The World BankCEPLAC Comissão Executiva do Plano da Lavoura Cacaueria (Executive Committee for the Cocoa Development Plan) CIFA Comitê Inter Instucional de Fiscalização Ambiental

Document of The World Bank

Report No: 26081

IMPLEMENTATION COMPLETION REPORT(CPL-34920)

ON A

LOAN

IN THE AMOUNT OF US$205.0 MILLION

TO

THE FEDERATIVE REPUBLIC OF BRAZIL

FOR

A

MATO GROSSO NATURAL RESOURCES MANAGEMENT PROJECT(LOAN 3492-BR)

October 30, 2003

This ICR was prepared based on the findings of the two ICR missions that visited the Rondonia and Mato Grosso Natural Resources Projects in the first semester of 2003, as well as various contributions from the Borrower and the Implementing Agencies. The ICR missions were led by Christoph Diewald (LCSES), and consisted of Stael Baltar (LCSEN), Flavio Chaves (LCC5C), Francesco Vita, Marta Irving, Magda Lara Resende, Pedro H. Z. da Conceição (consultants).

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CURRENCY EQUIVALENTS

(Exchange Rate Effective )

Currency Unit = Cruzeiro (Cr$) at Appraisal, Real (R$) at Completion

Cr$306.69 = US$ 1.00US$ 0.0036 = Cr$ 1.00

Rate at Completion R$3.00 = US$1.00FISCAL YEAR

January 1 December 1

ABBREVIATIONS AND ACRONYMS

BERON Banco do Estado de Rondônia (Bank of Rondonia)BNDES Banco Nacional de Desenvolvimento Econômico e Social (National Economic and Social Development Bank)CAF Corporación Andina de FomentoCCZEE Comissão Coordenadora do Zoneamento Ecológico Econômico (Federal Zoning Commission)CEPLAC Comissão Executiva do Plano da Lavoura Cacaueria (Executive Committee for the Cocoa Development Plan)CIFA Comitê Inter Instucional de Fiscalização Ambiental (Inter-institutional Environmental Law Enforcement Committee)COFIEX Comissão de Financiamentos Externos (Foreign Financing Committee)EMATER Empresa de Asistencia Técnica e Extensão Rural (Technical Assistance and Rural Extension Company)EMBRAPA Empresa Brasileira de Pesquisa Agropecuária (Brazilian Agricultural Research Enterprise)ENARO Empresa de Navegação de Rondônia (Water Transport Company of Rondonia)FAO Food and Agriculture OrganizationFEMA Fundação Estadual do Meio Ambiente (State’s Foundation for the Environment –Mato Grosso)FUNAI Fundação Nacional do Índio (National Indian Foundation)FUNDAGRO Fundo Agrário (Agricultural Credit Fund)GOB Government of BrazilGOMT Government of Mato GrossoGOR Government of RondoniaHQ Head QuartersIBAMA Instituto Brasileiro do Meio Ambiente e dos Recursos Naturais Renováveis (Institute for the Environment and Renewable Natural Resources)ICMS Imposto Sobre Circulação de Mercadorias e Serviços (State Sales Tax)ICR Implementation Completion Report

IMF International Monetary FundINCRA Instituto Nacional de Colonização e Reforma Agraria (National Institute for Colonization and Agrarian Reform)ITERON Instituto de Terras de Rondônia (Rondonia’s Land Institute)MIN Ministério da Integração Nacional (Ministry of National Integration)MTR Mid Term ReviewNGO Non Governmental OrganizationPADIC Programa de Apoio Direto às Iniciativas Comunitárias (Community Initiative Support Program)PAIC Programa de Apoio às Iniciativas Comunitárias (Community Initiative Support Program)PCU Project Coordination UnitPIC Programa de Iniciativas Comunitárias (Community Initiatives Program)PLANAFLORO Plano Agropecuario e Florestal de Rondônia (Rondonia Natural Resources Management Projects)POA Plano Operativo Anual (Yearly Implementation Plan)POLONOROESTE Programa de Desenvolvimento Integrado do Noroeste do Brasil (Northwest Integrated Development Program)PPG7 Programa Piloto para Conservação das Florestas Tropicais do Brasil Pilot Program to Conserve the Brazilian Rain Forests)PRODEAGRO Projeto de Desenvolvimento Agroambiental de Mato Grosso (Mato Grosso Natural Resources Management Project)PRONAF Programa Nacional de Fortalecimento da Agricultura Familiar (National Program for Family Agriculture Strenghening)QAG Quality Assurance GroupSAR Staff Appraisal ReportSEDAM Secretaria de Estado de Desenvolvimento Ambiental

Vice President: David de FerrantiCountry Director: Vinod Thomas

Sector Director: John Redwood III Task Manager: Flávio Chaves

BRAZILMato Grosso Natural Resources Project

CONTENTS

Page No.1. Project Data 12. Principal Performance Ratings 13. Assessment of Development Objective and Design, and of Quality at Entry 24. Achievement of Objective and Outputs 145. Major Factors Affecting Implementation and Outcome 326. Sustainability 357. Bank and Borrower Performance 368. Lessons Learned 419. Partner Comments 4910. Additional Information 50Annex 1. Key Performance Indicators/Log Frame Matrix 51Annex 2. Project Costs and Financing 52Annex 3. Economic Costs and Benefits 54Annex 4. Bank Inputs 55Annex 5. Ratings for Achievement of Objectives/Outputs of Components 57Annex 6. Ratings of Bank and Borrower Performance 58Annex 7. List of Supporting Documents 59Annex 8. Summary of Stakeholder Workshop 61

Project ID: P006505 Project Name: Mato Grosso Natural Resources Project

Team Leader: Flavio Chaves TL Unit: LCC5CICR Type: Core ICR Report Date: October 31, 2003

1. Project Data

Name: Mato Grosso Natural Resources Project L/C/TF Number: CPL-34920Country/Department: BRAZIL Region: Latin America and

Caribbean Region

Sector/subsector: General public administration sector (40%); General agriculture, fishing and forestry sector (29%); General water, sanitation and flood protection sector (23%); General education sector (4%); Other social services (4%)

Theme: Biodiversity (P); Environmental policies and institutions (P); Other rural development (P); Land management (S); Rural services and infrastructure (S)

KEY DATESOriginal Revised/Actual

PCD: 12/21/1989 Effective: 12/15/1992Appraisal: 09/30/1991 MTR: 06/30/1995 10/01/1996Approval: 06/18/1992 Closing: 12/31/1997 09/30/2002

Borrower/Implementing Agency: GOVERNMENT OF BRAZIL/SEC REG DEV/MATO GROTATEOther Partners:

STAFF Current At AppraisalVice President: David de Ferranti Shahid HussainCountry Director: Vinod Thomas Armeane ChoksiSector Director: John Redwood III Phyllis PomerantzTeam Leader at ICR: Christoph Diewald Luis CoiroloICR Primary Author: Christoph Diewald

2. Principal Performance Ratings

(HS=Highly Satisfactory, S=Satisfactory, U=Unsatisfactory, HL=Highly Likely, L=Likely, UN=Unlikely, HUN=Highly Unlikely, HU=Highly Unsatisfactory, H=High, SU=Substantial, M=Modest, N=Negligible)

Outcome: U

Sustainability: UN

Institutional Development Impact: M

Bank Performance: U

Borrower Performance: U

QAG (if available) ICRQuality at Entry: U

Project at Risk at Any Time: Yes

3. Assessment of Development Objective and Design, and of Quality at Entry

3.1 Original Objective:

Context.

The natural resources management projects in the neighboring states of Mato Grosso and Rondonia, known locally as PRODEAGRO and PLANAFLORO respectively, are two very similar operations funded by the Bank in the Brazilian Northwest (please note that, given the similarities between these two projects that the present report has section 3, 5, 7 and 8 in common with report N.° 26080 - PLANAFLORO's ICR). PLANAFLORO was the first one to be prepared and appraised, but both projects started at about the same time (early 1993). The projects were seen as follow-up to the Bank’s heavy involvement in that Brazilian Northwest, a sub-region of the Legal Amazon Region, through the POLONOROESTE program in the 1980s, in the form of four loans of some $400 million altogether. This earlier program had earned the Bank severe international criticism for contributing to destruction of rain forests by supporting the paving of trunk roads, migration, settlements and agricultural development in the rain forest. Both projects were intended to correct and compensate for the shortcomings of POLONOROESTE, and preparation of PLANAFLORO began already as that program was winding down. Many lessons were learnt from POLONOROESTE; however, not all of the lessons, including some of the most important (e.g., fully understanding and taking into account the political economy of the frontier, the importance of full state “ownership": of project objectives, the pitfalls as well as the advantages of decentralization and the critical importance of adequate local institutional capacity), were incorporated in the new projects.

The rationale for Bank involvement both projects, as stated in the SARs, was based on three main factors:

i. the Bank’s lending program for Brazil was placing increased emphasis on environmental issues;ii. the Bank was in a better position than during POLONOROESTE to assist Brazil in fostering more

“rational” development of the Northwest sub-region; and iii. there was a growing commitment within Brazil to sound environmental management, based on gradual

strengthening of essential institutions and improved technical knowledge.

These assumptions were reasonable. The circumstances that underpinned the decision of launching PRODEAGRO and PLANAFLORO were, however, unusual and merit mention:

- The Bank was uneasy with the international view that it had contributed to deforestation in the Brazilian Amazon through POLONOROESTE. The Brazilian Government was similarly uneasy about its image abroad, particularly at a time when Brazil was to host a major international conference on Environment and Development in Rio de Janeiro (June 92);

- The Brazilian Government felt the need to take stronger action in frontier areas, given the history of their “predatory” occupation and the innovative environmental agenda set by the 1988 Federal Constitution, which declared the Amazon a national heritage area. Brazil had also recently launched the “Nossa Natureza” program which intended to address the way Amazon occupation was taking place and contained as an important element the concept of zoning; and

- Poorer states such as Mato Grosso and Rondonia faced continued scarcity of resources, as a result of the drastic reduction of federal transfers that followed the 1988 Constitution.

The question of whether or not to finance a new project in the Amazon raised internal concerns and controversy in the Bank, both in relation to the strategy and design of the projects, and because of doubts about the true commitment of the Federal and State Governments to the environmental thrust of the

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projects. Another failure in supporting a new intervention in the Amazon region would put the Bank’s already tarnished image further at stake. On the Brazilian side, many decision-makers responsible for external financing shared those concerns and, although they recognized the need for federal support to Mato Grosso and Rondonia to avoid further environmental deterioration following POLONOROESTE, would rather not have external funds supporting the projects. The State Governments’ views, in turn, were quite pragmatic: the projects presented the best option to obtain federal transfers to finance some of their need for investments and public services. The real extent of their commitment to the projects’ environmental objectives and components, however, was less firm.

Moreover, projects of this type and scope, which aimed at significant changes in the way these large frontier states managed their natural resources over their entire territories, were unprecedented. The challenge was even larger because there was considerable uncertainty and lack of experience in terms of to what exactly would be required to make “sustainable development” a reality in the rain forest.

Evaluation of Objectives.

The Loan Agreement states the general objective of the Rondonia project as: “(…) to assist the Borrower and Rondonia in managing the development and protection of the Amazon basin in the territory of Rondonia”.

Similarly, the objective of the Mato Grosso project, as in the Loan Agreement, was : “(…) to implement an improved strategy for natural resource management, conservation, environmental protection and sustainable development of the State, under PRODEAGRO.”

This overall objective is highly relevant to the Bank and Brazil today, as reflected in the last CAS, and was so to the Bank at the time of appraisal, while, as suggested above, it is doubtful that the environmental elements in it had the same high priority for GOB, GOMT and GOR at the time. Legally speaking, the Loan Agreement bound the entire Federal Government to its terms, but in practice, there were (and still are) divergent and/or inconsistent interests and programs within GOB that did not feel bound by the objectives of the projects – the most salient example being the National Institute for Colonization and Agrarian Reform, INCRA. This INCRA agency signed an agreement with both Rondonia and Mato Grosso to follow their respective zoning plans , as a condition of loan effectiveness, but then went ahead with its settlements in both states, at least initially, without any regard to the zoning prescriptions in effect, although at a much slower pace than in the 1970s and 80s. With the perhaps unavoidable compartmentalization of the Federal Government, it has been difficult for any one ministry to ensure consistency of federal actions.

The objective was, however, formulated in such a broad way that all parties concerned could subscribe to it. It shows the imprint of the Bank’s post-POLONOROESTE interest in better (less destructive) natural resource management in the States, while acknowledging their (legitimate) development interests (just as in the objectives of the G-7 funded Pilot Program to Conserve the Brazilian Rain Forests [PPG7], started at about the same time). Indeed, it would have been difficult for the Brazilian Government to disagree with the objective given the unfortunate experience of the 1970s and 80s in the Amazon and the internal and external outcry that ensued and its environmental agenda.

The SARs for Rondonia and Mato Grosso provided a more concrete physical dimension to this objective, by stating that success was to be measured in terms of the reduction in the annual rate of deforestation. As it turned out, when the entire ten-year period of the project is considered, these rates were not reduced although they did fall at the time of preparation, appraisal and startup. Thus (in hindsight) this objective was not achieved.

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The stated objective makes no specific reference to poverty reduction, which has subsequently become an important focus in natural resource management projects, both for the Bank and GOB. The interests of the poorer rural population were partially addressed, however, in the reformulated project design in 1997, even though the projects’ stated objectives did not change to reflect this.

While the term “improved strategy” in the objective for the Mato Grosso project is vague, the text of the SAR and the structure of the project, as reflected in its components, make clear what was meant:

“The project would assist the Government to:

Rondonia (Ln. 3444-BR) Mato Grosso (Ln. 3492-BR)(a) institute a series of changes in key policies, regulations and public investment programs in order to provide a coherent incentive framework for sustainable development in Rondonia;

(a) support changes in policies, regulations and public investment programs to provide a coherent incentives framework for the sustainable development of Mato Grosso;

(b) improve the knowledge of the natural resource base, by providing more detailed data on land capability and land tenure to establish criteria for improving land management and for biodiversity protection in the various agro-ecological zones of the state;

(b) conserve the rich biodiversity of the State, while creating the basis for the sustainable utilization of its natural resources for the direct economic benefit of the local population;

(c) reduce environmental degradation and ensure the long-term preservation of the biodiversity of the state, through the conservation of ecologically significant samples of its territory;

(c) protect and enforce the borders of all conservation units, Amerindian reserves, public forests and extractive reserves, and control and prevent illegal deforestation, wood transport and forest fires;

(d) protect and enforce the borders of all conservation units, indigenous reserves public forests and control and prevent illegal deforestation, wood transport and forest fires;

(d) develop intensive and integrated farming systems in areas suitable for permanent agriculture and agro-forestry, and systems for sustainable forest management and extraction of non-wood forest products in other areas which should remain under natural forest cover;

(e) develop sustainable agriculture in areas suitable for permanent agriculture promoting integrated agro-forestry farming systems, and systems for sustainable forest management in areas which should remain under natural forest cover;

(e) support priority investments in socio-economic infrastructure and services needed to implement the State's agro-ecological zoning in already occupied and deforested areas;

(f) support priority investments in socio-economic infrastructure and services in those areas where population should remain concentrated, in order not to undermine the delicate ecological balance of the state;

(f) consolidate the technical and operational capacity of State institutions, particularly those responsible for agricultural and forestry support services, and the protection and management ofState and Federal conservation units and Amerindian reserves.

(g) strengthen the technical and operational capacity of the State institutions responsible for the agro-ecological zoning, the protection and management of the environment, and agricultural and forestry support services.

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The specific objectives are similar in both projects. The Rondonia version is less clear than the (later) Mato Grosso one , as the former does not give an explicit motive for zoning, which is implicitly part of objective (b). The Rondonia project is also more ambitious in terms of institutional strengthening. The specific objectives were consistent with the emerging Brazilian environmental agenda in the early 90s and with the concept of agro-ecological (and later ecological economic zoning) zoning – a pivotal element of the PRODEAGRO and PLANAFLORO projects – advanced by Brazil since the 1980s. (The “Policy Notes” offered recently by the Bank to the new Brazilian Government make similar points with regard to a strategy for sustainable development and conservation of rain forests.) With the exception of items (e) through (f) for Mato Grosso and (d) and (e) for Rondonia, above, these objectives were less consistent with the prevailing “development” mentality of a large part of local society in each state, although certain less articulated forest-dwelling groups, such as the rubber-tappers and indigenous peoples, would benefit from better environmental management and protection and the clearer definition of property rights. In short, numerous project objectives ran counter to the culture of young settler states at that time, specifically in Rondonia, and both state governments were “ahead” of their societies in signing on to these objectives.

The specific objectives follow an intrinsic logic and strategy: To put order and “rationality” into land use, spatial knowledge was needed. Zoning, based on such knowledge, was to guide land use and land conservation. While the “second approximation” of zoning was being prepared under the project, the less refined “first approximation” undertaken before project takeoff would have to do. Policies and programs based on zoning would provide incentives for private agents to behave accordingly. Creation and protection of conservation units and indigenous lands would effectively set aside part of the land and shield it from traditional forms of development (i.e, agriculture, ranching and mining). Groups using the standing forest for a livelihood would be benefited. . Intensifying land use in areas more appropriate for rural productive activities and introducing new forms of land use (such as agro-forestry) with the support of directed credit would reduce economic and population pressure on primary forests. To that end, technologies would be developed and disseminated making intensification more attractive. Infrastructure and services would be provided only in these areas to further enhance their attractiveness and to retain the population within such areas (“fixar o homem no campo” – root people in the rural areas, as this strategy is referred to in Portuguese).This logic appeared valid after the experience with POLONOROESTE. However, it was predicated on certain assumptions that turned out to be shaky:

- Forest clearing is “irrational” behavior, and people could be induced to desist from clearing land by offering better knowledge of its potential (or lack thereof) and alternatives;

- Better knowledge by itself would lead to changed behavior;- Intensifying land use in suitable areas would by itself diminish pressure on remaining forests;- Offering better technology and infrastructure would induce economic agents to behave in accordance

with zoning; and- State institutions would be willing and capable, with assistance from the project, to provide adequate

rural technology and basic infrastructure and services.

Recent Bank sector work has shown that cattle ranching is a major driving force of deforestation in the parts of the Amazon, and that ranching on pastures cleared from Amazon rain forest, in its final commercial stage of development, is not necessarily the low-return activity frequently assumed; nor is it necessarily unsustainable from a private perspective. Moreover, the economic logic of land use in a forest frontier is based on the perception of abundance of the resource and thus on its extensive use – the areas that have been “mined” for their nutrients can be readily replaced by fresh ones through extension of the frontier. Intensification happens where relative land prices are rising as a function of proximity to growing urban centers and local road infrastructure. But intensification does not necessarily diminish the drive to clear new areas on the moving frontier, as long as the forest beyond is considered abundant and the

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underlying ecosystems are suitable for production.

The project’s logic and strategy did not ignore the central issue of tropical forest use and conservation, i.e., the discrepancy between the private and the social gains/losses from specific land uses (externalities), but was clearly optimistic in the implicit assumption that project activities by themselves could adequately address it. Reformulation of the project following the MTR and introduction of a new component (community-driven sub-projects, mostly of a productive nature) was also ineffective in overcoming the externalities problem and changing behavior on a sufficiently large scale to fundamentally alter this underlying tension. Overall, project design relied essentially on a top-down, command-and-control approach based on prescriptive zoning, creation of conservation areas and enforcement of environmental law, coupled with supply-driven technology and incentives through improved infrastructure.

