Document of The World Bank · Modeling revised Modeling revised Date achieved 11/26/2001 11/26/2005 09/26/2010 Comments (incl. % achievement) Achieved Indicator 5 : Establishment

Document of The World Bank

Report No: ICR00001726

IMPLEMENTATION COMPLETION AND RESULTS REPORT (IBRD-70830)

ON A

LOAN

IN THE AMOUNT OF EURO98.6 MILLION (US$ 85 MILLION EQUIVALENT)

TO THE

FEDERATIVE REPUBLIC OF BRAZIL

FOR A

FORTALEZA METROPOLITAN TRANSPORT PROJECT

March 30, 2011

Sustainable Development Department Brazil Country Management Unit Latin America and Caribbean Region

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CURRENCY EQUIVALENTS

(Exchange Rate Effective March 11, 2011)

Currency Unit = Real (R$) R$ 1.00 = US$ 0.60 US$ 1.00 = R$1.66

FISCAL YEAR

[January 1 – December 31]

ABBREVIATIONS AND ACRONYMS

ARCE State of Ceara Regulatory Agency CBTU Brazilian Urban Train Company DO Development Objectives EMU Electric Multiple Units ETTUSA Empresa de Transito e Transporte Urbano S.A. EAS Environmental Assessment Study FM Municipality of Fortaleza FMR Fortaleza Metropolitan Region GoB Brazilian Federal Government IERR Internal Economic Rate of Return JBIC Japan Bank for International Cooperation Metrofor Ceara Metropolitan Transport Company NCB National Competitive Bidding NPV Net Present Value O&M Operations and Maintenance PAR Performance Audit Report PCR Project Completion Report PCU Project Coordination Unit PIU Project Implementation Unit PSP Private Sector Participation PIPP Public Investment Pilot Program RTCC Regional Transport Coordination Commission SC State Government of Ceara SEINFRA Secretariat of Infrastructure of Ceara SEMACE Cearl State Environmental Agency STU/FOR Fortaleza subdivision of the Brazilian Urban Train Company

Vice President: Pamela Cox

Country Director: Makhtar Diop

Sector Manager: Aurelio Menendez

Project Team Leader: Jorge Rebelo

ICR Team Leader: Aurelio Menendez

BRAZIL FORTALEZA METROPOLITAN TRANSPORT PROJECT

CONTENTS

Data Sheet A. Basic Information B. Key Dates C. Ratings Summary D. Sector and Theme Codes E. Bank Staff F. Results Framework Analysis G. Ratings of Project Performance in ISRs H. Restructuring I. Disbursement Graph

1. Project Context, Development Objectives and Design ............................................... 12. Key Factors Affecting Implementation and Outcomes .............................................. 53. Assessment of Outcomes .......................................................................................... 104. Assessment of Risk to Development Outcome ......................................................... 145. Assessment of Bank and Borrower Performance ..................................................... 156. Lessons Learned ....................................................................................................... 197. Comments on Issues Raised by Borrower/Implementing Agencies/Partners .......... 19Annex 1. Project Costs and Financing .......................................................................... 21Annex 2. Outputs by Component ................................................................................. 22Annex 3. Economic and Financial Analysis ................................................................. 23Annex 4. Bank Lending and Implementation Support/Supervision Processes ............ 25Annex 5. Beneficiary Survey Results ........................................................................... 26Annex 6. Stakeholder Workshop Report and Results ................................................... 26Annex 7. Summary of Borrower's ICR and/or Comments on Draft ICR ..................... 27Annex 8. Comments of Cofinanciers and Other Partners/Stakeholders ....................... 34Annex 9. List of Supporting Documents ...................................................................... 34

MAP

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A. Basic Information

Country: Brazil Project Name:

FORTALEZA METROPOLITAN TRANSPORT PROJECT

Project ID: P060221 L/C/TF Number(s): IBRD-70830

ICR Date: 03/30/2011 ICR Type: Core ICR

Lending Instrument: SIL Borrower: FEDERATIVE REPUBLIC OF BRAZIL

Original Total Commitment:

USD 85.00M Disbursed Amount: USD 34.81M

Revised Amount: USD 22.40M

Environmental Category: B

Implementing Agencies: CBTU Metrofor

Cofinanciers and Other External Partners: B. Key Dates

Process Date Process Original Date Revised / Actual

Date(s)

Concept Review: 05/19/1999 Effectiveness: 09/09/2002 09/09/2002

Appraisal: 05/25/2000 Restructuring(s): 03/22/2006

Approval: 12/04/2001 Mid-term Review: 02/27/2006 02/17/2006

Closing: 03/31/2006 09/30/2010 C. Ratings Summary C.1 Performance Rating by ICR

Outcomes: Moderately Satisfactory

Risk to Development Outcome: High

Bank Performance: Moderately Satisfactory

Borrower Performance: Moderately Satisfactory

C.2 Detailed Ratings of Bank and Borrower Performance (by ICR) Bank Ratings Borrower Ratings

Quality at Entry: Satisfactory Government: Moderately Unsatisfactory

Quality of Supervision: Moderately SatisfactoryImplementing Agency/Agencies:

Moderately Satisfactory

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Overall Bank Performance:

Moderately SatisfactoryOverall Borrower Performance:


C.3 Quality at Entry and Implementation Performance Indicators

Implementation Performance

Indicators QAG Assessments

(if any) Rating

Potential Problem Project at any time (Yes/No):

Yes Quality at Entry (QEA):

None

Problem Project at any time (Yes/No):

Yes Quality of Supervision (QSA):

None

DO rating before Closing/Inactive status:


D. Sector and Theme Codes

Original Actual

Sector Code (as % of total Bank financing)

General transportation sector 100 100

Theme Code (as % of total Bank financing)

Decentralization 50 50

Infrastructure services for private sector development 50 50 E. Bank Staff

Positions At ICR At Approval

Vice President: Pamela Cox David de Ferranti

Country Director: Makhtar Diop Vinod Thomas

Sector Manager: Aurelio Menendez Danny M. Leipziger

Project Team Leader: Aurelio Menendez Jorge M. Rebelo

ICR Team Leader: Aurelio Menendez

ICR Primary Author: Jose Ricardo Marar

Shomik Raj Mehndiratta F. Results Framework Analysis

Project Development Objectives (from Project Appraisal Document) (a) improve the quality of public urban transport in the FMR by enhancing the de velopment of a fully integrated urban transport system under the coordination of a Regional Transport Coordination Commission (RTCC) and rehabilitate the Metro for West Line; (b) to transfer the STU/FOR system from the Federal to the State

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government; and (c) increase the private sector participation in the operatio n and management of the Metrofor system (West and South lines) generated text Revised Project Development Objectives (as approved by original approving authority) (a) PDO Indicator(s)

Indicator Baseline Value

Original Target Values (from

approval documents)

Formally Revised Target Values

Actual Value Achieved at

Completion or Target Years

Indicator 1 : Percentage of rail stations physically and tariff integrated with the bus lines (integration related objective)

Value quantitative or Qualitative)

0% 50% 50%

Date achieved 11/26/2001 11/26/2005 09/20/2010 Comments (incl. % achievement)

Physical integration complete. Tariff integration ongoing and expected to be completed by end 2011

Indicator 2 : Rail share of urban transport motorized trips (%) (congestion related objective) Value quantitative or Qualitative)

2% 10% 2%


Likely to reach 5% in 20 months after operations. Operations scheduled to start in 2011

Indicator 3 : Generalized cost of travel (travel time plus fare plus reliability) in minutes between Caucaia and João Felipe (accessibility of low-income users related objective)

Value quantitative or Qualitative)

93 65 70


Partially achieved

Indicator 4 : Decentralization of STU-FOR to State Value quantitative or Qualitative)

Not decentralized Completed Completed


Systems transferred to the State and Decentralization completed

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(b) Intermediate Outcome Indicator(s)

Indicator Baseline Value

Original Target Values (from

approval documents)

Formally Revised

Target Values

Actual Value Achieved at

Completion or Target Years

Indicator 1 : % of the Permanent Way Works completed Value (quantitative or Qualitative)

0% 100% 100%


Achieved

Indicator 2 : % of other Civil Works completed Value (quantitative or Qualitative)

0 100% 100%


Achieved

Indicator 3 : % of Rolling Stock and System works completed Value (quantitative or Qualitative)

0% 100% 70%


Substantially achieved. Remaining two trainsets are under construction

Indicator 4 : Private Sector Participation Value (quantitative or Qualitative)

No Private Sector Participation

Modeling revised Modeling revised


Achieved

Indicator 5 : Establishment and strengthening of formal RTCC Value (quantitative or Qualitative)

Start periodic meetings No target values reported

Regular monthly meetings


Achieved

Indicator 6 : Integrated Urban Transport, Land Use and Air Quality Strategy

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Value (quantitative or Qualitative)

Draft report completed

Final report discussed in a participatory manner

Final report discussed in a participatory manner


Achieved

G. Ratings of Project Performance in ISRs

No. Date ISR Archived

DO IP Actual

Disbursements (USD millions)

1 05/09/2002 Satisfactory Satisfactory 0.00 2 05/09/2002 Satisfactory Satisfactory 0.00 3 08/13/2002 Satisfactory Satisfactory 0.00 4 09/18/2002 Satisfactory Satisfactory 0.00 5 11/19/2002 Satisfactory Satisfactory 0.98 6 04/04/2003 Satisfactory Satisfactory 0.98 7 07/29/2003 Satisfactory Satisfactory 0.98 8 11/24/2003 Satisfactory Satisfactory 0.98 9 12/02/2003 Satisfactory Satisfactory 0.98

