|1. Project Data:
ICR Review Date Posted:
|Recife Urban Upgrading Project
Project Costs(US $M)
Loan/Credit (US $M)
Cofinancing (US $M)
Board Approval Date
|Water supply (30%), Solid waste management (30%), Housing construction (30%), Sub-national government administration (5%), Central government administration (5%)|
|Urban services and housing for the poor (40% - P)
Land administration and management (20% - S)
Environmental policies and institutions (20% - S)
Participation and civic engagement (20% - S)|
||ICR Review Coordinator:
|Dale M. Hill
||Peter Nigel Freeman
|2. Project Objectives and Components:|
a. Objectives:The project development objective (PDO) in the appraisal report (p 2) and the ICR is:"to improve the wealth and well being of the urban poor of the Beberibe River Basin in the Recife Metropolitan Region (RMR) by increasing the institutional capacity of public (state and local) and civic entities to plan for, deliver and maintain basic shelter and urban services for the low-income population in a coordinated and sustainable manner."
The PDO in the legal agreement (p 20) uses more precise legal language, and is thus more monitorable, and clearer on accountability: (differences italicized): “to improve the wealth and well being of the urban poor in the RMR [Recife metropolitan Area] by increasing the institutional capacity of public (at the state and municipal level) civic entities to plan for, deliver and maintain basic shelter and urban services for the RMR’s low-income population in a coordinated and sustainable manner."
IEG chooses the formulation in the legal agreement since it is the legally binding document. After restructuring, the objective was not changed, but the scope of the project and the number of beneficiaries did change, although formal documentation did not reflect changes in number of beneficiaries, (TTL meeting).
Articulation of the objective: IEG notes that the phrasing of the objective explicitly mentions building institutional capacity of the State and municipal Governments, as a means to achieve results (and sustain them). For purposes of efficacy, IEG considers this a sub-objective.
b. Were the project objectives/key associated outcome targets revised during implementation?
c. Components:The project in Portuguese is known as "Prometropole I". A follow-on project under preparation is referred to as "Prometropole II". The ICR notes (p. 3 footnote) that project components in the PAD and legal agreement differ; the ICR thus uses the description in the legal agreement, as does IEG's review. The figures given in parentheses below are: a) original estimated costs at appraisal; b) revised estimated costs after 4th restructuring amendment; c) actual estimated costs at closing; all three include Government (state and municipality) counterpart funding, and are denominated in millions ("m"). Costs at closing are assumed to be "estimated" since some project activities are continuing after loan closing, with additional Government counterpart funding, and WB post-closing supervision missions.
Part A: ($11.8m; 6.5m; 5.4m) Beberibe River Basin Investments: Carrying out of infrastructure and environmental projects for the overall improvement of the built and natural environment of the Beberibe River Basin, consisting of: (a) creation or rehabilitation of parks, including the ecological park along the margins of the Beberibe River, pocket parks within each of the Sanitation Collection Units (UEs – Unidades de Esgotamento Sanitário) and the Matadouro de Peixinhos complex of historic buildings; (b) construction or rehabilitation of roads and accesses, including improvements in the general flow of traffic; (c) improvements in macro drainage to reduce flooding; and
(d) improvements in the transport systems of sewage to be treated by the Peixinhos waste water treatment plant.
Part B: ($5.5m; $8.3m; $5.4m) Water Distribution: (a) Installation of pipes and carrying out of the associated works to improve water supply and distribution within the UEs in the Beberibe River Basin; (b) Acquisition of micro meters for household installation in the UEs; (c) Installation of macro meters and the carrying out of associated works required to isolate the water distribution network within the UEs.
Part C: ($52.1m; $85.2m; $83.7m) Investments in Low-Income Areas: Carrying out of urbanization projects in groups of low-income settlements located in the UEs 03 (R), 04 (R), 08 (R), 17 (R), 19 (R), 20 (R), 21 (R) and 23 (R), which are in Recife, and 07 (O), 12 (O), 13 (O), 15 (O) and 17 (O), which are in Olinda, consisting of water supply and sanitation improvements and household connections, secondary road improvements, micro drainage works, installation of public lighting, creation or rehabilitation of public parks and open spaces, resettlement of population from risk prone areas, and other related investments.