In addition, the projects did not address the concerns and calculations of loggers, ranchers and even small-holder settlers, and these groups were not included as stakeholders or consulted in their original design. Little emphasis was placed on economic instruments to influence private behavior, although the project aimed at stimulating economic alternatives in standing forests, such as sustainable forest management (logging) and extractivism .

The sheer number of specific objectives (six and seven, respectively) reflects the extreme complexity of the projects. While project design did follow a coherent logic, as in the case of their predecessor program, Polonoroeste, the attempt to put all elements of the strategy simultaneously into a single operation, especially where full local “ownership” of the multiple objectives was lacking, clearly overloaded it with an unmanageable number of components.

The specific objectives provided the general direction for project implementation, but were not explicit as to the extent to which these objectives were to be reached. No targets or indicators were set to permit measurement of achievements in relation to each specific objective, with the result that they were overly broad and ambitious, exceeding by far local implementing capacity.

3.2 Revised Objective:

Context.

By 1995, the Rondonia project had run into considerable trouble with local and international NGOs, culminating in an appeal to the Inspection Panel by the Rondonia NGO Forum , strongly supported by international NGOs. In addition, the relationship of NGOs with the state government had deteriorated badly. Reasons for NGO dissatisfaction were:

- the poor performance of the agro-forestry and socio-economic infrastructure and services components, executed by weak state agencies;

- the lack of interest in the project on the part of the new Government of Rondonia; - the continuing advance of new INCRA settlements into unsuitable zones which threatened

forest-dwelling and indigenous communities and ran counter to the entire project strategy; - the lack of progress with creation of extractive reserves and demarcation of indigenous lands; and - the exclusion of civil society organizations and grass roots communities from actual project

implementation and their demand for decentralization of decision making and actions to the community level.

As part of the Mid-Term Review (MTR) in 1996, a team of independent Brazilian consultants undertook a

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comprehensive review of project design and implementation. The MTR addressed the complaints of civil society and proposed design changes which were introduced in 1997 and implemented from 1998 onwards. These changes were discussed with the federal and Rondonia state agencies, all relevant stakeholders, including those groups not benefiting from the project, international NGOs and the Bank in June 1996. The revised design was applied almost identically in the Mato Grosso project, which had shown similar performance problems, however, with much less attention and participation of state and international NGOs.

The restructured projects were intended to conciliate different demands, reduce direct funding of state agencies in favor of stronger civil society participation and a new community-driven development component. They continued, however, to respond to the States’ interest in road improvements. The new components (called PAIC in Rondonia and PADIC in Mato Grosso) replaced the original Agro-Forestry Development and Socio-Economic Infrastructure and Services components (see item 3.3 below) as an attempt to respond to actual demands from poor rural communities in a more participatory and efficient way. The rationale was to channel project funds directly to communities to improve the quality of project implementation and ownership at the community level and allow more effective and adequate solutions to community needs. The proposal drew on the community-driven development approach adopted by the Bank in its Northeast rural poverty reduction projects and in the PPG7 Demonstration Projects, and already experimentally introduced in Rondonia in 1995 in the form of "Community Initiatives Projects" (PICs). The MTR report did not foresee the total exclusion of state agencies from the project (as later happened), but suggested that their services would be contracted by community associations.

Evaluation.

The reformulation of both projects did not formally involve any change in their principal project objective in the Amendments to the Loan Agreement, but specific objectives were implicitly adjusted by the elimination of components and introduction of PAIC/PADIC. The language of the specific objectives of the Rondonia project, however, was edited to (a) make zoning an explicit goal, and (b) substitute the objective “develop intensive and integrated farming systems in areas suitable for permanent agriculture and agro-forestry, and systems for sustainable forest management and extraction of non-wood forest products in other areas which should remain under natural forest cover”, to read "support rural socio-economic development and conservation initiatives at the local level”.

The revised projects responded to strongly expressed demands of civil society organizations, but deviated from the original strategy and logic in the process. What was intended as a different way of implementing the projects with unchanged objectives, in fact resulted in abandonment of the initial spatially differentiated strategy, particularly the development of more intensive land use in the zones more suitable for agriculture and ranching (of the "first approximation") -- an essential part of the original logic underlying the project approach. Some of the socio-economic infrastructure and services development was to be taken up under the new component. While this component was initially meant to buffer and thus support conservation and protection efforts in the zones that were to retain forest cover, after reformulation, in practice it was applied throughout the two states, regardless of zones, and supported "rural socioeconomic development and conservation objectives" in a very general way, for small farmers and traditional forest-dwelling populations alike. As a consequence, the original logical nexus between specific objectives and components became fuzzy. On the other hand, , the reformulation de facto added objectives, namely improving quality of life of rural communities and increasing family incomes (with a view towards poverty reduction), promoting their social organization as well as their inclusion and more active role in the development process, strengthening administrative capacity at the level of communities and associations, and strengthening of civil society organizations as mediators/partners between communities and government. Demonstration and dissemination of agro-ecological production technology appropriate to

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each zone was mentioned, but never actually implemented . The project would have become a more typical rural development or poverty reduction project, had the zoning and environmental components not been continued.

If the original focus of the projects was on land, maps, technologies for farming and forest management, law enforcement, etc., following reformulation their attention turned more to people, their needs and quality of life, and their role as agents of change of awareness and behavior. There has been considerable debate since the MTR whether the new decentralized demand-driven component was still pursuing environmental objectives (a particular concern of the Bank and international NGOs), or whether the focus was more exclusively on production, income generation, infrastructure and political inclusion which were the main concerns of the local communities themselves. The Bank insisted on mandatory environmental content, while many local civil society organizations, which saw improved conservation of natural resources as a consequence once greater quality of life at the community level had been established , resisted this.

3.3 Original Components:

PLANAFLORO initially consisted of four components with 15 subcomponents, and PRODEAGRO had five components with 20 subcomponents:

Rondonia Mato Grosso(a) Refinement of Agro-ecological Zoning and Land Tenure Regularization ($40.0 M), including land zoning, mapping and land regularization activities, with priority assigned to those areas where establishment of conservation units and indigenous reserves would occur, and areas where the need for land tenure regularization is more acute or where tenure conflicts had already started.

(a) Environmental Conservation, Management and Protection ($64.8 M), including land zoning, mapping and regularization; establishment, management and protection of conservation units and Amerindian reserves; sustainable forest management; extractive reserves; environmental protection; and institutional strengthening, technical assistance and studies.

(b) Management, Protection and Monitoring of Natural Resources ($54.4 M), including establishment, management and protection of indigenous reserves; environmental protection, pollution control, strengthening of forestry police and monitoring of protected areas, training and technical assistance.

(b) Agro-forestry Development ($81.4 M), including agro-forestry research, rural extension, rural credit and input supply.

(c) Agro-forestry Development ($70.2 M), including rural extension, agro-forestry research, rural credit, and market information systems.

(c) Socio-economic Infrastructure and Services ($56.9 M), including a two-year time slice of essential activities in health, education and water supply, and a five-year time slice of road and river transport activities.

(d) Socio-economic Infrastructure and Services ($65.4 M), including strengthening of the infrastructure related to health, education, water supply, rural electrification, and rehabilitation of rural roads.

(d) Project Administration, Monitoring and Evaluation and Technical Assistance ($11.2 M), including, inter alia, the yearly contracting of an Independent Evaluation Committee,with

(e) Project Administration and Technical Cooperation ($11.9 M), including installation and operation of a Project Coordination Unit (PCU) in Cuiabá, supported by an independent technical

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participation of NGO representatives, to evaluate project progress and recommend any needed changes in strategy or content.

cooperation group responsible for advising the PCU with respect to project monitoring and evaluation, and for recommending any needed changes in project strategy and content.

Despite some small differences and the fact that zoning and land regularization have been separated out in the Mato Grosso, the two projects have essentially the same content. Given the objectives and strategy, the structure of the components was logical and consistent, and based on an attempt to incorporate at least some of the lessons of POLONOROESTE.

Zoning was the crucial component as it was intended to determine where the other components would be targeted. Both states already possessed a crude zoning plan and associated laws before project start, but this was either largely ignored by public and private agents alike as in Mato Grosso, or was highly controversial and poorly accepted, as in Rondonia. Hence the need for a “second approximation” or refinement of the existing zoning funded under the project. In practice, however, all project components were initiated simultaneously, so that the “first approximation” necessarily was established as the guide for the location of other project investments. Indeed, the Loan and Project Agreements “obliged” the federal and each state government to orient their investment programs strictly by the prevailing zoning law.

All components were to be executed by state and federal sector agencies, more than 20 in each project. There was no implementing role for local governments, civil society organizations or producer associations. The attempt to apply the multi-pronged strategy (zoning, conservation and protection, agricultural and forestry development, infrastructure and social services) made for an exceptionally complex design. This would have challenged any strong, well-organized and well-managed government. For the state governments involved, it was virtually impossible to implement coherently and completely. The capacities not only of project coordination but also of most of the numerous implementing agencies were more than challenged, they were far exceeded, even with all the technical assistance built into the project. This critical weakness -- i.e., over ambitious design in the face of less than full government “ownership” of project objectives and very poor local institutional capacity -- had already been clearly identified as a very serious design flaw in the evaluation of Polonoroeste previously carried out by OED but was not adequately taken into account in preparation of the follow-on projects.3.4 Revised Components:

The restructured projects following the MTR were approved by the Bank’s Executive Directors in October 1997 on a no-objection basis, and amendments to the legal agreements were signed in February 1998. As already discussed, project reformulation resulted in the elimination of the original Agro-Forestry Development and Socio-Economic Infrastructure and Services components and most of their sub-components, but retained road improvements, which the respective state governments continued to be very interested in. The two eliminated components were replaced by the demand-driven community development components (PAIC and PADIC), funded with US$ 38 million in Mato Grosso and US$20 million in Rondonia. The restructuring required reallocation of the loan proceeds and extensions of the respective closing dates.

The new components (PAIC and PADIC) had no subcomponents and were not restricted to any particular zone of the states. Rural communities were expected to identify and implement investments in local infrastructure, education and health facilities, productive investments in agriculture, agro-forestry and processing, and environmental conservation and rehabilitation measures. Their implementation structures involved only the project coordination unit in each state as implementing agency, together with the transfer

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of funds to an account jointly held by each community association and the project entity. This represented a significant operational simplification and increased the volume and timely flow of funds to rural communities. The revised design, however, made unrealistic assumptions about the availability of knowledge about innovative technologies and of truly qualified technical assistance to support the communities. Technical screening of proposals, selection processes, supervision and monitoring were all foreseen, but were not adequately taken into account in the arrangements to carry out these activities. Component design included, in Mato Grosso only and at the Bank’s insistence, a requirement that all sub-projects should have an environmental component corresponding to at least 30% of their cost. This was later dropped as it was only been complied with in a superficial way.

3.5 Quality at Entry:

The breadth and lack of concrete dimensions/indicators of the project development objectives have already been mentioned in item 3.1 Original Objective above.

A decisive factor, particularly for this unprecedented kind of project, was ownership. Despite the consistency of the projects’ declared objectives with Brazil’s environmental agenda at the time, it is not clear that the Federal Government attributed high priority to the project beyond its potential positive impact in terms of the country’s international image. For decades, the objectives of the Borrower and, even more so, of the states in frontier areas had been largely political and geopolitical in nature aiming at the demographic and economic occupation of frontier lands, the expansion of the agriculture through directed settlement/agrarian reform projects and, the promotion of extensive cattle ranching activities. The specific objectives of PRODEAGRO and PLANAFLORO diverged radically from these traditional concerns. The State Governments of Rondonia and Mato Grosso, the actual project implementers and loan beneficiaries, nevertheless appeared to accept the projects for the advantages they would bring (resources for infrastructure and services), rather than their alleged environmental thrust, which ran counter to the prevailing development culture of local e society at large and important political interests in the two states. The driving force in terms of the projects’ environmental objectives was clearly much more the Bank and to a lesser extent the Federal Government, than the principal local stakeholders. .

Also in relation to the ownership issue, the project would have benefited from a careful analysis of the interests of all important local stakeholders – which included not only beneficiaries but those that could potentially be adversely impacted by the project or limited in their freedom to act, including the private sector (loggers, timber industry, ranchers and new settlers) and agencies such as INCRA. Important groups, especially in Rondonia, where the state government made serious attempts to enforce the first zoning law, did not support the conservation and protection thrust of the project, subsequently caused serious problems and saw nothing in the projects that would benefit them in return. Representatives of local governments and civil society were included – in the Project Council, but private sector representatives were not. In sum, the projects could affect – in theory – virtually everybody in the rural areas of both states, but there was little local ownership and support for (or even knowledge of) them at the time they were prepared.

Civil society participation in government projects was certainly not the norm in the early 1990s. It is thus worthy of note that civil society representatives were to be included in the Project Council and in component-specific monitoring committees that would oversee and make strategic and operational decisions on the project implementation. This was an important innovation with which neither the Bank nor the country were familiar. This level of participation, restricted to seats on committees, however, did not yield the expected space for civil society which brought turbulence during the first years of the project

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implementation, especially in Rondonia, and was one of the factors leading to the complaint to the Inspection Panel.

One of the main assumptions – that agro-ecological zoning would provide a solid technical basis for project design and implementation – entailed the use of a new tool with which neither the Bank, the state governments, nor the Borrower were truly familiar. Some reviewers within the Bank pointed to the risk of building project objectives and design on the preliminary stage of zoning – based on maps at a scale of 1:1,500,000. Implementation proved, indeed, that the “first approximation” included mistakes, such as the zoning of areas for conservation where settlements had already been established. . Had appropriate safeguard policies been in place at the time, some mistakes might have been avoided. Since the “second approximation” of zoning was expected to be available relatively soon, this risk was underestimated. Methodologically, there were no precedents for rural zoning on such a grand scale anywhere. The Rondonia SAR did not describe the nature and process of zoning; it mentioned only “the preparation and distribution of statewide agro-ecological, climatological, soil and topographic maps”, and treated this as “works” for procurement purposes. The long delays until consulting contracts could be signed for the zoning work in both projects, including extended discussions on the terms of reference, also show that none of the parties clearly understood what zoning would actually entail. Even today, there still is debate whether zoning should be “indicative” (i.e., providing information on land use options) or “normative” (binding by law). Be that as it may, the long delay in preparing for and implementing zoning work significantly affected the implementation of some project activities and increased the dissatisfaction among groups whose economic activities were contingent upon the findings of the “second approximation”. The terms of reference for this crucial task should have been ready before effectiveness, while the whole process should have involved much greater participation in the part of the entire range of local stakeholders rather than being a largely top-down (and extremely costly) technocratic exercise .

From the technical preparation point of view, areas slated for conservation units were not always identified properly beforehand, perhaps owing to the crudeness of the first approximation, , and contained significant numbers of settlers in several cases. They were thus not suitable for the establishment of conservation units.

Supervision, monitoring and evaluation (M&E) were a clear concern for the Bank, and lessons were learned from the POLONOROESTE experience. The SARs mention several design elements for supervision and M&E: the executing agencies’ own monitoring and reporting, a central project M&E unit, also in charge of monitoring land use change in relation to the zoning plan and encroachments on conservation and indigenous areas, routine Bank supervision, and the MTRs. In addition, a State Council for the projects, chaired by the Governor of each state and comprising representatives of municipal mayors' associations, NGOs and all implementing agencies, would convene at least every quarter, while an Independent Evaluation Committee, in which NGOs would also participate, would meet annually to monitor project environmental and social performance and the compatibility of government investment programs with the zoning plan. Conscious of the sensitivity of the projects and the risks involved, the Bank established a field office in Mato Grosso as implementation started (February 1993), to closely supervise and support both the PRODEAGRO and PLANAFLORO projects. Substantial technical assistance for M&E through UNDP was planned.

Detailed physical targets for each component and sub-component were defined and included in the SARs. These referred mainly to specific outputs (establishment of conservation areas and reserves, demarcations, training activities, farmers attended, buildings, etc.) and in some cases to inputs (field visits, man-years, etc).

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The SARs were much less specific with regard to project impacts. They mentioned broad indicators, such as the reduction in the annual rate of deforestation, improved environmental preservation, protection of indigenous lands, economic utilization of designated areas, prevention of unsustainable agricultural activities, and reducing the rate of in-migration. But no specific qualitative or quantitative targets were given. A baseline study was to be prepared for three municipalities in both states. It is, however, noteworthy that the project was to fund an evaluation system to provide continuous environmental assessment, with analysis of remote sensing images and aerial photography and the establishment of a specially trained team within the project coordinating unit.

The Legal Agreements established a deadline, shortly after project start, for adoption of indicators and procedures, but they were never adopted by the project units in either Mato Grosso or Rondonia. Furthermore, a revised M&E system, developed as a result of agreements reached after the MTR, became available too late to have any impact on the implementation of the project.

The POLONOROESTE experience was interpreted by the project preparation team to show the need to decentralize project implementation from the federal to the state level. However, both states had very weak institutions at project start, as the implementation history has clearly shown. The SARs state that the organizational structure, staffing, operating practices and budget of each of the principal agencies to be involved in project execution had been reviewed, and they are frank about the limitations. Nevertheless, in hindsight it is evident that the review may not have been thorough enough. What was not analyzed were the guiding values and the internal and external incentives for staff to perform within a clear mission of the agency. The admittedly limited implementation capacity of project agencies was addressed in the design by inclusion of a heavy capacity building component, which encompassed an extensive training program, the assignment of new staff, provision of continuous technical support through a cooperation program with UNDP, and consultant services. It even included improvement in personnel policies. Project implementation revealed that, in addition to the slow agency response (which required more training than envisaged and increased the costs of both PRODEAGRO and PLANAFLORO), the state government did not properly disseminate the project among the implementing agencies during preparation nor did it sufficiently prepare them for their roles. As a result, roles were unclear and understanding of project objectives and strategy was poor. The combination of these constraints, together with insufficient political commitment to the project strategy and lack of forceful management, undermined the coordination mechanism that was intended to guide and integrate the activities of the many implementing agencies. The high-level State Council referred to above hardly met.

Project coordination was to be located within each state’s Planning Secretariat, but was to coordinate (not command) around twenty other agencies reporting to other state Secretariats. “Coordination” alone in the case of such large and complex projects is insufficient, and true management, going beyond coordination, is required. Management must be where the political power (over other agencies) is, i.e., in the Governor’s office, and even there delicate political relationships need to be respected. While largely independent, parallel (sub)components were indeed overseen, monitored and to some extent “coordinated” by the project coordination units, but there was no integrating force with the power and overall vision to steer these entire complex projects towards their objectives. This was a serious flaw in the implementation arrangements.

In addition, no provisions for sustainability of what the projects were to create in the states were built into the projects. The heavy reliance on UNDP-facilitated staffing, funded out of the loans, and lack of phasing out reliance on the loan significantly undermined project sustainability.

The project design attempted to incorporate some, but by no means all, of the lessons learned from POLONOROESTE. According to the SAR, in designing a new project for a frontier area with a fragile

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natural environment, it would be necessary to:

- Decentralize the implementation to the State level and strengthen its implementation capacity – this was a main rationale for creating state projects. But the dependence on the flow of federal resources, including loan resources, was maintained and strong local economic and political incentives to continue predatory occupation, resulting in continued environmental degradation, were essentially overlooked.

- Give an increased role to NGOs in project implementation to enhance accountability and improve responsiveness of the project agencies. In project design, however, NGOs were restricted to participation in councils and committees, but not directly involved in implementation.

