Document of

The World Bank

FOR OFFICIAL USE ONLY

AlA se t? o 0 P

Report No. 6670-BR

STAFF APPRAISAL REPORT

BRAZIL

NORTHEAST RURAL DEVELOPMENT PROGRAM

NORTHEAST RURAL DEVELOPMENT PROJECT - PARAIBA

May 26, 1987

Projects DepartmentLatin America and the Caribbean Regional Office

This document has a restficted distribution and may be used by recipients only in the performance oftheir officia duties. Its Contents may not otherwise be disclosed without World Bank authorization.

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

CURRENCY EQUIVALENTS

Currency Unit Cruzado (Cz$)US$1.00 - Cz$ 14.20 1/US$1.00 Cz$ 31.00 7/CZ$ 1.00 US$0.0323

WEIGHTS AND MEASURES

Metric System

FISCAL YEARS

Government of Brazil - January 1 to December 31Northeast Rural Development Program April 1 to March 31Project - April 1 to March 31

1/ Exchange rate at time of appraisal (December 1986).2/ Exchange rate as of May 20, 1987.

FOR omCAL USE ONLY

GLOSSARY OF ACRONYMS

BB Banco do Brasil(Bank of Brazil)

BNDS Banco Nacional de Desenvolvimento Social(National Bank for Social Development)

CD Community Development

CDB Certificado de Deposito Bancaria(Commarcial Bank's Certificate of Deposit)

CEASA-PB Central de Abastecimento da Paraiba(Central Marketing Organization of Paraiba)

CEPA-PB Comissao Estadual de Planejamento Agricola - Paraiba(State Agricultural Planning Commission - Paraiba)

CIBRAZEM Companhia Brasileira de Armazenamento(Brazilian Federal Storage Company)

CIDAGRO Companhia Integrada de Desenvolvimento Agropecuario(State Agricultural Marketing Company)

CPATSA Centro de Pesquisa Agropecuaria do Tropico Semi-Arido(Center of Agricultural Research for the Semi-Arid Tropics)

EMATER-PB Empresa de Assistencia e Extensao Rural da Paraiba(State Technical Assistance and Rural Extension Company)

EMBRAPA Empresa Brasileirs de Pesquisa Agropecuaria(Federal Agricultural Research Company)

EMEPA Empress Estadual de Pesquisa Agropecuaria da Paraiba(State Institute for Agricultural Research)

FINSOCIAL Fundo de Investimento Social(Social Investment Fund)

FUNDAP Fundacao de Colonizacao e Desenvolvimento Agrario da Paraiba(State Institute for Land Reorganization)

IC Comissao Interministerial para o Nordeste(Interministerial Commission for the Northeast)

This document has a restricted distribution and may be used by recipients only in the performnceof their official duties. Its contents may not otherwise be disclosed without World Bank authorization.

ICM Imposto Sobre Circulacao de Mercadorias(Tax on Product Circulation)

INCRA Instituto Nacional de Colonizacao.e Reforma Agraria(National Institute for Colonization and Agrarian Reform)

LDP Local Development Project

MINTER Ministerio do Interior(Ministry of the Interior)

MIRAD Ministerio da Reforma Agraria e de Desenvolvimento(Ministry of Agrarian Reform and Development)

NRDP Northeast Rural Development Program

OTN Obrigacoes do Tesoro Nacional(Obligations of the National Treasury)

PARAIBAN Banco do Estado da Paraiba(Paraiba State Bank)

POLONORDESTE Programa de Desenvolvimento de Areas Integradas do Nordeste(Development Program for Integrated Areas of the Northeast)

PROHIDRO Programa de Aproveitamento de Recursos Hidricos do Nordeste(Water Resources Use Program for the Northeast)

PROTERRA Programa de Redistribucao de Terras e de Estimulo aAgro-Industria do Norte e do Nordeste(Land Redistribution and Agro-industrial ModernizationProgram for the North and the the Northeast)

RDC Conselho de Desenvolvimento Rural(Regional Rural Development Council)

SAA-PB Secretaria da Agricultura e Abastecimento doEstado da Paraiba(Paraiba State Agriculture & Supply Secretariat)

SCC Comissao de Coordenacao Estadual(State Coordinating Commission)

SEPLAN-PB Secretaria do Planejamento e Coordenacao Geraldo Estado da Paraiba

(Paraiba State Secretariat of Planning andGeneral Coordination)

SERTANEJO Programa Especial de Apoio do Desenvolvimento daRegiao Semi-Arida do Nordeste(Special Program of Support for the Development of theSeni-Arid Region of the Northeast)

SIMA Sistema de Informacao do Mercado Agricola(Agricultural Marketing and Information System)

SRDC Conselho Estadual de Desenvolvimento Rural(State Rural Development Council)

SRH Secretaria de Recursos Hidricos(State Secretariat of Water Resources)

SUDENE Suiperintendencia de Desenvolvimento do Nordeste(Superintendency for the Development of the Northeast)

UT Unidade Tecnica do Projeto Nordeste(Northeast Project Technical Unit)

BRAZIL

NORTHEAST RURAL DEVELOPMENT PROGRAM

NORTHEAST RURAL DEVELOPMENT PROJECT - PARAIBA

Table of Conteats

Page No.

I. LOAN AND PROJECT SUMMARY 1

II. THE AGRICULTURAL SECTOR .... 3...........*..*..* * *** 3Agriculture in the National Economy .............. 3The Rural Northeast ................. ****..*** 3Government Development Strategy for the RuralNortheast 4

Experience with Past Bank Lending S............... 5The State of Paraiba.................*............ 6

III. THE PROJECT 7Rationale for Bank Involvement and Origin .... 7Project Areao.........*.......o ................... 8Project Objectives and Description ... e...o..o..o. 8Water Resources Development o.................... 9Agricultural Research and Basic Seed Production 9Rural Extension 10Rural Investment Credit .................... 10Marketing Services ... ..*.. ... . 11Support to Small Rural Communities 11Project Administration and Training 11

Land Tenure Improvement ..... 12Project Organization and Implementation ........ 12

Federal and Regional Levels 12State and Local Levels ....................... o. 12Annual Planning and Budgeting .... o......o....o. 13Accounts and Auditing *i.....ooo..oo.oo...o..oo. 13Operating Agreements ........................... 13Monitoring and Evaluation *..................... 13

Project Cost oo.oo... ...... ......... ..... ..... 14Financing Plan ooo** .0.eo..o.o.. ...... o.o..o.o... 14Procurement .o.oooo*oo.oo*eeeoe***o****ooo* 15Disbursements *. ooo. oo..o......................... 16Project Benefits and Justificationoo...oo......... 16Production, Benefits and Farm Incomes 16Cost Recovery and Fiscal Impact o.........o...o. 17Economic Analysis *oo...4...........e........ 17

Project Risks *o.o...oo.o ... o.o.. oooo....oe.... 18

IV. AGREEMENTS REACHED AND RECOMMENDATION..................... 18

This report is based on the findings of an appraisal mission which visitedBrazil during December 1986. The mission comprised Messrs. A. Berthier(mission leader), J. Heidebroek, H. von Pogrell, D. Mitchnik,Ms. M. Anderson (IBRD), and Mr. J.M. Pliego-Gutierrez (Consultant).

ANNEXES: Page No.

ANNEX 1 -PROJECT DESCRIPTION . 21

Table 1.1 Structure of Land Holdings in the Project Area ......... 30Table 1.2 Evolution of State Agricultural Production ............. 31Table 1.3 Project Area and Beneficiary Distribution .............. 32Table 1.4 List of Municipalities in the Project Area 33Table 1.5 Project Components by Year 36Table 1.6 Summary Account by Project Component.................... 37Table 1.7 Estimated Schedule of Bank Disbursements................ 38Table 1.8 Allocation of Loan Proceeds ...................... 39Table 1.9 Financing Plan . 40

ANNEX 2 - PROJECT ORGANIZATION AND MANAGEMENT ...................... 41

Table 2.1 List of Executing and Collaborating Agencies ........... 44Chart 1 Project Coordination and Management Chart .............. 45Chart 2 Public Irrigation Management Chart ..................... 46Chart 3 Implementation Schedule ............................... 47

ANNEX 3 - FINANCIAL AND ECONOMIC BENEFITS *.......................- 49

Table 3.1 Total Annual Area, Marketable Production andValue of Major Crops Without Project andat Full Development .................... 51

Table 3.2 Characteristics of Illustrative Farm Models Usedin Financial and Economic Analyses ...................... 52

Table 3.3 Estimated Areas and Yields of Major Crops at FarmLevel Without Project and at Full Development ........... 53

Table 3.4 Project Economic Analysis .............................. 57Table 3.5 Principal Prices Used for Financial and Economic

Analyses ..... 58Table 3.6 Project Sensitivity Analysis ........................... 59

ANNEX 4 - DOCUMENTS AVAILABLE IN THE PROJECT FILE .................... 60

MAPS: IBRD 18686-R - Yearly Land Adjudication OperationsIBRD 20376 - Project AreaIBRD 20398 - Agricultural Potential Defined by Dependable

Rainfall

BRAZIL

NORTHEAST RURAL DEVELOPMENT PROGRAM

NORTHEAST RURAL DEVELOPMENT PROJECT - PARAIBA

DRAFT STAFF APPRAISAL REPORT

I* LOAN AND PROJECT SUMMARY

Borrower: Federative Republic of Brazil

ExecutingAgency: The Northeast Project Technical Unit (UT) within the

Secretariat of Planning of the State of Paraiba (SEPLAN-PB).

Loan Amount: US$60.0 million equivalent.

Terms: Repayable in 15 years on a fixed amortization schedule,Including 3 years of grace, at the Bank's standard variableinterest rate.

Beneficiaries: Some 37,800 low-income families operating farms of up to100 ha in 96 municipalities of the State of Paraiba woulddirectly benefit from the project. A larger number offamilies would also benefit from the water supply, communitydevelopment and marketing components.

ProjectDescription: The proposed project is one of a series of projects within

the new Northeast Rural Development Program (NRDP). Theproject objectives are to: (a) increase agriculturalproduction and productivity; (b) generate income andemployment opportunities for low-income rural families;(c) promote water resources development and technologygeneration and diffusion to decrease small farmers'vulnerability to recurring droughts and pest outbreaks;(d) increase community participation in all phases of thedevelopment process; and (e) strengthen the State ofParaiba's institutional capacity to provide efficientagricultural services to small farmers. In order to meetits objectives, the project would support water resourcesdevelopment for agriculture and domestic use, adaptiveagricultural research, agricultural extension, investmentcredit, marketing services, funding for communitysubprojects and project administration and training.

Risks: Possible project risks include: (a) insecure land tenure;- (b) inefficient delivery of project services; (c) lack of

sufficient interinstitutional cooperation; (d) recurringdroughts and cotton pest outbreaks; and (e) delays andshortfalls in counterpart funding and credit. The projecthas been designed so as to minimize these risks. Progresswill be closely followed by Bank staff through review ofannual operating plans and improved supervision, monitoring

-2-

and evaluatlon. Implementation of the Northeast Region LandTenure Improvement Project and the Government's agrarian reformwould increase land tenure security. Streamlined administrativeprocedures, measuree for institutional strengthening and technicalassistance for selected agencies would improve efficlency andproject coordination. Crop diversification and intensifiedtechnology generation and diffusion would make farmers lessvulnerable to drought and pest outbreaks. The Government adoptednew measures in 1986 to ensure the timely availability ofcounterpart funds and credit. In addition# the regional scojd ofthe Northeast Program and the support the Program enjoys amonggovernment and local leaders should help secure adequate fundingand satisfactory implementation of the proposed project.

Estimated ProJet Costs

Estimated Costs: Local Forelgn Total~ - --- US$ millione--

A. Water Resources Development 15.1 4.0 19.1B. Agricultural Research and

Basic Seed Production 7.1 0.8 7.9C. Agricultural Extension 24.3 0.9 25.2D. Rural Investment Credit 32.1 5.6 37.7E. Marketing Services 2.0 0.4 2.4F. Support to Small Rural Communities 12.5 1.9 14.4G. Project Administration and Training 8.4 0.4 8.8

Total Baseline Costs 101.5 14.0 115.5Physical Contingencies 2.1 0.7 2.8Price Contingencies 5.2 0.4 5.6

Total Project Costs 108.8 15.1 123.9 1/

Financing Plan:Local Foreign Total- -US$ millions--

Government 63.9 - 63.9IBRD 44.9 15.1 60.0

TOTAL 108.8 15.1 123.9

Estimated Disbursements:

Bank FY: 1988 1989 1990 1991 1992 1993 1994 1995 1996~~~- ---- -US$ millllons-----

Annual 4.8 2/ 4.8 8.4 9.0 10.2 9.6 6.0 4.8 2.4Cumulative 4.8 - 9.6 18.0 27.0 37.2 46.8 52.q 57.6 60.0

Rate of Return: 14X

Maps: IBRD 18686-R, 20376 and 20398

1/ Including about US$4.6 million of local taxes.

2/ Including initial deposit of US$2.8 million into the Special Account.

- 3 -

II. THE AGRICULTURAL SECTOR

Agriculture in the National Economy

2.01 Agriculture i- Brazil has traditionally been the main source of exportsand employment, though a relatively small contributor to GDP. In 1970,agriculture accounted for 12% of GDP, 44% of the economically active populationand 67% of total exports. In 1985, these figures were 13%, 30%, and 31%,respectively. Throughout the 1970P, there was rapid expansion in Brazil'sagriculture (5% per annum); during the recession in the early 1980s, output andinvestment stagnated and then recovered in 1984 and 1985.

2.02 The performance of the sector in the 1970s masked sharply disparaterates of growth between regions, farm types and individual crops. The mostdynamic expansion was with products that rely on heavy capital investment or highlevels of inputs, such as soybeans, citrus, tobacco, cocoa and sugarcane on largecommercial farms in central and southern Brazil. Much slower growth rates, andin some cases declines, were recorded for such staple food crops as rice, maize,wheat, beans, manioc and potatoes.

2.03 These trends in agricultural output were reflected in agriculturaltrades In the 1970s, the rapid growth in agricultural exports depended heavily onsoy products, orange juice, cocoa, tobacco and sugar. Of total agriculturalexports of US$2.09 billion in 1970, only 15% were accounted for by these fivecrops. By 1980, they accounted for over 50% of Brazil's US$9.43 billion ofagricultural exports. After 1980, the value of agricultural exports hardly grewat all, except in 1984, when coffee and orange juice were aided by highlyfavorable price movements.

The Rural Northeast

2.04 The Northeast is comprised of the States of Maranhao, Piaui, Ceara, RioGrande do Norte, Paraiba, Pernambuco, Alagoas, Sergipe, Bahia, the northernportion of the State of Minas Gerais, and the island of Fernando de Noronha. Theregion covers a total area of over 1.5 million km2 (18% of the country's totalarea).

2.05 The Northeast has been the nation's foremost problem region since thelate 1800s because of drought, uncertain rainfall, skewed land distribution, andlimited employment opportunities. These problems resulted in high levels ofpoverty and underemployment. From 1970 to 1983, 3.3 million people migrated fromthe region, partially in response to a five-year drought (1979-1983). In 1985,the Northeast had a total population of 39 million (about 29% of the country'stotal), growing at 2.3% per annum with a population density of 25 inhabitants persquare kilometer. Half the population lives in rural areas and over 50% of thework force is engaged in agriculture. Land ownership is highly concentrated:

- 4 -

farms under 10 ha (70% of all farms) occupy less thsn 62 of the farm area; farmsover 500 ha (1X of all farms) occupy more than 40X of the farm area. Ruralincomes are low. In 1985, about half of the Northeast rural population earned onequarter or less of the official minimum wage (about US$6O0 annually).

2.06 The Northeast contributes about one-fifth of the total value ofBrazilian crop production; many regionally produced commodities (cotton, sisal,cassava, and sugar) represent significant shares of national production. The zonada mata, a narrow, fertile coastal strip, contains one-third of the regionalpopulation and a major proportion of industry and plantation agriculture. Theagreste, a transitional zone contiguous with semi-arid areas, is dominated bymixed farming, as well as the raising of cattle. The sparsely populated semi-aridsertao, where cattle raising and cotton cultivation are predominant, is thelargest of the subregions and the most vulnerable to periodic droughts.

Government Development St.ategy for the Rural Northeast

2.07 Until the 1950s, most Government interventions in the rural Northeastwere limited to drought relief works, emergency programs and incentives for exportcrops. The slow pace of socioeconomic development and the need for improvedregional planning led to the creation in 1959 of the Superintendency for theDevelopment of the Northeast (SUDENE). SUDENE was originally responsible. forcoordination of public investment, drought emergency measures and powerful fiscaland credit incentives to attract new private investment. The initiative forregional policy formulation was transferred to various Federal agencies in the1970s, with SUDENE continuing to play an important role in the coordination offederally funded special rural programs.