Part D: ($10.5m; $6.9m; $5.3m) Complementary Urbanization Activities: Carrying out of activities complementary to the activities under the preceding parts of the Project, consisting of: (a) engineering design services for the sub-projects; (b) development of social outreach and community participation activities; (c) provision of environmental education to the communities; (d) feasibility studies for a sites and services project; (e) studies for expanding to other areas in the RMR the investments made under the Project; (f) Project monitoring and evaluation activities; (g) a feasibility study for the establishment and operation of a micro credit program for housing improvement and small business development in the Beberibe River Basin (and provision of technical assistance for the operation of such micro credit program)(this component dropped in restructuring); and (h) formulation of the Environmental Management Plan (EMP).
Part E: ($4.1m; $13.0m; $14.6m) Project Management: Provision of technical assistance to Pernambuco State Planning and Research Agency (CONDEPE/FIDEM) and the Municipalities in the management, implementation and coordination of the Project.
d. Comments on Project Cost, Financing, Borrower Contribution, and DatesProject Cost:
The Project’s scope needed to be tightened during implementation, due to both: (a) significant increase in costs (55 percent appreciation of the Brazilian Real against the US Dollar, and 132 percent increase in construction sector costs in Brazil); and b) 37 percent increase in the number of families to be resettled. (See the Safeguard and Fiduciary Compliance Section for more detail) (ICR, p.4). In addition, the Water and Sanitation Company COMPESA raised its standards, making the cost estimates for that component at appraisal too low (ICR, p.7). Broadly, the Project’s components were revised as follows: (See ICR Table on p. 5 and Annex 10 for more detail): Parts of Component A were financed under Part C; Parts of C (benefitting both municipalities of Recife and Olinda) were removed from the WB-financed portion of the project, since Government's newly launched "Growth Acceleration Program (PAC)" which financed housing and infrastructure, allocated some finances to the State of Pernambuco to complete the works; and Part D which was to include micro-development and small business development was removed, in favor of completing engineering designs for the major works.
The PAD states (p. 22) that the municipalities of Recife and Olinda were to contribute $20m in counterpart funding, and "the rest" (IEG calculation works out to $18m) would come from the State of Pernambuco. The Legal Agreements do not mention specific amounts of counterpart financing. Initially, due to the increase in inflation, and the resultant increase in cost estimates, the scope of the project was cut back. Later, the Government(s) increased counterpart funding by $36m, in order to ensure completion of the agreed components. (ICR, p. 7). Obtaining approvals for this financing took some time, however, and some components were not completed at closing. The Government(s) committed to complete the works, and WB post-closing supervision continues on those components.
The ICR is unclear whether the original expected counterpart funds were provided on time ($20m plus 18m). Reference is made in the ICR (p.6) to an implied delay ("another risk that was underestimated was the delay in counterpart funding"), but the time frame is not clear--whether that was a delay in provision of the original counterpart funding, or the later pledge. The ICR reports in a later section (p.7) that "securing ...funding at the federal level" complementary to the additional $36m funded by the state and municipal government "further delayed the Project's progress." It is also not clear if the full committed counterpart funding is reflected in the final project cost estimates reported in the ICR, or if only the part disbursed at project closing is included.
The project was appraised in October 2001, approved in April 2003, and became effective in October 2003. (ICR, p.i)
Restructurings (not subject to Board approval, but sometimes requiring legal amendments) took place at the following dates (ICR, p. viii):
01/23/2004 (Disbursements at this date were $0.9m). (To create a second disbursement category for goods and expand the Project description for Part E, project management);
10/13/2006 (Disbursements at this date were $2.9m). (To create an additional subcategory for works and reallocate loan proceeds among disbursement categories);
03/06/2009 (Disbursements at this date were $29.0m). (To include engineering designs for waste water collection micro basins, incorporate electronic bidding among the procurement methods acceptable to the Bank, reallocate loan proceeds and disbursement percentages among categories, and extend the closing date for a period of 18 months);
06/10/2010 (Disbursements at this date were $39.1m). (To extend the closing date by five months, to reallocate loan proceeds and change the disbursement percentages and to revise the Project's scope).
The original closing date was 3/31, 2009; the Project was extended for a total of 23 months due to "design-related delays, political impediments, unanticipated cost escalations, and a dramatic increase in the number of families to be resettled." (ICR, p.1). The final closing date was 03/02/2011. As noted, work on some components continued past the closing date, with Government financing, and WB supervision support financed from budgeting for preparation of follow-on projects. (TTL meeting)
|3. Relevance of Objectives & Design:|
a. Relevance of Objectives:High.
