, al restringir tefois, ces réformes n'ont FRANÇAIS newed efforts to complete la disponibilidad de recursos débuté qu'à la fin de la dé- key reforms and to improve para inversión y para progra- cennie et ne sont pas allées the fiscal situation, but vulnerability mas sociales mejor orientados. suffisamment loin. La timide pro- to market volatility may remain for El programa de asistencia a Bra- gression de la réforme du système some time. Policies must maintain sil instrumentado por el Banco pro- des retraites (en particulier celles fiscal discipline to ensure access to dujo un conjunto lo suficientemente des employés du secteur public) a external finance, keep inflation low, importante de resultados positivos nuit à la bonne performance du pays and prevent an erosion of the gains como para ser calificado de satis- en limitant les ressources dispo- of the 1990s. The government and factorio. En los años noventa, las tasas nibles pour l'investissement et des the Bank must also continue ad- de pobreza extrema disminuyeron del programmes sociaux mieux ciblés. dressing the roots of poverty. Fur- 19% al 14,5% en el país en su con- Le Programme d'assistance de la ther reductions in poverty and junto y del 42% al 30% en el nordeste. Banque en faveur du Brésil a donné inequality will require improved El aporte del programa a la reducción un nombre suffisant de résultats po- growth performance and better tar- de las tasas de pobreza medida en sitifs pour être jugé satisfaisant. geting of social expenditures. In ed- función del ingreso fue moderado -- Dans les années 90, l'extrême pau- ucation, it is necessary to increase el avance obedeció más que nada a la vreté a reculé de 19 % à 14,5 % à years of schooling and to improve eliminación de los altos índices de in- l'échelon national et de 42 % à 30 % education quality to obtain sub- flación (que afectaban de manera des- dans le nordeste. Le Programme n'a stantive results. Access of the poor proporcionada a los pobres)--; el contribué que modestement au recul to basic services also needs to be programa sólo contribuyó indirecta- de la pauvreté monétaire -- sa prin- expanded. Completing tax, social mente ayudando al gobierno a man- cipale retombée ayant consisté à security, and financial sector reforms tener la estabilidad a fines del decenio. mettre un terme à la forte inflation is critical. The Bank can continue to Sin embargo, efectuó una importante (qui pénalisait les pauvres plus que play a relevant role in Brazil by help- contribución al extraordinario pro- toute autre catégorie) -- et il n'a ing the government to increase gains greso de los indicadores sociales y al contribué qu'indirectement à aider in education and health and to re- acceso de los pobres de las zonas ru- le Gouvernement à stabiliser dura- move the constraints to better rales y urbanas a la infraestructura bá- blement l'économie à la fin de la dé- growth performance. sica. Todos estos elementos son cennie. En revanche, l'apport du condiciones indispensables para lo- programme a été considérable à grar nuevos avances en la reducción deux titres : la remarquable amélio- de la pobreza y la desigualdad. Es pro- ration des indicateurs sociaux et bable que las mejoras en el campo de l'élargissement de l'accès des popu- la educación se traduzcan en menores lations pauvres des zones urbaines et grados de pobreza y desigualdad, rurales aux infrastructures de base. puesto que en Brasil los ingresos están Ces éléments constituent des condi- estrechamente vinculados a los nive- tions préalables indispensables à tout les de educación. Con un acceso más nouvel effort en faveur de la réduc- amplio de los pobres a la infraestruc- tion de la pauvreté et des inégalités. tura se alivia en forma directa la po- Les améliorations obtenues dans le breza y se crean las condiciones para domaine de l'éducation ont de el ulterior aumento de los ingresos bonnes chances de se traduire par de las unidades familiares. une baisse de la pauvreté et des in- x i i i B R A Z I L : F O R G I N G A S T R AT E G I C PA R T N E R S H I P F O R R E S U LT S De aquí en adelante, para égalités, sachant que dans ce que Brasil logre mayores re- pays les revenus sont forte- ~NOL ducciones de la pobreza y la ment liés au niveau d'ins- A desigualdad, será necesario truction. Enfin, le plus large profundizar los avances re- accès des pauvres aux infra- ESP alizados. En los primeros structures influe directement FRANÇAIS años de este siglo, el país en- sur la réduction de la pau- frentaba la inestabilidad de vreté et crée par là même les los mercados de capitales, difíciles conditions nécessaires à l'augmen- condiciones externas y una persis- tation des revenus des ménages. tente vulnerabilidad fiscal (un gran Les acquis du Programme doi- porcentaje de su deuda pública se vent désormais être consolidés pour ajusta según el tipo de cambio y las que le Brésil puisse poursuivre sur tasas de interés a corto plazo). En la la voie de la réduction de la pau- actualidad (mayo de 2003), los mer- vreté et des inégalités. Au début des cados están mejorando su percep- années 2000, le pays a été exposé à ción de Brasil, ante los renovados des marchés financiers instables, à esfuerzos del país por concluir las un environnement extérieur défa- reformas clave y sanear la situación vorable et à des difficultés budgé- fiscal, aunque la inestabilidad de los taires persistantes (une grande mercados puede continuar durante partie de la dette publique est in- un tiempo. Las políticas deben man- dexée sur le taux de change et sur les tener la disciplina fiscal, para asegu- taux courts). Actuellement (en rar así el acceso al financiamiento mai 2003), le marché a une position externo, impedir el aumento de la plus favorable à l'égard du Brésil, inflación y evitar el deterioro de los en raison de la volonté réitérée du progresos obtenidos en los años no- Gouvernement de mener à bien les venta. El gobierno y el Banco también principales réformes et d'améliorer deben seguir atacando las causas de la situation budgétaire, mais l'insta- la pobreza. A fin de continuar redu- bilité des marchés risque de durer ciendo la pobreza y la desigualdad quelque temps. Les politiques doi- será preciso acelerar el crecimiento vent garder le cap de la discipline y orientar mejor el gasto social. En budgétaire pour garantir l'accès aux educación, para obtener resultados sources de financement externes, sustanciales es necesario aumentar pour maintenir l'inflation à un ni- los años de escolaridad y mejorar la veau bas et pour empêcher une éro- calidad de la instrucción. También se sion des acquis obtenus dans les debe ampliar el acceso de los pobres années 90. Le Gouvernement et la a los servicios básicos. Es crucial ter- Banque doivent continuer à s'atta- minar las reformas del sistema im- quer aux causes profondes de la pau- positivo, el sistema de seguridad vreté. Progresser sur la voie de la social y el sector financiero. El Banco réduction de la pauvreté et des in- puede continuar cumpliendo un im- égalités implique de relever encore portante papel en Brasil ayudando le niveau de la croissance et de al gobierno a mejorar los logros ob- mieux orienter les dépenses sociales. tenidos en educación y salud y eli- S'agissant de l'éducation, il convient minar los obstáculos que impiden d'allonger la durée de la scolarisation acelerar el crecimiento. et d'améliorer la qualité de l'ensei- x i v E X E C U T I V E S U M M A R Y gnement pour obtenir des résultats significatifs. L'accès des populations pauvres aux services de base doit égale- ment être étendu. En outre, il est essentiel que les ré- FRANÇAIS formes portant sur la fisca- lité, la sécurité sociale et le secteur financier soient menées à bien. La Banque peut continuer à jouer utilement un rôle au Brésil en aidant le Gouvernement à pour- suivre son action sur le front de l'éducation et de la santé pour op- timiser les acquis et à lever les obs- tacles qui freinent encore la croissance. Gregory K. Ingram Director-General, Operations Evaluation x v ACRONYMS AND ABBREVIATIONS AAA Analytical and advisory services AIDS Acquired immune deficiency syndrome BNDES Banco Nacional de Desenvolvimento Econômico e Social (National Development Bank) CAE Country Assistance Evaluation CAS Country Assistance Strategy CEF Caixa Economica Federal CMU Country Management Unit ECLAC Economic Commission for Latin America ESW Economic and sector work FDI Foreign direct investment FRL Fiscal Reform Loan GDP Gross domestic product GEF Global Environment Facility HIV Human immunodeficiency virus IBGE Instituto Brasileiro de Geografia e Estatistica IBRD International Bank for Reconstruction and Development IDB Inter-American Development Bank IFC International Finance Corporation IFIs International financial institutions IMF International Monetary Fund INSS Instituto Nacional de Seguridade Social IPEA Instituto de Pesquisa Economica Aplicada LAC Latin America LCR Latin America and the Caribbean Region MDGs Millennium Development Goals MIGA Multilateral Investment Guarantee Agency NGO Nongovernmental organization OECD Organisation for Economic Co-operation and Development OED Operations Evaluation Department OEG Operations Evaluation Group OEU Operations Evaluation Unit PAYG Pay-as-you-go system PSD Private sector development QAG Quality Assurance Group SAL Structural Adjustment Loan SECAL Sector Adjustment Loan SMEs Small and medium-size enterprises SRL State Reform and Privatization Loan SUS Sistema Único de Saúde TA Technical assistance TFP Total factor productivity x v i i 1 Purpose and Background T his report evaluates the World Bank assistance program to Brazil dur- ing the 1990­02 period, covering the administrations of Presidents Fer- nando Collor de Mello/Itamar Franco (1990­94) and Fernando Henrique Cardoso (1995­02). The Country Assistance Evaluation (CAE) examines three main and interrelated questions. First, were the objectives of Bank assistance relevant, given Brazil's development needs and challenges in this period? Sec- ond, was the Bank's assistance program effectively designed and consistent with its objectives? Third, did the Bank's program achieve its objectives and have a substantive impact on the country's development during this period? Examining these three questions also allows poverty, as it tended to produce social tensions the CAE to assess whether the Bank can still and unrest.1 play a relevant role in a large middle-income country such as Brazil, and to draw lessons and Long Period of Growth Followed by the recommendations for future Bank assistance to "Lost Decade" the country. During the 1950­73 period, Brazil had one of The Bank's program of assistance to Brazil the best growth performances among develop- can only be evaluated with an understanding ing countries, as indicated by annual growth of Brazil's development challenges in the rates of 7.5 percent (table 1.1). Brazil was able 1990s. The country entered the 1990s after a to maintain high growth rates during the decade of poor economic performance, remainder of the 1970s (after the 1974 oil characterized by high inflation and low shock) at the cost of large current account growth. Brazilian society had succeeded in deficits and a rapid buildup of external debt, restoring democracy, but had also become but debt ratios were considered acceptable and frustrated with the many failed stabilization did not raise major concerns. Inflation was attempts and the stagnation in economic already high, but its effects seemed to have activity, after decades of high growth. The lack been largely neutralized by extensive indexa- of growth was particularly problematic, given tion arrangements. Income inequality was one Brazil's high social inequalities and levels of of the highest in the world, but all income 1 B R A Z I L : F O R G I N G A S T R AT E G I C PA R T N E R S H I P F O R R E S U LT S The country seemed classes benefited from The 1980s were labeled the "lost decade" for poised to become a the high growth rates, Brazil and most of Latin America. For Brazil, the success story. including the poorest lost decade extended until the mid-1990s segments of the popula- because of the failure to stabilize the economy tion. Growth seemed to and implement a coherent program of be sustainable, and the country seemed poised structural reforms. The administration of to become a success story. President Collor initiated a number of reforms The second oil shock and the developing- in 1990, including the reduction of trade country debt crisis of the 1980s brought an restrictions and the privatization of some State abrupt end to this growth performance and enterprises. But the failure to stabilize the exposed the fragility of Brazil's economic economy and the emergence of corruption strategy. First, the country's inability to adjust scandals reduced the impetus for reform and internally to the lack of foreign finance ultimately brought about the impeachment of President led to the acceleration of inflation and a decline Collor by Congress in 1992. Vice-President in investment ratios (table 1.1). Infrastructure, Itamar Franco assumed the presidency for the then almost exclusively a responsibility of the remainder of Mr. Collor's term. Inflation State, was especially affected. Second, it became remained unabated during most of his adminis- apparent that the country had failed to build its tration, reaching an annual rate of 5,000 human capital to the levels required to maintain percent in June 1994. high growth rates. Finally, the economy was plagued by severe inefficiencies in resource Stabilization and Structural Reforms allocation caused by trade and exchange restric- in the 1990s tions, distorting taxes, and the pervasive Success in stabilization was only achieved with presence of the State in virtually all sectors of the the implementation of the Real Plan in June economy. The poor 1994. The success of the Real Plan in reducing The 1980s were labeled segments of the popula- inflation was initially threatened by growing fiscal the "lost decade" for tion were particularly deficits in the first Cardoso administration penalized by the stagna- (1995­98), as they contributed to a real exchange Brazil and most of Latin tion of economic activity rate appreciation, an expansion of current America. and high inflation. account deficits, and a substantial increase in the S e l e c t e d E c o n o m i c I n d i c a t o r s , T a b l e 1 . 1 A n n u a l A v e r a g e s , 1 9 5 0 ­ 0 2 Real fixed CPI investment, Current Current External inflation GDP growth 1980 prices account account FDI debt Period (average) (%) (%) (% of GDP) (US$ million) (% of GDP) (% of GDP) (% of GDP) 1950­73 29.3 7.5 19.1 ­354 ­1.3 0.4 17.6 1974­80 41.6 6.8 24.0 ­7,745 ­4.5 0.8 27.0 1981­94 507.2 1.9 16.8 ­2,716 ­1.1 0.6 27.3 1995­99 16.6 2.3 17.0 ­26,218 ­3.7 2.7 42.5 2000 6.6 4.5 16.0 ­24,225 ­4.0 5.5 36.5 2001 5.7 1.5 16.5 ­23,214 ­4.6 4.5 41.7 2002 8.3 1.5 n.a. ­7,696 ­1.8 3.5 45.0 Note: All variables are period averages except for external debt; 2002 figures are estimates. 2 P U R P O S E A N D B A C K G R O U N D public and external debts. However, during the economic performance Success in stabilization second Cardoso administration (1999­02) there worsened considerably, was only achieved with was a substantial fiscal adjustment at all levels of resulting in a strong the implementation of the government, as indicated by the shift in the devaluation of the Real Plan. primary balance (excluding interests) from currency and a sharp deficits to surpluses of more than 3.5 percent of rise in international GDP. The adoption of tight fiscal policies for four borrowing spreads, from 500 basis points in consecutive years was instrumental in maintain- 2000 to 2,700 basis points in late 2002. The ing control of inflation, despite a large currency strong pressures on the exchange and interest devaluation (following the move from a managed rates, in turn, had adverse consequences for peg to a floating rate regime in 1999), and for fiscal policy, as a significant part of public debt is reducing the current account deficit (table 1.1 indexed to the U.S. dollar or at floating rates. and annex table A.10).2 These forces led to an increase in public debt The Cardoso government also implemented from 50 to 63 percent of GDP during 2002. The an ambitious program of reforms in other current account deficit declined further, but the areas, including the abolition of State monopo- growth recovery lost momentum with the lies, the privatization of State enterprises, the energy rationing, the tightening of macro restructuring and privatization of State banks, policies, the restricted access to credit, and the and land reform. Finally, there was also a more fall in confidence. focused effort to improve education and health In January 2003 Mr. Luiz Inacio Lula da Silva standards, as shown by the impressive became president and announced his commit- improvement of most social indicators. For the ment to fiscal discipline and the targets that had sake of illustration, the net enrollment rate in been agreed with the IMF in September 2002, primary education increased from 84 to 96 under a US$30 billion Standby to support Brazil percent during the 1990s, and infant mortality through December 2003. This announcement declined from 48 to 29 per 1,000 live births in had a positive impact on financial markets, but the same period (annex table A.11). will need to be followed by the implementation By the year 2000 Brazil seemed to be of coherent policies in order to consolidate the harvesting the first fruits of its stabilization and hard-won stabilization gains and restore reform efforts. As shown in table 1.1, inflation confidence further. Mr. Lula da Silva also faces a had been brought under control, despite a challenging development agenda, despite the large devaluation of the Real, and GDP growth positive achievements in the 1990s. Brazil's per had increased to 4.5 percent. The current capita GDP is around US$7,500 on a purchasing account deficit had declined from a peak of power parity (PPP) basis and its social indicators US$33 billion to US$23 billion, and was fully have improved significantly, but its distribution covered by a large volume of foreign direct of income is still very unequal, and 34 percent of investment (FDI). Real fixed investment was the population remains below the poverty line. still low by historical standards, but the FDI To restore growth and reduce poverty further, flows enhanced the prospects of large Mr. Lula da Silva will need to release fiscal increases in productivity. The increase in resources for investment and well-focused social external debt seemed to have been halted. programs, and remove the remaining structural These positive trends were disrupted in 2001 bottlenecks that hinder and 2002, however, by several adverse events. growth. Success in these By the year 2000 Brazil These included an international slowdown, a areas will depend, seemed to be harvesting domestic energy crisis, spillovers from the among other things, on Argentine crisis, and market fears that the 2002 the implementation of the first fruits of its elections would bring a new government not well-designed social stabilization and reform committed to fiscal discipline and economic security, tax, financial, efforts. reforms. Market expectations about Brazil's and judicial reforms.3 3 2 World Bank Assistance to Brazil, 1990­02 T he alleviation of poverty was the central objective of Bank assistance to Brazil throughout the 1990s and early 2000s. This was stated in the 1993 assistance strategy, and reiterated in the 1995, 1997, and 2000 strategies. Growth was usually defined as an intermediate objective, or as a means to achieve the final objective of poverty alleviation. The strategy that was developed in this period It became clear that the strategy had to called for elements that were expected to have reflect the diminishing importance of the Bank a direct impact on poverty alleviation and as a financing source. The Country Assistance elements designed to foster growth--but the Strategies (CASs) indicated that the Bank had emphasis was on the first set of elements. to become more selective and concentrate its The Bank's strategy was developed in a resources in the sectors and regions where its period when the institution was becoming poverty alleviation impact would be strongest. less important as a source of finance to Brazil. The strategy that was developed in response As shown in table 2.1, average Bank disburse- called for a switch of assistance to the social ments to Brazil increased slightly in nominal and other sectors expected to have a more terms but declined sharply in relative terms direct impact on poverty alleviation. The during this time. Bank disbursements strategy also called for a concentration of accounted for 16.5 percent of total debt efforts in the poorest regions of the country, financing flows to Brazil in the 1980s but only primarily the Northeast. In assisting the poor 6.5 percent in the 1990s. By the end of the regions, the Bank saw the need to deal directly decade, Bank disbursements had declined to with Brazilian states and municipalities, given less than 4 percent of total financing flows their responsibility for the provision of public (4.5 percent including the International services mandated by the 1988 Constitution. Finance Corporation [IFC]--see annex table Education and health were elevated as priority A.1). The institution's contribution had also sectors (especially the lessened in comparison with other develop- former), because they Education and health ment institutions, such as the Inter-American were seen to have the were elevated as priority Development Bank (IDB) and the National capacity to contribute to Development Bank (BNDES). poverty alleviation and sectors. 5 B R A Z I L : F O R G I N G A S T R AT E G I C PA R T N E R S H I P F O R R E S U LT S T a b l e 2 . 1 S i z e o f W o r l d B a n k L e n d i n g , 1 9 8 0 ­ 0 1 1980­89 1990­01 1990­94 1995­98 1999­01 Annual IBRD disbursements (US$ million) 894 1,100 663 1,254 1,621 Percent of total debt flows to Brazil 16.5 6.4 10.2 3.6 3.9 Percent of IDB disbursements 279.1 107.2 71.8 64.8 280.7 Percent of BNDES disbursements 24.2 15.8 20.2 10.0 16.4 IBRD debt outstanding, disbursed (US$ million) 8,311 7,963 6,310 6,298 7,963 Percent of total Brazil debt stock outstanding 7.3 3.4 4.1 2.6 3.4 Percent of total IBRD stock of disbursed loans 9.8 6.1 5.7 5.4 6.1 Sources: IBRD, IDB, BNDES. growth at the same time. Assistance to education agriculture extension) because of unsatisfactory would focus on early childhood development outcomes in the 1980s. Energy projects were also and basic education, while assistance to health scaled down for the same reason in the 1980s and would support the fight against transmittable early 1990s; the poor results caused primarily by diseases and improved access for the poor to the government's tariff policies.1 The CASs do not health services. Assistance to rural development mention, however, that the government also had would continue, but these projects would be reservations about Bank assistance to energy restructured to sharpen their focus on rural because of the Bank's safeguards, particularly the poverty alleviation. Bank's resettlement policies, after a traumatic Assistance to infrastructure would also and costly experience with resettlement in the continue, but with some changes. The Bank previous decade.2 would support the government's decentraliza- The sectoral reallocation of lending in the tion and privatization programs, assisting the 1990s was generally consistent with the Brazilian states and municipalities and encour- proposed strategy. As shown in table 2.2, the aging private sector participation in infrastruc- share of education, health, and the environ- ture, in order to help Brazil meet its large ment in the total portfolio increased substan- infrastructure needs. Lending would focus on tially--from around 6 percent in the 1980s to sectors more difficult to privatize, or needing an about 25 percent in the 1990­02 period. The "honest broker," or with a more direct impact share of rural development/poverty alleviation on poverty alleviation (such as roads, urban rail, remained roughly at the same levels. The share water and sanitation). Finally, the premise for of transportation increased through lending to assistance to the environment was that it would urban transportation, a subsector with a strong help to sustain growth as well as to reduce direct impact on the poor. The share of water poverty (as the poor were disproportionately and sanitation declined, although not by a wide affected by environmen- margin. The shares of traditional agriculture The share of education, tal degradation). projects and energy were substantially health, and the The decision to switch reduced. If the analysis is restricted to invest- to the social sectors and ment lending, the gains in the social sectors environment in the total the environment implied and the environment are even larger--their portfolio increased from the need to reduce combined shares increase from around 6 to 34 around 6 percent in the assistance to other percent of total investment loans (annex table sectors. The Bank scaled A.2 provides more detailed information). 1980s to about 25 percent down traditional agricul- At the same time, table 2.2 also reveals the in the 1990­02 period. ture projects (irrigation, emergence of Bank assistance in areas such as 6 W O R L D B A N K A S S I S TA N C E T O B R A Z I L , 1 9 9 0 ­ 0 2 public sector management and social protec- The First Phase (1990­94): Contraction of tion. It is also evident that assistance in these Lending and Shift to the Social Sectors two areas was accompanied by the emergence and the Environment of adjustment lending, which increased from The early 1990s were a turbulent period in 6.8 percent of the portfolio in the 1980­89 to Brazil, as noted in Chapter 1. During this period 26.4 percent in 1990­02. The shift to adjust- Bank commitments and disbursements ment lending in the 1990s reflects critical declined significantly and net transfers became developments in international capital markets large and negative, consolidating a trend begun and in Brazil, and an evolution of the Bank's in the late 1980s (figure strategy in the second half of the decade. To 2.1). The sharp decline The shift to adjustment appreciate the evolution of the Bank's in the volume of lending lending in the 1990s assistance, it is useful to define three different reflected the govern- reflects critical phases: the 1990­94 period of contraction and ment's inability to sectoral shifts; the 1995­98 period of recovery provide counterpart developments in of lending, consolidation of the strategy, and funds, as well as the international capital initial support to stabilization and structural Bank's hesitation to markets and in Brazil, reforms; and the 1999­02 period of shift to initiate new lending in and an evolution of the adjustment lending in support of stabilization view of portfolio deteri- and structural reforms. oration (the share of Bank's strategy. S e c t o r a l C o m p o s i t i o n o f B a n k L o a n s , T a b l e 2 . 2 1 9 8 0 ­ 0 2 ( p e r c e n t o f t h e v a l u e o f c o m m i t m e n t s ) 1980­89 1990­02 Sector All loans All loans Investment loans Agriculture 32.5 13.4 18.1 Rural development/poverty 11.4 10.1 13.6 Other 21.1 3.3 4.5 Education 2.0 11.7 15.9 Environment 0.9 6.2 8.5 Finance and PSD 12.7 8.9 4.9 Health 2.8 6.9 9.4 Infrastructure 43.4 28.7 34.9 Transportation 13.0 16.5 22.4 Urban 3.8 7.4 10.0 Other 9.2 9.2 12.4 Energy 21.0 5.8 3.8 Water and sanitation 9.5 6.4 8.6 Public sector management 0.2 11.0 3.8 Social protection 0.0 9.9 0.1 Urban development 5.4 3.2 4.3 TOTAL 100.0 100.0 100.0 Share of adjustment loans 6.8 26.4 -- 7 B R A Z I L : F O R G I N G A S T R AT E G I C PA R T N E R S H I P F O R R E S U LT S W o r l d B a n k L e n d i n g , 1 9 8 0 ­ 0 1 F i g u r e 2 . 1 ( U S $ m i l l i o n s ) U.S. millions 2,500 2,000 1,500 1,000 500 0 ­500 ­1,000 1980 1983 1986 1989 1992 1995 1998 2001 Commitments Gross disbursements Net disbursements projects at risk had sharply to 43 percent of new commitments The 1993 country strategy increased to 85 percent) (table 2.3). The education portfolio comprised proposed a focus on in an environment of five projects dealing with basic education; the poverty reduction and a extreme macroeco- new health portfolio included an innovative sectoral reallocation of nomic disequilibria and project to control AIDS and a project to political uncertainties. strengthen health services in low-income areas lending to education and The 1993 country of the Northeast. The Bank's green environ- other sectors consistent strategy, written in the mental agenda was initiated in this period with with this focus. middle of this turbulent three green projects (the Bank had two projects period, proposed a dealing with industrial pollution in the 1980s). focus on poverty The share of infrastructure remained the same reduction and a sectoral reallocation of lending as in the 1980s, but with a strong reallocation of to education and other sectors consistent with resources to water and transportation, and with this focus. The 1993 document had the merit of a focus on decentralization. outlining an assistance strategy that would be Although the sectoral shifts were consistent followed during most of the decade--but was with the Bank's strategy, most of the new an incomplete document. It lacked a satisfac- projects faced the same difficulties as previous tory discussion of the government's program, work: lack of counterpart funds, poor institu- did not assess the government's capacity to tional capacity, and slow implementation. absorb the assistance, and failed to address Several projects that faced implementation many important details. For example, it noted difficulties had to be restructured by the next the need to encourage private sector participa- administration. Some of the main lessons tion in infrastructure, but it did not elaborate a extracted from this period were the need to clear assistance strategy ensure government ownership of the The Bank's green in this area. assistance program, to make a candid assess- environmental agenda During this phase, ment of the government's implementation the combined share of capacity, and to limit the set of objectives to was initiated in this education, health, and those that had a realistic chance of being period. the environment rose reached. 8 W O R L D B A N K A S S I S TA N C E T O B R A Z I L , 1 9 9 0 ­ 0 2 The Second Phase (1995­98): Recovery of International Bank for There was a significant Lending, Consolidation of the Strategy, Reconstruction and expansion of Bank Initial Support to Structural Reforms Development (IBRD, the lending in this period, led The conditions for Bank assistance improved World Bank) and the by efforts to deal with dramatically after 1994. The government's International Finance success in stabilizing the economy and elaborat- Corporation (IFC). rural poverty. ing a development agenda led to a sharp There was a signifi- improvement in the quality of the portfolio and cant expansion of Bank lending in this period, opened the way for a resumption of lending. The led by efforts to deal with rural poverty (table quality of the policy dialogue improved, 2.3 and figure 2.1). The Bank launched 13 new especially after the decentralization of the projects focused on rural poverty alleviation, Country Management Unit to Brasilia in 1997.3 most of which were in the Northeastern states. The government became progressively more This cluster of projects was considered as the engaged in the elaboration of the assistance second generation of rural development strategy. The strategies in 1995 and 1997 projects, more focused on poverty alleviation reaffirmed the focus on poverty alleviation, with and more community-driven (the first genera- growth as a second objective, but were able to tion had been initiated in the mid-1980s). The elaborate the assistance strategy with more detail basic objective of these projects was to improve and coherence, benefiting from a poverty assess- the standard of living of the rural poor through ment and a private sector development (PSD) the provision of basic services such as electric- strategy. The World Bank country strategy in 1997 ity, water, and sanitation, on a community- was the first for Brazil jointly elaborated by the driven basis. This cluster also included an S e c t o r a l C o m p o s i t i o n o f B a n k L o a n s , T a b l e 2 . 