2.08 The special rural programs have followed two approaches. The first wasbaaad on the in.egrated development of selected subregions. It included theDevelopment Program for Integrated Areas of the Northeast (POLONORDESTE), theSpecial Program of Support for the Development of the Semi-Arid Region of theNortheast (SERTANEJO), and the Special Program of Support for the Small SugarcaneGrowers. The second approach was concerned with alleviating the effects ofdrought. It included several parallel programs such as the Water Resources UseProgram (PROHIDRO), the Agricultural Research Program for the Semi-Arid Tropicsand the Drought Emergency Relief Program, as well as large federal publicirrigation projects.

2.09 Planning for a major new development initiative began in 1982,stimulated by the recognition that the aggregate contribution of the first twoapproaches in alleviating rural poverty and increasing agricultural production hadbeen limited. The new initiative is to be implemented through a series ofsectoral projects in such areas as land tenure, federal irrigation, health,education and integrated rural development. The Northeast Rural DevelopmentProgram (NRDP), simpler in design than the previous efforts supported by the Bank,is a 15-year program which focuses on eliminating key constraints (land tenure

- 5 -

insecurity, drought vulnerability and limited access to credit and use of moderntechnology) on small farm development, It is based on a comprehensive regionalpolicy framewort, multiyear state rural lwestment plans and the integration ofall current rural special programs. NRDP Regional guidelines establieh unifiedand streamlined funding and administrative procedures and mechanisms for increasedbeneficiary participation aud improved institutional performance.

Experience with Past Bank Lending

2.10 The Bank has made 41 loans, totaling US$3,268.6 million, foragricultural and rural development in Brazil. These include one agriculturalcredit and export loan for US$3C3.0 million; one credit and marketing reform loanfor US$500.0 million; supplemental financing for US$30.5 million under the SpecialAction Program; three loans for US$519.2 million for agroindustries; two forUS$60.5 million for livestock; one for US$18.2 million for grain storage; two forUS$10( million for agricultural research; two for US$255 million for agriculturalextension; one for US$100 million for land tenure improvement; and 27, totallingUS$1,382.2 million, for various settlement, irrigation, and rural developmentprojects in the Northeast3/, in Minas Gerais, and in the North and Northwest.

2.11 Ten of the Bank-financed projects were POLONOROBSTE rural developmentprojects located in eight Northeast states. Approved from 1976 to 1983, three ofthe projects are still being executed; the other seven have been substantiallycompleted. Implementation of all POLONOROESTE projects generally improved overthe years, especially in project planning and agency coordination. The combinedProject Completion Report for the Rio Grande do Norte and Sergipe RuralDevelopment projects (Loans 1195 and 1714-BR) showed that, despite lower thanexpected rates of return in both projects, adopting farmers' incomes increasedsubstantially. However, these two projects, similar to the others, experiencedimplementation and disbursement delays> mainly because of the unusually severe andprolonged 1979-83 drought, delays in providing local funds, limited executioncapacity for carrying out small-scale irrigation and land activities, and initiallags in the generation of drought-resistant technology for small farmers. TheCompletion Report concluded that fundamental development constraints, such asinsecure land tenure, or uncertain water availability, should receive prioritytreatment in future project design and investment. These problems and prioritieswere addressed during the preparation of the NRDP.

The State of Paraiba

2.12 Location and Natural Features. Paraiba covers 56,000 km2 and is thethird smallest state in the Northeast. The driest area, the sertao (whichincludes the southern subarea of the Cariri da Princesa), has a rainfall of

3/ A preliminary evaluation of impact is provided in the World Bank CountryStudy, Brazil: An Interim Assessment of Rural Development Programs for theNortheast, Washington, D.C. 1983.

- 6 -

400-700 mm per year, which Is irregularly distributed, and a long dry season ofseven to ten months; soils are generally shallow and impermeable. The agreste, atransitional region, has an average annual rainfall of 600-1,000 mm and five toseven months of rain. The zona da mata (litoral), along the coast, and the brejo,an elevated inland region, have a more humid climate with rainfall of 1,000-1,500mm and fertile soils. The State is drained by two major rivers (Paraiba andPiranhas), both with a perennial flow. Underground water is plentiful on thecoast, but generally very deep and of poor quality in the interior.

2.13 Economic and Social Conditions. Some 48% of Paraiba's total populationof about three million lives in the rural areas; because of migratory trends,the rural population is decreasing. Population density (50/km2) is one of thehighest in the Northeast. GDP per capita is low (US$230). About 90% of theagricultural work force earns less than the minimum wage (about US$675 annually).Agriculture accounts for about 23% of the State's GDP. Living conditions for mostof the population are poor; there is only one doctor for 4,000 inhabitants andeven less in the rural areas, Sixty-eight percent of the rural population isilliterate. Infant mortality is high, and access to treated water is limited.

2.14 Land Tenure and Production. Most of the farms are small, but landdistribution is highly skewed. The 500 largest farms occupy as much land (onemillion ha) as the 100,000 smallest farms (below 50 ha) in the State. Of a totalof 170,000 producers, 65,000 are landless (40%). Small producers grow mostlyfoodcrops (beans, maize, cassava) and also play a dominant role in the productionof cotton and bananas. Large-scale farms in the litoral mostly grow sugarcane andpineapple; land in the sertao is mostly used for extensive grazing, sisal andcotton.

2.15 Agricultural Services. Because of previous rural investments inParaiba, there are a number of agencies and a core of trained technicians withagricultural development and project management experience. The planning,administration and coordination of the State's rural development programs used tobe carried out by the State Agricultural Planning Commission (CEPA-PB). The StateSecretariat of Planning's Northeast Project Technical Unit (UT) became responsiblefor these duties in 1985, and has already gained some experience in thecoordination of rural development programs. Smaller in size than CEPA-PB, andassigned exclusively to the project with qualified staff, UT is now adequatelystaffed at Headquarters and will progressively strengthen its regional offices.Land regularization and redistribution activities are entrusted to the StateInstitute for Land Regularization (FUNDAP). Reorganized and strengthened in 1985,FUNDAP is one of the most efficient land institutes in the Northeast and hascarried out almost all of its annual targets under the Northeast Region LandTenure Improvement Project. Agricultural research is the responsibility of theState Institute for Agricultural Research (EMEPA), a well-run organization, which

- 7 -

is able to play an important role in the adaptation of low-cost technology(including pest control programs, for cotton in particular). Agriculturalextension is provided with mixed results by the State Technical Assistance andRural Extension Company (EMATER-PB). EMATER-PB will need to improve its planningand supervisory activities particularly at field level. Water resourcesdevelopment, still at an incipient stage, is mostly done by the newly createdState Secretariat of Water Resources (SRH). Civil engineering and irrigationworks are all carried out under contract to private specialized firms. Because ofits inexperience, SRH will be greatly strengthened under the project (para.3.06). Three major public banks (the Bank of Brazil, the Bank of Northeast ofBrazil and the State Bank of Paraiba) provide credit to farmers through agenerally adequate branch network. However, demand for official credit by smallproducers is far greater than supply. Finally, public agricultural marketing ishandled by the Central Marketing Organization of Paraiba (CEASA-PB), which isefficiently running the marketing information and orientation services, and by the

State Agricultural Marketing Company (CIDAGRO),responsible for other marketingservices. Past performance of CIDAGRO, a parastatal institution, has generallybeen lower than average, and its participation in the project has been limited.

2.16 Rural Deveiopment in Paraiba and Previous Bank Participation. The Bankhas previously assisted the State's rural development in one of the ninemacro-planning regions, the Brejo. The Paraiba Rural Development Project, with aloan of US$24.0 million (Loan 1537-BR), was approved in March 1978. The executionof the project has been severely hampered by a chronic shortage in counterpartfunds and federal rural credit resources. The late addition of a land tenureimprovement component (only started in the fifth year of the project) and a poorrelationship between the coordinating unit (CEPA-PB, within the Secretariat ofAgriculture) and the Secretariat of Planning were other constraints. Despitethese constraints, most components have progressed satisfactorily, although at aslower pace than anticipated, and project beneficiaries (mainly those producingpotatoes and bananas) have increased their income. The loan, extended by threeyears, closed on September 30, 1986; the remaining balance of the loan (aboutUS$2.0 million) is being cancelled. Problems that arose during the execution ofthe Paraiba Rural Development Project were addressed during appraisal of theproposed project.

III. THE PROJECT

Rationale for Bank Involvement and Origin

3.01 The Bank's lending strategy in Brazil aims to promote and assiststructural reform, to develop and maintain essential infrastructure, and toimprove productivity and living conditions of the rural and urban poor. TheGovernment of Brazil attaches high priority to decreasing regional disparities.Incomes in Northeast rural areas are less than 35% of the national average. TheNRDP, of which the proposed project is a part, forms a central part of the

- 8 -

Government's iwestment strategy to narrow the gap between the Northeast regionand the rest of the country and to alleviate rural poverty.

3.02 In August 1982, the Government asked the Bank to assist SUDENE inpreparing the NRDP which is comprised of ten state projects and a regional landtenure improvement project. In April 1985, the Baik approved the Northeast RuralDevelopment Projects for the States of Sergipe and Rio Grande do Norte (Loans2523-BR and 2524-BR, respectively). In addition to supporting the Sergipe RuralDevelopment Plan, the first project established the structure and operatingprocedures for regional program planning, coordination and research to support allten Northeast state rural development plans. In June 1985, the Bank approved theNortheast Region Land Tenure Improvement Project (Loan 2593-BR), which financescadastral activities in all ten Northeastern states (Map IBRD 18686-R). The NRDPproject for the State of Pernambuco was approved in June 1986, and projects forthe States of Bahia, Piaui and Ceara were approved in October 1986. Projects forthe three remaining States (Maranhao, Alagoas and Minas Gerais) are beingpresented to the Executive Directors simultaneously with the proposed project.While it is still early on in the implementation of the NRDP, initial experiences,particularly with respect to federal and regional management, counterpart funding,and beneficiary participation, are encouraging.

3.03 The project was appraised by the Bank in December 1986, andnegotiations took place in Washington in April/May 1987. The Brazilian delegationwas led by Ms. Stael Martins Baltar of the Federal Ministry of Finance.

Project Area

3.04 The State selected 96 of Paraiba's 170 municipalities as priority areasfor development. Emphasis was put on the brejo, agreste, litoral, and some areasof the sertao regions (Map IBRD 20376). These priority areas generally have ahigh concentration of small farmers and a potential for crop diversification andincreased livestock production. The selected priority areas also coincide withthe areas selected for cadastral and land regularization operations financed underthe Northeast Region Land Tenure Improvement Project (Loan 2593-BR).

Project Objectives and Description

3.05 The main objectives of the proposed project would be to: (a) increaseagricultural productivity and production; (b) generate income and employmentopportunities for low-income rural families; (c) promote water resourcesdevelopment and technology generation and diffusion to decrease small farmers'vulnerability to recurring droughts; (d) increase community participation in allphases of the development process; and (e) strengthen the State of Paraiba'scapacity to provide efficient agricultural services to small farmers. The projectwould directly benefit an estimated 37,800 low-income farm families, each farmingless than 100 ha. A larger number of families would benefit from the watersupply, marketing and community development components. The project components

- 9 -

are described briefly below (with, in parentheses, the relative percentages oftotal project costs) and in Annex 1.

3.06 Water Resources Development (18%). This component would include:(a) constructilon if six medium-sized, state-managed irrigation schemes totalling2,900 ha of irrigated land, benefiting 1,000 families; (b) studies covering 7,500ha to support the development oi the State's irrigation plan and the preparationof irrigation projects for implementation under future projects; (c) a program oftechnical assistance to strengthen the implementing capacity of the SRH; (d)construction and rehabilitation of 110 simple water supply systems and (e)production and distribution of 5 million fingerlings annually for stocking ofpublic lakes and reservoirs with local fish species and monitoring of fishingactivities. In addition, 6,000 ha of private irrigation would be financed underthe rural inwestment credit component (para. 3.09). There would not be anyitwoluntary resettlement under the public irrigation subcomponent which wouldinclude only river pumping schemes. It was agreed during appraisal that theinstitutions dealing with irrigation schemes would be reinforced, as follows: forprivate irrigation, creation of 'a special coordinating unit within the Secretariatof Agriculture; and for public irrigation, under the responsibility of theSecretariat of Water Resources, creation of a planning unit at the state level,and of a field management unit in the sertao region. A condition of loaneffectiveness would be that the Bank be provided with evidence of the creation andsatisfactory staffing of these three units (para. 4.04). During negotiations, theState Government prwmided assurances that the staffing of these units would bemaintained under conditions satisfactory to the Bank (para. 4.03 (a)). Acondition of disbursement for loan proceeds financing the construction of eachpublic irrigation scheme would be that the Bank has: (a) received proof of landacquisition and (b) approved the detailed engineering designs and settlementplans (para. 4.05). Any loan proceeds so allocated would be cancelled if notcommitted by September 30, 1989 for the first three irrigation schemes; bySeptember 30, 1990 for the fourth and and fifth of such schemes; and by September30, 1991 for the sixth such scheme (para. 4.06).

3.07 Agricultural Research and Basic Seed Production (7%). Applied researchwould be directed towards simple technologies to make farming systems moreproductive and resistant to possible drought and pest outbreaks. It wouldinclude: (a) three agroecological and natural resources studies to assist infuture research planning; (b) 180 short- and medium-term applied research trialsat experiment stations to improve production technology; (c) establishment andmonitoring of about 30 observation farms to test and adapt integrated farmproduction and distribution technology; (d) annual production of about 50 tons ofbasic seeds for multiplication; (e) annual production and distribution of aboutone million fruit tree seedlings; and (f) a pilot breeding stock improvementprogram for goats and sheep, which would be distributed to farmers. EMATER-PBwould be responsible for the distribution of these animals to selected producers.These producers would eventually return an equivalent number of animals to EMEPA

- 10 -

to be passed on to other producers. EMEPA would develop its adaptive researchprogram in cooperation with both farmers and extension officers, and appraise bothtechnical and economic results from the farm-level observation units.

3.08 Rural Extension (22%). This component would include: (a) establishmentand maintenance of about 150 demonstration plots on farmers' fields;(b) equipment, salaries and related operating costs, on a declining basis, for upto 260 agricultural and social extension agents, about 30 subject-matterspecialists, and 130 administrative staff divided in six regional and 86 localoffices; (c) production of about 500,000 tree-crop seedlings annually for farmersto plant fodder, fuelwood and fruit trees; and (d) the implementation of a cottonpest control program for 7,700 farmers. The low ratio of agricultural extensionagents to farm families would improve gradually from Year 1 to Year 8 of theproject as follows: for farmers in rain-fed areas: 1:180 to 1:300; for farmerswho will benefit from irrigation: from 1:50 to 1:100; and for cotton growers whowill need to receive intensive support for the implementation of the pest controltechnology: from 1:100 to 1:250. The National Program for the Control of theCotton Pest would be coordinated and monitored by the newly created StateExecutive Commission for Pest Control and implemented by EMATER-PB, withassistance from EMEPA. During negotiations, the State Government providedassurances that the State Executive Commission for Pest Control, which isresponsible for the cotton pest control program in the State, in collaborationwith EMEPA and EMATER-PB, would coordinate with the Ministry of Agriculture toensure thatVthe research and extension annual work programs are consistent withthe National Program (para. 4.03 (b)).

3.09 Rural Investment Credit (30%). The project would finance medium- andlong-term credit for on-farm investments for about 11,500 farmers (30% of the37,800 direct beneficiaries). A greater number would receive short-termproduction credit to be financed by participating banks (para. 2.15). Farmerswould contribute their own labor to on-farm investments. However, because offarmers' limited savings, financing would cover up to 100% of the cost of goodsrequired for on-farm investments, with a maximum repayment period of twelve yearsand a maximum grace period of three years. Sugarcane plantations, irrigationschemes larger than 4 ha, and automobiles would not be eligible. Financing wouldnot exceed ceilings established for the NRDP credit program in the Central Bank'sManual for Rural Credit for individual farmers; farmers' associations andcooperatives would also be eligible, provided that at least 70% of their membersare small farmers who would directly benefit from the investments.

3.10 Recently, new official rural credit terms were established for NortheastBrazil. Under those terms, the interest rate for rural investment credit chargedto Northeast farmers (excluding those cultivating sugarcane, cocoa, rubber andcoffee, who would be charged a higher rate) would be 3% per annum, with fullmonetary correction, based on the monthly variation of the value of NationalTreasury Bonds (Obrigacoes do Tesouro Nacional, OTNs). This compares with aninterest rate of 6% per annum with full monetary correction on official ruralinvestment credit for all farmers outside of the North and Northeast. To providelow-income small farmers with a strong incentive to invest in the project's

- 11 -

technical packages, project beneficiaries would have a portion of their firstinvestment loan rebated as a grant. The percentage of the grant would be: 50%for investment loans approved from March 1, 1987 to December 31, 1988; 40% for theperiod January 1, 1989 to December 31, 1989; and 30% from January 1, 1990onwards. The rebate would occur at the time the loan funds were released to thefarmer. While still providing a significant subsidy, the new terms have severaladvantages over previous NRDP credit arrangements which resulted in largesubsidies due to the partial or total absence of monetary correction on theprincipal of the loan. Under the new agreement, the total amount of subsidy wouldbe known and budgeted in advance as part of the annual NRDP allocation in thefederal fiscal budget. Also, the long-standing practice of providing creditsubsidies through the use of partial monetary correction would be eliminated,paving the way for future improvements in the official rural credit system.