10 05/04/2004 Satisfactory Satisfactory 0.98 11 05/26/2004 Satisfactory Unsatisfactory 0.98 12 11/30/2004 Satisfactory Unsatisfactory 0.98 13 04/07/2005 Unsatisfactory Unsatisfactory 0.98 14 12/12/2005 Moderately Satisfactory Unsatisfactory 0.98 15 04/15/2006 Satisfactory Moderately Satisfactory 0.98

16 12/04/2006 Moderately SatisfactoryModerately

Unsatisfactory 0.98


Unsatisfactory 0.98


Unsatisfactory 0.98

19 11/21/2007 Moderately Satisfactory Moderately Satisfactory 1.17 20 01/22/2008 Moderately Satisfactory Moderately Satisfactory 1.81 21 09/19/2008 Moderately Satisfactory Moderately Satisfactory 5.30 22 04/09/2009 Moderately Satisfactory Moderately Satisfactory 11.66 23 11/10/2009 Moderately Satisfactory Moderately Satisfactory 15.79 24 04/09/2010 Moderately Satisfactory Moderately Satisfactory 19.63 25 10/20/2010 Moderately Satisfactory Moderately Satisfactory 32.89

H. Restructuring (if any)

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Restructuring Date(s)

Board Approved

PDO Change

ISR Ratings at Restructuring

Amount Disbursed at

Restructuring in USD millions

Reason for Restructuring & Key Changes Made

DO IP

03/22/2006 N MS U 0.98

Due to macroeconomic conditions and pressures no fiscal space had been provided for the project after Board approval. Consequently implementation had not commenced and there was no disbursement (apart from the front-end fee). After extended discussions, the project was restructured within a sharply reduced budget envelope (total costs were reduced from about US$200m to US$30m). No changes were made in the PDOs, but the components were changed. A reduced set of investments that supported the PDOs were agreed upon. Bank disbursement percentage was increased to 100 percent.

I. Disbursement Profile

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1. Project Context, Development Objectives and Design 1.1 Context at appraisal

1. This project was appraised in mid 2001, months before the September 11, 2001

terrorist attack in the US and 2001-2002 Argentine economic and fiscal crisis, which together had significant unforeseen implications for the project. From 1988 to 1998, GDP growth averaged 2.4 percent in Brazil. The economy had been under stress but in mid-2001 seemed to be on the road to recovery. In the aftermath of the Asian financial crisis of 1997 and the Russian financial crisis of 1998, Brazil lost an estimated $50 billion in foreign reserves due to capital flight. On 13 January 1999 the Brazilian Central Bank devalued the real by 8 percent; on 15 January 1999, the Cardoso government announced that the real would no longer be pegged to the US dollar, ending the so-called ‘Real Plan’. Immediately, the real lost more than 30 percent of its value, and subsequent devaluation made the real lose a total of 45 percent of its value. Despite the devaluation; however, the economy showed positive, if weak, growth in both 1998 (0.2 percent) and 1999 (0.8 percent), and inflation remained under control, at 3.2 percent in 1998 and 4.9 percent in 1999. Brazil's debt service ratio which had soared to an untenable 113.1 percent of export earnings in 1999, had also reduced to 90.8 percent by 2000 and to 78.5 percent by 2001, helped by a weakening real that made exports more competitive. GDP grew 4.5 percent in 2000, led by exports, while inflation picked up to 7 percent.

2. Three other features of the national economic environment at that time are worth

noting. First, many states (including the State of Ceara where the project was located) were operating with significant fiscal deficits that limited their fiscal space. Second, the country was in the midst of decentralization of authority and responsibility from federal to state and local levels in specific sectors including urban transport. Third, urban poverty was a significant concern, with limited access to public services by the poor being particularly critical.

3. The Bank Country Assistance Strategy (CAS) discussed by the World Bank Board in

March 2000 with an overall focus on poverty reduction responded to this environment with five ‘pillars’ relevant to this project: (i) targeted interventions to reduce poverty, among others through the provision of urban services to the poor; (ii) sustainable fiscal adjustment, among others through reform of public enterprises; (iii) renewed growth, among others through private sector participation in infrastructure management; (iv) improved government effectiveness and; (v) effective government management.

4. The project was framed in the context of a larger program of investments, policy

dialogue and sectoral reform in the urban transport sector. Since 1992 the Bank had

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been working with the government on a program that had: (i) supported the decentralization of ownership and management and responsibility of urban transport systems from the federal to regional authorities; (ii) supported the development of regional authorities as a means to increase integration across fragmented local governments in metropolitan areas; and (iii) supported private sector involvement in infrastructure provision, as a source both for efficiencies and private finance.

5. The project was located in the Fortaleza Metropolitan Region (FMR); Brazil’s 8th

largest metropolitan region with a population of 2.6 million inhabitants spread across 13 individual municipalities1. At the time, buses carried 60 percent of motorized trips. Suburban rail carried about 2.5 percent. Cars (23 percent), and bicycles and motorcycles (11.5 percent) accounted for most of the others. Buses were privately operated and there was no fare or operational integration between bus systems or between bus and rail systems. Access was a particular problem for the poor, concentrated in the metropolitan periphery, such as in the regions of Caucaia (in the west) and Maracanau (in the south). Journeys were long (1.5 to 2 hours a day for a round trip), expensive (costing up to a fourth of incomes), and often involving multiple transfers on overcrowded buses.

6. The State of Ceara (SC) and the Fortaleza Municipality (FM) had looked at this

project as a means to improve metropolitan transport and transform the western corridor connecting the Fortaleza city center to Caucaia by: (i) increasing coordination between the local and state governments responsible for the provision of urban and suburban transport; (ii) transformation of a limited passenger service on the Metrofor west line connecting the center to Caucaia (STU/FOR corridor) into a modern high quality operation fully integrated with buses and other modes; and (iii) the introduction of private sector participation in urban transport systems.

7. The project was designed to complement works on a Southern rail corridor

connecting the city center to Maracanau. This 24 km corridor extends south from central Fortaleza (Joao Felipe) to Pacatuba (Vila das Flores). The project included double-tracking, electrification, construction of 18 stations including 4 underground stations and about 3.9 km of underground construction. Ten (10) electric trains of four (4) coaches each were to be acquired and 16km of parallel freight tracks were also to be constructed. The total project cost was estimated to be US$ 326 million and JBIC financing of US$268 million was approved in April 1997 to partially finance the project.

1.2 Original Project Development Objectives (PDO) and key indicators

8. The original PDO’s (as approved in the PAD in November 2001) were:

1 Fortaleza, Aquiraz, Caucaia, Eusebio, Maracanau, Maranguape, Itaitinga, Guaiba, Pacatuba, Pacajus, Chorozinho, Sao Goncalo do Amarante and Horizonte. FM had 1.8 million inhabitants and Caucaia and Maracanaui were the other two important municipalities of the FMR.

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a. To improve the quality of public urban transport in the FMR by enhancing the development of a fully integrated urban transport system under the coordination of a RTCC and rehabilitate the Metrofor West Line. These objectives would be achieved by: (i) modal integration – to be measured by estimating the percentage of stations where bus/rail integration is provided; (ii) congestion related - by measuring the increase in the rail share in urban transport motorized trips; and (iii) accessibility of low-income user - by measuring the generalized cost of travel (travel time plus fare plus reliability).

b. To transfer the STU/FOR system from the federal to the provincial (state) government, measured by: decentralizing the system from the federal agency CBTU to the State government.

c. To increase the private sector participation in the operation and management of the Metrofor system (West and South lines). This objective would be achieved by competitively concessioning operations and management of the Metrofor system to a private operator (both the West and South lines).

9. The project had six output indicators that measured component progress. Key performance indicators are shown in detail in section F of the Data Sheet.

1.3 Revised PDO, key indicators and reasons/justification 10. While there was no change in the project, PDOs, the project was formally

restructured in 2006 after several delays resulting from deterioration in Brazil’s economic and fiscal climate following the 2001-2002 Argentine debt crisis (see paragraph 24). The new federal government that had taken office in January 2003 concluded that it did not have the budgetary resources to support the project in light of the then current fiscal conditions (see Section 1.6). As a result of this restructuring, the size of the project was significantly reduced through a reduction in the scope of activities and adoption of an alternative low-cost technology to achieve many of the desired improvements (see Sections 1.6, 1.7 and 2). The original PDO, however, was maintained as its formulation remained relevant even under the scaled down project.

1.4 Main beneficiaries 11. The PAD explicitly identifies the residents of the FMR as beneficiaries, particularly

low-income households (defined as those earning up to four times the minimum salary). Such low-income residents of Caucaia commuting to the Fortaleza city center would have been key beneficiaries, benefiting from significantly lower travel times and improved service resulting from integrated bus rail fares and facilities on the Metrofor west line. To the extent the increased rail capacity would have led to a reduction in the number of buses operating on the corridor, residents in the entire corridor would have benefited from reductions in air and noise pollution. The users of private autos in the corridor would likely have also seen some temporary benefits from decreased congestion for the same reasons.

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1.5 Original components 12. The original components of the project (as taken from the Loan Agreement, dated

August 2002) comprised: a. An Infrastructure and Equipment Investment Component (total $173.2m, WB

$82m) that supported (i) rehabilitation and modernization of the West Line, including improvements to stations, intermodal transfer facilities, track and related infrastructure along the corridor, rehabilitation works in the areas surrounding the stations and at grade crossings, and acquisition of rolling stock (eight train sets); and (ii) consultants for project management and supervision.

b. An Institutional and Policy Development Component (total $2.15m, WB $2.15m) that supported by means of technical assistance (i) the decentralization of the Metrofor system to the State of Cerea; (ii) capacity building to strengthen the newly established RTCC; and (iii) various studies related to urban transport policy and planning.