Problems and Consequences: In 2000, over 12 million persons or 3.2 million households lived in precarious housing within slums ("favelas") in Brazil. As the Project Appraisal Report (PAD) noted (p. 5-9), living conditions in low-income areas in Recife Metropolitical Region in the Northeast (RMR, home to 1.2 million) were recognized as particularly poor, demonstrating a high need for improvements to upgrade housing safety, regularize development patterns, provide urban services and infrastructure and alternatives to illegal connections, and to increase land security. The low income settlements were haphazard, and often located in environmentally sensitive and high risk areas. Poor drainage, lack of sanitary services and uneven solid waste collection caused health risks. The project focused mainly on the Beberibe River Basin, where 66% of the 550,000 residents lived on less than two minimum salaries.
Relevance at Time of Appraisal: Before the project, the Government of the State of Pernambuco (GSP) led a number of initiatives to manage interventions in low-income urban areas, but the programs were small-scale, did not approach interventions in an integrated manner, and had a limited impact. As Recife and Olinda became increasingly urbanized and informal settlements even more common, the municipalities wanted to develop a framework to systemize urban upgrading and land management, and called on the State of Pernambuco to request assistance from the Bank (ICR, p.1).The project was relevant at the time of appraisal, being consistent with the WBG Country Assistance Strategy (CAS), and responsive to the State's call for assistance.
Continued Relevance: Government Priority The need is still there today, and the objective is still relevant. New demand for housing in Brazil is forecast to reach 23 million units by 2023, with about one third of the housing deficit concentrated in Brazil‘s 11 largest metropolitan areas (RMR is the fourth largest). Showing the Federal Government's priority to address these issues, during 2011-2014 it plans to invest $19 billion in PAC Favelas, the world‘s largest slum upgrading program, and almost $45 billion in the Minha Casa Minha Vida (MCMV) program of housing subsidies for low and middle income households. The Government of Brazil (GoB) has also announced the multi-sector "Brasil sem Miséria‖ program (BSM)" which targets the 16.2 million people that live on less than R70 per capita per month (about $1.5 per day). 59% of the extreme poor are located in the Northeast.
Continued relevance: WBG Country Partnership Strategy (CPS): Supporting these programs is consistent with the Bank Group’s Country Partnership strategy for Brazil, which emphasizes creating opportunities for reduction of poverty and inequality by targeting the poor and vulnerable, supporting growth and employment, and improving the provision of public services for low income households (among other themes) (CPS, p.21).
b. Relevance of Design:Modest
Although the objectives did not change after restructuring, the scope, components and number of beneficiaries (and financing) did change, due to inflation, increases in construction costs, increased number of resettlees and increased standards and requirements for the provision of water supply.
Relevance of Original Design relative to objectives:
The original design emphasized integrated urban development and included the following investments in urban upgrading: components for resettlement of population from risk-prone areas, housing improvement, water and sanitation supply, roads, street lighting, rehabilitation of public parks, and improved drainage for flood control. These constitute an appropriate mix of components to improve the well-being of the low income population. The development of public parks was not only to reduce social exclusion, but also to protect environmentally sensitive areas from informal urban encroachment. The sub-objective in respect of institution-building of state and local Governments was not directly linked to the project's investments. Rather, institutional capacity was to be built via hands-on experience. However, the design did not allocate sufficient resources to this activity or sub-objective--only 5% of total costs, (ICR, p. 5-6).
Other reinforcing components, which were important in increasing the flow of benefits from this infrastructure included support for community participation and consultation, provision for studies of a possible micro finance and small business development component, and the installation of water meters for more efficient water use and cost recovery. Indicators related to these components' contributions included a survey of perceptions of quality of life of the beneficiary population, and measures of changes in cost recovery.
While the project further included provision for needed engineering and feasibility studies, an M&E system, and formulation of the environmental action plan, the funds provided for institution-building, an explicit part of the objective, consisted only of project management (component E) and were not sufficient. (<5% of total project costs). The Government found the support for project management helpful, but commented that some structured support on technical issues such as land titling were needed and would have been welcomed. (ICR, p. 5 -6). The ICR stated that the need for technical assistance (TA) support for resettlement had not been anticipated, and was not built into design (p. 18). Arrangements for ensuring appropriate maintenance were not well detailed.
Relevance of Revised Design relative to Objective:
After the cost escalation and other factors forced several restructurings, the geographical scope of the project was cut back (fewer sanitation collection units - EUs), the study for the microfinance and small business development component was dropped, (ICR, p. 4) and the scope of the technical assistance (TA) aiming to support the issuance of land titles was cut back--land titles were to be issued to project beneficiaries, but not all residents of the area. A minor component related to retaining walls was also dropped (TTL meeting). A follow-on project will provide broader TA to the State and municipalities in the important area of land titling. Positive features of the redesign included: (a) retention of the component providing support for community participation and consultation, and social worker services; and (b) increase of the amount allocated to project management. IEG regards the changes in scope and design changes to have been appropriate, given the changes in prices and standards which created the need for restructuring; however, the problem of insufficient provision for institution-building remained.
|4. Achievement of Objectives (Efficacy) :|
First Objective: to improve the wealth and well being of the urban poor in the RMR [Recife metropolitan Area]...." Substantial The following achievements reported (from ICR, p. iv) are achievements relative to original targets (no revised targets are included in the tables); IEG has included information relative to revised targets where the narrative covers this.
