Document of

The World Bank

FOR OFFICIAI, USE ONLY

Report No. 6914-BR

STAFF APPRAISAL REPORT

BRAZIL

ITAPARICA RESETTLEMENT AND IRRIGATION PROJECT

October 27, 1987

Brazil Agriculture DivisionLatin America and the Caribbean Regional Office

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

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CURRENCY EQUIVALENTS

Currency Unit - Cruzado (Cz$)US$1.00 Cz$51.7 1/Cz$1.00 - US$.02Cz$1 million - US$19,325

WEIGHTS AND MEASURES

The metric system is used throughout the report

FISCAL YEAR

Government of Brazil January 1 to December 31CHESF (Companhia Hidro = January 1 to December 31Eletrica do Sao Francisco)

1/ .Exchange rate as of October 1. 1987 (negotiations)

FOR OFFICIAL USE ONLY

GLOSSARY OF ACRONYMS

ATIR - AssistAncia T4cnica de Implantaqao de Recervat6rios - CRESF(Unit for Technical Assistance and Constrmction of Reservoirs- CHESF)

ATI4A - Assist#ncia T4cnica do Meio Amb4.ente - CHESF(Technical Assistance Unit for Environmental Aspects - CHESF)

CELPE - Companhia de Eletricidade de Pernambuco(State Electric Company of Pernambuco)

CHESF - Companhia Hidro El6trica do Sao Francisco(Sao Francisco Valley Hydroelectric Company)

CODEVASF - Companhia de Desenvolvimento do Vale do SAo Francisco(Sbo Francisco River Valley Development Company)

COELBA - Companhia de Eletricisdse do Estado da Bahia(State Electric Company of Bahia)

COMPESA - Companhia Pernambucana de Saneamento(State Water and Sanitation Company of Pernambuco)

CORI - Coordenagao de Reassentamento de Itaparica - CHESF(Field Unit for the Itaparica Resettlement - CHESF)

CRI - Coordenadoria de Reassentamento de Itaparica - CHESF(General Coordination Unit for the Itaparica Resettlement -

CHESF)

DEG - Departamento de Engenharia de Geragao - CHESF(Department of Power Generation - CHESF)

DERBA - Departamento de Estradas de Rodagem - Bahia(State Department of Roads - Bahia)

DERPE - Departamento de Estradas de Rodagem - Pernambuco(State Department of Roads - Pernambuco)

DET - Departamento de Engenharia de Transmislo - CHESF(Department of Power Transmission - CHESF)

DIR - Departamento de Implantagko de Reservat6rios - CHESF(Department for Implantation of Reservoirs - CHESF)

DNER - Departamento Nacional de Estradas de Rodagem(National Department of Roads)

DNOCS - Departamento Nacional de Obras Contra as Sacas(National Department for Drought Works)

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

GLOSSARY oF ACRONYMS (Continued)

ELETROBRASJ Centrais Eldtricas Brasileiras, S.A.(Brazilian Power Plants, S.A.)

EMBASA - Empresa Bahiana de Saneamento(State Water and Sanitation Company of Bahia)

FSESP - Funda;Io Servi9o Especial de Sadde P%blica(Public Health Special Service Foundation)

FUNAI - Funda;Ao Nacional do Indio(National Indian Foundation)

FUNDAJ - Fundacao Joaquim Nabuco(Joaquim Nabuco Foundation)

INTERBA - Instituto de Terra da Bahia(State Land Institute of Bah5*)

OTN - Obriga;8es do Tesouro Naeional(Obligations of the National Treasury)

PROINE - Programa de Irrigacao para o Nordeste(Northeast Irrigation Program)

SEDU-BA - Secretaria de Desenvolvimento Urbano - Bahia(State Secretariat for Urban Development - Bahia)

SEHAB-PE - Secretaria de Habita9&o do Estado de Pernambuco(State Secretariat for Housing - Pernambuco)

SEPLAN-PE - Secretaria de Planejamento - Pernambuco(State Secretariat of Planning - Pernambuco)

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

BRAZIL

ITAPARICA RESETTLEMENT AND IRRIGATION PROJECT

Table of Contents

PLSe

I. LOAN AND PROJECT SU1MMARY ............... .... ....... . 1

II. THE AGRICULTURAL AND POWER SECTORS........................ 3

Agriculture in the National Ecnomy...................... 3The Rural Nartheast ....................................... 3Resettlement as a Result of Hydropower Developm mnt........ 4Irrigation Development in the Northeast................... 4Past Bank Lending in the Agricultural Sector.......... 5

III. THE PROJECT ................... .. . ...... * ......* ...... 5

Rationale for Bank Involvement and Origin ....... 5The Project Areas ......................................... 6Project Beneficiaries ...... .......... ........ ......... 7Project Objectives 7 .......................... 7Resettlement Procedures ............................ 7Resettlement of Amerindian Populations .Environmental Impact Statement....................#..... 9Agricultural Credit.... *.9............. 9Project Desc-iption ....... 9Irrigation and Agricultural Production Servicesi.c.e..... 10

Irrigation Subprojects .............................. 10Agricultural Production Suppert ...................... 11

Other Rural Infrastructure and Services.,ve ........ 12Rural Houigo...................... 12Water Supl u...................... 12Road Systems .......................... . .... 12Electric Power Systems ................................ 12Education, Health and Social Services................ 13

Urban Infrastructure......................... ...... 13Ton2. .. . .. ..... ... .... . .. .. . .. 13Road Systyem .............................. .14

Electric Power Systems. ........ . ...... . 14Drinking Water Supply and Sanitation . .14

Project Organization and Implementation .14Phasing of Project Wor ... 14Project Management............ .... ... . 15Monitoring and Evaluation........... ...... 16Beneficiary Participation ........... 16

This report is based on the findings of an appraisal mission whichvisited Brazil in June/July 1987. The mission comprised Messrs.Tibor, Racynski (consultants), Emanuet, Mmes. Koch-Weser, Anderson,Messrs. Gouveia (IBRD), Miquel, Latour (consultants); and Midgley(UNDP).

Table of Contents (Continued)

Paae

Accounts and Auditing ................................ 17Financial Covenants.................................. 17

Project Costs and Financing .............................. . 17Costs ................................................... 17Financing Plan ............... ..... .... *....0.... 18Procurement .......................................... 18Disbursements ............ . ... .............. 19Cost Recovery ........................................ 20

Project Justification and Benefits ......................... 20Production and Marketing ............................. 20Farm Incomes and Other Project Benefits .............. 21Economic Analysis ...... ........ . ... ....... * 22

Project Risks ............................................. 23

IV. SUMMARY OF AGREEMENTS TO BE REACHED AND RECOMMENDATION.... 23

ANNEX 1 URBAN AND RURAL RESETTLEMENT ..................... 26Urban Resettlement .... *..... .. ...... ........ .. ....#. 26Rural Resettlement ......... .......................... 30Water Supply and Sanitation .......................... 32Resettlement Procedures .............................. 33Monitoring and Evaluation ............................ 36

ANNEX 2 PRODUCTIVE INFRASTRUCTURE .....................4 37Irrigation Subprojects .............................. . 37Agricultural Production ............................. 39Cost Estimates ................................ . 40Project Management ............................. ..... 40Project Implementation .............................. 41Project Benefits ..................................... 42Economic Viability .................... +............... ...... 42

ANNEX 3 PROJECT COSTS, PRODUCTION, ECONOMIC ANALYSIS ANDDISBURSEMENT TABLES ...... .............. ...... 49

ANNEX 4 DOCUMENTS AVAILABLE IN PROJECT FILE ............... 58

MAP: IBRD 20448 - Brazil - Itaparica Resettlement Project

BRAZIL

ITAPARICA RESETTLEMENT AND IRRIGATION PROJECT

STAFF APPRAISAL REPORT

I. LOAN AND PROJECT SUMMARY

Borrower: Centrais El6tricas Brasileiras S.A. (ELETROBRAS)

ExecutingAgencys Companhia Hidro Eletrica do Vale do S80 Francisco (CHESF)

(San Francisco Valley Hydroelectric Company)

Amount: US$132.0 million equivalent

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

ProiectBeneficiaries: Some 8,100 families currently residing in the area of the

future Itaparica Reservoir in the Northeast States of Bahiaand Pernambuco.