- Build the design on a tool that would provide better technical information about the sustainable development potential of the various sub-areas within the state, i.e., on zoning.

- Undertake an appropriate analysis of the policy and legal framework governing the land use standards in the project area, which was addressed in the “Matrix of Main Environmental Policy Issues, Measures and Actions” codified in side letters to the legal agreements.

- To ensure that project interventions would be sufficient to achieve their objectives, they should not only support parts of states without addressing the movements of populations and patterns of occupation. While, in retrospect, it is clear that the true determining factors of continued frontier occupation were not properly addressed, the projects did attempt to take a statewide, strategic view.

- Where agricultural success depends on credit and if prevailing credit conditions are not suitable, create (in exceptional circumstances warranted by significant environmental or poverty reduction objectives) an alternative, project-specific solution to ensure credit availability to agricultural production, which was addressed by including a special credit line (FUNDAGRO) in both projects.

- Innovative projects with above-average risks need a monitoring and evaluation system oriented to generate early warnings and project design should provide considerable flexibility to allow for corrective measures. The project design contained such system.

- Farm development in relatively unknown or difficult environments should be given longer start-up periods and less optimistic assumptions should be made about the speed of farm development. This was not specifically addressed in the projects.

- Where a multitude of implementing agencies is involved, create coordination mechanisms with sufficient authority (including control over budgetary resources). This was insufficiently – addressed by the establishment of Project Councils and budgetary control in the Planning Secretariats. As noted above, the issue is not coordination, but management.

.

Risks.

Finally, the SAR identified the following major risks to project implementation and ways to address them:

-a Inadequate knowledge about natural resources, to be addressed by further zoning under the projects.-b Encroachment of conservation areas and indigenous lands – control and mitigation measures to be

addressed through project strategy and design.-c Unanticipated factors increasing environmental degradation (migration, weather, plant diseases) – to be

addressed through M&E measures built into then projects.-d Fiscal difficulties in the states and restrictions on hiring of adequate staff – to be addressed by a

strategy of the state governments presented at negotiations to ensure that executing agencies would be able to recruit and retain adequate staff, by close monitoring of the staffing situation, technical assistance to and staff training for key institutions and supervision by Bank and Federal Government.

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The SAR recognized the seriousness of these risks but concluded that “the alternative of inaction would pose far greater risks ... to the remaining natural forests". In hindsight it is cleat that Item (a) above was not really a risk, as the project itself was to create the necessary knowledge, but the lack of clarity about what zoning entails did pose a risk, which was not recognized. Item (b) was clearly a risk, although not a major one, as experience has shown that the limits of protected areas are not fully, but still reasonably, respected, in part due to project activities. Item (c) was indeed a risk, less so for the possible factors mentioned in the SAR, but rather due to the fact that the dynamics of land occupation and underlying political economy of frontier areas were underestimated and poorly understood. As it turned out, fiscal constraints did not affect staffing levels and quality (although this may have been a reasonable fear at the time), but they had other severe consequences for implementation. Staffing constraints were, rightly or wrongly, overcome to a large extent through the UNDP hiring mechanism (traditionally heavily used in foreign-financed projects in Brazil and now restricted by Presidential Decree) and bonuses paid by UNDP.

Other major risks, however, were not identified. The overall weakness of the many state agencies was recognized at appraisal, but turned out to be a much more significant risk than initially anticipated. Again, technical assistance was proposed to remedy this deficiency. Another risk related to the structure of the loans, which were extended to the Federal Government as Borrower, but were to be spent by the state governments, even for funding of federal agencies such as FUNAI. Apart from state counterpart funds, all project funds (loan and federal counterpart) flowed through the federal budget to the states, and were thus vulnerable to the restrictions of federal budget management caused by the fiscal adjustment. This proved to be an enormous bottleneck to the adequate flow of funds, particularly in the later years of implementation.

The combination of all the factors discussed above warrants an overall rating of unsatisfactory for quality at entry.

4. Achievement of Objective and Outputs

4.1 Outcome/achievement of objective:Outcome is defined as the extent to which the project's major relevant objectives were achieved, or are expected to be achieved, efficiently. The principal objective was: “to implement an improved strategy for natural resource management, conservation, environmental protection and sustainable development in Mato Grosso”

This objective in itself is vague, and must be interpreted taking the set of specific objectives (see section 3.1) as proxy for the “improved strategy”.

(a) Changes in policies, regulations and public investment programs to provide a coherent incentives framework for sustainable development. Such policy changes were not (or should not have been) expected only from the State Government of Mato Grosso, but from the Federal Government as well. There have been changes in policies, regulations and investment programs towards a more coherent incentives framework, while other policies remained unchanged and some investment programs continued to provide incoherent incentives. Certain policies and regulations required are not yet in place.

- Mato Grosso has enacted legislation on environmental management, biodiversity conservation, extractive reserves, fisheries, water resources management, environmental education, including adequate institutional arrangements for most of these areas;

- It has today a system of monitoring and controlling deforestation (at least in larger properties) through a rural licensing system which is reported to have had a positive impact on the rate of deforestation (decrease by 35% between 1998-99 and 2000-01, according to FEMA data, more than the average in

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the Amazon); the longer-term effective impact remains, however, uncertain, with steep rises in the rate of deforestation more recently (see further below). As yet, only a small part of deforestation is authorized.

- It has enhanced its capacity to monitor and control water pollution, fisheries, and mining; - It has increased its biodiversity conservation areas (from 3 to 30), although on a total area much less

than expected, with as yet insufficient management, and weak legal basis and little political support;- FUNAI has worked with the project to demarcate most indigenous areas targeted under the project;- Mato Grosso has today a much stronger environmental agency, with well trained staff and adequate

organization (except for biodiversity conservation), and a significantly higher budget;- Mato Grosso has demonstrated sustainable forest management, although on a small scale, and the

feasibility of a micro-watershed approach to natural resource management;- It has improved its rural road network, water supply, health and education infrastructure in parts of the

state; - Mato Grosso has made important strides towards regularization of land tenure, not only for large but

also for many small holdings; the state has created an innovative methodology to do tenure regularization more efficiently; it intends to complete land regularization in 100% of the state (for which it seeks Bank support).

- Social capital has been created in the state and contributes an important element to future sustainable development;

- INCRA has allegedly ceased to require land clearing as proof of ownership and effective use of land, and land reform settlements in primary forests were prohibited;

- The Federal Government has made changes to the land tax and increased forest reserve requirements;- It participated in the preparation of the Brazilian Agenda 21 and prepared a proposal for the Agenda

21 of Mato Grosso.

On the other hand:

- as an overall indicator, the area cleared of rainforest and transition forest has increased by 68 % from about 9.1 million hectares in 1992 to about 15.3 million hectares in 2001 (according to INPE published in 2003), and the average annual deforestation rate for the period 1993 - 2001 was higher than in the 1980s (670,000 ha/yr vs. 514,000 ha/yr) while in the rest of the Amazon (except Rondonia) that average has decreased. In fact, there was a substantial slow-down in the years just before the project started, and a steep increase in the first years of implementation. After a steep fall of the rate from 1995 to 1997, the rate increased again steadily thereafter;

- the “first approximation” zoning law was largely ignored by public and private agents, including INCRA and INTERMAT;

- After ten years, the second approximation of zoning as the main guide to overall land use was technically completed, but has not been discussed and accepted by stakeholders and society, and not been made normative in some form. Since the “first approximation” zoning law has largely been ignored, the state currently has no effective spatial guide and policy for development. Plans to complete the political process of zoning exist, however, and zoning may still become an effective guide;

- the state has relied almost exclusively on a “command-and-control” approach to reduce deforestation. Aside from voluntary compensation options for delinquent landholders, there are few other incentives to keep forests standing or to use them sustainably. It is, however, recognized that such incentives often require action and legislation by the federal government;

- the creation of new settlements, by INCRA and the state’s land reform agency, INTERMAT, occurred virtually throughout the project period (increase from 5 to 127 in 2001), and largely did not follow the existing zoning and principles of sustainable development, with a some exceptions;

- IBAMA did not seek to coordinate its own actions with the plans and activities of the project and the

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state;- The Federal Government has not developed adequate policies and programs yet to (a) control

unsustainable logging or (b) promote sustainable logging.- alternative farming and land use models have not been generated and disseminated and small-farmer

credit has been discontinued, although credit is available for small settler farmers through the PRONAF program for rural family credit and support.

Relevance: HighEfficacy: ModestEfficiency: n/r

(b) Better knowledge of the natural resource base. There was enormous improvement in knowledge of land capabilities and limitations through the diagnostic and zoning work of the consultants, and this knowledge is available to the state’s administration and in principle to the people of Mato Grosso, although the modalities of public access are not yet clear. Together with Rondonia, Mato Grosso possesses today more detailed information about its natural resources than any other Brazilian state.

Relevance: HighEfficacy: HighEfficiency: Low

(c) Reduce environmental degradation and ensure long-term preservation of biodiversity, protect the borders of conservation units and indigenous reserves, control and prevent illegal deforestation, wood transport and forest fires. New conservation areas have been created, although not to the extent planned at appraisal, but their management and actual protection remain weak. Indigenous peoples reserves are better protected. There is no ecological analysis of gaps in biodiversity conservation, and thus no objective judgment can be made whether the extent of conservation areas now created is adequate, particularly with regard to the cerrado (savanna) areas of the state. Adequacy is, however, strongly questioned. The impact of inter-institutional operations planned to protect conservation and indigenous areas and to enforce other aspects of environmental law is doubtful and their sustainability is unlikely. Through its innovative control system, the state has been able to reduce deforestation in some regions, but has not been able to reduce the occurrence of fires, whether intentional or accidental. Little progress has been made with respect to the control of logging and wood transport, which is (still) a federal responsibility (IBAMA was virtually not involved in the project, and has allegedly counteracted the state’s control activities in some cases).


(d) Develop sustainable agriculture in areas suitable for permanent agriculture promoting integrated agro-forestry farming systems, and systems for sustainable forest management in areas which should remain under natural forest cover. With the termination of the agricultural/agro-forestry support component at mid-term, any attempts at the development of sustainable agriculture and integrated agro-forestry farming systems were halted (which is not to say that continuation of the component would have achieved this). There were sustainable forest management trials in three municipalities and some training of logging firms, but sustainable logging has not been mainstreamed. Policies and incentives in this direction would, again, largely depend on the Federal Government. The new component PADIC has not contributed much to this specific objective.

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Relevance: HighEfficacy: NegligibleEfficiency: n/r

(e) Support priority investments in socio-economic infrastructure and services in those areas where population should remain concentrated. While some infrastructure investments were indeed made during the first phase of the project, this component was reduced to paving of selected roads at mid-term, which has likely given a boost to local agriculture by reducing transport costs. But there was only a relatively small impact in terms of making agricultural development areas more attractive to people inclined to move further towards the “frontier”.

Relevance: HighEfficacy: ModestEfficiency: Modest

(f) Strengthen the technical and operational capacity of the State institutions responsible for the agro-ecological zoning, the protection and management of the environment, and agricultural and forestry support services. Capacity of the state for (continuation of) zoning has been partially created in the Planning Secretariat through the training of technical personnel in analysis of land, natural resources and land use. There is little capacity yet for the planning aspects of zoning proper and no organizational and procedural framework to continue the various aspects of updating the zoning databank and administering its use, nor for “territorial management” as part of a state planning and policy-making process. The government has indicated its intention to create such capacity. Technically, the environmental agency FEMA is today much better equipped for environmental management, has initiated excellent collaboration with the (also strengthened) independent State Attorney’s office, but has not yet prepared itself organizationally for management and protection of conservation areas. Support to agricultural and forestry support services remains weak.


Additional objectives were implicitly introduced after the MTR and relate to the quality of life of rural communities (and reduction of poverty), the social organization of communities and the strengthening of civil society organizations. Quality of life has been improved locally through the PADIC component, social capital was created, and NGOs are stronger as a result of PADIC and had a much more active role in the second phase of the project.

Relevance: HighEfficacy: SubstantialEfficiency: Low

Taken together, and despite some serious shortfalls, the achievements under the specific objectives and components make for a significant advance towards the “implementation of an improved strategy for natural resource management, conservation, environmental protection and sustainable development” in Mato Grosso. Overall relevance remains high, overall efficacy ranges from high to modest and in one respect negligible. Overall efficiency was difficult to assess in this type of project, but given the exceedingly long implementation period and high overhead costs, as well as the high cost of zoning and the likely low economic returns of the PADIC component, is rated as low. For these reasons, project impact is

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rated unsatisfactory.

4.2 Outputs by components:While components are reviewed individually below, the relationships among them in terms of elements of a coherent project strategy and their contribution to the specific objectives should be kept in mind, beyond mere outputs. A salient characteristic of project implementation was precisely that execution of components was largely independent, parallel and uncoordinated. The same holds true even for sub-components. The overall objectives of the project appear to have been lost from sight. Furthermore, clean separation of environmental and “development” components, which was also not remedied with the introduction of a new demand-oriented component (PADIC) after the MTR, hampered the integration of environmental sustainability aspects within agricultural development and socio-economic infrastructure activities.

There are no performance indicators available (beyond physical output and input targets).

(A) Agro-ecological Zoning and Land Tenure Regularization (Appraisal US$40.0 million, actual US$56.4 million )

Zoning (Appraisal US$21.5 million M, actual US$36.5 million )

Through the instrument of rural land-use “zoning”, first introduced in the late 1980’s, both the Bank and the Brazilian government felt that the unsatisfactory pattern of land settlement observed in Rondonia and Mato Grosso during the implementation of POLONOROESTE could be rationalized and brought under some control. It was hoped that the technical/scientific underpinning of zoning studies would help to increase the acceptability of zoning restrictions and reduce the emotional reactions of stakeholders.

Mato Grosso had a zoning plan since 1989, prepared at the scale of 1:1,000,000, which was made into a state law in June 1992. It defined what economic activities (if any) could be carried out in each of seven zones, the boundaries of which were drawn on a map. The first zoning plan and law were never discussed with stakeholders in the society, nor was it ever well-known in Mato Grosso. The law was required by the Project Agreement, which also stipulated that any change to the law that would affect the project adversely (in the Bank’s view) could trigger Bank remedies. The Project Agreement obliged the state government also to “ensure that its investment program, which currently takes into account land use capabilities, ecological and agro-ecological zoning considerations, shall, at each annual update thereof, be maintained consistent with such considerations and compatible with such zoning”. Thus, the Bank attached high importance to the first zoning law. However, the first zoning plan was considered too coarse and at too small a scale to gain acceptance. Further thematic mapping work was to be carried out at larger scales over three years, to refine zoning under the project. The SAR used the term “zoning” without defining what it meant and what processes it implied. It only emphasized the “preparation and distribution of agro-ecological, climatic, soil and topographic maps of the territory of the State”. ( Oddly, the physical target for zoning was given as 26.8 million hectares , whereas the state has a total surface of 90.6 million hectares). The revised loan agreement of 1998 is somewhat more detailed but not much clearer:

- Preparation of the socio-economic-ecological zoning (ZSEE) of the state, including the preparation of small-scale maps to assist in the detailed planning and implementation (including agro-ecological, climatic, soil and topographic maps) of the zoning;

- Preparation and implementation of information and awareness activities of the civil society related to ZSEE;

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- Training of the staff of the state zoning committee;- Preparation and establishment of the zoning databank

It is likely that there was little clarity on the meaning and process of zoning on the part of the Bank and the state government. Even today, zoning is controversial, with multiple goals, definitions and methodologies. From the outset, zoning was considered by the Bank and government as an eminently technical and scientific exercise of making and combining thematic maps, so that the only alternative considered for preparing the second zoning was to have this done by contractors. No public consultations before or during the technical work were considered. It took more than two years to agree on terms of reference, select a firm and sign a contract. The contract initially defined only diagnostic work on land use, but was later (2000) amended to include a zoning proposal, a new draft law and assistance with public consultations about the final proposal. It also included training of specialized staff in the Planning Secretariat and the delivery of a database with all data collected and used for zoning.

The consultant’s work was concluded only in late 2002, at a cost of US$27.1 million, equivalent to about US$30/sq km. Total zoning costs amounted to US$32.78 million. (Per unit area, zoning in Mato Grosso cost much less than in Rondonia). This long delay was the result of several work stoppages by the firm, methodological issues and deficiencies on its part, and shortfalls in counterpart funds from state budgets. Numerous component studies and thematic reports of excellent quality were delivered during the “compilation” phase of the assignment, with sufficient detail and precision, so that Mato Grosso may have one of the most comprehensive natural resource and socioeconomic databases of any sub national jurisdiction in the world (some of the information on land use and other socio-economic themes is now out of date, however). The final products delivered by the consultants are the zoning proposal for the entire state, and the final database that incorporates data from all previous studies and surveys.

The zoning proposal consists of a map elaborated at a scale of 1:250,000 but presented at 1:1,500,000, including indications of recommended land use and development and conservation measures. It defines 42 zones and 67 sub-zones plus 69 specific areas within these zones, and an additional 15 zones recommended for creation of new conservation areas. Each zone falls into one of five categories of land use (restricted use, controlled use, uses that require redirection or rehabilitation, consolidation of current use, and special uses), which were defined by the consultants. While the state technical staff are satisfied with the content of the final proposal, they are critical of its methodological underpinnings, because the rules, principles and criteria that led to a specific recommendation for a given zone have never been made explicit and documented by the firm. This makes it unlikely that different planners will come to the same decisions and will defend the proposal in public discussions, making negotiations more difficult. The consultants also submitted a draft zoning law.

While technical work for zoning has been finished, its public discussion in the various regions of the state, its negotiation and eventual adoption (in a new law) and implementation still lie ahead. While the Bank and the state of Mato Grosso looked to zoning as a guide for the actions of PRODEAGRO and the state’s overall development, this did not occur. Mato Grosso still has no real experience with the implementation of zoning after more than a decade of effort.

The “second approximation” is likely to face some implementation challenges. First, the zoning plan is highly complex and verbose, and thus difficult to explain to stakeholders and to the public in general. The inclusion of proposed development or conservation actions for each zone gives the plan an operational and practical orientation, and may facilitate or hinder its implementation depending on how affected communities and the new state government receive and understand these recommendations. A second aspect is the fact that it was prepared by out-of-state consultants with virtually no input from local stakeholder

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groups, although the MTR had called for consultations with the public on zoning. Little effort was made by the state to explain the objectives of zoning or to enhance its political acceptability before or during the work on the “second approximation”. The State Zoning Commission was supposed to provide a forum for government and non-governmental entities to express their views on zoning and to orient the zoning work, but it met only four times during project implementation and seems to have accomplished little.

Clearly, ranching and commercial agriculture interests will be using hearings and consultations to lobby for greater flexibility in the application of the rule on minimum forest reserves. According to current federal law, the existence of a statewide zoning plan could justify selective reductions of the legal reserve from 80% to 50%, but the current zoning proposal does not make any recommendations as to where this might be considered. Small-scale producers will look to zoning to provide a clearer definition of those areas reserved for traditional, non-mechanized agriculture. The results of the consultations on the “second approximation”, and the government’s responses to stakeholder demands will go a long way to determining whether zoning promotes better land use in the long run.

Given the limited outputs envisaged by the SAR and the 1998 amendment, the result of the zoning sub-component was satisfactory, except for the lack of a public information campaign and of an institutional capacity to carry on the work.