3 1 9 9 0 ­ 0 2 ( p e r c e n t o f t h e v a l u e o f c o m m i t m e n t s ) Sector 1990­94 1995­98 1999­02 Agriculture 6.1 26.3 10.3 Rural poverty 0.7 24.7 7.4 Other 5.4 1.7 2.8 Education 22.1 5.2 8.2 Environment 11.2 7.1 1.9 Finance and PSD 6.3 4.5 13.8 Health 8.9 7.1 5.3 Infrastructure 40.2 34.0 16.4 Transportation 18.2 27.3 8.0 Urban 5.3 10.2 7.0 Other 12.9 17.1 1.0 Energy 5.4 3.1 7.9 Water and sanitation 16.6 3.6 0.5 Public sector management 0.0 10.0 20.1 Social protection 0.0 0.1 24.0 Urban development 5.2 5.7 0.0 TOTAL 100.0 100.0 100.0 Share of adjustment loans 0.0 0.0 63.9 9 B R A Z I L : F O R G I N G A S T R AT E G I C PA R T N E R S H I P F O R R E S U LT S The absence of Bank innovative pilot project restructured to provide funds for technical assistance for early to support market- assistance. In the case of water, assistance was childhood development based land reform. provided through an existing water modern- There were few new ization loan in the water portfolio and a new and nutrition was education and health water management loan in the environment disappointing. projects in this period, portfolio. The IBRD's lending to infrastructure largely because of the in this period focused on the transportation need to manage existing projects and to sector, including two large projects that restructure some of them. The new education accounted for half of the lending and project was the first of a program of three supported the restructuring and privatization projects supporting improvements in school of federal railways and highways. These actions management and quality in poor regions. The were all consistent with the strategy, but the new health project supported better delivery IBRD provided little assistance to the develop- of health care in poor regions. These projects ment of regulation in the transportation were highly consistent with the strategy, but sector, a surprising finding since this sector the absence of Bank assistance for early received most of the lending. childhood development and nutrition was The IFC started investing in infrastructure disappointing, as the CASs had been proposing (primarily ports and roads), although not to a project in this area since the early 1990s. the extent that would be expected--the share Support to infrastructure continued, but of infrastructure investments increased to only under a strategy that benefited from greater 25 percent of new commitments and only 13 elaboration and was consistent with the broader percent of commitments in the whole period PSD strategy developed by the IBRD and IFC. (annex table A.3). MIGA, which had started The PSD strategy had identified infrastructure operations in Brazil in 1994, provided guaran- deficiencies as one of the major obstacles to tees on foreign investments with an accumu- private sector development and growth (other lated value of US$9 billion, mostly in obstacles included deficiencies in financial infrastructure (annex table A.3). intermediation and in the legal and regulatory Another important development in this frameworks). The infrastructure strategy that period was the Bank's initial support for was developed maintained the support to stabilization. The assistance strategies in 1995 decentralization, but and 1997 pointed out the risks to stabilization Another important also included support to posed by growing fiscal imbalances at the development was the the government's federal and state levels and signaled the Bank's infrastructure privatiza- willingness to support meaningful reforms Bank's initial support for tion program, in order through adjustment lending. The government stabilization. to help Brazil meet its was not yet ready to start implementing a large infrastructure major reform, but requested Bank assistance needs. The strategy also in its efforts to sanitize the finances of Brazil- assigned well-defined roles to the IBRD, IFC, ian states. In response to these requests, the and the Multilateral Investment Guarantee Bank initiated a policy dialogue with several Agency (MIGA). The IBRD would provide states, culminating in the elaboration of four technical assistance in the regulatory area and loans. These loans accounted for 10 percent of catalytic lending to specific sectors, IFC would new commitments (table 2.3) and supported make pioneer investments in infrastructure, and the privatization of banks and several MIGA would help attract foreign investment. infrastructure enterprises owned by the states. The IBRD assisted the federal government These were de facto adjustment loans that had in the development of regulatory frameworks to be constructed as investment loans because and agencies in the energy and water sectors. there was no appropriate lending instrument In the case of energy, an existing loan was at the time.4 1 0 W O R L D B A N K A S S I S TA N C E T O B R A Z I L , 1 9 9 0 ­ 0 2 The Third Phase (1999­02): Further reforms, one loan The government's Expansion of Lending and Shift to preserving critical social willingness to pursue Adjustment Lending in Support of expenditures, two loans critical reforms justified a Stabilization and Structural Reforms supporting financial shift to adjustment The 1997 Asian crisis and the 1998 Russian crisis sector reforms, and one exposed the inconsistencies of Brazil's policy loan supporting energy lending. mix, ultimately forcing the government to adopt sector reform. Because a floating exchange rate regime and tighten of new policy developments, the package was fiscal policies considerably. These efforts were slightly different from the one originally supported by an international financial package envisaged in the revised strategy. In particular, led by the IMF and including the Bank and the programmatic lending started in 2001 (this IDB. The Bank's contribution would include instrument did not exist previously), assistance several adjustment loans supporting fiscal and to financial sector reforms was expanded, with a financial sector reforms, as described in the second loan approved in 2002, and one energy revised 1997 strategy approved by the Board in loan was approved in the same year, supporting December 1998. The package proposed in the changes in tariff policy and other sector reforms. revised strategy had to be submitted to the These adjustment loans were accompanied by Board because the original 1997 assistance technical assistance loans supporting reform strategy did not foresee a substantial amount of implementation. adjustment lending in the period. The Bank scaled down assistance to The revised 1997 strategy and the assistance infrastructure in order to make room for adjust- strategy in 2000 stress the need to avoid the ment lending and maintain the assistance to economic stagnation and rising poverty that the social sectors. In education, the Bank would result from a crisis and note that the initiated four new basic education projects in government's willingness to pursue critical poor regions, two of which focused on the reforms justified a shift to adjustment lending. states of Bahia and Ceará. These projects show The documents also point out that investment an evolution in design, including greater lending had to be temporarily curtailed concern with teacher training. In health, the anyway--the fiscal effort involved limitations Bank launched three projects, including a on counterpart funds and borrowing restric- second AIDS project building on the first tions on the states that would slow project successful project, which strengthened the disbursements. But the documents do not national disease control system (an evolution mention that the decision to shift to adjust- of two previous projects that dealt successfully ment lending was also a response to a govern- with transmittable diseases), and a promising ment complaint that the Bank had been family health project that supports prevention inconsistent--advocating fiscal adjustment at and a proactive contact with the communities. the macroeconomic level while pressing for The Bank also started the third generation of project lending at the sectoral and state levels. rural poverty alleviation projects, encouraged During the 1999­02 period there was a further by the success of the second generation, and a expansion of lending, accompanied by a strong larger land reform project, building on the shift to adjustment lending, as shown in figure successful pilot project. In the environment, 2.1 and tables 2.1 and 2.3. The Bank's share in the Bank initiated four green projects and total financing flows to Brazil increased for the finalized the preparation of an ambitious first time since the 1980s, although it remained project designed to protect 10 percent of the small. The package of adjustment loans included Amazon region, financed by Global Environ- two loans supporting fiscal/public administration mental Facility (GEF) and Group of Seven (G7) reforms, two loans supporting social security grants. 1 1 3 Assessment of Bank Products and Services Assessment of Analytical and Advisory Services A nalytical and advisory services became an important component of the Bank's assistance to Brazil in the 1990s. The greater importance of non- lending services was brought about by the Bank's awareness of its de- clining importance as a source of finance and its potential capacity to contribute to reforms and the quality of sectoral policies in Brazil. During 1990­02 the Bank elaborated 75 formal compared with 82 and 81 percent for the Latin reports (economic and sector work--ESW) and American Region and Bankwide, respectively. numerous policy notes, covering all areas of The Operations Evaluation Department's assistance. Half of the ESW produced was (OED) review of Bank ESW for Brazil concluded prepared after 1997, indicating the increasing that QAG's positive assessment is largely importance of nonlending services in the justified. The issues covered by the ESW were Bank's assistance strategy in the second half of relevant and the analyses were generally of high the decade. quality. The government has valued the Bank Bank ESW for Brazil has received positive ESW, as well as the more informal policy notes. reviews from the Quality Assurance Group Some ESW has had a significant and positive (QAG). As shown in table 3.1, all ESW for Brazil impact in the formulation of sectoral policies reviewed by QAG has been rated satisfactory, and the quality of Bank projects (box 3.1). Q A G E v a l u a t i o n o f E S W : S h a r e o f T a b l e 3 . 1 S a t i s f a c t o r y E S W , 1 9 9 6 ­ 0 2 Brazil Latin America Bank Number Satisfactory (%) Number Satisfactory (%) Number Satisfactory (%) 6 100 38 82 234 81 1 3 B R A Z I L : F O R G I N G A S T R AT E G I C PA R T N E R S H I P F O R R E S U LT S At the same time, OED also found that the specific cases, the Bank made an effort at ESW program has fallen short of its potential, dissemination by organizing conferences with and that there is scope for improving ESW the participation of federal and state govern- selection; clearance; and, especially, dissemina- ments, politicians, academics, and nongovern- tion. Government officials noted that on mental organizations (NGOs), but in other cases occasion ESW was initiated by the Bank after active dissemination of the ESW was poor. The informal requests from officials in sector Bank's Web site in Brazil, www.obanco- ministries, rather than as part of a formally mundial.org, constitutes another channel for agreed work program. In some of these cases dissemination, providing a variety of useful the relevant ministry had limited interest in information about the Bank, including its participating in the final review phases. In these operations in Brazil, and access to publications. cases the clearance process took longer than However, very few publications are translated usual, diminishing the value of the ESW for into Portuguese, which is a major obstacle to policy purposes. At the time of the OED review, wider dissemination within the country. The the Bank and the government had agreed to executive summaries containing the most ensure clear sponsorship for every ESW important findings and recommendations have product by the relevant ministry, to meet not been translated either, even though the cost regularly to monitor the ESW program, and to of translation would have amounted to a small establish a maximum of fraction of the ESW budget. The main problem 30 days for review and Government officials have indicated that the limiting the impact of final clearance. Bank is the primary multilateral institution that These measures will the government resorts to for technical advice. ESW--insufficient enhance the relevance The government has also indicated that the dissemination--needs to of the Bank's ESW if Bank can play an important "pedagogical" role be addressed. implemented effectively, in the country, informing Brazilian society but the main problem about long-term structural issues, their limiting the impact of ESW--insufficient dissem- potential solutions, and the tradeoffs involved. ination--needs to be addressed. In some To play this role effectively, however, the Bank B o x 3 . 1 E x a m p l e s o f O u t s t a n d i n g E S W A report on environmental policies for the Amazon in 1992 substantial impact on the design of government and Bank strate- provided an accurate diagnosis of the causes of deforestation gies to deal with this problem. The recommendations were in- and recommended a coherent sustainable development strategy corporated in the design of the government's FUNDESCOLA for the region. The report filled a strategic gap in the Bank and program, which has been supported by three Bank projects. gave substance to the government's agenda. Critical Issues in Social Security (2001) presented a com- State Debt: Crisis and Reform (1995) was a timely report that prehensive analysis of the Brazilian pension system and de- examined the serious imbalances in the finances of Brazilian tailed recommendations for reform. The report provided the states that jeopardized the success of the Real Plan. The report analytical basis for the policy dialogue and the extensive Bank was the basis for key policy discussions with the government, assistance, and its recommendations remain valid. the provision of technical assistance to the National Treasury, Attacking Brazil's Urban Poverty (2001) and Rural Poverty Re- and the starting point for de facto adjustment loans to state duction in Brazil: Towards an Integrated Strategy (2001) are two governments. outstanding reports on urban and rural poverty, providing solid A report to improve education in 1997 portrayed accurately the material for the design of coherent and integrated poverty re- difficulties facing primary education in the Northeast and had a duction strategies. 1 4 A S S E S S M E N T O F B A N K P R O D U C T S A N D S E R V I C E S must make a greater effort to disseminate its evolution--a pronounced decline in ratings in work among the potential audiences and to the the first half of the 1990s followed by a sharp population at large. improvement after 1994. The sustainability of 81 percent of the projects closed after 1994 was Assessment of Lending Services rated as likely, compared with only 64 and 55 During 1990­02 OED reviewed 94 closed Bank percent for the Latin American Region and projects in Brazil, representing US$13.2 billion Bankwide, respectively. The institutional develop- in commitments. The share of closed projects ment impact of 67 percent of the projects closed with outcomes rated as satisfactory by OED after 1994 was judged to be substantial, amounted to 73 percent, showing a significant compared with only 45 and 39 percent for Latin improvement over the previous decade and America and the Bank overall, respectively (annex relative to the benchmarks, as shown in table table A.5). 3.2. During the 1980s the outcomes of projects QAG evaluations of The improvement in in Brazil, on average, had worse ratings than ongoing projects are project outcomes sprang projects in Latin America and Bankwide, consistent with OED from the sharp whereas in 1990­02 the ratings were compara- evaluations. As shown turnaround in project ble to or better than these benchmarks. in table 3.3, since 1996 Computing the shares of satisfactory projects (when QAG started performance after 1994. by the value of commitments yields similar evaluating ongoing results (annex table A.5). projects) projects in Brazil have obtained The improvement in project outcomes for better ratings than the benchmarks, both for the decade as a whole sprang from the sharp quality at entry and quality of supervision. turnaround in project performance after 1994. Finally, the annual computation of projects at As shown in table 3.2, in the first half of the risk from supervision reports also indicates a 1990s the share of projects with satisfactory pattern consistent with all the previous results. outcomes declined further, to 33 percent, but As shown in figure 3.1, in the first half of the that was more than offset by the high perform- 1990s, 85 percent of active Brazilian projects ance in the 1995­02 period. Furthermore, both were considered at risk, compared with 50 and investment and adjustment loans performed 35 percent for Latin America and Bankwide, significantly better than the benchmarks during respectively. Since the mid-1990s the share of this period--90 percent of the investment Brazilian projects at risk has been equal to or loans reviewed had a satisfactory rating, lower than the benchmarks. compared with only 70 percent Bankwide, and all four adjustment loans reviewed had a Factors that Contributed to Improved satisfactory rating, compared with 82 percent Project Performance Bankwide (annex table A.5). Several factors contributed to the improved OED ratings on project sustainability and performance of Bank projects in Brazil during institutional development impact show a similar the second half of the 1990s. On the govern- O E D E v a l u a t i o n o f C l o s e d P r o j e c t s : S h a r e T a b l e 3 . 2 o f P r o j e c t s w i t h S a t i s f a c t o r y O u t c o m e s , 1 9 8 0 ­ 0 2 ( p e r c e n t ) 1980­89 1990­01 1990­94 1995­02 Brazil 59 73 33 91 Latin America 63 73 65 78 Bankwide 69 69 65 72 1 5 B R A Z I L : F O R G I N G A S T R AT E G I C PA R T N E R S H I P F O R R E S U LT S Q A G E v a l u a t i o n o f O n g o i n g P r o j e c t s : T a b l e 3 . 3 S h a r e o f S a t i s f a c t o r y P r o j e c t s , 1 9 9 6 ­ 0 2 Brazil Latin America Bank Satisfactory Satisfactory Satisfactory Number (%) Number (%) Number (%) Quality at entry 18 100 81 98 429 87 Quality of supervision 21 86 147 78 800 77 ment's side, two factors can be identified. First, On the Bank's side there were also two success at stabilization lengthened the time contributing factors. The first was the Bank's horizons of policymakers and allowed for a response to underperforming projects, involv- much better planning of public expenditures. ing changes in project design or curtailed The problems caused by deficient fiscal lending to the sector. For example, some rural planning and lack of counterpart funds development projects of the first generation diminished considerably, benefiting all were rated as unsatisfactory because of heavy projects. Second, the government that took overhead costs and failure to respond to the office in 1995 was able to elaborate and demands of beneficiaries. The second genera- implement a clear development agenda. tion was considered more effective at rural Government ownership of the assistance poverty alleviation (essentially because of the program strengthened, several problematic community-driven approach) and was projects were restructured, and project generally rated as satisfactory. Irrigation implementation units were generally strength- projects closing in the early 1990s were rated as ened as well. This also tended to benefit all unsatisfactory because they failed to boost projects. NGO involvement in the implementa- rural growth and reduce poverty, and were tion of projects in areas such as health and the curtailed in the second half of the decade. Most environment may also have contributed to energy projects closing in the early 1990s were improved project performance in these areas. rated as unsatisfactory primarily because of low P r o j e c t s a t R i s k , 1 9 9 0 - 0 2 F i g u r e 3 . 1 ( p e r c e n t o f c o m m i t m e n t s ) Percent 100 90 80 70 60 50 40 30 20 10 0 1990 1992 1994 1996 1998 2000 2002 Brazil Latin America Bank 1 6 A S S E S S M E N T O F B A N K P R O D U C T S A N D S E R V I C E S tariffs and the poor financial performance of wide margin, and were The decentralization of energy companies, leading the Bank to curtail significantly lower than Bank operations has lending to the sector. average costs Bankwide. improved Bank The second contributing factor on the If average lending costs knowledge of the Bank's side was the increasing Bank presence are defined as the ratio in the country. In 1996 the Bank increased the of costs to the value of Brazilian economy and number of staff working in the environmental commitments, average the quality of the policy area. In 1997 the Country Management Unit costs in Brazil drop dialogue, resulting (CMU) was transferred to Brasilia and the significantly below the number of staff in the field increased consider- two benchmarks. The generally in better project ably. In mid-2002 the Bank had 85 technical and high share of local staff design. support staff working in 3 offices, 10 from employed has probably headquarters. The Brasilia office had 70 helped the Bank keep average costs under employees, including the country director, control. All in all, these indicators suggest that several sector specialists, and an implementa- the decentralization enabled the Bank to tion team dealing with procurement, disburse- manage effectively a large and complex ments, and audits. The Recife office had 10 assistance program, involving an average of 55 employees and focused on the management of active projects every year, spread over many agriculture projects in the Northeast. The states and a large territory. Fortaleza office had 5 employees and carried the policy dialogue in the Northeast. It was Assessment of the Bank's Role in Aid being upgraded to also manage education Coordination projects in the region and handle distance The Bank Group and the IDB were the largest learning programs. sources of external development finance to The decentralization of Bank operations has Brazil in the 1990­01 period, with roughly improved Bank knowledge of the Brazilian US$16.5 billion in total commitments, including economy and the quality of the policy dialogue, IFC but excluding MIGA's guarantees (annex resulting generally in better project design. tables A.3 and A.4). The Bank and the IDB Project implementation has also improved with performed largely complementary roles, with the greater proximity of staff to project areas. just a moderate overlapping between the two For example, the presence of agriculture institutions. The IDB provided very limited specialists in the Recife office has allowed the assistance to agriculture; its education, health, Bank to closely supervise a large number of and environment portfolios were smaller than agriculture projects and subprojects in the the Bank's and generally focused on different Northeast. Procurement and disbursement areas (such as secondary education). Its problems, relatively common in the first half of infrastructure portfolio the 1990s, have been reduced with the was much larger than The Bank and the IDB presence of the implementation team in the the Bank's and the performed largely Brasilia office. Government officials indicated institution was also complementary roles. to OED that the quality of the Bank's work had more active in urban improved significantly after decentralization. development, filling a Officials stressed that the Bank had become gap left by the Bank. Japan and Germany were more sensitive to political constraints and more the third- and fourth-largest sources of external responsive to the country's needs. development finance, with US$3.2 and US$0.2 The improved perfor-mance of the Brazil billion of lending, respectively, mostly to portfolio did not lead to high average costs infrastructure. relative to other areas of the Bank. As shown in The Bank held consultations with the IMF, table 3.4, average project costs in Brazil were the IDB, and the bilateral agencies (all of which higher than those in Latin America, but not by a have offices in Brazil), but coordination of 1 7 B R A Z I L : F O R G I N G A S T R AT E G I C PA R T N E R S H I P F O R R E S U LT S A v e r a g e L e n d i n g C o s t s , b y P r o j e c t a n d T a b l e 3 . 4 C o m m i t m e n t , 1 9 9 0 ­ 0 2 Brazil Latin America Bankwide Lending costs per project (US$ 000) 655 623 763 O/w: preparation costs 372 360 427 ESW costs per ESW (US$ 000) 146 143 125 Operational costs per project (US$ 000) 715 667 819 Lending costs per commitment (%) 0.45 0.58 0.85 external assistance has essentially been and bilateral agencies. The division of labor performed by the government. The Ministry of between the Bank and the IDB emerged Finance is responsible for the overall policy essentially from the government's dialogue dialogue with the IMF and the Bank, as well as with the two institutions. There does not seem the Bank's adjustment loans. The Ministry of to be a need for a more active Bank role in Planning and COFIEX (an interministerial overall aid coordination, although the Bank and committee) are responsible for screening and the IDB would both benefit from more frequent approving investment loans from all multilateral consultations and sharing of experiences. 1 8 4 Assessing the Development Impact of the Bank's Assistance T his section addresses the three major questions raised in Chapter 1: were the objectives of the Bank's assistance program relevant, was the pro- gram well designed and consistent, and did it achieve its two central objectives of poverty reduction and growth. The previous chapter showed the sharp As mentioned in Chapter 2, the Bank's strategy improvement in the ratings of individual to reduce poverty comprised a set of elements projects during the 1990s. The favorable ratings expected to address the roots of poverty, and indicate that, in general, project objectives another set to foster growth. Emphasis was on were relevant and achieved, but they provide the first set, which essentially included assistance little information on the overall impact of the to human resource development (education, Bank's assistance. To assess the latter, it is health) and expansion of basic services to the necessary to go beyond individual project poor. The second set comprised financial and ratings, examine the country's progress at technical assistance to the buildup of infrastruc- poverty reduction and growth, and assess the ture and the removal of structural inefficiencies. extent to which the Bank contributed to these The decision to provide more intensive outcomes. assistance to human resource development, especially education, was appropriate. Poverty Assessing the Relevance and and inequality are highly correlated with differ- Consistency of the Bank's Strategy ences in educational outcomes,1 and Brazil had Brazil entered the 1990s suffering the made very slow progress in improving key consequences of more than a decade of high social indicators in the 1980s (table 4.1). The inflation and slow growth. The share of the country lagged Latin American and middle- population below the extreme poverty line had income countries in many aspects, despite risen from 16.5 to 19 percent, and income distri- having a higher per capita income than these bution had continued to worsen because of a groups of countries. The decision to pursue a pronounced drop in the real incomes of the diversified strategy of poverty reduction poor (figure 4.1 and table 4.1). Poverty indica- (combining human resource development with tors for the Northeast were appalling. Under other elements) was also justified by the these conditions, the Bank's focus on poverty finding that growth reduces poverty in Brazil, alleviation was relevant and appropriate. but with an elasticity lower than one.2 1 9 B R A Z I L : F O R G I N G A S T R AT E G I C PA R T N E R S H I P F O R R E S U LT S The presentation of the assistance strategy sectoral programs (as defined in the 1996­99 and in the CASs may be criticized for failing to 2000­03 multiyear plans)(see Brazil, Ministry of explain and justify more clearly the greater Planning 1996, 2000). For example, the govern- emphasis on human resource development. ment defined primary education as a clear priority For example, the dichotomy between poverty and established the goal of reaching universal reduction and growth objectives pursued in access to primary education by 2007. The Bank most CASs was to some extent artificial. contributed to this effort through significant Education and health are arguably essential assistance to primary education. In health, the ingredients to long-run growth as well, government's agenda stressed the need to although there is an ongoing debate in the expand access to health care and to reduce infant literature on the channels and the extent to mortality through reforms of the public health which human capital affects growth.3 Also, system, family health programs, and control of access of the poor to basic services not only transmittable diseases. The Bank's assistance to alleviates poverty in a broad sense but may also the health sector covered these areas. In foster subsequent growth (Pinheiro and others infrastructure, the government's program 2001). Another criticism that may be raised is included, inter alia, the recovery, decentraliza- the failure of the CASs to clarify the time tion, and partial privatization of federal highways, horizon within which these interventions the recovery of state highways, the privatization of would produce their effects. Education may be federal railways, and the decentralization of urban an important ingredient for both poverty rail transportation. The Bank contributed with reduction and growth, but it may take several transportation projects in all these areas. decades for its effects to materialize fully. During the 1990s the Bank had to operate in These criticisms of the presentation of the an increasingly decentralized mode, dealing assistance strategy in the CASs do not imply directly with Brazilian states. The focus on the criticisms of the substance of the strategy, Northeastern states was appropriate, given the however. On the contrary, the assistance region's high levels of poverty (table 4.1), and program was generally well designed, the strategy to provide assistance to these underpinned by sound analytical work, and states was also reasonable and cost-effective. consistent with the main program objectives Rural poverty alleviation projects were and with the government's development prepared and implemented in every Northeast- agenda. The analytical support to the CASs ern state, an appropriate decision given the improved substantially during the 1990s, with high levels of rural poverty in the region. the elaboration of high- Assistance to education and health was The analytical support to quality poverty assess- provided in part through federal projects ments, PSD strategies, covering all Northeastern and other poor the CASs improved and other ESW prepared states. More specific assistance was provided to substantially during the with the substantial Bahia and Ceará in the areas of education, 1990s, with the participation of top health, water and sanitation, and urban Brazilian researchers. development. The selection of these two states elaboration of high- The consistency of the seems to have followed pragmatic rules. These quality poverty assistance program with are large states, accounting for 43 percent of assessments, PSD the government's own the Northeast population. The two states had development agenda active and reformist governments and the strategies, and other ESW also improved during the capacity to borrow from the Bank because of prepared with the 1990s, with increasing previous efforts to adjust their public finances. substantial participation government participa- The shift to adjustment lending at the end of of top Brazilian tion in the CASs, macro- the decade was also justified and consistent economic stability, and with the Bank's central objectives of poverty researchers. the formulation of clear reduction and growth. The 1995 CAS had 2 0 A S S E S S I N G T H E D E V E L O P M E N T I M PA C T O F T H E B A N K ' S A S S I S TA N C E T a b l e 4 . 1 P o v e r t y a n d S o c i a l I n d i c a t o r s , 1 9 9 0 ­ 0 1 1980 1990 2000 Poverty rate (% of households) 40.0 40.7 33.6 Northeast 66.8 68.6 57.4 Northeast rural -- 84.9 72.6 Extreme poverty rate (% of households) 16.6 19.1 14.6 Northeast 36.2 41.8 30.0 Gini coefficient 58.4 61.6 59.6 Theil coefficient 68.2 77.3 71.3 Ratio of average income (10% richest/40% poorest) 21.5 26.7 23.6 Adult illiteracy rate (% of population ages 15 and above) 22.8 18.7 12.4 Northeast 41.6 36.4 24.3 Youth illiteracy rate (% of population ages 15-24) 12.0 9.8 4.2 Northeast 27.0 22.7 9.6 Net school enrollment rate, primary education (% of pop.) 80.1 83.8 95.4 Northeast 69.1 72.0 92.8 AIDS incidence (per 10,000 pop.) -- 0.6a 1.0 Malaria incidence (per 1,000 pop.) 14.0 32.7 30.3 Life expectancy at birth (years) 62.6 65.6 68.6 Infant mortality rate (per 1,000 live births) 79.2 48.0 29.6 Northeast 112.8 72.9 44.2 Access to electricity (% of households) 74.9 87.5 96.0 Northeast 50.8 70.5 89.4 Northeast rural 12.6 35.4 66.5 Access to improved water source (% of households) 60.7 74.2 87.3 Northeast 30.8 43.3 67.0 Northeast rural 4.9 10.6 22.8 Access to sanitation (% of households) 51.3 63.2 71.3 Northeast 30.9 43.2 54.2 Households with refrigerators (% of households) 56.6 70.6 85.1 Northeast 28.7 41.5 64.9 Northeast rural 5.9 14.5 33.9 a. AIDS incidence increased to 1.4 per 10,000 people in the mid-1990s (annex table A.11). Sources: IBGE (Household Surveys--PNAD); IPEA, INEP, Ministries of Education and Health. already indicated the need to provide intermediation as a major obstacle to higher assistance to fiscal, social security, and financial growth. When the government requested reforms to consolidate stabilization and create support to its fiscal, social security, and the conditions for growth. Poverty assessments financial sector reforms, the Bank acted stressed the need to maintain stability and promptly through adjustment and technical improve the targeting of social programs, and assistance loans, while preserving the PSD strategies identified distortions in financial assistance to the social sectors. 