ProjectDescription: The project would provide for the resettlement of some

8,100 families who will be displaced by the flooding of thereservoir of the Itaparica Hydropower Project on the SaoFrancisco River. The principal project objective is tomaintain and improve the displaced population's currentliving standards. The project would finance: (a)irrigation and agricultural production services, includingestablishment of some 8,000 ha of irrigated farmland andagricultural production support services; (b) other ruralinfrastructure and services including rural housing, watersupply, rural road construction, installation of electricpower systems, and education, health and social services;(c) urban resettlement of the townships of Petrolandia,Itacuruba, Rodelas and Barra do Tarrachil and water supplyand sanitation, and relocation of regional roads and powerlines.

Risks: Resettlement as a result of manmade changes in theenvironment is always a difficult task. Risks areincreased due to the tight timeframe in which theresettlement must be carried out because of Northeast powershortages, the need for effective cooperation among anumber of public agencies, and complex social and technicalissues involved in the establishment of newly irrigatedagricultural areas. The project has been designed tominimize these risks by setting up effective farmer

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representation, adequate support payments to the settlersup to the marketing of their first crop, and the provisionof agricultural production support.

Estimated Costs:Local Foreian Total---------US$ Million--------

A. Irrigation and Agricultural Production 58.6 80.8 139.4Irrigation Subprojects 54.3 74.7 129.0Agricultural Production Support 4.3 6.1 10.4

B. Rural Infrastructure and Services 58.4 20.0 78.4Rural Housing 1/ 41.0 13.7 54.7Road Systems 5.2 2.8 8.0Electric Power Systems 9.1 2.5 11.6Education, Health, and Social Services 3.1 1.0 4.1

C. Urban Infrastructure 47.8 17.3 65.1Towns 3./ 41.3 13.9 55.2Road Systems 6.2 3.3 9.5Electric Power Systems 0.3 0.1 0.4

Total Baseline -osts 164.8 118.1 282.9Physical Contingencies 10.1 6.0 16.1Price Contingencies 2.5 2.2 4.7

Total Proiect Costs 177.4 126.3 303.7 2i

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

ELETROBRAS 171.7 - 171.7IBRD 5.7 126.3 132.0

Total 177.4 126.3 303.7

Estimated Disbursements:

Fiscal Year 88 89 90 91 92 93--------------- US$ Million---------------

Annual 77.0 48.0 4.0 1.0 1.0 1.0Cumulative 77.0 125.0 129.0 130.0 131.0 132.0

Rate of Return: 12Z

Map: IBRD 20488

1/ Includes costs of drinking water supply and sanitation.2/ Includes US$18.0 million of taxes.

11. THE AGRICULTURAL AND POWER SECTORS

firiculture in the National Economy

2.01 Agriculture in Brazil has traditionally been the main source ofexports and employment, although a relatively small contributor to GDP. In1970, agriculture accounted for 122 of GDP, 44? of the economically activepopulation was employed in the agricultural sector and 67? o' total exportswere generated from agriculture. In 1984, these figures were 13?, 30? and38?, respectively. Throughout the 19709, there was rapid expansion inBrazil's agriculture (52 per annum); during the recession in the early1980s, output and investment stagnated and then recovered in 1984 and 1985.

2.02 The performance of the sector in the 1970s and 19808 marked sharplydisparate rates of growth between regions, farm types, and individual crops.The most dynamic expansion was with products that rely on heavy capitalinvestment or high levels of inputs, such as soybeans, citrus, tobacco,cocoa, and sugarcane, mostly grown on large commercial farms in central andsouthern Brazil. Much slower growth rates, and in some cases declines, wererecorded for such staple food crops as rice, maize, wheat, beans, manioc,and potatoes.

2.03 These trends In agricultural output were reflected also inagricultural trade. In the 1970s, the rapid growth in agricultural exportsdepended heavily on soybean products, orange concentrates, tobacco, cocoa,and sugar. Of total agricultural exports of US$2.09 billion in 1970, only15? were accounted for by these five crops. By 1980, they accounted forover 50? of Brazil's US$9.43 billion of agricultura'l exports. After 1980,the value of agricultural exports stagnated, except for 1984, when coffeeand orange concentrates were aided by favorable prices in the exportmarkets.

The Rural Northeast

2.04 The Northeast is comprised of the States of Maranhao, Piaui, Ceara,Rio Grande do Norte, Paraiba, Pernambuco, Alagoas, Sergipe, Bahia, theNorthern portion of Minas Gerais, and the island of Fernando de Noronha.The region covers a total area of over 1.5 million km2 (182 of the country'stotal area).

2.05 The Northeast has been the nation's foremost problem region sincethe late 18009 because of unreliable rainfall patterns, periodic droughts,inequitable land distribution, and severely limited employmentopportunities. These problems resulted in poverty and underemployment.From 1970 to 1983, 3.3 million people migrated from the region, partially asa result of a five-year drought cycle (1979-1983). In 1980, the Northeasthad a total population of 35 million (about 29? of the country's total),growing at 2.2? per annum with a population density of 22.5 inhabitants persquare kilometer. About half of the population in the Northeast lives inrural areas and over 50Z of the work force is engaged in agriculture. Landownership is skewed; farms under 10 ha (702 of all farms) occupy less than6? of the farm areas, while farms over 500 ha (11 of all farms) occupy mnorethan 40?. Rural incomes are low.

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Resettlement as a Result of Hydropower Development

2.06 The development of hydroelectric power projects in the Northeasthas involved the resettlement of large numbers of rural and urban families.The most important of these resettlements followed the construction of thePaulo Afonso IV Sobradinho Hydroelectric Project (supported by Loan 1008-BR,approved in 1974), on the Sao Francisco River. A large storage dam createdthe Sobradinho Reservoir. Some 10,000 families were displaced from theflooded area. The Sao Francisco Valley Hydroelectric Company (CHESP), asubsidiary of ELETROBRAS responsible for power generation in eightNortheastern states, was the principal executing agency for the damconstruction and resettlement.

2.07 Evaluations of the Sobradinho resettlement program, including theProject Completion and Audit Reports for the Bank-financed project,concluded that urban resettlement was carried out in a satisfactory manner.However, rural resettlement was inadequately planned and implemented,resulting in unnecesssry hardship for the evacuees. It failed toreestablish the livelihood of the displaced farmers compared to their pre-resettlement incomes. The rural resettlement relied on ad hoc emergency-type planning without adequate participation of the affected families. Anunusually high failure rate among resettled farmers was apparently due topersonal hardships and losses of animals and other possessions during theresettlement process, inadequate infrastructure at the new village sites;lack of financial support to farmers prior to their first full harvest; andineffective technical assistance during the early years followingresettlement. While commercial, mechanized agriculture and fisheries aretoday flourishing in parts of the settled area, many beneficiaries are newarrivals; most of the original farm families have dispersed and moved tourban areas.

Irrigation Development in the Northeast

2.08 Irrigation has long been viewed as an important element for ruraldevelopment in the Northeast. However, at present, there is little morethan an estimated 100,000 ha of irrigated farmland in the Northeast. Abouthalf has been developed by the two federal agencies responsible forNortheast irrigation development, the National Department for Drought Works(DNOCS) and the Sto Francisco River Valley Development Company (CODEVASF).DNOCS has been mostly involved in emergency drought programs and theconstruction of large dams and reservoirs. CODEVASF, established in 1974,is responsible for the implementation of major public irrigation systems inthe Sao Francisco River Valley, It currently operates 18 irrigationprojects with some 40,000 ha developed and 25,000 ha in various stages ofconstruction. Since 1986, both agencies have been institutionally linked tothe special Minister for Irrigation.