Land Tenure Regularization (Appraisal US$26.2 million , actual US$20.0 million )

Mato Grosso was the state with the highest rate of overlapping claims and titles in Brazil (20% excess of titled land over the actual area of the state). The project strategy rightly included a strong emphasis on land regularization – a daunting task. Clear property rights are important for (a) proper land use decisions that take into account the longer run; (b) tenure security particularly for small farmers; (c) access to credit; and (d) government control of land use through licensing, monitoring, law enforcement and fines . In the case of public conservation areas, tenure security is important to be able to enforce their integrity. The project initially had set unrealistic targets, which were reduced at the time of reformulation. Revised targets and results are as follows:

Targets ResultsCadastral work necessary for creation, management and protection of Conservation Units

Completed for nine conservation areas

Delimitation, demarcation and cadastral registration of about 23 million hectares of land

Cadastre of 33.1 million hectares

Land regularization activities in ten municipalities to identify public and private lands, assist in the resolution of pending administrative questions regarding indigenous areas, and identify land and boundaries for the creation of Conservation Units

Survey and cadastre of the total area of two municipalities completed; titles in only one of them. Partial regularization in another 13 municipalities. Elaboration and application of an innovative, rapid, efficient methodology of land regularization.Repossession of 7,000 ha for conservation purposes.

Demarcation of about 1,000 kilometers of conservation area boundaries

349 km

Regularization of land titles of about 7,000 17,300 definitive titles issued, in part in

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smallholders urban areas

Even though this sub-component did not fully achieve its goals, the state land agency INTERMAT has nevertheless made significant progress. Even more titles could have been issued, had not federal legislation impeded the issuing of titles in the of 150 km strip along Brazil’s border (in this case with Bolivia), and were there not unresolved issues of authority between the state agency and INCRA. The sub-component went beyond what was planned at appraisal and reformulation, by implementing a geodesic and cartographic reference network in 53 municipalities (half the state).

One of its most significant achievements was creation of a considerably faster and cheaper method of cadastre and regularization work, by means of which an interdisciplinary team of surveyors, mapping specialists and lawyers targets the area and plots of an entire municipality, reducing the number of steps necessary for regularization from forty-two to ten, and reducing the cost per hectare from about US$20 to about US$1. The delimitation of properties in the field is done amicably with the involvement of each of the affected owners or squatters. This innovation serves as a model for other states. The cost to the smallholders is zero, but the registration of titles in private notary offices (“cartórios”) is expensive and thus often avoided by owners. An important challenge for the future is the establishment and maintenance of an up-to-date, geo-referenced cadastral data bank in the state with the participation of state, federal and private agencies (“cartórios”), as part of the planned national system of land registration.

Given the size of the state and its tenure problems, and despite shortfalls, the achievement of outputs by this sub-component is deemed satisfactory in view of the substantive progress achieved and the streamlining of the process which the project assisted. The new State Government is interested in Bank financing to complete regularization of the remainder of the state’s land within about two years.

(B) Management, Protection and Monitoring of Natural Resources (Appraisal $54.4 M, actual $42.6 M)

Subcomponents at Appraisal After Reformulation

Management of forest resources; and Merged, with additional activities, into an Environmental Demonstration Projects sub-component

Rationalization of mining activities

Establishment of nine state conservation areas Establishment and management of nine state conservation areas, with addition of four new conservation areas

Environmental education and awareness building

Deleted as free-standing sub-component and integrated into other (sub)components of the project

Law enforcement activities (Forest Police and FEMA licensing and monitoring)

Improvement of the environmental licensing and monitoring of deforestation, water and air pollution

Support to indigenous communities Maintained

Forest cover monitoring and remote sensing, inspection of permits

Integrated into enforcement and monitoring sub-component

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Institutional strengthening of agencies in charge of carrying out environmental conservation and protection activities through the preparation of a long-term, strategic environmental law enforcement plan

Institutional Strengthening of FEMA

The original structure of this largest and most complex project component had eight subcomponents, revised at reformulation to a different, but still complex structure of six subcomponents. Most of these elements can be considered as necessary parts of an environmental conservation and protection strategy, but as a whole this set of activities was almost unmanageable, given the initial weak institutional capacity of the state, and essentially remained so after project revision. It mixed elements of command-and-control with promotion of economic activities based on forest conservation, consciousness-raising of the rural population, and with welfare of indigenous communities (strangely under the heading “natural resources”).

This component was also the least welcome to a large part – but not all - of Mato Grosso’s society and its major stakeholders at the time, as it appeared to run counter to the prevailing development culture. It had the least political support. It was, in part , due to the Bank’s insistence on “pari-passu” implementation of (and disbursement for) developmental and environmental components of the project that the component managed to still achieve surprising results, although this had little backing in the legal agreements.

Conservation Units (Appraisal US$2.9 million , actual US$4.0 million )

The SAR called for the creation of nine new state conservation units, out of a total of 16 identified in the first zoning, with a total area of about 4.85 million hectares . At appraisal, there were less than 500,000 ha of protected areas in Mato Grosso. The project planned to put 6.6% of the state under conservation. Actually, fifteen areas were created: eight of the nine areas planned at appraisal, plus another seven, in part identified in the amendment. The total of these areas amounts to about 1.56 million hectares , which is two-thirds short of the target area. With one exception, the areas envisaged for each unit given in the SAR overestimated by far the actual availability of state land or unoccupied land. Targets were based on erroneous data or assumptions, due to errors of the first approximation of zoning. The second approximation zoning proposal has identified, based on vastly better information, new or expanded areas for conservation.

Eleven units are for strict protection, the remaining ones allow some form of use. Demarcations, rapid ecological assessment and management plans have been concluded to varying degrees for the 15 units. No management arrangements have yet effectively been made for any of the units, due to the lesser priority given by FEMA to conservation during the last years. Despite cadastral and tenure surveys of most of the areas, the actual legal status of the units remains tenuous, due to pending expropriations or private claims, and due to time limitations of the decrees that created them. There have been repeated attempts by Deputies in the State Legislature to reduce the size of some state parks, none of which has yet been successful, due in part to vetoes by the Governor, counter movements by NGOs and “threats” by the Federal Government to create a national park in place of two state parks (Cristalino I and II). Under the new government, FEMA plans to review all units for size and category of protection.

Mato Grosso was the first state in Brazil to have passed its own legislation for a State System of Conservation Units, even before the Federal Government, but has not completed a conservation master plan which would include, inter alia, provisions for the financial sustainability of the system and its units.

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Environmental Management, Enforcement and Protection (Appraisal US$30.8 million , actual US$11.4 million )

The SAR provided for the establishment of a state system of law enforcement, licensing, monitoring and control, with special emphasis on protection of forest areas in the north of the state and indigenous lands. The project achieved much in this regard. In 1995, the State codified its environmental management system defining the institutional roles and responsibilities at the state and municipal levels, as well as the instruments of environmental policy, including rules and processes for licensing, environmental assessments, control and enforcement. In 1999, the state approved a fisheries law.

After some ineffective and uncoordinated attempts, since 1995, to carry out control of deforestation and forest fires and to protect conservation areas and indigenous lands, mainly by the Forest Battalion of the State Military Police, the state government instituted in 1997 the Inter-institutional Committee of Environmental Law Enforcement (CIFA), integrating eleven federal, state and NGO entities, with a strategic function of coordinating the dispersed functions of monitoring, surveillance and policing through annual plans and organizing joint enforcement campaigns. CIFA had a wider scope than just protection of conservation units and indigenous lands. In five years, CIFA has reportedly carried out 40 campaigns on hunting and fishing, more than 40 on deforestation and burning, 40 on flora, fauna and polluting activities, and 25 on protection of conservation units and indigenous lands. While its activities were intense during the first two years, they slowed down during the later years, as CIFA became integrated into FEMA. No data on the impact of these campaigns are available, except for the impact of deforestation control, nor on the degree of integrity achieved for conservation units and indigenous lands, despite repeated requests by Bank missions. No strategic law enforcement plan is available. Thus, as far as integrity of protected of lands is concerned and without better data, outputs of such CIFA campaigns are considered unsatisfactory.

An innovative system by FEMA to monitor and control deforestation (and to a lesser extent wildfires) in Mato Grosso has become a celebrated success. It has been supported jointly by PRODEAGRO, the Rain Forest Pilot Program (PPG7) and the Bank-funded Emergency Amazon Fire Prevention and Control Project (PROARCO). It combines use of the traditional instruments of licensing, monitoring and enforcement with remote sensing technology and geographic information systems. The system was introduced in 1999, after a “federative pact” between the State of Mato Grosso and IBAMA, which turned over responsibility for deforestation control of larger properties to the state, among other functions. It is based on the federal Forest Code and the Environmental Crimes Law, the Mato Grosso Environmental Code and state decrees creating additional specific legal instruments. Mato Grosso introduced a simplified “environmental license for rural properties”, replacing the usual three licenses required with one, and applied this requirement, in a first phase, to properties over 1,000 hectares in the deforestation belt of the state . The legally required forest reserves,permanent protection areas, areas available for clear-felling, and already degraded areas are mapped for each property on a satellite image, which is provided by the owner and mandatory for obtaining the license and a permit to clear forest. Actual land use on each property is monitored through interpretation of annual satellite images and field inspection. FEMA works closely with the independent State Attorney’s Office in dealing with offenders, and allows compensation for excess clearing by the offender granting land (in other areas) to the state to augment conservation units. Annual land clearing in the state fell by 32% in the period 2000-01 relative to the period 1998-99, and particularly so in regions where the control system was active.

Water resource management and water pollution control were not contemplated at appraisal, but included in the revised agreements along with air pollution control. Three significant achievements are noted: the approval of a State Water Resources Policy (law of 1997) and Plan, prepared with UNDP assistance under the project, including institutional arrangements as foreseen in the National Water Resources Policy and

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arrangements for water rights concession and fees, the establishment and operation of a pollution control laboratory at FEMA, and the monitoring of water quality in three river basins. In addition, the state strengthened its apparatus for control of predatory fishing and approved a state fisheries law. These are significant contributions to environmental management in the state.

Environmental Demonstration Projects (Appraisal US$ 38.0 million , actual US$ 10.7 million )

Under this sub-component, project results were obtained in the areas of sustainable forest management, improved mining practices, reforestation and rehabilitation of degraded areas. Three demonstration forest management areas were established, and training courses on the subject held in ten northern municipalities. While forest management has not become mainstream in Mato Grosso, the project contributed to the diffusion of the concept, its feasibility and associated technologies and models among logging companies. The pilot projects were later abandoned. The establishment of nine state forests on four million ha was foreseen at appraisal, but dropped at the reformulation, victims apparently also of the erroneous guidance of the first approximation zoning and the unavailability of public lands. No land/forest management plans were consequently prepared for public lands, nor for any private lands. Furthermore, the project supported the establishment of tree nurseries in 26 municipalities, and the rehabilitation of small degraded areas in four others, however, apparently to little lasting effect.

Small-scale placer mining for gold is a widespread activity in Mato Grosso, with mercury pollution and other environmental consequences. The project helped to establish some monitoring and control of such activities in certain river basins through inventories, inspection and licensing of mining sites (after environmental improvements), strengthened FEMA’s laboratory facilities, promoted technological research and diffusion of technologies, and established a model placer mine in the Pantanal area. Overall, the state acquired capacity to monitor and control mining, and the project was effective in disseminating improved technologies and a changed attitude among miners, even if in a limited way.

The largest (spending) item under the environmental demonstration components was not foreseen at appraisal but was eligible under the amendment: the building of a solid waste management and recycling plant for the city of Cuiabá. The plant operated for a while, but turned out to have a totally insufficient capacity for Cuiabá, and is not operational anymore.

Strengthening of State Environmental Agency FEMA (Appraisal US$6.6 million , actual US$9.9 million )

The strengthening of FEMA under the project exceeded what was expected at appraisal. It included a substantial increase in staff (from 65 to 344), staff training in several fields, establishment of regional offices, a library and laboratories and environmental information units in all municipalities with conservation units, equipment, vehicles and information technology. The establishment of a water resources management capacity, with its own directorate in FEMA, was not foreseen at appraisal. At the end of the project (2002), the project financed a new building for FEMA. All this improved FEMA’s standing in the public eye. A shortcoming was the decreasing attention and priority given to the system of conservation units during the last years, and the failure to create a directorate for biodiversity conservation in FEMA. As a result of its strengthening and increased licensing activity, FEMA was able to augment its budget resources from R$140,000 in 1994 to R$1.8 million in 2001, excluding project funds.

In 1996, the judiciary of Mato Grosso created, in four municipalities of the South and East of the state, the institution of mobile “environmental circuit courts” with civil and penal jurisdiction over environmental matters and power to execute fines imposed by FEMA, but with a preference for conciliation among the

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parties.

The environmental legislation of the state was augmented and improved, covering all environmental concerns and allowing for the necessary institutional arrangements.

Indigenous Protection (Appraisal US$9.1 million , actual US$6.7 million )

The project has enabled very significant advances in terms of indigenous rights, security, health and education. There are 38 indigenous peoples in Mato Grosso, who have been subject to severe pressures and strife during the centuries of expansive occupation of the state. Their population has increased substantially during the project period. The project gave support to four essential activities for protection of indigenous lands: (i) identification, demarcation and registration of “indigenous lands” (ILs); (ii) vigilance and protection from intruders; (iii) identification of isolated Indians, and (iv) indigenous health and education. Seven ILs were to be identified (delimitation on the map); work began on five, but was concluded only for one (one of those omitted is for a group that is generally not recognized as indigenous). Seventeen areas were to receive physical demarcation of their boundaries. This was fully achieved. Of these, only ten have been legally regularized, and two are under litigation. The loan amendment also called for renewal of overgrown boundaries in seven ILs, for a length of 900 km (much reduced from appraisal targets). This was achieved in eleven areas, with 551 km. Attempts at identification and contact with “isolated” indigenous groups were also funded by the project, but had minimal success. Overall, achievements to create visible and legal boundaries for indigenous lands have been quite remarkable, although available funds during the last years of the project could have been used more effectively to achieve even more. More than 90% of the state’s indigenous population now live in demarcated ILs. There is still work left to do in terms of studies, identification, demarcation, regularization and boundary demarcation and removal of settlers. It is hoped that this will be taken up by the ongoing Indigenous Lands Project under PPG7, which so far has not operated in Mato Grosso.

Little is known of the efficacy of joint action of relevant agencies under CIFA (see above) to protect indigenous lands from intrusions. Better results were reportedly achieved when indigenous communities participated in or undertook vigilance activities themselves.

The issue of occupation of the Sararé indigenous land warrants special mention. This area underwent the sudden intrusion of gold miners and ranchers just before appraisal. The Bank had made it a condition of loan effectiveness that “all miners and other illegal occupants within and around the Sarare Indigenous Area have been removed ... and the Sararé Action Plan has been furnished to the Bank.” The condition was complied with by the Government of Mato Grosso, but by 1996, illegal occupants had returned. At that time the Bank insisted again on the immediate removal of intruders and requested the preparation and implementation of another action plan for the area to guarantee the integrity of its borders. This plan was prepared with UNDP assistance and included removal of encroachers, policing of the borders; strategic relocation of the villages to permit better surveillance and a stronger sense of responsibility of the indigenous community; and support to indigenous subsistence production. The plan was implemented with success, and there appear to be no further problems. The state government also obtained an area from a local mining company to permit gold miners to continue their activities elsewhere.

The SAR provided for a complex set of measures to improve indigenous health within an equally complex and tenuous context of institutional responsibilities (FUNAI, state government, municipalities, and later also the National Health Foundation), aimed at bringing preventive and curative health care to the communities and increasing the share of financial and personnel resources dedicated to indigenous people – a project by itself. In the absence of any impact indicators of indigenous health, little can be said about the

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success of the sub-component. The first phase of the project was based on “itinerant health teams”, carried out an indigenous health diagnostic and model/plan, and invested in training, equipment and infrastructure. The difficulty of finding qualified professionals to serve indigenous populations led UNDP to contract professionals under very generous contracts paid 100% with project funds, but the Bank insisted that this program be phased out after a few years, because it was not sustainable. The MTR noted the absence of an overall policy for indigenous health, the failure to address rising health problems by their causes, and the need to integrate health care with other lines of action concerned with environmental education and self-sustenance of indigenous communities. The reformulation brought the establishment of “indigenous health districts” under the National Health Foundation and a highly innovative program of training 120 indigenous nurses’ assistants to increase the reach of the activities of the districts in terms of basic health care and monitoring. Training also included indigenous medicine and elementary schooling. Almost all of the students (117) graduated, gained professional recognition (equivalent to nurses’ aides anywhere in the country) and were contracted to work with indigenous communities. This is the first and so far only program of this type in Brazil, and serves as a model for other states. Shortcomings included contracting of the professionals at lower salary levels than normal for personnel with their training, the lack of training in general environmental aspects and hygiene, and the low number of women students.

A similar innovation was achieved, even before the reformulation, in indigenous education which was not part of the original project design. A diagnosis in 1995 indicated the need to train indigenous teachers for indigenous village schools, as members of specific ethnic and social groups, and oriented by the motif “land, language and culture”. The project trained 200 indigenous teachers from eleven ethnic groups over four years; 176 graduated, of whom 101 subsequently passed the entrance exam for a specialized course for indigenous teachers at the University of Mato Grosso. The activity was primarily an initiative of the State Government, with support from FUNAI,, municipalities, NGOs, and academic institutions.

Environmental education (appraisal US$1.7 million , actual US$1.4 million )

Environmental education was meant to increase awareness of the population of Mato Grosso of environmental problems and sustainable development, through support of municipal environment councils and suitable NGOS. Activities were carried out slowly and in highly dispersed form, and revision of the project eliminated this sub-component and integrated environmental education in other components (PADIC, conservation units). Overall, the environmental component has produced sufficient outputs to warrant a rating of “satisfactory”.

(C) Agro-forestry Development, including rural extension, agro-forestry research, rural credit, and market information systems (Appraisal US$ 70.2 million , actual US$35.6 million )

This component was excluded from the revised project after 1997. At appraisal, the overall objective of these sub-components was to support the transformation of extensive farming systems into permanent agro-forestry systems in the northern part of the State (zone 3), intensify small-holder agricultural production in the southern fertile soils (zone 2) and initiate the privatization of agricultural support services. This was an important element of the overall strategy, but overly ambitious. It also was not consistent with the traditional interests of the state’s agricultural sector, largely based on cattle ranching and cultivation of commercial crops.

Research and extension (appraisal US$ 44.6 million , actual $25.6 million )

This sub-component suffered from the lack of political support by the various governments during implementation and the institutional rigidity of the state’s research and extension agency (EMPAER) and its management, unwilling to take advantage of the chances offered by PRODEAGRO for improving its

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institutional structure to better serve producers’ demands. The project called for research and extension to concentrate on mixed cropping system, improved forest fallow management, agro-forestry systems and diversification into alternative tree crops on soils of lesser fertility. Instead of a systems approach, EMPAER continued to work on individual crops and did little with respect to perennial crops or agro-forestry. The integration of research and extension did not receive EMPAER attention; the two branches are still working in isolation, although there were a few promising initiatives with “participatory research”. Only a fraction of tests and field trials was carried out. Very few of the training courses for extension staff and farmers were carried out, although demonstration events exceeded targets. With about 36,000 farmers reportedly assisted, this appraisal target was also exceeded. The project has helped to strengthen the field structure of research and extension through establishment of research centers, improvements of experimental stations, vehicles, equipment, and agro-meteorological stations.