2 1 B R A Z I L : F O R G I N G A S T R AT E G I C PA R T N E R S H I P F O R R E S U LT S Assessing the Contribution of the the consolidation of stabilization in the second half Assistance Program to Poverty of the decade. The state reform loans contributed Alleviation to the effort at fiscal reform and privatization within these states in 1995­98. After 1998 the Bank The Program's Contribution to the Decline in stepped up its support to stabilization through a Income Poverty Ratios package of five adjustment loans amounting to During 1990­01, Brazil achieved progress in US$2.8 billion and several complementary techni- poverty reduction, as indicated by the decline cal assistance loans. The package of adjustment of 7 and 5 percentage points in the share of loans (all of which were one-tranche operations) the population below the poverty and included two fiscal reform loans, one social protec- extreme poverty lines, respectively (figure 4.1 tion loan, and two social security reform loans. and table 4.1). Brazil seems to have achieved The two fiscal reform loans supported the greater progress in reducing poverty than fiscal stability program that shifted the primary most Latin American countries, according to a balance from deficits to surpluses for more comparative analysis by the United Nation's than 3.5 percent of GDP, and the passage of an Economic Commission for Latin America impressive body of legislation that reformed (UNECLAC 2002). Progress in poverty the public administration and the finances of reduction was greater in the Northeast, as Brazilian states. This included the Law of Fiscal indicated by the 10 percentage point Responsibility and the Law of Fiscal Crimes. reduction in poverty rates. In the rural This body of legislation has addressed a Northeast there was an even greater reduction problem of fiscal imbalances and excessive of 12 percentage points (table 4.1). debt in the states that seemed intractable in the Most of these gains are related to the mid-1990s. In particular, the Law of Fiscal success of the 1994 stabilization plan, which Responsibility has institutionalized fiscal stopped the erosion of the real incomes of the discipline, transparency, and accountability, lowest two-tenths of the income distribution changing radically the way government officials (figure 4.1). The gains at the end of the decade at all levels think and act. were minor. Stabilization had a strong impact The social protection loan was designed to on poverty reduction because high inflation minimize the impact of the 1999 fiscal adjust- disproportionately affected the poor.4 The ment on the poor by minimizing cuts to social successful reduction in inflation also helps assistance, health, and education, and preserv- explain why Brazil achieved greater progress in ing a number of programs targeted at the poor. reducing poverty than the average Latin The loan achieved its objectives and was rated American country, despite a similar growth as highly satisfactory by OED. Finally, the two performance--between 1990 and 2002 its per social security loans supported a constitutional capita GDP grew at an average rate of 1.1 amendment that introduced the principle of percent yearly, similar to the Latin American actuarial balance for both public and private average of 1.2 percent. sector workers and introduced a minimum Assessing the contribution of the Bank's retirement age for public sector workers and a assistance program to the less generous benefit formula for private Progress in poverty decline in national sector workers. These reforms were important reduction was greater in poverty rates in the 1990s steps, but the Brazilian social security system involves assessing its remains imbalanced, a problem that will be the Northeast, as contribution to stabiliza- discussed below. indicated by the 10 tion,asthetwoeventsare The program's contribution to the consoli- percentage point clearly related. The Bank dation of stabilization must be acknowledged, did not play any meaning- both financially and in the provision of techni- reduction in poverty ful role in the 1994 Real cal assistance, but should not be exaggerated. rates. Plan, but contributed to The IMF led the international financial package 2 2 A S S E S S I N G T H E D E V E L O P M E N T I M PA C T O F T H E B A N K ' S A S S I S TA N C E P o v e r t y R a t i o s a n d I n c o m e G r o w t h F i g u r e 4 . 1 b y D e c i l e s A. Evolution of Poverty and Extreme Poverty in Brazil, 1981­01 Percent of population 60 50 40 30 20 10 0 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 Poverty rate Extreme poverty rate B. Growth of the Real Income of Each Tenth of the Income Distribution Between 1993 and 2001 Growth rates (%) 30 25 20 15 10 5 0 1 2 3 4 5 6 7 8 9 10 Tenths of the income distribution C. Growth of the Real Income of Each Tenth of the Income Distribution Between 1981 and 1993 Growth rates (%) 10 5 0 -5 -10 -15 -20 -25 -30 1 2 3 4 5 6 7 8 9 10 Tenths of the income distribution 2 3 B R A Z I L : F O R G I N G A S T R AT E G I C PA R T N E R S H I P F O R R E S U LT S in 1998­99, through a US$18 billion Stand-by sive increase of 21 percentage points. The agreement. The IDB also participated in the progress in education produced a double rescue package, with two loans amounting to convergence of key education indicators--the US$3.4 billion. Therefore, the Bank can claim Northeast indicators converged with the only a moderate and shared contribution to the national averages, and the latter converged reduction in national income poverty rates in with the averages of Latin American and the 1990s. middle-income countries (figure 4.2). This The Bank's contribution to the decline in increase in net enrollment in the Northeast also poverty rates in the Northeast and the rural implied that roughly one-and-a-half million Northeast was probably larger, as the institution children in the lowest two-tenths of the income was focusing its resources on the region. But it is distribution gained access to schooling in this difficult to link Bank interventions such as the period. rural poverty alleviation projects to increases in The Bank made an important contribution to household incomes and reductions in poverty-- these results. During 1990­02 the institution it would require a more detailed analysis of launched 10 projects focused on basic household incomes and poverty in municipali- education, 7 of which benefited the Northeast ties covered by the projects (an impact evalua- and other poor regions. Bank projects have tion study is planned for the third generation of contributed to the positive outcomes by, inter rural projects but was not done for the second). alia, enhancing access of poor children to There were also other factors at work, including education through the provision of infrastruc- the introduction of rural pensions early in the ture and education materials (benefiting decade. directly one million poor children in the The Bank's main Northeast and other poor regions), building the The Bank contributed to contribution to poverty capacity of state secretariats of education poverty alleviation in alleviation in Brazil is (enabling them to manage the increased Brazil by helping the more clearly reflected in student population), helping federal and state government address the other related indicators governments set up information and evaluation also shown in table 4.1. systems for primary education, implementing fundamental The Bank contributed minimum operational standards in all schools, determinants of poverty. to poverty alleviation in empowering local communities, and introduc- Brazil by helping the ing programs for disadvantaged children. government address the fundamental determi- The two basic education projects launched nants of poverty, including education and in the Northeast in the early 1990s received health outcomes among the poor and the only a moderately satisfactory rating by OED access of poor urban and rural populations to because they did not pay sufficient attention to basic services. The Bank's contribution to these teachers' training and classroom effectiveness. two sets of outcomes is assessed below. Quality of teaching in the Brazilian primary education system is still unsatisfactory, The Program's Contribution to Improved especially in the Northeast, as revealed by the Education and Health Outcomes national and state evaluation systems (which During 1990­01 there were impressive gains in the Bank helped introduce) and international education, as shown by the sharp decline in the student comparisons. However, the design of youth illiteracy rate and the sharp increase in Bank projects improved during the decade. the net enrollment rate in primary education Bank ESW provided important inputs for the (table 4.1). The gains in the Northeast were design of the national school improvement particularly impressive--the net enrollment program (Fundescola), initiated in 1997 and rate in primary education had increased by only supported by three Bank projects. The full 3 percentage points in the 1980s, but jumped implementation of the program should lead to from 72 to 93 percent in the 1990s, an impres- better learning outcomes. The recent basic 2 4 A S S E S S I N G T H E D E V E L O P M E N T I M PA C T O F T H E B A N K ' S A S S I S TA N C E 00­ 2000 LAC LAC 2000 1990 income 1998 00­ 1998 Education, Brazil 1990 Middle 1996 Rate, 1996 Primary in Brazil Mortality 1994 1994 Enrollment 14)­7 Infant D. (Northeast) Net (Northeast) B. ages 1992 1992 Brazil Indicators Brazil births) live 1990 Population 1990 1,000 (% 80 70 60 50 40 30 20 100 90 80 70 60 (Per Health 2000 2000 LAC LAC and 00­ 1998 income 00­ 1998 income 1990 1990 Middle Middle 1996 1996 Rate, Birth, at Education Brazil Brazil Illiteracy 1994 1994 24)­ Expectancy Youth 15 A. Life 1992 (Northeast) 1992 (Northeast) ages C. Brazil Brazil Selected 1990 1990 Population 25 20 15 10 5 0 (Years) 71 69 67 65 63 61 (% 4.2 Figure 2 5 B R A Z I L : F O R G I N G A S T R AT E G I C PA R T N E R S H I P F O R R E S U LT S In health, the gains have education projects in many cases, access remained constrained by also been impressive. Bahia and Ceará show factors not addressed by the projects, such as lack further improvements of health professionals and adequate financing. in design, including better targeting of the The project was designed on the assumption that poorest municipalities, improvements in these constraints would be removed by other school supervision, and a greater concern with programs, but this did not happen to the extent teacher training programs. expected, a problem that may be interpreted as a In health, the gains have also been impres- flaw in project design. In sum, the Bank's contri- sive, as indicated by the sharp decline in infant bution to better health outcomes in Brazil was mortality rates (especially in the Northeast), significant, particularly in the first class of projects. the increase in life expectancy, the decline in The second class of health projects also the transmission of HIV/AIDS, and the decline contributed to improved health outcomes among in deaths from communicable diseases such as the poor, but this contribution fell short of its malaria, Chagas, and schistosomiasis (table potential because of mismatches between the 4.1). As in the case of education, there was a buildup of infrastructure and the development of double convergence of key health indicators human resources in the health sector.5 (figure 4.2). The Bank contributed to these One disappointing aspect of the Bank's positive outcomes as well, although in the case assistance to education and health was the of health the extent of the Bank's contribution absence of a project addressing early childhood varied between the two main classes of development and nutritional issues. These projects. issues were examined in Bank ESW, but the The first class of projects focused on the program did not include even a pilot project, fight against communicable diseases; it despite the well-known positive impact of early included five projects that produced satisfac- childhood development on educational tory outcomes. The projects effectively outcomes, and that several CASs proposed targeted poor populations by the nature of the assistance in this area. A recent education diseases addressed. For many diseases, mortal- project in Ceará addresses this issue for the first ity rates dropped and incidence rates stabilized time, but not with the focus and intensity that or dropped as well. A good example is malaria: it deserves. a sharp increase in incidence in the 1980s was stopped in the 1990s and was accompanied by The Program's Contribution to Expanding a dramatic reduction in mortality. The second Access of the Poor to Basic Services class comprised three projects focused on During the 1990s and early 2000s there was improvements in health infrastructure and significant progress in expanding the access of policy. Two of these projects were exclusively the population to basic services, such as focused on the Northeast, and the third was a electricity, water, and sanitation (table 4.1 and national project primarily benefiting the North, annex table A.12). It is difficult to pinpoint with Northeast, and Center-West regions. These accuracy the extent to which poor populations projects created or recovered infrastructure, benefited from this expansion, but the provided equipment, and trained staff in relatively large gains in the Northeast and the hospital management. This class of projects rural Northeast suggest that large numbers of also contributed to better health outcomes poor households were reached. The Bank overall, but was ultimately rated as only participated in this effort through its rural moderately satisfactory, because of its partial poverty alleviation and water and sanitation success in expanding access of the poor to projects, and can claim an important contribu- health care. tion to these outcomes. Improvements in infrastructure and equipment The second generation of rural poverty are necessary to expand access of the poor to alleviation projects was initiated in 1995 and health care, but sometimes are not sufficient. In comprised 13 projects, including 8 for the 2 6 A S S E S S I N G T H E D E V E L O P M E N T I M PA C T O F T H E B A N K ' S A S S I S TA N C E Northeastern states. Roughly 60 percent of key issues, such as the During the 1990s and disbursements in the Northeast projects concession of water early 2000s there was financed the provision of electricity and water companies. It issignificant progress in to poor rural households, in approximately possible that the Bank expanding the access of equal amounts. The project benefits of access did not explore its to water and electricity were extended to potential mediation the population to basic 541,000 and 294,000 households, respectively, role in this sector, a role services. corresponding to 2.1 and 1.2 million people. that was actually These numbers account for a large share of proposed in the CASs. additional households in the rural Northeast Another criticism that can be raised is the covered by these services in the 1995­01 insufficient integration among classes of period, according to household survey data projects dealing with water. In the late 1990s (PNAD), suggesting that the Bank made a the Bank launched two water management fundamental contribution to these positive projects in the environment portfolio, outcomes. designed to improve the capacity of the federal The Bank's contribution to the provision of government and Northeastern states in water water and sanitation to the urban poor was also management, and also improve water supply in significant. The water portfolio included three the rural Northeast. Therefore, the Bank had classes of projects. The first class comprised water projects in three sectoral programs two projects designed to extend water and (water, rural poverty, and environment), some sanitation to the urban poor with low-cost of them operating in the same regions and with technologies. The first project provided both similar objectives. It is unclear whether the water and sanitation to roughly one million policies that guide the Bank's assistance in this poor people in the 1992­97 period, accounting area are being harmonized across the three for about 15 percent of the increase in total programs and whether the potential synergies coverage, and probably for a much larger share among these projects are being explored. of the increase in the coverage of the poor. The second project is expected to extend coverage Assessing the Contribution of the Bank's to a similar number of people. Program to Sustainable Growth The second class comprised three projects benefiting four states, and instituted a new The Program's Contribution to Brazil's Growth approach to the recovery of some of the most Performance in the 1990s polluted urban watercourses in the country, Between 1990 and 2002 Brazil grew at an based on integrated water management and average rate of 2.5 percent per year and 1.1 including environmental and land-use aspects. percent per year in per capita terms, similar to These projects benefited a large urban popula- the average growth rate of the rest of Latin tion, and probably benefited a large number of America--2.9 percent per year and 1.2 percent the urban poor, judging by project location and in per capita terms. Brazil's growth perform- design.6 Finally, the third class comprised three ance was much worse than the rest of Latin projects designed to improve the sector's America in the early 1990s but improved in the regulatory framework and encourage private mid-1990s and was better than the region at the sector participation. The need for moderniza- end of the decade (table 4.2). Brazil seems to tion and investment in the water and sanitation have been less affected by the international sector is obvious given the low coverage rates, slowdown than the rest of Latin America, particularly in sanitation. The Bank provided suggesting that the stabilization measures in substantial assistance to the government in the 1999 have paid off, at least to some degree. regulatory area, but progress in passing critical However, its growth performance in the 1990s legislation has been slower than expected was generally disappointing, in comparison because of the lack of political consensus on with other large countries and with its own 2 7 B R A Z I L : F O R G I N G A S T R AT E G I C PA R T N E R S H I P F O R R E S U LT S G D P G r o w t h R a t e s i n B r a z i l a n d S e l e c t e d T a b l e 4 . 2 C o m p a r a t o r s , 1 9 9 0 ­ 0 2 1991­93 1994­98 1999­02 1994­02 Brazil 1.9 3.2 2.0 2.7 Latin America w/o Brazil 5.4 3.6 0.3 2.1 Latin America w/o Brazil and Argentina 4.2 3.7 1.8 2.8 Mexico 3.3 2.9 2.8 2.9 China 12.3 9.9 7.3 8.7 India 3.6 6.6 5.1 5.9 OECD 1.2 2.7 2.3 2.5 Note: OECD = Organisation for Economic Co-operation and Development. Sources: WDI electronic database, United Survey, Consensus Forecast (October, 2002), and OECD. historical record. Brazil's growth performance (except telecommunications) because a large in the 1990s looks particularly disappointing portion of FDI was driven by mergers and considering that several structural reforms acquisitions, including the privatization of state were implemented during the decade. enterprises. This type of FDI generally produces The Brazilian growth literature indicates that efficiency gains but may not raise investment Brazil's disappointing growth performance has levels significantly, at least in the early stages. been fundamentally the product of lower growth of The problem of low investment levels during capital accumulation in the last two decades, and this period was essentially created by three that this factor may explain as much as 70 percent of factors: (i) low domestic savings (arising in the decline in output growth rates after 1980. The good part from public dissavings); (ii) lingering growthstudiesalsoshowthatthestructuralreforms legal and regulatory deficiencies that increased implemented in the 1990s actually generated signif- risk and deterred new investments (including icant productivity gains--total factor productivity expansion investments by new private owners); (TFP) increased more in the 1990s than in any other and (iii) lingering deficiencies in financial period and explains a large share of the GDP intermediation, resulting in large intermedia- growth. The literature concludes that the reforms in tion spreads and lending rates. the 1990s failed to restore high growth rates, not The Bank's assistance program contained because they failed to generate productivity gains, many good elements that addressed the causes but because they failed to raise the levels of invest- of Brazil's weak growth performance. The ment to a significant degree (figure 4.3). The 2001 IBRD's adjustment loans in support of fiscal energy crisis provides an illustrative example of how and social security reforms aimed at reducing the insufficient level of investment in infrastructure fiscal imbalances (caused in good part by has affected the country's growth performance-- excessive wage and pension payments) and the rationing of energy in increasing public and national savings. The The Brazilian growth 2001 reduced GDP IBRD also provided technical and financial literature indicates that growth in that year alone support to the development of regulatory byafullpercentagepoint.7 frameworks and agencies in energy and water. Brazil's disappointing The large flows of The IBRD's transportation portfolio included growth performance has foreign direct invest- operations supporting private sector participa- been fundamentally the ment (FDI) in the 1990s tion in railways, highways, and urban product of lower growth have not contributed to transportation. The IFC invested in toll roads, substantive increases in ports, and telecommunications, and also of capital accumulation investment in infrastruc- provided financial support to SMEs through in the last two decades. ture and other sectors lines of credit and venture capital. MIGA 2 8 A S S E S S I N G T H E D E V E L O P M E N T I M PA C T O F T H E B A N K ' S A S S I S TA N C E G D P G r o w t h , 1 0 - Y e a r M o v i n g A v e r a g e s F i g u r e 4 . 3 ( % p . a . ) a n d R e a l F i x e d I n v e s t m e n t ( % o f G D P ) , 1 9 6 5 ­ 0 1 GDP growth (% p.a.) Investment ratio (% GDP) 12 30 10 25 8 20 6 15 4 10 2 0 5 ­2 0 1965 1970 1975 1980 1985 1990 1995 2000 Investment ratio GDP growth GDP per capita growth guaranteed foreign direct investments with an law imposing contributions on public retirees. accumulated value of US$9 billion, mostly in Second, progress in developing the regula- energy and telecommunications. Finally, the tory framework for infrastructure has been Bank's program included support to financial insufficient and uneven across sectors and sector reforms through two adjustment loans layers of government. Federal regulatory and two technical assistance loans. agencies in the energy and water sectors were The assistance was generally of good quality, created with Bank support, but the transforma- but it did not have a strong impact on invest- tion of the two sectors remains uncertain. In ment and growth in the 1990s, for several the case of water, a major piece of legislation reasons. First, the fiscal and social security (prepared with Bank support) has not been reforms supported by the program started late approved by Congress yet. The regulatory in the decade, and have produced only a framework for energy was improved, including modest increase in national savings (annex several changes in the structure of tariffs table A.10). The fiscal reforms achieved their designed to ensure cost recovery and protect main objectives, but the social security reforms low-income consumers. But the transformation did not go far enough--the reforms have of the energy sector remains incomplete and reduced the actuarially projected expenditures uncertain--distribution was largely privatized and deficits, but they have not reduced the but generation remains largely state-owned. disproportionately large pension expenditures Finally, there has been little progress in and deficits (12 and 5 percent of GDP, respec- developing the regulatory framework for tively) that burden public finances and depress transportation and building regulatory capacity public and national savings. The reforms were at the level of states and municipalities (which less ambitious than expected because of strong have responsibilities in several areas). political opposition. Among other setbacks, Third, the financial sector reforms Congress did not pass measures to increase the supported by the Bank have not been retirement age of private sector workers and to completed. The two programmatic loans have reduce the high benefits of public sector supported a number of important reform retirees, and the Supreme Court overruled a steps, including the liquidation or privatization 2 9 B R A Z I L : F O R G I N G A S T R AT E G I C PA R T N E R S H I P F O R R E S U LT S of most banks owned by the states (a major G7 countries (Pilot Program to Preserve the achievement, as these banks had been repeat- Brazilian Rain Forests). The green agenda edly used as a source of finance by state govern- (forest management) accounted for 60 percent ments and had become insolvent), the of the overall financial assistance, including restructuring of federal banks, improvements loans and grants. Some of the projects in the in bank and corporate legislation, and improve- green agenda were designed to correct the ments in financial supervision. However, environmental degradation caused by federal state banks still account for 40 percent infrastructure projects financed by the Bank in of banking assets, the share of directed credit the 1980s (such as the Polonoroeste project). remains large, financial intermediation is The brown agenda (industrial pollution) heavily taxed (by explicit and implicit taxes accounted for 10 percent of commitments, and such as reserve requirements), and creditor the blue agenda (water management) rights remain weak. As a result, competitive accounted for the remaining 30 percent. In access to credit has remained restricted, and addition, there were projects in the water and intermediation spreads large. sanitation portfolio dealing with the recovery In sum, the part of the Bank's assistance of urban watercourses, as described above. program designed to improve efficiency and Bank assistance to the environment has growth produced mixed results. The program been generally satisfactory, especially in the strengthened the institutional capacity of green area. Although environmental indicators states and municipalities to manage their own in Brazil still lag those of developed countries infrastructure, promoted private sector partic- in several areas, they generally improved ipation in infrastructure, contributed to the during the decade. As shown in table 4.3, the creation of some federal regulatory agencies, average rate of deforestation in the Amazon and introduced several improvements in the was still high during the 1990s, but declined financial sector. These outcomes have below 1980s levels. The size of protected areas probably generated efficiency gains with some increased significantly and air pollution in large positive growth effects. But Bank assistance in cities such as São Paulo declined. The the regulatory area proved largely insufficient emissions of carbon dioxide (measured in and some key reforms supported by the metric tons per capita) increased during the program started late in the decade and have 1990s, but this also happened in other regions, not gone far enough. The regulatory and average emissions in Brazil remained framework needs to be substantially below the averages of Latin Bank assistance to the substantially strength- America, North America, and the OECD (table environment has been ened and key reforms 4.3).9 The Bank's assistance program generally satisfactory. completed to generate contributed to these results not only through the increase in invest- specific project interventions, but also through ment and the additional gains in efficiency that a critical buildup of institutional capacity in the are required for a much better growth Brazilian environment sector from relatively performance.8 low levels in the early 1990s. The Bank's strategy in the green area had The Program's Contribution to Improvements in some shortcomings, but has evolved signifi- the Environment cantly in recent years. An OED report published The Bank was the first international organiza- in 2000 noted that the Bank's forest strategy in tion to provide financial and technical support most of the 1990s was excessively conservation- to environment-related activities in Brazil. oriented and did not support production activi- During the 1990s and early 2000s this ties (OED 2000). The report added that the assistance was greatly expanded through nine forest strategy had not constrained Bank projects and the management of grants from operations in Brazil, but the lack of balance the Global Environment Facility (GEF) and the between conservation and development had 3 0 A S S E S S I N G T H E D E V E L O P M E N T I M PA C T O F T H E B A N K ' S A S S I S TA N C E E n v i r o n m e n t a l I n d i c a t o r s , 1 9 8 0 s a n d 1 9 9 0 s T a b l e 4 . 3 ( u n l e s s o t h e r w i s e i n d i c a t e d ) Indicator 1980s 1990s Average annual deforested areas in the Amazon (km2) a 20,374 16,806 Share of protected areas in the National Territory (%) b 2.4 6.5 Proportion of inadequate days in air quality in the city of São Paulo (%) c 9.7 3.5 Average annual emissions of carbon dioxide (metric tons per capita) d 1.4 1.6 Average annual emissions of carbon dioxide (metric tons per capita) in other regions Latin America d 2.3 2.4 North America (Canada and the U.S.) d 18.8 19.2 High-income OECD d 11.5 12.1 a. Average deforestation in 1977-89 and 1990-00; source: INPE. b. 1989 and 2002; source: WRI, World Bank. c. 1991 and 2000; source Cetesb. d. Average emissions in 1980-89 and 1990-98; sources: World Bank and Carbon Dioxide Information Analysis Center. precluded a more active role for the Bank in (broadly defined toThe government has forest management and the design of sustain- include water projects recently launched the able development policies. The OED report in both the water and National Forest Program argued that proactive development policies environment portfo- may not maintain forests intact, but may lios). As mentioned in with Bank assistance. succeed in reducing deforestation, mitigating the previous section, its impact, and deviating its course to less the projects addressing pollution of urban sensitive areas (in biodiversity parameters). watercourses have generally achieved satisfac- The Bank seems to have embraced this new tory results, but the projects designed to build forest strategy. Recent Bank ESW proposes a capacity in water management are too recent strategy that includes the imposition of taxes on to be evaluated. What can be stated at this stage nonsustainable logging and adequate credit is that there is still much progress to be made schemes for reforestation in degraded areas in developing and implementing a meaningful (Schneider and others 2001). Along the same lines, blue agenda. As mentioned before, access to the government has recently launched the sanitation services increased during the 1990s National Forest Program with Bank assistance, and but is still low, which leads to frequent the Bank has also finalized the preparation of a pollution of urban river basins and quality project on sustainable forests as part of the problems in water supply. The lack of faster National Forest Program, with strong support from progress is largely the result of factors outside NGOs. Finally, in 2002 the Bank and the govern- the Bank's control, such as delays in passing ment, with support from the GEF and G7 funds, critical water legislation. However, there also launched an ambitious project of strict conserva- seems to be scope for more effective Bank tion designed to protect an area equivalent to 10 assistance in this area through more integrated percent of the Amazon region. This implies an strategies and closer collaboration with the increase in the total share of protected areas in the IDB, which is also providing a substantial national territory of 2­3 percent (from 4.2 percent amount of assistance in this area. in 2000 to around 6.5­7 percent in 2002). While Bank assistance under the green Assessing the Overall Impact of the agenda has generally produced satisfactory Assistance Program results, it is more difficult to evaluate the Assessing the overall impact of the Bank's large outcomes of projects under the blue agenda assistance program in Brazil requires assessing 3 1 B R A Z I L : F O R G I N G A S T R AT E G I C PA R T N E R S H I P F O R R E S U LT S its main blocks or components. A major The package of adjustment loans merits a component of the program was designed to separate examination, given its size and that it reduce poverty in the long run through human was proposed for both poverty reduction and resource development and access to basic growth objectives. Assessing the package services. This component produced satisfactory requires considering different clusters of results. Education and health outcomes loans, as they had an uneven impact on improved significantly, and the access of the Brazil's performance in the period of evalua- rural and urban poor to services was consider- tion. The state reform loans and the fiscal ably expanded. The Bank can claim an reform loans achieved their main objectives, important contribution to these outcomes, as it which were essentially the reform of the was the only international development agency public sector and the imposition of hard providing substantial assistance to federal and budget constraints at all levels of government. state governments in most of these areas. These loans could not be expected to produce A second component of the program was much greater improvements in the public designed to stimulate private investment, finances, because this would require other economic efficiency, and growth. This specific and complementary reforms--in component produced mixed results. The taxes and social security, for example. The Bank's strategy was reasonable, and it social protection loan also achieved its well- probably contributed to the efficiency gains defined objective, which was the preservation observed in the decade, but did not succeed of critical social programs during fiscal adjust- in stimulating savings and investment to a ment. The social security, financial sector, and significant degree or in removing some critical energy loans supported important reform structural bottlenecks that continue affecting steps, but these reforms started late in the economic performance. The actions and decade and have not gone far enough, partic- reforms supported by the program were all ularly the social security reform. necessary, but they were not sufficient. In The Bank's assistance program to Brazil in particular, the regulatory framework in the 1990s produced a sufficient mass of infrastructure needs to be substantially positive outcomes to be rated as satisfactory. The Bank's assistance strengthened and some The program had only a moderate contribu- program to Brazil in the key reforms concluded tion to the decline in income poverty rates in order to generate a and the slight reduction in inequality 1990s produced a sharp turnaround in observed in the 1990s. As discussed above, sufficient mass of positive growth performance. macroeconomic stabilization is largely respon- outcomes to be rated as A third component sible for these gains. However, the program of the program involved helped the government achieve some of the satisfactory. support to the environ- key preconditions for further and more ment. This effort produced satisfactory results. substantive reductions in poverty and inequal- The Bank played a critical role in the buildup of ity. As also discussed above, the education institutional capacity in the environment area (and health) gains should translate into from relatively low levels in the early 1990s, reduced poverty and inequality, because the helping the Brazilian government address income differences in Brazil are strongly many important challenges in the decade. related to educational levels. The expanded Brazil's environment indicators still lag those of access of the poor to infrastructure not only developed countries in many respects, but alleviates poverty in a broad sense, but also improved during the decade. The Bank's creates the conditions for a subsequent strategy was excessively rigid in the early 1990s growth in household incomes. but evolved during the decade, with more Admittedly, these gains will need to be explicit recognition of the need to balance consolidated and deepened for Brazil to conservation and growth. achieve further reductions in poverty and 3 2 A S S E S S I N G T H E D E V E L O P M E N T I M PA C T O F T H E B A N K ' S A S S I S TA N C E inequality. For example, in the case of Assessing the Sustainability of the education it will be necessary to raise years of Positive Outcomes schooling and improve education quality to A critical question in Country Assistance obtain more substantive results. A large share Evaluations is whether the positive outcomes of the poor still lacks access to basic services achieved over a decade are likely to be and assets, despite the gains in recent years, sustained over time. Assessment of sustainabil- because access was initially very limited. ity requires examining, inter alia, whether the Therefore, further efforts in this area are also hard-won macroeconomic stability will be needed. However, these are developmental consolidated by the new government, whether problems--solving them will require more the infrastructure built and the programs time and persistence with the right policies, supported by Bank projects will be maintained, policies that do not diminish the achievements and whether the institutional capacity that has of the 1990s. 10 been built at the federal Brazil made substantial Further reductions in poverty and inequality and subnational govern- will also depend on an improved growth ment levels will be progress in all areas performance and better targeting of social preserved. covered by the MDGs and expenditures. In this regard, the need to Macroeconomic is likely to meet the complete some critical reforms in areas such as instability could disrupt targets at the national social security cannot be emphasized enough. many of the positive Brazil's large pension payments are an obstacle outcomes of the 1990s. level by 2015. to growth because they have contributed to For one, poverty rates low public and national savings and hindered a could increase again and growth performance substantial investment recovery. They have also could weaken. Macroeconomic instability been a more direct obstacle to poverty could also affect the sustainability of outcomes reduction by diminishing the volume of at the sectoral level. Bank projects have resources available to better-targeted social financed a substantial volume of infrastructure programs. Finally, they have affected the poor benefiting poor populations and have also by preventing a reduction in payroll tax rates contributed to a substantial buildup of institu- and an increase in formal employment. Brazil's tional capacity. Several programs supported by social security problem constitutes a major Bank projects have become regular govern- obstacle to development and should remain a ment programs and/or been expanded. The priority item in the agendas of both the govern- Water and Sanitation for the Poor, Urban Basin ment and the Bank in the current decade. 