2.09 Irrigation programs for the Northeast received new impetusfollowing the 1978-83 drought and the appointment of a special Minister ofIrrigation in 1986. The five-year Irrigation Program published in January1986 proposes an increase of one million hectares in the areas under publicand private irrigation in the Northeast by 1990. In support of thisprogram, the Bank granted loans for the Northeast Irrigation Engineering

Project (Loan 2680-BR) in March 1986 and the Up?er and Middle Sao FranciscoIrrigat;on Project (Loan 2719-BR) in FLay 1986. The engineering projectprovides te'hnical and financial support for regional irrigation planningand detailed study and design of possible future public irrigation projects.The Upper and diddle Sao Francisco Irrigation Project is implemented byCODEVASF and provides for the rehabilitation of 17,800 ha of irrigated landand the development of some 11,000 ha of new lands.

2.10 Prior to these recent irrigation efforts, the Bank was involved intwo other CODEVASP irrigation projects. The Lower Sao Francisco PolderProject (Loan 1153-BR), approved in August 1975, was a follow-up to thePau'o Afonso IV/Sobradinho Hydropower Project (para. 2.06). The project wasneeded to compensate for changes in the flow regime of the river caused bythe operation of the hydropower project, which affected the fertilefloodlands (varzeas) downstream of the dam. It financed the construction ofprotective dikes and the establishment of irrigation in six large floodplains (32,000 hectares). improving the livelihood of 11,000 families.During its first years, the project suffered serious delays mainly due toorganization4l difficulties within CODEVASF, and inadequate implementationof social and land tenure improvement activities. The Project PerformanceAudit Report for the Lower Sao Francisco Polders Project showed, however,that despite these implementation delays, net incomes of beneficiariesincreased beyond original estimates and many small farmers moved fromsubsistence agriculture to commercial farming. The second project, the SaoFrancisco II Irrigation Project (Loan 1729-BR) is still underimplementation. Progress has been satisfactory. Although flood conditionsin 1985 and 1986 created delays in completing civil works, production in thedeveloped areas has exceeded appraisal estimates. The loan closing date,recently postponed for the second time, is now June 30, 1988.

Past Bank Lending in the Agricultural Sector

2.11 As of September 1, 1987 the Bank has made 45 loans, totallingUS$3,470.0 million (net of cancellations), for agricultural and ruraldevelopment in Brazil. These include one agricultural credit and exportloan for US$303.0 million; one credit and marketing reform loan for US$500.0million; supplemental financing for US$30.5 million under the Special ActionProgram; three loans for US$503.5 million for agroindustries; three fotUS$111.5 million for livestock, including a disease control project ofUS$51.0 million; one for US$18.0 million for grain storage; two for US$100.0million for agricultural research; two for US$255.0 million for agriculturalextension; one for US$100.0 million for land tenure improvement; and 31,totalling US$1,548.5 million, for various settlement, irrigation, and ruraldevelopment projects in the Northeast, in Minas Gerais, and in the North andNorthwest.

III. THE PROJECT

Rationale for Bank Involvement and Origin

3.01 In order to assist the Government of Brazil in increasing energysupplies, the Bank began preparing a power sector loan in 1985 (Loan

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2720-BR of US$500 million approved in June 1986). As part of preparation, areview was carried out of the social and environmental issues affecting thepower sector. The review found critical delays in the planning andpreparation for resettlement of some 8,100 families residing in the area ofthe future Itaparica Reservoir, scheduled to be filled in early 1988.Similar to the pceviously completed Sobradinho Reservoir resettlementprogram, preparations for the rural resettlement of the Itaparica evacueeswere inadequate (para 2.07). Consequently, disbursem'nts of the first andsecond tranches of the power sector loan were conditioned upon submission ofa satisfactory resettlement plan for Itaparica and satisfactory progress inits implementation. In addition, when the loan was presented to the Board,staff made a commitment that the Bank would provide technical and financialsupport for the resettlement to ensure that it was carried out efficientlyand without undue human hardship. The Sobradinho experience had shown thatpoorly planned and executed resettlement could have high social and economiccosts, causing unnecessary human hardship, delays in electric energygeneration and losses in regional agricultural production. Conversely, asound resettlement project could contribute toward broader developmentobjectives in the irrigation and power sectors, and support general povertyalleviation objectives in the Northeast region.

3.02 Preparation of the proposed project began in June 1986. Design ofthe irrigation systems and the urban and rural infrastructure werecontracted to local consulting firms, and coordinated by CHESF's Directorateof Engineering. A US Bureau of Reclamation's technical team, attached tothe Minister of Irrigation in Brasilia (financed under the NortheastIrrigation Engineering Loan (para 2.09)), assisted CHESF and theconsultants. Preparation for the resettlement of the population was carriedout by various CHESF units coordi'rvted by the Directorate of Engineering.The project was appraised by the Lank in June 1987, and the negotiationstook place in Washington, D.C. in October 1987. The Brazilian delegation wasled by Mr. Jose Fagali Neto of the Federal Ministry of Finance.

The Project Areas

3.03 The Itaparica Dam is located in the arid sertao region of theStates of Bahia and Pernambuco. The reservoir created by the dam wouldflood about 800 km2, including some 18,000 ha of irrigable land of whichabout 8,000 ha are presently cultivated. Another 40,000 ha of land to beflooded are used for rainfed cropping and livestock grazing. At present,the main crops grown on the floodplains of the river are beans, tree-cotton,maize, onions, tomatoes, watermelons, and rice. The fertile alluvial soilsallow for good yields and high cropping intensities. About 80Z of thefarmers in the area have irrigation experience. Livestock (some 90,000heads) and rainfed farming provide important additional sources of income.

3.04 With the flooding of the reservoir, most of the fertile and easilyirrigable land in the vicinity of the river will be lost. Due to the sparseand irregular rainfall (an average 350 mm per annum) in the area and theoccurrence of pluriannual droughts, resettlement must be based on irrigatedfarming. Soils suitable for irrigation are limited near the presentlyfarmed areas. Consequently, less than half of the rural population can beresettled in the vicinity of the future lakeshore. The rest will be movedto Irrigation perimeters up to 270 kms away (Annex 2). The areas chosen forresettlement are only sparsely populated; some 400 farm families living inthese areas would be included in the resettlement schemes.

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3.05 In addition to farmland which will be flooded by the reservoir,several urban settlements will have to be moved. The municipal centers ofPetrolandia, Itacuruba, and Rodelas, and the village of Barra do Tarrachilwill be submerged. Roads and power lines will also have to be relocated.

Proiect Beneficiaries

3.06 Of a total of some 7,900 families to be resettled, including the400 families presently living in the proposed resettlement areas, some 5,300are farm families; of these 1,600 are land owners and tenants. Some 190 farmfamilies are Tuxa Amerindians which live in the town of Rodelas. The Tuxaare presently farming irrigated land on an island in the Sao FranciscoRiver.

Project Objectives

3.07 The Itaparica Power Project would make an important contributiontoward alleviating critical power shortages in Northeast Brazil. The mainobjective of the proposed project would be to maintain and, if possible,improve the livi. g standards of the 7,900 families to be resettled. For thefamilies to be rejettled in the newly constructed irrigation perimeters, theobjectives of the project are to improve agricultural production, provideadequate housing in small rural centers (agrovilas) and improve landownership conditions. The urban population would be moved into newlyestablished towns which have been planned and designed to modern townplanning standards and which would provide a relatively high level ofmunicipal services.

Resettlement Procedures

3.08 Resettlement in the urban areas started several months ago and isproceeding smoothly. The relocation of all population is scheduled to becompleted in January 1988. Procedures agreed for the exchange of propertyare described in Annex 1. Resettlement of the rural population is a morecomplex undertaking; communities will be relocated several hundredkilometers from their present homes to newly established villages with adifferent ecological environment.