3.11 During negotiations, the Federal Government provided assurances that:(a) the Central Bank and the other participating banks would carry out thiscomponent in accordance with the lending terms and conditions recently agreed withthe Bank; (b) the Central Bank would provide sufficient funds to the participatingbanks to carry out the project's investment credit component; (c) each of theparticipating banks would provide monthly information to SUDENE and UT oninvestment credit availability, demand and lending per Bank agency; and(d) priority would be given by the participating banks to allocations from theirown resources of short-term production credit to their agencies serving theproject area in amounts adequate to finance the working capital requirements ofproject beneficiaries (para. 4.01 (a)).

3.12 Marketing Services (3%). This component is designed to increase thefarmers' knowledge of markets, product grading and prices, and improve the storageand marketing of agricultural products. The project would include: (a) expansionof the State-run marketing information system (SIMA); (b) rehabilitation of threeexisting warehouses and expansion of a cold storage unit for potato seedconservation; (c) production of improved seeds for a period of three years, to bedistributed to farmers on an exchange basis through cooperatives and farmers'associations; (d) provision of equipment for crop classification; and(e) introduction of a market promotion program for alternative crops. Ongoingcrop purchasing schemes would continue with Government support.

3.13 Support to Small Rural Communities (12%). The objectives of thiscomponent Are to help formal and informal groups of farmers participate in thedevelopment of their communities. The component would include: (a) creation of acommunity development (CD) fund of about US$11.3 million 'to make grants for localsubprojects; (b) purchase of office equipment; and (c) training and otheroperating costs for about 23 community development agents. The UT would beresponsible for implementing the component and administering the CD fund.Farmers' groups would identify, plan and execute subprojects that would financeeconomic activities (such as fish ponds and cottage industries), community

- 12 -

infrastructure (such as laundry facilities, small irrigation and drainage schemes,and storage facilities), and related training for community leaders. Writtenproposals explaining objectives, benefits, implementation methodology andcost-sharing would be subject to Municipal Councils' approval. Duringnegotiations, the State Government provided assurances that: (a) the CD fundwould be established and maintained under terms and conditions satisfactory to theBank; (b) no funds would be released to beneficiary groups prior to the signing ofthe agreement between UT and the groups or between UT and the municipalities forunregistered groups; and (c) by March 31, 1989, the Bank and UT would revieweconomic subprojects performance to establish the feasibility of carrying outfurther funding of subprojects on a loan basis (para. 4.03 (c)).

3.14 Project Administration and Training (8%). UT is now adequately staffedat Headquarters and will progressively strengthen its regional offices (para.2.15). All project-related training would be centrally coordinated by UT. Thetraining program would include management and technical training for executingagency staff as well as training of farmers in all services provided under theproject. The project would finance salaries and related expenses for upto 45 technicians and related support staff distributed between the Headquartersand the six regional offices. During negotiations, the State Government providedassurances that satisfactory staffing of UT would be maintained (para. 4.03 (d)).

Land Tenure Impovmenen~mrove nt

3.15 Land tenure improvement, through the provision of land titles or formalusufruct rights to small farmers, is essential to the success of the proposedproject and would provide small farmers with access to institutionalizedimvestment credit. Land regularization and redistributton in the 96municipalities would result from the cadastral activities carried out under theNortheast Region Land Tenure Improvement Project (Loan 2593-BR). Redistributiontargets, procedures for land acquisition, allotment, and selection ofbeneficiaries were agreed upon as conditions for the regional land project.Implementation of the land tenure project has been delayed due to organizationalchanges within INCRA and the Ministry of Agrarian Reform and Development (MIRAD).The Bank, INCRA and other inolved Ministries recently agreed on the measuresneeded to improve project implementation. They agreed on implementationstrategies, revised targets based on a two-year loan extension to be approved oneyear at a time based on satisfactory project performance, new managementarrangements, and several amendments to the project's legal documents. However,basic project objectives and overall targets did not change. The reaching ofthese targets by 1990 would secure access to land and credit for those projectbeneficiaries who are currently landless. The Gcvernment has recently signedthese legal amendments to the Northeast Region Land Tenure Improvement Project andproject implementation is expected to accelerate in the coming months. Duringnegotiations, the Federal and State Governments provided assurances that in theproject area: (a) at least 67,400 ha would be available for redistribution toproject beneficiaries by March 31, 1989; and (b) at least an additional 35,000 hawould be available by March 31, 1990 (para. 4.02 .a)).

- 13 -

Project Organization and IMglementation

3.16 Federal and Regional Levels. An Interministerial Commission (IC),chaired by the Secretary-General of the Ministry of Interior (MINTER) andcomprised of representatives from the Ministries of Planning, Finance, LandReform, Agriculture and Irrigation, and the Superintendent of SUDENE, has overallpolicy planning responsibility for NRDP. As regional coordinator of the NRDP,SUDENE's Directorate for the Program of Support to Small Farmers receives policybacking from a Regional Rural Development Council (RDC) which meets once a monthand includes representatives of federal agencies, the ten Northeastern States andbeneficiary groups. e

3.17 State and Local Levels. The State Rural Development Council (SRDC),chaired by the Governor, with the Secretary of Planning as Executive Secretary andwith participation of representatives from SUDENE and the Secretaries ofAgriculture and Water Resources Development, would provide overall guidance forproject-supported rural development activities. The day-to-day projectimplementation would be carried out by the executing agencies and coordinated byUT, which has its own legal authority, budget, salary structure and administrativepersonnel procedures. ThIe Bank has been provided with evidence that the planning,budgeting, staffing and administration of all current federally-funded ruralprograms in Paraiba have been unified under the coordination of UT.

3.18 Annual Planning and Budgeting. Targets and costs established atappraisal would be adjusted annually during the project implementation period.Once the Federal Governuent has established overall funding availability for theNRDP for the next year, state allocations would be established by SUDENE inconsultation with the RDC. UT would consolidate each executing agency's detailedannual operating plans, ensure internal consistency and then submit them to SRDCand SUDENE for approval. SUDENE would consolidate state plans into a regionaloperating plan to be presented to the RDC and IC as the basis for the adminis-trative regulation (poraria) signed by the various ministers involved, andestablishing budget allocations for each state. During negotiations, the FederalGovernment provided assurances that: (a) the regional operating plan would be senteach year to the Bank for comment prior to approval;, (b) the portaria, the finalregional operating plan and the State of Paraiba's operating plan would be sent tothe Bank not later than the first working day of each project fiscal year; and(c) any proposed changes in planning and budgeting procedures would be submittedto the Bank for comment prior to enactment (para. 4.01 (b)).

3.19 Accounts and Auditing. Each participating agency, including the CentralBank and participating banks, would maintain separate accounts for projectexpenditures, to be audited annually by independent, private or public auditorsacceptable To the Bank. During negotiations, the Federal and State Governmentsprovided assurances that: (a) the Special Account, the investment credit accounts,and the project accounts, would be maintained and audited annually according to

- 14 -

practices satisfactory to the Bank; (b) terms of reference for the auditors wouldinclude, Inter alia, verification of the Statements of Expenditure for the projectaccounts; and (c) copies of the three audit reports would be submitted to the Bankwithin six months of the close of each project fiscal year (para. 4.02 (b)).

3.20 Operating Agreements. Agreements among project coordinating andexecuting agencies would be entered into between: (a) the State, through UT, andthe federal agencies involved; (b) executing agencies, with the participation ofUSA, when more than one is involved in executing a project component; and (c) theState, through UT or an executing agency, and the concerned municipality or groupprior to implementing a community subproject. These agreements would includeexecution guidelines and targets, reporting requirements, procedures forinter-agency collaboration and funding conditions linked to performance criteria.During negotiations, the Federal and State Governments provided assurances that UTwould enter into all necessary agreements referred to in (a) and (b) above notlater than six months after loan signing (para. 4.02 (c)).

3.21 Monitoring and Evaluation. Monitoring and evaluation arrangements havesimplified reporting requirements and would aim at providing accurate and timelyinformation for project management and annual planning. UT would receive monthlyreports from executing agencies on key physical and financial indicators, producequarterly consolidated monitoring summaries, and be responsible for the on-goingevaluation. Project evaluation would be the responsibility of a special unitwithin UT but executed, under contract, by the State Agricultural PlanningCommission (CEPA-PB). During negotiations, the State Government providedassurances that: (a) quarterly monitoring reports would be sent to the Bank notlater than three months after the end of the respective fiscal quarter; and (b)terms of reference and institutional arrangements for evaluations would besatisfactory to the Bank (para. 4.03 (e)).

Project Cost

3.22 Total project costs are estimated at US$123.9 million, with a foreignexchange component of approximately US$15.1 million, or about 12% (see Loan andProject Summary). The total cost is based on the assumption that all goods andservices would be acquired in Brazil, with the exception of some specializedconsultants' services. The cost estimate includes about US$4.6 million equivalentin applicable local taxes. Physical and price contingencies are equivalent to 2%and 5% of baseline costs, respectively. Physical contingencies were added tobaseline costs at 15% for irrigation and water supply construction, 10% for otherconstruction and contracted services, and 5% for equipment and furniture. Pricecontingencies were estimated in US dollar terms, based on international inflationrates estimated at 3% for 1987, 1% for 1988 to 1990, and 3.5% p.a. thereafter. Itwas assumed that periodic currency adjustments, estimated on a purchasing powerparity basis, would compensate for differences between projected US dollarinflation and local inflation rates.

- 15 -

Financing Plan

3.23 The amount of the proposed Bank loan would be US$60.0 millionequivalent, which would represent 50% of total estimated cost, net of taxes. Theproposed loan would finance 100% of direct and indirect foreign exchange costs and41% of local costs. The loan would be repayable over 15 years, including threeyears of grace, and would bear interest at the Bank's standard variable rate. Theloan would be made to the Federative Republic of Brazil, which would carry theforeign exchange risk and provide counterpart funds as necessary to complete theproject. Budgeting procedures would be those described in para. 3.18. Fundswould be channelled from the Treasury through MINTER and SUDENE to either aspecific project account in the State for activities executed by State agencies,or directly to federal executing agencies. Monthly advances of Governmentcounterpart funds would also be made through the Central Bank to cover theestimated Bank share of monthly expenditures. During negotiations, the FederalGovernment provided assurances that the administrative regulation (portaria)establishing these funding procedures would not be changed without Bank approval(para. 4.01 (c)).

3,24 In August 1986, the Ba* and the Government reached an agreement thathas improved the timeliness and adequacy of counterpart funds. This agreementincludes: (a) the provision in the annual Federal Budget of the full amountrequired for the execution of all the Northeast Rural Development projects;(b) the monthly release of these resources in accordance with schedules andamounts agreed upon with the Bank; and (c) the simplification of procedures forchanneling the released funds to the project executing units. As a result of thisagreement, counterpart funding has been, and continues to be, satisfactory.

Procurement

3.25 Civil works, estimated at US$15.5 million, would be executed bycontracts awarded through local competitive bidding procedures, which areacceptable to the Bank. Brazil has a competitive local construction industry thatis capable of carrying out project works. As individual construction works aresmall and dispersed, foreign contractors are not expected to be interested, butwould not be excluded from bidding. Some community development civil works(para. 3.13) would be carried out by the beneficiaries under written agreementswith UT. Equipment and materials required by the project, totalling some US$2.8million, almost all locally produced, would be procured by the several executingagencies at various locations over the project implementation period, inaccordance with local competitive bidding procedures which are acceptable to theBank. Vehicles and microcomputers required by the project (amounting toapproximately US$4.8 million), as reserved procurement items, are not included inthe project costs and are not financed by the proposed loan. During negotiations,the State Government provided assurances that those items would be procured in atimely manner (para. 4.03 (f)). Civil works contracts estimated to cost more thanUS$250,000, and goods and services contracts for more than US$100,000 would besubject to prior Bank review of procurement documentation (about 70% and 40% of

- 16 -

the value of civil works, and goods and service&, respectively). Consultants'services mainly for feasibility studies for future Irrigation projects, totallingsome 20 man-years equivalent, would be procured in accordance with Bankguidelines. During negotiations, the Federal and State Governments providedassurances that they would follow the procurement arrangements outlined above andsummarized in the following table (para. 4.02 (d)).

Procurement Arranegemnts(US$ million)

Type of Procurement Method TotalProject Expenditure LCB Other NeA Cost

Civil Works 15.5 (9.J) 15.5 ( 9.2)Equipment & Materials 2.8 (1.1) 2.8 ( 1.1)Studies & Training 4.0 (2.0) 4.0 ( 2.0)Rural Investment Credit 37.7 (18.8) 37.7 (18.8)Community Subprojects 11.3 ( 7.8) 11.3 ( 7.8)Salaries & Allowances 38.6 (15.0) 38.6 (15.0)Other OperatingExpenses 14.0 ( 6.1) 14.0 ( 6.1)

T 0 T A L 18.3 (10.3) 4.0 (2.0) 101.6 (47.7) 123.9 (60.0)

Note: Figures in parentheses are the respective amounts financed by the Bank.

Disbursements

3.26 The proceeds of the proposed loan would be disbursed throughout theeight and one-half year disbursement period at a rate of 70% against projectexpenditures made for water resources development (or 100% of foreign expendituresfor consultants' services for irrigation works) and support to small communities,and at a rate of 50% against expenditures made for marketing and credit.Disbursements for the remaining components, which have a high share of recurrentcosts, would be made at a rate of 50% of project expenditures until aggregateamounts of US$2.2 million for agricultural research, US$6.6 million for extension,US$2.0 million for administration, and US$0.3 million for training have beendisbursed. Thereafter, disbursements for those categories would be made at a rateof 30% of project expenditures until aggregate amounts of US$2.5 for agriculturalresearch, US$8.1 million for extension, US$2.2 million for administration, andUS$0.4 million for training have been disbursed; the remaining funds for thesecategories would be disbursed at 10% of expenditures. To enable project executingagencies to prepare for an early start of project execution, project expenditures(except agricultural credit) incurred prior to loan signing, but after December18, 1986 (end of project appraisal), would be eligible for reimbursement up toabout US$3.0 million equivalent. Disbursement projections reflect thedisbursement profile for previous rural development projects in Brazil.

- 17 -

3.27 Disbursements for all investment, operating and technical assistanceexpenses under US$250,000 would be made under Statements of Expenditure preparedby the various executing agencies and certified by UT. Supporting documentationwould not be submitted to the Bank but would be made available during projectsupervision. Standard documentation for contracts exceeding US$250,000 would besubmitted to the Bank. To reduce Government prefinancing requirements, a SpecialAccount would be opened and thereafter maintained in US dollars in the CentralBank with an initial deposit of US$2.8 million. Withdrawals in cruzados from theSpecial Account, supported by Statements of Expenditure and other requireddocumentation, would be made at the exchange rate that prevailed on the date ofthe expenditure.

Project Benefits and Justification

3.28 Production, Benefits and Farm Incomes. The impact of the project onagricultural production would result from increased productivity (through bettercultivation practices, including pest and disease control, increased use of animaltraction, and irrigation), crop diversification, and expansion of the croppedarea. The annual value of incremental marketable production at full developmentis expected to be US$24.7 million, at November 1986 farmgate prices.Approximately 95% of this amount would come from crops and 5% from livestockproducts. This is not expected to lead to marketing constraints as Paraiba'spresent production, with the exception of cotton and beef, does not meet demand.Production surpluses would be marketed through existing public and privatechannels. Improved water supply systems and community activities would alsoprovide substantial benefits to the population, especially women. Expandedagricultural activities would create employment equivalent to some 9,600 mau-yearsannually. Improved farming practices and soil and water conservation would have abeneficial impact on the environment. Estimated financial rates of return for theseven illustrative farm models range from 15% to 69%. All project beneficiariesbelong to the poverty group. Net annual family farm benefits, which currentlyrange from US$300 to US$1,000, would increase at full development to a range ofUS$900 to US$2,800, in constant terms.