Water Supply: One reservoir, 96% of water supply systems and 87% of household connections were completed. Plans are underway for completion. Attempts to measure cost recovery improvements are covered under second objective.
Drainage: 92% of contracted meters were completed. Plans are underway for completion.
Increase in length of thoroughfares w/proper lighting: ICR says “met” but indicators given do not support this; plans underway for completion.
Resettlement: 83% resettled; 289 families still to be resettled. Plans underway for completion.
Integration of community-based groups in slum upgrading processes: all groups targeted after scale-back were integrated into processes.
Roads: 96% roads completed; but key “Road Presidente” not completed and said to be affecting commerce (TTL meeting). Plans underway for completion.
Increase in access to recreational activities: 66% completed. Plans underway for completion.
Titling: number of new properly titles issued: 83% met; the remaining in process.
Direct employment of community members in execution of project works: 100% met (but definition unclear).
Increase in property values: $7,350 increase per property in slum upgrading (exceeds appraisal target of $2,963); $24,278 increase per property in resettlement areas (exceeds target of $3,774). These high values reflect also lower beneficiary coverage after restructuring (5,040 households instead of 35,000; ICR p33, Annex 3) and some effects of growth in demand for housing generally. TTL stated that cited values netted out inflation. (See also section on efficiency).
Improved Quality of Housing (private investment): “ICR says “met”. and statistics reported from a survey in the 6 UEs appear to support this; but lack of explanation on sampling and significance of differences makes this interpretation tentative.
Perceptions of Quality of Life: ICR says “met”; however, sufficient information to justify this judgement is not given, as data are reported for different UEs, with no information on statistical significance. For example, from scanning the data, unambiguous improvement over baseline in all service areas sampled (UEs) are evident only in three sectors of 11: water supply, sewage services and leisure areas. In some service areas, there were declines in perceptions of some services (pavement quality, public transportation, health services.).
While the number of UEs was cut back, and the number of resettlees increased, the objective did not specify the geographical boundaries or the number of beneficiaries targeted, so the changes in components are not considered in the efficacy rating. (The substantial delays are considered in “efficiency”)
Second Objective: "... increasing the institutional capacity of public (at the state and municipal level) civic entities to plan for, deliver and maintain basic shelter and urban services for the RMR’s low-income population in a coordinated and sustainable manner. "
Outputs: The planned assignment of responsibility to the State and municipal Governments for execution of components of the project was met: 47% of spending involved components executed by the state (compared to a “target” of 43%), and 51% involved components executed by the municipalities of Olinda and Recife (compared to “target” of 57%. However, for this indicator to properly reflect “institution building,” assumptions need to be made about the quality of the execution, the experience and learning gained, and the ability to apply this to future similar projects. Given the limitations of such an indicator (and no baseline) and considering there were no other outcome indicators that measured the impact of this experience, the ICR relied on the Borrower's final report and anecdotes supplied by the institutions concerned to assess this outcome. In general, the municipal and state entities believed that through the project they enhanced their ability to deliver and maintain basic shelter and urban services for low income people, particularly in the areas of resettlement. In regard to resettlement the GSP and the municipalities developed a standardized approach (that included community participation and social outreach) which they are currently utilizing in the execution of urban upgrading projects. Olinda Municipality described the approach as a "paradigm shift". Nevertheless, there is an absence of hard evaluative that institutional capacity building has been successful.
The labeling of the indicator for "cost recovery" is incorrect, since what is measured is the "benefit" of increased water supply coverage, and many of the new recipients are exempt from payment.
Outputs Not Delivered: Technical assistance in land titling sufficient to issue land titles for all the residents in the target area;
Outcomes Not Realized: Institution-Building: Not explicitly measured and little evidence presented. Notably, the ICR's rating of implementing agencies is moderately unsatisfactory, and note is made of issues in both fiduciary and safeguard management that emerged during implementation, including issues on municipal accounting revealed in the final audit of the project.