3.09 A cadastre of families to be resettled has been made. Resettlementprocedures involve a series of routine preparatory steps for each community,including: (a) a communication campaign, including meetings at the communaland family levels and visits to the resettlement sites, to familiarizeresettlers with their options; (b) the definition of the type of house forwhich each family is eligible; (c) an inventory of livestock to betransferred; (d) ratification of resettlement agreements by each family(including special treatment of any difficult cases); (e) consolidation ofcommunity resettlement plans, including the definition of neighborhoodclusters and the distribution of irrigated lots in accordance withentitlements and preferences expressed by the community (conflicting claimsof different neighborhood clusters would be settled by a type of lottery);and (f) arrangements for actual transfer of families and their belongings.

3.10 Starting in May 1987, 37 teams (each with one social andi oneagricultural extensionist, with support from a field aide), led by a

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sociologist with relevant resettlement experience, were trained and fieldedto carry out this process. Physical resettlement of the rural populationwill be staggered and is scheduled to take place between mid-September andend-Decembet 1987. Detailed procedures have 4lso been established to aupplyand assist families following their arrival in the new locations. Specialarrangements have been made to settle conflicts tbrough the ruralsyndicates, and following resettlement, through local councils nominatLed bythe communities. Resettlers would be entitled to legal assistance in caseswhich cannot be solved through these local mechanisms. Finally, independentevaluation work throughout the resettlement process by a respected researchinstitution is expected to provide expeditious feedback and to facilitateany adjustments which might become necessary with regard to the resettlementprocedures (para 3.45). A post- appraisal mission has reviewed theadministrative and organizational preparations in the field for therelocation of the population and found them satisfactory. Duringnegotiations, CHESF provided assurances that it would, in accordance withsound administrative and technical practices, commence the filling up of thefuture Itaparica reservoir only after the physical relocation of thepopulation residing in the area has been completed (para 4.03).

3.11 Difficulties experienced by CHESF in obtaining funds for theacquisition of resettlement sites have been one of the major causes fordelays in the planning and implementation of the resettlement process. Mostproposed resettlement areas have now been expropriated and theindemnification of owners or occupants is underway. A condition for loaneffectiveness would be CHESF's possession, with utilization rights of allland required for the project (para 4,04). During negotiations, CHESF alsoprovided assurances that it would not later than December 31, 1989, acquiretitle to all the land required for the project for eventual transfer to thepopulation resettled by the proje;t. (para 4.03).

3.12 Because the productive infrastructure (irrigation systems) would becompleted only several months after the farmers have been resettled, monthlysupport payments would be made to the settlers for work on land clearing,road construction and the building of irrigation infrastructure. Duringnegotiations, CHESF provided assurances that it would pay monthly supportpayments to farmers up to nine months after water has become available ontheir fields (para 4.03). Detailed procedures for the resettlement of therural population are presented in Annex 1.

Resettlement of Amerindian Populations

3.13 Resettlement of the Tuxa Amerindian community would be treated as aseparate operation. Some 190 families of the acculturated Tuxa tribe, wholive in the city of Rodelas and in the rural areas of the municipality ofItacuruba and who own irrigated farmland on an island in the Sao FranciscoRiver, would be resettled by the project. Ninety-two families of the tribehave settled some 15 km from Ibotirama on the upper Sao Francisco Riverwhere CHESF has acquired some 2,100 ha of land for these families.

3.14 The remaining 98 families would be resettled in a special sectionof the new town of Rodelas. An &rea of 4,000 ha has been acquired by CHESFfor the agricultural development of these families. Agricultural and socialextension services for the Amerindian populations would be supplied by

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FUNAI. CHESF and FUNAI have already signed an agreement recording detailedarrangements for the Tuxa resettlement. However, in order to becomprehensive, the agreement requires some amendments. Consequently, duringnegotiations CHESP provided assurances that, not later than six months afterthe signing of the project agreement, it will amend the existing agreementwith FUNAI and define CHESF's and FUNAI's responsibilities for:

ti) the resettlement of some 180 Tuxa Amerindian families toIbotirama and Rodelas in the State of Bahia;

(ii) FUNAI's responsibility in providing social and agriculturalextension services to the resettled Amerindian population; and

(iii) CHESF's obligation to transfer not later than January 1, 1990to FUNAI, on behalf of the Tuxa Amerindian communities, theland to be occupied by them (para 4.03).

Environmental Impact Statement

3 15 Government regulations (Federal Law 6938 of 1981) require ther -eparation of an environmental impact statement (RIMA). As the project wasalready under construction when the law and its regulations were published,CHESF is only now preparing such a study. Host of the data for thestatement is available from feasibility studies of the resettlement sites.Some additional work, however, would be required to ensure the statementmeets required standards. Terms of reference to complete the study andfulfill the requirements of the law, have been prepared by CHESF. Duringnegotiations, CHESF provided assurances, that not later than June 30, 1988,it would furnish to the Bank, for its comments, the results of the study,and follow the recommendations of the study in carrying out the project,taking into account the Bank's comments (para 4.03).

Agricultural Credit

3.16 As a complement to project activities, agricultural credit formedium and long-term investment would be made availablo to the resettledfarmers through regula: Northeast Irrigation Program (PROINE) creditchannels. Under the project the farmers would receive their lots withsprinkler equipment installed. However, farm implements and otherinvestments would be the farmers' responsibility. Norms approved in July1987 for PROINE credit establish interest rates of 72 over an indexedprincipal. The index used would be the OTN, which is closely related toinflation and adjusted periodically. Sufficient credit to cover theItaparica benefiaries' needs would be included in the Ministry's annualbudget request for PROINE.

Pro1ect Description

3.17 The proposed project has three major components: (i) anirrigation and agricultural production services component which includesconstruction of irrigation infrastructure and agricultural productionsupport services; (ii) a rural infrastructure and services component thatincludes housing, water supply systems and road construction, electricalnetwork installation, and provision of education, health and social

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services; and (iii) an urban infrastructure component which includeshousing, public building and road construction, electrical networkinstallation and construction of water supply and sanitation systems. Therural and urban infrastructure has been planned and designed by consultantsengaged by CUESF or by State Government agencies such as the Secretariatfor Housing (SEHAP-PE) in Pernambuco. Detailed designs of allinfrastructure has now been completed and construction is underway in thetowns and rural villages.

Irrigation and Agricultural Production Services

3.18 Irrigation Subprojects. The project would finance theconstruction of pumping stations and conveyance systems for publicirrigation systems, the installation of irrigation equipment on thefarmers' fields and the construction of power lines to the pumpingstations.

3.19 The rural resettlement targets assume that all 5,300 ruralfamilies will opt for resettlement in the rural areas. Some of the moreprosperous farmers however, may opt for cash indemnification. The 18,000ha of irrigated farmland to be developed for irrigation would be dividedinto some 5,200 farms (Annex 2). Some 2,400 family farms, including theTuxa Amerindian community of about 100 families, would be located aroundthe lake, and the remaining families in three new irrigation perimetersseveral hundred kilometers from their present homes. All new farmland wouldbe sprinkler irrigated. Each farmer would receive an irrigated plot of atleast 1.5 ha with a maximum of 6.0 ha, depending on the size of his familyand whether he previously owned land, was a tenant farmer or was a farmlaborer. Each farmer would also receive rights to about 22 ha of communitygrazing and rainfed cropland. The combination of irrigated agriculturewith livestock grazing and rainfed cropping would be similar to presentcultivation practices.

3.20 The subproject areas include:

(a) Lake Proiects. The 7,900 ha of irrigated land on both banks of thefuture Itaparica reservoir in the states of Pernambuco and Bahia,would be divided into 2,400 farms grouped in small irrigated areas.The project would finance the design and construction of pumpingstations and water distribution networks for each subprojectincluding surface drainage and roads.

(b) BriRida. The subproject area would be divided into 430 farms.Water would be pumped from the Sao Francisco River to irrigateabout 1,500 ha. Items to be financed include: a pumping station,a main canal, a secondary distribution network, and surfacedrainage and feeder road networks.