3.29 Cost Recovery and Fiscal Impact. Although it is not Government policyto obtain full cost recovery on rural programs for low-income families, currentlegislation allows SRH to recover 100% of operation and maintenance costs based ona volumetric annual charge for water, and 100% of public investments in commonirrigation and drainage infrastructure, based on a per hectare charge, over a50-year period. The initial investment is revalued but without charginginterest4/. The municipalities would cover the costs of operation andmaintenance of the water supply services until the Northeast Rural Water Supplyand Sanitation Program begins in 1989; at that stage, consumers would be expected

4/ For further clarification on cost recovery of irrigation projects, seeBrazil: Upper and Middle Sao Francisco Irrigation Project, SAR (Buff CoverReport No. 5975-BR), dated May 12, 1986.

- 18 -

to pay for the service. During negotiations, the State Government providedassurances that: (a) cost recovery provisions for public irrigation schemes wouldbe implemented in accordance with Government legislation satisfactory to the Bank;and (b) drinking water supply charges covering full operation and maintenancecosts would begin to be charged to consumers in 1989 (para. 4.03 (g)).

3.30 Additional recurrent costs to the Government of about US$2.5 millionannually to sustain the project following the investment period are expected to beoffset by additional fiscal revenues of about US$4.5 million annually generated bythe value-added tax on product circulation (ICM) that would apply to theincremental marketable production.

3.31 Economic Analysis. The economic rate of return for the project has beenestimated at 14%. The cost and benefit streams are detailed in Annex 3.Sensitivity tests show that, when project benefits fall by 28%, or project costsrise by over 39%, the rate of return falls to the 11% opportunity cost ofcapital. A lag of three years in achieving project benefits, such as might occurduring a severe drought, would result in an 11% rate of return.

Project Risks

3.32 Although projects under the NRDP are simpler in design than previousrural development projects, efficient delivery of project services andirterinstitutional cooperation would still be important for project success.The project includes improved monitoring and evaluation to foster a more efficientinstitutional environment. Delays and shortfalls in counterpart funding and ruralcredit could decrease the proposed project's impact. Recent changes in fundingprocedures, the merging of the rural special programs, the regional scope of theNortheast Rural Development Program, of which the project is a part, and the broadsupport which the program enjoys among Government and local leaders, should helpthe project receive adequate funding. At the farm level, the security of landtenure is still a problem; implementation of the Northeast Region Land TenureImprovement Project (Loan 2593-BR) and the Government's agrarian reform shouldhelp minimize this risk. Many farmers are dependent on cotton as a main cashcrop, and as such are vulnerable to pest outbreaks. The project has been designedto minimize this risk by increasing the focus on pest and disease control, on cropdiversification through technology generation and diffusion, and on waterresources development.

IV. AGREEMENTS REACHED AND RECOMMENDATION

4.01 During negotiations, the Federal Government provided assurances that:

(a) for rural credit: (i) lending terms and conditions would be thoserecently agreed between the Bank and the Government; (ii) the Central

- 19 -

Bank would provide sufficient funds to the participating banks to carryout the project's investment credit component; (iii) each of theparticipating banks would provide monthly information to SUDENE and UTon investment credit availability, demand and lending per bank agency;and (iv) priority would be given by the participating banks toallocations from their own resources of short-term production credit totheir agencies serving the project area in amounts adequate to financethe working capital requirements of project beneficiaries (para. 3.11).

(b) (i) the regional operating plan would be sent each year to the Bank forcomment prior to approval; (ii) the portaria, the final regionaloperating plan and the State of Paraiba's operating plan, would be sentto the Bank not later than the first working day of each project fiscalyear; and (iii) any proposed changes in planning and budgetingprocedures would be submitted to the Bank prior to enactment (para.3.18); and

(c) the administrative regulation (portaria) establishing funding procedureswould not be changed without Bank approval (para. 3.23).

4.02 During negotiations, both the Federal and State Governments providedassurances that:

(a) at least 67,400 ha by March 31, 1989, and an additional 35,000 ha byMarch 31, 1990, would be available for redistribution to projectbeneficiaries in the project area (para. 3.15);

(b) (i) the Special Account, the investment credit accounts, and the projectaccounts would be maintained and audited annually according to practicessatisfactory to the Bank; (ii) terms of reference for the auditors wouldinclude, inter alia, verification of the Statements of Expenditure forthe project accounts; and (iii) copies of the three audit reports wouldbe submitted to the Bank within six months of the close of each fiscalyear(para. 3.19);

(c) all necessary operating agreements would be entered into no later thansix months after loan signature (para. 3.20); and

(d) procurement procedures would be as specified in para. 3.25.

4.03 During negotiations, the State Government provided assurances that:

(a) satisfactory staffing of a private irrigation coordinating unit, adirectorate of planning, and a field management unit would be maintained(para. 3.06);

(b) The State Executive Commission for Pest Control would coordinate withthe Ministry of Agriculture to ensure that the State extension and

- 20 -

research annual work programs are consistent with the National Programfor the Control of the Cotton Pest (para. 3.08);

(c) (i) the Community Development Fund would be established and maintainedunder terms and conditions satisfactory to the Bank; (1i) no funds wouldbe released prio. to a written agreement between UT and the groups orbetween UT and the municipalities; and (iii) by March 31, 1989, the Bankand UT would review the economic subprojects' performance to establishthe feasibility of carrying out further funding of subprojectson a loanbasis (para. 3.13);

(d) the satisfactory staffing of UT would be maintained (para. 3.14);

(e) (i) quarterly monitoring reports would be sent to the Bank no later thanthree months after the end of the respective fiscal quarter; and(ii) terms of reference and institutional arrangements for evaluationswould be satisfactory to the Bank (para. 3.21); and

(f) vehicles and microcomputers necessary for project implementation wouldbe procured in a timely manner (para. 3.25);

(g) (i) cost recovery provisions for public irrigation schemes would beimplemented in accordance with Government legislation; and (ii) drinkingwater supply charges covering full operation and maintenance costs wouldbegin to be charged to consumers in 1989 (para. 3.29).

4.04 A condition of loan effectiveness would be that the Bank be providedwith evidence of the creation and satisfactory staffing of: (a) a privateirrigation coordinating unit, within the Secretariat of Agriculture; and(b) a planning unit and a field management unit, within the Secretariat of WaterResources (para. 3.06).

4.05 A condition of disbursement for loan proceeds financing the constructionof each public irrigation scheme, to be implemented in the second and subsequentyears, would be that the Bank has: (a) received proof of acquisition of the landrequired for irrigation schemes; and (b) approved the detailed engineering designsand settlement plans (para. 3.06).

4.06 Any loan proceeds allocated for the construction of public irrigationschemes would be cancelled if not committed: by September 30, 1989 for the firstthree schemes; by September 30, 1990 for the fourth and fifth schemes; and bySeptember 30, 1991 for the sixth such scheme (para. 3.06).

4.07 Subject to the above agreements and conditions, the proposed projectwould be suitable for Bank loan of US$60.0 million equivalent, with a term of 15years, including a three-year grace period*

ANNEX 1- 21- Page I of 9

BRAZIL

NORTHEAST RURAL DEVELOPMENT PROGRAM

NORTHEAST RURAL DEVELOPMENT PROJECT - PARAIBA

Project Descrption

A. Land Tenure and Agricultural Production

1. About 951 of the project area's 107,000 farma are smaller than100 ha, yet they account for only 33% of the total farm area. Furthermore,about 44% of the small farms (less than 100 ha) are worked by farmerswithout legal titles to their land (Table 1.1). About 70% of theseproducers work on rainfed farms that are smaller than 10 ha; they are,however, responsible for two-thirds of the State'3 basic food production.

2. Paraiba has an overall deficit of basic foodcrops and livestockproducts, such as rice, beans, maize, beef and milk, pork and fish. It isa net exporter of sugar, cassava, coconut, pineapple, and sisal; since theboll weevil infestation, it is no longer an exporter of cotton. In 1984,the State's gross agricultural product was distributed as follows:60% for crop production, and 40% for livestock production (mainly frombig-size farms).

B. Project Area

3. For ,ilanning purposes, the State Secretariat of Planning(SEPLAN-PB) has divided Paraiba into nine regions. Out of these nineregions, the State selected six: litoral, agreste, brejo, Cariris daPrincesa, alto sertao, and baixo sertao as high priority areas fordevelopment. These six regions include 114 municipalities out of which 96were selected (Table 1.4). The objective of the selection was toaccelerate development in those municipalities where small farmers andbasic fooderop production predominate, and where there is stillconsiderable underdeveloped agricultural potential and a need for improvedservices. The regions selected have also been partly subject to priorcadastral and land titling operations and would receive priority attentionunder the Northeast Region Land Tenure Improvement Project. Three of thesix priority regions have, until recently, benefitted from ruraldevelopment projects and would become an integral part of the NRDP.

-22 - ANNEX IPage 2 of 9

C. Detailed Features of Project Components

Water Resources Development

4. The state-managed public irrigation activities would include theconstruction of the following schemes: Juru (218 ha); Saco Nova Olinda(800 ha), Pianco (600 ha), Escondido (135 ha), Carneiro (450 ha), andCapoeira (675 ha), totalling 2,878 hectares. In all six schemes, some 957farm families would benefit. In addition, about 6,000 ha of privateirrigation financed under the rural inestment credit component is expectedto benefit 3,500 farm families. The execution of the public irrigationcomponent would be carried out by the Secretariat of Water Resources (SRH)which would be strengthened under the project. At the State level, a plan-ning unit would be created and managed under the responsibility of SRH.Mtoreover, SRH would set up a field management unit in the sertao region.The creation and satisfactory staffing of these three units would be acondition of loan effectiveness (para. 4.04). The planning unit would beresponsible for planning and coordinating irrigation activities, elaborat-ing further feasibility studies, preparing engineering designs and carryingout civil works (usually by contractors), supervising, executing settlementprograms jointly with EMATER-PB, managing the irrigation schemes during thefirst three years, collecting water charges and providing technicalassistance to farmers in hydro-agronomic practices. EMATER-PB would beresponsible for all agronomic technical assistance to farmers in publicirrigated schemes as well as to those undertaking private irrigation. Forprivate irrigation, a special coordinating unit would be created within theSecretariat of Agriculture. The project would also finance the acquisitionby the State of external technical services during the first three years ofproject implementation, to provide SRH with specialized assistance inproject implementation and irrigation scheme management.

5. There would be no construction of public irrigation schemesduring the first year of the project. The construction of the sixirrigation subprojects would follow a phased schedule: three schemes wouldstart in FY89, two in FY90, and one in FY92. Disbursement of loan proceedswould be contingent on proof of land acquisition and Bank approval ofengineering designs and settlement plans (para. 4.05), with staggeredpartial cancellations if funds were not committed (para. 4.06). Costrecovery provisions would be implemented for public irrigation schemes inaccordance with Government legislation.

- 23- ANNEX 1Page 3 Of 9

6. Collective investment costs, including pumping equipment,pipelines, sprinklers, canals and drains range from US$2,150/ha for Juru(river pumping with gravity irrigation) to US$5,250/ha for Escondido (riverpumping with gravity irrigation). On-farm works, averaging aboutUS$560/ha would be financed to the beneficiaries through rural investmentcredit.

7. Under the public irrigation subcomponent, the project would alsofinance identification and preparation of future projects (to be financedunder the subsequent NRDP phase) as follows: reconnaissance and basicstudies for 16,000 km2, feasibility studies for 6,000 ha, and engineeringdesigns for 1,500 ha.

8. The domestic water supply subcomponent would consist of theconstruction and rehabilitation of 110 simple water supply systems withbore-holed wells, benefiting some 8,250 families (41,250 people). Thissubcomponent is only expectd to be financed for the first two years, asthis action would later be funded by the Bank-financed Northeast RuralWater Supply and Sanitation (NRWSS) Project that is currently underpreparation. Each simple water supply system would include a well orsurface source, pumping equipment, a transmission line, a storage tank,laundry facilities, and one or more stindpipes that would serve from 40 to100 families. Water supply systems would be designed for an average flowof 30 liters per capita per day.

9. Planning, supervision, and monitoring of the water supplysubcomponent would be carried out by SRH. Contractors would be responsiblefor the construction of the water supply systems. Selection criteria forcommunities would include village size, per capita investment costs,location (preference would be given to areas where population density ishighest) and community willingness to gradually assume responsibility foroperation and maintenance. During a transition period until the NRWSSbecomes effective, the municipalities and the State would assist thecommunities in meeting operating expenses. SRH would discuss the locationof the wells and standpipes with the recipients and the municipalauthorities before installation of the sytems; it would also providetechnical backstopping and training to the community.

10. The fisheries subcomponent would consist of: (a) improving theexisting fish hatchery at Itaporanga to reach at full development a totalannual production of 5 million fingerlings to be distributed among 2,300farm families; (b) establishing eight pilot fishponds for demonstrationpurposes; and (c) providing technical assistance on fishery operation,benefiting 750 farmers.

-24 - ANNEX IPage 4 of 9

11. SRH, which has initiated fisheries activity, with funds andtechnical assistance provided by the Hungarian bilateral aid, wouldimplement the project's fisheries subcomponent. Fishing in the publicreservoirs by the communities living nearby would be monitored andcontrolled to maintain production levels. Starting in Year 4, sales offingerlings would allow the operation and maintenance costs to be fullyrecovered at full development.

Agricultural Research and Seed Production

12. The state research program has developed during the past tenyears and will continue to develop technical recommendations to improveagricultural productivity. However, there is a recognized need to redirectthis research program towards adoption of low-cost technology (includingpest control programs, for cotton in particular), to adapt farmers'technology to drought conditions. The project would finance: (a) threenatural resources studies to assist in future research planning; (b) about180 applied research trials to be carried out at experiment stations toimprove production technology; (c) establishment and monitoring of about30 observation farms to test and adapt integrated farm production tech-nology; (d) annual production of about 50 tons of basic seeds (rice, maize,beans, sorghum and cotton) for multiplication; (e) annual production anddistribution of about 1,000,000 fruit-tree seedlings; and (f) productionand distribution of animal breeding stock (1,400 goats and 1,100 sheep),benefiting 2,600 farmers.

13. The implementing agency would be the State Agricultural ResearchCompany (EMEPA). Technical supervision, training, coordination withresearch programs in other States and review of annual plans would be theresponsibility of the Federal Center of Agricultural Research for theSemi-Arid Tropics (CPATSA), which is receiving support for these activitiesunder the first Northeast Rural Development Project (Loan 2523-BR). EMEPAwould develop the research, in cooperation with both farmers and extensionofficers, and appraise both technical and economic results from farm-levelobservation units. Cooperating farmers, who have observation units ontheir farms, would contribute to the investments (mostly in the form oflabor). Once the results of these observation units have been proven, theywould be diffused among farmers through demonstration plots under the aegisof EMATER-PB. EMEPA would expand the existing program to produce basicseeds of major crops: rice, beans, maize, sorghum, and cotton. Theproject would finance investment costs for infrastructure, agriculturalequipment and recurrent costs. The basic seed produced would be sold tocooperatives and farmers for multiplication or be used for EHEPA's ownproduction of certified seed under rainfed or irrigated conditions. Thecertified seed would be processed by EMEPA and marketed through the

- 25 -ANNEX 1Page 5 of 9

existing CIDAGRO and/or by cooperative networks (Annex 1, paras. 18 and22). The goats, mostly milk goats, and sheep produced in EIMPA's breedingcenters would be distributed by EKATER-PB to selected producers; thesebeneficiaries would return to EMEPA an equivalent number of animals in thesucceeding years, to be passed on to other candidates.

Rural Extension

14. ENATER-PB is currently providing technical assistance to some31,000 small farmers throughout the State, of which about 7,000 are underthe former Bank-assisted Brejo Project (Loan 1537-BR). Overstaffed with atotal work force of 833, of which 30X is in the State capital, EMATER-PBwill need to improve its planning and supervisory activities as well asintensify the trainuig of its technical staff. Under the proposed project,the extension service would be expanded to reach about 37,800 farm familiesat full development. This represents about 372 of the 100,000 smallfarmers in the project area. The project would finance: (a) theestablishment and maintenance of about 150 demonstration plots annually;(b) salaries and other operating costs for, at full development, 260agricultural and social extension agents (two agricultural agents for everysocial extension agent), 30 subject-matter specialists, and 130administrative staff; (c) annual production of about 500,000 tree-cropseedlings for 1,600 beneficiaries; (d) the implementation of a cotton pestcontrol program for 7,700 farmers; and (e) project-related training forextensionists and farmers.

15. EMATER-PB field staff within the 96 project municipalities wouldbe organized into 6 regional and 86 local offices. Most supervisorypersonnel and subject-matter specialists would be located in regionaloffices or in Joao Pessoa and would travel 50% of the time to superviselocal extension agents. At field level, each extension agent would assiston a fixed schedule six to eight groups of 20-25 farmers organized aroundcontact farmers and demonstration plots. The ratio of agriculturalextension agents to farm families, presently very low, would improvegradually from Year 1 to Year 8 of the project, according to the threefollowing patterns: (a) for rainfed farmers: from 1.:180 to 1:300;(b) for cotton growers who will need to receive intensive support for theimplementation of pest control technology: from 1:100 to 1:250; and(c) for farmers who will benefit from irrigation: from 1:50 to 1:100.Social extension workers, cooperating in teams with agriculturalextensionists, would work with farm families to improve sanitation, childcare, family nutrition, small animal husbandry and vegetable gardening.Specialists from the Federal Company for Technical Assistance and RuralExtension (ERBIATER) would supervise ENATER-PB at least once a month.In-service training for extension staff would include assistance from EMEPAand the Federal Agricultural Research Company (EMBRAPA) through CPATSA.