Methodology: A consulting firm, Datamétrica, set out to measure two types of benefits: a) increase in housing values in the project area (capturing effects of housing and infrastructure improvements); and b) improved water service coverage, using a proxy of increased revenues of the water supply company in the project area. For comparisons between estimated benefits and costs, total project costs were used, with an assumption of 1% maintenance. IEG's assessment is based on the ICR coverage. (Consultant report was in Portuguese.)
--Housing: The broad approach is sound:-- a) to use increase in housing prices as a proxy for the benefits of improved housing and infrastructure; b) to estimate the probable increase in housing values using regression analysis with the log of housing prices as dependent variable and various features of the housing and community services (some proxies) as independent variables; and c) to compare the resulting price increase estimates to (i) PAD estimates; (ii) costs, and (iii) housing with no improvements. But data sources and dates, and details of the way the approach was actually applied are not fully presented, and some aspects of the econometric analysis can be questioned. Also, separate estimates of benefits and costs were made for the Beberibe Basin, the “low income areas” and the resettlement areas, but the results of each are not reported fully.
--Three major factors which make results hard to interpret are: a) the decrease since restructuring in the number of beneficiaries, particularly in the “low-income areas” (from 35,000 to 5,040); b) the fact reported in the ICR (p. 32-33) that “macroeconomic conditions in Brazil have improved substantially since the PAD (2003)... with positive repercussions in terms of job creation and distribution..... The corollary of this phenomenon is a steep rise in real estate prices on the Brazilian market, sustained by the growth of employment, income and credit. It is possible, then, that the estimated post-program rise in real estate values also reflects the current upward movement of the national real estate market."; c) the ICR also reported an increase in inflation, and specifically in construction costs during the implementation period.
--Results: Housing Prices/Values: For the Beberibe Basin:(a) the estimated post-project housing benefits exceeded those of the PAD both in total and in per household terms: (e.g. $971 vs. $377 per household); (b) the post-project estimated benefits also exceeded project costs in equivalent terms (e.g. $971 vs. $56 per household); (c) properties with characteristics typical of project-financed improvements exceeded estimated benefits of those without those characteristics by 43%.. In contrast, the figures given for the low income areas indicate higher costs than benefits per household (e.g. costs of $9,225 vs. $7,349 benefits per household. Results for the resettles are also presented, but are hard to interpret. Net present value (NPV) was $30m and $34m for discount rates of 12 and 9% respectively.
--Results: Water Service: The benefits of new water service coverage were calculated based on estimates of increased revenues of the water utility, using data from a census survey (since data from the company was not available, ICR, p. iv.) Use of this proxy assumes that charged water rates bear a reasonable relationship to the value that beneficiaries place on the service. Datamétrica took the average water bill, multiplying by number of residences benefitting from new connections (7,202), considering the payment rate of 87%. That methodology resulted in an estimated annual "economic benefit" from water distribution of $1.7m. The NPV of the water services improvement was $4.8m and $7.5m using a discount rate of 12 and 9 percent per annum, respectively.
--Internal Rates of Return (IRR): Separate estimates were calculated for the two components above by comparing benefits to costs and discounting over 20 years. The estimated IRR for housing was 40 percent, 3 percent higher than the target projected in the PAD. The estimated IRR for the water supply was 21.7%, compared to the PAD estimate of 19% . (Coverage of each of these out of project costs was not provided, nor overall IRR estimate.)
--Factors positively affecting efficiency: Government commented in its completion report that hiring a project management company to provide additional support alongside permanent government staff assigned to the project (including training) was an important factor in the successful progress of the work, as was the ongoing participation of the communities in the discussions. (ICR, p. 41)
--Factors negatively affecting efficiency: (a) In the early years of the project, elections resulted in political misalignments, which was said to slow down project implementation; (b) The unanticipated currency depreciation, inflation, construction cost increases, and increased water supply standards led to the restructurings, with attendant contract renegotiations, causing delays and increasing costs; (c) The reluctance of the Government to enforce the cutoff date for registering eligible resettlees led to increased demand which delayed resettlement (at the time of closing, some of these are still in rental housing subsidized by the Government.); (d) lack of optimal provision for support on resettlement and other technical assistance likely reduced project efficiency. The compounded effect of all these factors, summed on ICR p.1, was that the Project was extended for a total of 23 months, and indeed, work on some components continues past the closing date, through Government financing, and continued WB supervision support. (Note this means that some delays and costs are not factored into the economic analysis).
a. If available, enter the Economic Rate of Return (ERR)/Financial Rate of Return at appraisal and the re-estimated value at evaluation:
* Refers to percent of total project cost for which ERR/FRR was calculated