(c) Pedra Brancas. The subproject area would be divided into some 750farms. Water would be pumped from the Sao Francisco River toirrigate 2,700 ha. The project would finance a pumping station, amain canal, a second pumping station to deliver water to twosubareas, several smaller pumping stations, distribution networks,compensation reservoirs and surface drainage and road networks.

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(d) Caraibas (P.G). The subproject area would be divided into some1,600 farms and irrigate 5,600 ha by pumping water from the SaoFrancisco River. The project would finance a main pumping stationon the Sao Francisco River, several smaller pumping stations alongthe main canal, a di3tribution network, reservoirs, and surfacedrainage and road networks.

During negotiations, CHESF provided assurances thats (a) should problems ofsalinity occur within five years of settlement which are not a result offarmer negligence, CHESF would provide the affected farmers with a new plotof irrigated land; (b) farm families would receive full title to their landfrom CHESF not later than five years after resettlement; and tc) farmerswould be authorized to use the land until title is transferred or untilCHESF would notify the farmers that, as a result of their failure to farmthe land, their right to farm the land had been terminated (para. 4.03 andAnnex 1).

3.21 Agricultural Production Support. Soil management and irrigationpractices for the newly developed areas would be quite different from thetraditional irrigation practices along the Sao Francisco River. Also, theoperation and management of the relatively large irrigation subprojectswould require experienced agricultural support staff. During the projectperiod, these services, financed by the project, would be contracted to aprivate, consulting firm which would also provide social support services tothe farm families. The consultants would be responsible for the overallmanagement of the irrigation subproject areas, the coordination of operationand maintenance, the provision of organizational support to farmers'organizations, and on-farm technical assistance to fanmers.

3.22 One of the major tasks would be farmer training. Existing stateextension services do not, at present, have the necessary expertise inirrigated farming. However, eventually state extension agencies couldassume responsibility for technical assistance. Therefore, the selectedfirm(s) would coordinate their agricultural extension activities with thePernambuco and Bahia extension services, and staff from these services wouldbe employed and trained by the firm.

3.23 Specially trained agricultural technicians would provide the basicvillage level contacts with the farmers, with each technician responsiblefor a group of farmers. The technicians would live in the villages inhouses provided by the project. Agriculturists (university graduates)would supervise the village level workers and meet with them and thefarmers on a regular basis. Problems in specific areas such as plantprotection, irrigation, marketing, and credit, would be handled by subjectmatter specialists.

3.24 It is expected that the consultants selected for agricu.Lur-.iproduction and social support services would be a joint venture between aBrazilian firm end an international consulting firm with proven experiencein irrigated agriculture development. CHESF would also recruit anextension specialist for irrigated agriculture to assist in the supervisionof the performance of the consultants. Agricultural support services wouldbe required in the spring of 1988. A condition of loan effectiveness would

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be that CHESP had selected consulting firms, with qualificationssatisfactory to the Bank, to present proposals for the provision ofagricultural and social support services (para 4.04). In addition, duringnegotiations, CHESF provided assurances that, not later than April 1, 1988,it would employ consulting firm(s), under terms of reference satisfactoryto the Bank, for the provision of agricultural production and socialsupport services and also employ the supervising extension specialist (para4.03).

Other Rural Infrastructure and Services

3.25 Rural Housing. The completion of all rural housing is aprerequisite for the physical resettlement of the rural families. Ruralhouses would be grouped in 121 small villages (agrovilas) and would consistof one bedroom dwelling units, 45 m2 in area for non property owners andunits not exceeding 65 m2 in area for property owners in exchange for theirexisting houses.

3.26 Water Supply. Because of the need to rapidly resettle thepopulation in the rural areas, water supply systems would be constructed intwo stages. There would be a provisional stage, with raw water pumped fromthe river, followed by the construction of the final systems, with rawwater supplies drawn from the irrigation system. Water treatmentinstallations and the clear water wells in the agrovilas would beconstructed by contractors and completed before resettlement. Designstandards for the water supply systems are satisfactory. The operation andmaintenance of rural water supply systems in the agrovilas would beundertaken initially by CODEVASF, and subsequently, by the communitiesthemselves. The Public Health Special Service Foundation (Fundacao ServicoEspecial de Saude Publica), FSESP, would assist with the training of therural communities.

3.27 Road Systems. To connect the new settlement areas with the stateroad network and to provide internal road systems in the rural resettlementareas, the project would finance the improvement of about 170 km of 5.0 mwide, gravel surfaced rural roads, and the construction of some 1,400 km ofnew roads to the same specifications. Road construction would be done bycontractors. The designs of the road network were approved by the stateroad departments of Bahia (DERBA) and Pernambuco (DERPE). Duringnegotiations, CHESP provided assurances that it would, not later than sixmonths after the signing of the project agreement, make arrangementssatisfactory to the Bank with the appropriate state and municipalauthorities for the maintenance of roads to be constructed and improvedunder the project (para 4.03).

3.28 Electric Power Systems. The primary power supply system involvesthe installation of 133 km of electrical transmission lines of 69 KV, andthe construction of six new electrical substations (69/13.8 KV) in Campinho(10 MVA), Se Angico (5 MVA), Brigida (5 MVA), Caraibas I (10 MVA), CaraibasII (10 MVA), and Rodelas (2.5 MVA). All rural distribution systems wouldbe operated at 13.8 KV; motors at the main pumping stations would operateat 4.16 KV. Individual house connections would be at 220 V; installationcosts would be financed by the project. The state power companies, COELBAin Bahia and CELPE in Pernambuco, would be responsible for the design,

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construction, and operation and maintenance of all electricalinstallations, and collect charges in accordance with federal regulations(para 3.58). The permanent electrical systems are expected to be completedin December 1988. Until then, provisional installations at 13.8 KV,tapping existing power lines, would provide power in the resettlement stagefor rural villages and the provisional water systems.

3.29 Education. Health and Social Services. Existing state health andeducational services from the reservoir area would be relocated to the newsettlement sites. As a result of the dispersion of the rural population tosix resettlement areas, the number of schools and health posts wouldincrease. The project would finance: (a) the construction and purchase ofequipment and supplies for 59 rural schools and 8 health posts; (b) thetraining of teachers and health professionals; and (c) (on a shared basiswith the state health and education secretariats) the cost of salaries forteachers and health personnel; the project's contribution would be on adeclining scale from 1988 to the end of the project period.

3.30 CHESF's social extension services have been in place for severalyears. Their task has been to prepare a family-by-family inventory of thepopulation to be resettled. After resettlement, responsibility for socialextension services for the rural families would be transferred to a privateconsulting firm (para 3.24).

Urban Infrastructure

3.31 The project would finance the construction of housing, schools,health facilities, public buildings and the supply of electric power,roads, drinking water and sewage facilities for some 3,200 urban families.The four riverside towns of Petrolandia (2,400 families) and Itacuruba (530families) in the State of Pernambuco and Rodelas (580 families) and Barrado Tarrachil (260 families) in the State of Bahia would be relocated.About 700 families who are presently urban dwellerg and whose principalactivity is farming, have opted for relocation in the agrovilas. Theremaining 3,100 families, plus some 100 rural families (who opted forrelocation in urban areas), would be relocated in new towns presently underconstruction. The relocation process started a few months ago and isscheduled to be completed by January 1988. The process of site selection,new town layout and design was carried out by CHESF, with the fullcollaboration of the communities involved, and the respective municipal,state, and federal authorities. The site plans, with respect totopographic, climatic, and ecological characteristics allow for futurepopulation growth, and urban expansion of services. The plans meetsatisfactory urban planning criteria, are cost effective in concept, andprovide the basis for the socio-economic development of the familiesresettled in urban areas.