ANNEX 1- 26 - Page 6 of 9

16. Extension activities would encourage adoption of simple, low-costpractices which would improve crop yields, preserve soil fertility, expandthe cultivated area and increase livestock production. Many practices toreach these objectives are already proven; they include: (a) increased useof animal traction to achieve better land preparation and improve laborproductivity; (b) increased use of improved seeds; (c) contour ploughingand more appropriate crop rotations to improve water and soil conservation;(d) improved weed, pest and disease control; (e) increased use ofdrought-resistant perennial crops; (f) improved animal husbandry;(g) improved pastures and cultivated forage crops; and (h) development ofnew casherops to replace cotton in some subareas.

17. Agricultural extension agents would also be responsible for theimplementation of the social forestry activities aimed at producing some500,000 seedlings annually for farmers to plant fuelwood, timber, fruit andfodder trees. Small nurseries would be installed at the village and farmlevel, and EMATER-PB technical staff would be specifically trained inseedling production, distribution, and wood lot management.

Marketing Services

18. The marketing component is designed to increase the farmers'knowledge of markets and prices, improve storage facilities and the timelyprovision of agricultural inputs (potato seeds and certified seeds), andseek new markets for alternative crops replacing cotton. A Marketing Fund(FINACOM) grouping ongoing Government schemes, such as Minimum Price Scheme(CEP) and the Advance Purchase of Farmers' Surpluses (CAP), would beestablished, but without Bank support.

19. The Marketing Information Service (SIMA) is an ongoing activitycarried out under the control of the Ministry of Agriculture. It providesfarmers with timely advice on local and regional prices, storagefacilities, transport, and selling options. The project would support theinstallation of three local SIMA offices through the financing of staffsalaries, vehicles and office equipment. Data would be collected atmarkets and disseminated by radio and printed bulletins.

20. Storage Facilities. The project would rehabilitate and equipthree existing warehouses (minimarkets) for a total capacity of 1,500tons. The storage facilities would be operated by CIDAGRO. In addition,the project would double the 1,000-ton capacity of the existing coldstorage rooms at Esperanca, which are being used for conservation of potatoseeds; these facilities are operated by the Brazilian Storage Company(CIBRAZEM) which would also be responsible for staff training (costsincluded under the training component). For both types of facilities,

-27- ANNEX 1Page 7 of 9

users would be expected to pay average CIBRAZEM-established tariffs basedon weight, ad valorem and handling charge.

21. Marketing Fund. The Marketing Fund (para. 19) would be entirelyfinanced by the Government and would include:

(a) the advance purchase of farmers' surpluses (CAP) program (aboutUS$2.1 million) under the responsibility of CIDAGRO;

(b) the minimum price scheme (CEP) program (about US$2.3 million) forabout 17,000 producers, or 45% of the project beneficiaries, tobe executed under the responsibility of CIDAGRO; and

(c) working capital for a stock of agricultural inputs (fertilizers,pesticides, etc.) for about US$5.9 million, to be used under theresponsibility of CIDAGRO.

22. Certified Seed Production and Marketing. Certified seeds (2,340tons of seeds plus 6,000 tons of potato seed) would be produced by EMEPA onits research stations as well as by selected farmers. They would then bedistributed to farmers, through CIDAGRO, cooperatives and other farmers'associations, on an exchange basis. In order to support the program, theProject would finance, during the first three years, the production,storage and transport costs.

23. Crop Classification. The project would finance some farm-productgrading equipment for CIDAGRO's buying posts to expand the CEP program.CIDAGRO is assisting farmers in classifying and grading fruits, vegetablesand grain.

24. Market Studies. Many small farmers who used to grow cotton haveabandoned the crop since the boll weevil infestation. New casheropswould be promoted as an alternative source of income for the farmers.Marketing conditions for these crops are little known and would have to beexplored by CIDAGRO. These studies will be performed by the "Fundacao JoaoPinheiro" under the supervision of SUDENE.

Support to Small Rural Communities (SSRC)

25. The objectives of the SSRC component are to help formal andinformal groups of farmers participate in their own development by:(a) providing them with a system whereby they select, plan, implement,manage and monitor local development projects suited to their own needs;(b) safeguarding their own interests through group representation; and(c) enabling them to Improve their economic base through organizing joint

-28- ANNEX IPage 8 of 9

resources for increased production. In order to carry out theseobjectives, the component would include: (a) creation of a community grantfund of US$11.3 million to finance local development projects; (b) purchaseof equipment; and (c) training, salaries and related operatilng costsfor about 18 community development agents and 5 technicians at centrallevel. About 45,000 families in the project area would benefit directly orindirectly as a result of thle local development projects (LDPs).

26. The Community Development (CD) fund would finance threecategories of LDPs: (a) economically based LDPs (representing in total atleast 60% of the fund), such as cottage industries, building of fish ponds,and small animal production schemes; (b) community infrastructural LDPs(representing at least 25% of the fund), such as construction of communallaundry facilities, small irrigation and drainage schemes, and repair ofsmall access roads; and (c) community organization LDPs (representingnot more than 15% of the fund), such as training group leaders and givinglegal assistance for land tenure matters. Guidelines have been establishedto help select LDPs:

(a) LDPs would be submitted in writing to Municipal Councils andwould include objectives, justification, expected benefits,method of implementation, cost sharing (groups wouldparticipate with about 15% of cost), and monitoring andevaluation;

(b) the fund would not finance subprojects funded by otherproJect components or the construction of schools, healthposts, roads, or rural electrification;

(c) the fund would not finance recurrent costs of LDPs; and

(d) the group would be solely responsible for the management andadministration of the LDPs that should attempt to benefitthe community and eventually become self sustaining.

27. UT would be responsible for the implementation of the SSRC. Itwould recruit 18 full-time CD agents who would be university graduates.These agents, each one covering three municipalities, would stimulatecommunity organizations and assist in the formulation of group requests forLDPs. Group requests would then be submitted to Municipal Councils fordiscussion, analysis, evaluation, and approval. Municipal Council memberswould be elected by village, and each village would send two representa-tives to the Council. The relevant CD agent and regional coordinators fromUT would also participate in the analysis and evaluation of grouprequests. UT could reverse the Municipal Council's recommendation if it

ANNEX 1- 29 - Page 9 of 9

does not conform with the stated guidelines, or postpone funding if fundshave been exhausted for the current fiscal year.

28. Disbursements would be made by installments, and progress inimplementation would be supervised by the CD agent. In the case of alegally registered association or group, disbursements would be madedirectly to the group through a bank account. In the case of anunregistered group, the agreement would be signed by the municipality orother designated institution on behalf of the group, and funds would bechanneled through the municipality or the designated institution. Atpresent, all funds would be disbursed on a grant basis; but by March31, 1989, UT and the Bank would review the experience on theeconomicallybased LDPs to study the possibility of carrying out further CDfund operations on a loan basis.

29. Monitoring and evaluation of the LDPs would be extremelyimportant to both the groups themselves and the development of the SSRCcomponent itself. During the preparation of a group request, the CD agentand the group would determine the procedures required for monitoring andevaluation. As a participatory effort, monitoring and evaluation would:(a) increase the awareness and commitment within the community; (b) allowfindings to be fed back immediately to the group; and (c) as an ongoingprocess, give the CD agent a closer understanding of the project and of thecommunity's evolution.

- 30 - A

Tde11

NASFm AL 11EVMM KM

N?M MIW L F VEAW TW PRl D - PARAIBA

Stnx* at 1w.!1W In the !D~ An-- -fanir dvth lessta 11-00 bao) --

Ne of b. of Farns TotalbN. Toa lN. Z ofAgraecolgical | , , of Fams of Laxlleas

Sulb-area | less 10 ha 10-80 ha |80-100 ha less 100 hb Farm Farmers

I Sertoes

- Alto Sertao 5158 6372 1590 13120 14298 29- Bado Sertao 7514 8749 2242 18505 21110 31

Carris da 9577 6723 911 17211 17053 40

I Brejo 9141 820 113 10074 10292 51

M Areste 2406 2231 329 26620 27193 53

'IV LI±oral 14641 2117 227 16985 17312 53

TOTAL 70091 27012 5412 102515 107258 44

Soirce: MM - CAP Northeast Program for Support of nala Farmsrs,Volme 2 - Project Bakgoud Analysis.

- 31- ANEKX 1Table 1.2

lA2IL

NaFEAS! RUAL MV0rM PWCr - PARAIBA

Ruvdid:i of fate hAgrlaateml PmOizcti.

1970 1979

Crop Area Yield Prodcton Area Yield Production(ha) (kg/ha) (toi) (ha) (kg/ha) (tow)

Sesicatton(perennlal) 407,653 11 45,308 467,299 104 49,033Seedcotton(anoial) 73,328 386 29,505 132,656 497 65,962Supo=n1 43,519 42,008 1,828,169 97,490 49,103 4,787,121Beam 136,262 302 41,151 220,472 257 56,661maize 176,783 418 73,895 278,863 402 112,102Cassava 52,511 10,383 545,206 63,255 8,414 532,227Banana 8,368 2,050 17,157 8,288 1,961 16,260Rice (paddy) 19,407 529 10,275 15,543 695 10,735Tcmatoes 97 10,969 1,064 1,347 31,130 41,945Pineq)ple 5,087 13,494 68,642 6,764 18,277 123,627Sisal 55,591 1,399 77,800 104,213 986 122,817Potatoes 2,624 1,578 4,140 769 4,509 3,468

Source: DE - Statistical Yearly BulItim.

NORKDWAS RL4 UKNWY PFG

NOWZ P= XWAL 1EVfLCSB1 PED= - PAEAIM

ftm1.~ Are and lefIdur Uutrflad

mL S1P:E W _A I

C SEAS ND. f lb. of Total Fas r Project As % dties nLmi Area Popqatlon lit Area Population less than BI/itary Total

062) (b 2 ) 100 ba 1b

ABUA I

Sertma 57 16,593 558,800 33 12,021 399,920 31,625 11,800 31Cai da dPrinoesa 10 3,225 116,000 10 3,225 116,000 17,211 5,C0XX 29Sodd 12 _ - _ - _ _

Sub-total 79 43 15,246 53,820 48,836 16,*80

AM II~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

Cad-r do Paratib 14N1dio Paraibs 12Qdrii two 7 __ ___ __ __ ___

Sub-total 33

Drejo 21 3,119 325,550 21 3,119 325,550 10,074 7,500 74Agrte 17 2,623 199,180 17 2,623 199,180 26,620 8,000 30Utoral 20 5,086 383,783 15 4.582 295,090 16.985 5.5CO 33

Sub-total 58 53 10,324 819,820 53,679 21,000

T 0 T A L 170 56,372 2,700,176 96 25,570 1,323,640 102,515 37,800 37

1/ From n 1, Tible 1.1

FIBE, Ceimu MO8

- 33 -

ANNEX 1af-le 1.4

Page 1

BRAZIL

NORTHEAST RURAL DEVELOPMENT PROGRAM

NORTHEAST RURAL DEVELOPMENT PROJECT - PARAIBA

Llat of Mhnicpalities In the Prolect Area

Name ofAgroecologicalSub-area Municipality

Litoral

1. Alhandra2. Caapora3. Conde4. Itapororaca5. Jacarau6. Lucena7. Mataraca8. Mamanguape9. Mari10. Pedra de Fogo11. Pitimbu12. Rio Tinto13. Sape14. Santa Rita15. Joao Pessoa

Agreste

1. Aracagi2. Belem3. Caicara4. Caldas Brandao5. Duas Estradas6. Gurinhem7. Inga8. Itabaiana9. Itatuba10. Juarez Tavora11. Lagoa de Dentro12. Mogeiro13. Mulungu14. Pilar15. Salgado de Sao Felix16. Serra da Raiz17. Serra Redonda

- 34 -

ANNEX 1Table 1.4Page 2

BreJo

1. Areia2. Arara3. Alagos Nova4. Alagoinha5. Alagoa Grande6. Areial7. Bananeiras8. Borborema9. Cuitegi10. Esperanca11. Guarabira12. Lagoa Seca13. Montadas14. Puxinana15. Piloes16. Piloezinho17. Pirpirituba18. Remigio19. Solanea20. Sao Sebastiao da Lagoa de Roca21. Serraria

Cariris da Princesa:

1. Agua Branca2. Desterro3 * Imaculada4. Juru5. Manaira6. Mae D'Agua7. Princesa Isabel8. Sao Jose do Bonfim9. Tavares10. Teixeira

- 35 -

ANNEX 1Table 14Page 3

Sertoes

a) Zona Nortet

1. Antenor Navarro2. Lastro3. Lagoa4. Naaarorlaho5. Paullsta6. Poabal7. Riacho dos Cavalos8. Sao Bento9. Santa Cru

10. Sousa11 Beles do Brejo do Crux12. Brejo do Crus13. Boa Sucesso14. Brejodos Santos15. Catole do Rocha16.. Jertco

b) Zona Zul:

1. BOnlto de Santa Pe2. Boa Ventura3. Conceicao4. Curtal Volho5. Diamanto6. Ibiara7. Monte liorebo8. Podra Branca9. Serra Graude

10. Sao Jose do Calana11. Sautan do Ma'guetra12. Boquetrao dos Cochos13. Itaporana14. Nova Olinda15. Pianco16. Santana dos Garrotes17. Olho d'Agua

s.e.s. ......... ......... .s...... ... s... ......... .................. ........ sSsaS113118s 338Is 111588l 0-93118 ,l 51* 181guru VWti 68'1818 1068 Sau Wnmi Iwm m11m *3336 8380ae*-u SUe *' 6' sw g' sa- t*' i-r sw swami i"1 ^lw

Simi sUs wst i V Wss el I" 0-1 0..119 S*-._.__.__._.......................................... _135 118 138 #1s%t2_* S'O$lO 1181l 8161. .30t 01*"_ meain

8 a-aug *' c-gast a-oe seas g-s ew corns 84861 -U I5136 , sm q : _

Iws smlcelm s. awl *,ml Vowe s-ulsa 9 OU u'I s"1 81811331133011 "Oft.9W

| 'U*'t t-" *ttt sw t-U lStt t l-O'm . 11_ 3-__ .___....... .. .... .w...... _. _ ..... .......... .__.... _. .__. ___...... ._.___.......... ...

Sw - 11 -33 03 $ 11 * 6 @6s 16 V1 181134 s13183

*13h si£a3 OU ewus awe g.grg 18611 owl,46 VAGI; mnisam U tmu

%-l t blgl %- ' £2 lU '" U ,_Lll I_S 1z11

-a- @t ;t 7g uimit 141 I

el1,158 v 151 5868 0)3 11m,8 4118 451411 Oval 11Ko' 368613 IN

_ ___ ._. _ ____...._.. .... .. _ .... ... ......... ........ . .. .. . ......... ........