11 Management, School Improvement, and The effectiveness of the Bank's assistance can Disease Control programs are just a few also be assessed by examining Brazil's progress examples. These gains could be eroded in a in meeting the Millennium Development Goals scenario of fiscal instability. Sectors such as (MDGs). As shown in table 4.4, during the 1990s education and health command priority and Brazil made substantial progress in all areas would probably be less affected, but sectors covered by the MDGs and is likely to meet that are not considered a social priority--such the targets at the national level by 2015.12 The as the environment--would be more vulnera- Bank contributed to many of these outcomes, ble to funding cuts. primarily through its assistance to education, Sustainability of the Bank's results in the health, and the environment. Areas that require 1990s is closely associated with the preserva- closer monitoring by the government and that tion of macroeconomic stability, but not warrant Bank support include child nutrition exclusively so. It is also possible that the institu- and maternal mortality. Brazil's large regional tional capacity that has been built will be partly inequalities also imply the need to monitor eroded with the termination of Bank projects, the progress of the poorer regions in meeting even without budgetary cuts to the sector. This the MDGs. is because in some sectors (such as the 3 3 B R A Z I L : F O R G I N G A S T R AT E G I C PA R T N E R S H I P F O R R E S U LT S B r a z i l ' s P r o g r e s s i n M e e t i n g t h e T a b l e 4 . 4 M i l l e n n i u m D e v e l o p m e n t G o a l s Goals/targets Assessment Eradicate extreme poverty and hunger 1. Halve, between 1990 and 2015, the proportion of people The share of the population below the indigence line declined from 19.1 whose income is below one dollar a day. percent in 1990 to 14.3 percent in 2000. A further decline to 9.5 percent or less by 2015 is feasible--it would require average growth rates of 3 percent per year. 2. Halve, between 1990 and 2015, the proportion of people Child malnutrition rates declined by 30 percent between 1990 and 1996, to who suffer from hunger. 10.5 percent (height) and 5.7 percent (weight). The decline suggests progress in meeting the target, but there are no recent reliable data. Achieve universal primary education The youth illiteracy rate has declined to 4.2 percent and the net enrollment rate 3. Ensure that, by 2015, boys and girls are able to complete in primary education has increased to 95.4 percent, approaching universality. primary education. Universal completion of primary education by 2015 is highly likely. Promote gender equality Female educational indicators improved faster than male indicators in the 4. Eliminate gender disparity in primary and secondary 1990s and were slightly higher in 2000. This target has been achieved. education no later than 2015. Maintenance of this outcome by 2015 is highly likely. Reduce child mortality The under-five mortality rate declined from 60/1,000 births in 1990 to 37/1,000 5. Reduce by two-thirds, between 1990 and 2015, births in 1999. A further reduction to 20/1,000 by 2015 is likely. the under-five mortality rate. Improve maternal health Many related indicators such as number of prenatal exams or gynecological 6. Reduce by three-quarters, between 1990 and 2015, consultations through the public health system have improved, but the rates of the maternal mortality ratio. maternal mortality are still high by comparison with other upper-middle-income countries. Achievement of this target is feasible but will require continuing efforts. Combat AIDS, malaria, and other diseases AIDS incidence declined from 12.7/100,000 in 1995 to 10.3/100,000 in 2000. 7. Halt by 2015 and begin to reverse the spread of HIV/AIDS. There is evidence that the epidemic is being stabilized overall, although some regions continue to show an increase in transmission and require close monitoring and concentrated control efforts. 8. Halt by 2015 and begin to reverse the incidence of Incidence of malaria has been halted and, despite temporary setbacks, has malaria and other major diseases. started reversing relative to the population. Strong progress at reversibility by 2015 is likely. Incidence of tuberculosis has increased recently, but control of this disease is feasible. Ensure environmental sustainability The Brazilian development agenda and multi-year development program 9. Integrate the principles of sustainable development incorporate the principles of sustainable development. into country policies. The share of households with access to improved water increased from 74.2 10. Halve by 2015 the proportion of people without access percent in 1990 to 87.3 percent in 2001. The aggregate target has been met, to safe drinking water. but meeting the target in rural areas will require further efforts. environment), Bank projects have played a not only in Brazil, and in any case poses a lower critical role in the buildup of technical and risk for sustainability than the risk of managerial expertise. Some qualified experts macroeconomic instability. recruited with project resources may find it As mentioned in Chapter 1, in January 2003 unattractive to remain in the public sector after the new government expressed its commit- project closure, in good part because of ment to macroeconomic stability and the uncompetitive salaries. However, this is a targets agreed with the IMF, in the context of a problem that affects Bank projects worldwide, Standby of US$30 billion approved in Septem- 3 4 A S S E S S I N G T H E D E V E L O P M E N T I M PA C T O F T H E B A N K ' S A S S I S TA N C E ber 2002. In the first quarter of 2003 the the assistance because of Brazil's main primary fiscal surplus had increased to around political limitations or vulnerability lies in the 6 percent of GDP, well in excess of the target of other exogenous factors. large share of the public 3.75 percent of GDP agreed with the IMF, and Overall, the Bank's the government's own target of 4.25 percent of performance was good debt indexed to the GDP. Also, in April 2003 the government during the period of exchange rate and to submitted ambitious pension and tax reform evaluation. The strategy short-term floating proposals to Congress. Market reaction to that evolved in the 1990s these announcements was positive, and by May was underpinned by interest rates. 2003 the pressures on the exchange rate and good-quality ESW, consis- international spreads had subsided signifi- tent with the government's agenda, the country's cantly--the rate of the Brazilian Real in relation development needs, and the Bank's own compar- to the U.S. dollar had declined from 4 to 3 ative advantages. The institution was able to learn between October 2002 and May 2003, and the lessons from the early 1990s and to generally international spreads had declined from 2,700 improve its modus operandi during the decade. to 800 basis points in the same period. The The decentralization of the Country Management exchange rate appreciation led to a decline in Unit (CMU) and the buildup of technical expert- public debt to 52 percent of GDP in May 2003, ise in the field were important factors contribut- from a peak of 63 percent of GDP in late 2002. ing to the improvement in outcomes. The If these trends persist it would be reasonable to decentralization also seems to have enabled the rate sustainability as likely. Bank to manage a complex program in a cost- Unfortunately, even with the recent improve- effective way (Chapter 3). ment in market sentiments, Brazil's macroeco- The Bank cannot be faulted for the lack of nomic vulnerabilities will persist for some time completion of some key reforms. When the 1998 to come. Brazil's main vulnerability lies in the crisis created the conditions for the implementa- large share of the public debt indexed to the tion of structural reforms, the institution exchange rate and to short-term floating responded quickly with financial and technical interest rates, which makes the debt service assistance. It was difficult burden very sensitive to shifts in market to predict the extent and The strategy that evolved perceptions and price movements. A negative the speed with which in the 1990s was shift in market perceptions brought about by individual reforms would underpinned by good external or internal events can have a substan- progress, and when tial impact on debt service flows and impose some reforms stalled, the quality ESW, consistent severe financing constraints. As this CAE is Bank stopped adjust- with the government's being written (May 2003), insufficient time had ment lending while agenda, the country's passed for the new government to establish a maintaining technical track record that would permit a conclusion assistance. What can be development needs, and that current trends will be consolidated and that criticized is the lack of a the Bank's own debt ratios will be placed on a sustainable path. clear assessment of comparative advantages. Therefore, macroeconomic stability and the progress and of the sustainability of the outcomes achieved in the measures required to 1990s and early 2000s were considered to be complete the reform in some of the adjustment nonevaluable.13, 14 loans. The Bank should also not be faulted for the Assessing the Bank's Performance energy crisis in the late 1990s. The institution Assessing the Bank's performance differs from had solid reasons to stop lending to the sector assessing the program's performance because in the early 1990s--the policy of low energy there are situations where the Bank's program tariffs resulted in weak financial results and low produces limited outcomes despite the quality of rates of return in energy projects. The lack of 3 5 B R A Z I L : F O R G I N G A S T R AT E G I C PA R T N E R S H I P F O R R E S U LT S investment in the sector dates back to the 1980s considered these objections, but concluded that and has been largely the result of low tariffs and they did not justify any fundamental revision of the weak capacity of the sector to generate the strategy. The situation was ultimately funds internally. When the government started handled by the Bank in a satisfactory way, but it implementing its restructuring and privatization also exposed the potential conflicts among some program in the mid-1990s, the Bank responded of the Bank's objectives (for example, govern- quickly by restructuring an existing project and ment ownership, stakeholder participation, releasing funds for the development of the promotion of NGO activity). regulatory framework. At this point there was Although the Bank's performance in the probably little rationale to resume large-scale decade was generally good, it is also important lending to a sector that was being privatized. It is to identify areas where the Bank failed to possible that the Bank did not provide sufficient provide adequate assistance. For example, the technical assistance to the sector in the second Bank did not provide assistance in critical areas half of the 1990s, but it would be unfair to fault such as early childhood development and the institution for the crisis. nutrition. The Bank may not have provided Some Bank policies created difficult situations enough assistance to the development of regula- that had to be carefully managed by the CMU in tory agencies either, especially at the level of Brazil. For example, during the elaboration of the Brazilian states. Some projects did not provide assistance strategy in 2000, the Bank had to handle reliable estimates of project benefits for the a delicate situation, resulting from its intention to poor, a clear weakness, considering the poverty discuss the assistance reduction objectives of the program. Also, there It also exposed the strategy with NGOs. The was insufficient integration between related potential conflicts among government indicated projects and important synergies may have been some of the Bank's that it supported NGO missed. More generally, monitoring and evalua- involvement in project tion of projects was less than satisfactory--the objectives (for example, implementation but not Bank should be able to ascertain more systemat- government ownership, in the formulation of ically the impact of its assistance on the poor and stakeholder participation, assistance strategies. The on the efficiency of the Brazilian economy. promotion of NGO government also pointed There are issues of a global nature that are out that strategy formula- more difficult to evaluate in a Country activity). tion was the responsibil- Assistance Evaluation. Brazil's economic ity of democratically elected governments, and performance was to some extent affected by that the government's program was already trade barriers in its main export markets. strenuously negotiated within the government Multilateral trade relations are conducted in coalition and in Congress. Bank attempts to other international fora, and the Bank has only introduce other players in the formulation of the a modest influence over the results of trade strategy could increase the complexity of the negotiations. However, it can be argued that the exercise enormously, contradict government's Bank could have been more vocal during the priorities, and even decrease the legitimacy of the 1990s, advocating greater access for developing strategy. countries, including Brazil, to the markets of As it happened, the institution had separate developed countries. This issue had already consultations with NGOs and other segments of been raised in the mid-1970s by former World civil society to discuss their views on key Bank President Robert McNamara,15 but was not developmental issues. In general, the consulta- pursued by the institution until very recently. tions did not reveal major objections against the main thrust of the Bank's assistance program. The Counterfactual and the Some NGOs voiced objections to globalization, Bank's Relevance the government's privatization program, and the The relevance of the Bank has been challenged effectiveness of regulatory schemes. The Bank on more than one occasion, particularly regard- 3 6 A S S E S S I N G T H E D E V E L O P M E N T I M PA C T O F T H E B A N K ' S A S S I S TA N C E ing its assistance to middle-income countries without conflicts. Also, The Bank played an such as Brazil. Critics usually point out that greater Bank presence important role in the these countries have access to private financial in the field produced transfer of knowledge and flows, that the links between Bank financing important improve- institution building in and project performance are weak because of ments in project design money fungibility, and that the recent and supervision. Brazil during the 1990s. decentralization of Bank operations has This evaluation con- intensified the problem of duplication and cluded that the Bank can still play a relevant role conflict with regional development banks.16 in a middle-income country such as Brazil. The This evaluation concluded that these Bank is most relevant as a source of knowledge criticisms were not justified in the case of Brazil. and technical assistance. It is less relevant as a The Bank did become less important as a source of finance, but not irrelevant, particularly source of finance during the 1990s, as Brazil for poorer regions and in a scenario of volatile gained greater access to private capital markets. capital markets. Besides, financing and transfer of However, the Brazilian authorities stated that knowledge frequently come together. Substantial Bank resources were still an important element learning and experience accumulate during the of the government's financing strategy, particu- life of a project, both for the government and for larly in periods of volatile capital markets, the Bank, and this experience can be capitalized curtailed access, and high spreads. Bank adjust- in future Bank projects and government ment loans in the late 1990s and early 2000s programs. The evolution in the design of helped the government build a reserve cushion education projects is a good illustration. and manage the timing of its international bond The assessment of a counterfactual scenario issues more effectively, yielding important (how Brazil would have performed without the savings for the country. Bank) and the assess- In a middle-income The criticism that the link between Bank ment of relevance are financing and projects is weak disregards the closely related. Brazil country such as Brazil, transfer of knowledge and technical assistance has substantial human the Bank is most relevant that takes place through Bank projects. The resources, but they are as a source of knowledge Bank played an important role in the transfer of not evenly distributed knowledge and institution building in Brazil across regions and are and technical assistance. during the 1990s. Although this transfer generally scarcer in the occurred in part through policy dialogue and North and the Northeast. The country could ESW, a large share took place during the design eventually have achieved the same results and execution of projects. The Bank's contri- without Bank assistance, but it would have bution seems to have been particularly taken longer. Several government programs important in the Brazilian states, which have a were started, accelerated, or expanded much weaker institutional capacity than the through Bank assistance. Also, the technical federal government, while being responsible assistance loans that accompanied the adjust- for delivering basic services to the population. ment loans provided knowledge at a pace that The criticism that the expansion of regional would not have occurred otherwise. For offices would cause duplication and conflict example, the implementation of the inflation with regional banks--the IDB in the Brazilian targeting system by the Central Bank in a very case--is not supported and overlooks the gains short period of time (the first half of 1999) was from a greater presence in the field. Bank and only possible with the intensive use of a techni- IDB programs were highly complementary, as cal assistance loan. The blending of technical noted in Chapter 3. Although the Bank and the assistance and finance provided by the Bank IDB could both gain from closer cooperation, was effective and probably would not have Brazil's large size and development needs offer been provided by any other institution or ample space for the two institutions to operate bilateral donor in the Bank's absence. 3 7 5 Lessons and Recommendations T he greatest lesson learned from a decade of assistance was the need to ensure macroeconomic stability and government ownership of the Bank's assistance program. The unsatisfactory project outcomes and the low effectiveness of the Bank's assistance in the early 1990s reflected fun- damentally the lack of a stable macroeconomic framework and a clear devel- opment agenda. The Bank's central objectives of poverty alleviation and growth cannot be achieved under these circumstances. Other major lessons include the need for the literature on poverty and growth does not Bank to build technical capacity in the field, provide precise parametric information on the maintain an open and frequent policy dialogue impact of all relevant variables. However, there with federal and state authorities, employ the is a strong case for continuing Bank involve- resources of the local academic community, ment in the social sectors, particularly and have the ability to closely supervise its education. Primary education has been univer- projects. salized, but enrollment in secondary education The Bank can continue playing a relevant role is still low, and the quality of education is in Brazil in the coming years by helping the deficient on both levels, particularly in the government consolidate the important achieve- Northeast. The Bank can play an important role ments of the 1990s, correcting some flaws in its in this area, assisting the federal and state assistance, and entering critical areas that remain governments to address the problem of largely uncovered. The following recommenda- student learning, particularly in the poorer tions address the quality of the Bank's assistance. regions of the country. They include both general and strategic and sector-specific recommendations. Improved Framework for Programmatic Lending. There is justification for further programmatic Strategic Direction of Bank Assistance. It is very lending in the coming years to help the country difficult to determine the optimal mix of complete critical reforms, such as those in human resource development and other social security and the financial sector. projects (such as infrastructure) in the Bank's However, programmatic lending requires assistance program because the empirical discipline in the setting of the overall reform 3 9 B R A Z I L : F O R G I N G A S T R AT E G I C PA R T N E R S H I P F O R R E S U LT S program, its final objectives and the intermedi- and the judiciary, the assistance could evolve ary benchmarks. For example, the second into an operation. More assistance to regulatory social security loan supported improvements agencies is also needed, especially at the level in the pay-as-you-go (PAYG) system for private of the states, in order to reduce the lingering workers, but did not stress sufficiently that the uncertainties and encourage private sector imbalances of the pension system remained investment. large and constituted a major obstacle to Brazil's development, and that addressing the Design of More Integrated Strategies. There is pension problem would require a more scope to produce more integrated strategies ambitious reform. This loan was not technically and to explore better the potential synergies a programmatic loan (this instrument had not across projects by changing the focus of been approved by the Board yet), but had assistance from sectors to regions. The move similar characteristics and should have toward more integrated projects may imply followed similar rules. Agreement with the some tradeoffs, such as the reduction in the government on final reform goals and geographical areas covered by the projects. meaningful benchmarks is essential to keeping However, the gains in project efficiency and programmatic lending on track. sustainability may offset the possible losses. The Bank seems to be proceeding in this Building the Capacity of Subnational Governments. direction in the state of Tocantins.1 At the subnational government level, public Regarding the design and objectives of new finance management and administration projects, there is a need to review the outcomes appear weak, especially in relation to the of the 1990s and identify the changes that are federal government. Bank assistance to states needed. The following paragraphs provide the and municipalities might reap high returns. For main recommendations for improved project example, during the early 1990s, the Bank design. More detailed recommendations are helped southern states such as Paraná provided in Annex B and in the background strengthen the administrative capacity of papers prepared for each sector. municipal governments, enabling municipali- ties to manage their finances and meet their Education. The Bank must change the emphasis expanded obligations under the 1988 Constitu- of basic education projects, from improving tion (through a statewide program of technical management to improving quality of teaching. assistance, training, and equipment). The Bank Operationally, this should be achieved by should explore the possibility of providing a moving from system and efficiency goals to similar type of assistance to Northeastern classroom and learning goals. The priority for states. Bank assistance to primary education should be to get inside the classroom in order to Further Support to Private Sector Development. ensure better learning outcomes. This change There is also scope for improving Bank support will require a major role for technical assistance to private sector development. The Bank might and supervision, to ensure that the quality leap consider assistance to judicial reform, as the required to tackle student learning is achieved. judiciary has been identified as a bottleneck in Many poor states in the Northeast may need private sector development strategies produced more focused assistance, and several of these by the Bank and domestically (Pinheiro 2001). states may not be able to borrow from the Bank Protracted judicial procedures, unpredictable because of fiscal constraints. Small and focused outcomes, and weak enforceability of contracts technical assistance loans may be one alterna- and rights are frequently identified as important tive to deal with specific learning problems constraints. The Bank is already providing some faced by these states (such as teacher training initial assistance through ESW. Depending on and effectiveness). The Bank must also the results and the interest of the government consider entering two areas that remain largely 4 0 L E S S O N S A N D R E C O M M E N D AT I O N S uncovered: early childhood development/pre- concession of water and sanitation services has school and secondary education. not been overcome. Studies on asset valuation of current water and sanitation infrastructure Health. The Bank has been only partially and compensatory schemes for the transfer of successful in targeting the poor and offering concession power could contribute to a satisfac- effective solutions for their problems with tory resolution of this problem. Regarding health care. Focus on diseases that by their privatization, an issue that is highly misunder- nature affect the poor is an effective manner of stood, studies should cover themes such as targeting, but is not sufficient. It is necessary to universality of services, economies of scale, design projects to deal with the structure of the partial against total concession, cross-subsidies, public system and that address specifically the and regulation of natural monopolies. Bank barriers of the poor. These issues could be strategies toward the water and sanitation addressed through adjustment lending. The sector must be more integrated with the Bank's Bank must also consider a pilot project environmental and poverty strategies. As a addressing child nutrition in the Northeast, starting point, a common strategy plan should preferably integrated with an early childhood be prepared with the collaboration of the three development project. Another area to be areas. In this regard, there should be a greater considered is that of maternal mortality, effort to estimate the share of the poor benefit- because of its high rate and devastating impact. ing from water and sanitation projects. Rural Development. The rural development Environment. The Bank should undertake a sound projects have made an important contribution analysis of the private and social costs and to alleviating poverty and providing the benefits of deforestation, as well as studies infrastructure for agricultural growth. How- integrating blue and brown issues and its activi- ever, there may now be a need for a more ties in the water and sanitation sector. In project focused effort to raise farm productivity in work, the Bank should adopt more realistic areas of higher agricultural potential. This criteria for determining the regional coverage could be achieved through a combination of and scale of projects, in relation to the institu- approaches: tional capacity of the implementing agencies. The Bank should also engage representatives of · The share of resources in rural development the private sector (timber producers, industries, projects channeled to productive activities, in- and farmers) in project formulation and cluding mechanization, commercialization, implementation, forging additional sources of technical assistance, and training of community financing and risk sharing, and contributing to councils can be increased. the political sustainability of its projects. · Land reform can also contribute to higher agri- cultural productivity. The pilot land reform Better Dissemination of ESW and Bank Activities in project has built on the design of community- Brazil. The Bank's relevance as a source of based projects and shows promising results. knowledge and technical assistance may not · Despite past failures, irrigation may also con- be sufficiently explored. Greater dissemina- tribute to an increase in productivity. The Bank tion of its work may help the Bank enhance its could pursue a limited program, focusing on credibility and provide more effective areas with good soils, access to markets, and assistance to the government in the design sound state finances. and implementation of complex reforms. The Bank should consider allocating a larger share Water and Sanitation. The Bank should explore its of its budget in Brazil for translation, organiza- potential educational role in this sector. The key tion of workshops, distance training, and issue of which government level--state or other activities designed to disseminate its municipal--has the jurisdiction to make work. 4 1 ANNEXES ANNEX A: REFERENCE TABLES T a b l e A . 1 W o r l d B a n k L e n d i n g t o B r a z i l , 1 9 8 0 ­ 0 1 Average annual flows 1980­89 1990­01 1990­94 1995­98 1999­01 US$ millions IBRD commitments 1,221 1,143 1,001 1,044 1,512 IBRD disbursements 894 1,100 663 1,254 1,621 IFC disbursements 57 153 106 232 127 IFC disbursements + IFC "B" loans 93 381 154 745 274 Shares in total debt finance (%) IBRD 16.5 6.4 10.2 3.6 3.9 IBRD + IFC 17.4 7.6 11.9 4.2 4.2 IBRD + IFC + IFC "B" Loans 17.7 8.3 12.4 5.6 4.5 Relative to other institutions (%) IBRD/BNDES 24.2 15.8 20.2 10.0 16.4 IBRD/IDB 279.1 107.2 71.8 64.8 280.7 End-of-period stocks 1989 2001 1994 1998 2001 US$ millions IBRD disbursed 8,316 7,963 6,311 6,298 7,963 IBRD undisbursed 4,672 2,770 4,950 3,546 2,770 IBRD total 12,988 10,733 11,261 9,844 10,733 Shares in total stocks (%) IBRD Brazil/total Brazil stock 7.3 3.4 4.1 2.6 3.4 IBRD Brazil/IBRD worldwide 9.9 6.1 5.7 5.4 6.1 4 5 B R A Z I L : F O R G I N G A S T R AT E G I C PA R T N E R S H I P F O R R E S U LT S T a b l e A . 