An interesting experiment was contractual extension for farmer associations, an attempt at gradual privatization of these services. It had only limited success, as poor farmers were unwilling or unable to pay for the services, staff quality was poor, and due to ingrained corporate interest at EMPAER, its management was not supportive. A second innovative experience (for Mato Grosso) is related to eleven pilot micro-watershed management projects in two municipalities of the cerrado biome, based on the Bank’s experience in the southern states of Brazil. They only included simple interventions of terracing and road restoration, but were well accepted by farmers and technical staff. Beyond soil erosion control, the micro-watershed approach holds promise for organizing all stakeholders and local governments around issues of natural resource management in a cooperative way, although it would not be appropriate where large farms predominate and may even exceed the size of micro watersheds. The new state government is interested in expanding this approach.

A central element of agricultural development strategy was the provision of adequate agricultural credit, through the FUNDAGRO credit fund (appraisal US$35.1 million , actual US$9.7 million ). By 1997 the credit sub-component had only disbursed 27% of the appraisal target and assisted only 18% of the planned number of farmers. The main reasons were the overly heavy bureaucratic procedures designed more to satisfy federal norms than the needs of small producers, delays in approval and disbursement on the part of the State Bank of Mato Grosso, delays in the preparation of technical proposals by EMPAER; and the unavailability of marketing and technical assistance during sub-project preparation. FUNDAGRO funded only 2347 ha of “consorcios” with perennial crops, 3838 ha of perennial crops, 897 ha of annual crops, and farm equipment, and thus failed to meet project objectives. After cancellation of this sub-component and the liquidation of the State Bank, the delinquent portfolio of FUNFAGRO increased from 1% to more than 80%. Some other activities funded under this component also had only limited success.

Overall, output and performance of the agricultural/agro-forestry component was unsatisfactory due to lack of political support from the state government for research and extension services responsive to small farmers’ needs; lack of management vision and capacity to plan the integration of research and extension and reluctance to accept innovations suggested by UNDP Technical Assistance under the project; lack of technical “messages” for small farmers, regarding farm planning and integrated crop systems, and lack of simplified and efficient credit procedures for FUNDAGRO accessible to small farmers. The MTR clearly pointed out the unsatisfactory implementation of the component and recommended its termination. Civil society representatives argued with the state government that there was no point in continuing with the component (with the exception of the research service), and insisted that this and the infrastructure component be substituted by a program of support to community initiatives (PADIC). PADIC, however, was not really designed or prepared to provide services to small farmers considered essential for the overall strategy. Alternatives to providing these services in a different form were not contemplated or not considered feasible in the institutional context of the state.

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(D) Socio-economic Infrastructure and Services, including strengthening of the infrastructure related to health, education, water supply, rural electrification, and rehabilitation of rural roads (Appraisal: US$65.4 million , actual US$73.4 million )

The main objective of this component was to provide incentives the concentration of the rural population in the areas with potential for agriculture (zones 2 and 3 of the first approximation zoning) and to reduce pressure on the forest areas of the state. (The SAR affirms that the State had committed not to provide such infrastructure and services elsewhere. The Project Agreement, however, obliged the Government of Mato Grosso only to ensure that “its investment program, which currently takes into account land use capabilities, ecological and agro-ecological zoning considerations, shall … be maintained consistent with such considerations and compatible with such zoning.” The project was to fund a five-year time-slice of the state’s health, education, water supply, electrification and road improvement programs.

This component was also terminated with the project reformulation, eliminating another important element of the original strategy. However, the new project component PADIC included, in principle, the possibility of funding community investments in local infrastructure and certain services, and thus mitigated the elimination of this component.

Between 1993 and 1997, the health sub-component completed only the construction of 26 new and improvements to seven existing health posts. Improvements to indigenous health services were discussed above and stand out as an innovative achievement. Implementation of the education subcomponent fared somewhat better, but also failed to reach appraisal targets, with one notable exception, the training of “uncertified” teachers which benefited double the number foreseen and is unanimously considered an effective and efficient innovation with an impact on rural education, worthy of further study and replication elsewhere. However, some of the health posts and school buildings are in precarious conditions, or closed, or not being used for their intended purpose.

The rural electrification and water supply subcomponents also fell short of their appraisal targets. They benefited some 3,760 families with water supply and electricity.

The main objective of road pavement and rehabilitation was to provide adequate road conditions for input supply and marketing, by rehabilitating and paving existing roads in the southern parts of Mato Grosso (Zones 2 and 3). During the first phase 1993-1997, the project funded rehabilitation of 3,965 km of state and municipal gravel roads (53% of appraisal target), and 103 km of road paving (83%). The revised project after MTR excluded further rehabilitation of gravel roads, mainly for lack of a lasting effect of such efforts, and concentrated on road paving and rehabilitation of paved roads. By the end of the project, 472 km of paved roads were rehabilitated (96%)., 108 km of gravel roads had been paved (84%), and seven bridges had been built. In spite of the last extension of the loan closing date to allow, inter alia, for completion of road works, about 23 km of rehabilitation of a paved roads and 22 km of pavement of a gravel road remained unfinished at closing, with likely loss of part of the works already executed to the rains. Quality of road paving was good, but rehabilitation of some paved roads suffered from inadequate prior surveys and engineering designs. Maintenance is sporadic, limited by scarce state funds, and responds to emergencies; a required study on a permanent road maintenance system was not done. Training of road department staff in road management (including environmental aspects) was completed, and required environmental assessments were carried out. An environmental unit in the state roads department was created, but may not be functioning as well as expected. A proposed study on a multi-modal transport system for the state was not undertaken. Due to the lack of criteria for prioritizing construction works or evaluating the benefits derived from them, decisions on works tend to be taken on the basis of political

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opportunity instead of evaluated and prioritized on the basis of social demands or requirements.

The roads sub-component represented a large share of Mato Grosso’s investments in transport infrastructure during the project period, yet remained small in relation to the development needs of a rapidly growing state economy with a thriving commercial agriculture. Road improvements benefited both large and small farmers, and have provided incentives for the rural population to stay in areas slated for agricultural development.

Overall, the results of the infrastructure component were unsatisfactory.

(E) Project Administration and Technical Cooperation (US$11.9 million at appraisal, actual US$32,3 million ), including a Project Coordination Unit (PCU), supported by an independent technical cooperation group responsible for advising the PCU with respect to project monitoring and evaluation, and for recommending any needed changes in project strategy and content.

The SAR provided for the strengthening of the institutional capabilities of the State and the Federal Project Coordination Units, with particular emphasis on improving their monitoring and evaluation capability, through training, technical assistance and consultancies.

Specifically the projects would support: (a) the installation costs of the State Project Coordination Units, including administrative offices, equipment and operating costs; (b) the operating costs of the Federal National Coordination Unit; (c) training, technical assistance, consultants studies; (d) in Mato Grosso, processing facilities and related expenditures for implementation of a monitoring system based on satellite imagery, for the immediate detection of illegal deforestation and invasion of protected areas, as an aid to project enforcement activities; and (e) in both States, the yearly meeting of an Independent Evaluation Committee, with participation of NGO representatives, to evaluate the annual progress of the project and recommend any needed corrective actions.

The strengthening of the Project Coordination Units (PCUs) did not occur as foreseen. Monitoring and evaluation did not provide information to steer the project as intended. In Mato Grosso the monitoring of deforestation was successfully transferred to PRODEAGRO’s environmental components, but there, the relation to other project activities became tenuous. In Rondonia the independent evaluation committee only met once and was finally dropped.

Reasons for the poor performance of the Administration and to some extent the Technical Cooperation include the diffused ownership of PRODEAGRO and PLANAFLORO, and the lack of proper PCUs empowerment to manage the projects. This lack of management affected the development of an adequate monitoring and evaluation system, as there was no demand for the information generated by such a system. As a result, no baseline studies and outcome indicators were developed, and very few references are available to measure project outputs and outcomes against.

Technical Cooperation, which was carried out by UNDP, played an important role in assisting both projects to overcome difficulties in some key activities, especially in the zoning and environmental components, by allowing the hiring of qualified personnel. In both states, however, better work conditions were offered to this personnel (higher salaries, privileged status within the institutions, and better facilities), which had an adverse impact on relations with regular staff. . Moreover, this privileged position not only made more difficult the transfer of knowledge and in-house capacity-building to carry on the project after closure, but also resulted in some distortions. Examples are the personnel hired by technical assistance going much beyond the activities associated with a regular technical assistance program, notably in Mato

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Grosso, where they carried out activities that regular staff should have implemented. Also, project resources allocated through technical cooperation were used to create incentives to retain qualified personnel. However, the federal agency in charge of auditing both projects (“Secretaria Federal de Controle”) identified several hiring or incentive procedures in PRODEAGRO that were incompatible with federal and state laws. As a consequence, all transfer of funds to the technical assistance component was suspended until the full amount spent in connection with these irregular procedures was recovered. The key point about the capacity-building program through technical assistance, however, is that no exit strategy was devised by governments to maintain these incentives at project’s conclusion and therefore retain qualified personnel.

The absence of project management is the single most important factor leading to the diminished outcomes of the Administration Component. This absence of management, a result of insufficiently empowered PCUs and diffused project ownership coupled with different agendas and sometimes conflicting interests among the various agencies, resulted in the yearly implementation plans (POA) being limited to activities that reflected each participating institution’s own goals, without regard to the necessary complementarities between project activities. The lack of baseline studies and outcome indicators for both PRODEAGRO and PLANAFLORO, may also have contributed to the loss of sight by Project Coordination Units of what the project should achieve. There were no clear targets to orient project implementing agencies in the preparation of their POAs.

The final outcome of the Project Administration and Technical Cooperation Components is that the structures created to manage PRODEAGRO and PLANAFLORO were not strengthened. Instead of managing the projects, the Project Administration Units spent most of their time dealing with procurement, contract management, troubleshooting administrative issues and struggling for adequate transfer of federal government funds to the projects. Little, if any, in-house expertise was created and it will remain difficult for the governments of both Rondonia and Mato Grosso to continue project-related activities, such as the enforcement of zoning. It is noteworthy that despite the modest achievement of outcomes, the Project Administration and Technical Assistance components had a major budgetary overrun. PLANAFLORO had 136 % overrun in regard to Appraisal and PRODEAGRO had a 187 %.

Overall, the outcome of the Project Administration and Technical Assistance components was unsatisfactory.

(F) Community Initiatives Support Program -PADIC (Appraisal: n/a, revision: US$38.0 million , actual US$17.3 million )

This new component pursued multiple specific objectives within the context of an unaltered principal objective after project reformulation (see sections 3.2 and 3.4 above). Between 1998 and 2002, 878 proposals were received from communities, associations and NGOs, of which 395 subprojects were approved (47%), 228 were completed, and 167 are still under execution. About 27,000 families were reached by the component in 115 municipalities (83% of the state), including indigenous communities. Most sub-projects included more than one investment item and purpose. Of all items financed, about 58% were for infrastructure, 26% for production (of which only 2% agro-forestry), 16% for vehicles and equipment, and 13% for environmental purposes (nurseries, waste recycling, reforestation). The component was implemented in two phases (1998-2000 and 2001-02, the latter still ongoing). Loan disbursements were made on the basis of advances to joint government/community accounts, but these advances have not yet been fully spent). Considerable learning and improvements took place in PADIC design and implementation between the first and second phase.

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Implementation was severely hampered by interruptions in the flow of funds to subprojects, the lack of qualified technical assistance and training to communities and associations, and by spending of funds on components that the communities did not really want and support, particularly on the environmental side, which was mandatory only in the first phase. Some associations were established simply because funding was available, and some subproject proposals were submitted by technical personnel specializing in writing proposals, but did not have the full ownership of the community.

PADIC represented the only support of PRODEAGRO to small farmers, landless and traditional populations after reformulation. It has been hugely popular and much better known than PRODEAGRO itself in the state. Politicians appreciated PADIC as a means to gather votes in rural constituencies. PADIC has clearly helped to improve the quality of life of rural communities through its infrastructure investments (water supply, electricity, local roads, etc.), although quality of designs and execution has been mixed and future arrangements for operation and maintenance are mostly unclear or lacking. No improvements to health and education services were supported.

PADIC did nothing to replace the credit sub-component . PADIC has apparently achieved little in terms of technological innovation, new farming systems and alternative forms of land use, due in part to the lack of knowledge of technical personnel (government and private) and the NGOs elaborating proposals with the communities, or due to lack of proven models. The technical value-added of PADIC was just as weak as that of the agro-forestry support component it replaced. There is little evidence that the component has furthered environmental conservation or protection, or reduced pressure on conservation units and forests in general. PADIC did not make the link between (i) production or infrastructure investments and (ii) environmental considerations or changes of behavior in land use. By leaving out the state’s agencies for research and extension, infrastructure and social services, any opportunity for state reform in these functions was foregone. Interestingly, the MTR was fully aware of the possible consequences of a demand-driven approach, and envisaged the contracting of state agencies by communities to provide certain services or investments. This vision was lost in the actual design of PADIC.

PADIC has, however, clearly contributed to the mobilization and social organization of rural communities, thereby creating social capital, and the level of organization may be maintained by many communities after the end of project funding. PADIC also increased the awareness of issues and opportunities related to natural resource and environment among the rural population, as came out clearly in the stakeholders meeting. It created at least a demand for knowledge about environmentally sustainable development among poor farmers. The limited information introduced in some subprojects about new species or species combinations increased the notion of how natural resource management can improve productivity and income. Whether betterment of the quality of life is followed by changes in dealing with natural resources (as was predicted by some) cannot be answered yet, but warrants serious further study.

A further result of PADIC is the strengthening of civil society organizations, not only through the challenge of participation in decision-making bodies and their role with the communities, but also as direct beneficiaries of PADIC subprojects, and also politically. On the other hand, PADIC has done little to integrate municipal governments in its initiatives, a characteristic of the entire PRODEAGRO project.

Whether PADIC has contributed directly to an “improved strategy for natural resource management, conservation and environmental protection and sustainable development” in Mato Grosso is doubtful for now, based on current evidence and impressions. Much deeper and more systematic studies are required to learn more from this experience. The “fundamental” strategic issues of rain forest use and conservation, which were at the heart of the project concept and objective, became secondary and were not addressed anymore by PADIC. Were it not for the parallel zoning and environmental conservation components, the

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project would have become a general rural development and poverty reduction project – a noble objective, but not the original one. PADIC may have helped indirectly, however, to strengthen the social and political basis on which an improved strategy must continue to build, which was so much lacking at the beginning of the project. Overall, the PADIC component is rated unsatisfactory.

4.3 Net Present Value/Economic rate of return:

Not available. Farm models and related financial indicators were included in the SAR. However, the agricultural component was dropped at mid-term, and no data are available to replicate and compare the farm models at completion.

4.4 Financial rate of return:N/A

4.5 Institutional development impact:N/A

5. Major Factors Affecting Implementation and Outcome

5.1 Factors outside the control of government or implementing agency:

The external shocks to the Brazilian economy, the intervention of international NGOs in concert with local ones in the case of Rondonia (with repercussions on Mato Grosso), and the Bank’s consequent concern with its reputational risk were the major factors outside the control of the government that affected the implementation and outcome of PLANAFLORO (and PRODEAGRO).

After successive external shocks since 1998 and devaluation of the Brazilian Real in 1999, GOB restricted expenditures progressively for on-going projects in order to cope with the crises in line with IMF requirements. This affected not only counterpart funds, but loan funds as well. This was aggravated by the application of legal impediments to transfer funds to states with any outstanding debt to the Federal Government. While some projects and sectors remained shielded from major budget cuts, externally funded projects with low disbursement capacity and limited relevance to the Federal Government were particularly affected. Releases of funds to PLANAFLORO and PRODEAGRO were not only reduced but occurred usually late in the year, causing delays in implementation and increasing project costs (and the cost of supervision to the Bank as well).

Concern with its reputation after the POLONOROESTE experience led the Bank to adopt a defensive posture in relation to NGO criticism of PLANAFLORO and its performance (see section 3.2). In order to address NGO complaints, the Bank agreed to the new PAIC/PADIC component in each project and shifted the focus from the projects’ initial strategy, which had relied on development of agriculture and agro-forestry and investments in social and economic infrastructure as part of the spatial logic of the strategy. Local partisan and grassroots politics took advantage of PAIC/PADIC, scattering subprojects through most of each state’s municipalities rather targeting communities around protected areas.

5.2 Factors generally subject to government control:

The responsibility for project coordination at the federal level was with the Ministry of National Integration (MIN, or its predecessors), which never assumed a leading role. MIN had no means to influence actions and policies of other federal agencies with impact on project outcome, such as INCRA, the Ministry of Environment or its subordinate, IBAMA. The political priority given by MIN to the two projects was

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usually low. As a consequence, federal attention to the project’s overall strategy and impact, and its resolve and power to protect the projects against budget cuts was usually weak. The states were left without much federal guidance or assistance when they needed to make decisions that had national significance. MIN never requested that PLANAFLORO and PRODEAGRO be considered “strategic” and, as such, be shielded, from the worst budget cuts. In short, there was no effective federal “champion” for these projects.

This was also felt in the zoning components of both projects. Although the Federal Government had created a Federal Zoning Commission (CCZEE) in 1992, charged with planning, coordinating and following up all zoning exercises in Brazil, CCZEE paid little attention to Rondonia and Mato Grosso. As a result, each state followed different methodologies and their databases are cartographically and methodologically incompatible. In another example of federal oversight, Rondonia enacted the second approximation zoning plan into state law which conflicted with Brazilian forest law.

Limited interest of the responsible federal Ministry is related to the fact that project activities were defined by the Legal Agreements and gave little room for Ministry intervention in project design and implementation, precluding any kind of political benefit. Second, allocating funds to PLANAFLORO and PRODEAGRO had a high political opportunity cost, in terms of reduced funding to other regional projects in Brazil, especially irrigation projects in the Northeast (also funded by the Bank), the main political constituency of MIN.

With respect to sector policies, the National Congress’ delay in approving the National System of Conservation Units affected the project schedule for establishing such areas in the states. Remarkably, Mato Grosso took the initiative and created its own system before the federal one, and became the first Brazilian state to do so. More serious, though, was the resolve of the Federal Government, to push ahead with land reform, with emphasis on Amazonia, which led to a renewed drive for the establishment of directed settlements by INCRA.

5.3 Factors generally subject to implementing agency control:

Factors subject to the control of the governments of Rondonia and Mato Grosso were: lack of political support in the states; lack of effective project management; ineffectiveness of monitoring and evaluation; lack of qualified staff for some components; and lack of administrative continuity.

Mato Grosso and Rondonia were societies used to expand the agricultural frontier with an extensive type of development, not in line with the objectives of PRODEAGRO and PLANAFLORO. Uncertain political will and weak public support, combined with fiscal constraints at the state level, continuously hampered project implementation, not least through difficulties in allocating state counterpart funds and funds for regular operation and maintenance.

As discussed above, the SARs provide only for “coordination” among state and federal agencies. In the absence of strong, goal-oriented project management and the presence of typical centrifugal political tendencies of state agencies, mere “coordination,” when it occurred at all, was bound to lose sight of ultimate project objectives and make it almost impossible to get executing agencies to plan and implement activities coherently with the overall objectives. This allowed state agencies to pursue their particular corporate or political interests with little regard for the common goal.