Saul o swng amg teat 8161o 31411111*1 31 6641 usuu-an SC311113 m

~~~~~~~~~~. ... .... .-....

0161 . -- ac& 611 1118 0118 33~~~~~~~~~~~~~~~~~~~~~~~~~.11 3361111 NM8

11 aVI 66VI 1)1t 381 833 8 1118 S S1 111 s I ussns .......... ........ .. ...... ...... ........ ...... s..:..... ......... .........55555

I I'm Ol4365ga pe 11r VW/l gu/As US/0I66/U S6/16415/1

a's SU * @S S - $3 SI@Vga U *Xg I I" I Um I vu * lu 4-00 * 'O WW W91F 41 GM St2_t l"% t 9 lac -4"U 1161 11$9 * `91 U0 t in sla .1m sot wi "100s1V101111-9 tst -Ut t vt ' o Ut G't V11 m_aX Jo wit1"

____.......... ___ ......... ........ ____ ......... _ ____ ___.__,____.. ..... ....... .. .__. ..... .. . ...... .. .......... _

ol t lo - VA -= t *-t *1SV tG w SI

-Um't alo- - b -t -'I* -30 -' I "lv c *4I11S t 01 SO1

S-ta 11I UU AMs'" -SIM A '"-0 #'Su CM * cla' s 's A'Sl " go11""o 111t. _ ~~~~~~~~~~~... ..... ..... . ...... _ . ... .

YuIvEv4-L" U flNd LUNIlU'IIAU iVII n5YuW.Uz mMcal"V11/111 I611/014 "aGms imwwon "awM-__ _ _ 1VA110fla

~~~I 93ao-v, 30ii0

I_~~~~~~~xo a I D | at | X ! t SOC UZ m 3= vr P s

IIW 0 Goa01 661 _ o9 Lo tt 1 _Lott Olt O0 IDA=

,K rig SIVS 6-1 ' IL til _ -0 6% l' t -9 a

I -0 - --1 Got DtP

at too it1 I1 At <-S0 CO coZt Il MTw4a

WI 0~ 01 UI 1 '91LLC0.C00U9. too ZI %*nol Mm OL

II1- 0*1 6_0 91 t_

90K s PS 101 tolLtG ot 001 LIST 1A= ~ W = .3

9 *1 S-10 G0 too t0 a

Q 0Om Ia t -9 L t _-_ 9*9 5? f e1nl Is

m1

tggi C S W -- 1*0 £-1t 5.5 C'?1' 0-t L'SI

^ Ct t G 11 t-ll 0O £st t0l '3- s

'~~ i ii : Pt~~~90 cl lo OI 6011 me,s golltC 31 IIC L'Lt L*5 h1_ *Jm.

to o- 9-0 oa0 6l 1-0- t

n . zs tt s Z*l t*~~~~~~~~~90 m*s-0 l% '

0.31 0'?! 4aR inUU 1 'Vb 900 Vo sevo~~~~~~~~~~~~mm Om. 10*0 OMt J If -ne te

mama mwjwma warn -m ~ l 0

a *

. ~ ~ ~ ~ ~ ~ ~ v" . .nu ,WN WM

_ X M_ 1 t_ a tlP , &} _ bptsm m

- 38 - ANNEX 1Table 1.7

BRAZIL

NORTHEAST RURAL DEVELOPMENT PROGRAM

NORTHEAST RURAL DEVELOPMENT PROJECT - PARAIBA

Betleated Scbedule of leak DiJhuteut.(US$ million)

Bank Disbursement Cumulative Disbursement BalanceFiscal Quarter duringYear Ending Quarter Amount Z of Total Loan

1987 June 30, 19871988 Sept.30, 1987

Dec. 31, 1987 2.8 2.8 1/ 4 57.2Mar. 31, 1988 1.0 3.8 56.2June 30, 1988 1.0 4.8 8 55.2

1989 Sept.30, 1988 0.9 5.7 54.3Dec. 31, 1988 0.9 6.6 11 53.4Mar. 31, 1989 1.5 8.1 51.9June 30, 1989 1.5 9.6 16 50.4

1990 Sept.30, 1989 1.8 11.4 48.6Dec. 30, 1989 1.8 13.2 22 46.8Mar. 31, 1990 2.4 15.6 44.4June 30, 1990 2.4 18.0 30 42.0

1991 Sept.30, 1990 2.1 20.1 39.9Dec. 30, 1990 2.1 22.2 37 37.8Mar. 31, 1991 2.4 24.6 35.4June 30, 1991 2.4 27.0 45 33.0

1992 Sept.30, 1991 2.4 29.4 30.6Dec. 31, 1981 2.4 31.8 53 28.2Mar. 31, 1992 2.7 34.5 25.5June 30, 1992 2.7 37.2 62 22.8

1993 Sept.30, 1992 2.7 39.9 20.1Dec. 31, 1992 2.7 42.6 71 17.4Mar. 31, 1993 2.1 44.7 15.3June 30, 1993 2.1 46.8 78 13.2

1994 Sept.30, 1993 1.5 48.3 11.7Dec. 31, 1993 1.5 49.8 83 10.2Mar. 31, 1994 1.5 51.3 8.7June 30, 1994 1.5 52.8 88 7.2

1995 Sept.30, 1994 1.5 54.3 5.7Dec. 31, 1994 1.5 55.8 93 4.2Mar. 31, 1995 0.9 56.7 3.3June 30, 1995 0.9 57.6 96 2.4

1996 Sept.30, 1995 0.9 58.5 1.5Dec. 31, 1995 0.9 59.4 99 0.6Mar. 31, 1996 0.6 60.0 100 -

/ Initial Deposit of US$2.8 million into the Special Account.

- 39 -ANNEX 1Table 1.8

BRAZILNORTHEAST RURAL DEVELOPMENT PROGRAM

NORTHEAST RURAL DEVELOPMENT PROJECT - PARAIBA

Allocation of Loan Proceeds

Category Item Amount(US$ million)

I Water Resources Development.(a) Irrigation works 9.0

70% of expenditures.(b) Other subcomponents 3.4

100% of foreign expenditures forconsultant services and70% of other expenditures.

II Agricultural Research. 2.750% of expenditures up to an aggregatedisbursement under this category of US$2.2million; 30% thereafter until the aggregatereaches US$2.5 million; and 10% thereafter.

III Rural Extension. 8.750% of expenditures up to an aggregatedisbursement under this category ofUS$6.6 million; 30% thereafter until theaggregate reaches US$8.1 million; and 10%thereafter.

IV Credit. 17.050% of expenditures.

V Marketing. 1.150% of expenditures.

VI Support to Small Communities. 9.270% of expenditures.

VII Administration. 2.450% of expenditures up to an aggregatedisbursement of US$2.0 million;30% thereafter until the aggregate reachesUS$2.2 million; and 10% thereafter.

VIII Training. 0.550% of expenditures up to an aggregatedisbursement of US$0.3 million; 30% thereafteruntil the aggregate reaches US$0.4 million;and 10% thereafter.

IX Unallocated 6.0

TOTAL 60.0

- 40 -ANNEX ITable T.9

BRAZILNORTHEAST RURALi DEVELOPMENT PROGRAM

NORTHEAST RURAL DEVELOPMENT PROJECT - PARAIBA

(ln US$ m no-n}

Amounts to be Financed byGovernment Government TOTALand IBRD only 1/

A. WATER RESOURCES DEVELOPMENTDomestic Water Supply 2.4 - 2.4Public Irrigation 16.4 0.3 16.7Feasibility Study 1.6 - 1.6Institution Strengthening 1.2 0.1 1.3Fish Culture 0.4 - 0.4

Subtotal (A) 22.0 0.4 22.4

B. AGRICULTURAL RESEARCHGeneration of Technology 2.7 0.2 2.9Diffusion of Technology 1.6 0.3 1.9Basic Seed Production 2.2 - 2.2Livestock Breeding 1.5 0.1 1.6Basic Agricultural Studies 0.8 - 0.8

Subtotal (B) 8.8 0.6 9.4

C. RURAL EXTENSIONRural Extension 27.6 3.0 30.6Social Forestry 0.4 - 0.4

Subtotal (C) 28.0 3.0 31.0

Do MARKETINGMarketing Information 0.3 - 0.3Storage Construction 1.5 - 1.5Classification 0.6 - 0.6Input Supply Network 0.6 5.3 5.9Marketing Fund (FINACOM) - 4.4 4.4

Subtotal (D) 3.0 9.7 12.7

E. RURAL INVESTMENT CREDIT 37.7 37.7

F. SUPPORT TO SMALL RURAL COMMUNITIESCommunity Fund 11.3 - 11.3Fund Administration 3.4 0.7 4.1

Subtotal (F) 14.7 0.7 15.4

G. PROJECT COORD., MONITORING & EVAL.Headquarters 5.6 0.1 5.7Regions 2.2 0.3 2.5

Subtotal (G) 7.8 0.4 8.2

H. TRAINING 1.9 - 1.9

TOTAL 123.9 14.8 138.7

1/ Excluding Incremental Seasonal Credit.

- 41- ANNEX 2

Page 1 of 3

BRAZIL

NORTHEAST RURAL DEVELOPMENT PROGRAM

NORTHEAST RURAL DEVELOPMENT PROJECT - PARAIBA

ProJect Orgoniaatiom nd Xswsgmmt

A. Institutional Aspects

Federal and Regional Levels

1. An Interministerial Commission (IC) for the Northeast RuralDevelopment Program (NRDP), chaired by the Secretary-General of theMinistry of Interior, and comprised of representatives from the Ministriesof Finance, Planning, Land Reform and Agriculture and the Superintendent ofSUDENE, has overall policy and planning responsibility for the NRDP(Chart 1). The Director for the Program of Support to Small Farmers withinSUDENE is the regional coordinator of the NRDP in which the proposedproject participates. The Directorate receives policy backing for its workthrough the Regional Rural Development Council (RDC) linked to SUDENE'sDeliberative Council, which includes all of the Northeast State Governors.The RDC consists of the Superintendent of SUDENE, senior management of theDirectorate, representatives of the involved federal Ministries and banks,the Northeast State Secretaries responsible for program coordination andprogram beneficiary associations and unions.

State and Local Levels

2. A State Rural Development Council (SRDC), chaired by the Governorwith the Secretary of Planning as Executive Secretary, including theSecretaries of Agriculture (SAA) and Water Resources (SRH), andrepresentatives from participating banks, SUDENE regional office andbeneficiary associations would provide overall guidance for ruraldevelopment activities. A State Coordinating Commission (SCC), chaired bythe Secretary of Planning and composed of UT's Executive Secretary andrepresentatives of all executing agencies operating within the project,would ensure proper implementation of SRDC guidelines and integration ofproject activities. The SCC would meet monthly to plan, supervise andevaluate the implementation of the annual work plans to ensure theircompatibility with overall project goals and methodology.

3. UT, an agency with its own budget, salary structure andadministrative personnel procedures, located within the Secretariat ofPlanning (SEPLAN-PB), would be the agency responsible for administering andcoordinating all federally-funded rural programs and for fully integratingthem under the project. Under the project, it would be responsible for:(a) consolidating annual operating plans drafted by executing agencies(Table 2.1); (b) supervising project performance and advising the SRDC on

ANNEX 2- 42 - Page 2 of 3

institutional or technical difficulties; (c) monitoring progress andpreparing reimbursement requests; (d) evaluating ongoing projects; and(e) administering training activities and the community development fund.

4. UT has reorganized its administrative structure to adjust to theneeds of the NRDP (Chart 1). Its headquarters in Joao Pessoa would have upto about 4 subject-matter specialists, 28 technicians, and 27 support stafforganized into an executive secretariat, directly in charge of fourdepartments, namely: Planning and Evaluation, Community Development,Technical Coordination and Administration and Finance. The TechnicalCoordination Department would be responsible for supervising and monitoringproject implementation through the six regional offices. The regionaloffices would gradually increase in number from two in the project Year 1to a maximm of six in Year 4. Regional offices staff would include 25staff (6 managers, 13 technicians, and 6 support staff). Field officeswould typically have three project officers, namely a regional coordinator,two officers covering economic activities (such as extension) and anotherfor social activities.

B. Project Execution

(See Charts 1 and 2.)

C Training

5. All training programs would be emphasized and would be centrallycoordinated and administered by the Training Division within the PlanningDivision of UT to avoid duplication and conflicting strategies among Stateagencies. The five types of training given would be:

(a) Induction Training. The objective would be to give aninitial orientation for staff, farmers and community leadersas to the basic project concepts, components expectationsand the underlying strategy of "participation" in theimplementation of project activities. It would be given byUSA;

(b) Project Component Related Training. The objective would beto provide technical training by component for projectstaff. Responsibility for assessing the needs andundertaking the execution of the training program wouldremain with the implementing agencies, but UT's TrainingDivision would have to give its clearance before releasingproject funds;

(c) Management Training. The objective would be to improve allinvolved agencies' own managerial skills (both at centraland regional level). Though organized by UT, the coursesthemselves would be given by consultants and specializedinstitutions;

- 43 -ANNEX 2Page 3 of 3

(d) Training of Trainers. USA in cooperation with SUDENE wouldtrain trainers, usually with the assistance of consultants;and

(e) Farmers' Training. Farmers would receive training onspecific components, such as credit, marketing and communitydevelopment. In each case, the respective implementingagency would be responsible for the training. -

Detailed training programs have been designed to achieve identified impactsto be used as evaluation indicators. They have been spelled out explicitly(project files).

D. Monitoring and Evaluation

6. Monitoring and evaluation arrangements have been designed tosimplify reporting requirements to provide accurate and timely informationfor project management and to allow annual planning. UT's OperationsDepartment would receive from executing agencies monthly reports on keyphysical and financial indicators. In addition, UT would coordinatemonitoring and evaluation activities and assist regional offices to carryout ongoing evaluation of project activities. State evaluation activitiesunder the proposed project would comprise: (a) a baseline survey;(b) ongoing evaluation and special studies of selected topics; (c) mid-termevaluation; and (d) post-project evaluation.

44 - ANNEX 2Table I.1

BRAZIL

NORTHEAST RURAL DEVELOPMENT PROGRAM

NORTHEAST RURAL DEVELOPMENT PROJECT - PARAIBA

List of Executing and Collaborating hzencies

Main Executing Main CollaboratingProject Activity Agency Agencies

Water Resource Development-Public Irrigation SRH Consultants, private

contractors-Water Supply SRH Private contractors,

municipalities-Feasibility Studies SRH Consultants-Fishery SRH EMATER-PB-Institution Strengthening SRH Consultants-Private Irrigation SAA Credit banks, EMATER-PB

Agricultural Research-Studies, Trials, Observation EMEPA CPATSA, EMBRAPA

Units-Basic Seeds/Seedlings EMEPA EM&TER-PB

Production-Animal Breeding Stock EMEPA EKATER-PB

Rural Extension-AgriculturalTSocial Extension EMATER-PB EMBRATER, EMBRAPA-Cotton Pest Control Program EMATER-PB EMBRATER, EMBRAPA

Rural Investment Credit BB, BNB, EMATER-PBPARAIBAN, BNCE

Marketing Services-Marketing Information and CEASA-PB EMATER-PB

Orientation Services-Storage CIDAGRO CIBRAZEM-Marketing Promotion CIDAGRO EMATER-PB-Products Classification CIDAGRO EMATER-PB-Training CIDAGRO CIBRAZEM-Seeds Production/Distribution EMEPA CIDAGRO, Cooperatives

Support to Small Rural Community-Community Activities Comm* Group UT, EMATER-PB-Technical Assistance, Training UT EMATER-PB

Project Administration andTraining

-Administration, M&E UT CEPA-PB, SUDENE,all project executing

agencies-Training UT most gr_Lect executing

a�r :1 �I !

SIE 'I

Ut -qp

�d. 1__ -- �%i.,

-� 5.4 --�ft U.9, 3 * II� PU'

*1

i�i'-9-I ciI?I U

.1

- 46 - 2

33*211. Cbart 2

NDRUAT EA.DRYUOH5~ PIJtIC - PARIS

Secic tul.t df FT F 1Vee t.ouc IA1c1 Ie

SW . _~~~~~S

Dlr.towte of State Rural

(7) LaL

R1-VAL tLVE_i am. 1.f8 el Sogt.o

I _mu Unit Ralua| | ~(') JOffig

LOCAL liVE.Sac Nova ~Sup"uawao118 Adl4ature. ~~~~~~OM _ _ teils __ts_

(7) (2) (3)

j t ¢ :sm Fied uAguiicultwe§ 135ow - - - - ts _

(7) ~~~~~~~~~~(2)

Ii____ (7) (16) l (2)

50h. ~ Spelao 114 Ap1culo X t~wTOM1w-rkers - - -I usaIourts(7) (21)(1

m *AgricultureTom 1Woun - - - £1 1onets;

I I I (7) I I (6 I I (1)

TOTL 2,878 b4. 142 stdf )0 .t , u.l ul

nin bas- "Wp t Ioj.tnacs taff. '-_ __ ddua Uiw.

-47 - aChart 3Page 1

BRAZIL

NORTST RU$M DKVKLMENT PROGRAM

NORTUMSRURAL DEVEOIXUT ?ROJRCT - PARIBA

Iuleantation Schedule

Projet t tV __.Yew yew Yew Yaw Yew Yew Yew Yew1 2 3 4 5 6 7 8

ME 1motm t3ww sPusi IrSa~ Scm Jwu _ _ _

hA -_ ' = = =

Itst1ns Sttmd -.-

lim1tU S A1otic r _ __Il -,Fish Rito

As*a1ia1 miuDWBic Sa PhaA%

An_d nIq _ __ _,

Soadl Rdb . _ _Cott= pot ox _ , | .il Sag Prto -__

Galin S mz Stock . l .I-

Sod cmf __ -_

Ceztifid %Id proftsu gm ---

Wumctr htuwelc cm -

48 ~~~~~~~ANNEX 2- 48 - Chart 3

Page 2

Project Component _ ,e .t1_ A_ _ Year Year Year Year Year Year Year Year1 2 3 4 5 6 7 8

Supprt to U11 Rural UrCm stiesCou~ity Activitiw _ _ -

Prolect _t U? -& ,hf

Imlut±ion oi Traird g& Tedwdcad

Traifr4t--

Evaluation-- --

Mid-tem AiewCowado R .