2 S e c t o r a l C o m p o s i t i o n o f L o a n s IBRD Investment Loans, 1980­89 1990­02 1980­02 Commit. Disburs. # Commit. Disburs. # (US$ million) Agriculture 3,409.3 2,802.9 34 2,047.2 878.5 31 Rural poverty 1,356.0 1,008.8 20 1,540.6 665.6 22 Other 2,053.3 1,794.1 15 506.6 212.9 9 Education 238.5 163.6 5 1,798.7 1,248.6 12 Environment 108.0 77.5 2 958.0 610.2 14 Finance & PSD 1,166.4 1,072.5 4 554.6 204.8 5 Health 338.0 283.1 5 1,060.0 662.3 6 Infrastructure 5,179.7 4,510.4 28 3,941.3 2,477.8 27 Transport 1,547.0 1,204.3 10 2,533.1 1,386.7 16 Urban 449.0 234.5 3 1,130.1 448.8 9 Other 1,098.0 969.8 7 1,403.0 937.9 7 Energy 2,505.1 2,183.8 11 433.9 390.4 4 W & S 1,127.6 1,122.3 7 974.3 700.7 6 PSM 29.0 24.0 1 428.8 345.4 4 Social protection 0.0 0.0 0 10.0 4.0 2 Urban development 640.0 592.0 8 490.0 353.8 4 TOTALS 11,108.9 9,526.0 87 11,288.7 6,785.5 105 1980­89 1990­01 (Proportions) Commit. Disburs. # Commit. Disburs. # Agriculture 30.7% 29.4% 39.1% 18.1% 12.9% 29.5% Rural poverty 12.2% 10.6% 23.0% 13.6% 9.8% 21.0% Other 18.5% 18.8% 17.2% 4.5% 3.1% 8.6% Education 2.1% 1.7% 5.7% 15.9% 18.4% 11.4% Environment 1.0% 0.8% 2.3% 8.5% 9.0% 13.3% Finance & PSD 10.5% 11.3% 4.6% 4.9% 3.0% 4.8% Health 3.0% 3.0% 5.7% 9.4% 9.8% 5.7% Infrastructure 46.6% 47.3% 32.2% 34.9% 36.5% 25.7% Transport 13.9% 12.6% 11.5% 22.4% 20.4% 15.2% Urban 4.0% 2.5% 3.4% 10.0% 6.6% 8.6% Other 9.9% 10.2% 8.0% 12.4% 13.8% 6.7% Energy 22.6% 22.9% 12.6% 3.8% 5.8% 3.8% W & S 10.2% 11.8% 8.0% 8.6% 10.3% 5.7% PSM 0.3% 0.3% 1.1% 3.8% 5.1% 3.8% Social protection 0.0% 0.0% 0.0% 0.1% 0.1% 1.9% Urban development 5.8% 6.2% 9.2% 4.3% 5.2% 3.8% TOTALS 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 4 6 A N N E X A : R E F E R E N C E TA B L E S 1990­94 1995­98 1999­02 Commit. Disburs. # Commit. Disburs. # Commit. Disburs. # 290.0 211.3 3 1,108.6 661.8 18 649.6 5.4 10 33.0 33.0 1 1,039.0 632.4 13 469.6 0.3 8 257.0 178.3 2 69.6 29.5 5 180.0 5.1 2 1,059.6 1,017.5 6 217.5 90.4 2 521.6 140.8 4 539.0 474.2 4 299.0 129.7 6 120.0 6.2 4 300.0 184.1 1 190.0 12.7 2 64.6 8.1 2 427.0 376.4 2 300.0 167.5 1 333.0 118.4 3 1,926.5 1,732.7 10 1,431.6 722.2 10 583.2 22.9 7 872.5 774.5 5 1,151.6 590.1 7 509.0 22.2 4 254.5 254.4 2 431.6 172.3 4 444.0 22.2 3 618.0 520.1 3 720.0 417.8 3 65.0 0.0 1 260.0 260.0 1 130.0 130.0 2 43.9 0.4 2 794.0 698.3 4 150.0 2.1 1 30.3 0.3 1 0.0 0.0 0 420.0 344.6 3 8.8 0.8 1 0.0 0.0 0 5.0 1.7 1 5.0 2.4 1 250.0 199.6 2 240.0 154.3 2 0.0 0.0 0 4,792.1 4,195.7 28 4,211.7 2,284.9 45 2,285.8 305.0 32 1990­94 1995­98 1999-01 Commit. Disburs. # Commit. Disburs. # Commit. Disburs. # 6.1% 5.0% 10.7% 26.3% 29.0% 40.0% 28.4% 1.8% 31.3% 0.7% 0.8% 3.6% 24.7% 27.7% 28.9% 20.5% 0.1% 25.0% 5.4% 4.2% 7.1% 1.7% 1.3% 11.1% 7.9% 1.7% 6.3% 22.1% 24.3% 21.4% 5.2% 4.0% 4.4% 22.8% 46.2% 12.5% 11.2% 11.3% 14.3% 7.1% 5.7% 13.3% 5.2% 2.0% 12.5% 6.3% 4.4% 3.6% 4.5% 0.6% 4.4% 2.8% 2.7% 6.3% 8.9% 9.0% 7.1% 7.1% 7.3% 2.2% 14.6% 38.8% 9.4% 40.2% 41.3% 35.7% 34.0% 31.6% 22.2% 25.5% 7.5% 21.9% 18.2% 18.5% 17.9% 27.3% 25.8% 15.6% 22.3% 7.3% 12.5% 5.3% 6.1% 7.1% 10.2% 7.5% 8.9% 19.4% 7.3% 9.4% 12.9% 12.4% 10.7% 17.1% 18.3% 6.7% 2.8% 0.0% 3.1% 5.4% 6.2% 3.6% 3.1% 5.7% 4.4% 1.9% 0.1% 6.3% 16.6% 16.6% 14.3% 3.6% 0.1% 2.2% 1.3% 0.1% 3.1% 0.0% 0.0% 0.0% 10.0% 15.1% 6.7% 0.4% 0.3% 3.1% 0.0% 0.0% 0.0% 0.1% 0.1% 2.2% 0.2% 0.8% 3.1% 5.2% 4.8% 7.1% 5.7% 6.8% 4.4% 0.0% 0.0% 0.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% (Table continues on the following page.) 4 7 B R A Z I L : F O R G I N G A S T R AT E G I C PA R T N E R S H I P F O R R E S U LT S T a b l e A . 2 S e c t o r a l C o m p o s i t i o n o f L o a n s ( c o n t i n u e d ) All IBRD Loans, 1980­89 1990­02 1980­02 Commit. Disburs. # Commit. Disburs. # (US$ million) Agriculture 3,870.3 3,263.9 36 2,047.2 878.5 31 Rural poverty 1,356.0 1,008.8 20 1,540.6 665.6 22 Other 2,514.3 2,255.1 15 506.6 212.9 9 Education 238.5 163.6 5 1,798.7 1,248.6 12 Environment 108.0 77.5 2 958.0 610.2 14 Finance & PSD 1,518.4 1,424.5 5 1,362.6 1,012.8 7 Health 338.0 283.1 5 1,060.0 662.3 6 Infrastructure 5,179.7 4,510.4 28 4,395.8 2,932.3 28 Transport 1,547.0 1,204.3 10 2,533.1 1,386.7 16 Urban 449.0 234.5 3 1,130.1 448.8 9 Other 1,098.0 969.8 7 1,403.0 937.9 7 Energy 2,505.1 2,183.8 11 888.4 844.9 5 W & S 1,127.6 1,122.3 7 974.3 700.7 6 PSM 29.0 24.0 1 1,691.5 1,608.1 6 Social protection 0.0 0.0 0 1,525.2 1,519.2 5 Urban development 640.0 592.0 8 490.0 353.8 4 TOTALS 11,921.9 10,339.0 90 15,329.1 10,825.9 113 1980­89 1990­01 (Proportions) Commit. Disburs. # Commit. Disburs. # Agriculture 32.5% 31.6% 40.0% 13.4% 8.1% 27.4% Rural poverty 11.4% 9.8% 22.2% 10.1% 6.1% 19.5% Other 21.1% 21.8% 16.7% 3.3% 2.0% 8.0% Education 2.0% 1.6% 5.6% 11.7% 11.5% 10.6% Environment 0.9% 0.7% 2.2% 6.2% 5.6% 12.4% Finance & PSD 12.7% 13.8% 5.6% 8.9% 9.4% 6.2% Health 2.8% 2.7% 5.6% 6.9% 6.1% 5.3% Infrastructure 43.4% 43.6% 31.1% 28.7% 27.1% 24.8% Transport 13.0% 11.6% 11.1% 16.5% 12.8% 14.2% Urban 3.8% 2.3% 3.3% 7.4% 4.1% 8.0% Other 9.2% 9.4% 7.8% 9.2% 8.7% 6.2% Energy 21.0% 21.1% 12.2% 5.8% 7.8% 4.4% W & S 9.5% 10.9% 7.8% 6.4% 6.5% 5.3% PSM 0.2% 0.2% 1.1% 11.0% 14.9% 5.3% Social protection 0.0% 0.0% 0.0% 9.9% 14.0% 4.4% Urban development 5.4% 5.7% 8.9% 3.2% 3.3% 3.5% TOTALS 100% 100% 100% 100% 100% 100% 4 8 A N N E X A : R E F E R E N C E TA B L E S 1990­94 1995­98 1999­02 Commit. Disburs. # Commit. Disburs. # Commit. Disburs. # 290.0 211.3 3 1,108.6 661.8 18 649.6 5.4 10 33.0 33.0 1 1,039.0 632.4 13 469.6 0.3 8 257.0 178.3 2 69.6 29.5 5 180.0 5.1 2 1,059.6 1,017.5 6 217.5 90.4 2 521.6 140.8 4 539.0 474.2 4 299.0 129.7 6 120.0 6.2 4 300.0 184.1 1 190.0 12.7 2 872.6 816.1 4 427.0 376.4 2 300.0 167.5 1 333.0 118.4 3 1,926.5 1,732.7 10 1,431.6 722.2 10 1,037.7 477.4 8 872.5 774.5 5 1,151.6 590.1 7 509.0 22.2 4 254.5 254.4 2 431.6 172.3 4 444.0 22.2 3 618.0 520.1 3 720.0 417.8 3 65.0 0.0 1 260.0 260.0 1 130.0 130.0 2 498.4 454.9 3 794.0 698.3 4 150.0 2.1 1 30.3 0.3 1 0.0 0.0 0 420.0 344.6 3 1,271.5 1,263.5 3 0.0 0.0 0 5.0 1.7 1 1,520.2 1,517.6 4 250.0 199.6 2 240.0 154.3 2 0.0 0.0 0 4,792.1 4,195.7 28 4,211.7 2,284.9 45 6,326.2 4,345.4 40 1990­94 1995­98 1999-01 Commit. Disburs. # Commit. Disburs. # Commit. Disburs. # 6.1% 5.0% 10.7% 26.3% 29.0% 40.0% 10.3% 0.1% 25.0% 0.7% 0.8% 3.6% 24.7% 27.7% 28.9% 7.4% 0.0% 20.0% 5.4% 4.2% 7.1% 1.7% 1.3% 11.1% 2.8% 0.1% 5.0% 22.1% 24.3% 21.4% 5.2% 4.0% 4.4% 8.2% 3.2% 10.0% 11.2% 11.3% 14.3% 7.1% 5.7% 13.3% 1.9% 0.1% 10.0% 6.3% 4.4% 3.6% 4.5% 0.6% 4.4% 13.8% 18.8% 10.0% 8.9% 9.0% 7.1% 7.1% 7.3% 2.2% 5.3% 2.7% 7.5% 40.2% 41.3% 35.7% 34.0% 31.6% 22.2% 16.4% 11.0% 20.0% 18.2% 18.5% 17.9% 27.3% 25.8% 15.6% 8.0% 0.5% 10.0% 5.3% 6.1% 7.1% 10.2% 7.5% 8.9% 7.0% 0.5% 7.5% 12.9% 12.4% 10.7% 17.1% 18.3% 6.7% 1.0% 0.0% 2.5% 5.4% 6.2% 3.6% 3.1% 5.7% 4.4% 7.9% 10.5% 7.5% 16.6% 16.6% 14.3% 3.6% 0.1% 2.2% 0.5% 0.0% 2.5% 0.0% 0.0% 0.0% 10.0% 15.1% 6.7% 20.1% 29.1% 7.5% 0.0% 0.0% 0.0% 0.1% 0.1% 2.2% 24.0% 34.9% 10.0% 5.2% 4.8% 7.1% 5.7% 6.8% 4.4% 0.0% 0.0% 0.0% 100% 100% 100% 100% 100% 100% 100% 100% 100% 4 9 B R A Z I L : F O R G I N G A S T R AT E G I C PA R T N E R S H I P F O R R E S U LT S S e c t o r a l C o m p o s i t i o n o f W o r l d B a n k G r o u p T a b l e A . 3 A s s i s t a n c e , 1 9 8 0 ­ 0 1 1980­89 1990­02 IBRD IFC IBRD IFC MIGA US$ US$ US$ US$ US$ million # million # million # million # million # Agriculture 3870.3 36 54.1 6 2,047.2 31 400.2 15 Education 238.5 5 1,798.7 12 3.3 1 Environment 108.0 2 958.0 14 Finance & PSD 1,518.4 5 88.5 46 1,362.6 7 1069.0 56 770.5 12 Health 338.0 5 1,060.0 6 40.3 3 150.5 1 Infrastructure 5,179.7 28 0.4 1 4,395.8 28 235.9 11 12,297.2 10 Telecom 106.1 5 4,005.2 3 Transport 1,547.0 10 2,533.1 16 99.8 5 Urban 449.0 3 1,130.1 9 0 Other 1,098.0 7 1,403.0 7 99.8 5 Energy 2,505.1 11 0.4 1 888.4 5 30 3 8,292.0 7 W & S 1,127.6 7 974.3 6 PSM 29.0 1 1,691.5 6 Social protection 0.0 0 1,525.2 5 Urban development 640.0 8 490.0 4 TOTALS 11,921.9 90 143.0 53 15,329.0 113 1,748.7 97 13,218.2 23 Percent IBRD IFC IBRD IFC MIGA Agriculture 32.5 40.0 37.8 11.3 13.4 27.4 22.9 15.5 Education 2.0 5.6 11.7 10.6 0.2 1.0 Environment 0.9 2.2 6.2 12.4 Finance & PSD 12.7 5.6 61.9 86.8 8.9 6.2 61.1 57.7 5.8 52.2 Health 2.8 5.6 6.9 5.3 2.3 3.1 1.1 4.3 Infrastructure 43.4 31.1 0.3 1.9 28.7 24.8 13.5 11.3 93.0 43.5 Telecom 6.1 5.2 30.3 13.0 Transport 13.0 11.1 16.5 14.2 5.7 5.2 Urban 3.8 3.3 7.4 8.0 Other 9.2 7.8 9.2 6.2 5.7 5.2 Energy 21.0 12.2 5.8 4.4 1.7 3.1 62.7 30.4 W & S 9.5 7.8 6.4 5.3 PSM 0.2 1.1 11.0 5.3 Social protection 0.0 0.0 9.9 4.4 Urban development 5.4 8.9 3.2 3.5 TOTALS 100 100 100 100 100 100 100 100 100 100 5 0 A N N E X A : R E F E R E N C E TA B L E S S e c t o r a l C o m p o s i t i o n o f I n t e r - A m e r i c a n T a b l e A . 4 D e v e l o p m e n t B a n k P r o j e c t s 1980­89 1990­01 US$ million % # % US$ million % # % Agriculture 328.4 11.7 8 15.4 130.8 0.8 2 2.4 Education 218.2 7.8 4 7.7 862.0 5.3 5 6.1 Environment 701.9 4.3 6 7.3 Finance & PSD 397.4 14.1 14 26.9 3,436.0 21.0 8 9.8 Health 535.0 3.3 2 2.4 Infrastructure 1,758.8 62.6 24 46.2 6,094.7 37.2 41 50.0 Transport 715.5 25.5 10 19.2 3,090.5 18.9 21 25.6 Urban 560.6 3.4 4 4.9 Other 715.5 25.5 10 19.2 2,529.9 15.5 17 20.7 Energy 592.19 21.1 9 17.3 818.8 5.0 9 11.0 W & S 406.61 14.5 3 5.8 2,185.4 13.3 11 13.4 General 44.51 2 3.8 0.0 PSM 1,083.0 6.6 8 9.8 Social protection 2,242.0 13.7 2 2.4 Urban development 107.5 3.8 2 3.8 1,285.5 7.9 8 9.8 TOTALS 2,810.4 100 52 100 16,370.9 100 82 100 5 1 B R A Z I L : F O R G I N G A S T R AT E G I C PA R T N E R S H I P F O R R E S U LT S 94 0 0 0 0 0 0 0 0 0 0 0 0 51 21 54 43 21 23 Brazil 100 % 02 46 13 05 0 0 0 44 93 0 72 34 19 17 24 26 48 20 LCR 100 100 SUB 12 42 40 43 13 25 40 37 83 5 61 81 27 20 37 30 31 29 orld 100 100 W 81 0 0 0 0 0 0 0 0 0 0 21 69 98 43 39 47 100 100 100 Brazil % 6 0 0 80 62 27 48 47 0 53 40 48 26 43 42 75 37 LIK LCR 100 100 100 orld 30 66 69 41 56 33 37 55 65 45 30 89 54 45 40 48 24 49 100 100 W 0 0 0 0 0 0 0 0 0 0 37 75 44 12 90 62 38 47 52 100 Brazil % 0 T 31 85 63 65 43 57 17 78 65 73 18 56 44 49 55 61 53 Projects 100 100 LCR SA 58 87 75 73 57 70 37 66 88 17 36 49 74 62 63 69 58 70 orld 100 100 W Closed 0 0 0 0 0 84 34 31 905 251 464 239 351 319 678 653 of Brazil 1,514 1,169 6,038 5,385 34 76 10 LCR 468 896 346 295 231 110 249 4,553 3,479 1,571 3,024 3,260 1,772 1,264 3,810 commitments 21,639 17,828 Net Ratings 80 10 orld 475 638 782 297 W 3,241 6,000 4,405 8,903 2,688 1,640 3,195 3,764 21,677 10,701 11,132 79,629 11,256 68,374 OED energy A.5 population other & sanitation & development management & commitments power nutrition sector able gas sector protection development supply T net & Adjustment Investment ater 1980­89 By Agriculture Education Electric Environment Finance Health Industry Mining Multisector Oil Private Public Social elecommunicationsT ransportationT Urban W otalT 5 2 A N N E X A : R E F E R E N C E TA B L E S ) page. 0 0 0 0 0 0 0 0 0 0 0 50 50 20 50 33 0 34 35 Brazil 100 following % the 0 0 0 22 46 19 42 33 63 0 52 76 13 33 31 26 63 24 on LCR 100 100 SUB continues 22 30 31 31 52 26 36 22 34 7 71 33 19 24 93 26 12 26 orld 100 100 ableT( W 0 0 0 0 0 0 0 0 0 36 50 80 75 33 0 51 55 100 100 100 Brazil % 18 96 74 62 0 0 52 0 44 45 20 34 56 33 39 35 40 LIK LCR 100 100 100 orld 34 85 68 43 24 29 83 35 57 74 20 68 41 59 53 43 33 43 100 100 W 45 76 0 67 05 0 0 0 0 0 0 0 0 86 73 34 0 59 61 100 Brazil % T 56 97 0 73 86 43 62 50 16 46 60 06 53 47 95 63 25 64 100 100 LCR SA 59 08 79 96 54 63 63 36 98 76 75 87 72 97 27 69 06 69 orld 100 100 W 3 1 2 2 7 1 1 0 0 0 0 0 5 7 2 20 12 11 72 70 Brazil # 1 7 98 36 53 34 41 8 5 1 9 24 11 15 68 31 34 28 LCR 449 421 Projects 4 28 58 1 25 82 63 25 47 46 87 98 orld 689 180 172 159 298 130 W 2,121 2,023 energy population other & sanitation & development management & projects power nutrition sector of gas sector protection development supply # & Adjustment Investment ater By Agriculture Education Electric Environment Finance Health Industry Mining Multisector Oil Private Public Social elecommunicationsT ransportationT Urban W otalT 5 3 B R A Z I L : F O R G I N G A S T R AT E G I C PA R T N E R S H I P F O R R E S U LT S 0 4 0 0 0 0 0 0 47 28 62 49 61 85 50 59 42 20 42 50 40 Brazil % 49 64 37 71 51 50 56 12 18 74 48 16 0 61 55 64 27 20 46 53 41 LCR SUB 42 24 43 14 41 44 41 33 85 64 30 54 52 42 56 50 29 22 42 44 41 orld W 0 63 81 94 0 0 0 0 0 0 87 91 85 47 47 44 66 58 100 100 100 Brazil % 64 74 73 85 91 95 70 85 81 79 91 66 85 78 61 80 35 69 78 64 LIK LCR 100 orld 54 68 64 36 65 86 66 62 75 62 75 57 71 79 91 68 59 32 63 70 60 W 0 4 0 0 0 0 0 69 98 89 91 97 79 70 75 69 100 100 100 100 100 Brazil % T 77 88 76 37 84 69 87 08 99 68 78 74 91 99 54 91 85 56 78 85 74 LCR SA 74 38 80 67 74 74 79 56 68 18 70 64 86 86 09 86 82 58 77 80 75 orld W 0 0 0 0 0 978 337 483 647 664 170 834 516 Brazil 3,364 1,240 1,515 1,418 1,056 2,502 13,222 10,720 49 LCR 561 592 6,859 1,977 2,490 4,356 6,585 1,915 2,656 4,410 1,408 1,945 4,023 3,693 6,693 3,191 2,349 commitments 55,754 21,278 34,476 Net orld W 1,417 5,602 9,606 2,097 6,148 4,128 6,632 2,497 9,798 7,945 32,457 20,213 11,632 23,202 21,873 12,222 10,029 23,626 71,771 211,125 139,353 (continued) energy A.5 population other & sanitation & development management & policy commitments power nutrition sector able gas sector protection development supply T net & Adjustment Investment ater 1980­02 By Agriculture Economy Education Electric Environment Finance Health Industry Mining Multisector Oil Private Public Social elecommunicationsT ransportationT Urban W otalT 5 4 A N N E X A : R E F E R E N C E TA B L E S ) page. 0 63 33 71 05 0 05 0 0 0 0 67 05 0 67 50 05 33 49 60 48 Brazil following % 39 64 43 43 74 34 93 22 75 24 50 92 35 0 56 47 82 52 the 41 52 38 LCR on SUB continues 33 23 43 53 74 83 92 23 62 72 49 62 04 47 50 44 92 03 36 38 36 orld ableT( W 0 66 76 05 38 0 38 0 0 0 0 05 0 50 76 05 63 61 100 100 100 Brazil % 50 64 16 66 78 63 55 78 57 68 83 56 27 52 76 55 35 34 60 71 58 LIK LCR orld 41 63 55 45 56 52 25 53 26 46 58 43 85 53 08 60 54 83 51 60 50 W 0 72 98 71 38 0 38 0 0 0 0 57 0 90 38 76 73 72 100 100 100 Brazil % T 68 68 87 16 37 17 07 87 88 88 29 35 68 69 67 77 96 84 73 68 71 LCR SA 64 08 87 46 27 36 76 95 71 17 47 64 96 68 83 80 37 06 69 67 68 orld W 0 9 6 6 2 6 0 0 0 3 1 4 3 0 6 6 5 32 10 95 90 Brazil # 9 8 3 96 16 42 41 15 44 23 25 12 18 44 25 55 32 29 87 LCR 537 450 Projects 43 47 29 78 55 79 46 orld 657 134 239 233 163 129 100 179 301 148 128 397 2815 2418 W energy population other & sanitation & development management & policy projects power nutrition sector of gas sector protection development supply # & Adjustment Investment ater By Agriculture Economy Education Electric Environment Finance Health Industry Mining Multisector Oil Private Public Social elecommunicationsT ransportationT Urban W otalT 5 5 B R A Z I L : F O R G I N G A S T R AT E G I C PA R T N E R S H I P F O R R E S U LT S 3 0 4 0 0 0 0 0 0 0 0 0 0 0 0 0 4 0 5 62 Brazil % 42 15 3 0 78 40 21 6 54 34 46 0 70 15 34 18 38 49 26 LCR 100 SUB 36 64 63 43 38 31 23 25 94 24 34 62 49 73 23 31 29 39 45 36 orld W 0 46 74 94 0 0 0 0 0 0 0 0 0 0 0 0 18 34 26 100 Brazil % 65 89 82 66 35 0 6 81 79 97 70 16 56 82 81 69 82 57 LIK LCR 100 100 orld 48 53 79 17 05 57 68 86 64 92 52 35 66 87 58 53 82 59 62 58 W 0 4 0 0 0 0 0 0 0 0 0 0 0 58 99 18 34 26 100 100 Brazil % T 77 98 0 96 15 59 47 48 54 29 0 71 88 71 37 69 82 58 100 100 LCR SA 70 88 90 64 56 76 27 55 87 08 77 68 49 57 80 77 72 73 73 72 orld W 0 0 0 0 0 0 0 0 57 24 116 483 347 132 313 482 1637 1240 4349 3867 Brazil 74 47 27 LCR 360 111 575 773 956 553 3652 1179 2651 2013 2085 3818 2422 1307 22605 10798 11807 commitments Net 71 orld 666 572 671 2768 2873 5683 6455 2050 1153 2165 8478 3663 2044 W 15279 10062 10012 74665 25198 49467 (continued) energy A.5 population other & sanitation & development management & policy commitments power nutrition sector able gas sector protection development supply T net & Adjustment Investment ater 1980­94 By Agriculture Economy Education Electric Finance Health Industry Mining Multisector Oil Private Public Social elecommunicationsT ransportationT Urban W otalT 5 6 A N N E X A : R E F E R E N C E TA B L E S ) page. 0 11 33 71 0 0 0 0 0 0 0 0 0 0 0 0 0 0 10 10 Brazil following % the 27 50 46 42 53 0 41 50 33 50 52 26 0 32 81 25 33 44 29 on LCR 100 SUB continues 29 31 38 03 82 17 43 46 13 8 61 72 57 41 29 42 36 31 34 31 ableT( orld W 0 20 67 05 0 0 0 0 0 0 0 0 0 0 0 05 0 26 24 100 Brazil % 39 57 54 76 0 59 71 05 63 57 05 62 05 54 54 52 53 71 48 LIK LCR 100 orld 35 45 63 75 40 45 55 45 50 05 32 33 05 67 15 83 33 45 52 44 W 0 30 71 0 0 0 0 0 0 0 0 0 0 76 05 0 32 30 100 100 Brazil % T 61 75 77 25 56 0 17 48 75 75 77 50 37 54 33 65 08 61 100 100 LCR SA 60 79 80 46 65 69 36 58 76 75 46 94 57 76 27 57 70 65 76 65 orld W 0 3 6 2 1 0 0 0 0 0 1 0 0 3 2 2 1 10 30 29 Brazil # 4 41 41 2 7 2 4 4 2 2 9 24 18 19 13 22 11 42 LCR 198 156 Projects 14 38 64 29 65 4 13 67 36 13 52 17 55 47 orld 323 111 129 141 972 1113 W energy population other & sanitation & development management & policy projects power nutrition sector of gas sector protection development supply # & Adjustment Investment ater By Agriculture Economy Education Electric Finance Health Industry Mining Multisector Oil Private Public Social elecommunicationsT ransportationT Urban W otalT 5 7 B R A Z I L : F O R G I N G A S T R AT E G I C PA R T N E R S H I P F O R R E S U LT S 0 0 0 0 0 0 0 0 83 24 62 53 61 87 50 78 56 29 60 63 59 Brazil % 56 93 30 93 51 45 59 65 99 0 58 51 58 58 55 72 22 20 51 56 49 LCR SUB 48 14 36 64 41 74 42 43 06 29 25 45 49 41 57 60 28 20 44 43 44 orld W 0 0 0 0 0 0 0 0 79 82 87 87 63 56 62 81 75 100 100 100 100 Brazil % 63 52 72 44 91 62 73 99 18 86 36 93 78 64 79 40 70 74 67 LIK LCR 100 100 orld 58 70 59 56 65 75 68 05 78 35 67 95 76 79 69 73 63 34 66 74 61 W 0 0 0 0 0 0 0 0 79 98 89 93 91 100 100 100 100 100 100 100 100 Brazil % T 77 78 73 07 84 47 90 99 60 97 99 94 95 62 85 89 83 100 100 100 100 LCR SA 78 28 77 07 74 08 80 25 89 49 64 59 90 86 59 90 85 53 79 84 76 orld W 0 0 0 0 0 0 0 862 337 590 664 170 810 384 743 Brazil 1,727 1,515 1,071 8,873 2,020 6,853 22 LCR 799 561 571 481 592 833 3,207 2,130 1,705 4,572 1,841 1,171 3,067 3,646 4,272 1,883 1,796 commitments 33,149 10,480 22,669 Net orld W 8,759 1,417 4,936 3,151 1,525 2,210 4,098 2,975 7,864 6,561 1,826 6,135 5,901 17,178 17,444 13,140 16,190 15,149 46,573 89,887 136,460 (continued) energy A.5 population other & sanitation & development management & policy commitments power nutrition sector able gas sector protection development supply T net & Adjustment Investment ater 1995­02 By Agriculture Economy Education Electric Environment Finance Health Industry Mining Multisector Oil Private Public Social elecommunicationsT ransportationT Urban W otalT 5 8 A N N E X A : R E F E R E N C E TA B L E S 0 86 33 0 05 0 0 0 0 0 0 60 67 67 67 71 75 50 67 75 66 Brazil % 48 44 92 74 74 84 43 05 83 67 50 13 0 50 52 58 33 25 45 60 43 LCR SUB 38 23 23 04 74 44 32 82 75 20 38 23 46 45 55 56 32 26 39 40 39 orld W 0 86 76 0 38 0 0 0 0 0 0 67 71 75 75 81 80 100 100 100 100 Brazil % 58 60 46 65 78 67 60 38 38 88 58 77 48 61 57 50 64 70 63 LIK LCR 100 100 orld 46 64 15 51 56 60 54 44 96 83 66 50 69 53 38 67 48 41 55 65 53 W 0 91 38 0 38 0 0 0 0 0 0 92 91 100 100 100 100 100 100 100 100 Brazil % T 74 09 97 17 37 67 67 83 64 09 69 18 18 55 78 19 76 100 100 100 100 LCR SA 68 18 67 46 27 76 66 05 81 79 74 64 87 78 86 68 17 55 72 28 70 orld W 0 6 0 6 0 5 0 0 0 3 1 3 3 0 7 4 4 4 22 64 60 Brazil # 2 6 6 8 1 55 12 28 17 15 26 21 14 31 23 33 21 20 45 LCR 339 294 Projects 43 99 81 16 33 42 42 75 29 93 81 orld 334 120 156 122 100 127 172 256 W 1,702 1,446 energy population other & sanitation & development management & policy projects power nutrition sector of gas sector protection development supply # & Adjustment Investment ater By Agriculture Economy Education Electric Environment Finance Health Industry Mining Multisector Oil Private Public Social elecommunicationsT ransportationT Urban W otalT 5 9 B R A Z I L : F O R G I N G A S T R AT E G I C PA R T N E R S H I P F O R R E S U LT S T a b l e A . 6 P e r f o r m a n c e o f t h e A c t i v e P o r t f o l i o Fiscal year 1991 1992 1993 1994 1995 1996 Country /region Brazil No. of projects under supervision 58 57 56 59 63 50 Projects at risk 49 48 48 49 52 22 Projects at risk (%) 84.5 84.2 85.7 83.1 82.5 44 Actual problem projects 26 13 8 20 23 10 Actual problem projects (%) 44.8 22.8 14.3 33.9 36.5 20 IP problem (%) 44.8 21.1 14.3 33.9 33.3 16 DO problem (%) 13.8 7 8.9 6.8 11.1 8 Potential problem projects 23 35 40 29 29 12 Potential problem projects (%) 39.7 61.4 71.4 49.2 46 24 Realism indexb (%) 53.1 27.1 16.7 40.8 44.2 45.5 Proactivityc (%) 0 0 0 0 0 0 Net commitment amount $8,170 $8,268 $7,240 $7,728 $7,534 $6,913 Commitment at risk ($m.) $6,941 $7,139 $6,293 $6,637 $6,307 $5,383 Commitment at risk (%) 85 86.3 86.9 85.9 83.7 77.9 Total undisbursed balance $0 $0 $0 $0 $0 $0 Total cancelled $262 $217 $118 $113 $602 $344 Average project age (yrs) 3.8 4.1 4.5 4.8 5.2 4.7 Lag approval-signingd 255.9 271 264.3 269.2 300.1 267.7 Lag approval-effectivenessd 515.4 523.5 524.8 535.2 580 464.8 Disbursement ratio 16.0 12.2 10.8 9.1 16.5 24.0 a. FY02 is incomplete. b. Realism Index: Measures the ratio of actual problem projects to total actual and potential problem projects. In order to have 100 percent realism, the potential problem projects need to be given some attention. The first question to ask when a project has three or more flags, is whether the project really deserves the satisfactory IP and DO ratings that have been given to it. If after consultation with CMU and SMU management the Task Team decides that the project does deserve satisfactory IP and DO ratings and that the ratings will not be downgraded, then the Task Team could intensify project supervision on the issues that are flagged, so that over time performance on those issues improves. In some cases, a project will have two or even three flags because of country or subsector risks, even though project implementation is satisfactory and the development objectives are being met. In these cases, the Country Director may decide to request the use of a Golden Flag. Data are not available prior to FY89. Calculated as follows: ((At-risk actual problem (IP/DO/GO)))/(At-risk, no. of proj- ects))*100. c . Percent Proactivity: Measures the proportion of projects rated as actual problem projects 12 months earlier which have been upgraded, restructured, suspended, or partially or fully canceled. In order to have 100 percent proactivity, action must be taken on a project. Data are not available prior to FY97. Calculated as follows: (Proactivity action)/(Problem projects 12 months ago) * 100. d Elapsed time (in days) between the signing date/effectiveness date and the Board date. Source: World Bank data. 6 0 A N N E X A : R E F E R E N C E TA B L E S 1997 1998 1999 2000 2001 2002a 2001 2001 LCR WB 49 58 52 54 55 56 289 1448 7 3 6 5 5 5 36 184 14.3 5.2 11.5 9.3 9.1 8.9 12.5 12.7 4 3 4 3 5 5 29 145 8.2 5.2 7.7 5.6 9.1 8.9 10 10 8.2 5.2 7.7 5.6 9.1 8.9 7 39 4.1 3.4 5.8 3.7 3.6 3.6 2.4 2.7 3 0 2 2 0 0 7 39 6.1 0 3.8 3.7 0 0 2.4 2.7 57.1 100 66.7 60 100 100 80.6 78.8 76.9 75 66.7 100 66.7 66.7 82.8 89.4 $6,663 $7,342 $6,093 $5,711 $5,537 $5,571 $22,500 $103,847 $1,078 $440 $757 $799 $776 $776 $3,005 $12,539 16.2 6 12.4 14 14 13.9 13.4 12.1 $0 $0 $0 $2,914 $2,828 $2,817 $12,289 $57,327 $258 $142 $104 $192 $140 $140 $768 $5,411 3.6 3.1 3 3.5 3.6 3.8 3.5 3.4 297.1 336.4 260.8 372.6 363.6 365.8 1,315.4 3,637.2 458.4 468.6 354.9 514 480.9 487.2 2,445.9 9535 36.9 35.4 23.7 18.0 19.4 3.4 23.6 19.6 6 1 B R A Z I L : F O R G I N G A S T R AT E G I C PA R T N E R S H I P F O R R E S U LT S T a b l e A . 7 A v e r a g e C o s t s o f W o r l d B a n k O p e r a t i o n s Costs per project, Lending preparation costsa Supervision costsb 1990­02 per project, ($'000) per project, ($'000) Sector Brazil LCR Bank Brazil LCR Bank Agriculture 249 406 550 207 282 351 Education 394 306 394 347 293 310 Electric power & energy 1796 604 524 55 312 331 Environment 355 402 446 557 401 342 Finance 650 462 529 138 177 261 Health, nutrition, & population 404 333 418 340 310 378 Industry .. .. 1661 .. .. 322 Mining .. 434 464 .. 411 409 Multisector .. 325 579 .. 133 190 Oil & gas 552 589 643 393 350 442 Private sector development 378 296 368 217 291 337 Public sector management 443 309 353 132 215 250 Social protection 151 222 302 41 171 246 Telecommunications .. 313 531 .. 164 345 Transportation 258 337 428 242 305 310 Unidentified .. .. .. .. .. .. Urban development 235 386 501 425 303 359 Water supply & sanitation 353 431 522 508 330 331 Average for all sectors 372 360 457 296 270 312 6 2 A N N E X A : R E F E R E N C E TA B L E S ESW costs Total operational costsc Total lending costsd per ESW, ($'000) per project, ($'000) per project, ($'000) Brazil LCR Bank Brazil LCR Bank Brazil LCR Bank 87 183 146 454 733 936 446 681 896 182 188 124 857 623 728 741 592 697 .. 16 104 1852 916 875 1852 915 855 176 139 140 895 826 834 866 795 783 227 150 139 805 691 854 760 629 777 189 148 143 718 650 821 687 624 783 .. 162 173 .. .. 2054 .. .. 1962 .. .. 49 .. 845 882 .. 845 873 145 137 151 .. 794 1453 .. 459 766 .. 0 57 944 939 1110 944 939 .. .. 89 68 595 597 710 595 588 703 144 128 123 647 547 706 575 507 589 120 136 107 371 455 626 192 390 545 .. 0 93 .. 478 890 .. 478 875 90 94 69 506 646 745 500 642 735 .. .. 35 .. .. .. .. .. .. 168 109 94 703 720 880 661 689 855 90 110 98 892 778 869 862 761 849 146 143 125 715 667 819 655 623 763 (Table continues on the following page.) 6 3 B R A Z I L : F O R G I N G A S T R AT E G I C PA R T N E R S H I P F O R R E S U LT S T a b l e A . 7 ( c o n t i n u e d ) Total lending costs per commitment, Costs per commitment, $ per $1000 of 1990­02 Total lending costs, $000e Gross commit., $m gross commitment Sect grp (C) Bank LCR Brazil Bank LCR Brazil Bank LCR Brazil Agriculture 428,248 53,150 9,814 33,105 5,723 1,639 12.9 9.3 6.0 Economic policy 97,661 11,008 .. 27,937 5,190 .. 3.5 2.1 .. Education 205,063 43,205 8,154 20,614 6,560 1,639 9.9 6.6 5.0 Electric power & energy 151,329 15,560 1,852 24,420 1,965 385 6.2 7.9 4.8 Environment 107,336 35,765 10,390 7,274 2,757 1,019 14.8 13.0 10.2 Finance 128,212 24,547 3,799 27,985 8,415 789 4.6 2.9 4.8 Health, nutrition & population 193,324 31,183 4,120 15,430 4,584 1,060 12.5 6.8 3.9 Industry 29,425 2,346 1,643 1,687 .. .. 17.4 .. .. Mining 25,325 4,225 42 3,437 534 .. 7.4 7.9 .. Multisector 59,771 11,465 55 9,623 3,415 .. 6.2 3.4 .. Oil & gas 59,667 7,509 2,833 5,327 545 433 11.2 13.8 6.5 Private sector development 87,133 15,864 1,190 7,374 1,749 215 11.8 9.1 5.5 Public sector management 132,004 39,048 3,449 14,962 7,316 1,652 8.8 5.3 2.1 Social protection 103,087 17,931 767 12,616 4,691 1,520 8.2 3.8 0.5 Telecommunications 32,380 1,912 273 3,039 56 .. 10.7 34.0 .. Transportation 228,498 41,741 8,007 35,204 9,247 2,534 6.5 4.5 3.2 Unidentified 2,234 444 35 .. .. .. .. .. .. Urban development 125,663 14,460 2,642 11,145 2,334 490 11.3 6.2 5.4 Water supply & sanitation 133,247 24,357 5,169 11,578 2,820 974 11.5 8.6 5.3 Total 2,329,606 395,718 64,233 272,759 67,900 14,348 8.5 5.8 4.5 a. Supervision costs include both costs of approved and dropped projects. b. Lending preparation costs include both costs of approved and dropped projects. c. Total operational costs include lending preparation, supervision, and ESW costs. d. Total lending costs include lending preparation and supervision costs e. Total lending costs include preparation and supervision costs. Source: World Bank data. 6 4 A N N E X A : R E F E R E N C E TA B L E S A S e l e c t e d L i s t o f E c o n o m i c T a b l e A . 8 a n d S e c t o r W o r k Sector/report title Date Report # Country Assistance Strategies Brazil - 2002 Country assistance strategy progress report (Vol.1) 5/20/2002 24182 Brazil - 2001 Country assistance strategy progress report (Vol.1) 5/1/2001 22116 Country Report Bahia State economic memorandum 10/26/2001 21377 Ceara State economic memorandum 8/21/2000 19217 Agriculture Rural poverty alleviation in Brazil: towards an integrated strategy 12/27/2001 21790 Decentralized rural dev.,and enhanced community participation: a case study from northeast Brazil 8/31/1995 WPS1498 Brazil - The management of agriculture, rural development and natural resources (Vol.1) 7/31/1994 11783 Rural development: from vision to action? 9/30/1998 23925 Education Brazil - Teachers development and incentives - a strategic framework 12/6/2001 20408 Brazil - Early child develop. a focus on the impact of preschools 9/24/2001 22841 Brazil - Assessment of the Bolsa Escola Programs (Vol.1) 3/15/2001 20208 Brazil - Higher education sector study (Vol.1) 6/30/2000 19392 Brazil - Early childhood development: a focus on the impact of preschools 9/24/2001 22841 Environment Brazil - Managing pollution problems : the brown environmental agenda (Vol.1) 2/27/1998 16635 Brazil - Managing environmental pollution in the state of Rio de Janeiro (Vol.1) 8/22/1996 15488 Brazil - National Biodiversity Project 3/1/1996 14523 Finance & PSD Brazil - The Custo Brasil since 1990-92 (Vol.1) 12/10/1996 15663 Brazil - The development of Brazilian capital markets (Vol.1) 10/7/1994 11581 Brazil - Private sector and social services in Brazil: who delivers, who pays, who regulates (Vol.1) 6/30/1994 13205 Brazil - An assessment of the private sector (Vol.1) 6/24/1994 11775 Health Brazil - Maternal and child health 2/26/2002 23811 Brazil - The Brazil health system: impact evaluation report 6/30/1998 18142 Brazil - Addressing nutritional problems in Brazil 10/18/1996 16010 Brazil - The organization, delivery and financing of health care in Brazil: agenda for the 90s 6/30/1994 12655 Brazil - The new challenge of adult health 8/31/1990 PUB7807 Infrastructure Brazil - Rural electrification with renewable energy systems in the Northeast: a preinvestment study 7/31/2000 ESM232 Brazil - Multimodal freight transport: selected regulatory issues 10/15/1997 16361 Brazil - Hydro and thermal power sector study 9/30/1997 ESM197 Brazil - Natural gas pricing and regulatory study 10/25/1996 12772 Brazil - Energy efficiency and conservation: strategic pathways for energy efficiency in Brazil 1/1/1995 ESM170 Brazil - Attacking Brazil's Poverty - poverty report focus on urban poverty reduction policies 3/31/2001 20475 Brazil - Rio de Janeiro - a city study 6/19/1999 19747 (Table continues on the following page.) 6 5 B R A Z I L : F O R G I N G A S T R AT E G I C PA R T N E R S H I P F O R R E S U LT S T a b l e A . 8 ( c o n t i n u e d ) Sector/report title Date Report # Public Sector Management Brazil - Public expenditures for poverty alleviation in northeast Brazil 6/11/2001 22425 Brazil - Financing municipal investment: issues and options 4/20/2001 20313 Brazil - State debt: crisis and reform 11/14/1995 14842 Brazil - An agenda for stabilization 10/7/1994 13168 Brazil - From stability to growth through public employment reform 2/17/1998 16793 Brazil - Issues in fiscal federalism 6/4/2002 22523 Social Protection Brazil - Attacking Brazil's poverty - poverty report focus urban poverty 3/31/2001 20475 Brazil - Critical issues in social security 5/1/2001 22513 Brazil - Gender review: issues and recommendations 1/23/2002 23442 Brazil - Poverty assessment 6/27/1995 14323 Brazil - Social insurance and private pensions 1/25/1995 12336 Brazil - Public spending on social programs: issues and options 5/27/1988 7068 Urban Development Brazil - Rio de Janeiro: A City Study 6/19/1999 19747 6 6 A N N E X A : R E F E R E N C E TA B L E S T a b l e A . 9 L i s t o f P r o j e c t s Loan # Name Commitment Approval date Closing date AGRICULTURE 31300 Agriculture Research III 47 24-Oct-89 30-Jun-96 31600 BR LND MGMT II-S. CATAR 33 30-Jan-90 18-Oct-91 31700 NE IRRIG I 210 30-Jan-90 30-Jun-99 grant ITAPARICA SUPPLEM 20-Feb-90 grant ITAPARICA 232 20-Feb-90 31-Dec-97 grant SCIENCE CENTERS-EMERGENCY ASSISTANCE 1-Jul-94 grant EMERGENCY ASSISTANCE 28-Oct-94 grant EXTRACTIVE RESERVES 16-Nov-94 grant INDIGENOUS LANDS 19-Jun-95 39170 RURAL POV. (BAHIA) 105 29-Jun-95 29-Jun-95 39180 RURAL POV.- CEARA 70 29-Jun-95 30-Jun-01 39190 RURAL POV.-SERGIPE 36 29-Jun-95 30-Jun-01 40600 BR (PR)R.POVERTY 175 27-Jun-96 30-Sep-02 40600 BR(PR)R. POVERTY 175 27-Jun-96 30-Sep-02 grant FOREST RESOURCES MNGMT 12-Dec-96 41200 R.POVERTY(RGN) 24 12-Dec-96 30-Jun-02 grant R.POVERTY(PE) 39 12-Dec-96 31-Dec-01 41210 (PIAUI)R.POVERTY 30 12-Dec-96 31-Dec-01 41470 LAND RFM PILOT 90 22-Apr-97 30-Jun-02 41480 RGS LAND MGT/POVERTY 100 22-Apr-97 30-Jun-03 41690 AG TECH DEV. 60 22-May-97 22-May-97 41900 CEARA WATER PILOT 9.6 12-Jun-97 12-Jun-97 42380 BR LAND MGT 3 (SAO PAULO) 55 28-Oct-97 28-Oct-97 42510 PARAIBA R.POVERTY 60 20-Nov-97 20-Nov-97 42520 MARANHAO R.POVERTY 80 20-Nov-97 30-Jun-03 44800 ANIMAL&PLANT DIS. CO 44 27-May-99 31-Dec-03 45310 CEARA WTR MGT (PROGERIRH) 136 6-Jan-00 30-Jun-06 70370 7037T001 LAND-BASED POVERTY ALLEVIATION I 218.19 30-Nov-00 30-Sep-04 46260 RURAL POVERTY REDUCTION PROJECT - CE 37.5 26-Jun-01 30-Jun-05 46250 RURAL POVERTY REDUCTION PROJECT - PE 30.1 26-Jun-01 30-Jun-05 46240 RURAL POVERTY REDUCTION PROJECT - PI 22.5 26-Jun-01 30-Jun-05 46230 RURAL POVERTY REDUCTION PROJECT - BA 54.35 26-Jun-01 30-Jun-05 EDUCATION 33750 BR: INNOV BASIC ED 245 26-Jun-91 30-Dec-98 36040 BR NE BASIC EDUC II 212 13-May-93 31-Dec-98 36630 BR NE BASIC EDUC III 206.6 23-Nov-93 31-Dec-99 37330 BR- MINAS GERAIS BASIC EDU. 150 17-May-94 28-Jun-02 37660 BR- PARANA BASIC EDUC 96 28-Jun-94 31-Dec-01 42660 BR- SC. & TECH 3 155 18-Dec-97 31-Dec-02 43110 BR- FUNDESCOLA I 62.5 2-Apr-98 30-Jun-01 44870 BR- FUNDESCOLA 2 202.03 8-Jun-99 31-Dec-04 (Table continues on the following page.) 6 7 B R A Z I L : F O R G I N G A S T R AT E G I C PA R T N E R S H I P F O R R E S U LT S T a b l e A . 9 ( c o n t i n u e d ) Loan # Name Commitment Approval date Closing date 45920 BR- BA BASIC EDU PROJECT (PHASE I) 69.6 20-Dec-00 30-Jun-03 45910 BR- CEARA BASIC EDUCATION 90 20-Dec-00 30-Jun-06 ENVIRONMENT 34800 NATL IND POLLUTN 50 28-May-92 30-Jun-97 34920 MATO GROSSO NAT RES 205 18-Jun-92 31-Dec-01 grant NATURAL RESOURCES POLICY PROJECT 22-Nov-94 39240 BR ENV/CONS(CVRD) 50 11-Jul-95 30-Jun-00 grant N'TL BIODIVERSITY 16-Apr-96 grant BR BIODIVERSITY FUND 16-Apr-96 42320 BAHIA WTR RESOURCES 51 11-Sep-97 31-Dec-02 43100 FED.WTR MGT 198 2-Apr-98 31-Dec-03 grant MONITORING/ANALYSIS 14-Aug-98 43890 BR EMER. FIRE PREVENTION 15 10-Sep-98 31-Dec-01 45240 NATL ENV 2 15 9-Dec-99 30-Jun-03 FINANCE & PSD 32680 PRIVATE SCTR FIN 300 29-Nov-90 14-Mar-91 42450 CEN.BANK TAL 20 18-Nov-97 2-Mar-98 45540 NE MICROFINANCE DEVELOPMENT 50 30-May-00 6-Sep-00 70530 Prgrm Financial Sect Adj I 404 24-May-01 23-Jun-01 46370 TA FINANCIAL SECTOR 14.46 4-Sep-01 HEALTH 26990 NE BASIC HLTH SRV I 59.5 22-May-86 31-Dec-95 29310 NE ENDEMIC DIS. CTL 109 31-Mar-88 30-Jun-96 30720 AMAZON BASIN MALARIA 99 25-May-89 30-Jun-96 31350 NE BASIC HLTH SRV II 267 30-Nov-89 30-Dec-97 36590 BR: AIDS CONTROL 160 9-Nov-93 30-Jun-98 40470 BR- HEALTH SECTOR REFORM - REFORSUS 300 20-Jun-96 31-Dec-01 43920 BR- AIDS & STD CONTROL II 165 15-Sep-98 9-Feb-99 43940 BR- DISEASE SURVEILLANCE - VIGISUS 100 17-Sep-98 17-Feb-99 INFRASTRUCTURE 31690 HWY MGMT AND REHAB 310 13-Feb-90 31-Dec-96 32270 ELEC TRNS&CONSRVTN 385 14-Jun-90 30-Jun-95 33760 HYDROCARBN TRNSP/PRO 260 26-Jun-91 31-Dec-01 34570 METRO TRANSP.SPAULO 126 31-Mar-92 31-Mar-98 35480 STATE HWY MGMT 88 22-Dec-92 31-Dec-99 36330 METRO TRANSP. RIO 128.5 29-Jun-93 14-Oct-93 37150 STATE HIGHWAY MANAGEMENT II 220 15-Mar-94 25-Mar-94 39160 BELO H M.TSP 98.6 29-Jun-95 30-Nov-95 39150 RECIFE M.TSP 102 29-Jun-95 3-Apr-96 40460 RAILWAYS RESTRUCTURG 350 20-Jun-96 17-Sep-96 41650 RGS HWY MGT 70 15-May-97 31-Dec-03 41880 FED HWY DECENTR 300 12-Jun-97 31-Dec-02 42650 GAS SCTR DEV PROJECT 130 18-Dec-97 31-Dec-00 42910 RJ M.TRANSIT PRJ. 186 5-Mar-98 30-Jun-02 43120 (BF-R)SP.TSP 45 7-Apr-98 31-Dec-02 6 8 A N N E X A : R E F E R E N C E TA B L E S T a b l e A . 