Lack of qualified staff also hindered PLANAFLORO’s and PRODEAGRO’s performance. This was known at appraisal and was to be addressed by generous technical cooperation. Hiring staff through technical cooperation, rather than recruiting them as civil servants, works as long as the project lasts, but it

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is not a substitute for institution building, wherever functions and services are concerned that must continue beyond the life of the project. In the case of zoning, an inexperienced firm was selected, aggravated by the state governments’ (and the Bank’s) lack of knowledge of exactly how zoning could become the best possible planning tool for the state, with the result that the final product was delivered not in the third but in the seventh year in the case of Rondonia and the tenth year in that of Mato Grosso. An important factor was also the choice in favor of a consulting firm, even with a mandate of training government staff, which led the states to limit themselves to mere contract management, without themselves becoming directly involved in technical, methodological and policy aspects of the work. As a result, the projects did not create sufficient know-how to allow the states to carry on zoning functions on their own.

As mentioned before, the project monitoring systems did not include impact indicators. Despite deadlines established in the Legal Agreements, and despite ample technical assistance, project implementation went ahead without such systems, as project coordination units found output indicators satisfactory. Indicators for the development objectives would have helped the coordinating units and the Bank to keep track of the principal goals during implementation. Their absence made it difficult for the ICR team to provide evidence for the rating of outcomes.

Lastly, administrative discontinuities after changes in state governments affected implementation. Incoming administrations initially had little “ownership” of the projects in view of their own political agenda. This led to slow-downs in project implementation at the beginning of each new administration, especially in Rondonia where three administrations managed PLANAFLORO, but less so in Mato Grosso where only two administrations oversaw PRODEAGRO, with the last one extending over eight years. In this regard, the long implementation period were themselves a contributing factor to unsatisfactory implementation.

5.4 Costs and financing:

Total project cost amounted to about 90% of appraisal estimates for both operations , even with an actual implementation period of ten rather than five years. The devaluation of the Brazilian Real led to substantial savings. Insufficient, delayed and unreliable transfers of federal government funds to the states also constrained the capacity of the project to spend, particularly after 1998. . Cuts and delays of federal funds caused adjustments to some contracts, notably for zoning and road restoration and paving. The extended project period increased the cost of project administration and UNDP technical assistance. The great majority of expenditures occurred in the five years 1994 through 1998. The loan financed US$177 million, or 68% of total expenditures, in the case of Mato Grosso, as against 72% foreseen at appraisal. In Rondonia, the loan funded US$148 million, or 73% of expenditures, the same percentage foreseen at appraisal.

Appraisal estimates, revised plans after reformulation, and actual expenditures are shown below:Mato Grosso:

Component Appraisal Revision Actual of which LoanAgro-ecological zoning and Land Regularization 47.7 37.9 56.4 48.5

Management, Protection and Monitoring of Natural Resources

63.4 46.5 42.6 33.9

Community Initiative Support Program (PADIC) - 38.0 17.3 16.7Agro-Forestry Development 80.5 47.6 35.6 17.9Water Supply, Rural Electrification and Road Improvement

63.2 62.0 65.6 29.5

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Health and Education 17.6 10.4 8.6 5.6

Training, Technical Assistance and Studies 3.2 25.2 18.5 16.8Project Administration and Technical Cooperation 10.1 12.1 13.8 8.8

Total Cost 285.7 285.7 258.4 177.7

Rondonia:

Component Appraisal Revision Actual of which LoanEnv. Conservation, Management and Protection 64.8 60.9 57.5 51.0 Agro-Forestry Development 81.4 52.1 35.3 21.0Socio-economic Infrastructure and Services 71.5 53.3 70.3 42.2Project Administration, Monitoring and Evaluation 11.2 42.6 18.6 27.1Support to Community Driven Initiatives Program - 20.0 7.8 7.8

Total Cost 228.9 228.9 203.8 149.1

6. Sustainability

6.1 Rationale for sustainability rating:

Sustainability is taken as the durability of the achievements generated by the project (or expected to be generated) in the face of risk and adversity. The achievements under the specific objectives (discussed in Section 4) were assessed with respect to the following factors representing potential risks: technical, financial, economic, social support, environmental, government ownership, stakeholder ownership and institutional support. For sustainability to be likely, all relevant factors have to be met. Details are shown in the table below:

Specific Objective Overall Sustainability

Techn. Financl Econ. Social Suppo

rt

Env. Gov. Ownshp

Stkhldr. Ownshp

Inst. Support

1. provide a coherent incentives framework for the sustainable development

U - N - M - M M M

2. improve the knowledge of the natural resource base

U H N - M H M H M

3. reduce environmental degradation and ensure the long-term preservation of the biodiversity

U H N - M H M N M

4. protect and enforce the borders of conservation units and indigenous reserves; control and prevent illegal deforestation, wood transport and forest fires;

U S M - M H M N M

5. develop sustainable agriculture and forestry

NR - - - - - - - -

6. support priority investments in socio-economic infrastructure and services in those areas

U M N - H M H H N

7. strengthen the technical and U - N - H - M M M

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operational capacity of State institutions responsible for zoning, protection and management of the environment, and agricultural and forestry support services8. Rural quality of life U M N M H - H H N9. Rural social capital L - - - H - H H M

10. Strengthening civil society organizations

U - N - H - N H -

H = high; S= substantial; M = modest; N = negligible; HL = highly likely; L = likely; U = unlikely; HU = highly unlikely; NR = not rated.

Development of sustainable agriculture and (agro)forestry was not rated because of the negligible outcome of this component. Achievements are likely sustainable only under one objective - social capital created. Overall sustainability of the project achievements is rated as unlikely. The most important factors leading to this assessment are (i) the likely lack of financial resources for maintenance of staff, institutions, infrastructure and support to organizations and (ii) the poor of stakeholder ownership for environmental management, control and protection.

The financial situation of the state, with its high public debt, as well as the perceived priorities of the state government, make it unlikely that adequate funds will be available (or, if available, will be allocated) for certain functions supported under the project or for the maintenance of public infrastructure. A substantial part of the operating cost of agencies that participated in the project was provided through UNDP, and this support has ended without, in most cases, being taken up by the state with its own funds. Some continued support may be forthcoming through PPG7 in the area of environmental management and zoning, and FEMA has already strengthened its self-financing capacity but is not self-sufficient. INTERMAT is ready to continue its land regularization program, but does not have the necessary funds. Community infrastructure will likely suffer from lack of funds for maintenance and replacement, as few sub-projects have made provisions for the future. Four of the specific objectives above could be considered as likely sustainable if continued financial support were likely.

Institutional support is threatened by discontinuity in management, lack of incentives for staff performance, or lack of institutional arrangements after project closure. Important functions considered in this context left incomplete, fragile or inadequate at the end of the project are: zoning/land use planning, addressing rural quality of life through continued management, improvement and monitoring of a program like PADIC, organizational and planning arrangements for systematic maintenance of infrastructure, particularly roads, management of parks and reserves and enforcement of their integrity and that of indigenous lands, and capacity to formulate policies and policy instruments to give incentives to sustainable development. Strengthening of NGOs relies mostly on funds received under foreign-financed programs or projects or contracts under such projects.

6.2 Transition arrangement to regular operations:N/A

7. Bank and Borrower Performance

Bank7.1 Lending:

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The idea, identification and preparation of PRODEAGRO and PLANAFLORO as follow-up projects to POLONOROESTE were timely and responsive to the Brazilian Government's environmental agenda launched by the 1988 Constitution. FAO supported the first stages of preparation, still during the implementation of POLONOROESTE. At the appraisals in 1989 and 1991, the Bank’s large and multidisciplinary teams were notable, reflecting the priority attached by the Bank, although more team-like interaction and use of synergies among mission members could have improved the effective integration of the various project components. The Bank behaved like a partner who would listen and agree to incorporate the various governments’ main concerns into the project design. Nevertheless, staff skepticism within the Bank about these two loans remained high throughout the lending process and afterwards due in part to the incomplete incorporation of lessons learned from POLONOROESTE and the findings and recommendations of parallel Bank ESW on Amazonian development and political economy of the frontier. Given the somewhat doubtful ownership on the part of the Borrower and state governments mentioned in Section 3.1, the Bank may have taken more of a lead than advisable. The Bank took care, however, to discuss and define required policy actions by the state governments prior to project start and to have them registered in side letters.

On the technical side, Mato Grosso staff who participated in the preparation process report that the Bank provided little space for each state to adapt project design, which also contributed to more difficult implementation from the outset. This was apparently not the case in Rondonia, where the project preparation team had been part of the POLONOROESTE coordination and hence was more experienced. Less Bank flexibility in Mato Grosso may have been due to the fact that that state’s project was modeled on the already agreed Rondonia design, and prepared and appraised later. Greater flexibility would have been helpful as Mato Grosso has significantly different geographic and economic conditions than Rondonia: less than half of the state is covered by rain forests, it has an older land tenure structure with mostly large to very large holdings, and a highly developed, modern agriculture.

Quality at entry was discussed at length in Section 3 and rated unsatisfactory for both projects.

7.2 Supervision:

The Bank changed task managers for the projects three times between 1992 and 1996. Given the importance of these two operations,, however, it established an office to oversee their supervision in Cuiabá (Mato Grosso) and appointed a member of the earlier FAO team who had participated in POLONOROESTE and in the preparation of PRODEAGRO and PLANAFLORO to head the office and closely monitor and support to the projects in the field. This turned out to be a good decision in many respects, but perhaps reduced the distance of the Bank from the projects and provided too much "elbow room" in terms of overseeing their implementation. . Given the extreme complexity and initial condition of the projects, as the QAG assessment in FY00 states, "there was room for many things to go wrong which apparently have not, in part because of the close supervision which was located in the project area". Project teams in both states unanimously affirm that the Bank's local representative played a key role not only in advising on routine implementation issues, including procurement and compliance with fiduciary issues, but also as a "diplomatic firefighter" at sensitive moments and a mediator between NGOs and the two state governments. He stayed on for nine years (1993-2001), but moved to the Brasilia office in 2000. It is noteworthy that the Cuiabá office reviewed all procurement actions, not only those requiring prior Bank review.

State project teams and independent evaluators do not t see much value added to project implementation by the annual missions from headquarters from 1992 through 1996, other than their checking for compliance

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with actions agreed during previous missions, and establishing new ones. In 1997, when the staff member based in Cuiabá became also task manager, Headquarters support to missions was reduced. The Bank used the same consultants on missions for certain aspects of the projects (environment, zoning, roads) over many years. Their inputs and advice were (usually) highly valued by the state partners. The overall supervision effort was certainly adequate, it exceeded normal levels by far.

Throughout the long project period, the Bank focused diligently, though too narrowly, on keeping the many individual project activities on track and resolving conflictive situations with NGOs or in indigenous lands and conservation areas. In the process , however, it may have lost sight of the big picture, of the development objectives, perhaps because attention to detail becomes a priority when supervision is located so close to the implementing agencies. The Bank’s attention to the big picture increased considerably after the Rondonia Forum of NGOs invoked the Inspection Panel in June 1995, and during the subsequent MTR and reformulation process of 1996/97. At that time, the Bank may have become hostage to its own commitment to the projects, its fear of a second reputational loss in the Amazon, the expectations of national and international NGO groups, and the governments involved. The NGOs' call for the Inspection Panel and the MTR were, in retrospect, useful interventions, alerting the Bank to the danger of the projects drifting off course. The option of canceling project support, which was seriously considered by the Bank prior to the MTR, was discarded when both local NGOs and state governments lobbied effectively for continuing the projects. Conflict resolution was paramount to the Bank at that time, even at the cost of giving up part of the initial logic of the project strategy (as discussed in Sections 3.2 and 3.4 above). Given the unanimity with regard to the new community-based demand-driven component after negotiations between NGOs and governments, the Bank did not insist on alternatives to achieve the objectives of the dropped components in a different form.

The Bank's rapport with the NGOs changed over time. In the early 90s, neither the Bank nor the governments had much experience with NGO participation. Giving NGOs a seat on supervisory project committees was deemed appropriate and sufficient; otherwise, NGOs were apparently viewed more as a complicating factor. As the NGOs’ relationship with the state governments deteriorated further, the Bank was sought to mediate the dialogue, and tried to do so. This role was criticized severely by the MTR (which it is worth remembering was carried out by independent Brazilian consultants) which considered it as inappropriate and not conducive to a healthy relationship between NGOs and government. It did not avoid, in the case of Rondonia, the request for Inspection Panel review, led and supported by international NGOs. The period of conflict through 1996 actually served to substantially strengthen local NGOs and helped them to define their own positions towards project performance and design. During the second phase of the projects (1998-2002) there were few problems between the Bank and the NGOs. When some NGOs later turned into consultant firms contracted by the state governments for environmental education or park co-management, they asked the Bank again to help mediate conflicts, this time related to their performance and the state’s contract management. At that time, the Bank refused to intervene between client and contractors.

The Bank was chastised by several parties (including the MTR) for not being sufficiently firm in enforcing covenants. For example, the Bank's remedies were not applied when the Rondonia legislature changed the first approximation zoning law adversely, but were applied when project resources had been diverted. The Bank was (belatedly) firm with regard to INCRA settlements in unsuitable areas in Rondonia, but not in the case of Mato Grosso (where there was also much less attention on the part of local and, especially, international NGOs). With respect to safeguard policies and fiduciary issues, the Bank took action as required when such issues were identified. For example, it was forceful in assuring indigenous rights and the removal of mining intruders from the Sararé area in Mato Grosso. It did suspend disbursements when the diversion of loan funds in Rondonia was discovered until these funds were recovered, despite serious

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interruptions in project implementation. Independent evaluations in both states found, however, that the Bank was too patient when it came to slow government compliance with agreements reached in successive mission Aide Memoires. Actions on such agreements were often delayed, and were then requested again in following Aide Memoires.

Some other failures to enforce covenants deserve mention. The first concerns the establishment and maintenance of a system of indicators for project development objectives. With the breadth of project objectives, it was difficult to define measurable impact indicators. Despite UNDP technical assistance, either an understanding on development indicators could not be reached (Mato Grosso insisted on output indicators) or the system was rejected by some of the participating agencies (Rondonia). Bank staff eventually gave up. This was not helpful to the Borrower, implementing agencies nor the Bank , who were, thus, less able to keep their focus on project impacts and outcome. The Bank missed another opportunity to better define the objectives and develop meaningful indicators when the project was restructured. Moreover, the ups and downs of the annual deforestation rate in both states and survey of actual land use by remote sensing rarely seemed to have received adequate attention from decision makers, except in Mato Grosso when it established its surveillance and licensing system in 1999.

A failure not at all unique to these two projects in Brazil was the Bank’s tacit acceptance of the consequences of federal budget management. Brazil’s compliance with IMF conditions in the wake of global crises, particularly from 1999 onwards, led to the release of insufficient loan and counterpart funds, often with long delays, by the Federal Government to the projects. The Bank supported, of course, strict federal budget management, but the consequences for Bank-funded projects were serious, and the cuts violated the Loan Agreements (Section 3.01). Repeated requests for extension of closing dates were another consequence. While the Bank intervened with attempts to shield loan-funded projects from cuts and delays, it never treated them as breach of the agreements nor invoked its remedies on these grounds. The issue came up repeatedly at annual portfolio reviews with government, but was apparently treated as unavoidable under the circumstances. This dilemma of conflicting Bank objectives with regard to Brazil’s budget management and smooth project implementation is now being addressed by the Bank with the Federal Government.

Parallel to the two projects, the Bank helped build the Pilot Program to Conserve the Brazilian Rain Forests (PPG7), a multi-donor program started in 1992, led by the federal government, and aimed essentially at the same objectives as PRODEAGRO and PLANAFLORO. PPG7 has been actively supporting “integrated environmental management” across agencies in Mato Grosso, but less successfully in Rondonia. However, Bank staff rarely managed to coordinate effectively among PPG7 and the two projects.

Various evaluators, including the QAG, felt that Bank management may not have paid proper attention to continuously troubled project implementation. Management was well aware of reputational risks that could arise from a second failed attempt to support sustainable development in the Amazon and remained engaged, but this engagement was only visible when critical decisions had to be made (on restructuring, canceling, closing or extending the loans, for instance) or when action was required with high-level federal officials applying pressure to allocate sufficient funds for the projects. In the case of Rondonia, management involvement was intense when the Inspection Panel was invoked, leading up to, during and immediately following the MTR and when working with the Federal Government to recover diverted project funds from that state.

7.3 Overall Bank performance:

Unsatisfactory.

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Borrower7.4 Preparation:

As the Borrower of two large loans associated with complex and highly visible projects to be executed by states, the Federal Government was unusually attentive to the preparation of both projects. The Brazilian Inter-ministerial Commission that selects projects for external funding (COFIEX) established several conditions for approving both projects. Among these were: (a) a baseline study to be carried out from the project outset, which would be re-assessed at MTR and upon project completion; (b) inclusion in the Legal Agreements of the States' obligation to provide resources for the operational phase of the project; (c) the States' obligation to involve all implementing agencies in the establishment of the monitoring indicators; and (d) the creation of an inter-ministerial group to monitor implementation of both projects.

At the state level, the main implementing agencies and NGOs were formally involved in project appraisal. However, as pointed out under “Quality at Entry” above, not bringing all implementation agencies effectively on board in terms of dissemination and their full assimilation of the projects’ overall objectives adversely affected coordination among them during implementation. Involvement of civil society and its organizations was almost negligible as, particularly in Mato Grosso, they were not prepared to assess project objectives and activities in light of their needs. In Rondonia, the NGOs were able to agree on a Protocol with the State, which later formed the basis of the first official public complaint against the project -- the legal documents negotiated with the Bank did not incorporate important agreements established in the Protocol, such as the need for immediate action in some project areas. Local society in the two states as a whole, including the private sector, was certainly not in agreement with specific project objectives, and the state governments did little to the disseminate them, perhaps for that very reason.

Once the governments of Rondonia and Mato Grosso had approved the respective laws that established the first agro-ecological zoning and had started the dialogue with NGOs and signed off on agreed policy actions, the Federal Government (just as the Bank) overestimated the evidence of local ownership, political commitment, public support and readiness for implementation, and gave its final agreement to the project.

7.5 Government implementation performance:

At the federal level, priority given to both projects remained low throughout their implementation. As the preparation process concluded, attention waned and the inter-ministerial group to monitor implementation did not function for either project. The role of the Federal Government was essentially limited to receiving, e, transferring and accounting for loan funds, and to transferring its own counterpart funds to the states. The perceived low spending capacity of both projects discouraged the significant budget allocations required for project implementation as initially proposed, particularly in a context of increasing fiscal constraints. Neither loan nor federal counterpart funds were transferred in a timely fashion or in the required amounts, and this became a severe problem after 1998, contributing to multiple loan extension requests. On occasion, funds were released but the federal ministry in charge reallocated them to more visible projects.

Not surprisingly, the Federal Government did not act as a monolithic entity during the period of project implementation. The inconsistent behavior of INCRA in locating settlements in “forbidden” zones has already been mentioned. The relationship of the federal environment agency IBAMA with the state environmental agencies (FEMA in Mato Grosso and SEDAM in Rondonia) was at best uncoordinated, at worst conflictive. No specific role for IBAMA was foreseen in the project designs. Furthermore, some transfers of federal land to the State of Rondonia, although formally agreed with the Bank, never took place at all due to “national security” considerations.