Lend: - -- - Preputay activities-.- D e l pXrlad

ANNEX 3- 49- a Pgs - of 2

BRAZIL

NORTHEAST RURAL DEVELOPMENT PROGRAM

NORTHEAST RURAL DEVELOPMENT PROJECT - PARAIBA

Plasncial and Economic Benefits

A. Financial Benefits

1. The estimated increase in crop and livestock production (Table3.1) due to the project was derived from seven illustrative farm models.The farm models (Table 3.2) take into acconmt the present low level ofproduction and the assumption that only simple on-farm investments will bemade by farmers. The financial rates of return range from 15% to 69X;however, the incomes to be derived are not excessively high. The projectedincreases in crop yields are shown in Table 3.3. Agricultural productionwould be increased through a combination of increased productivity andexpansion of the cropped area by about 18Z (mainly resulting from improvedsecurity of land tenure). Increased productivity would result mainly fromincreasing the cropping intensity on irrigated lands, more widespread useof improved seeds and better cultivation practice, including introductionof pest control techniques. The expansion of the cropped area would bepossible due to the increased use of irrigated land and animal traction.Cropping patterns are not expected to change dramatically. In the rainfedareas, perennial crops (fruit trees) would be expanded; also drought-resistant crops such as grain sorghum, groundnut, castor oil, sunflower andsesame would be introduced or expanded. The annual cotton crop, which hadalmost disappeared as the consequence of the boll weevil infestation, wouldbe reintroduced in the areas most favorable to its cultivation and a set ofnew techniques for pest control would be adopted by a limited number ofmore progressive farmers. In areas benefiting from irrigation, farmers areexpected to increase the proportion of more profitable casherops such asbananas, tomatoes and other vegetables, and long-fiber cotton. Expansionof the cattle (mostly dairy cattle) and goat and sheep herds would occurmainly from Improved animal husbandry and better feeding resulting fromincreased use of artificial pastures (such as buffel grass) and legumefodder trees (algaroba); these trees would be planted from seedlingssupplied by project nurseries. At full development (Year 10), the annualincremental marketable production generated by the project is estimated tobe US$24.7 million (in November 1986 farm-gate prices) with 95Z resultingfrom crops and 5% from animal products.

2. The increased production would raise incomes considerably. Moreimportantly, it would give greater food security by reducing the impact ofthe effects of droughts. In the financial analysis of the models,supplementary income from off-farm work has been taken into account. Netannual family farm benefits, which currently range from US$300 toUS$1,000, would increase at full development to US$900 and US$2,800,respectively. The expansion of agricultural activities alone would create

- 50 - ANNEX 3

Page 2 of 2

new on-farm opportunities equivalent to about 9,600 man-years at fulldevelopment. Most of this demand would be for unskilled labor that wouldbe met with family labor. Many small rural community subprojects wouldalso generate demand for local employment, possibly of a semi-skillednature.

B. Economic Analysis and Sensitivity

3. The overall economic rate of return of the project is estimatedto be about 14% with a 20-year analysis (Table 3.4). The cost stream forthe economic analysis is based on five elements: (a) all Paraiba projectcosts, except those related to water supply systems, feasibility studiesfor NRDP second phase irrigation projects, social forestry and communitydevelopment component, or 84% of total project costs; (b) 10% of regionaladministration costs financed under the Northeast Rural Development -Sergipe Project (Loan 2523-BR); (c) 7.4% of regional research costsfinanced under the Northeast Rural Development - Sergipe and Bahia Projects(this percentage is equal to the proportion of Paraiba's rural populationwithin the Northeast's rural population); (d) Paraiba's share (6%) ofcadastral activity costs financed under Loan 2593-BR; and (e) recurrentcosts on a declining basis for Years 9 to 12, and 25% of Year 8 costsduring Years 13 to 20.

4. The evaluation of incremental net benefit included two elements:(a) benefits from 11,500 farmers expected to use investment credit(3,960 irrigated farms and 7,500 rainfed farms) equivalent to 30% of the37,800 farmers in the project area; and (b) an estimate for the incrementalbenefits accruing to the remaining rainfed farmers who would be reached bythe extension service and who would adopt improved farming practiceswithout using institutional credit (6,500 or 25% of the remainingfarmers). No benefits were included from the fish hatchery and socialforestry subcomponents because they are too small to have any substantialweight when compared to on-farm benefits.

5. Economic prices (Table 3.5) at the farm gate were derived fromthe main traded goods including cotton, maize, rice, sorghum, and chemicalfertilizers, taking into account international trading prices, freight,insurance, processing and handling costs, with price trends projectedaccording to those estimated by the Bank's Economic Analysis and ProjectionDepartment at 1986 constant prices. Beans, cassava, bananas and pineappleswere valued at financial farm-gate prices. All other outputs and inputs(including labor) were adjusted by the standard conversion factor (0.83) toaccount for domestic price distortions.

6. Sensitivity tests showed that the rate of return is moderatelysensitive to possible variations in costs and benefits. If projectbenefits fall by 26%, or project costs rise by 35%, the rate of returnwould fall to the estimated 11% opportunity cost of capital. Also, a lagof three years in achieving project results, such as might occur during asevere drought, would result in an 11% rate of return.

-5S1 - ANNEX 3Table 3.1

K_iII .w ilr - PAM

TqtdA u id ut Ntxdnd wl W d Vlgum o t W2

Psb¢ d At T.i Vab.- -1, P 1jp B

A (be ) - (b) xs) (he )

Amal and S iial s2Comm - 27,300 - 37,30 - 10,532 2M'm - 7,710 - 11,149 - 3,439 43R189whs Bwe - 2,155 - 4,047 - 1$8!2 866V*R Be" - 3,358 - 13,952 - lox, 3,456Stfb cb,ii - 2,79 - 3,476 - 717 253catr OIl - - 550 550 55D 550 39S ,qlu - - 4,800 9,00D 4,8)0 9,000 317Rim (pisdy) 1,20 1,4C8 4,700 11,142 3,440 9,734 1,851yams 600 5,688 1,21) 14,*a 600 8,550 1,867PFtabM, 480 480 960 4,800 480 4,32) 1,795

gwmt Pataum 160 1,12) 480 3,696 32) 2,576 73P1xpe (OO ut) 12 1,195 6m0 8,995 480 7,800 1,044loa-fiker Comtto (Irdta) - - 5,460 13,650 5,460 13,65D 6,729Tau - - 96 4752 96 4,752 744Ol= - - 96 1,127 96 1,121 316

BaWis 610 5,673 3,30D 50,89 1 2,660 45,290 255Stfrcx 160 144 32) 374 160 230 1(9Psya - - 240 7,194 240 7,194 203(ow - - 110 550 110 550 155Qata. A;Oe - - 110 704 110 704 110Scslscp - - 110 308 110 308 174cEsm1 t - - 110 440 110 440 465

Lisstock mAamMilk (OOD litams) - - - 13,475 - 13,475 949

$ML 4lS ___ _ __ 24,671

Nlb s In 1= becaw c0 p mp ti quies am aLe in udt (fiut).

1/ km ukr ntd cLtrg (awmrco) camt be dbyft 1 cr<p

WAZIL

NmC rmL Dr P

NWWA MURAL DPVE F - PARAIB

a)Brcterstics of I1lltstrative Fam Models

edin Pitmueia o cxi mye

size ofEstinuted cultivated FNadly Fanm Beneits (US$) Years tb FIR

tDistrmi Area Fanmiz Main Iwo WI Full over 20modelof Farms w) WP Type Livestock Location Cli Project Proje ncre lDeutalDwe yeam %

1 2,200 2.5 5.0 Ralifed - Litoral lbmf. 792 2,587 1,795 5 69

2 3,700 3.1 4.0 RainfedMIk Agreste Semi-ftudd 50D 920 920 3 15

3 3,000 5.0 6.0 Brejoaine lgillo U 1,007 1,86 889 4 49

4 2,100 5.0 6.3 _ _ _ Caris Semi-add 790 2,345 1,555 6 49da Prdam llls

5 3,000 8.2 11.3 EsInEedAULk Sertao Seai-adid 820 1,650 830 4 27

6 1,000 4.0 4.6 1 Rainfed/IUvigated Serta Semi-arid 418 2,294 1,876 3 58(Public)

- -..

7 3,000 4.6 7.5 2 Irgstsel Sertao Semi-aid 307 2,760 2,453 4 3B(Private)

Total 189000 3/

1/ COf vMd 2 ba are lirpted.

2/ All irrtipted.

3/ W vJelnt to 30% cf the befi i reuiEv i:itOiied credit pla 25% of the remSnitg rainfal awmersdob wll adopt irproved tedwoloy usizg otbdr ureas E credit. 1 |

!Al

-53 - ANNEX 3Table 3.3Page 1

BRAZIL

NORTHEAST RURAL DEVELOPMENT PROGRAM

NORTEAST RURAL DEVELOPMENT PROJECT - PARAIBA

gEtimted Ares and Yields o Nor C5 at Farm LevelWHthout Project and atd DeoLost

Agroecological Area (ha) Yields gk/ha) Z Increase/Subarea g o P WO WP Decrease t )

LITORAL-- erT 1 (Rainfed

with D.A.) 1/ 5.0 5.0

CropsMize and Vigna

Beans 0.1 0.3 620/460 713/529 15/15Bananas 0.1 0.5 9,000 11,700 30Pineapple (unit) 0.1 0.5 10,000 15,000 50Yams 0.5 1.0 9,500 11,875 25Cassava 0.3 0.3 8,000 10,000 25Papaya - 0.2 - 30,000 -Coconut (unit) 0.4 0.4 3*000 3,000

Pasture/ForageNative Pasture 1.0 1.0 - -Improved Pasture - 0.2

Forest, Fallow and Others2.5 0.6 - -

AGRESTEModel 2 (Rainfedwith D.A.) 1, 4.0 4.0

CropsAnnual Cotton, Maizeand Ph. Beans 0.4 1.2 2/ 150/300/240 1,000/175/140 565/(42)/(42)Cassava, Maize andPh. Beans 1.3 1.1 7,500/240/240 8,000/260/275 7/8/15Bananas 0.1 0.2 9,000 11,700 30Cassava 0.2 0.2 800 1,000 25

Pasture/ForageNative Pasture 1.0 1.0 - -Improved Pasture 0.1 0.3 - 30,000

Forest, Fallow and Others0.9 - -

- 54 -

ANNEX 3Table 3.Page 2

Agroecological Area (ha) Yields (kg/ha) I Incresse Subarea 8P WO WP Decrease ( )

BRWJOMiel 3 (Xainfedwith D.A.) 1/ 6.0 6.5

CropsAnnual Cotton, Maizeand Ph. Beans 0.3 - 100/300/420 -

Cassava, Maize andPh. Beans 0.6 1.2 7,500/240/300 9,250/290/360 23/21/20

Potatoes 0.3 0.6 6,000 7,500 25Bananas 0.2 0.5 9,000 11,700 30Urucu 0.1 0.2 900 1,170 30Sweet Potatoes 0.1 0.3 7,000 7,700 10

Pasture/ForageNative Pasture 3.1 2.7 -Improved Pasture 0.3 0.3 -Artifical Pasture - 0.3 - -

Forest, Fallowand Others 1.0 0.4 -

CAkIRIS DA PRINCESAModel 4 (Ralnfedwith D.A.) / 6.0 6.3

cropsAnnual Cotton, Maize

and Vigna Beans 2.0 - 100/300/240 -Maize and Ph. Beans 2.0 3.6 620/540 715/620 15/15Custard Apple, Maizeand Vigna Beans - 0.1 - 6,400/160/120 -

Guava and Vigna Bean a - 0.1 - 5,000/300 -Soursop and VignaBeans - 0.1 - 2,800/120

Cashew Nuts - 0.1 - 4,000Cassava and Ph.

Beans - 0.5 - 9, 750/540 -Castor Oil and

Vigna Beans - 0.5 - 1,000/625 -

Pasture/PorageVative Pasture 1.0 1.0 - -

Forest, Fallowand-Others 1.0 0.3 -

- 55 -ANNEX 3Table 3*3Page 3

Agroecological Area (ha) Yields (kg/ha) X Increase/Subarea WO WP WO VP Decrease ( )

SERTAOModel 5 (Rainfedwith D.A.) 1/ 10.0 11.3

CropsPerennial Cotton 2.6 3/ - 20 - -

Perennial Cotton,Maize and VignaBeans 2.3 3/ - 16/400/240 -

Annual Cotton,Maize and VignaBeans 1.2 0.5 420/300/240 1,000/170/140 138/(42)/(42)

Maize and VignaBeans 0. 4.0 560/420 645/485 15/15

Rainfed Rice 0. 2.0 1,600 2,500 56Sorghum and VignaBeans - 3.0 - 1,875/800

Pasture/ForageNative Pasture 1.0 1.2 --

Improved Pasture - 0.6 - -

Forest, Fallow andOthers 1.8 -

PUBLIC IRRIGATIONModel 6 (Irrigation &Rainfed with D.A.) 1,

Crops - 4.0 4.6Perennial Cotton 0.3 31 - 100Perennial Cotton, -

Maize and VignaBeans 1.5 3/ - 80/400/240 -

Annual Cotton, Maizeand Vigna Beans 0.6 0.6 480/300/420 480/300/420 -

Maize and VignaBeans 0.3 0.3 560/420 645/485 15/15

Irrigated Cotton - 1.0 - 2,500 -Irrigated VignaBeans - 0.6 - 1,475 -

Irrigated Maize - 0.6 - 3,000 -Irrigated Tomatoes - 0.1 - 50,000Irrigated Onions - 0.1 - 12,000 -

Pasture/ForageNative Pasture 0.6 0.6 - --Improved Pasture - 0.4 - 309000

- 56 -ANNEX 3Tabe 3T.3Page 4

Agroecological Area (ha) Ylelds (kg/ba) Increase/Subarea VO VP VO VP Decrease ( )

Forest. Fallow andOthers 0.7 0.4 - -

PRIVATE IRRIGATIONModel 7 (Irrigationand Rainfed withD.A.* '; 5.1 7.5

CropsPerennial Cotton 0.7 3/ - 100Perennial Cotton,Maize and VignaBeans 0.9 3 / 80/400/240 -

Annual Cotton,Maize and VignaBeans 0.4 3/ 480/_60/420Maize and Vigna -Beans - 0.5 - 645/485

Rainfed Rice 0.1 0.5 1,600 2,500 56Irrigated Cotton 1.5 - 2,500Irrigation VignaBeans - 1.5 - 1,416

Irrigated Bananas - 0.5 - 20,000

Pasture/PorageNative Pasture 2.5 2.5 -

Forest, Fallow andOthers 0.5 0.5 -

1 D.A.: Draft Animal/ Area infested by the boll weevil, where the technological package recommended includes

the reduction of the shares of maize and vigna beans In the consortium and the use ofimproved cotton variety and fertilizers, combined with thorough pest control.