9 ( c o n t i n u e d ) Loan # Name Commitment Approval date Closing date 44940 SALVADOR URBAN TRANS 150 17-Jun-99 31-Dec-03 45140 ENERGY EFFICIENCY (ELETROBRAS) 43.4 5-Oct-99 31-Dec-03 grant BR ENERGY EFFICIENCY (GEF) 5-Oct-99 grant GUARANTEED NOTE TRANSPORTADORA BRASILEI 14-Dec-00 46360 GOIAS STATE HIGHWAY MANAGEMENT 65 23-Aug-01 31-Dec-04 PUBLIC SECTOR MANAGEMENT 27210 PUB SECTOR MGMT 29 19-Jun-86 31-Dec-93 41390 BR RGS ST.REF 125 4-Mar-97 31-Dec-98 41890 BR MT STATE PRIV. 45 12-Jun-97 30-Sep-01 42110 BR RJ ST.PRIV. 250 17-Jul-97 31-Dec-98 43180 MG STATE PRIV. 170 28-Apr-98 31-Dec-99 45430 BR ADMIN & FISC REF 505.06 30-Mar-00 31-Dec-00 70460 BR PRGM.FISCAL REFORM SAL 757.6 18-Jan-01 31-Mar-02 46040 BR FISCAL & FIN. MGMT. TAL 8.88 24-May-01 31-Dec-05 SOCIAL PROTECTION 43690 BR PENSION REFORM LIL 5 30-Jun-98 31-Dec-01 44310 BR SOC SECURITY REF I 757.57 7-Jan-99 30-Jun-99 44300 BR SOCIAL PROTECTION 252.52 7-Jan-99 30-Jun-99 45370 INSS REF LIL 5.05 7-Feb-00 31-Dec-02 45420 SECOND SOCIAL SECURITY SPEC. SEC. ADJ LN 505.06 30-Mar-00 31-Dec-00 URBANDEVELOPMENT 25320 RURAL WS & S PILOT 16.3 7-May-85 30-Sep-90 26230 STA CATARINA TOWNS 24.5 19-Sep-85 31-Dec-93 26450 NE URBN RECON (FL'D) 100 19-Dec-85 31-Dec-88 26810 SALVADOR METRO DEVT 55 22-Apr-86 30-Jun-97 29750 RIO EMERG FL'D RECON 175 24-Jun-88 30-Sep-95 29830 W&S/PROSANEAR 80 29-Jun-88 30-Dec-96 31000 MUNIC DEV 100 22-Jun-89 31-Dec-95 31020 WATER SCTR SAO PAULO 280 28-Jun-89 30-Jun-97 31290 MUN DEV (RIO GRANDE) 100 24-Oct-89 31-Dec-95 34420 WATER SECTOR MODERNIZATION PROJECT 250 10-Mar-92 30-Jun-00 35050 BR WTR Q/PLN(SP/PR/FED) 245 2-Jul-92 31-Dec-02 35540 WTR Q/PLN(MINAS GERA 145 5-Jan-93 30-Sep-99 36390 BR MINAS MNC.DEVELOPMT 150 20-Jul-93 31-Dec-01 37670 ESP.SANTO WATER 154 28-Jun-94 31-Dec-02 37890 CEARA URBAN DEVELOPMENT & WATER RESOURCE 140 6-Sep-94 31-Mar-02 41400 BAHIA MUN.DV 100 4-Mar-97 31-Mar-02 42920 WATER S.MOD.2 150 5-Mar-98 30-Jun-04 45320 PROSANEAR 2 30.3 6-Jan-00 31-Dec-04 6 9 B R A Z I L : F O R G I N G A S T R AT E G I C PA R T N E R S H I P F O R R E S U LT S T a b l e A . 1 0 K e y E c o n o m i c I n d i c a t o r s , 1 9 9 0 ­ 0 1 Indicator 1990 1991 1992 1993 1994 1995 GDP growth (annual %) ­4.3 1.3 ­0.5 4.9 5.9 4.2 Population, total (m) 147.6 149.9 152.2 154.5 156.8 159.0 Population growth (annual %) 1.7 1.6 1.5 1.5 1.5 1.4 GNI per capita (US$), Atlas method 2,780 2,950 2,820 2,780 3,100 3,700 GNI per capita (US$), PPP 5,410 5,530 5,620 5,910 6,280 6,670 GDP per capita growth (annual %) ­5.9 ­0.3 ­2.0 3.3 4.4 2.8 Gross domestic savings, current prices (% of GDP) 21.4 20.5 21.4 22.3 22.5 20.5 Fixed investment, current prices (% of GDP) 20.6 18.1 18.4 19.3 20.7 20.5 Fixed investment, constant prices (1975 = 100) 60.7 59.3 54.7 56.3 59.7 65.0 Exports of goods and services (% of GDP) 8.2 8.7 10.9 10.5 9.5 7.7 Imports of goods and services (% of GDP) 7.0 7.9 8.4 9.1 9.2 9.5 Current account balance (US$ millions) ­3,784 ­1,408 6,109 ­668 ­1,811 ­18,384 Current account balance (% of GDP) ­0.8 ­0.4 1.6 0.0 ­0.2 ­2.6 Foreign direct investment (US$ millions) 989 1,102 2,061 1,291 2,150 4,405 Foreign direct investment (% of GDP) 0.2 0.3 0.5 0.3 0.4 0.6 Total debt service (% of exports of goods and services) 22.2 22.6 20.2 23.6 30.0 36.6 External debt (% of GDP) 26.3 30.5 35.1 33.9 27.3 22.6 Gross international reserves (in months of imports) 2.7 2.7 7.5 8.2 8.4 7.9 Inflation, consumer prices (annual %) 2,947.7 432.8 951.6 1,928.0 2,075.9 66.0 Current fiscal revenues, central government (% of GDP) 22.8 20.9 23.5 25.6 27.0 -- Fiscal expenditures, central government (% of GDP) 34.9 24.4 29.2 37.2 33.8 -- Pension expenditures (% of GDP) 4.7 4.9 5.9 8.4 9.0 9.3 Nominal deficit, general government (% of GDP) -- -- -- -- 27.0 7.3 Primary deficit, general government (% of GDP) -- -- -- -- ­5.2 ­0.3 Total public debt, general government (% of GDP) -- -- -- -- 26.0 27.3 7 0 A N N E X A : R E F E R E N C E TA B L E S Middle Brazil LAC income average average average 1996 1997 1998 1999 2000 2001 1991­01 1991­01 1991­01 2.7 3.3 0.2 0.8 4.5 1.5 2.6 3.1 3.2 161.2 163.5 165.7 167.9 170.1 172.4 161.2 485.2 2,527.8 1.4 1.4 1.4 1.3 1.3 1.3 1.4 1.6 1.2 4,320 4,740 4,600 3,870 3,590 3,060 3,060 3,560 1,647 6,820 6,930 6,800 6,910 7,300 7,450 7,450 7,070 4,497 1.3 1.9 ­1.1 ­0.5 3.2 0.2 1.2 1.4 2.0 18.6 18.9 18.6 19.3 20.1 19.9 20.2 19.8 25.4 19.3 19.9 19.7 19.1 19.4 19.4 19.4 19.6 25.4 64.6 70.6 68.5 63.4 62.0 64.6 62.6 -- -- 7.1 7.5 7.3 10.6 10.8 13.4 9.5 14.9 24.5 9.2 10.1 9.9 11.7 12.4 14.4 10.2 16.1 24.6 ­23,502 ­30,453 ­33,417 ­25,335 ­24,226 ­23,212 ­16,028 -- -- ­3.0 ­3.8 ­4.3 ­4.8 ­4.1 ­4.6 ­2.4 ­2.7 ­1.2 10,792 18,993 28,856 28,578 32,779 22,457 13,951 -- -- 1.4 2.4 3.7 5.4 5.5 4.5 2.3 -- -- 42.2 62.7 74.8 112.8 90.7 -- 51.6 -- -- 23.2 24.8 30.7 45.5 39.7 44.9 32.6 38.5 35.6 8.6 6.4 5.3 5.0 4.2 4.5 6.3 6.0 6.2 15.8 6.9 3.2 4.9 7.0 6.9 499.9 39.6 40.9 -- 23.8 24.9 -- -- -- 24.3 20.0 18.3 -- 24.5 26.8 -- -- -- 29.3 22.8 21.4 9.8 10.1 10.8 11.1 11.0 11.5 9.2 -- -- 5.9 6.1 7.5 5.8 3.7 3.6 8.3 -- -- 0.1 1.0 0.0 ­3.2 ­3.5 ­3.7 ­1.9 -- -- 30.9 30.7 38.9 44.6 45.2 49.2 36.6 -- -- 7 1 B R A Z I L : F O R G I N G A S T R AT E G I C PA R T N E R S H I P F O R R E S U LT S T a b l e A . 1 1 K e y S o c i a l I n d i c a t o r s , 1 9 9 0 ­ 0 1 Indicator 1990 1991 1992 1993 1994 1995 1996 1. Poverty and inequality indicators Population below the poverty line 40.7 40.8 40.8 41.7 37.8 33.9 33.5 Northeast 68.6 67.2 65.7 66.9 63.0 59.1 59.1 Northeast rural 84.9 -- 80.1 77.8 -- 73.4 72.8 Population below the extreme poverty line 19.1 19.2 19.3 19.5 17.1 14.6 15.0 Northeast 41.8 41.5 41.2 43.7 36.8 29.9 31.9 Northeast rural -- -- -- -- -- -- -- Gini coefficient 61.5 59.9 58.3 60.5 60.3 60.1 60.2 Income 10% richest/40% poorest 26.7 24.3 21.8 24.5 24.3 24.1 24.6 2. Education indicators Illiteracy rate, adult total (% of pop. ages 15 and above) 18.7 -- 17.2 16.4 -- 15.5 14.6 Northeast 36.4 -- 32.8 31.8 -- 30.5 28.7 Illiteracy rate, youth total (% of pop. ages 15­24) 9.8 -- 8.6 8.2 -- 7.1 6.4 Northeast 22.7 -- 19.9 19.2 -- 17.0 15.3 School enrollment, primary (% net) -- 83.8 -- -- 87.5 -- -- Northeast -- 72.0 -- -- 81.5 -- -- School enrollment, secondary (% net) -- 17.6 -- -- 20.8 -- -- Northeast -- 8.5 -- -- 10.3 -- -- Average years of schooling 4.8 -- 4.9 5.1 -- 5.2 5.4 Northeast 3.3 -- 3.5 3.7 -- 3.8 3.9 3. Health indicators Immunization, DPT (% of children under 12 months) 66.0 78.0 71.0 75.0 69.0 84.0 75.0 Immunization, measles (% of children under 12 months) 78.0 85.0 91.0 85.0 72.0 90.0 80.0 AIDS incidence (per 10,000 pop.) 0.6 0.8 1.0 1.1 1.1 1.3 1.4 Life expectancy at birth, total (years) 65.6 66.0 66.3 66.6 66.9 67.2 67.5 Northeast 62.3 62.7 63.1 63.4 63.8 64.2 64.5 Mortality rate, infant (per 1,000 live births) 47.5 45.0 42.6 40.4 38.4 36.6 34.9 Northeast 73.4 69.6 66.0 62.6 59.4 56.4 53.7 Mortality rate, under-5 (per 1,000 live births) 60.0 56.4 51.7 48.8 46.7 44.5 41.8 Northeast 84.1 79.1 75.2 71.3 67.4 63.9 60.9 Malnutrition prevalence, height for age (% children under 5) 15.4 -- -- -- -- -- 10.5 Malnutrition prevalence, weight for age (% children under 5) 7.0 -- -- -- -- -- 5.7 4. Access to services Access to electricity (% of households) 87.5 -- 88.8 90.0 -- 91.8 92.9 Northeast 70.5 -- 73.3 75.8 -- 79.1 81.7 Northeast rural 35.4 -- 37.2 40.9 -- 47.5 52.3 Access to improved water (% of households)a 74.2 -- 77.1 78.3 -- 80.5 83.6 Northeast 43.3 -- 49.9 51.0 -- 53.8 59.4 Northeast rural 10.6 -- 11.6 11.6 -- 13.7 18.6 Access to water networks (% of households) 65.7 -- 68.4 69.6 -- 71.3 74.3 Northeast 40.9 -- 47.5 48.2 -- 51.1 56.2 Access to sanitation (% of households) b 63.2 -- 64.0 65.5 -- 66.0 69.5 Northeast 43.2 -- 46.3 47.7 -- 45.9 51.7 Households with fixed telephone lines (% of households) -- -- 19.0 19.8 -- 22.4 25.5 Northeast -- -- 9.3 10.2 -- 11.5 13.8 Households with refrigerators (% of households) 70.6 -- 71.6 71.8 -- 74.9 78.4 Northeast 41.5 -- 44.0 44.3 -- 47.8 53.0 Northeast rural 14.5 -- 14.8 14.7 -- 18.2 22.0 Households with television (% of households) -- -- 74.0 75.9 -- 81.2 84.5 Northeast -- -- 49.9 53.1 -- 61.6 68.0 Northeast rural -- -- 19.2 22.2 -- 31.3 38.5 a. Networks and wells. b. Networks and septic tanks Sources: IBGE, IPEA, Ministry of Education, Ministry of Health, World Bank (SIMA), UN-ECLAC. 7 2 A N N E X A : R E F E R E N C E TA B L E S Middle Middle LAC LAC income income average average average average 1997 1998 1999 2000 2001 1990 2000 1990 2000 33.9 32.7 34.0 33.8 33.6 48.3 43.8 -- -- 60.0 57.6 58.6 58.0 57.4 -- -- -- -- 74.9 73.3 72.6 -- -- -- -- -- -- 14.8 13.9 14.3 14.5 14.6 22.5 18.5 -- -- 31.7 29.3 29.9 29.9 30.0 -- -- -- -- -- -- -- -- -- -- -- -- -- 60.2 60.1 59.5 59.6 59.7 -- -- -- -- 24.5 24.1 23.2 -- 23.6 14.7 13.8 13.3 -- 12.4 14.9 11.1 19.0 13.8 29.4 27.5 26.6 -- 24.3 -- -- -- -- 6.3 5.4 4.9 -- 4.2 7.2 5.0 6.9 4.9 15.1 13.0 11.4 -- 9.6 -- -- -- -- -- 95.3 95.4 -- -- 89.3 96.9 94.5 -- -- 90.4 93.2 -- -- -- -- -- -- -- 30.8 32.6 -- -- 29.1 -- -- -- -- 14.5 15.7 -- -- -- -- -- -- 5.5 5.6 5.7 5.8 6.0 5.9 6.6 -- -- 4.0 4.1 4.2 4.3 4.5 -- -- -- -- 79.0 90.0 90.0 -- -- 70.7 86.8 88.4 89.0 99.0 96.0 99.0 -- -- 76.7 93.0 89.3 90.1 1.5 1.5 1.3 1.0 -- 67.8 68.1 68.4 68.6 68.8 67.9 70.4 68.2 69.5 64.8 65.1 65.5 65.8 66.1 33.4 32.0 30.8 29.7 -- 42.2 28.9 40.0 31.7 51.1 48.8 46.7 44.7 -- -- -- -- -- 39.9 38.2 37.1 -- -- 53.0 35.7 51.6 39.3 57.9 55.7 53.2 -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- 93.4 94.2 94.8 -- 96.0 82.6 84.5 85.8 -- 89.4 -- -- -- -- 54.4 58.9 62.9 -- 66.5 -- -- -- -- 83.3 84.7 85.6 -- 87.3 58.1 61.4 62.5 -- 67.0 -- -- -- -- 18.8 20.9 23.3 -- 22.8 -- -- -- -- 73.8 75.2 76.1 -- 77.8 54.7 57.9 58.7 -- 62.0 -- -- -- -- 68.0 68.9 69.5 -- 71.3 47.4 47.5 47.7 -- 54.2 -- -- -- -- 27.9 32.0 37.6 -- 51.1 15.9 18.0 21.0 -- 30.8 -- -- -- -- 80.3 81.9 82.8 -- 85.1 56.6 58.5 60.2 -- 64.9 -- -- -- -- 25.3 27.9 31.7 -- 33.9 -- -- -- -- 86.2 87.6 87.8 -- 89.1 72.3 74.8 75.5 -- 78.4 -- -- -- -- 44.4 49.5 51.5 -- 51.9 -- -- -- -- 7 3 B R A Z I L : F O R G I N G A S T R AT E G I C PA R T N E R S H I P F O R R E S U LT S T a b l e A . 1 2 B r a z i l a t a G l a n c e Latin America Upper- and middle Brazil Caribbean Income POVERTY and SOCIAL 2001 Population, mid-year (millions) 172.6 524 504 Development diamond* GNI per capita (Atlas method, US$) 3,060 3,560 4,460 GNI (Atlas method, US$ billions) 528.7 1,862 2,248 Life expectancy Average annual growth, 1995-01 Population (%) 1.3 1.5 1.3 Labor force (%) 1.8 2.2 1.8 GNI Gross Most recent estimate per primary (latest year available, 1995-01) capita enrollment Poverty (% of population below national poverty line) 22 .. .. Access to improved water source Urban population (% of total population) 82 76 77 Life expectancy at birth (years) 68 70 71 Brazil Infant mortality (per 1,000 live births) 30 29 24 Upper-middle-income group Child malnutrition (% of children under 5) 6 9 9 Access to an improved water source (% of population) 87 85 87 Illiteracy (% of population age 15+) 14 11 10 Gross primary enrollment (% of school-age population) 154 130 127 Male 156 131 128 Female 152 128 126 KEY ECONOMIC RATIOS and LONG-TERM TRENDS 1981 1991 2000 2001 GDP (US$ billions) 263.6 407.7 593.8 502.0 Gross domestic investment/GDP 23.1 19.8 21.7 21.0 Economic ratios* Exports of goods and services/GDP 9.4 8.7 10.8 13.4 Trade Gross domestic savings/GDP 22.7 20.5 20.1 19.9 Gross national savings/GDP 18.6 18.6 17.2 16.4 Current account balance/GDP ­4.5 -0.3 ­4.1 ­4.6 Domestic Investment Interest payments/GDP 3.1 0.5 2.2 2.1 savings Total debt/GDP 30.9 29.7 39.8 45.0 Total debt service/exports 66.4 23.3 92.0 60.5 Indebtedness Present value of debt/GDP .. .. 37.7 .. Brazil Present value of debt/exports .. .. 327.4 .. Upper-middle-income group 1981­91 1991­01 2000 2001 2001­05 (average annual growth) GDP 2.9 2.9 4.4 1.5 2.8 GDP per capita 0.9 1.5 3.1 0.2 1.6 Exports of goods and services 6.8 6.4 11.4 12.1 3.7 7 4 A N N E X A : R E F E R E N C E TA B L E S T a b l e A . 1 2 ( c o n t i n u e d ) STRUCTURE of the ECONOMY 1981 1991 2000 2001 (% of GDP) Growth of investment and GDP (%) Agriculture 10.7 7.8 7.4 9.3 Industry 43.7 36.2 28.3 33.9 20 Manufacturing 32.9 25.3 17.4 21.0 10 Services 45.5 56.1 64.3 56.8 0 Private consumption 68.0 61.6 60.6 60.1 ­10 96 97 98 99 00 01 General government consumption 9.3 17.9 19.3 19.9 GDI GDP Imports of goods and services 9.8 7.9 12.4 14.4 1981­91 1991­01 2000 2001 (average annual growth) Agriculture 2.5 3.4 3.0 5.1 Growth of exports and imports (%) Industry 2.2 2.5 4.9 ­0.6 40 Manufacturing 1.4 1.9 6.1 0.6 20 Services 3.5 2.9 3.7 1.5 0 96 97 98 99 00 01 Private consumption 1.2 5.0 3.7 2.6 ­20 General government consumption 7.5 ­1.0 0.0 4.8 Exports Imports Gross domestic investment 3.9 3.5 11.2 ­2.0 Imports of goods and services 2.9 10.0 12.4 0.7 PRICES and GOVERNMENT FINANCE 1981 1991 2000 2001 Domestic prices (% change) Inflation (%) Consumer prices 101.7 432.8 6.0 7.7 100 75 Implicit GDP deflator 107.2 415.3 8.0 7.4 50 Government finance a 25 (% of GDP, includes current grants) 0 96 97 98 99 00 01 Current revenue .. .. 21.9 23.0 GDP deflator CPI Current budget balance .. .. 1.8 1.8 Overall surplus/deficit .. .. 3.2 3.8 TRADE 1981 1991 2000 2001 (US$ millions) Total exports (fob) .. 31,620 55,086 58,223 Export and import levels (US$ mill.) Coffee .. 2,870 3,048 2,932 80,000 Soybeans .. 2,031 2,188 2,726 60,000 Manufactures .. 20,483 41,027 41,144 40,000 Total imports (cif) .. 21,041 55,783 55,581 20,000 Food .. 1,275 1,507 1,169 0 Fuel and energy .. 3,371 6,362 6,276 95 96 97 98 99 00 01 Exports Imports Capital goods .. 5,966 13,591 14,803 Export price index (1995=100) 81 81 97 94 Import price index (1995=100) 70 68 118 114 Terms of trade (1995=100) 116 120 82 82 7 5 B R A Z I L : F O R G I N G A S T R AT E G I C PA R T N E R S H I P F O R R E S U LT S T a b l e A . 1 2 ( c o n t i n u e d ) BALANCE of PAYMENTS 1981 1991 2000 2001 (US$ millions) Exports of goods and services 25,522 34,333 64,584 67,545 Current account balance to GDP (%) 0 Imports of goods and services 27,200 26,142 72,443 72,652 95 96 97 98 99 00 01 Resource balance ­1,678 8,191 ­7,859 ­5,107 ­2 Net income ­10,272 ­11,154 ­17,886 ­19,743 Net current transfers 10 1,556 1,521 1,638 ­4 Current account balance ­11,940 ­1,407 ­24,224 ­23,212 Financing items (net) 12,286 ­3,272 31,904 19,468 ­6 Changes in net reserves ­346 4,679 ­7,680 3,744 Memo: Reserves including gold (US$ millions) 6,693 8,763 33,011 35,866 Conversion rate (DEC, local/US$) 3.38E-11 1.48E-4 1.8 2.4 EXTERNAL DEBT and RESOURCE FLOWS 1981 1991 2000 2001 (US$ millions) Total debt outstanding and disbursed 81,454 121,020 236,157 226,067 Composition of 2001 debt (US$ mill.) IBRD 2,286 8,165 7,377 7,963 7,963 8,337 IDA 0 0 0 0 29,292 11,476 Total debt service 17,874 8,340 62,891 42,977 16,583 IBRD 317 1,917 1,351 1,362 IDA 0 0 0 0 Composition of net resource flows Official grants 8 50 54 .. Official creditors 1,230 ­1,062 ­1,780 786 152,416 Private creditors 7,512 1,701 7,936 3,615 A -IBRD D - Other multilateral E - Bilateral Foreign direct investment 2,520 1,103 32,779 22,457 B -IDA F - Private C -IMF G - Short-term Portfolio equity 0 803 3,076 2,481 World Bank program Commitments 1,039 1,348 1,290 1,609 Disbursements 387 840 1,692 1,639 Principal repayments 136 1,248 887 828 Net flows 251 ­408 805 810 Interest payments 181 669 464 533 Net transfers 70 ­1,077 341 277 Note: 2001 data are preliminary estimates. * The diamonds show four key indicators in the country (in bold) compared with its income-group average. If data are missing, the diamond will be incomplete. a. Data refer to central government. 7 6 ANNEX B: SUMMARIES OF SECTOR EVALUATIONS 1. Public Sector Management 2. Agriculture 3. Water and Sanitation 4. Environment 5. Health 6. Education 7 7 B R A Z I L : F O R G I N G A S T R AT E G I C PA R T N E R S H I P F O R R E S U LT S 1. Public Sector Management services became the mainstay objective for the loans. Also, the establishment of a state regula- The Bank's Assistance Strategy tory agency for the newly concessioned or pri- The Real Plan succeeded in establishing greater vatized public services was supported in all the macroeconomic stability, and with it a conducive SRLs. The SRL objectives were consistent with environment for a more active Bank role. The those of the CAS objectives--macroeconomic Bank's assistance included, inter alia, ESW, tech- stability and public sector modernization--as nical assistance loans, and adjustment loans deal- well as private sector participation in infra- ing with fiscal reform, social security reform, structure. The effects of the privatizations sup- privatization of the state banks, and economic ported by the loans, with a few possible regulation. exceptions, were positive. There is also evidence In general, the ESW was relevant to the major of fiscal adjustment in these states. policy problems facing the country, and the as- Fiscal Reform Loans (FRLs). Brazil's increas- sessment of the problems and issues addressed ingly weak macroeconomic fundamentals in was of satisfactory quality. The proposed solu- 1996­98 and a looming currency crisis prompted tions and policy suggestions were generally well the Brazilian government to undertake the nec- founded, although not always realistic or prac- essary and overdue fiscal adjustment. Assistance tical, given the political realities and constraints from the Fund, the Bank, and the IDB was re- faced by the government. Moreover, inadequate quested in support for a fiscal adjustment pro- attention was given to report dissemination. gram. A Fund Stand-by Arrangement, involving In great part derived from the ESW and related substantial fiscal adjustment, was negotiated and policy dialogue, the Bank undertook a number approved by the Fund's Board in November of lending operations as part of its assistance in 1998. The Bank's participation in the special in- the area of public sector management during ternational financing package took the form of the period 1995­01. This lending consisted of (a) two successive fiscal reform loans (FRLs), along four state reform loans; (b) two fiscal reform with two adjustment loans for social security re- loans; (c) two social security reform loans; and form and one adjustment loan for social pro- (d) a series of technical assistance loans sup- tection (discussed below). porting the implementation of these reforms. The fiscal reform loans entailed two separate, The four state reform loans were prepared and but sequentially linked, adjustment operations. approved in the 1995­98 period, when it be- Common features of the loans included (a) sup- came apparent that fiscal imbalances in the states port to overall improvements in Brazil's fiscal per- were part of the overall fiscal imbalances that formance at all government levels (including jeopardized the Real Plan. The remaining loans adherence to a number of quantitative per- were approved after 1998, in the aftermath of the formance criteria specified in a Fiscal Stability Pro- Russian crisis and in support of the govern- gram and supported by the Fund Standby ment's effort at fiscal adjustment. Arrangement); and (b) specific components sup- State Reform and Privatization Loans (SRLs). porting, inter alia, public administration re- From the Bank's ESW, independent work within forms and improvements in debt management. the government, and the policy dialogue be- Both operations were designed as one-tranche tween the Bank and the government, it was clear loans, with up-front conditionality. by 1995 that there was an emerging fiscal prob- The outcomes and results of the FRLs have lem in the states of major proportions--a prob- been positive. The primary balance of the gen- lem that threatened macroeconomic stabilization. eral government shifted from deficits to sur- This was the point of departure for the devel- pluses around 3.5 percent of GDP, exceeding opment of the SRLs, with the overall goal being the FRL targets. The proportion of government to support fiscal adjustment in the states. As a spending for personnel has been progressively partial means to this end, the divestiture of state- reduced. Greater fiscal discipline has been im- owned enterprises or the concession of their posed on the states, as supported by the Fiscal 7 8 A N N E X B : S U M M A R I E S O F S E C T O R E VA L U AT I O N S and Administrative Reform Loan, through the in the formulation or implementation of the implementation of legislation affording the Na- Real Plan. Since the Real Plan, the Bank has tional Treasury a central role in refinancing the played a much more positive and supportive debt of the states. Refinancing contracts be- role. A central and consistent Bank assistance ob- tween the state governments and the National jective--as articulated in the recent CASs--has Treasury now involve fiscal performance criteria. been to support the underlying fiscal adjust- The Programmatic Fiscal Reform Structural Ad- ment to make stabilization sustainable. The ob- justment Loan supported inter alia the imple- jective was highly relevant and Bank loans mentation of the Fiscal Responsibility Law, which supporting public sector reforms during 1995­01 is currently being successfully pursued as a new were very consistent with the CASs. modus operandi for government at all levels. The overall assessment of the Bank's assis- Social Security Reform Loans. As a part of the tance to Brazil in the area of public sector reforms Bank's efforts to support fiscal adjustment, two is rated as satisfactory, encompassing the SRL adjustment loans were made to support reforms cluster, the fiscal reform cluster, and the social in the country's problematic social security and security cluster. Within the areas of focus that the pension systems. The social security loan in- Bank set for itself, Bank assistance was both rel- volved support for a constitutional amendment evant and effective. The Bank contributed to that, upon enactment in December 1998, intro- the establishment of a framework and control duced the principle of actuarial and fiscal balance mechanism for improving fiscal performance of for both private and public sector workers, elim- several layers, including the federal government, inated the benefit formula for private sector states, municipalities, and social security. This as- workers from the constitutional text, introduced sistance has come in several ways, including a minimum retirement age for public sector em- lending for adjustment and technical assistance, ployees, eliminated most special regimes, and ESW, informal technical assistance in loan prepa- tightened eligibility criteria. The second loan ration and execution, and informal personnel was centered on the introduction of a new ben- exchange. efit formula for private workers in an attempt to Brazilian policymakers had a clear under- reduce actuarial imbalances and to tighten con- standing of the macroeconomic issues and prob- tributions and benefits. It also included the re- lems, including those related to public finance structuring of the Social Security Organization questions. The fiscal adjustment was delayed (INSS), a Law of Crimes against Social Security, until 1998--not for lack of understanding on tightening of disability criteria, and incentives for the part of the policymakers, but for a lack of po- expansion of coverage among the self-employed. litical consensus. The unfolding currency crisis, Both the government and the Bank have ac- beginning in 1997, created the political will to fi- knowledged that these initial reforms would not nally proceed with fiscal adjustment, and the by themselves reduce significantly the severe government effectively used that opportunity actuarial imbalances of the pension system. How- to implement a number of much-needed re- ever, the reforms undertaken to date have in- forms. If some reforms, such as those to social troduced several important changes and, most security, did not go as far as originally expected, important, opened the door for subsequent and it was not because of a lack of government com- more specific reforms through enactment of or- mitment and ownership, but because of a lack dinary legislation. of political consensus and support. Apart from the Brazilian government, the IMF Overall Evaluation of the Bank's Assistance was unquestionably the institution that played During the macroeconomic stabilization crisis of the most central and critical role in supporting the early 1990s, the Bank did not appear dis- the fiscal adjustment beginning in 1998. The posed--or possibly able--to assist the Brazilian Fund exercised general leadership in defining the government in finding a solution to the crisis. parameters of the fiscal program with the Brazil- There is no evidence that the Bank had any role ian authorities and in orchestrating financial 7 9 B R A Z I L : F O R G I N G A S T R AT E G I C PA R T N E R S H I P F O R R E S U LT S support for that program. However, both the assistance to the government in the elaboration Bank and the IDB became important partners in of a well-articulated educational/public relations providing necessary financial, as well as techni- campaign and opinion surveys designed to re- cal, support. The Bank supported fiscal adjust- duce resistance to further and deeper reforms; ment and reform during 1994­98 through state and (ii) support actual efforts on the part of the reform loans. Once the government finally de- government to reduce imbalances in the PAYG cided to proceed with a concerted and significant systems for private and public workers through fiscal adjustment program beginning in late 1998, further adjustment lending. the Bank responded quickly with adjustment lending in support of deeper fiscal and social se- 2. Agriculture curity reforms as well. The Agriculture Sector in the 1990s Recommendations for Future Assistance Agriculture in Brazil accounted for 11 percent of Continued fiscal adjustment and public sector GDP and 22 percent of employment in 2000. modernization will continue to be important Livestock production has outpaced crop pro- challenges for the new government that took of- duction and now accounts for 40 percent of out- fice in January 2003. Bank responsiveness and po- put value. The agriculture sector is particularly tential support for these challenges should important to trade, with about 35 percent of constitute high priorities for Bank assistance, merchandise exports coming from agriculture and accordingly it is recommended that Bank as- and processed food products. The country ac- sistance continue in public sector reform and counts for about 4 percent of global agricultural public sector management. Three broad areas of trade. It is the world's largest exporter of coffee, assistance are suggested, covering fiscal man- sugar, and orange juice; the second-biggest ex- agement, public governance, and social secu- porter of soybeans; and the third-largest ex- rity reform. porter of beef and chicken. First, under the heading of fiscal manage- Brazil has one of the most concentrated pat- ment, several specific interventions could in- terns of land distribution in the world. The last clude (i) continued support for fiscal adjustment agricultural census (1996) revealed that 11 per- and reform, possibly in the form of additional cent of rural property owners controlled 68 per- programmatic adjustment lending, conditional cent of arable land. There has been progress in on the generation of substantial primary fiscal land reform, as indicated by the redistribution of surpluses and a reduction of public sector debt, about 18 million hectares (equivalent to 6 per- the deepening of the administrative reforms, cent of the land in farms) to 542,000 families (al- and the implementation of the long-delayed tax most 2 million people). However, land reform has reform; and (ii) assistance to state governments not yet changed significantly the skewed distri- and selected municipalities in public finance bution of land in Brazil. Since the early 1990s management, in the form of investment or tech- Brazil has made progress in reducing rural nical assistance loans. poverty, but the incidence of poverty in rural Second, in relation to public governance, areas remains extremely high, especially in the specific Bank interventions could include: (i) Northeast--72 percent in 1999, down from 85 support for improvements in the regulatory percent in 1990. framework, assisting the recently established federal and state regulatory agencies to over- The Bank's Assistance to Agriculture come their start-up problems; and (ii) assistance The share of total Bank commitments devoted to "new" areas of public governance such as ju- to agriculture (broadly defined) slumped from dicial system reform, the strengthening of prop- 32 percent in 1980-89 (US$3.8 billion) to 14 per- erty rights, and the reform of labor legislation. cent in 1990-02 (US$1.9 billion), with important Third, for proceeding with high-priority social variations across types of interventions. There security reforms, the Bank could: (i) provide was an increasing focus on rural develop- 8 0 A N N E X B : S U M M A R I E S O F S E C T O R E VA L U AT I O N S ment/poverty alleviation projects in Northeast disbursements were channeled toward the pro- states. Most of the poor are located in the rural vision of electricity and water alone, benefiting Northeast, and the focus of the Bank's strategy 835,000 poor households and an estimated rural toward the country and the sector has adequately population of more than 3 million people. Sec- reflected this. The share of this class of projects ond, although it is too early to pass judgment on in total commitments increased from 47 per- the land reform projects, the early evidence cent in the 1980s to 74 percent in the 1990s. shows that the cost of delivering parcels to small There was also a change in design in this class farmers is lower than in previous land reform of projects in the 1990s, with greater focus on models and the existence of supporting infra- community-based poverty alleviation. Projects structure and financing suggests that there is a supporting land reform were also launched in the viable base for raising productivity. 1990s, as part of the poverty alleviation strat- The less satisfactory project clusters were re- egy. The Bank scaled down more traditional proj- duced in number and size of commitments. Re- ects, such as irrigation projects, because of search and extension efforts are rated moderately unsatisfactory outcomes in the 1980s and early satisfactory. The research projects provided top- 1990s. quality training to a critical mass of profession- als, but were less successful in transferring Overall Assessment of the Bank's Assistance appropriate technologies to poor Northeastern Since the middle of the last decade, agriculture farmers. Within the last three years, however, a projects have been turned around. Between concerted effort has been launched to conduct 1980 and 1989, agriculture projects in Brazil had, research more relevant to that region. Finally, the on average, worse ratings than the rest of the irrigation projects are rated unsatisfactory owing Brazilian portfolio, and the Brazilian portfolio to persistent high costs and conspicuous design had, on average, worse ratings than projects flaws. However, in important pockets, crop di- both Regionwide and Bankwide. In the 1990s, the versification exceeded appraisal expectations, performance of the Brazilian portfolio in general farmers used their own resources to upgrade to and agriculture projects in particular was turned drip irrigation, and there was significant growth around, primarily because of the sharp im- of farm incomes. provement after 1995, when Brazil outperformed The Bank is the only multilateral organiza- the Region and the Bank by a wide margin. Of tion still devoting significant attention to the the projects with an unsatisfactory outcome in agriculture sector. The Inter-American Devel- 1990­01, two were irrigation projects, two were opment Bank has scaled back its involvement in credit projects, two were for Amazonian devel- agriculture to a much greater extent than the opment, one was for rural water supply and san- World Bank, with only one project in 1995­02. itation, and one was for land administration. Of The Bank maintained a direct policy dialogue the projects with satisfactory outcomes, roughly with most Northeastern states and contributed 60 percent correspond to the community-driven to better outcomes in the rural area, particu- rural development program that covered all nine larly through the rural development and land re- states in the Northeast plus Minas Gerais. form projects. It is probable that, at least in some The overall assistance to agriculture for the states, these results would not have occurred decade is rated satisfactory, primarily because of without Bank involvement. Bank performance the positive outcomes of rural development and was stronger in the latter part of the period, land reform projects. The rural development owing in no small measure to increased Bank projects were successfully restructured in the presence in the field. The Recife-based supervi- early 1990s by building a demand-driven ap- sion team has been particularly effective, re- proach in a cost-effective manner. These projects sponding rapidly to requests and queries from have delivered electricity, water, and other es- the various state project management units. Less sential services to large numbers of poor house- positive, however, has been the neglect of impact holds in the region. Roughly 60 percent of evaluation. 8 1 B R A Z I L : F O R G I N G A S T R AT E G I C PA R T N E R S H I P F O R R E S U LT S The outcomes of agriculture projects are likely widely reported, there will be more pressure on to be sustained over time. Rural development politicians to provide the funding needed to projects in particular show good prospects for boost the performance of rural schools. Closer sustainability based on the maintenance record coordination is needed between sector units for infrastructure investments and the likelihood within the Bank. Finally, the case for Bank as- that skills created in the municipalities will en- sistance to rural finance needs to be examined. dure. Land reform projects require groups of This should probably take the form of institu- beneficiaries to take the initiative, keeping costs tional development rather than a credit line. low to avoid excessive debt. Its outcomes should also be sustained for a significant number of 3. Water and Sanitation new farms. It is to be expected that some of the newly created farms will fail, but given the gross Main Developments in the Water and underuse of farmland before the reforms, even Sanitation Sector in the 1990s if only about half of the new farms prove sus- The 1988 Constitution stated that public services tainable, this will be an improvement. should be provided by a public authority, either directly or through concessions; it also em- Recommendations for Future Assistance powered municipalities to make these conces- Although the overall rating of the Bank's program sions. However, the 1988 Constitution and the is satisfactory, there is room for improvement. 