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Implementation Completion Report (ICR) Review - Recife Metropolitan Transport Decentralization


  
1. Project Data:   
ES Date Posted:
02/24/2005   
PROJ ID:
P038882
Appraisal
Actual
Project Name:
Recife Metropolitan Transport Decentralization
Project Costs(US $M)
 203.8  264.8
Country:
Brazil
Loan/Credit (US $M)
 102.0  100.5
Sector, Major Sect.:
Sub-national government administration, Roads & highways, Railways, General transportation sector,
Law and justice and public administration; Transportation; Transportation; Transportation
Cofinancing (US $M)
 0  0
L/C Number:
L3915      
   
Board Approval (FY)
  95
Partners involved
 
Closing Date
12/31/2001 06/30/2004
         
Prepared by: Reviewed by: Group Manager: Group:  
Kavita Mathur
Peter Nigel Freeman Alain A. Barbu OEDSG

2. Project Objectives and Components:

a. Objectives
There were four objectives:

(a) the development of an integrated urban transport system for the Recife Metropolitan Region (RMR) under the existing regional transportation coordination commission established to coordinate and recommend common policies on pricing, regulation, financing, project evaluation and selection;
(b) the decentralization (transfer of ownership and operational responsibilities) of the Recife Subdivision of the Brazilian Urban Railways Company STU-REC from the federal to the state level;
(c) the reduction of the negative environmental (mainly air quality and noise) impacts on the RMR due to road-based vehicles and the promotion of non-motorized transport modes; and
(d) the development of special strategies and actions to improve the accessibility of the poor to employment centers, health centers and education facilities.

b. Components
The project consisted of three components:
(a) Infrastructure and Equipment component (planned US$ 191.1 million; actual US$ 249.8 million) to help build: (i) the rail extensions/traction conversions and the additional stations required to enhance modal integration; and (ii) the transfer terminals and physical accesses required for the actual integration between buses, rail, pedestrians, automobiles and bicycles;
(b) Environmental and Traffic Safety component (planned US$ 0.35 million; actual US$ 0.0 million) to support: (i) the design of an inspection and maintenance (I/M) program for vehicle emissions and noise; and (ii) the development of a traffic management control and safety program particularly in the area of influence of the rail system; and
(c) Institutional and Policy Development component (planned US$ 12.3 million; actual US$ 15.0 million) to help in: (i) strengthening the Metropolitan Urban Transport Company (EMTU) for the RMR; (ii) preparing an integrated Transport Policy, Land Use, and Air Quality Management strategy for the RMR to meet both transport and air quality targets and to introduce sound cost-recovery, tariff, regulatory and subsidy policies; (iii) provision of an action plan to improve the financial management of the STU-REC; (iv) developing an enabling environment and financial instruments for more substantial participation of the private sector in the investment and operation of the operating agencies; and (v) strengthening air-quality planning and monitoring of vehicle-based emissions.

c. Comments on Project Cost, Financing and Dates
The actual costs were 30% higher than the appraisal estimate because of additional costs for resettlement, increased market value of land, and additional works not envisaged at appraisal. The Federal Government funded the cost overruns completely. The project suffered considerable disbursement delays in the range of 10 to 44 months, mainly due to late effectiveness (the State was trying to obtain a larger project from the Federal Government than the one agreed at appraisal), delays in procurement, and delays in counterpart funding. The project closed on June 30, 2004, two and a half years behind schedule. The project was extended thrice to give the new administration a chance to reformulate the decentralization model and start its implementation.


3. Achievement of Relevant Objectives:

(a) Development of an integrated urban transport system for the Recife Metropolitan Region (RMR): achieved. Recife Metropolitan Transport Consortium (CTRM) was established to coordinate urban transport in the RMR. Modal and tariff integration was partially realized with the implementation of the Integrated Structural System (Sistema Estrutural Integrado - SEI) in 1998. The SEI is designed as a trunk and feeder system that provides physical and tariff integration between modes. At project closing, SEI was serving 33% of the public transport demand. The Metropolitan Council for Urban Transport sets the fare levels and the fare revenues are managed and controlled by EMTU. Bus operators are part of a tariff clearing house managed by EMTU. However, metro is not yet part of the tariff clearing house.
The study to update the Transport, Land Use and Air Quality portion of RMR with the emphasis on route rationalization and modal and tariff integration was still ongoing at project closure.

(b) Decentralization of the Recife Subdivision of the Brazilian Urban Railways Company: achieved. Progress was made towards decentralization of the Brazilian Railways Company. The project assisted in: (a) the negotiation of a new decentralized model with the Federal Government; (b) the preparation of the legal documents for the eventual transfer of the system; and (c) the creation of a joint management team for Recife Subdivision of the Brazilian Urban Railways Company (STU-REC), composed of a representative of CBTU (Federal Government), the State of Pernambuco and the Municipality of Recife to finalize the decentralization process. A study to evaluate options to concession out the urban rail system to the private sector was completed. The decentralization process has advanced after loan closure and most of the operational tasks transferred to local authorities.

(c) Reduction of the negative environmental (mainly air quality and noise) impacts on the RMR and the promotion of non-motorized transport modes: achieved. Reduction of the bus fleet by about 30% and a decrease in bus trips to the city center on the Caxanga Avenue corridor has led to a decrease in pollution levels. However, the designing of an inspection and maintenance (I/M) program for vehicle emissions and noise was not done. The Federal Ministry of Environment is studying a plan to control vehicle maintenance through the inspection of the mechanical conditions and the emission levels of vehicles at the time of their licensing. To promote non-motorized transport, bicycle paths were constructed in the city center.