3/ Area infested by the boll weevil.

~~~~~~~~~~~~~~~~~~(. _._____ ._ gqd _f h.'d 1______)__

I 2 3 4 5 6 7 e 9 1% is 12 13 14 15 U 17 t

KY 1f1 IETm -2"00 5S*. *713210 -24,0 30.1 104.0 1U.O 273".0 3016. 312S0IM.0 29370 2 zM,0 f.o0 V .o 26510.0 2924.0 311S46.0 460IOTa. i'i-r vnma in K T r-20. -sn.7290-66, .o*..o1230 m05. asa.316.0m . 09. 'wo rn.i rsas.o _rz. iag_. 226.5 EFUfA E.ItA 1E1403.0 -20 236.o 3293.0 -20 32Z SU.0100 609 9.0 & - 35.0.0 2 0 USA 2 .0 - I.0

am rB tt30.- 2IM0 V0 .42 4M.0 IMM. WM 0.0 .603011 0016OA5 1261.#0 12".0 lilo 0794,0 121.0 1164.0 109"90 loft5.# M U12.5 476.3 2720.0 2120.0 272,0 2.0 7720.0 27t0.0 2n9.0OK llV iSl 23.0 261".0 320 35.0 4522.0 4.0 4370 .0 36.0 264.0 1.0 It 0 t .0 107. 102.0 12.0 1OWA0 12.0WTh1 492.0 1909. 16093. 1511.0 914.0 793. 4672.0 30. 32. 260. 1743.0 MO 9. 96.0 99.0 99.0 996.0 9.04oMUIIITtIU 9690 9100.0 meo. 11733.0 1097".0 tiw,0 107A0 U4.0 926.0 e.. .0 21. 2 .0 22.0 2W52.0 2052.0 W.O 12o1N 2w70.0i 20 44.0 3J.0 o.0 0.0 124.0 t6.0 134. 15 7.3 41.0 41.0 41.0 41.0 41.0 41.0 41.0EGSE eNREK lt St1"* 36.0 4193.0 - - - - - - - - - - - - - -_1 IE31 1 1M00 2640.0 - - - - - - - - _ - . - _ _ _0IEm 069060 11I 1017.0 9106.0 S2.0 06.0 84210 Oe.0 - - - - - - - - -EUWUL Law t no 44;93.0 443.0 44.0 44.0 44.0 - - - - - - - - -

I tat C COSTS 10267.0 tS 0 1 .0 17036 18365. 9473.0 I. 40. MMS 42 3003AM 17136.0 17136.0 171346.0 807136.0 17136.0 17136.0 17340MAL =JC _M A .5'T M. .S -2800 -2W 0

Iota INJECT zcIlltll IET 55927 -211807,0 200424.0 237040 -19532.0 -Th139. 8w07300n 134540 197616.0 24$J2Y95 269).6,0 2693.S5 28719. 229691.0 259017,0 261312.0 2116.0 294420.0 30701O0.j.ina _ . '...u _1g..a ..... a _ _ a* _ .. _ S ..sn.m. . -.3* .tsi _n _~ .. .s *; t_ .- gig _._

- 58 -ANNEX 3Tablee .5

BRAZIL

NORTHEAST RURAL DEVELOPMENT PROGRAM

NORTHEAST RURAL DEVELOPMENT PROJECT - PARAIBA

Principal Prices Used for Financial and Economic Analyses

(Cruzados in Constant November 19Yb prices)

1 Price

Selected Products Unit Financial Economic

1987/89 1990/94 1995Imported Products

Cotton - long fiber kg 7.00 - - -

- short fiber kg 5.00 4.51 5.97 7.47Maize kg 1.40 2.79 2.79 2.71Rice (paddy) kg 2.70 2.22 2.76 2.80

Non-traded Products

Sorghum kg 0,50 2.18 2.71 2.72

Imported Inputs

Urea (45%N) kg 2.80 3.28 4.63 4.43Triple Super Phosphate

(45% P205) kg 2.50 3.17 3.60 3.94

Potassium Chloride(60% K20) kg 2.60 2.48 2.77 2.94

All Other Inputs/Outputs: Financial Price x 0.83 1/

/ Standard Conversion Factor.

Source: Bank Mission.

- 59ANNE 3Table 3.6

BRAZIL

NORTHEAST RURAL DEVELOPMN PROGRAM

NORTRHAST RURAL DEVELOPMENT PROJECT - PARAIBA

Project Sensitivity Analyis

"A.SENT UW.UU OF KET STRA At ,i PISCWtlT PATE Of 11l

1.?,T LI 102 Up 2o? P 52 M'.4 1Q % NO Mt OM 50Z LAS I M YftR LW:, YE: LOS 3 Y S

CdlO! Y9 .37.9 4146.? t2?6415.5 968043.231.! X$4# .'0#460:1 -271!3S. 9 1S562654 93M9t.,8 -.'!t7.¢

UP '0% 214#452*9 My31 442#330, ;844lt6Ae 44*12 -13#424,6 -W3 240.? 1015440 -182.1 -914r24.3UP 202 130MM.0 244,306,7 M59t245-5 '('061 Y 16.4:'.2 9',09.6 -439t325:9 IM53' 8u267d 1 -175909.3JP M0t -121e88r.0 -7,'1 i 1.19O 4 w1 ; *235.925' *.'4' -1f 9 !;F0, -234#79 3 -:46o522.0 -4284164.2MM 102 382.622.9 496s1t..' 610J!00: 4 1s. I '18t604.1 1r4 .7'54 1897fr571, 2690710.6 167.99 7W345.?MM1 202 466#.Y079 5s 0.4. i64PS85 4 :. '6'O1( P.X * 9. .38s830.3 -102t9960 3M3.795. 6 752#072,8 1.0.4306MM 50$ ?1PP°62.8 !32,'°0 69144.4 t 98.S6:67 605.024.0 4%.f90M3 14929;0 6O 6.050X5 'iO,32?,? 4129685*6LAO I YFAR - - - 268953.1 1472430.3 75.S8l.1LAM 2 YEARS -4 - - - - - W2430O1, ',67.9A8 3 YtEARS -- - - - 228.

INTIAL WAES IMF Ri t1 RFrT 9TNEApsSi,4333331. 3833333

PMTOT LP102 lP t0 1 JP. D MNI0 VWU N2% VWt ' 10:r 4 Y' LAO2YEA"R.LAe 3 YEARS

C.TOT 14,464 155? .0 6,A86 19.'6i 13 ;YI 11.909 67,7 13 y.2 laS.t 10.920UP 102 11366 14 464 l5.473 18.15 12.154 128136 S '1Il 12.2.4' lo.." 10.104UP 202 2t237 1.3:461 11.464 17?044 111191 9.16? 4CM00 1. V7 1019. I0 9.365Up l02 i .S67 1*1,;29 14 1464 9,716 .42M 248 2 t S. IN 9.!4; 7 195

NOWN 102 IS.67 16.81" ;7 Pe21 20 .441 14 4.44 13.108 '.in1 141.52 12.313,! 11.831DMWN "02 1i:0.14 !8.1¶' I 1 2'6 2I.326 1¶ .i932 1i4.464 ?1!5! .!?7 4.2 12.858Wil8 to% 22: 57 23.681 24,478 27.175 21.349 '?:96 9i.464 !0. 406 89,581 17.040!.'3 I YEAR - - - - - - 14.4t4 z!.052 11.891L.'W YEA' - - - - - - - - 14,464 13.052LAO3 IEAS" - - - - - - :44464

SVITCH41N 'J.'II.NS AT 11.

4 AP.AISA 94ITPCHING PERCVItASESTRM VA.UE 3lALIfi 3 3

e ;TOT 1sW39i387.70 840.849,79 -26 20

C.TOT 840,4M.78 1f13?7.S?.?o 35.50%

MeL Prr.,:st oll, d iJ ttZ 298>537.-I;.taeinal P.ee .?tn - 141.%

P Ewi,sltt E .e.,e to As b ffr - 15.4%

U-.

LA

- 60 -ANNEX 4Page 1 of 2

BRAZIL

NORTHEAST RURAL DEVELOPMENT PROGRAM

NORTHEAST RURAL DEVELOPMENT PROJECT - PARAIBA

Documents Available in the Project File

A. Selected Reports and Studies on Northeast of Brazil

- World Bank Report 3988-BR "Rural Development Programs for Brazil'sNortheast: An Interim Assessment." February 7, 1983.

- Kutcher, Gary P. and P.L. Scandizzo. "The Agricultural Economy ofNortheast Brazil". A World Bank Research Publication: The JohnHopkins University Press, Baltimore and London, 1981.

- Peter H. May. "Northeast Brazilian Agriculture - An Overview"January 9, 1986.

- Report 5360-BR - Northeast Region Land Tenure Improvement Project,"May 31, 1985.

- World Bank Reports 5349-BR, 5350-BR, 6118-BR, 6117-BR and6135-BR, "Northeast Rural Development Project" for Rio Grande doNorte, Sergipe (April 1985), Pernambuco (May 1986), Bahia, Piaui andCeara (September 1986).

B* SUDENE

- "Regional Program of Support to the Small Rural Producer," May 1984

Volume I - Program SummaryVolume II - Background

Part I - The Brazilian EconomyPart II - The NortheastPart III - The Rural Sector in Northeast

Volume III - Policy FrameworkVolume IV - The Program

Part I - - Global ConceptionPart II-VIII - Program ComponentsPart IX - Targets and Total Costs

Volume V - AdministrationVolume VI - Socio-Economic JustificationAnnex - Regional Agricultural Programming

- Description of the Programming, Monitoring and EvaluationSub-Systems," September 1984.

- 61 -

ANNEX 4Page 2 of 2

C. State Secretariat of Plantin & Paraiba

- Northeast Program for Support of Small Farmers, October 1984; andsubsequent updated and revised reports:

Volume 1: Project BackgroundVolume 2: Program Framework:

Part 1: The State EconomyPart 2: The Rural SectorPart 3: The Small Rural Producer

Volume 3: The Political FrameworkVolume 4: Part I - Targets and Costs

Part II - Land TenurePart III - Water ResourcesPart IV - Rural ExtensionPart V - ResearchPart VI - Marketing ServicesPart VII - Rural CreditsPart VIII - Small Communities DevelopmentPart IX - Farm Models

Volume 5: Program Administration - Executing AgencesTraining-Coordination

Volume 6: Program Impact

D. World Bank, SUDENE and State Government of-Paraiba:

- "Minutes of Understanding, December 17, 1986".

E. IBRD Supplementary Staff Working Papers

(i) Water Resources Development(ii) COSTAB(iii) FARMOD(iv) Economic Analysis

44'~~~~~~~~~~~~~~~~~0

BRAZIL

NATIONAL LAND ADMINISTRATION PROGRAMNORTHEAST REGION LAND TENURE

oyw*u IMPROVEMENT PROJECT B R AZ I L

PARA YEARLY LAND ADJUDICATION OPERATIONS

SPouth America

3'6

caStelO do PIau~~~~~~~~~~~~~~~JaocOftwo

s-i > at \ -s R18 GRANDE .ooToud -0 - DO NORTE

x~~~~~~~~~

ookk~~~~~~

0801s0s ~~~PIAUI fgzosd At

/-'%on# do o §

8' - I ~~~~~~gJO'v entr~o p-ul

7 't - > ERNAMBUCO

~~Bntn 2.09, J - ~~ do Pot'owY,

/ |1 ° Seto Se ALAGOASN S. 9

0t; 0 5Co-n-s } O Serhor do Boni' fldon DoreO 7* Rbe,m do Po-t> SERGIPE

Bo 8 arto O /of ®' )ARACAJU

12 <'-e e'o ; >^ BAHIA A.!og ho,euB 12-

° °" ' O Sroberoba OF*,,o de Sorotno

0

S Ant dv Jo,o SALVADOR

G OI AS s s d*rio & itM o . :--. o vco. Project Boundary

0J¢ave Land adjudication:

/ ° Oerumodo ^ Q > .ki. Year O

Year I

' >. V S- .)w .............. .J V,Oo.o do Conq-tto 0buo t_ Year 2

N Year 3

. ...nv.. Land adjudication under

f F * D" *) | } * }~0 Nuclei Centers

-16 2®9B]RASI|t Jr 2 °cs2Ltz Rivers 16-

TOe 09$ OnO4'0d b Cabr6i.o Rivers

tsw ITW h&* aa WdO xPcWd by m; Cr

The WOW nna ot arof .. k 2 State Boundaries

*esd.swd .a *.b so f~ V's4m wr uset of rh bV SW*) 7:

m dW ndV 4 t,en,WtaW ton .International Boundaries

UDCo.wn,.t,o The d.nola,nnn MIA/R I'nSod and ft ba-'daoe

OA b-

-on tS .np do o p ON'" n_

> h .te ntsaIrn nc.CodonS* , SW A 0 100 200 300 KiOMETERS KM

ny An n on thV tet *e st ,k ,C; I i

of SWy inntory on any 0

ando,n.rnt°.n on M dow ot j ESPiRIT0 0 100 200 MILES

su sch 00 / t SAN0 C

SD 0)

co-'403

/ ~~~NORTHEAST RURAL DEVEINORTHEAST RURAl DEVELOPNV

/ ~~~~~~~~PROJECT

CEARA / ~~~~~~~~~~~~~~~~~IMPLEMENTATION YEARS

LOYEAR I

/ ~~~~~~~~~~~~~~~YEAR2.,.; sYEAR 3

.. ,,.YEAR 4

6" hl r g/

r.- a Odocrut gw ~~RIO GRW

/'t. on,.E A l _~.Vps

XTnunX, 9 r- r~~~~~~~~~~o t.Nrt NW

} t Sot Jse Aguiar < o °~ ieJdAnre°a S .de Moldto 0

' ' r~~~~~~~~~~~~~~~~~~~~~~~~~~~~Mre o nto- r 0~ g

s GW ht b_ r f ~ ~ ~ guir

rynray~~~~~~~a JOS6 0 gflfl_Gf 7 lAbd)*,* ~ ~ ~ ~ ~ ~ ~ ~ ~ Ma

OllfG bF ,+ **~spihiacif_ G T~~~~~~~~~~~~~~~~~~~~~~~~~~~G~~JS

G~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~Urnt Il G kGt_"Gf~ ~~ ~ ~ ~~~~~~~~~~~~~~~~~~~~~~~~oo

38e 37°~~~~~.~~~~~~~~~~~~~l Voh

IBRD 20376

L

.OPMENT PROGRAMENT PROJECT - PARAiBAkREA

ISOHYETS IN MILLIMETERS

- SELECTED ROADS

o MUNICIPAL CAPITALS

* STATE CAPITAL

O NATIONAL CAPITAL

MUNICIPAL BOUNDARIES

-s *- ~STATE BOUNDARIES

- - -- REGION BOUNDARY

INTERNATIONAL BOUNDARIES

NDE DO NORTE

Aro_ run__ * / A

wad St AG do o l ^0 ~ d o PtmuPRABC

toOntO KOSO ~~~~~~~~~~~~~~~CiEARARIO GRANDE

bGbI * ~~~~~~~~~~~~~~~~~~~~~00 NORTE

50 Oge \,/Sa I t )

Sldd \Pecn h. amno JOAO

P< Ct~ JQ, h ; A PARAiB PESSOA*

,,t' ds s B R A ZI L

115040~~~~~~~~~~~~~8 PEtUIlotego

Quoemo Fagund A

,/ Cabocaimsj) BovLa - do) Pogo'0 BoqwiraAootre 0PInibtw PERNAMBUCO

VENTE A C DGUIANA

Borrode Umb ~~~~~~~~~~~~~ ~~~~~COLOMBIAj Q~Borra de ~~~~~~~~~~~~~~~~~~~'-/GUYANA SURINAME

SaoO 35 (gUU>A

To Coruoru

BRAZIL ~~~~Northeast

PERU ')Region

BOLIVIA BRASILJA@ \

0 25

s.75 3*

KILOMETERS CHIAL

/ARGENTINA2

36' ~~~~~~~~~~~~~~~~~~~~~~~URUGUAYMARCH 1981

33Q~~~~~~~~~~~~~~~~~~~7

B R A Z I L

/ NORTHEAST RURAL DEVELOPMENT:4 NORTHEAST RURAL DEVELOPMENT PROJE

./ AGRICULTURAL POTENTIAL DEFINED BY DEPEI

' .' CLASSIFICATION: DESCRIPTION:CE ARDA / LICEARA L VERY ARID NOT SUITED FOR RAIN-FED AGRICULTURE

/ [. 1ARID LIMITED SUITABILITY FOR RAIN-FED AGRICULTURE

SEMI-ARID PRODUCTION POSSIBLE FOR CROPS REQUIRING/ t A 3 TO 4 MONTHS GROWING SEASON

FT1 m WET DRY PRODUCTION POSSIBLE FOR CROPSF-.1 REQUIRING A GOOD LEVEL OF MOISTURE6° ,/ .. ADEQUACY DlURING 5 OR MORE MONTHS -

iHARGREAVES, 1974)

/7Befm do St*j

**.- r-,> RIO GRAND

) *. 8reIo4\ Coto4doC:d ( N

I~~~~~~~~~~~~~~~~~~~~~~~~m o/,.4> A,aie$

To Jogjonbe o

;~~~~~~~~~~~~~~b - -

0A

- P. / ~ ~~~ ~~~( C ;o-

TO~PENMBC SO5.

Bonito del do COertliono i

lxarp ONov6 MuO

_1w uwd Ts S ** * -

OW S<O

.otW de I

ff4 ~4 4, s4Q4$U

Pedr3

d~~~~~~~~~~~~Ni -Aa

0 18 / 7t-

00mal.*.~~~~~~~~~~~~~~~~~ The

IBRD 2039k. .'6 -o - 3,4 -

T PROGRAMIECT - PARAiBAENDABLE RAINFALL

-o ISOHYETS IN MILLIMETERS

- SELECTED ROADS

o MUNICIPAL CAPITALS

* STATE CAPITAL

* NATIONAL CAPITAL

-_ MUNICIPAL BOUNDARIES

-'-~ STATE BOUNDARIES

REGION BOUNDARY

~- -INTERNATIONAL BOUNDARIES

IE DO NORTE

t | FINova

Plorosta~~~~~~ s-PRUL, t )Nrtes

C:0 75 5 5 10 36°~~ ~~ ~ ~

_____ To Natal

daTrkako

CEARAtRIO GRANDE

DO NORTE

K'~~~~~-~~~~ ~~~~ PESSOA P~~~~~~~~~~jAR AIBA JAOAO0

Pitimbu ~~PERNAMBUCO

NVENEZUE~) / !R 7 UINCOLOMiA ~~~

-/.dGUYANA SURINAME

/~~~~~ I~~~ NortheastPERU\ l.)Region

BOLIVIA BRAS'IiIA@

0 25 50 75 100

KILOMETERS / PARAGUAXN)

)ARGENTINAQ/)

3601 350 LRGA

URUGUAY ~~MARCH 198;