1995 Concession Law have left important gaps, There are four areas in which more attention is creating obstacles for private sector participation needed. First, it is vital to avoid complacency in and for a faster development of the sector. A relation to the community-driven rural devel- Draft Law establishing the National Water Policy opment projects. The most important challenge should have resolved all these ambiguities by set- is to press forward with the comprehensive im- ting tariff policy and concession criteria and es- pact evaluation that is now being sponsored. tablishing the autonomy of the regulatory agency. There is good reason to believe that funds are But the Draft Law has not yet been passed by adequately targeted, but supervision and im- Congress, because it is being challenged on plementation completion reports need to doc- some key privatization issues, and because it is ument this routinely. facing strong opposition from municipalities Second, raising the productivity of North- (which disagree with the transfer of the con- eastern farms remains the biggest challenge for ceding power to the states). the government and the Bank. The rural devel- Coverage of water through network services opment projects have made an important con- increased from 66 to 78 percent of households tribution to providing the infrastructure that will in the 1990s, while coverage of sewerage through allow agricultural growth to take place. How- network services increased from 31 to 45 percent ever, more is needed in generating and dis- of households in the same period. Total water seminating technology packages. There may coverage compares relatively well with other now be a need for a more focused effort to raise Latin American countries, particularly for urban farm productivity in areas of higher agricultural areas, but can get as low as 9 percent in poor rural potential. areas and, although wells and springs supply A third area to address is the possible short- safe water to some of the non-served rural pop- fall in support to schooling in rural areas. In the ulation, a significant percentage still lacks ac- 1990s, Brazil made great strides in raising school cess to safe water. Sewerage coverage in Brazil enrollments, but it is less clear what success is one of the worst in the continent, reaching less there has been in reducing the gap that separates than 60 percent of the urban population. Urban rural from urban areas. Monitoring the gap be- sewerage coverage reaches only 80 percent in the tween urban and rural schools is an essential richest Southeast and falls to 2 percent in the aspect of improving performance. If rural school- North. Coverage of sewerage networks in rural ing is explicitly monitored and the results are areas is extremely small although somewhat al- 8 2 A N N E X B : S U M M A R I E S O F S E C T O R E VA L U AT I O N S leviated by septic tanks, which can provide safe ESW work was unsatisfactory, however, mostly disposal in low-density areas. because of its scarcity. Bank assistance could have been more effective if it had undertaken The Bank's Assistance to the Water ESW on specific areas such as privatization, con- and Sanitation Sector cession, and pricing criteria and had promoted The Bank's strategy for assisting the water and discussion of these issues among the several in- sanitation sector in Brazil has comprised three terest groups. It is possible that such an effort main components: (i) service extension to the could have reduced the current resistance to poor; (ii) institutional and regulatory reform; the approval of the Draft Law. and (iii) water quality, pollution control, and The institutional development impact of the urban drainage. The Bank's program of assis- Bank's assistance is rated as substantial. Bank tance to the sector seems to be based on a good projects required a significant degree of inter- diagnostic and to be consistent with the sector's governmental integration and stakeholder par- needs. The three components were highly rele- ticipation, with positive effects in institution vant: the first because of the low levels of serv- building. Several projects were launched as pilot ice to the poor; the second because of the difficult projects and have been replicated at a broader, regulatory issues that have hindered the devel- national level. Sustainability of the outcomes is opment of the sector; and the third for having in- judged as likely, despite the problems that still troduced an integrated approach to the problem affect the full development of the sector. The in- of water quality and pollution control. troduction of sound managerial practices was not The Bank's assistance to the sector since the fully implemented in some state water compa- late 1980s has comprised eight projects with nies, and some low-income areas may lack re- total commitments of US$1.3 billion. Bank in- sources to prevent deterioration of the physical vestments were concentrated in the early 1990s infrastructure. However, tariff pricing has gen- (about 85 percent of total commitments), when erally improved with macroeconomic stabiliza- high inflation was the main bottleneck for do- tion to sustain most of the investments, and mestic investments in the sector. With macro- several state water companies have improved economic stabilization, domestic sources their performance. The adoption of integrated gradually returned to finance the sector and the approaches and river basin management units is Bank has moved its assistance toward modern- also a step in the right direction and contributes ization and regulation reforms in order to sus- to the sustainability of investments in the sector. tain the sector's development. More important, there is a growing awareness among policymakers and politicians that this Overall Evaluation of the Bank's Assistance sector has been neglected for too long, and that The overall outcome of the Bank's assistance further neglect would pose a risk to the health has been satisfactory. The objectives of individ- of the population. ual projects and clusters of projects were rele- vant, and the projects already closed or near Recommendations for the Future completion have met most of their objectives. Despite the satisfactory evaluation of the Bank's The Bank has pioneered the introduction of assistance during the past decade, there is room river basin management and the development for further adjustment and improvements. First, and application of low-cost technologies in poor the Bank should explore more effectively its urban areas in the PROSANEAR projects. Exten- knowledge and educational role. The key issue sion of water and sewerage services to the pop- of conceding power, although a matter of legal ulation increased significantly, especially among interpretation and political decision, can largely the poor. Despite the ongoing controversy sur- benefit from studies on asset valuation and com- rounding regulatory issues, the Bank has pro- pensatory schemes. Regarding privatization, an vided critical assistance to the revision and issue that is poorly addressed and highly mis- elaboration of the National Sanitation Policy. understood, studies should cover themes such 8 3 B R A Z I L : F O R G I N G A S T R AT E G I C PA R T N E R S H I P F O R R E S U LT S as universality of services, economies of scale, of new commitments in the 1990­00 period. In partial against total concession, cross-subsidies, addition, the Bank managed US$350 million in and regulation of natural monopolies. grants from the Global Environment Facility Second, achievements of PROSANEAR should (GEF) and the Pilot Program to Preserve the be fully scrutinized and disseminated to promote Brazilian Rain Forests. their effective mainstreaming into government Bank assistance was channeled through three programs and more effective coverage of poor separate agendas. It started in the 1980s with in- populations. Third, removal or mitigation of fi- dustrial pollution control projects (the brown nancing constraints is crucial for the future of agenda), and during the 1990s it focused on the Bank's assistance. One alternative is partner- ecosystems, particularly the Amazon (the green ship schemes with the private sector in conces- agenda). Since the late 1990s the assistance has sions, thereby reducing the need for public been expanded to include river basin manage- expenditures. Another is to match funds with do- ment (the blue agenda). The brown agenda in- mestic sources (BNDES and CEF, for example). At- cluded three operations amounting to 10 percent tempts to forge partnerships with IDB must be of the total environment portfolio. The green made so that both institutions can share experi- agenda comprised seven operations amounting ences in overcoming financial constraints in proj- to 60 percent of the portfolio. In addition, there ect analysis and implementation problems. were grants supporting work on green issues. Fi- Finally, Bank strategies toward the water and nally, the new blue agenda includes two opera- sanitation sector must be more integrated with tions amounting to 30 percent of the portfolio. the Bank's environmental and poverty strate- In 1980 the Bank approved its first environ- gies. As a starting point, a common strategy plan mental project in Latin America--an industrial should be prepared with the collaboration of pollution control project for the state of São the three areas. The new institutional arrange- Paulo. This project was renewed in 1986 and a ments in the Brazilian water management system nationwide version, the National Pollution Con- have to be taken into account in future Bank proj- trol Project, was launched in 1992. During the re- ects. Issues such as water charging, water com- mainder of the 1990s the Bank seemed to mittee representation, and subordination to struggle to distill the experiences of these proj- water agencies require careful analysis in the ects and elaborate a brown strategy. A few reports design of future projects. were developed to stress the need for institu- tional strengthening, but they did not set up a 4. Environment clear agenda, nor elaborate a careful analysis of the main causes and consequences of pollution The Bank's Assistance Strategy problems in Brazil. Bank assistance to Brazil in the environmental In 1990 the Bank launched the green agenda area started modestly in the 1980s with only two with the first National Environmental Project to projects amounting to US$108 million, repre- protect other national ecosystems, reedited later senting only 1 percent of total commitments in 1998. Half of Bank commitments in the green during the decade. By contrast, during the 1990s agenda were allocated to two Amazonian states the environment was identified as one of the pri- with specific projects, PLANAFLORO in Rondo- ority areas for Bank assistance. The intensifica- nia and PRODEAGRO in Mato Grosso. These tion of Bank involvement in this area was enabled projects focus on conservation, monitoring and by the increased awareness of environmental financing of sustainable practices, and correct- problems in Brazil, as well as the improvements ing the adverse effects of some infrastructure in the Brazilian institutional framework (in par- projects supported by the Bank in the 1980s. The ticular, the creation of IBAMA and the Ministry green agenda also included management of GEF of the Environment in the late 1980s). This trans- grants for biodiversity (PROBIO and FUNBIO) lated into nine projects and almost US$900 mil- and a Pilot Program to Preserve the Brazilian lion in commitments, accounting for 7 percent Rain Forests grants to Amazonian projects. Over- 8 4 A N N E X B : S U M M A R I E S O F S E C T O R E VA L U AT I O N S all, the green agenda seems to have been well Except for the three projects under the timed and in tune with Brazil's policies and en- brown agenda, the institutional development vironmental challenges. However, most green impact of Bank projects is judged to be sub- projects lacked sound private and social analy- stantial. Environmental projects have pro- sis of costs and benefits of deforestation as well moted participation by stakeholders and as a good understanding of issues related to in- ownership through integrated management ternational compensation for forest preserva- among government institutions, NGOs, and tion. social actors. Technical assistance components The blue agenda was launched in the late are present in all projects, in a mix of institu- 1990s with two large projects on water man- tional strengthening, social infrastructure in- agement in the Northeast (Federal PROAGUA vestments, and the pursuit of ecologically and Bahia PROAGUA). Water provision in the sustainable activities. Northeast has been a secular problem, not only There is a risk that these positive outcomes because it has a large semi-arid region, but also might not be sustained over time. Environmen- because of political interference and lack of in- tal concerns are still a luxury good for Brazil stitutional capacity. The Bank's participation and (compared with education, health, and basic in- support to the new blue agenda are welcome, but frastructure). Consequently, the environment this work seems to be poorly connected with the could become a low-priority sector during a fis- Bank's work in the closely related area of water cal crisis. Although the risk of this unfavorable and sanitation, despite the recognition of the outcome is considered to be modest (the degree tight connections between sanitation and the of environmental awareness has increased and environment in the CASs. a fiscal crisis is not expected), it cannot be en- tirely ruled out. Overall Assessment of the Bank's Assistance Bank projects generally had relevant objectives, Recommendations for Future Assistance consistent with the country's own agenda and Despite the favorable assessment of the Bank's needs. Some of these projects were designed to assistance to Brazil in the environmental area, deal with the environmental degradation asso- there is room for improvement. Regarding ana- ciated with infrastructure projects supported by lytical work, the Bank should carry out a sound the Bank in the 1980s. Although some individual analysis of the private and social costs and ben- projects have not been able to generate the ex- efits of deforestation, as well as studies inte- pected results, outcomes have been generally grating blue and brown issues and Bank activities positive. Some environmental indicators for Brazil in the water and sanitation sector. Regarding are lagging behind those of developed countries, project work, the Bank should adopt more re- but in many cases are ahead of those in devel- alistic criteria for the determination of the re- oping countries and are showing a consistent gional coverage and scale of projects in relation trend of improvement. For example, air pollution to the institutional capacity of relevant imple- in the city of São Paulo is still severe, but the num- menting agencies. Managerial plans and risk as- ber of critical days has dropped in the last ten sessment analyses could be improved. The Bank years. The share of protected areas has increased should engage representatives of the private by 75 percent. The average rates of deforestation sector (timber producers, industries, and farm- in the Amazonian region are still high, but have ers) in project formulation and implementation, declined relative to the 1980s. It is admittedly dif- forging additional sources of financing and risk ficult to measure with any degree of accuracy sharing, and contributing to the political sus- the extent of the Bank's contribution to these out- tainability of its projects. The Bank should also comes, but the Bank provided invaluable assis- promote the inclusion of new donors in the tance to the government through projects, ESW, Pilot Program to Preserve the Brazilian Rain and the policy dialogue, and contributed at least Forests and IDB partnerships on the brown and indirectly to these results. blue agendas. 8 5 B R A Z I L : F O R G I N G A S T R AT E G I C PA R T N E R S H I P F O R R E S U LT S 5. Health health policy and finance, and aiming ulti- mately at improving access and quality (NE-I, Main Developments in the Health Sector NE-II, REFORSUS). in the 1990s Class 1 projects began with a focus on con- During the 1990s there was a sustained im- trol of specific infectious diseases such as provement in major health indicators such as life malaria, Chagas' disease, schistosomiasis, and expectancy and the infant mortality rate, although AIDS. These projects evolved into the strength- Brazil still lags Latin American and middle-income ening of the national epidemiologic surveillance countries in some areas, and there remains room system. There were many problems with dis- for improvement. The new Constitution of 1988 bursement and implementation, but ultimately set the goal of providing universal, free health care financial and operational goals were achieved. through the health care system (Sistema Unico de PCDEN and PCMAM made significant contribu- Saúde--SUS). It also initiated a progressive de- tions to disease control in the North and North- centralization of administration to municipalities. east, introducing new frameworks and important Financing mechanisms began to be reoriented lessons. The AIDS projects were singularly im- from production-based payments to capitation, portant in mounting an adequate response to and new legislation was created to guarantee the the advance of the HIV/AIDS epidemic, estab- sustainability of finance at all levels. Progress was lishing an institutional framework, training made toward the regulation of the private health human resources, and creating indispensable sector through the creation of an independent partnerships. VIGISUS has been somewhat im- agency. Implementation began on the Family peded by barriers within government, but has Health Program as the framework of a health care still made important progress in strengthening system that emphasizes prevention. the surveillance system. Despite these important advances, many chal- Class 2 projects began with a traditional focus lenges lie ahead. The process of decentralization on constructing clinics in the Northeast, and of health care is not yet consolidated. Ensuring evolved to include infrastructure rehabilitation, the financial sustainability of the system remains provision of equipment, and managerial and a challenge. The expansion of coverage by the policy contributions to SUS. The Northeast proj- Family Health Program will require special at- ects had significant disbursement and imple- tention for the detection and prompt correc- mentation problems, and lessons learned from tion of errors. Chronic human resource the first project were not incorporated into the deficiencies will need to be addressed in the second. Some difficulties were alleviated when public system. the Bank became more flexible in adapting its rules to the reality of the national situation and The Bank's Assistance to the Health Sector to changes in a dynamic health sector. REFOR- Bank assistance to health increased significantly SUS also has not yet met its disbursement goals. in 1990­02. Projects initiated totaled US$992 Inadequate assessment of implementation ca- million, representing 8 percent of the Bank's pacity and the excessive fragmentation of re- portfolio. Including three projects started in the sources into many subprojects are part of the late 1980s, the Bank maintained eight active cause. health projects during the 1990s. Two new proj- ects are set to initiate in 2002­03: the Family Overall Assessment of the Bank's Assistance Health Project and the Bahia Health Project. Class 1 Projects: Control of Transmittable Diseases. Bank projects during the period of evaluation can The projects to control specific infectious dis- be categorized into two classes. Class 1 com- eases had highly relevant objectives that were prises projects dealing with the control of trans- met with a satisfactory degree of success. PCDEN mittable diseases (PCDEN, PCMAM, AIDS-I, allowed the continuation of disease control in the VIGISUS, AIDS-II), while class 2 comprises Northeast that was threatened by lack of funds; projects dealing with health infrastructure, transmission of Chagas' disease was significantly 8 6 A N N E X B : S U M M A R I E S O F S E C T O R E VA L U AT I O N S reduced and important progress was made in through the strengthening of health infrastruc- controlling schistosomiasis and treating kala- ture and equipment, but without effectively ad- azar. PCMAM made an important contribution to dressing other barriers, such as chronic human the government's efforts in malaria control in the resource deficiencies and other financial con- Amazon, which dramatically reduced mortality straints. These projects share some of the credit and incidence, and clearly demonstrated the ef- for the tangible improvements in the Northeast, fectiveness of emphasizing rapid diagnosis and especially the sharp decline in infant mortality, treatment as opposed to vector control alone. but their impact has been moderate compared Despite significant external difficulties created to their potential. Class 2 projects also intro- within the government for VIGISUS, it has man- duced diverse new skills at different levels of aged to organize, strengthen, and enhance the government, and their impact on institutional de- national epidemiologic surveillance system. It velopment has been substantial. has also played an important and effective role in some aspects of disease control, and in envi- Recommendations for Future Assistance ronmental and indigenous health. These projects General Strategic Approach. The Bank's assistance adequately target the poor by the very nature of has been composed of a mixture of policy lend- the diseases they aim to control. ing, technical assistance, and investment lending. The impact of these projects on institutional In Brazil, it would be appropriate to designate a development has been significant at all levels of larger role for policy lending and technical as- government. This included the acquisition of sistance. To prevent delays in disbursement and new managerial capacities and skills in moni- execution, the Bank should undertake a careful toring and evaluation. Also of importance were evaluation of operational and managerial capa- innovative actions in infectious disease control bilities before finalizing project design, and main- such as those supported by PCMAM, which had tain a reasonable level of flexibility in procedures. great impact at the international level. The AIDS Both ESW and investment loans should be more projects brought about a more sophisticated ap- focused, and the investment loans should be proach to prevention as well as new working smaller. The Bank should consider addressing relationships with institutions of different cate- key issues such as decentralization, quality of gories, most notably NGOs. The sustainability of care, regulation of the private health sector, and the outcomes from the transmittable disease the creation of mechanisms for equitable distri- projects is rated as likely, as many of the new skills bution of resources. More difficult issues could and approaches have been thoroughly assimi- be addressed in pilot projects. Direct lending to lated into the institutional culture, although part states could also lead to more effective health of the built-up capacity may be lost after project system solutions and more receptivity for their completion. implementation. Assessment of Class 2 Projects: Health Infrastructure, Poverty Issues. The Bank has only been partially Policy, and Finance. These projects ultimately at- successful in targeting the poor and offering ef- tained several of their operational goals, but fective solutions for their problems through their impact on the health of the population has health care. Focus on diseases that by nature af- been only moderately satisfactory. Regional tar- fect the poor is an effective manner of targeting, geting of resources was satisfactory, with most but it is not sufficient. It is necessary to design project resources effectively directed to poorer projects to deal with the structure of the public regions, but it is difficult to ascertain the extent system as a whole and that specifically address to which the project benefited the poor, as there the problems and barriers of the poor. Malnu- are no reliable data showing the number of trition is one of the major barriers to better ed- health interventions by income group over time. ucational outcomes for children. One particular A major flaw of these projects is that they have pilot project to consider is an early childhood nu- aimed to improve access and quality primarily trition project in the Northeast that ultimately 8 7 B R A Z I L : F O R G I N G A S T R AT E G I C PA R T N E R S H I P F O R R E S U LT S aims to show a concrete improvement in edu- rollment rates. The net enrollment rate in basic cational outcomes. The Bank also needs to un- education increased from 84 to 95 percent for the derstand and provide input to the evolving country as a whole and from 72 to 93 percent in approach of regionalization and the efforts to the poor Northeast. The net enrollment rates in bring about equity in health finance. secondary education doubled, to 33 percent. Other indicators, such as dropout and reten- Specific Disease Groups. There are certain disease tion rates, also show impressive improvements. groups of high impact that need urgent and fo- Improving the quality of education is a battle that cused attention. Noncommunicable diseases is just starting, however, as indicated by the poor cause a large share of mortality in the Brazilian results of Brazilian students in national and in- population; nonintentional injuries and certain ternational evaluation tests. The expected in- types of neoplastic disease would be prime tar- come gains among the poor will increasingly gets. Cardiovascular disease is the largest single depend on how fast learning outcomes reach ac- cause of mortality and is susceptible to appro- ceptable standards. priate and well-designed preventive interven- tions. Programs for the detection and control of Bank Assistance to the Education Sector risk factors could have a potentially huge impact Bank assistance to the education sector became on the health of the population. Another area to an important component of the overall assis- be considered is that of maternal mortality, with tance strategy to Brazil during the 1990s, as in- its extremely high rate and devastating impact. dicated by the significant increase in the number It would be appropriate to continue assistance and dollar value of projects, as well as the in- in the area of HIV/AIDS control, but this should crease in ESW. In the 1980s there were only 5 ed- gradually taper off over the next few years. ucation projects, amounting to US$239 million in commitments, and representing only 2 percent 6. Education of the portfolio. After 1990 the Bank launched 12 education projects, amounting to more than Main Developments in the Education Sector US$1,800 million in commitments, and repre- in the 1990s senting more than 11 percent of the portfolio.1 In the early 1990s, political turmoil and a failed sta- The Bank's greater attention to the education bilization program adversely affected all sectors, sector is also reflected in the body of ESW pro- including education. Since 1995, economic sta- duced--eight studies addressing specific edu- bility and political continuity have provided a fer- cation issues and additional analytical material in tile ground for education reforms. Among them, poverty assessments and other related studies. one can list the introduction of evaluation systems The Bank's ESW covered a broad range of ed- for basic, secondary, and higher education (SAEB, ucational issues, but Bank projects were focused ENEM, and PROVÃO); the improvement of in- in assisting basic education in poor regions of the formation systems; the establishment of curricu- country. The assistance was provided through fed- lum guidelines (PCN); the formula for eral loans covering poor regions (North, Northeast, redistributing resources among municipalities, Center-West) and direct loans to specific North- assuring a minimum level of unit expenditures in eastern states (Bahia, Ceará). In the early 1990s all schools (FUNDEF); changes in procurement, there were also basic education loans to the states quality control, and distribution of textbooks; of Paraná, Minas Gerais, and São Paulo. and the promulgation of the National Education Law (LDB), which provides flexibility for reforms. Overall Assessment of the Bank's Assistance Many states and municipalities have also made The overall objectives of Bank assistance in the substantial efforts to improve management and education sector were highly relevant. The focus to accommodate the enrollment expansion. on primary education was correct and the at- There was an impressive gain in educational tention to the poor regions of the country (es- achievements during the 1990s, particularly in en- pecially the Northeast) was also correct, because 8 8 A N N E X B : S U M M A R I E S O F S E C T O R E VA L U AT I O N S this double emphasis assured that poor students pedagogical innovations, such as automatic pro- would be the main beneficiaries. Although fo- motion, but with mixed results. The São Paulo cusing on poor regions tends to tax manage- project was also overly complex: the school ac- ment capacity, the benefits of promoting tions and health interventions required an im- convergence between regions cannot be un- plementation capacity that was not available, derestimated. The Bank's assistance comprised even in a rich state. three education projects in higher-income states The first group of projects contributed to the in the first half of the decade. The selection of increase in enrollment rates and to some other these states can be justified for at least two rea- improvements, such as the introduction of eval- sons. First, these projects focused on primary ed- uation systems. However, they did not achieve ucation, benefiting primarily poor students. the improvements in management and teaching Second, the experience acquired in these states quality that are essential for improving actual was relevant for the Bank--these states had a bet- learning outcomes. Possibly it was unrealistic to ter institutional capacity to execute Bank proj- expect that these achievements could take place ects, and the lessons learned could be replicated at all in a short period of time, especially in the in poorer states. Northeast. This cluster of projects is rated as The assessment of the actual outcomes of only moderately satisfactory. education projects needs to take into account the The projects pertaining to the second group evolving conditions in both the country and the comprise the sequence of three FUNDESCOLA Bank. As mentioned before, the 1990-94 period projects and the Paraná and Minas Gerais proj- was characterized by economic and political tur- ects. These projects are generally characterized moil, coupled with the lack of a clear strategy for by a strong emphasis on management and on at- the education sector. After 1994 the projects taining minimum standards in all schools. FUN- benefited from macroeconomic and political sta- DESCOLA is a federal project covering poor bility, a well-articulated strategy for the education regions of the country--the North, Northeast, sector, and a more efficient project unit in the and Center-West regions. All schools in urban and Ministry of Education. On the Bank's side, con- peri-urban areas meeting minimum size criteria ditions also improved during the 1990s, with can participate. The definition of participating the transfer of the country management unit to schools has avoided political influences and has Brasilia and the placement of education spe- forced the rationalization of the use of class- cialists in the Brasilia office, leading to better rooms in the area. The FUNDESCOLA program project design and supervision. has set minimum operational standards that all The projects reviewed can be divided into schools have to satisfy, strengthened local em- two groups. The first group comprises two fed- powerment and planning through the school eral projects focused in the Northeast (the NEBE development plan and greater community par- projects) and a project in São Paulo, all initiated ticipation, promoted institutional development in the early 1990s. These projects suffered from in state and municipal secretariats, and intro- design and implementation problems. The de- duced special learning programs such as escola gree of project ownership and absorption ca- ativa and accelerated classes. The Paraná and pacity were low. All projects in this group Minas Gerais projects have common features required subsequent restructuring and more and similar performances. In both cases there time to complete the disbursements and achieve was strong government ownership as well as their objectives. The NEBEs tried to solve too good implementation capacity. The two proj- many education problems in the Northeast in a ects proved to be fertile grounds for consistent troubled period. Their inadequate design was re- policies such as school-based management, as- flected in confusing criteria for the choice of sessment and information systems, and train- schools, inappropriate financial arrangements ing for state and municipal teachers. for poor states, and faulty performance indica- Projects in this second group seem to have tors. The São Paulo project introduced several improved access and promotion rates and to be 8 9 B R A Z I L : F O R G I N G A S T R AT E G I C PA R T N E R S H I P F O R R E S U LT S generating gains in management and efficiency broad political support and are likely to be main- that are preconditions for better learning out- tained in the future. The management practices comes. They represent a very important step in and the innovations implemented by the projects the effort toward better quality, relative to the are also likely to be sustained in the future. Many projects in the first group. For this reason, they states are mainstreaming project initiatives into are rated as satisfactory. However, the evidence the regular activities of the secretariat. The in- regarding learning is still ambiguous, especially creased participation of the stakeholders has in the poor regions, as suggested by SAEB results. provided firm ground for sustaining the projects' These disappointing results may be partly re- achievements. lated to natural lags and the enrollment of poor and disadvantaged children from uneducated Recommendations for Future Bank Assistance parents. However, they may also be attributable The Bank should elaborate focused ESW on early to insufficient attention to teacher training and childhood development, the performance of au- classroom practices. FUNDESCOLA III, the last tomatic promotion policies, the performance of project in the FUNDESCOLA program, has SAEB and state evaluation systems, the prob- started dealing with these issues, but it is too lem of teacher training and classroom perform- early to make an assessment of this project, as ance, and the problem of over-age students in it has been initiated very recently. secondary education. The Bahia and Ceará basic education proj- Regarding future project work, primary edu- ects are very recent. Therefore, the evaluation of cation still deserves support from the Bank, these projects also has to be restricted to their given the low levels of proficiency. The empha- design. The two projects expand the area of cov- sis should shift from management to quality of erage of FUNDESCOLA, with similar compo- teaching and learning outcomes. The Bank nents. Actions such as early childhood should continue its main focus on the Northeast development, pre-service teacher training, and and other poor regions. Improving access and school supervision appear for the first time. Fur- quality in rural areas may deserve a specific treat- thermore, the two state projects target the poor- ment. For this purpose, the targeting of the est municipalities for some activities, thus poorest municipalities in the Ceará and Bahia reaching the rural areas directly. The design of projects may suggest viable strategies. The Bank the two projects is satisfactory and reveals an should consider the use of smaller Technical As- enormous accumulation of lessons and experi- sistance Loans (TALs) and Learning and Inno- ence from previous Bank projects. The prospects vation Loans (LILs) in critical areas such as for favorable outcomes are positive, but close su- teacher training, and in states facing severe bor- pervision will be required for many of these ac- rowing constraints created by fiscal problems. tivities. A pilot project dealing with early childhood Bank projects have contributed significantly development and nutritional issues needs to be to the buildup of institutional capacity in the considered in the immediate future, especially education sector through their support of the for the Northeast. The Bank has touched on implementation of school autonomy, greater secondary education in its recent projects. There participation of the communities, the introduc- is an increasing space for projects in this sector, tion of information and evaluation systems, and as many states face critical shortages of inputs a number of other innovations that are being and inadequate management. The need to focus mainstreamed by federal and state administra- on the quality of teaching will require increasing tions. There are reasons to believe that the pos- supervision efforts from the Bank. For this rea- itive outcomes will be sustained in the future. The son, it is recommended that the Bank place a sen- education reforms implemented in the 1990s, ior education specialist in the Fortaleza or Recife such as FUNDEF and Bolsa Escola, command offices. 