1.6 Revised components

13. The loan agreement was amended to facilitate project implementation in light of unfavorable macroeconomic conditions and fiscal conditions (see Sections 1.7 and 2). In March 2006, in response to a request from the Borrower, the project was restructured with a significantly reduced scope of work, while maintaining the original objectives. As a result of this restructuring: (i) original plans to electrify the line were dropped, and only short sections of the 19km line were double tracked; (ii) the scope of works around the stations and at grade crossings were significantly reduced; (iii) the number of train sets to be acquired was reduced from ten to six; and (iv) some of the studies were cancelled. Works included station rehabilitation; infrastructure and superstructure works including rehabilitation of bridges and viaducts; and rehabilitation works in the areas around the stations and in grade crossings, and in the area of influence of the line. Facilities and components of automatic ticketing systems were to be procured as well as enhanced signaling at grade crossings. While there were other amendments to the loan agreement (see Section 1.7), there were no other significant changes in the Project’s components.

14. In effect, as a result of this restructuring, what was initially designed as a project to increase line capacity and to increase ridership (double tracking, electrification, purchase of high-quality air conditioned coaches) became almost a rail maintenance project, with limited line upgrades and measures to upgrade rolling stock (with some new purchases complementing rehabilitation of existing stock). These technical changes preserved many of the envisioned benefits for the poorest users but had substantial impacts on line capacity, ridership, and the ability to achieve objectives related to congestion alleviation.

1.7 Other significant changes

15. Though the project became effective by September 2002, even by mid-2005 implementation had not begun because the Borrower (the federal government) did

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not provide adequate budget space for the counterpart funding that was needed to enable the loan to start disbursing. In May 2004, the Bank rated project performance as unsatisfactory, and discussed a variety of options with the Borrower including Loan cancellation. By late 2004 the Borrower indicated they wanted to avoid outright cancellation but were looking to reduce project costs and scope. At that stage the Bank team helped to prepare a variety of options to avoid the cancellation2.

16. After extended discussions with the Bank, the Borrower took actions that provided a

limited amount of fiscal space for the Project. In August 2005, the Borrower decided to include the project in its Public Investment Pilot Program (PIPP), which allowed disbursements to be de-linked from its primary fiscal surplus targets. An agreement was signed to this effect between the federal government, the state of Ceara, CBTU and Metrofor in November 2005, and the federal government committed to fulfilling the revised project disbursement targets through the end of 2007. The inclusion of this project in the PIPP meant that the budgeted funds over the period 2006-07 (R$70m or approximately US$30m, to be 100 percent reimbursed from loan funds) would be made entirely available.

17. In March 2006, the project was restructured and the loan amended at the request of

the Borrower, in light of this available fiscal space. The project scope and total cost were sharply reduced, though the original PDOs were maintained for their relevance. The key changes in project components were described in Section 1.6. Additionally: (i) Euro 72.614m (or close to 75 percent) of the original loan of Euro 98.6m was cancelled; (ii) total project cost was reduced from $193.8m to about $30m (or Euro 22m equivalent3) in line with the reduced scope; (iii) funds were reallocated across disbursement categories; (iv) disbursement percentages for all disbursement categories were increased to 100 percent; and (v) the closing date of the loan was extended 24 months to March 30, 2008.

18. The loan was amended a second time in March 2008, at the Borrower’s request to

extend the closing date for the loan to September 30, 2010, and a four month grace period following the revised closing date was granted for disbursements related to activities undertaken prior to the closing date.

19. Apart from the loan amendments, the project was also changed on two occasions (in

2007 and 2009) in the form of additional funds provided by the state (the state of Ceara) to support the rehabilitation of existing rolling stock that was not being financed by the Loan.

2 One was to combine the West line as part of the South line project under implementation. The second (finally selected) was reducing project scope and its inclusion into the ongoing IMF Public Investment Pilot Program (PIPP) thereby allowing for disbursements to be de-linked from its primary fiscal surplus targets. The third was to leverage the fiscal space of Ceara State by transferring the project to Ceara State as the Borrower. This would have required the Federal Government to assume some of the State’s existing debt.

3 The values in Euros do not add up due to the significant exchange rate fluctuations.

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2. Key Factors Affecting Implementation and Outcomes 2.1 Project Preparation, Design and Quality at Entry 20. The project was prepared within a context where the Bank’s ongoing dialogue with

the borrower and stressed: (a) promoting reforms and financial viability of public enterprises, including the concession of state-owned urban transport agencies to the private sector; (b) increasing the efficiency of infrastructure investments; (c) encouraging economic growth by improving efficiency in the metropolitan area and (d) contributing to poverty alleviation by improving accessibility of low-income segments of the population to jobs, educational and health facilities.

21. The project drew on a long history of the World Bank policy dialogue, lending and sector work on transport in Brazil including seven Bank-financed projects in public transport in the country (Loans 1563-BR, 1839-BR, 1965-BR, 3547-BR, 3633-BR, 3915-BR, and 3916-BR). As part of this relationship, the Bank was supporting the decentralization of urban rail systems from a federal agency (CBTU) to state and municipal agencies in Sao Paulo, Rio, Salvador and Belo Horizonte. Though this decentralization was required as per the Brazilian constitution, previous experience had indicated the value of ensuring this decentralization was completed in the early stages of a Bank-supported investment project.

22. Previous experience had also indicated that while decentralization and local

management would be beneficial to the system and to users, it needed to be complemented with investments in system improvements as well as support for institutional strengthening at the metropolitan level for benefits to be maximized.

23. In this context, modal integration – between buses and rail, creating functional

regional transport authorities and finding appropriate roles for the private sector had emerged as important yet difficult elements of the agenda. Experience from previous projects suggested that all three of these issues were critical to a well functioning urban transport system, but needed continuous engagement and always uncertain prospects of success in the short-term. Integrated tariffs’ across bus systems and between bus and rail, for example, required agreements between (usually private) bus operators and with the rail system. Establishing a functioning regional transport authority required a favorable political environment. The introduction of the private sector was considerably complicated if the economic or political environment was not stable.

2.2 Project Implementation 24. The most significant factor affecting project implementation had to do with changes

in macroeconomic conditions and funding constraints in the 2001-2002 period. The September 11, 2001 attacks in the United States, Argentina’s debt default in late 2001 and subsequent recession, and market jitters ahead of Brazil’s presidential

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elections led to higher inflation, lower foreign direct investment, a significant depreciation of the real, higher interest rates, and lower economic growth4. This combination of events subjected the Brazilian economy to significant economic stress.

25. Growth then fell to 1.4 percent in 2001 as the Argentine situation, the US recession, and the global slowdown dampened export demand. In 2002, debt service payments were running at over 80 percent of exports (a debt service ratio of 80.3 percent) as export markets continued slow after the 11 September 2001 terrorist attacks on the United States, and, as investors became increasingly anxious about the political risks associated with a presidential election in October 2002. There were also questions about whether existing standby arrangements with the IMF would be extended. In September 2002 the expiring 2001 arrangements with the IMF were replaced by two more one-year standby arrangements with a $30 billion line of credit just as the currency exchange rate and the Brazilian stock market index—the Bovespa index—were reaching historic lows.

26. A new federal administration took office in January 1st, 2003. Both the exchange

rate and the Bovespa index improved after the election and into the first quarter 2003; the improvements were in part because the incoming government was proving to follow prudent macro-economic and fiscal management. In February 2003, the government announced its target for a primary fiscal surplus (that is, the surplus before interest payments are made to service debts) at 4.25 percent, higher than the 3.75 percent agreed to with the IMF.

27. The combination of a difficult macroeconomic environment and change in government at the same time was particularly difficult for this project. The new administration was focusing on improving the macroeconomic environment and argued it lacked fiscal capacity to undertake the entire project as it had been approved.

28. A number of reinforcing co-related factors seem to have lead to this decision. First,

to achieve the government’s primary fiscal surplus targets required the federal government to significantly cut capital spending. This austerity drive undoubtedly made all capital spending difficult for federally supported projects. Then, the decentralization agenda that this project was supporting was not at that time an immediate priority of the new government. Additionally, this project had to compete with several other ongoing suburban rail projects in Salvador Bahia, Belo Horizonte and Recife, that supported decentralization with federally financed (partially World Bank financed) loans. Though all of these projects were affected due to the changing environment, this project suffered in particular. While the other projects were already in implementation, this one had not yet commenced at the time of the

4 See World Bank. 2004. Brazil: Equitable, Competitive, Sustainable. Contributions for Debate, Chapters 12 and 13.

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crisis and was thus easiest to reprioritize. Finally, this project had to compete for counterpart funds with the JBIC-financed South line in Fortaleza, which was significantly more advanced.

29. As a result, project implementation could not commence due to the absence of

counterpart funds: against the contractual commitments with the Bank, appropriations in the federal budget for the project were not included in the budget at all. Note that if the appropriation were not budgeted, then the Bank loan could not disburse. Furthermore, disbursement of budgeted funds was restricted. (This situation also affected other Bank-financed projects, such as Salvador, P048869, Recife, P038882; and Belo Horizonte, P006564).