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7.6 Implementing Agency:

At the state level, priority was variable and selective. With each change of administration, the projects were adversely affected due to lack of (at least initial) political commitment and staffing changes in key project positions. This was less serious in Mato Grosso, where the project spanned only two administrations. During elections, candidates might argue against the state project, only to accept it when elected. Insufficient state counterpart funds were also a serious constraint undermining the financing of relevant operational costs. Moreover, state governments did not institute forceful project management at the highest level, but left it (with the Bank’s agreement) at project “coordination” without real authority to ensure that the implementing agencies and project activities were effectively aligned. Nevertheless, each project coordinating unit, with the support of UNDP technical assistance, was able to keep the project more or less moving in the numerous implementing agencies -- despite huge difficulties, including overlapping and conflicting activities. With low empowerment of the coordination unit, it would have been even more important to carry out an intensive dissemination and team-building program among the implementing agencies and interested groups in civil society, bringing everybody up to speed on the project strategy and strengthening synergetic links among activities. Joint development and adoption of indicators for monitoring outputs and outcomes would have guided implementation better towards the achievement of project objectives.

The Rondonia state government tried to stick to its first zoning law as required by the Project Agreement, at sometimes heavy political cost, but was not always successful due to limited political backing. Its support for environmental actions (such as surveillance and enforcement) and for strengthening its environmental agency, SEDAM, however, were not strong throughout most of the project period, although it managed to create and demarcate a number of state conservation units (on federal land) and improve the state’s legal framework for environmental conservation. Based on work under the project, Rondonia has managed to approve a new state zoning law in 2000. A one-time diversion of project funds in 1999 was corrected, with a long delay, by the following state administration. Handling of consultant contracts for management of conservation areas during the last year of project implementation, with the interference of the States attorney, led to serious delays in these activities in view of the loan closing date.

In Mato Grosso, the government managed to create a strong environmental agency, new conservation areas (mainly on private land, and covering much less area than foreseen) and a rural licensing system to enforce forest law and control deforestation on larger properties. During the last year of project implementation, the state government, in response to political pressures, proposed reductions to the area of a state park to the legislature, but has subsequently tried veto or to delay such action. Not much attention appears to have been paid to the existing zoning law, particularly with regard to state and federal land settlements. The refined zoning in Mato Grosso was much delayed and may have less than the desired quality, due to poor handling of the contract with the consulting firm preparing the zoning diagnostic studies and proposal, despite insistent and repeated advice from the Bank’s consultant.

7.7 Overall Borrower performance:

Unsatisfactory.

8. Lessons Learned

What went wrong?

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The outcome of both projects is obviously not satisfactory to the Bank, and in many ways it is not satisfactory to the client governments involved either. Deforestation did clearly not decline in either state, and socio-economic development advanced less than expected. While this report has discussed quality at entry, Bank/Borrower performance and external factors, it is useful to distill the few key factors that, in the view of this evaluation, may have contributed to this outcome.

• The objective of the projects was to change behavior of private and public agents in the use of the natural resources of tropical rain forests. The three main instruments to bring this about, synergistically, were zoning (a restriction on land use), the promotion of intensified land use and the provision of infrastructure and services in areas already cleared, and the creation and protection of reserved areas. However, the projects did not define the desired outcome in terms of actual or planned land use (zoning), which made in principle any zoning plan acceptable, including Rondonia’s sanctioning of the status quo (in terms of forest clearing) with its new zoning law. While the agreed environmental project agenda was implemented to varying degrees by both states, albeit after much Bank insistence, disappointment stems from the perception that the traditional development paradigm, and thus the land use trends, prevalent in these frontier states at project start have changed little under the project. • The project concept did not recognize the strong existing economic and political forces that were (and still are) working in favor of continued expansion of forest clearing - the “political economy” of the frontier states. Consequently, any project would have to work against the strong current of such forces. Had meaningful consultations with the true stakeholders, whose behavior was expected to change, taken place beforehand, the dimension of the “economic mainstream” of the states would have become apparent. In as far as the underlying economic forces have not changed, deep changes in land use policies and behavior of public and private agents should perhaps not be expected.• In the strive for decentralization after POLONOROESTE, state governments became the principal partners and executors of the projects. Despite all the merits of decentralization, it may have been premature to turn over the sensitive issue of land use entirely to the states. On the other hand, creation of a “coherent incentives framework for sustainable development” was expected (almost) only from the states, but should have required adjustments to federal policies and programs as well, which were not the focus of project preparation. • At the risk of undue simplification, the Bank had a strong interest in the environmental objectives of the projects, in the aftermath of POLONOROESTE, but saw development - in the right places - as part of an overall strategy. The state governments (and their societies) were much more interested in development, particularly infrastructure. They would not accept a purely “environmental” project, and the Bank would not support a purely “developmental” one. There was a risky element of “quid pro quo” in negotiating project scope, with the parties giving different weights given to objectives and components: investments for socio-economic development would be funded, as long as an environmental agenda (zoning, setting aside of reserves and their protection) was also implemented. With the official commitment to the environmental objectives, the state governments set themselves up, in a certain way, against the local “economic mainstream”.• In spite of formally approved initial zoning laws, there was no sufficiently deep commitment on the part of the states’ society to be bound by the provisions of (first approximation) zoning. Refined (second approximation) zoning came too late to change such commitment, and is not binding yet in either state. Other, non-coercive instruments of “getting the zoning plan implemented” were not devised. • The sustainability of project results remains highly questionable, not only because appropriate arrangements were absent, but even more importantly because the thrust of the projects was, and likely still is, not in line with the local mainstream (although some seeds for changed values, attitudes and behavior may have been laid by the projects). The institutional capacity to carry out the projects was highly limited from the outset, and technical assistance, which by its nature is limited to the duration of the

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projects, did not remedy that deficiency in a sustainable way, some notable advances in institutional capacity notwithstanding.• The project reformulation after the mid-term review did not address the principal shortcomings of the original projects. They accommodated one part of society (“organized civil society”), but not private sector interests, on the basis of a vague strategy of community-driven development, largely without any solid and proven natural resource management technologies that would have reverted the mainstream use (clearing) of rain forests. This outcome of the mid-term review can be partially attributed to the Bank's risk aversion in regard to possible criticisms from NGOs (local and international) and to its willingness of possibly putting the project on back on track.

Prior lessons

At a time when the Bank is considering the expansion of its engagement in the Brazilian Amazon, and as harmonizing environmental conservation there with economic and social development continues to be a tough challenge, any possible lessons from the PLANAFLORO and PRODEAGRO projects will be of utmost importance and urgency. The projects are good examples of what can happen when lessons available from previous projects similar in nature and implemented in the same physical, political-economic and institutional environment (e.g., POLONOROESTE) are not adequately incorporated in project design. Many of the problems encountered by these two operations were predictable and could perhaps have been avoided, had all lessons learned been taken into account during preparation. These lessons were set out in both contemporaneous OED evaluations of POLONOROESTE and in Bank analytical work on the challenges of sustainable development in the Brazilian Amazon. They included, inter alia, the following:

• the importance of understanding and taking into account the political economy of the Amazonian frontier, including the need to consider the interests, motivations and incentives of all local stakeholders;• the fundamental importance of securing true local stakeholder commitment to key project objectives and components (ownership), especially environmental and social ones; • the risks – as well as advantages – associated with the decentralization of control over investment projects in frontier regions from the federal to state (and local) governments – which was actually and naively viewed as a “panacea” in the respective appraisal reports -- precisely because of the differencing economic and political incentives vis-à-vis natural resource use and conservation at these different levels; and• the importance of building – and “internalizing” – adequate, sustainable institutional capacity at the state level to manage project interventions and associated follow-on activities.

Although such lessons are not new and were (or should have been) known during project preparation, some of them are nevertheless discussed again below. A. Limit the complexity of projects and consider sequential implementation

There are limits to the number of components and sub-components than can be included under one project and one management unit. These limits vary from case to case, but no project should attempt to implement twenty or more sub-components in parallel. Where simultaneous implementation of all the necessary activities for a given objective is obviously impossible, sequencing should be considered.

B. For ownership, don’t fail to involve all the stakeholders

Government cannot be the only stakeholder involved in the design and negotiation of natural resources

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management projects, especially on the agricultural (and extractive) frontier, designed to interfere profoundly with the activities and interests of the rural economy of and the associated political interests in a state. Where project strategy goes against the grain of a large part of society, as was at least initially the case, government ownership is necessary but far from not sufficient. Identification of other stakeholders, analysis of their interests, thorough consultations and their involvement (or at least acquiescence) are essential. This process takes time and should not be shortchanged. More specific recommendations based on the lessons of these two projects in this regard are:

- Stakeholders are not only the “beneficiaries” or “civil society”; they include also potential opponents, private sector interests and local governments and politicians;

- Don’t skimp on or delay stakeholder consultation, from the very beginning of project design; prepare for consultations in advance and have a methodology for the same;

- Explain transparently to stakeholders what is planned, without hiding anything;- Be ready to adjust project design after consultations and re-assess the chances of project success;- If there is stiff opposition from significant stakeholders, consider postponing, implementation in stages,

or, as a last resort, abandoning the project;- Without having carried out this ‘homework,” the project may fail to correctly assess the incentives for

stakeholder behavior and thus, jeopardize the perspective of satisfactory outcomes.

C. If project strategy hinges on an important pre-condition, create that condition first

The refinement (second approximation) of state zoning plans was a crucial part of the strategy, to overcome the technical weaknesses of the first approximation and to increase public ownership and acceptance. Given the deficiencies of the first approximation and the fact that it was never truly discussed with the stakeholders, it might have been better (a) to complete the second approximation zoning before beginning the other components; (b) not to turn the first zoning, but only the refined second approximation into law; (c) not to oblige the state governments to comply with a zoning law (with regard of its investment programs) before the improved zoning plan had been accepted. Similarly, other important preconditions for smooth implementation, such as minimum capacity of executing agencies for the job they would have to do, should be met before project start. This would have called either for a separate small project or a preparation facility just for zoning and capacity building, or else for the sequencing of project components (through the use of disbursement conditions), or for an Adaptable Program Loan (which did not yet exist in 1992). In fact, this is precisely the type of situation where a programmatic approach would have been useful.

D. Don’t lend to the Federal Government if the project will be executed by one State

Both loans were made to the Federal Government, which was to pass virtually all loan funds on to the states for execution. This turned out to be inefficient. Funneling loan proceeds through the federal budget created severe funding shortages and delays. Ministers of Finance or Planning do not identify as much with the objectives of state projects as State Secretaries of Finance or Planning, and often have other priorities. This lesson was already emerging with regard to the Northeast rural poverty projects at the time. The Bank’s practice today is indeed much more geared towards loans to states. Obligations of the Federal Government related to its own policies, programs and agencies could still be included in guarantee agreements.

E. Make sure that relevant federal agencies and federal policies “play the same game”

Project success or failure depended to a large degree on the cooperation of powerful federal agencies, such

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as INCRA for land reform, IBAMA for environmental management and protection, and FUNAI for indigenous affairs, to mention just the most relevant. The loan agreements obliged the Borrower to cause INCRA and FUNAI to enter into operating agreements with the states, but did not foresee any role for IBAMA. INCRA turned out to be less a cooperating agency than a strong, virtually independent stakeholder whose potential operating space was threatened by the projects through zoning and whose personnel in Rondonia did not feel bound by any federal agreements. In fostering ownership, it is important (i) to include all federal agencies, including their representations in the states, early in project preparation and stakeholder consultations, and (ii) to assess carefully and objectively their history, guiding corporate values and willingness to cooperate; and (iii) not to rely blindly on covenants and operating agreements.

F. Don’t confine “environment” to a component - it is a cross-cutting concern

Project design grouped all activities related to environmental management and protection in one discrete component. The importance of environmental considerations to other components, such as agriculture, infrastructure, health and education, as a cross-cutting concern was obscured in this way. While some environmental functions clearly require their own components, such as the establishment and management of parks, preoccupation with sustainability and conservation of natural assets should permeate all project activities and agencies and should not be restricted to a component.

G. Projects need to be managed, not “coordinated”

“Coordination” is a term frequently used in Brazil’s public sector, even when management is really meant. Coordination attempts to get cooperation from actors not under one’s control. Management, on the other hand, implies formal or de-facto power to make actors work to achieve a common goal, individually and jointly; it builds effective teams and provides leadership. In the case of PLANAFLORO and PRODEAGRO, the design provided merely for coordination, not for management. As a result, project units lacked power (except to withhold funds) over the executing agencies with their divergent interests and were incapable of building teams, providing leadership towards the larger objectives, or of effectively informing participant agencies on objectives, strategy and roles. Power over state agencies is only at the Governor’s level (and even there are limitations). In both projects, the coordinating units were frequently “trumped” by other state and federal agencies, that held more power at a particular moment.

H. Complex projects benefit from “adaptive planning”

No project in Brazil had previously attempted to bring about such a significant change of land use in a whole state. At the outset, it was probably not clear what the final outcome would be and what would happen on the way. Objectives were vague, perhaps appropriately so. The projects aimed in part at knowledge generation and capacity building, public and private. “Where capacity development is concerned, in the public or private sphere, blueprint approaches seldom work. Most development programs are voyages of technological and sociological discovery, in which the goal and the path to that goal remain highly uncertain” (D. Horton, based on Albert Hirschman.

Project activities were implemented by the agencies in parallel fashion, with defined inputs and outputs, but without their receiving feedback on impacts. Both projects had mid-term reviews which provided an opportunity to take stock and propose revisions to strategy and content. Such one-time evaluations and course corrections are essential, but may not be enough. In complex projects laden with uncertainty like these, monitoring and feedback on the basis of well-defined indicators (which did not exist in this case) should be continuous. Projects should have their own built-in learning capacity, where feedback on performance, outputs and impacts is collected and analyzed, and planning, even the basic design, is

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adjusted in the light of what has been learned (“adaptive management” ). This would, however, require even more continuous Bank attention and involvement, well beyond routine supervision. With a more flexible approach, project outputs and costs would likely differ from those at appraisal, and even objectives and impacts may vary from original expectations. This should be acceptable as long as there is agreement along the way. Where learning and adaptation are resisted, or where changes to principal objectives would cause them to deviate too much from the original ones, the Bank can always consider an exit.

I. Institutional strengthening is more than hiring and training staff, and not all institutional deficiencies can be corrected with technical assistance

The traditional way of strengthening institutions has been to hire more staff, train staff, acquire equipment and vehicles, and provide office space. Often, advisors are posted at the level of management of an institution or in specific departments. Less often, organizational changes are made. Strengthening should mean making an institution capable of what it is supposed to do for a project or program. Where institutional objectives, culture and values are at odds with the chosen project objectives and strategy, even the best staffing, training and equipping will not make an institution capable. This was probably the case with the agricultural research and extension agencies in both projects. Project preparation and appraisal should look not only at the stated mission and mandate of an institution, but also understand its underlying goals, the dynamics of its organizational structure and internal processes, and the incentives for staff behavior. Ideally, everyone in the institution should agree on goals and results and indicators beforehand. If this turns out to be difficult or impossible, the institution should be dropped from the plans and alternative arrangements should be considered, or else the entire component or project should be dropped.

It is an ever-present temptation to compensate for institutional shortcomings with hiring of “incremental” staff through a technical assistance mechanism for the duration of a project. Where an institution or service is not needed after the project (as in the case of engineering works), this is acceptable. Where a lasting capacity must be created to ensure sustainability, technical assistance should be limited in time and work with a “learning counterpart” who will eventually take over. If the client does not want to create counterpart learning positions for permanent functions during implementation, the component (and if necessary, the project) should be dropped, as there is obviously insufficient ownership. Moreover, if government can obtain qualified personnel for certain positions or activities only through better-paying channels (e.g., UNDP consultancies), it will need to be able to pay better itself after the project, or else such positions or activities are unsustainable.

J. Zoning is more than a technical exercise

Zoning was first adopted in Rondonia and Mato Grosso to satisfy Bank requirements, not to respond to a felt need by a wide spectrum of the states’ population. There should be knowledge and ownership on the part of the affected population before zoning starts with regard to zoning concepts and objectives, and later on ownership of the final result, as this is a prerequisite for change on the part of public and private agents.

Both projects chose to hire consultant firms to carry out zoning, which was perceived as an eminently technical task. (Later, other Amazonian states preferred to rely on their own staff to learn and undertake the zoning themselves, with specific contributions from consultants.) But stakeholders were not effectively involved before zoning started. It is important to recognize the proper role of technical studies within a zoning process, which is ultimately a political one. Zoning is not finished when multi-colored final maps and detailed recommendations are on the table. In principle, zoning should be understood as a social and political process of negotiation (conflict resolution) to arrive at a broadly acceptable plan of land use, based on adequate information concerning capabilities and limitations of land and natural resources, economic

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opportunities, impact on environmental services, current trends, etc. In some cases, arrangements will need to be proposed together with zoning restrictions to compensate the losers, or to make payments for environmental services. Technical and scientific studies should play an ancillary, problem-solving role and address information and knowledge gaps to support decision making. The State of Acre has apparently understood this and embedded the technical work in a social and political process.

Zoning should be flexible. Hard lines drawn on maps may harden the attitudes of stakeholders and draw attention away from the analysis and reasoning behind the lines, which should be at the heart of discussions. To be convincing, the reasoning must be explicit and follow a methodology based on transparent and agreed principles, criteria and rules. The recommendations should be replicable by different analysts given the same data and methodology, and not based on intuition.

Zoning was done at the state level. The states had no indication as to national/federal guidelines or directives for land use in the Amazon, apart from the legal reserve requirement in private properties and the location of national parks and indigenous lands. Indicative or normative macro-zoning of the entire Amazon region has never been done. This was not perceived as a problem by Rondonia and Mato Grosso, but Brazil may wish to have a national vision of land use in the Amazon and its other biomes take precedence over the sum of the state zoning plans, as interests at the national, as at the global, level vis-à-vis those at the individual state levels in terms of resource use may differ.

Zoning plans should be consistent with a state’s financial capacity. No state in the Amazon, or elsewhere in Brazil, can afford to spend US$20-30 million on zoning without external support. Costly, comprehensive and data-intensive forms of zoning may not be required to come to decisions that are “good enough” for the objectives at hand. The benefits of increasing the quality of a zoning decision with a certain study or survey should be compared to its incremental cost.

Where zoning is adopted, a state should also create capacity for (a) carrying zoning work forward, updating it and maintaining data bases, (b) meeting demands for data by the public, and (c) to do spatial planning (“ordenamento territorial”) and integrate it into the overall state sustainable development planning function. This is now understood in both states, but not yet implemented. Professional capacity for integrating the various physical and socio-economic themes in the process of landscape planning, is a scarce resource but is needed to come to well-founded, defensible zoning recommendations. Eventually, zoning must be taken down to the municipal level, and here solid capacity at the state level will be very helpful. Some more specific recommendations in relation to zoning are:

- Start with a process including all groups of stakeholders, not only with technical studies, and evaluate stakeholder interests carefully;

- Make sure all legitimate stakeholders participate – even the normally absent ones; - Help people think together about natural resource potentials and constraints and associated

implications for their use and sustainability, about environmental services, and possible problems;- Take higher-order (e.g., national, regional) zoning orientations into account;- Facilitate the adoption of commonly accepted visions, directives and principles, and encourage

government and community to pass these to technical staff as essential input; - In negotiations, somebody must play the role of “advocate of nature”; probably the state environmental

agency initially, until constituencies have grown that will defend those interests;- Don’t study everything – just what is needed for “good-enough” zoning decisions, within a realistic

budget;- Prepare society and stakeholders for meaningful discussions and negotiations by providing some

minimal necessary prior knowledge;

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- Draw the focus of attention away from lines on maps and towards the rationale behind recommendations, and be flexible;

- Have and apply a methodology for conflict resolution;- Once there is reasonable consensus, ensure that everybody knows what it means for their land; - Think about (economic) instruments to make zoning “stick”;- A law may not be necessary. If there is a law, make it binding on the public sector (licenses,

investments, public credit), and influence private sector behavior with incentives or disincentives. Build in flexibility.