(d) Improve the accessibility of the poor to employment centers, health centers and education facilities: achieved. 79% of the metro users in 2001 belonged to lower income households. Accessibility for the poor has also improved through road/rail integration terminals.


4. Significant Outcomes/Impacts:

The construction of bridges, road viaducts, pedestrian over/underpasses and the improvement of access to stations has improved the conditions for people walking to stations. Also, improvements in road signs and traffic lights, construction of speed bumps to reduce speed further improved pedestrian safety.
  • Access to social, health and community services was improved by bringing services directly to the metro stations. These include: health week during which free health services were offered, beginner's computer classes, citizens week during which identity cards, work permits, birth certificates and other documents were issued.
  • The joint efforts of the State and the municipalities in the RMR eliminated informal transport providers (illegal vans) that were causing increased congestion and environmental problems.
  • The private sector has shown willingness to make investments in the system, for example, the Recife Airport Authorities have agreed to pay for a link via an overpass walkway to the Boa Viagem station, while other private entrepreneurs are willing to invest in a cable link between the metro system and the biggest shopping center of the city, and in the construction of a station on the South Line to serve a new University already located there. More private sector participation is expected with the revision of the municipal law regarding zoning.

5. Significant Shortcomings (include non-compliance with safeguard features):

There was a lack of leadership in the decentralization process. The Ministry of Transportation (as the original representative of the Federal Government) was never a champion in assuring the States compliance with the decentralization model. The non-compliance of decentralization related clauses led to sending of strong warning signals and suspension of the execution of he project. The transfer of the system was not formalized due to delays in the preparation of the Provincial Measure. With the coming of new Federal Government in January 2003, the original decentralization process which was almost complete was brought to a halt and the responsibility for the project was transferred to the newly created Ministry of Cities. This Ministry took a long time to present its new decentralization model and was slow in implementing it. The new CBTU, also took a long time to work out the details of the new decentralization model and even longer to start implementation. At loan closing, the decentralization process was not fully completed.
  • Furthermore, the project implementation and outcome was negatively affected by inadequate provision of counterpart funds. During project implementation Brazil's economy was affected by the repercussions of the severe economic crisis that hit Argentina in 2001 and by substantial fluctuations of its local currency (from 0.96 BRL for 1US$ at the moment of appraisal to 3.1 BRL for 1US$ at project closure). This decreased the availability of the necessary counterpart funds for the project, and the lack of fiscal space led the Treasury to prioritize projects, relegating investment on infrastructure to a very low priority and causing considerable delays.
  • The project also suffered considerable disbursement delays in the range of 10 to 44 months, mainly due to late effectiveness and delays in procurement.
  • At project closing, about 69% of the South Line was completed. Some of the intermediate stations were completed, while other stations at the beginning of the line are still under construction, which makes operation on a partial network impossible.
  • There were substantial delays in the delivery of rehabilitated trains.While trains were expected to be ready by December 2002, they are now expected by December 2007. Delays in trains can have devastating and sometimes irreversible impacts on demand diversion to other modes.
  • 6. Ratings:ICROED ReviewReason for Disagreement/Comments
    Outcome:
    SatisfactorySatisfactory
    Institutional Dev.:
    SubstantialSubstantial
    Sustainability:
    LikelyLikely
    Bank Performance:
    SatisfactorySatisfactorySatisfactory on balance. However, the project suffered considerable disbursement delays in the range of 10 to 44 months, mainly due to late effectiveness and delays in procurement. Also, the Bank underestimated the complexity of the decentralization process in Recife.
    Borrower Perf.:
    SatisfactorySatisfactoryBut only marginally so for the following reasons: (a) there was a lack of leadership in the decentralization process;
    (b) the new CBTU took a long time to work out the details of the new decentralization model and even longer to start implementation;
    (c) project implementation and outcome were negatively affected by inadequate provision of counterpart funds;
    (d) the late signing of the loan and delays leading to invasion of squatters increased project costs.
    Quality of ICR:
    Satisfactory

    7. Lessons of Broad Applicablity:

    Decentralization of an urban rail system from Federal to State or lower level of government can be an extremely lengthy, complicated and highly politicized process. For the process to be completed within the lifetime of the project, decentralization should be a condition of effectiveness for a rehabilitation and modernization loan, with the respective rights and obligation of the transferring and receiving parties laid out in a binding way in advance.
    1. Effective measures need to be undertaken to prevent additional resettlements that may occur once the project becomes known. Also, it is critical to follow-up on families that accepted cash contributions (during the resettlement process) to determine whether they were able to restore their previous income level and quality of life.
    2. The time indicated by contractors for train rehabilitation is generally optimistic and should be carefully evaluated since long delays can have devastating and sometimes irreversible impacts on demand diversion to other modes.
    3. The scheduling of civil works for construction of stations need to be carefully evaluated. One way to do is to bid the stations in a progressive way in order to make operation on a partial network possible.

    8. Audit Recommended?  Yes

              Why?  Brazil's experience in addressing decentralization issues in the urban rail system is relevant to other developing countries which are planning urban transport reforms. Field assessment of this project along with the recently completed Brazil Belo Horizonte Metropolitan Transport Decentralization Project can provide valuable lessons.

    9. Comments on Quality of ICR:

    The quality of the ICR is satisfactory. The ICR provided a detailed and comprehensive analysis of implementation issues, and highlights important lessons which have broad applicability. Perhaps, the ICR could have assessed political complexity more carefully. It is somewhat lenient in its rating of the Borrower Performance. Also, the ICR could have discussed some ways to prevent invasion by squatters.

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