30. By 2004 the project was flagged as non-performing due to delays in implementation

and slow disbursement. The Bank initiated discussions with the Borrower on a range of alternatives to address this issue including project cancellation, and restructuring. After an extended dialogue between government and the Bank, the project was finally restructured in March 2006 with a sharply reduced scope as discussed in Sections 1.6 and 1.7.

2.3 Monitoring and Evaluation Design 31. M&E System Design. The M&E system of the original project was appropriately

designed to measure the achievement of the development objectives of the original design. However, the target indicators could have been updated as part of the March 2006 restructuring before implementation commenced. At the time the task team decided not to change the target values of the indicators, in part because the government had indicated that it would return to support the project once the macro-economic environment improved. In retrospect that was perhaps optimistic, given that at the time of the restructuring the project had only another 24 months before the Loan closing date. See also discussion in 3.2 that discusses the actual achieved outcomes – which in the case of two of the three indicators relevant to physical achievements – were quite substantial even relative to the original targets for key indicators.

32. M&E Implementation and utilization: Due to slow pace of implementation the Bank team relied mostly on output indicators to assess progress. The team used physical output indicators to monitor the progress of the works and the delivery of equipment. Most supervision missions’ aide memoires reported the progress in those outputs. To measure “institutional development progress” indicators such as “a formal regional transport coordination commission in place,” “decentralization of commuter rail services from federal to state government,” “preparing an integrated transport policy, land use and air quality strategy” were used. The indicators were an integral part of the project, and were regularly reported by the implementing agency’s Project Management consultant (MWH). This consultant’s reports included information on progress of the works, the procurement of goods and services, and the general development of the project.

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2.4 Safeguard and Fiduciary Compliance

33. Environmental Assessment. The project was appropriately designated as an Environmental Category ‘B’ project. An assessment and management plan had been designed by professional independent consultants and had found construction-related disruption to be the primary environmental impact of the project. Adequate measures to mitigate this impact had been designed and agreed upon in the management plan. The Brazilian State environmental agency had provided the required legal clearance to proceed with works (a license had been issued). The environment management plan was implemented through project implementation as agreed. There were no significant issues related to environmental management during implementation.

34. Involuntary resettlement. The original project design called for resettlement affecting 319 properties including 291 that were residential or mixed use. An adequate resettlement plan had been designed that was based in part on consultations with the affected community and their expressed wishes. Most of the originally planned resettlement was cancelled when the project was restructured. The restructured project required the acquisition of limited number of properties which were covered by the original resettlement plan, and the resettlement proceeded successfully in line with the agreed plan.

35. Consultations were carried out appropriately in accordance with Bank policy. As

per the PAD, consultations were conducted during the preparation of both the environmental assessment and the resettlement plan. Previously announced and scheduled public meetings were held, and minutes were recorded. The draft environmental assessment was available for public review and was discussed (as per Brazilian law) in an official public audience.

36. Procurement was generally well designed and supervised. The federal level

counterpart (CBTU), which was providing assistance to Metrofor on procurement was knowledgeable in Bank Procurement procedures and had capacity, as correctly assessed during preparation. Furthermore, the team had experienced procurement specialists including a local expert with proximity to the client. This level of collaboration with the borrower facilitated communications and helped to address issues promptly. There were some delays due to disagreements between CBTU and Metrofor on design issues; the disagreements were eventually resolved and all procurement was carried out successfully and in compliance with Bank guidelines, albeit with delays.

37. Financial Management (FM) aspects were generally in compliance with Bank

procedures. The Project Agreement required both CBTU (the recipient of the loan on behalf of the federal government) and FMR to keep proper accounting of expenditures in the project. Audited copies of the accounting records had to be submitted yearly until loan closure. Audit reports occasionally identified minor

10

issues but they were always addressed promptly. In general the Bank team considered the FM performance of the project to be satisfactory.

2.5 Post-completion Operation/Next Phase 38. Physical works. At present, works on the west line as envisioned in the restructured

project, have been completed. Some of the existing rolling stock has been successfully rehabilitated. Additional rolling stock is in the process of being acquired – two trainsets are in testing and another two are near delivery. Metrofor has asked the manufacturer to keep these two trainsets at the factory so that when delivered, they can reflect the adjustments needed to the trainsets currently under testing. Two others are planned to be procured in the future using counterpart funds. Works on the JBIC supported South line, the other element of the Metrofor system, have been delayed and are expected to be complete by mid to late 2011. At that time, the project improvements conceived at appraisal will be completed – in a delayed and somewhat reduced fashion.

39. Institutional. As already noted, the decentralization process underlying the project design was successfully implemented by mid-2002. Since then the rail system has been operated by Metrofor, the provincial metropolitan transport company. The Metrofor and CBTU teams working on the West line are also working on the JBIC-financed south lines.

40. Currently, the system covers all its variable operating costs but the salaries of

Metrofor personnel are paid by the federal government as per the decentralization agreement until the South line is completed. This annual operating subsidy is R$ 11 million. The original project design called for concessioning the operations of the entire Metrofor system, once both the Bank-financed West line and the JBIC financed South line were complete. A study to support this strategy has been completed as part of the Project and the state government is looking to update that study. Metrofor is currently expected to continue to operate the system in the short-term. Metrofor has gained considerable experience in operations over the project period and at this juncture and it is expected that it will continue to operate the system competently.

3. Assessment of Outcomes 3.1 Relevance of Objectives, Design and Implementation 41. The PDO remained valid throughout the life of the project and did not require

adjustment to accommodate changing government priorities in response to a shifting macroeconomic context.

a. The objectives remained relevant according the Bank's priorities regarding Brazil. For example, the objective of improving quality of public urban transport in the FMR by developing a fully integrated public transport system under the

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coordination of a RTCC was in line with the 2006 revised CAS (2004-2007) priority of "Investing in growth, including enhanced emphasis on improving competitiveness and investing in infrastructure." Urban mobility and a focus on public transport as a means to support multiple goals of urban congestion, air pollution, greenhouse gas pollutants and provide mobility and access for the poorest remains a core element of the Bank’s sectoral strategy.

b. A high-quality integrated transit system was an investment in infrastructure that promotes urban competitiveness and efficiency by requiring fewer resources to move passengers. The PDO was also in line with the 2008-2011 CPS which identifies Brazil's country goals: (i) to improve competitiveness by investing in the transport system, and (ii) to reduce inequality by providing, among others, job opportunities for the poor. The integrated system will benefit mainly the poor residing in the urban periphery.

c. The second PDO has to do with the decentralization of CBTU’s Fortaleza to the state government. The decentralization of urban transport is mandated by the Constitution of Brazil and therefore continues to be relevant (even though providing support to the decentralized transport systems was not one of the most immediate priorities of the incoming federal government in 2003).

d. The final PDO has to do with the introduction of private sector participation in infrastructure operation and management. Identifying an appropriate role for the private sector to introduce market discipline and drive efficiency remains a core element of the Bank’s sectoral strategy in transport. Also, the studies conducted and revised under this project have had a major role influencing the State-level decision makers with respect to their understanding and attitude towards private sector participation. However, the last decade has provided a wealth of experience and new information with respect to public-private partnerships in urban transport, in Brazil and in the region, and there is a need to examine this experience to inform future efforts in this regard.

e. The PDOs, therefore, remained relevant throughout the life of the project.

42. The PDOs were also relevant and integrated with both the original and restructured project design. The project supported the decentralization, which was an effectiveness requirement during preparation, and by supporting Metrofor with institutional strengthening during implementation. The design of investments in both the original and restructured project supported the second PDO (related to system performance) given the available resources. The policy dialogue during the project – focusing on post-construction operations, supported the third PDO (on private sector participation in operations).

43. The Project Design also remained relevant. It allowed the advancement of a significant and complicated policy agenda around a targeted set of investments. As a result the design remained relevant in the face of significant deterioration of the macroeconomic and fiscal environment (e.g. a 65.7 percent devaluation of the Real over 1.5 years). The Project Design was flexible and allowed changes through a scaling down of the project and the introduction of an alternative low-cost system without needing changes to the PDOs. Indeed, even in face of a 85 percent

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reduction in project cost, it was possible for the project to survive by (i) abandoning electrification in favor of rehabilitating and continuing with diesel traction, which allowed low-cost rehabilitation of existing rolling stock to achieve incremental improvement in service; and (ii) limiting the double tracking to some essential sections in order to achieve at least partial improvements in service quality and frequency. The adaptable Project Design, coupled with an intensive engagement in supervision, prevented Fortaleza from having an abandoned and partially completed project. Instead, the city has an upgraded system at relatively low cost that will complement the South line which is expected to be operational in mid-2011.

3.2 Achievement of Project Development Objectives

44. The analysis in this section is carried out in light of the likely operation of the JBIC-financed Metrofor South line (Maracanau – Fortaleza city center) by mid to late2011, the associated improvements in the Bank-financed Metrofor West line, and expected further improvements on this line as a result of ongoing procurement and testing of additional trainsets.

45. The achievement of overall PDOs is considered moderately satisfactory. This rating is based on the ratings for the achievements of the individual PDOs.