9 0 ANNEX C: AN EVALUATION OF MIGA ACTIVITIES IN BRAZIL, 1994­02 MIGA's Strategy in Brazil as insure that Brazilian companies would invest MIGA's mandate is to promote the flows of pri- in other developing countries. The country strat- vate investments to developing countries and to egy also suggested that MIGA should generate complement the activities of the IBRD and IFC. additional insurance capacity to meet the de- To fulfill its mandate, MIGA offers insurance to mand for risk insurance in the context of limited foreign investors against the risks of expropria- capacities. tion, war and civil disturbance, transfer restric- tions, and breach of contract. Additionally, MIGA MIGA's Products: Political Risk provides technical and advisory services related Guarantees for FDI to foreign direct investment (FDI). As of June 30, 2002, Brazil was MIGA's largest host The 1997 assistance strategy called on MIGA country, with outstanding gross and net expo- to focus on infrastructure and manufacturing, sures (before and after reinsurance) of US$909 while the 2000 strategy indicated that MIGA million and US$307 million, respectively, as should also consider guaranteeing investments shown in table C.1. Demand for MIGA guaran- in services, agribusiness, and small and medium- tees was high during most of this period, stretch- size enterprise (SME) projects. The 2000 coun- ing the Agency's capacity to meet requests for try strategy noted that MIGA should also support coverage. 1 During 2000­02, MIGA made exten- highly developmental projects that would help sive use of opportunities to reinsure and coin- Brazil reduce its current account deficit, as well sure investments with public and private insurers M I G A G u a r a n t e e P r o j e c t s a n d E x p o s u r e T a b l e C . 1 ( U S $ m i l l i o n s , u n l e s s o t h e r w i s e i n d i c a t e d ) Number of Gross Net Share of Brazil in Flows of new projects exposure exposure MIGA's portfolio FDI Fiscal year guaranteed outstanding outstanding (gross, percent)a insured 1994 3 95.0 95.0 9.1 103.1 1995 1 107.0 107.0 6.6 11.0 1996 3 163.8 163.8 7.2 131.9 1997 2 201.0 173.5 8.0 1,196.9 1998 0 195.0 167.5 6.8 0 1999 6 356.7 225.2 9.6 1,335.1 2000 4 631.4 284.8 14.5 3,313.0 2001 5 888.5 312.1 16.8 2,963.1 2002 2 908.6 307.3 17.3 270.0 Total 26 -- -- -- 9,324.1 a. Brazil was MIGA's largest client country in fiscal years 1996­97 and 2000­02. 9 1 B R A Z I L : F O R G I N G A S T R AT E G I C PA R T N E R S H I P F O R R E S U LT S to leverage its own capacity, especially for large No claims have been brought under policies infrastructure projects. This trend is reflected in issued by MIGA in Brazil. However, MIGA's Legal the growing difference between gross and net ex- Department has mediated an investment dis- posure shown in table C.1. pute unrelated to a MIGA guarantee in support MIGA's guarantees are estimated to have fa- of a Canadian claimant against the state of Ceará. cilitated US$9.3 billion of FDI during 1994­02 pe- riod (table C.1), or roughly 6 percent of the total Assessment of MIGA Activities accumulated flows of FDI in the same period. MIGA's activities have generally followed the pri- Only 8 percent of the FDI facilitated by MIGA was orities set out in the CASs. The strong infra- related to privatizations, compared with 20 per- structure component was consistent with World cent for the total flows of FDI in this period. Bank Group strategy to attract private capital in This implies that the FDI facilitated by MIGA order to meet Brazil's large infrastructure needs, had a greater component of greenfield invest- and also consistent with the government's lib- ments and contributed more to capital accu- eralization and privatization programs. However, mulation in this period. MIGA has been only partially successful in di- Infrastructure projects accounted for a large versifying its portfolio into the other sectors share of MIGA guarantees--45 percent of total identified by the 2000 assistance strategy. exposures and 91 percent of the total FDI in- Facing capacity constraints imposed by coun- sured. Recently, MIGA has also guaranteed a try limits, MIGA has leveraged its country expo- banking project supporting SMEs and mortgage sure well. By intensively pursuing cooperation financing and a project in the health sector. The with national and private insurers in reinsur- regional distribution of the portfolio was biased ance and coinsurance, MIGA has been able to fa- toward the more prosperous regions around cilitate large amounts of additional FDI, while Rio de Janeiro and São Paulo. However, MIGA in- limiting its net exposure. Each dollar of gross in- sured three projects in the poorer Northeastern surance in Brazil facilitated estimated invest- states, in the automotive sector, municipal trans- ments of US$9.5, a very high leverage ratio. portation, and power generation. However, MIGA does not seem to have adopted clear selection criteria (for example, develop- MIGA's Products: Non-Guarantee mental impact) or processes for choosing proj- Activities ects from a universe of possibilities under MIGA has provided some limited investment capacity constraints. marketing services in Brazil, but the impacts Although MIGA's Investment Marketing Ser- have not yet been assessed. These include a vices have not been evaluated, the Agency's de- forum on new tools and techniques to promote cision to devote little in the way of resources to FDI for the heads of South American investment investment services activities appears to have promotion agencies and a cooperation agree- been appropriate, given Brazil's record in at- ment with Investe Brasil to participate as a part- tracting large amounts of FDI. It is consistent with ner in MIGA's new FDI e-mail alert service that MIGA's strategy to focus these activities on coun- provides users with customized updates on new tries that attract little FDI and need to develop investment opportunities and market analysis. institutions to target foreign investors. T a b l e C . 2 S e c t o r a l B r e a k d o w n o f M I G A G u a r a n t e e s Manufacturing Finance Services Energy Telecom Transport Shares in exposure 7 27 21 29 12 4 Shares in FDI insured 2 5 2 58 31 2 9 2 A N N E X C : A N E VA L U AT I O N O F M I G A A C T I V I T I E S I N B R A Z I L , 1 9 9 4 ­ 0 2 The Operations Evaluation Unit (OEU) has creditation. Similarly, a soft drink bottler and evaluated seven MIGA projects in Brazil guar- distributor launched a successful aluminum can anteed during FY94­96: four projects in the fi- recycling program in partnership with local nancial and three in the manufacturing sector. All schools, the local recycler, and the municipal seven projects had substantial effects in the de- government. velopment of human capital through general OEU conducted a survey of MIGA guarantee- and specific training courses for their staff. Over holders in Brazil, with a response rate of 71 per- 70 percent of the evaluated projects had high rat- cent. For 63 percent of the respondents, MIGA ings for their downstream effects. For example, insurance was indispensable for the investment a financial project contributed to increasing the to go forward, another 25 percent considered availability of medium-term U.S. dollar capital MIGA coverage important, and 12 percent pe- equipment financing for the middle market in ripheral. From those investors who responded Brazil. All real sector projects had substantial that MIGA coverage was indispensable, it can upstream effects and achieved high develop- be inferred that foreign investments of US$5 bil- ment impacts in the dimensions of technology lion would not have gone forward. transfer and know-how and social/infrastructure provision. Lessons and Recommendations The evaluated projects did not have a strong Given MIGA's capacity constraints in Brazil, the direct macroeconomic impact, as their scale was Agency should continue to leverage its expo- too small to generate sizeable tax revenues or sure well in order to maximize beneficial FDI improvements to the balance of payments. The flows into Brazil. MIGA should also explore al- direct impact on employment was either nega- ternative forms of cooperation to help meet the tive or negligible, although this result is not sur- demand for political risk insurance of potential prising given that entry of foreign capital usually foreign investors in Brazil. contributes to sector restructuring. MIGA should establish transparent criteria Two real sector projects had positive impacts for its selection of projects for coverage in Brazil in the areas of environmental performance and and should give priority to projects with high de- corporate citizenship, respectively. The mod- velopmental impact. MIGA also needs to diver- ernization of an automotive plant included the sify its existing portfolio in Brazil to take account expansion of the wastewater treatment system of priority areas identified by the CAS, as well as and other improvements to attain ISO 14001 ac- reduce portfolio risk. 9 3 ANNEX D: GOVERNMENT COMMENTS 9 5 B R A Z I L : F O R G I N G A S T R AT E G I C PA R T N E R S H I P F O R R E S U LT S 9 6 ANNEX E: MANAGEMENT ACTION RECORD Recommendations Management Response (i) Improved Framework for Programmatic Lending. (i) We fully agree with the recommendation that programmatic lend- Further programmatic lending to help the country ing should have clear goals and benchmarks, but not with the as- complete critical reforms are justified, but will re- sessment that this was not the case for Brazil. The framework and quire clarity in the setting of the final objectives and benchmarks for the fiscal and financial programmatic loans during the intermediary benchmarks that would justify the review period were explicit, within the constraints that prudent and trigger further loans within the programs. policy commitments. They were carefully designed in recognition of the tradeoff between the need for specificity and flexibility vis-à-vis the reform path. We are supporting reforms in macroeconomic and sectoral areas using a programmatic framework, but with flexibility in the lending in- strument to be adopted. High on this list of areas are fiscal and so- cial security; competitiveness, urban & housing, the environment, water & sanitation. (ii) Further Support to Private Sector Development. (ii) We agree with the recommendation, and its importance for over- Improve support to private sector development, in- all progress as well as in key interrelated sectors such as transport, cluding assistance to judicial reform and more as- energy, water, urban, and rural environment. Recent work has an in- sistance to regulatory agencies, especially at the creased focus on private sector development issues, including ana- level of states. lytical and advisory services on the link between the judicial system and the investment climate and competitiveness. The CAS recognized the importance of regulation. The limited traction was not due to lack of efforts on our part but rather due to weak counterpart responses. (iii) Education. Education should continue com- (iii) We agree with the recommendation and are moving in the indi- manding priority in the Bank's assistance. In basic cated direction. We have attempted to work on early childhood de- education, change the emphasis from improving velopment for years, first with analytical and advisory services and management to improving quality of teaching. Op- later with a municipal lending operation, which was stalled until re- erationally, this should be achieved by moving from cently when the federal government decided to let us proceed with system and efficiency goals to classroom and learn- lending to selected municipalities. IDB has considerable presence in ing goals. In states with borrowing constraints, secondary education, suggesting the need for careful coordination in consider focused technical assistance loans to ad- that area. It's such links at the subnational levels and partnerships dress problems of teacher training and classroom with others we are supporting across the board. effectiveness. Enter two areas that remain largely uncovered: early childhood development and sec- ondary education. 9 7 B R A Z I L : F O R G I N G A S T R AT E G I C PA R T N E R S H I P F O R R E S U LT S Recommendations Management Response (iv) Health. Deal with the structure of the public sys- (iv) We agree with the recommendation and would emphasize recent tem as a whole, addressing specifically the barriers steps to move the program in this direction. The recently approved of the poor. These issues could be addressed through Family Health project represents a shift toward broader support to adjustment lending. Address remaining child nutri- the health sector with systemic impact in particular for basic care. tion problems in the Northeast, preferably integrated We also see progress in health very much linked to institutional is- with assistance to early childhood development. Ad- sues as well as progress in key sectors such as water & sanitation dress the problem of maternal mortality. and the environment. It's such integrated approaches among sectors that we are supporting across the board. (v) Better Dissemination of ESW and Bank Activi- (v) We agree with the recommendation and point to substantial im- ties in Brazil. Allocate more resources for transla- provement in recent years. Many reports (not just summaries) are rou- tion, workshops, distance training, and other tinely translated into Portuguese. Development fora organized in activities designed to disseminate the Bank's work. Brasilia in 2000 and 2001 provided broad coverage for several key an- Translate the executive summaries of all ESW into alytical and advisory service products. Also, we had an explicit an- Portuguese. nual budget for Outreach, and an External Affairs/Outreach officer, to provide incentives to task managers to do translations, seminars, and other outreach efforts. We support broader efforts in two-way exchanges with multiple stakeholders using conventional and new means, including distance learning. 9 8 ANNEX F: CHAIRMAN'S SUMMARY: COMMITTEE ON DEVELOPMENT EFFECTIVENESS (CODE) Background. The CAE evaluated the World Bank as- Overall Conclusions and Next Steps. Members wel- sistance program to Brazil during the 1990-02 pe- comed the timing of the discussion of the CAE riod. It examined (i) whether the Bank's assistance prior to Board consideration of the Brazil CAS. during this period was relevant; (ii) whether the They broadly concurred with the CAE's conclu- Bank's assistance program was effectively de- sion that the Bank's assistance strategy in 1990- signed and consistent with its objectives; and (iii) 02 was relevant overall, and that the shift to the whether the Bank's program achieved its two social sectors and the focus on the Northeast central objectives of poverty reduction and were largely justified. At the same time, there growth. The report concluded that the Bank's were some differences of views on the ratings, assistance strategy in 1990-02 was relevant over- with some members suggesting that the assess- all. The strategy was underpinned by high-qual- ment was too positive and uncritical, and others ity analytical work on poverty and growth, indicating that it could have been even more conducted with substantial participation by top positive. The Committee's discussion focused on Brazilian researchers. The report also found that the issues of ESW, lending services, growth, de- the shift to the social sectors and the focus on the velopment impact, consultation process, the Northeast were justified--given the very weak Bank's role in middle-income countries, and the social indicators in the Northeast region--as was review of IFC's operations. Some members felt the shift to adjustment lending at the end of the that the CIR deserved fuller attention from mem- decade. It noted that when the Bank made ad- bers, and it was agreed that the CODE Sub- justment and technical assistance loans, it main- committee would schedule a separate discussion tained assistance to the social sectors. of the CIR. Government's comments and management's re- sponse to the CAE were included in the annexes. · ESW. Members highlighted the importance of The CIR reviewed IFC's operations in Brazil ESW, and agreed that it was generally of high from FY90 to FY02. It concluded that IFC made quality. They also agreed with the finding of the a strong contribution to Brazil's sustainable de- study that better dissemination of ESW could velopment through financing many viable and pi- help the Bank provide more effective assistance oneering projects that have substantial benefits to Brazil. A key step would be to ensure that the on the ground. Overall within the large IFC port- Bank's work is available in Portuguese. However, folio, the success rates for development and several members raised questions with regard combined development-and-investment out- to the abundance and relevance of ESW and sug- comes were somewhat better than in other coun- gested a more critical appraisal of the program tries. However, IFC's returns on assets in Brazil based on the country's demand for it. have been low and have fallen well below the av- · Lending services. Members agreed that pro- erage corresponding returns for the rest of IFC's grammatic adjustment lending was warranted, portfolio. Key issues identified for further at- to address critically needed reforms. They sup- tention were corporate governance reform, ported OED's recommendation that the Bank strengthening the financial sector, and improv- continue to further build on its approach on ing the profitability of IFC activities. programmatic lending, particularly with respect 9 9 B R A Z I L : F O R G I N G A S T R AT E G I C PA R T N E R S H I P F O R R E S U LT S to establishment of objectives linked to real tion of assistance strategies. Another member, economic outcomes, quantified and time bound while concurring with the view that govern- benchmarks, and a framework for measuring ment bears the responsibility for policy and and assessing outcomes and benchmarks. Some strategy formulation, suggested that broad members felt that the Bank's assistance to in- public consultations inform and improve pol- frastructure should be maintained or scaled icy and strategy formulation and increase own- up, particularly in regard to regulatory and en- ership, and urged the Bank and the vironmental aspects. A member agreed with government to consult fully with the public in the government view that the Bank's exit from formulation of the new CAS. infrastructure may have been too abrupt. Mem- · Bank role in middle-income countries. bers also supported the shift from a sectoral to Members agreed that the Bank can still play a a more regional approach, and noted that the relevant role in large middle-income countries method for selecting the regions to receive the such as Brazil. The Bank is most relevant as a Bank's attention will be crucial. source of knowledge and technical assistance · Growth. Members noted the report's finding that could also enhance its relevance as a source that the component of the program designed of finance. In this context, a member high- to stimulate investment, economic efficiency, lighted the need to address the issue of IBRD and growth produced mixed results. Brazil's competitiveness and IFC's low profitability. growth performance in the 1990s was gener- · IFC support for second-tier companies. In ally disappointing considering that several response to a member's recommendation of structural reforms were implemented during strong promotion of IFC support for rigor- the decade. Some members suggested that ously screened second-tier companies, OEG in- the Bank should focus its support more on the dicated that screening would have to be growth agenda, and expressed the view that dramatically tighter to raise the current 16 per- Brazil will not be able to sustain the necessary cent win-win rate to the 55 percent achieved expansion of coverage and improvement of for the 53 evaluated first-tier company projects. quality of social services without a higher level Demonstration effects of second-tier company of economic growth. A suggestion was made lending can be valuable, and the preferred in- that the Bank pay attention to the qualitative strument for supporting them is wholesaling determinants of growth and increase its focus via credit lines with banks. However, for that on secondary and higher education. alternative to be feasible, there needs to be a · Development impact. Members commented systemic solution to what is a systemic prob- on the complexity of attribution and the diffi- lem of public sector borrowing requirements culty of assessing development impact of the driving up interest rates and driving out banks' Bank's assistance. They acknowledged the ef- appetite for lending to corporates. forts made by the evaluation team in this re- · IFC equity performance. A member sug- gard, but suggested that further work and gested that the depreciation of the Real since refinement were needed to assess more thor- 1998 played a central role in IFC's poor equity oughly the Bank's contribution. Members also performance. OEG responded that the impact encouraged the Bank to bring to bear its ex- of the currency decline was indeed signifi- periential knowledge and analytical resources cantly negative, as it had also been in both to demonstrate the cost-benefit of reforms. Argentina and Mexico over the same period, The importance of addressing the issue of in- but it had been compounded by other Brazil- come inequality to further the poverty reduc- specific factors described in the report. For tion agenda was highlighted. example, the sectoral mix of IFC investments · Consultation process. Some members was both unfavorable and more vulnerable to agreed with the government's position that currency losses. the NGOs' involvement should be limited to project implementation rather than formula- Finn Jonck, Chairman 1 0 0 ENDNOTES Chapter 1 Chapter 4 1. A historical review of Brazil's development per- 1. The empirical literature is extensive. See, for formance is provided in Gordon 2001 and Pinheiro and example, Almeida and Barros (1992); Barros, Hen- others 2001. riques, and Mendonca (2000), Ferreira and Litchfield 2. The professional literature analyzing fiscal and (2001); and Menezes-Filho (2001). exchange rate policies in this period criticizes the 2. The literature is also extensive. See, for exam- first Cardoso administration for not having con- ple, Neri (1999) and Pinheiro and others (2001). tained the fiscal imbalances and for maintaining the 3. Krueger and Lindahl (2001) provide a compre- managed peg regime for too long. At the same time, hensive and critical review of the literature. See also the literature also acknowledges that fiscal adjust- Pritchet (2001) and Temple (1999). ment was complicated by several factors, including 4. Poverty had also been sharply reduced in the the rigidities introduced by the 1988 Constitution, mid-1980s, but such reduction was short-lived be- the emergence of large hidden liabilities (for ex- cause the stabilization attempts in that period (the ample, past losses of public banks), and the imbal- Cruzado Plan), did not succeed (figure 4.1). Inflation ances at the level of states and municipalities. Tyler may affect the poor through more than one channel. (1999) and Cardoso (1996, 2000) stress the incon- See, for example, Neri (1995), Ferreira and Litchfield sistencies of the fiscal and exchange regimes in (2001), and Cardoso, Barros, and Urani (1995). 1995-98, and Giambiagi (2002) provides a compre- 5. A previous OED evaluation of Bank assistance to hensive analysis of fiscal policy in the 1990s and the health sector achieved the same conclusions, but early 2000s. without including the AIDS-II and REFORSUS Pro- 3. Brazil's unfinished development agenda is ex- jects, which had not progressed enough to be prop- amined in Scheinkman and others 2002. erly evaluated. 6. Unfortunately, these projects do not always pro- Chapter 2 vide accurate estimates of the number of poor peo- 1. The completion report of a power distribution ple that have benefited from greater access to these loan closed in 1992 includes an overview of the 1980s basic services. This deficiency can be interpreted as and points out the devastating effect of tariff policies a flaw in design, as well as inadequate monitoring on sector finances. In the same year the Bank cancelled and evaluation. a power transmission loan, because of the govern- 7. Pinheiro and others (2001) provide the most ment's unwillingness to adjust tariffs. comprehensive analysis of Brazil's growth performance 2. In 1992 OED reviewed the environmental impact in recent decades. Abreu and Verner (1997), Bacha and of Bank projects in Brazil, and noted that the final cost Bonelli (2001), Bonelli and Fonseca (1998), Ferreira of rural resettlement supported by the Itaparica proj- and Malliagros (1999), and Giambiagi (2002) also em- ect had exceeded US$63,000 per family. phasize the weak pace of capital accumulation after 3. The decentralization is examined further in 1980 and the larger productivity gains in the 1990s. The Chapter 3. results of these studies contradict for Brazil the con- 4. The Board had not yet approved subnational ad- clusions of Easterly and Levine (2000), based on cross- justment loans. country data, that factor accumulation does not have 1 0 1 B R A Z I L : F O R G I N G A S T R AT E G I C PA R T N E R S H I P F O R R E S U LT S a significant impact on growth. It is possible that an MDGs, in all the areas where progress was assessed. earlier correction of the overvaluation of the Real Curiously, the areas that were not assessed are pre- would have enabled somewhat higher growth rates in cisely those where progress was faster--the education the late 1990s, but the supply constraints would still and gender areas. have limited Brazil's growth performance in this 13. Brazil's macroeconomic fundamentals are still period. not sufficiently strong to rule out scenarios of insta- 8. The Brazilian literature and OED audits of trans- bility. They are in an intermediate range, giving rise portation projects generally conclude that the priva- to situations of multiple equilibria, where market psy- tization of infrastructure has improved the financial chology dominates the final outcomes. Williamson and operational management of enterprises, increased (2002) presents a numerical exercise of multiple equi- efficiency in the utilization of the infrastructure, im- libria applied to Brazil and (2003) provides an up- proved quality, and reduced the number of accidents. dated evaluation of Brazil's current situation. However, there has not been any significant expansion 14. The government expressed its disagreement of capacity, with the exception of telecommunica- with the CAE conclusion that sustainability could not tions, in good part because of lingering regulatory de- be evaluated, stressing the positive evolution of eco- ficiencies. Annuati and others (2002) examine the nomic indicators and the submission of key reforms financial and operational performance of privatized to Congress (Annex D). firms, Pinheiro (2000) provides an overview of the first 15. Address to the Board of Governors in the 1976 results of privatization, and Castro (2001 and 2002) ex- annual meetings in Manila, the Philippines. amines the regulatory challenges in the transportation 16. For example, the well-disseminated Meltzer sector. report (U.S. Congress 2000) raises these and other 9. This is primarily because of the predominance criticisms. of renewable energy sources, such as hydropower and ethanol, in Brazil's energy matrix. Chapter 5 10. As shown in table 4.1 and figure 4.1, poverty 1. The Prosanear projects provide a good illustra- rates in 2000 were below the 1980 levels, but the re- tion. These projects were able to extend water and san- duction in inequality in the 1990s was too slight to off- itation to a large poor population at a low cost, but set the legacy of the previous decades, especially the maintenance of the infrastructure became an issue, be- damage inflicted in the 1980s. Reducing inequality cause of the lack of parallel investments in paved has proved more difficult than reducing poverty, not streets and electricity. A more integrated urban de- only in Brazil but in most other countries. Li, Squire, velopment project could have had to sacrifice geo- and Zou (1998) show that there is much more vari- graphic coverage, but could also have gained in ability of Gini coefficients across countries than within sustainability. countries over time. 11. The government made the comment that in- Annex B come distribution in Brazil is very unequal and must 1. These numbers include three projects devel- improve, but also pointed out that World Bank com- oped in the late 1990s but only approved in 2001 and parisons of inequality coefficients across countries 2002. are flawed and tend to worsen Brazil's ranking rela- tive to other countries (Annex D). Annex C 12. In December 2002, the United Nations named 1. In FY02, MIGA's limit on individual country ex- President Cardoso the first winner of the Mahbub ul posure was US$420 million, defined as MIGA's net Haq Award for Outstanding Contribution to Human exposure plus 10 percent of the amount of reinsur- Development, in recognition of the improvement in ance to account for the credit risk of reinsurers. 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Photocopy. tional Economics, Washington, D.C. 1 0 4 OPERATIONS EVALUATION DEPARTMENT ENHANCING DEVELOPMENT EFFECTIVENESS THROUGH EXCELLENCE AND INDEPENDENCE IN EVALUATION The Operations Evaluation Department (OED) is an independent unit within the World Bank; it reports directly to the Bank's Board of Executive Directors. OED assesses what works, and what does not; how a borrower plans to run and maintain a project; and the lasting contribution of the Bank to a country's overall development. The goals of evaluation are to learn from experience, to provide an objective basis for assessing the results of the Bank's work, and to provide accountability in the achievement of its objectives. It also improves Bank work by identifying and disseminating the lessons learned from experience and by framing recommendations drawn from evaluation findings. TMxHSKIMBy359082zv":&:^:!:> THE WORLD BANK ISBN 0-8213-5908-8