K. Community-driven development must be given time to be driven by the community

Many PAIC/PADIC sub-projects did not originate from felt needs of specific rural communities. The notion of a homogeneous local community whose members all agree on goals and values is often a fiction. Some associations were created only because funds could be obtained. Thorough community discussions of options and design did not always take place. Often, proposals were prepared rapidly by technical staff based on standard blueprints, and certain design elements were essentially imposed onto the communities by project management (such as agro-forestry in Rondonia). Eventually, many communities took up more than they could handle given their organizational and administrative capacity.

Once a grant facility like PAIC/PADIC is established, there are strong incentives to mobilize unsatisfied social “demands” and to make them manifest. True community-driven development requires time for communities to organize themselves, discuss their needs and produce initiatives that have full local ownership; otherwise, “half-cooked” proposals without true community backing may come forward. This implies the need to perhaps start out with smaller, less ambitious community projects ($100,000 is a huge amount of money to handle for poor rural communities). Communities will need help and guidance on conducing their process of organization and, knowledge of options available, but do not need proposals imposed on them from above or the outside. In this context, the presumption that existing NGOs necessarily serve local community interests best may not always be correct, even where NGOs claim to represent or speak for such interests.

L. Community-driven development needs knowledge and technical assistance

“Demand-oriented”, community driven development became almost an objective in itself after project reformulation. Without a doubt there is great value in community organization, social capital and better quality of life. But as part of a larger project, PAIC/PADIC needed to keep the overall and specific objectives in mind, which called for introducing new, sustainable ways to use natural resources, alternative farming systems, agro-forestry, sustainable forest management, etc. Both projects were unsuccessful in this regard, before and after reformulation. There is thus a potential – and, in many cases, an actual – trade-off between decentralized, demand-driven development strategies and those that are and spatially and operationally differentiated (i.e., based on actual natural resource potentials and constraints and on actual capacity to implement specific actions or activities).

In both projects, a fundamental ingredient was missing: relevant knowledge. The design of PAIC/PADIC assumed that such knowledge was available and useable; but that was largely not the case. Training was given to community leaders, NGOs and potential “community consultants” in the rules and procedures, but not in the substance, technologies, models and opportunities that could be used by the communities. NGO enthusiasm and engagement for the poor and the environment did not substitute for lack of knowledge, experience and professionalism.

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It would have been useful to analyze and evaluate relevant knowledge available at the time, and package and disseminate it to project staff, consultants and community leaders before approving “productive” investments. (The problem was less severe with regard to infrastructure investments). Technical training before sub-project preparation and qualified technical assistance during implementation would have helped greatly.

M. When reformulating a project, don’t lose sight of the ultimate goals and don’t throw out the baby with the bathwater

After the Mid-Term Review, the Bank had three basic options: cancel the loans, accept the proposals on the table, or propose an alternative. Happy about seeing a consensus emerge after great turbulence, the Bank made no alternative proposal and agreed readily to the results of the MTR, but in the process downplayed the ultimate sectoral and spatial goals of the project (see Section 3.2). PAIC/PADIC was unlikely do much for research, extension, credit and more intensive land use, which were once deemed strategically important. While it was correct that the original approach chosen to provide these services did not work, no alternative ways were proposed to provide them and the entire component was dropped without replacement. Any chance to do achieve institutional reform was also lost. The baby went out with the bathwater.

N. Field offices may not always see the forest for the trees

The Cuiabá field office has provided good services to the two clients in Mato Grosso and Rondonia, as was amply acknowledged in the final evaluations and workshops. Yet an overloaded field office (with only one HQ staff) tends to have difficulties of seeing the forest for the trees. Supervision from Washington was less appreciated by clients, but could have been more strategic and involved. A combination of more removed, but highly and continuously attentive supervision from Washington or Brasilia with client support by a field office might help to maintain a strategic, arms-length view of a large project. Also, tough decisions are often easier made from a distance (though some were indeed made up close). Higher than average budgets, however, are required for more intensive field and headquarter-based supervision, but this may be fully justified in light of the complexities and risks associated with certain projects such as those under review.

O. Balancing federal fiscal constraints with investment needs should be a priority in the Bank’s and Borrowers AgendaWhere traditional investment loans are made to the federal government, containment of federal budget expenditures invariably affects projects funded from a loan. Implementation periods stretched to 150-200% of the original are inefficient and costly to the Borrower, states, beneficiaries and the Bank. The Bank and the Borrower should make this issue a top priority on their agenda and continuously monitor project implementation performance in the light of fiscal constraints. This would allow revisions, when necessary, of priority investments and lead to necessary adjustments to the portfolio (e.g. amendments, partial cancellations, etc) to balance both fiscal and investment needs.

9. Partner Comments

(a) Borrower/implementing agency:Neither Borrower nor implementing agency provided comments to this report.

(b) Cofinanciers:n/a

(c) Other partners (NGOs/private sector):

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n/a

10. Additional Information

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Annex 1. Key Performance Indicators/Log Frame Matrix

Outcome / Impact Indicators:

Indicator/Matrix

Projected in last PSR1

Actual/Latest Estimate

N/A N/A

Output Indicators:

Indicator/Matrix

Projected in last PSR1


Second Aproximation of Agro-ecological zoning

26,800,000 ha 26,800,000 ha

Demarcation, delimitation and cadastral issuance of titles

41,300,000 ha 33,100,000 ha

Issuance of land titles 18,000 families 17,300 families

Creation of Conservation Areas 4,847,000 ha 1,560,000 ha

Demarcation of Indigenous Areas boundaries 1630 km 349 km

Water supply house linkages 9700 houses 3760 houses

State road rehabilitation 26 000 km 3965 km

State road paving 124 km 580 km

Community Driven Projects - 228 projects1 End of project

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Annex 2. Project Costs and Financing

Project Cost by Component (in US$ million equivalent)AppraisalEstimate


Percentage of Appraisal

Component US$ million US$ millionAgro-Ecological Zoning and Land Tenure Regularization 40.00 56.40 14Management, Protection and Monitoring of Natural Resources

54.40 42.60 19.04

Agro-Forestry Development and Support Services 70.20 35.60 24.57Socio-Economic Infrastructure and Services 65.40 74.20 22.89Project Administration and Technical Cooperation 11.90 32.30 4.17Community Initiative Support Program (PADIC)* 0.00 17.36

Total Baseline Cost 241.90 258.46 Physical Contingencies 15.20 5.32 Price Contingencies 28.60 10.01

Total Project Costs 285.70 258.46Total Financing Required 285.70 258.46

* The Community Initiative Support Program component was added after the Mid Term Review and used the remaining resources from the Agro-Forestry Development and Support Services and Socio-Economic Infrastructure and Services components which were extinct.

Project Costs by Procurement Arrangements (Appraisal Estimate) (US$ million equivalent)

Expenditure Category ICBProcurement

NCB Method

1

Other2 N.B.F. Total Cost

1. Works 17.60 41.50 6.00 0.00 65.10(12.70) (29.90) (4.30) (0.00) (46.90)

2. Goods 9.00 20.50 4.20 0.50 34.20(6.50) (14.80) (3.00) (0.00) (24.30)

3. Services 17.30 12.80 1.00 0.00 31.10(17.30) (12.40) (0.70) (0.00) (30.40)

4. Technical Assistance, Training and Studies

0.00 0.00 22.20 0.00 22.20

(0.00) (0.00) (22.20) (0.00) (22.20)5. Salaries, Benefits and Other Operating Costs

0.00(0.00)

0.00(0.00)

99.00(56.60)

0.00(0.00)

99.00(56.60)

6. Other Operating Costs 0.00(0.00)

0.00(0.00)

34.10(24.60)

0.00(0.00)

34.10(24.60)

Total 43.90 74.80 166.50 0.50 285.70(36.50) (57.10) (111.40) (0.00) (205.00)

Project Costs by Procurement Arrangements (Actual/Latest Estimate) (US$ million equivalent)

Expenditure Category ICBProcurement

NCB Method

1

Other2 N.B.F. Total Cost

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1. Works 15.52 42.79 0.00 0.00 58.30(1.09) (12.63) (0.00) (0.00) (13.72)

2. Goods 0.00 0.00 0.00 0.00 0.00(0.00) (0.00) (0.00) (0.00) (0.00)

3. Services 2.25 0.00 52.22 0.00 54.47(2.23) (0.00) (23.10) (0.00) (25.33)

4. Technical Assistance, Training and Studies

0.00 0.00 0.00 0.00 0.00

(0.00) (0.00) (0.00) (0.00) (0.00)5. Salaries, Benefits and Other Operating Costs

0.00(0.00)

0.00(0.00)

0.00(0.00)

0.00(0.00)

0.00(0.00)

6. Other Operating Costs 0.00(0.00)

0.00(0.00)

0.00(0.00)

0.00(0.00)

0.00(0.00)

Total 17.77 42.79 52.22 0.00 112.78(3.32) (12.63) (23.10) (0.00) (39.05)

1/ Figures in parenthesis are the amounts to be financed by the Bank Loan. All costs include contingencies.2/ Includes civil works and goods to be procured through national shopping, consulting services, services of contracted staff

of the project management office, training, technical assistance services, and incremental operating costs related to (i) managing the project, and (ii) re-lending project funds to local government units.

Project Financing by Component (in US$ million equivalent)

Component Appraisal Estimate Actual/Latest EstimatePercentage of Appraisal

Bank Govt. CoF. Bank Govt. CoF. Bank Govt. CoF.Agro-Ecological Zoning and Land Tenure Regularization

46.80 0.90 48.50 5.92 103.6 657.8

Management, Protection and Monitoring of Natural Resources

59.50 3.90 32.72 9.43 55.0 241.8

Agro-Forestry Development and Support Services

47.70 32.80 15.30 19.95 32.1 60.8

Socio-Economic Infrastructure and Services

41.10 30.20 35.91 35.90 87.4 118.9

Project Administration State

5.00 2.40 8.83 4.33 176.6 180.4

Project Administration Federal

1.90 0.80 0.0 0.0

Technical Cooperation 3.00 0.20 15.82 0.00 527.3 0.0

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Annex 3. Economic Costs and Benefits

No analysis was done. The SAR included some C/B analysis of agricultural models, but that component was discontinued at mid-term, and no data are avaible for such analysis.

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Annex 4. Bank Inputs

(a) Missions:Stage of Project Cycle Performance Rating No. of Persons and Specialty

(e.g. 2 Economists, 1 FMS, etc.)Month/Year Count Specialty

ImplementationProgress

DevelopmentObjective

Identification/Preparation- - -

Appraisal/Negotiation- - -

Supervision

10/07/1993 7 ANTHROPOLOGIST (1); FIELD REP. (1); ECOLOGIST (1); LAND REGUL. SPEC. (1); LAND ZONING SPEC. (1); TASK MGR (1); ENV. ENGINEER (1)

2 2

08/12/1994 7 ANTHROPOLOGIST (1); FIELD REPRESENTATIVE (1); ECOLOGIST (2); OPERATIONS OFFICER (1); LAND REGULARIZATION SP (1); AGRO-FORESTRY (1)

U S

04/11/1995 7 FIELD REPRESENTATIVE (1); OPERATIONS OFFICER (1); SOCIOLOGIST (1); ECOLOGIST (1); AGRONOMIST (1); AGRICULTURAL ECONOMIST (1); ECONOMIST (1)

U S

06/20/1999 1 ECONOMIST (1) U S03/15/2000 3 ECONOMIST, TASK MANAGE

(1); CONS. ENVIRONMENTALIST (1); ROAD ENGIEER (1)

U U

11/16/2000 2 ECONOMIST, TEAM LEADER (1); ROAD ENGENEER (1)

U U

11/09/2001 6 TTL, Mission Leader (1); Ex-TTL, Agr Dev Spclst (1); Mission Support (1); Env. Specialist (1); Road Engineer (1); Zoning Specialist (1)

S U

05/10/2002 6 MISSION LEADER (1); ECONOMIST/EX-TTL (1); ENVIRONMENTAL SPEC. (1); ROAD ENGINEER (1); FINANCIAL MGMT SPECIAL (1); ZONING SPECIALIST (1)

U U

ICR

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02/15/2003 5 TTL(1); Ex-TTL/ Agric. Dev. Spec. (1); Community Dev. Spec (1); Econ/Rural Dev. Spec. (1);Operations Officer (1)

U U

(b) Staff:

Stage of Project Cycle Actual/Latest EstimateNo. Staff weeks US$ ('000)

Identification/Preparation 66 169.82Appraisal/Negotiation 44 72.78Supervision 433 1,385.75ICR 22 90.00Total 785 1,718.34

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Annex 5. Ratings for Achievement of Objectives/Outputs of Components(H=High, SU=Substantial, M=Modest, N=Negligible, NA=Not Applicable)

RatingMacro policies H SU M N NASector Policies H SU M N NAPhysical H SU M N NAFinancial H SU M N NAInstitutional Development H SU M N NAEnvironmental H SU M N NA

SocialPoverty Reduction H SU M N NAGender H SU M N NAOther (Please specify) H SU M N NA

Community organizatìon, social capitalPrivate sector development H SU M N NAPublic sector management H SU M N NAOther (Please specify) H SU M N NA

Civil society organization and strengthening

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Annex 6. Ratings of Bank and Borrower Performance

(HS=Highly Satisfactory, S=Satisfactory, U=Unsatisfactory, HU=Highly Unsatisfactory)

6.1 Bank performance Rating

Lending HS S U HUSupervision HS S U HUOverall HS S U HU

6.2 Borrower performance Rating

Preparation HS S U HUGovernment implementation performance HS S U HUImplementation agency performance HS S U HUOverall HS S U HU

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Annex 7. List of Supporting Documents

Bartholo Jr. R.S. Bursztyn. Amazônia Sustentável – Uma estratégia de desenvolvimento para Rondônia 2020. M . Porto Velho 1999. (Projeto ÚMIDAS).

Browder, J. O. Conservation and Development Projects in the Brazilian Amazon: Lessons from the Community Initiative Program in Rondonia, Environmental Management Vol. 29, No. 6, pp. 750–762.

Bursztyn, M. coord. (1996). “PLANAFLORO: Avaliação de Meio Termo”. Brasilia.

Bursztyn, M. coord. (1996). “PRODEAGRO- Avaliação de Meio Termo”. Brasilia.

Conceição, P. H. Z. (2003). “Contribuições para o ICR, Projeto 3444-BR – PLANAFLORO”: 21 pages. Brasilia.

Conceição, P. H. Z. (2003). “Contribuições para o ICR, Projeto 3492-BR – PRODEAGRO”: 18 pages. Brasilia.

Cowell, D. Implementation Completion Evaluation of Zoning Component of the Rondônia Natural Resources Management Project - PLANAFLORO, and the Mato Grosso Natural Resources Management Project - PRODEAGRO. Consultant’s report. 34 pages.

Governo do Estado de Mato Grosso- SEPLAN (2002). “Modelo, Estrutura, Ações e Resultados do PRODEAGRO”. Cuiabá. (Independent Evaluation Report).

Governo do Estado de Mato Grosso- SEPLAN (2002). “Síntese dos Relatórios Parciais e Final”. Cuiabá. (Independent Evaluation Report).

Governo do Estado de Rondônia- SEPLAD (2003). “Relatório de Avaliação Final do PLANAFLORO”. (Independent Evaluation Report) Porto Velho.

Irving, M. Consultants report on the Environmental Components of the Rondonia Natural Resources Management Projetc. March, 2003. 11 pages.

Mahar, D. Land-Use Zoning in Rondonia and Mato Grosso: What Are the Lessons Learned? Consultant’s report. 2002.

Margulis, S. The Logic Of Deforestation Of The Brazilian Amazon, The World Bank, June 2003.

PAIC/PLANAFLORO (1997). “PROGRAMA DE APOIO ÀS INICIATIVAS COMUNITÁRIAS -PAIC: Prestação de Contas”. Porto Velho.

PAIC/PLANAFLORO (1997). PROGRAMA DE APOIO ÀS INICIATIVAS COMUNITÁRIAS -PAIC: Instruções Técnicas. Porto Velho.

PAIC/PLANAFLORO (1997). PROGRAMA DE APOIO ÀS INICIATIVAS COMUNITÁRIAS -PAIC:

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Roteiro e Instruções para Elaboração de Projetos. Porto Velho.

PNUD/PLANAFLORO, (2002). Avaliação Final do PLANAFLORO. Porto Velho. Explain

Rezende, M.L. Consultants report on the Çommunity Driven Development Components of the Rondonia and Mato Grosso Natural Resources Management Projetc. March, 2003. 11 pages.

Sant'Ana, M.-M. M. “PLANAFLORO: Orientações conceituais e técnicas para a implantação do Sistema de Monitoria e Avaliação”.

Schneider, Robert R. (August 1995), Government and Economy on the Amazon Frontier, World Bank, Environment Paper Number 11

World Bank, Operations Evaluation Department (April 30, 1992), World Bank Approaches to the Environment in Brazil: A Review of Selected Projects: Volume V: The POLONOROESTE Program (Report No. 10039)

World Bank (May 21, 1992), Brazil: An Analysis of Environmental Problems in the Amazon (Report No. 9104-BR)

World Bank (1992). Staff Appraisal Report - Rondonia Natural Resources Management Project, Report. No. 8073-BR.

World Bank (1992). Staff Appraisal Report - Mato Grosso Natural Resources Management Project, Report. No.10402-BR.

World Bank (1992). Loan Agreement- (Rondonia Natural Resources Management Project) - Loan Number. 3444-BR.

World Bank (1992). Project Agreement- (Rondonia Natural Resources Management Project) – Loan Number 3444-BR.

World Bank (1992). Project Agreement- (Mato Grosso Natural Resources Management Project) – Loan Number 3492-BR.

World Bank (1997). Office Memorandum- Rondonia Natural Resources Management Project

(PLANAFLORO -Loan 3444-BR): Amendment to the Loan Agreement.

World Bank (1997). "Rondonia Natural Resources Management Project (PLANAFLORO project), (Loan 3444-BR): Proposed Amendment to Loan " Agreement."

World Bank (1998). "Memo to MOF- ref: Mato Grosso Natural Resources Management Project ( Loan Number 3492-BR) - Amendments to the Loan and Project Agreements."

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Additional Annex 8. Summary of Stakeholder Workshop

The workshop included personnel from implementing agencies, and representatives of civil society organizations and the private sector. The most prominent points raised during the workshop were:

- At project start, the project objective was not clear to the project staff and implementing agencies, nor to stakeholders. At the end of the project, the objective is clear to government and a few sectors of the society, but still unclear to several stakeholders.

- Government commitment existed, however the government lacked the know-how to implement the project; the State was not organized to manage the project; the project didn’t provide sufficient training and capacity building for implementation.

- There was lack of understanding of salient themes of the project, especially “sustainable development”.

- The project lacked support from other parts of government (agencies, decision-makers on public investments, etc.); the project lacked integration; implementation of the components was fragmented.

- The project’s greatest benefits consist in the development of scientific knowledge and techniques; but dissemination to end users still lacks.

- Zoning should have been treated as strategic for all activities, not just agriculture;

- Zoning is still not implemented, and not known by the society as a whole;

- The project should have provided the means to identify and disseminate technologies for sustainable development.

- The project was well publicized, but too ambitious, which made difficult its understanding.

- Participation was not well developed.

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