3.32 Towns. Conditions in the existing towns are rudimentary and inmany cases below acceptable standards. CHESF is providing in each new townthe replacement of existing facilities (and the establishment of newservices which should have existed) at more than adequate standards. Theproject would finance:

(a) Provision of serviced plots for property owners who accept cashindemnities for their existing dwellings; provision of sufficient

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building materials for construction tf a complete dwelling unit fornon-property owners; and construction of dwelling units for propertyowners who prefer to exchange a new house for their existingdwelling;

(b) Construction of municipal, state, and federal buildings for health,education, postal and telecommunication serv'ces, police, cemeteries,slaughterhouses, markets, and ancillary public services;

(c) Provision of serviced plots for commercial use (construction is theresponsibility of commercial property owners indemnified by CHESF);and

(d) Construction of churches and ancillary facilities, community halls,libraries, public squares, parks, sports facilities, and the plantingof trees alongside all urban roads.

3.33 Construction and design standards are satisfactory and higher thanthose of the existing towns. They are nevertheless warranted as they reflectthe opportunity cost standards set by the residents for their resettlement.The municipalities presently do not have the experience to adequately maintainthe higher standard of urban services provided by CHESF at their request. Therespective state secretariets for urban development (SEDU-BA), planning(SEPLAN-PE) and housing (SEHAB-PE) would assist the municipalities in theoperation and maintenance of these services. Also, the recently establishedNortheast Urban Development Training Program in SUDENE (UNDP Project85/BRA/008 financed under Loan BR-2170) would assist with the training ofmunicipal staff.

3.34 Road Systems. The road component involves the relocation of onefederal road (BR-11O, Itaparica Dam/Petrolandia, 20 km), a Pernambuco stateroad (PE-422, access to Itacuruba, 11.4 km) and a Bahia state road (BA-210,Itaparica Dam/Barra de Tarrachil, 106 km). The first two roads would be paved(double surface treatment), and the third would be gravel-surfaced with aprotective asphalt coating.

3.35 Electric Power Systems. In the urban areas all residential andcommercial properties would receive a house connection at 220 V.

3.36 Drinking Water Supply ard Sanitation. The design standards forthe urban water supply and sanitation systems are satisfactory, as are thedemand estimates upon which they are based. The urban waste water andsewage disposal networks would consist of ceramic collection pipe networksand oxidation ponds. The low organic content of the waste water, theshallow depth of the ponds and the climatic conditions in the area wouldguarantee an aerobic treatment of the waste water. The operation andmaintenance of the urban water supply and sewerage systems would beundertaken by the respective state water and sanitation companies (COMPESAand EMBASA).

Project Organization and Implementation

3.37 Phasing of Project Works. Project implementation would take anestimated seven years, divided into three distinct phases:

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(a) the urban and rural relocation phase ending in De-ember 1987;

(b) the irrigation infrastructure construction phase in 1988; and

(c) the production and socioeconomic consolidation phase in the ruralareas from January 1989 to December 1993.

3.38 Phase one would end in December 1987, about the date of the startof the reservoir flooding. Depending on precipitation in the watershed,flooding could take several months. Investments in the first phase are foressential urban and rural infrastructure to enable the evacuation of thepopulation from the reservoir area and their resettlement in newlyconstructed towns and villages. Relocation of the first families began inearly October 1987 and is proceeding smotthly. Construction of the new townsis scheduled for completion by the end of December 1987. At the time ofappraisal, construction had advanced sufficiently in Petrolandia andItacuruba for people to begin moving in. Progress has been somewhat slowerin Rodelas and Barra do Tarrachil. Also, by December 1987, some of the roadconstruction in the new towns and rural resettlement areas and most of therealignment and construction of federal and state roads and the provisionalpower transmission lines would be completed (Annex 2, Chart 3).

3.39 The second phase would start in January 1988 and continue until thecompletion of all major investments in the urban and rural areas. In therural areas, the irrigation infrastructure would be completed, and theagricultural production and social support services established. The thirdphase would start in 1989 when agricultural production on the newlyirrigated lands would begin. During this phase the project would finance theagricultural production and :ocial support services.

3.40 Proiect Management. CHESF would have overall responsibility forthe resettlement, in line with its cobligations under Brazilian law. CHESFwould assume direct responsibility through the first and second phases,until resettlement has been completed and the productive infrastructure inthe rural areas has been constructed (end of 1988). From 1989 and duringthe third phase of the project, the responsibility for development of therural areas would be delegated to CODEVASF, while the management of thenew urban areas would be the responsibility of the respectivemunicipalities. During this last phase, CHESF would retain overallbudgetary control and supervision responsibility. Both CHESF and CODEVASFhave experience in the design, construction and operation of major civilworks.

3.41 In October 1986, the Minister of Irrigation established a jointCHESF/CODEVASF working group to plan and design the agriculturaldevelopment of the new rural resettlement areas. The CHESFICODEVASFworking group would operate during the entire project period. An agreementbetween CHESF and CODEVASF defining their respective tasks andresponsibilities was signed in June 1987 and published in the OfficialGazette on September 30, 1987. The agreement provides for cost recoveryarrangements and for the transfer of ownership of the rural infrastructureto CODEVASF at the end of the project period.

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3.42 Within CHESF, responsibility for the coordination of theresettlement project lies with the Directorate of Engineering. Under theguidance of a qualified project manager already in place, responsibilitiesfor project implementation (construction of infrastructure and theorganization of the relocation of the population) would be divided betweentwo site managers and their respective teams, one for the resettlementareas around the future reservoir and the other for the other four areas ata distance from the reservoir. During negotiations, CHESF providedassurances that it would maintain a project implementation unit withorganization, structure and functions satisfactory to the Bank, and staffedwith personnel in numbers and with qualifications satisfactory to the Bank(para 4.03).

3.43 CODEVASF would establish a project coordination team located atthe Itaparica dam to provide overall supervision during the construction ofthe irrigation systems and the following period of agricultural development(Annex 2, Chart 2). CODEVASE would receive assistance froms

(a) a specialized consulting firm(s), satisfactory to the Bank, whichwould provide agricultural production and social support servicesto the farmers, including the overall management of the irrigationsubprojects, the supervision of the operation and maintenancecontractor(s), rural extension, plant protection and marketingservices, and organizational support to farmer organizations: and

(b) prequalified contracting firms, satisfactory to the B'nk, for theoperation and maintenance of the irrigation subprojects. Thecontractors would operate the sub-project areas to the end of theproject period, after which the responsibility for operation andmaintenance would be shared between CODEVASF and the farmers.

3.44 For the Tuxa Amerindian resettlement, CHESF would collaborate withFUNAI, which is the responsible agency for Amerindian affairs underBrazilian law (paras 3.13 and 3.14). For the operation of health andeducation services, CHESF would delegate implementation to the states (para.3.29). An agreement has been signed between CHESF and the State Governmentsof Bahia and Pernambuco for the provision of health and education services.Annex 2 provides additional information on project organization andmanagement.

3.45 Monitoring and Evaluation. In addition to CHESF's own projectmonitoring procedures, CHESF has contracted the Joaquim Nabuco Foundation(FUNDAJ) to carry out in-field evaluation of the resettlement process.This would ensure continuous evaluation and provide feedback to projectmanagement on implementation issues, serving as a corrective instrument forthe process and a vehicle for the expression of farmers' views. Inaddition to these arrangements, a special high level supervisory committeewould be responsible for independent evaluations of the resettlementprocess, in accordance with agreements reached under Power SectorEnvironmental Master Plan.

3.46 Beneficiary Participation. The participation of the affectedpopulation in the planning and implementation of the resettlement processwas formally agreed to in December 1986. The local Rural Workers Union is

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representing the settlers in their contacts with CdESF. Written agreementshave been signed and frequent formal and informal consultations have takenplace (Annex 1).

3.47 Accounts and Auditina. CHESF would maintain separate accounts forproject expenditures which would be audited annually by private,independent auditors acceptable to the Bank. During negotiations, theBorrower and CHESF provided assurances thatt (a) project accounts,including the Special Accounts, would be maintained and audited annuallyaccording to practices satisfactory to the Bank; (b) terms of reference forthe auditors would include verification of expenditures made understatement of expenditures (SOEs) and (c) copies of the audit reports wouldbe submitted to the Bank within six months of the close of each fiscal year(paras. 4.01 and 4.03).