46. The first PDO, is “to improve the quality of public urban transport in the FMR by

enhancing the development of a fully integrated urban transport system under the coordination of a Regional Transport Coordination Commission (RTCC) and rehabilitate the Metro for West Line.” The potential to achieve this PDO materially deteriorated with the reduction of project scope. Once a decision was made not to electrify this line, it was no longer possible to integrate it completely with the electrified South line; indeed current plans call for users to transfer with a few hundred meter walk between the electrified South line and the diesel operated west line. Further, plans for the originally envisioned accompanying electrified rolling stock – electrified, air conditioned, providing a high-quality smooth ride – were dropped as part of the 2006 restructuring. Instead, the existing diesel trainsets were rehabilitated and new similar trainsets were acquired. Possibilities for additional frequencies (and related rail capacity) are also limited by the need to curtail double-tracking. All these reductions in scope decrease both system capacity and system attractiveness. However, as discussed below, under difficult circumstances the restructured project preserved many of the benefits critical for the poorest: those related to integration and improvements in generalized costs. The biggest impact of the reduced scope and consequent reduced attractiveness of the service is an inability to attract trip-makers who have a choice (such as those who have access to a car), thus curtailing the project’s ability to capture the levels of market share originally envisioned.

47. In all, remarkably, despite the significant reduction in project scope, achievement of

this PDO is rated moderately satisfactory based on the following evidence: a. Integration, which is measured by estimating the percentage of stations where

bus/rail integration provided has been partially achieved. Success of this indicator

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was dependent not-so-much on big investments as much as changes in the way bus and rail operators interacted. Physical integration has been achieved in that buses now stop at rail stations. However, tariff integration is not yet achieved. The government has given a commitment to implement an integrated fare system with a common card by the time that the Metrofor South line is operational (forecast in mid to late 2011). At this time, though some equipment for such a smartcard system has been purchased, talks between government and the association of private buses concessionaires is still ongoing. Additionally, the rehabilitated stations provide high quality bicycle lockers which accomplish intermodal integration between the rail and bicycles.

b. Congestion, which is measured by the increase in the rail share in urban transport motorized trips, is likely to be achieved in a limited manner; and will be due primarily to the operations of the South line, once is operational. As discussed already, the potential of the West line to increase rail share, was severely curtailed by the reductions in scope and consequent reductions in the competitiveness and attractiveness of the service.

c. Generalized cost of travel, which is measured by the accessibility of low-income users in the form of an aggregate of travel time, fare and reliability. This indicator has been substantially achieved due to increases in speed (due to track improvements) and reliability (due to track improvements and enhanced rolling stock) of the service. It is a testimony to the restructuring that it focused all the limited resources available on incremental improvements that materially improved the quality of the service offered to the poor. It is also likely the case that, the original targets in this respect were conservative; if the project had indeed been implemented as designed, this target would have been significantly exceeded. As it is, significant improvements have been made, amounting to over 80 percent of the original target.

d. Furthermore, project –related improvements also resulted in: (i) improvements in safety which represented the reduction in terms of accidents;5 and (ii) improvements in comfort levels for passengers resulting from the rehabilitation of existing trainsets and the acquisition of new trainsets.

48. The achievement of the second PDO, “to transfer the STU/FOR system from the Federal to the State government” was fully achieved. The achievement of this objective is considered satisfactory, because the transfer from the Federal Government took place as planned, albeit with some minor delays.

49. The achievement of the third PDO, “to increase the private sector participation in the operation and management of the Metrofor system (West and South lines” is considered moderately unsatisfactory. At present the state government has asked to update the study conducted as part of the project to explore models for private

5 No formal data are available but Metrofor has reported that they have seen up to a fifty percent reduction in accident rates at level

crossings.

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sector participation and reportedly is considering plans to concession the system after the completion of the South line and another East-West line currently under planning. It is unlikely that private sector participation in operations will be introduced in the near term of 12 to 18 months. That said, the studies conducted as part of the project (and measured as part of the achievement of intermediate indicators) have played an important role in influencing decision-makers’ attitudes and outlook towards private sector participation. Further, Brazil’s experience with private sector participation in the last decade has provided many important and useful lessons relating to the management of such private-public partnerships in times of economic and/or political instability. It would be prudent for the state of Ceara, as well as the national government and civil society to absorb and deliberate on this experience as a pre-requisite to embarking on a new privatization process.

3.3 Efficiency

50. The economic analysis done for the original project at appraisal was based on a traditional corridor level urban transport modeling analysis. As per the PAD, a NPV of US$145 million at a 10 percent discount rate and an internal rate of return of 22 percent were reported. A summary economic analysis was conducted as part of this ICR and summarized in Annex 3. This summary analysis reflects the restructured project with lower costs and concomitantly lower benefits. An economic rate of return of 8.5 percent is estimated using a generally conservative set of assumptions. Additional investments to complete double-tracking of the line, a prerequisite to increase service frequencies, would significantly increase the attractiveness of the service, attract new riders and thus increase the net economic rate of return. On one hand, this analysis indicates the significant impact of the restructuring on the potential of the rail system to attract new riders and deliver on its potential to support Fortaleza’s transport system. On the other hand, the restructured project reflected a ‘do-minimum’ set of actions critical to maintain a safe and minimally reliable service. Under the circumstances, this rate of return is not unusual.

3.4 Justification of Overall Outcome Rating

Rating: Moderately Satisfactory

51. This rating is based on the combination of the project relevance, achievement of the objectives and the achieved project efficiency.

3.5 Overarching Themes, Other Outcomes and Impacts

(a) Poverty Impacts, Gender Aspects, and Social Development

52. None measurable with available data. Though no formal surveys have been conducted – the key beneficiaries of the project are poor households on the urban

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periphery that have benefited from integration and improvement of transport service into the center city.

(b) Institutional Change/Strengthening 53. For the actual implementation of the project, Metrofor has trained several cohorts of

professionals in areas such as engineering, procurement under Bank rules, project management, and railway technology. As operations pick up pace, the people at Metrofor will further their experience in this area and to go faster along the learning curve, Metrofor signed technical cooperation agreements both with the Metro of São Paulo and with CBTU. The creation of the RTCC is also worth highlighting because of the need to gather different stakeholders to plan the evolution of the urban transport system and gather consensus.

(c) Other unintended outcomes and impacts 54. None measurable with available data.

3.6 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops 55. Not Applicable.

4. Assessment of Risk to Development Outcome 56. The risk to development outcome of this operation is significant because:

a. Technical risk. The technical risk derives from two sources. First, the possibility

that the new trainsets (in procurement and in testing), do not operate as planned or are not maintained properly due to financial pressures (see below). Second, that tariff integration between buses and rail, which is currently under discussion is not implemented as promised by the time the South line is operational. The lack of tariff integration will make the service less attractive to all customers. In the short-term it will particularly hurt the poorest who will have to pay multiple times to use the rail, and to the degree passengers decide not to use the rail for this reason, affect the financial viability of the rail operations. In the medium term, a system that is not integrated will be less attractive to customers who have choice, a particularly important segment from the perspective of long-term sustainability of the urban area, from the perspective of congestion, air pollution and climate change. To mitigate this risk Metrofor is dealing with Fortaleza municipality and Sindionibus on the integration matters, however until the conclusion of this ICR, the remaining issues have not been fully resolved.

b. Financial risk. Financial risk emerges from the dependence of the Metrofor system on a subsidy for close to 40 percent of its long-term variable costs. Though this is not a significant burden on the federal government at present, it presents significant risks in the medium and long term unless addressed. Cost recovery is expected to significantly improve once the South line is operational and once tariff integration

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with the bus system is accomplished. However, if the system does not begin to recover long-run variable costs at that time, subsidies from the state government will be needed. This would be unfortunate and would remain a source of significant risk, particularly in fiscal downturns and when there is a need for further capital investments. In the worst case, financial deficits could translate to inadequate maintenance with the potential to impact service quality negatively.

5. Assessment of Bank and Borrower Performance 5.1 Bank Performance In ensuring quality at entry Satisfactory 57. The project was well prepared and Bank performance in ensuring quality at entry is

rated satisfactory. The rationale for this assessment is summarized below:

a. Sound strategic context. First, the project was consistent and aligned with the Bank’s country strategy focusing on poverty reduction and growth as well as targeting public services for the urban poor, the Bank’s sectoral strategy in urban transport (decentralization, private sector participation, creation of a regional transport authority, establishment of a multi-modal integrated transport system, and integration of the regional land-use, transport and air quality agendas) and was conceived within the framework of a broader ongoing country sectoral dialogue that combined institutional reform, policy dialog, and investments.

b. Technically well designed and well prepared. The design was comprehensive – covering an extensive sectoral policy agenda – without being unduly complicated. All the investments focused in a sensible manner about upgrading the performance of a single existing rail corridor using a set of established and cost-effective actions. The technical and economic analysis presented at appraisal were well done, followed good practice and adequate. The project was focused, identifying and targeting a particular vulnerable beneficiary population. The design of project investments was based on an analysis of different technical alternatives that concluded that the modernization of the rail line was the most cost-effective feasible alternative to improve capacity in the corridor in question.

c. Strong ownership of the project including the institutional agenda. There is little doubt of the ownership of the project at the municipal and state levels. At the time of Project appraisal and Board, the federal government was also clearly in favor of decentralization.

d. Risk assessment was adequate. A range of risks were appropriately identified, actions to mitigate the risk were identified and as appropriate taken, and given the information available, the project’s risk rating of ‘medium’ was acceptable. Clearly, in hindsight, the project was unable to foresee appropriately the risks related to limited fiscal space – which were not mentioned in the PAD. However, it is not clear how that could have been done at the time. It is noted that after recent reforms in the Bank’s lending process, the ORAF instrument has been designed so

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that macro-economic risks that could affect project performance are more systematically identified and assessed during project preparation.

e. Lessons from past experience were incorporated into design. The project reflected a number of lessons learnt from previous projects implemented in the sector. These lessons influenced the design on the technical assistance component, actions to ensure that the project was included in federal and provincial government budgets to ensure counterpart funding (to no avail), and the design of effectiveness conditions (that included the completion of the decentralization process for the system, an important part of the reform agenda).

f. Preparation was adequately advanced at the time of Board. The RTCC had been established, the decentralization process was well advanced and final engineering designs for the first year of work were completed.

g. Fiduciary issues. Adequate procurement and financial management assessments had been part of the appraisal process. CBTU, the key counterpart at the federal level had significant experience with previous Bank projects, as did the state.

h. Social and environmental issues. Project design included an exhaustive social survey that mapped travel patterns of the poor and a ‘willingness-to-pay’ exercise to inform tariff issues. The project was designed to upgrade the environmental and social environment in the FMR – in the form of reduced congestion, noise and air pollution from buses, and increased quality of service for the urban poor living on the periphery.

i. Safeguards. As discussed already the appraisal adequately covered all issues relating to social and environmental safeguards and consultation.