3.48 Financial Covenants. During negotiations, the Government,ELETROBRAS, and CHESF provided assurances related to the financialperformance of CHESF and the electric power sector (paras 4.01-4.03). Theseinclude:

(a) the implementation of a satisfactory program to reduce borrowingsto no more than 702 of annual financing needs.

(b) the conversion of loans or equity contribution to maintain anadjusted debt service coverage for the beneficiaries of at least1.3 in 1987; 1.4 in 1988 and 1.5 in 1989 and thereafter; and thatCHESF would not incur any debt without Bank approval until thesedebt service coverages are achieved.

(c) a ratio of debt to equity not greater than 67/33; and

(d) preparation of a satisfactory plan by November 30 of each year,demonstrating that the financial requirements would be met for thecurrent and the following year.

These assurances are similar to those already agreed under the CHESF-FURNASTransmission Project (Loan 2564-BR).

Proiect Costs and Financina

3.49 Costs. Total project costs over the seven-year projectimplementation period are estimated at US$303.7 million, including localtaxes of about US$18.0 million. All equipment costs, and costs fortechnical assistance and agriculture and social support services have beenestimated in US dollar terms. All civil works have been estimated incruzados and converted into US dollars utilizing the exchange rate onOctober 1, 1987. Physical contingencies of 652 were added to baselinecosts. Physical contingencies for urban civil works are low because mostof the urban construction contracts have already been awarded. Adequatephysical contingencies have been included for the irrigation infrastructure(0l for civil works and 52 for equipment). Overall price contingenciesare estima':ed at 2Z of baseline costs plus physical contingencies. Pricecontingencles are estimated in US dollars, based on expected inflationrates of 32 for 1987, 12 for the years 1988 to 1990 and 42 annually

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thereafter. It is assumed that periodic, local currency devaluations,carried out on a purchasing power parity basis, would compensate for anydifferences between the projected US dollar and local inflation rates.Project costs and the annual phasing of investments are summarized in theLoan and Project Summary and in Annex 3.

3.50 Financing Plan. Because of the emergency nature of the project andthe need to have basic infrastructure completed prior to the physicalrelocation of the affected populations, retroactive financing of US$13.0million has been included for expenditures made between June 15, 1987, thedate of appraisal, and the date of ltan signing. The proposed Bank loan ofUS$132.0 million equivalent would finance 46S of total estimated costs netof taxes. The loan would finance 1002 of the direct and indirect foreignexchange costs and approximately US$5.7 million of local costs. The loanwould be for 15 years, including a three-year grace period. The Bank loanwould be made to the Centrais Eletricas Brasileiras S/A (ELETROBRAS), whichwould provide the counterpart funds to complete the project. ELETROBRASwould relend the proceeds of the loan to CHESP under a subsidiary loanagreement, at the same terms and conditions as those of the IBRD loan, butincluding a service fee to be paid by CHESF to ELETROBRAS at a rate of 0.5Zper annum. A condition of loan effectiveness would be that a SubsidiaryLoan Agreement, satisfactory to the Bank, has been executed on behalf ofELPTROBRAS and CHESF (para 4.04). During negotiations, the FederalGoverment provided assurances that should the funds available toELETROBRAS and CHESF be insufficient to meet the estimated expendituresrequired for carrying out the project, it would provide ELETROBRAS andCHESP with the needed funds. Some US$100.0 million has been allocated byELETROBRAS to CHESF's 1988 budget for project implementation.

3.51 Procurement. Equipment and all civil works would be contractedthrough ICB and LCB procedures acceptable to the Bank. Procurementarrangements are summarized below:

Table 3.1: Procurement Arrangements(US$ million)

Project Element Procurement Method Total Costs

ICB LCB Other NA

Civil Engineering Works - 169.5 - - 169.5(45.0) (45.0)

Goods and Equipment 112.2 1.5 - - 112.7(78.0) (1.0) (79.0)

Production Support - - 10.0 - 10.0Services and Technical (8.0) (8.0)Assistance

Consultant and Other - - 11.5 - 11.5Services (0.0) (0.0)

TOTAL 111.2 171.0 21.5 303.7(78.0) (46.0) (8.0) (132.0)

Notet Figures in parenthesis are the amounts expected to be financed bythe Bank.

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3.52 Individual contracts range from US$0.3 million to US$6.9 million.Goods and equipment for the electrical systems (transmission lines andsubstations), and for the irrigation systems would be procured under ICB,except for concrete posts and cross arms which are not suitable for ICB andwould be procured under LCB. Electrical goods and equipment would begrouped in 12 separate 'packagesg with values ranging from US$1.6 million(conductors) to US$9.1 million (lighting rods). Irrigation goods andequipment would be grouped in 10 packages varying from US$0.2 million forsprinklers, to US$8.0 million for pressure pipes. Equipment would besupplied to the civil work contractors for installation.

3.53 Most of the infrastructure works for the urban centers and ruralsettlements have already been contracted under LCB; the procedures used areacceptable to the Bank. Civil works for the irrigation infrastructurewould be procured under LCB since no foreign contractors showed interest inthe invitation for prequalification for ICB. The sub-project sites would begrouped into five contracts. Prequalified contractors would be allowed tobid for a maximum of three contracts. All civil works contracts overUS$2.0 million and goods and equipment contracts over US$500,000 would besubject to prior Bank review of bidding documents, bid evaluation and awardproposals. In total, prior Bank review would cover some 90S of thecontracts financed under the proposed project. Other contracts would besubject to selective post-award reviews. Operation and maintenancecontracts for the irrigation projects would be bid under LCB proceduresafter prequalification. Agricultural produ^tion and social supportservices would be procured in accordance with Bank guidelines for the useof consultants. Vehicles required for implementation are reservedprocurement items. They are not included in total project costs and wouldnot be financed by the proposed loan.

3.54 Disbursements. The projected seven year disbursement period isbased on the project's construction schedule and the continuous provisionof production support services while the settlers are making the transitionto social and economic self-sufficiency. The proceeds of the proposed loanwould be disbursed as follows:

(a) 281 for civil works expenditures;(b) 100? of foreign expenditures and 1002 of local expenditures

(ex-factory cost) for equipment and(c) 752 of expenditures for agricultural production and social

support services, and for technical assistance.

3.55 Because of the nature of the project, standard disbursement profilesfor irrigation and other agricultural development projects are not applicableto the proposed project. Given the need to construct the infrastructure forthe resettlers as soon as possible, Bank disbursements would be front loaded,with most disbursements concentrated between the first quarter of 1988 andthe second quarter of 1989. Disbursements 'or all civil works, goods andexpenses for agricultural production and social support services which areless than US$250,000 equivalent would be made against statements ofexpenditure prepared by CHESF. Supporting documentation would be madeavailable during project supervision.

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3.56 To facilitate disbursements, two special accounts would beestablished. A Cruzado Expenditure Special Account (CESA) would be opened inthe Central Bank with an ftitial deposit of US$40.0 million. After a totalamount of US$40.0 million has been disbursed from the loan, the maximumamount deposited in the CESA would be reduced to US$17.0 million and furtherreductions are expected in the project's later years. The initial deposits inthe CESA have been calculated based on estimates of the project's actualfinancing needs and projected Bank disbursements during 1988 and 1989. Tofacilitate disbursements in foreign currencies, a Foreign Currency SpecialAccount (FESA) woule also be established in a commercial bank abroad, with aninitial deposit of US$5.0 million. Withdrawals from CESA and FESA would besupported by the required documentation.