Quality of supervision Moderately Satisfactory

58. Bank supervision is rated as Moderately Satisfactory.

59. On one hand, the team did a solid job as evidenced by actions such as:

a. Timely and frequent supervision missions during the implementation stage accompanied by timely communication between the project team and Bank management (as evidenced by 25 Implementation Status Reports filed in the 1999-2010 period);

b. Prompt and sound identification and assessment of implementation problems as well as provision of high-quality advice and solutions to the borrower to address the implementation problems;

c. A proactive attitude, appropriate and prompt Bank follow up actions. The proactive nature of the Bank’s supervision was particularly important to the restructuring process. By raising the possibility of cancelling the project when counterpart funds were not forthcoming in the project’s early years, the Bank initiated the dialogue that eventually led to the restructuring and eventual project implementation;

d. Depth of country and sector knowledge which allowed the team to fashion a restructured project even in an extraordinarily adverse fiscal environment. To ensure that the project would proceed, the team worked with the Borrower to get the project included in a national priority infrastructure list (the PIPP). This was

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critical to secure funding for the project and to allow implementation to proceed smoothly without disbursement restrictions.

e. Timely and diligent attention to fiduciary and safeguards issues through the project implementation period.

60. At the same time the team could have exercised a higher level of administrative due-diligence. Lapses in this respect include (a) that the restructuring did not encompass the M&E framework – when the scope of the project got reduced to 15 percent of its original size, the PDO targets should have been appropriately revised; and (b) the ratings of the ISRs displayed some inconsistencies. Specifically, after the Project was effective in September 2002, there was almost no disbursement for about two years, yet the ISR ratings remained as Satisfactory until April 2004; at which stage it was changed to Unsatisfactory, and then after two years it was changed to Moderately Satisfactory and then Moderately Unsatisfactory until mid-2007 while there had been no disbursement.

Rating for overall performance Moderately Satisfactory 61. This rating reflects the combination of the Bank performance ratings for preparation

and supervision. 5.2 Borrower Performance Moderately Unsatisfactory

62. During preparation both the federal government (as the Borrower) and the state

government (as project beneficiary) performed satisfactorily. They supplied information, carried out the necessary studies, estimated investment needs, and recognized institutional weaknesses. Furthermore, the federal agency, CBTU, had acquired experience in at least three similar projects and was able to manage safeguard and procurement issues easily. The state and local governments, for their part, created the Regional Transport Coordination Commission (RTCC) and the actual implementation agency, Metrofor.

63. However, during implementation, as explained in Section 2.2 the federal government neither budgeted adequate resources for project implementation (disbursement of the loan or counterpart funds) nor made a decision on how to proceed with the Loan until late 2004 after persistent engagement by the Bank, and the restructuring was not completed until 2006. In this sense, more could have been done by the Ministry of Transport and since 2003 by the Ministry of the Cities to focus on the project’s needs and to take the necessary actions to prioritize its implementation in line with the provisions of the signed legal agreement. Obviously, the adverse fiscal and macroeconomic conditions are an important extenuating factor. Yet, the rating reflects the limited proactivity and the over four-year delay in taking the decisions that reactivated the project. That said, the government did finally engage and worked with all the other stakeholders to identify a solution that allowed the project to proceed, albeit in a reduced form. For these reasons, the Borrower performance during implementation is rated as moderately unsatisfactory.

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64. The state government's performance during implementation is rated as moderately satisfactory because, on one hand, they carried out considerable efforts towards advancing project implementation but, on the other, the protracted process in procurement and in reaching agreement in the integration processes with municipalities and the private sector caused severe delays in project implementation and the integration of the urban transport system.

Implementation Agency Performance CBTU Moderately satisfactoryMETROFOR Moderately satisfactory 65. There are two implementation agencies, CBTU, at the federal level, and Metrofor, at

the state level. This evaluation considers both. First, CBTU had ample experience with Bank loans, procedures, safeguards, monitoring and evaluation, and reporting. As such, the agency complied with all Bank requirements. Furthermore, the Project Implementation Unit at CBTU was adequately staffed and its management was stable. However, the CBTU team could potentially have been more pro-active in resolving the project impasse in the years before restructuring. The Metrofor team has done a commendable job implementing the project while keeping the system operating. That said there were delays in project implementation even after restructuring due to difficulties in resolving design issues between the two implementing agencies. In all, the implementing agencies receive a Moderately Satisfactory rating.

Overall Borrower Performance Moderately satisfactory 66. The overall Borrower performance is moderately satisfactory based on the

performance of the government and implementing agency in light of the significant issues outside their control and because the overall project performance is judged to be moderately satisfactory.

6. Lessons Learned 67. The following lessons have been derived from the implementation of this project.

They emerge from the analysis of the project done in this ICR.

68. Modal integration remains an important but difficult agenda at the core of all public transport projects. On one hand, this project indicates how difficult achieving good quality integration is. Despite arrangements that were quite advanced during preparation, despite a functioning regional coordinating committee (an important building block towards modal integration) by the time the project was presented to the Bank Board for approval, and despite repeated assurances from government, integration thus far has only been partially achieved. A lesson is for projects documentation to more explicitly recognize the risks and difficulties related to

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achieving good integration, even as this issue should continue to be a central focus of the sectoral agenda.

69. Supervision and restructuring – modalities to respond to macroeconomic

shocks. Lack of fiscal space can greatly influence the pace of project implementation and in some cases has led to cancellation of components. Risks related to macroeconomic environments are outside the control of any given project but affect them significantly. There may be a benefit for the Bank to create a flexible framework within which all projects can be restructured or modified as needed in the aftermath of significant macroeconomic deterioration.

70. Institutional change and PDO indicators. Bank-financed investments projects have a limited timescale and are often seen by the Borrower primarily as vehicles to support particular investments. While investment projects can often be structured to support particularly elements of structural change (such as the decentralization process, or private sector participation); it remains difficult to tie significant politically driven structural change to project-related timetables. The example of private sector participation in this project is a case in point. Over the course of this project, there was significant change in decision-makers attitude towards private sector participation as a result of project-related activities as evidenced by the study financed by the Bank on private participation. However, due to a combination of macro-economic factors and other non-project related delays in the South line, the privatization process itself is currently in abeyance. There remains likelihood that in the future – when an appropriate political and economic environment is in place – that the privatization process will continue; just not on the same schedule of a Bank-financed sector investment loan.

7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners (a) Borrower/implementing agencies The Borrower’s main body report is included as Annex 7 of this document. The full report, including the appendixes, is available in the project’s files. (b) Cofinanciers Not applicable. (c) Other partners and stakeholders Not applicable.

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Annex 1. Project Costs and Financing Project Cost by Component Table 1 Disbursement Table

Loan agreement August 1, 2002

First amendment June 20, 2006

Second amendment June 2, 2008

Category Amount of the Loan

Allocated (Euros)

% of Expenditures to be financed

Amount of the Loan Allocated (Euros)

% of Expenditure

s to be financed

Amount of the Loan Allocated

(Euros)

% of Expenditures to be financed

Goods (under Part A.1 of the Project)

Metrorail systems 15,764,000 50 100,000 100 000,000 100

Rolling stock 26,274,000 50 100,000 100 12,600,000 100 Works (under Part A.1 of the Project)

41,540,000 65 19,854,000 100 11,100,000 100

Consultants’ services

3,932,000 4,696,000 100 1,300,000 100

Front -end-fee 986,000 986,000 986,000 Unallocated 10,104,000 250,000 0 TOTAL 25,986,000 25,986,000 Cancellation amount

72,614,000 72,614,000

Original Loan amount

98,600,000 98,600,000 98,600,000

Closing date March 31, 2006 March 30, 2008 September 30, 2010

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Annex 2. Outputs by Component Table 1a: Performance indicators (in PAD)

Indicators Unity 2000

(base) 2001 2002 2003

2004 2005

% of rail stations physically and tariff integrated with bus lines % 0 - - - 50 50

% rail share of urban transport motorized trips % 2 - - - 10

Generalized cost of travel6 Min. 93 - - - 69 65

Decentralization of STU-FOR

Project Outputs

Physical Implementation

% of the Permanent Way Works % 0 0 33 66 100 % of other civil works % 0 0 33 66 100

% rolling stock system % 0 6 0 33 80 100

Institutional Development Private Sector Participation

- Model.

completedProc. Ident.

-

Establishment and strengthening of formal RTCC

Started periodic meetings

Integrated urban transport land use and air quality strategy -

Draft concluded

- Final report

discussed

Table 2: Achievement of performance indicators

Indicators Unity 2000

(base) 2010

% of rail stations physically and tariff integrated with bus lines % 0 507

% rail share of urban transport motorized trips % 2 28

Generalized cost of travel Min. 93 70 Decentralization of STU-FOR

Project Outputs

Physical Implementation % of the Permanent Way Works % 0 100/100 % of other civil works % 0 100/100 % rolling stock system % 0 70/100 Institutional Development 2001 (base) Private Sector Participation Model completed Model revised Integrated urban transport land use and air quality strategy

Draft report completed Final report discussed

6 Travel time plus fare plus reliability in minutes between Caucaia and Joao Felipe (accessibility of low-income user related objective). 7 Physical integration complete tariff integration ongoing and expected to be completed by end 2011 8 Market share expected to reach targeted 5 percent once south line is operational in 2011

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Annex 3. Economic and Financial Analysis

The economic analysis done for the original project at appraisal was based on a traditional corridor level urban transport modeling analysis. The model estimated the travel time benefits for existing train users as well as tripmakers that switched from other modes (such as buses), associated savings in vehicle operating costs (the net difference between rail operating costs after the project and the costs of operating the buses running in the without project case) and the associated savings from reduced bus travel in terms of pollution, accidents and road maintenance. In addition to investment costs, costs related to additional rail operational overhead (additional staff and maintenance costs) were also accounted for. The analysis was solid and followed established transport economic analysis methods. As per the PAD, a NPV of US$145 million at a 10 percent discount rate and an internal rate of return of 22 percent were reported.

As a result of the project restructuring, the improvements on the rail system have been incremental, accruing significant benefits on existing users; though not being significant enough to attract many new users. The primary gains, as measured by the project’s performance indicators, have been a reduction in the generalized cost of travel by way of increased speeds and higher reliability. A summary economic analysis was conducted for this ICR to measure the net impacts of these benefits in light of the actual project costs. Travel time savings accruing to existing riders were the primary source of benefits as per this analysis. This reflects the relatively limited ability for the restructured project to attract riders from other modes. The Table below summarizes the key assumptions and results of the ex-post analysis.

Parameter Values Comments and remarks Benefit period 2010-2030 Ridership expectations Additional 8000 riders a day once 6 new trains-sets are operating

Additional 10,000 riders a day once JBIC financed South line is complete and operating

Daily travel time savings 15 minutes Travel time equivalent of achieved generalized cost savings of 23 minutes for the poor

Value-of-time US$1.2/hour A 10 percent reduction of the value-of-time of users of a similar rail system serving a similar demographic in SP

Capital Costs US$36,000,000 Total project expenditures in 2005-2010 period, expenditures associated with rolling stock currently in acquisition

EIRR 8.5%

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Annex 4. Bank Lending and Implementation Support/Supervision Processes Task Team members Names Title Unit Responsibility Lending Jorge M. Rebelo Lead transport Specialist and TTL LCSTR TTL

Supervision/ICR Aurelio Menendez Sector Manager and TTL LCSTR TTL since April 2010 Jorge M. Rebelo Lead transport Specialist and TTL LCSTR TTL until April 2010 Armando Ribeiro Araujo Consultant LCSPT Procurement Tulio Henrique Lima Correa Financial Management Specialist LCSFM Financial management Nicolas Drossos Consultant LCSFM Financial management Elisabeth Goller Sr Transport. Spec. LCSTR Institutional Daniel R. Gross Consultant LCSEN Social safeguards Sabina Augusta Kauark Leite Consultant LCSTR Institutional Shomik Mehndiratta Lead Transport Specialist LCSTR ICR Jose Ricardo Marar E T Consultant LCSTR ICR Staff Time and Cost

Stage of Project Cycle Staff Time and Cost (Bank Budget Only)

No. of staff weeks USD Thousands (including travel and consultant costs)

Lending FY99 11.91 FY00 16 140.89 FY01 3 17.01 FY02 3 21.69 FY03 0.00 FY04 0.00 FY05 0.00 FY06 0.07 FY07 0.00 FY08 0.00

Total: 22 191.57 Supervision/ICR

FY99 7.71 FY00 0.00 FY01 0.24 FY02 3 27.68 FY03 6 43.18 FY04 5 40.77 FY05 7 64.34 FY06 13 96.46 FY07 9 93.81 FY08 6 81.68

Total: 49 455.87

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Annex 5. Beneficiary Survey Results Not applicable. Annex 6. Stakeholder Workshop Report and Results Not applicable.

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Annex 7. Summary of Borrower's ICR and/or Comments on Draft ICR

Brazilian Urban Trains Company (CBTU)

Borrower’s Evaluation Report

Loan Agreement No. 7083-BR

Preface This is the final report concerning the Fortaleza Metropolitan Transport Project undertaken with the participation of the Brazilian Urban Train Company (CBTU), the Ceará Metropolitan Transport Company (Metrofor), the Ceará State Government and Brazil’s Federal Government. The project was supported with Euro 25.986 million from IBRD financing, under the terms of a Loan Agreement signed on 1st August 2002. The Agreement was concluded on 30th September 2010, 54 months over and above the originally agreed completion date of 30th March 2006. The final disbursement was made on 13th January 2011, in the Grace Period of four months, and all the funds provided by the IBRD (Euro 25.986 million) were utilized.

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Evaluation Summary

Fortaleza Metropolitan Transport Project

Brazilian Urban Trains Company (CBTU)

Loan Agreement No. 7083-BR

Brazil

Introduction

Brazil’s Federal Government, responsible through the CBTU for operating and administering the existent urban rail systems, developed the Metropolitan Trains Decentralization Program aimed at transferring the systems from federal to local control in response to a series of constitutional directives determining the transfer of the management and operation of urban transportation systems to their respective local authorities. The urban trains system in Fortaleza was transferred to a state company specifically constituted for this purpose (Metrofor) on 28th June 2002. The World Bank has provided partial financing for mass transit decentralization projects in São Paulo, Rio de Janeiro, Belo Horizonte, Recife, Salvador, as well as in the West Line of Fortaleza. The Fortaleza metropolitan transport project was submitted to the IBRD, with the definitive project design approved by the World Bank Board of Executive Directors on 12th April 2001.

Project Objectives The following documents were signed on 1st August 2001: Loan Agreement LN-7083-BR between the Federative Republic of Brazil and the IBRD; a Project Agreement between the CBTU, the METROFOR and the IBRD; and, finally, the ‘State Agreement’ between the Government of the State of Ceará and IBRD. The Loan Agreement signed with the IBRD was in the sum of Euro 98.6 million, corresponding at that time to US$ 85.0 million. With the US$ 91.2 million representing the Federal Government’s counterpart contribution represented a total project value of US$ 176.2 million. The purpose of the project was to implement the West Line of the Fortaleza’s metro line, in electrified metric gauge, with similar characteristics of the South Line project going on. Contracts were split into three major categories: goods, works and consulting services. On 20th June 2006 a reduction of Euro 72.614 million, as well as a reduction in the project scope was officially approved (down to Euro 25.986 million), without any Federal Government counterpart contribution. The original West Line project involved the construction, the rehabilitation and modernization of the West Line, including: (a) the construction of an integrated system consisting of: (i) about 19 line-kilometers of infrastructure and superstructure works, rehabilitation of about 13 bridges and viaducts, rehabilitation works in the areas

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surrounding the stations and in the grade crossings, and road works in the area of influence of such line; (ii) installation of signaling, telecommunications and electrification facilities, escalators and elevators, a central control system, automatic train control equipment, air conditioning, ventilation, fans and ancillary equipment: and (iii) acquisition of rolling stock (eight train sets); and (b) carrying out of the Resettlement Plan. The project also set provision of technical assistance for: the management and supervision of the carrying out of construction above and (b) the strengthening of the capacity of the project coordination unit – PCU to coordinate project implementation. As the scope was reduced, the project included only the rehabilitation of about 19 line-kilometers of permanent way, refurbish of ten stations, modernization of 13 Pidner’s passengers cars, rehabilitation of two diesel locomotives and the acquisition of six Light Rail Vehicles – LRV. The key objectives of the project were: to improve the quality of public transport in the Fortaleza Metropolitan Region by developing an integrated urban transport system coordinated by a regional transportation coordination commission; rehabilitation of the Metrofor West Line; to undertake the decentralization of the system operated by CBTU, transferring ownership and management from the Federal level to the Ceará’s State authorities; and promote the private sector participation in the operation and management of the Metrofor system (West and South Lines). The CBTU-IBRD-FOR project was regarded as a project of major importance which enabled the CBTU to fulfill its role of upgrading urban transport in the area by utilizing railway systems integrated with other modes of transport, thereby substantially boosting the quality of transport for the population living in the urban area of large Brazilian capitals. Specifically in Fortaleza’s case, the acquisition of Light Rail Vehicles – LRV enabled to offer to the system’s users a transportation with quality, comfort, on time services, air conditioning environment, and others, as well as promoted an incentive to the national rail-road industry making possible the creation of a genuine Brazilian company to produce these vehicles to the West Line and to others metropolitan trains systems in Brazil. The Fortaleza project differed in some respects to the urban trains systems of São Paulo and Rio de Janeiro (partially financed by the World Bank). In these cities the bidding and contraction procedures, as well as the works and services management, remained under the responsibility of the CBTU, even after the systems had been decentralized. In the case of Fortaleza these functions were devolved in their entirety to the State of Ceará and the Ceará Metropolitan Transport Company (Metrofor), with the central government, through the CBTU, responsible solely for transferring the Loan Agreement resources and for tracking their correct application.

Experience acquired in the implementation of the project and results achieved

The Fortaleza project after its scope reduction was designed on the basis of two key components:

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A physical component envisaging, in civil works, the rehabilitation and modernization of the permanent track in the section between João Felipe and Caucáia, including, wherever necessary, the replacement of sleepers and fastenings; ballast and rail switches; construction of walls and fences along the right of way; improvement of drainage systems; double tracking in the section between Parque Albano and Conjunto Ceará stations; refurbishment of João Felipe, Álvaro Weyne, Pe. Andrade, Antônio Bezerra, São Miguel, Parque Albano, Conjunto Ceará, Jurema, Araturi and Caucáia stations, with works in the surrounding areas, revision in the electric and hydraulic installations, improvement in visual communication, paintings and access improvements for people needing special care; construction of a road viaduct in the city of Caucáia and execution of administrative and operational works; in rolling stocks, the acquisition of 6 (six) Light Rail Vehicles - LRV; in systems, automatic control at grading crossings, wherever possible; changes into the radio systems and visual signaling; and in administration, provision of technical assistance for basic and executive design development and for management and supervision to carry out the construction described.

An institutional and policy development component carrying out an integrated urban transport policy studies and the introduction of sound cost recovery, tariff, regulatory and subsidy policies.

Integration of the metro into the local transportation system has been assisted by the Infrastructure Secretary of Ceará State associated with the Fortaleza Urban Transport Company (Empresa de Transporte Urbano de Fortaleza S.A. – ETUFOR), which is the Fortaleza city transportation agent. The World Bank Loan Agreement was signed on 1st August 2002 and became effective on 9th September 2002. Implementation of the project was planned for a period of three and a half years (2002 to 2006), with an estimated completion date of 31st March 2006. The completion date was extended for a further 54 months to 30th September 2010. The main reasons which caused the implementation of the project to be delayed for 54 months were the following:

Problems related to the global economic situation had a major effect on the supply of foreign credit. As a result the Brazilian Government was obliged to cut the release of budget funds originally earmarked for the implementation of the Fortaleza project. These budget restrictions made it necessary to revise the overall project implementation plan resulting in the total contingency of funds for the implementation of the project, until 2005.

The assurance of receiving resources became possible only from the Investments Pilot Plan (PPI), in 2005, and considering the reduction of

30

scope and financed value, changing the electrified metro system to a rehabilitation of the diesel existing system. With the introduction of the Acceleration Growth Program (PAC) by the Federal Government, in the month of January of 2007, this project had an upgrade in the rolling stock component, including the acquisition of six Light Rail Vehicles. The old rolling stock scope of modernization of Pidner’s passengers cars and the rehabilitation of diesel locomotives were assumed as the Ceará State Government’s counterpart contribution;

Delays on contracting the executive projects and its corresponding works occurred chiefly by the lack of experience of the Metrofor’s staff on using the World Bank standard bidding documents, besides all the effort of the experienced CBTU team, involved in 5 (five) other World Bank financed projects. The Metrofor bids could not be done on the originally estimated time, causing a great delay on the project implementation even after the scope revised with assurance on resources from the Investments Pilot Plan (PPI), in 2005.

The Loan Agreement stipulates as project performance evaluation criteria a number of physical execution targets to be met in the course of the project execution after the scope reduction. These targets were not met as the result of the above-mentioned circumstances. By the end of the project implementation, in September 2010, the civil works and systems were totally concluded. The acquisition of Light Rail Vehicles was the only project inclusion not totally done besides all project financed sum was entirely disbursed. The reason was the greater cost for LRV acquisition than the estimated one. The excided value was also assumed by the Ceará State Government.

The World Bank Participation

This project represents the continuation of a partnership between the World Bank and the CBTU. The first Bank missions involved in the identification of the Fortaleza Metropolitan Trains Decentralization and the publication of the Staff Appraisal Report manifested the World Bank’s interest in developing this project in a true spirit of co-operation. Following the signature of the Loan agreement at every stage of the project from beginning to end, the World Bank’s interest was clear as manifested by the following:

Training sessions, seminars, lectures and support material were provided for the CBTU’s teams and government bodies;

Supervisory visits to track the development of the project on a regular

basis to identify and recommend solutions in problem areas; undertaking necessary interventions or collaborating in a search to correct solutions

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while highlighting project achievements which were subsequently adopted as recommended procedures:

The prompt supply of funding whenever requested by the Brazilian Government, as established in the Loan Agreement. The money was first disbursed in advance by the Brazilian Treasury and after the presentation of the application forms it was promptly withdraw by the World Bank. This approach was essential for the Metrofor to be in a position to honor its financial commitments with suppliers and consultants, which greatly assisted the ones responsible for managing the project.

Given the above support provided to both the CBTU and the Metrofor and amply demonstrated by effective practical action, we assess that the performance of the World Bank throughout can be considered satisfactory. Borrower Participation In the World Bank assessment contained in the Staff Appraisal Report the highest risks involved in the Program were considered to be the following: project cost and time overruns; demand forecast overestimated; proliferation of illegal transport; fare integration and tariff too high for low-income users after private sector participation; delay in approving bus feeder routes to rail stations; untimely availability of counterpart funds and limited private sector interest in the operations and management of Metrofor. These risks arose with different degrees of intensity in the course of the project’s development, as explained below. The mitigation action proposed by the World Bank with respect to the projected costs and the project execution timeline was the use of well-known technology, available from many sources. With the funds contingency mentioned and the reduction on the project scope, an unexpected situation, conducted to a completely different cost and time for implementation than the initial one estimated. Although the CBTU requested, on annual basis, the funds needed for carrying out the works planned for each fiscal year, the corresponding budget amounts were not released at the due time because of the problems mentioned above, and it was part of the great contingency made by the Federal Government. Furthermore, the Federal Government, through the Ministry of Finance, completely changed the original project, with considerable reduction in scope and cost. In the new composition, there was no counterpart from the Federal Government. About demand forecast, the CBTU had contracted a specific study including an origin-destiny resource with funds from a Japanese Grant, managed by the World Bank. The Metrofor contracted a consulting company for updating the mentioned studies. Regarding to the private sector interest, the Metrofor contracted a specific study, with funds from another Japanese Grant direct to the State of Ceará. No private company had

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demonstrated interest for the system operation once completion of the projects of West and South Lines did not occurred yet. About the proliferation of illegal transport, the local authorities took the regulation providences needed. Concluding the Evaluation Report on the participation by the borrower in implementing the Fortaleza Metropolitan Train Decentralization Project, it is incumbent on us to say that: The project, after its inclusion on the Investments Pilot Plan (PPI), in 2005, and later

on the Growth Acceleration Program (PAC), in 2007, all the funds needed were ensured with a non-abated resource flow;

The project has fulfilled the objective established under the Loan Agreement, i.e., to decentralize operation of the commuter rail system in the city of Fortaleza by transferring the system to a state company created specifically for this purpose, the Ceará Metropolitan Transport Company – METROFOR.

Flávio Mota Monteiro Coordinator of the CBTU/IBRD Project Approved by: Elionaldo Magalhães Director/President of CBTU

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Annex 8. Comments of Co-financiers and Other Partners/Stakeholders Not applicable.

Annex 9. List of Supporting Documents METROFOR (MHW). Progress reports February 2009. METROFOR (MHW). Recuperacao e melhorias da Linha Oeste. December, 2010. PAD Presidencia da republica- CGU. Nota técnica 801/DIURB/SFC/CGU-PR. April 2010. Projob Engenharia. Relatorio de acompanhamento do projeto e fabricacao de VLTs Metrofor. May 4, 2009. World Bank. Aide Memoires in Project File, 1999-2010. World Bank. ISRs in Project file, 2001-2010. World Bank. Loan Agreement Amendment in Project file, 2005. World Bank. Loan Agreement in Project file, 2001. World Bank. ICR Report 929. Salvador Urban Transport Project (Loan 4494-BR). December, 2008. World Bank. ICR Report 29806-BR. Belo Horizonte Metropolitan Decentralization Transport (Loan SCL 3916A CPL 39160). December, 2004. World Bank. ICR Report 22930. Rio de Janeiro Metropolitan Transport decentralization Project (Loan CPL 36330; SCL 3633A). December, 2001. World Bank. ICR Report 29805-BR. Recife Metropolitan Transport Decentralization Project (CPL 39150 SCL 3915A). December, 2004.

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Project chronology-Aide memoires June 7, 1999 Preparation mission August 9-10, 1999 Preparation mission December 8-10, 1999 Preparation mission February 11-17, 2000 Preparation mission May 1-5, 2000 Pre appraisal mission December 14, 2000 Project approved COFIEX March 14, 2001 Supervision mission February 20-22, 2002 Supervision mission March 27-28, 2002 Supervision mission June 28, 2002 Transference STU July 12-16, 2002 Supervision mission August 1, 2002 Loan agreement November 7-8, 2002 Supervision mission March 10-11, 2003 Supervision mission July 7-8, 2003 Supervision mission September 21-23, 2005 Supervision mission November 25, 2005 Convenio 11/2005 February 15-17, 2006 Supervision mission February 16, 2006 New closing date march 30, 2008 June 20, 2006 Loan agreement amendment November 14, 2006 Supervision mission February 26-27, 2007 Supervision mission May 31-1, 2007 Supervision mission January 8-10, 2008 Supervision mission June 2, 2008 Closing date September 30, 2010 September 4, 2008 Supervision mission March 2, 2009 Supervision mission October 6-7, 2009 Supervision mission March 15, 2010 Supervision mission June 14-15, 2010 Supervision mission August 16-17, 2010 Supervision mission (fiduciary) August 23, 2010 Amendment Grace period till

January 31 2011

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