3.57 Cost Re overy. In accordance with the Federal Irrigation Law andits regulations (Decree 89496), farmers who benefit from irrigation schemesare expected to pay water charges. These call for a volumetric watercharge to recover full operation and maintenance costs. The regulationsalso provide for an area-based water charge to recover the publicinvestments in off-farm infrastructure. In the case of small farmers,these regulations would normally call for recovery of 100Z of investmentcosts (in real terms, but without interest) over a 50-year period.However, in view of the involuntary nature of this resettlement, CHESFwould assume full responsibility for all irrigation investment costs, andno cost recovery from farmers for off-farm investments and on-farm landclearing and irrigation equipment would be required. CHESF would alsoabsorb part of the cost of power for pumping water for irrigation,specifically the power demand charge. This subsidy to the farmers would belimited to a period of about five years, to compensate the farmers foradditional pumping lifts, resulting from their involuntary resettlementfurther away from the source of water and at higher elevations. Duringnegotiations, CHESF provided assurances that it would, not later than sixmonths after the date of signing the project agreement, furnish to the Banka satisfactory proposal for compensating farmers, and subsequentlyimplement the proposal (para 4.03). Farmers would. however, pay a watercharge to cover operation and maintenance of she irrigation and drainagenetworks, and would also be responsible for the operation, maintenance, andreplacement costs of on-farm equipment (para 3.41). The water charge atfull development, with the above power subsidy, is estimated at US$150equivalent per ha/per year.

3.58 Project investments in the urban areas for electricity would berecovered through tariffs set in accordance with federal regulations; thosefor wate supply and sewarage facilities would be recovered through watertariffs set by COMPESA and EMBASA. CODEVASF would recover operation andmaintenance costs for the drinking water supply in the rural areas throughtariffs charged to agrovila residents for their irrigation water supplies(para. 3.57).

Proiect Justification and Benefits

3.59 rProduction and Marketing. Main crops to be grown in the proposedirrigatior. subprojects are tomatoes, onions, pulses, potatoes, peanuts andwatermelons (Annex 3, Table 3.4). At full development (year seven) a totalof 222,000 tons of tomatoes, 83,000 tons of onions, 15,000 tons of

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watermelons, 20,000 tons of potatoes, 5,000 tons of peanuts and 12,000 tonsof pulses, would be produced. The annual incremental value of productionis estimated at Cz$1,600 million (US$31.0 million).

3.60 A marketing study carried out by project consultants showed thatthis production could be marketed without major difficulties. Tomatoeswould mainly supply the regional agroindustrial centers in Petrolins,Juazeiro, Pesqueira, Arcoverde and Belo Jardim, which have an annualprocessing capacity of about 500,000 tons. The tomato processing capacityis expected to reach 870,000 tons of fresh produce in the early 19900 withsome 600,000 tons coming from the CODEVASF and DNOCS irrigation projects,235,000 tons from the Itaparica resettlement project and the remainder fromprivate producers along the Sao Francisco river banks. If marketingconstraints for tomatoes materialize in the future, tomatoes could bereplaced by garlic or cotton.

3.61 Onions would be an equally important cash crop. Onions would bemarketed in June and July and therefore would not compete with productionfrom the Slo Paulo area and the south of the country. Pulses would mainlybe produced for local consumption. The Northeast has an annual deficit ofsome 500,000 tons of beans. The present outlook for watermelons isfavorable. In addition to its own major cities, the Northeast supplies themetropolitan areas of Sgo Paulo, Rio de Janeiro and Belo Horizonte whereper capita consumption levels are still low compared to the cities in theNortheast. Watermelons could also be replaced by melons. Potatoes andpeanuts would be cultivated on the lighter soils in the lake area. Thedemand for potatoes in the Northeast exceeds present production levels.The market for peanuts is somewhat limited in the absence of adequateprocessing facilities; however, peanuts could become an important crop inthe future.

3.62 Farm Incomes and Other Proiect Benefits. The financial situationof the farmers would improve towards the end of the first year of irrigatedcropping (1989). At full development, all farmers would have significantlyhigher incomes, with annual farm incomes ranging from CZ$110,000 (US$2,100)on 1.5 ha farms to CZ$305,000 (US$5,900) on 6.0 ha farms; this excludesincome farmers may obtain from livestock production on community grazingland.

3.63 The proposed project would support the resettlement process forsome 8,100 families and provide, over the resettlement consolidation phase,technical assistance to farmers which would be essential to the successfuladoption of new techniques in irrigation and soil management. In additionto restoring and improving the livelihood of the families affected by theresettlement, the project would have irhportant social benefits. Consideringthat 701 of the farmers are presently landless, the project would not onlyreestablish present standards of living, but upgrade the land tenuresituation for the majority of the rural population. The provision of newhousing and safe drinking water would represent substantial improvementsfor the majority of the affected population. The project wculu' alsoprovide almost full employment throughout the year for the resettledpopulation and create a demand of about 3,600 man-years of hired labor,including permanent and temporary employment. Indications are that therequired additional farm labor would be available, when needed.

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3.64 Economic Analysis. The need for the project results from theconstruction of the Itaparica Hydropower Project. Its economic viabilitymust thus be considered ir. the contest of the power benefits created.However, even without considering power benefits, the overall rate ofreturn for the irrigation subprojects is estimated at 132, utilizing a 25-year anslysis (Annex 3). The cost stream for the economsic analysisincludes all investments in the irrigation subprojects as well asassociated recurrent costs. The net benefits include the estimatedproduction of irrigated crops and assume that farmers would continue toproduce crops with which they have experience (industrial tomatoes, onions,pulses, watermelons), with changes in cropping patterns occurringgradually. In order to ensure a conservative estimate, project benefitsfrom rainfed crops and livestock have not been included.

3.65 The individual subprojects are estimated to have the followingrates of return:

Bordo do Lago (PE) 14XBordo do Lago (BA) 102Brigida 13ZCaraibas(PG) 11tPedras Brancas 112

3.66 Sensitivity tests show that a one year delay in benefits would lowerthe overall rate of return on the productive investment to 11.32, and a 1OXincrease in costs, together with a 102 decrease in benefits, would result ina rate of return of 10.02. If all rural investments including farm houses,roads, electricity, drinking water supplies, schools and health centers wereincluded in the cost stream, the rate of return would be 62.

Proiect Risks

3.67 Resettlement as a result of manmade changes in the environment isalways a difficult task and faces many risks. These are increased as aresult of the tight timeframe in which the resettlement must bc carried outdue to the need to rapidly increase power generation in the Northeast.There is also a need for effective cooperation among many public agencies,given the complex social and technical issues involved in the establishmentof new irrigation perimeters in a difficult ecological environment. In theperiod immediately following resettlement there would also be a risk ofemigration by settlers who would be tempted to sell their land holdings.Finally, once irrigation perimeters become operative, operation andmaintenance risks, typic&tl of other irrigation projects, would have to befaced. Drawing upon lest;ons from past reattlement projects, every effort hasbeen made to reduce these risks. Through effective farmer representation,the project beneficiaries have been and would continue to be fully involvedin the design and implementation of the resettlement process. To reduce therisk after resettlement, adequate support payments to each family would bemade up to nine months after water would become available on the farmer'sfield and through a delay in the issuance of the final land title until thefarmer has developed all irrigated land and marketed crops from it. Bycontracting agricultural and social support services to qualified private

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sector enterprises, the training of farmers in modern irrigation andagricultural practices would be assured. The operation and maintenance ofthe irrigation projects would also te contracted to private sectorenterprises and CHESF and CODEVAS? would closely supervise the performance ofthese firms to ensure that extension support and the operation of theprojects meet the required standards. The secondary pumping stations andwater distribution systems are designed to facilitate their eventualoperation by the farmers. While the risks remain considerable, the projecthas been designed to minimize them, and if successful, would reaffirm theBank's reputation as an environmentally and socially responsive institution.

IV. SUMMARY OF AGREEMENTS REACHED AND RECOMMENDATION

4.01 During negotiations, the Federative Republic of Brazil providedassurances that:

(a) should the funds available to the Borrower or CHESF be insufficientto meet the estimated expenditures required for the carrying out ofthe Project, it would promptly provide the needed funds (para 3.50).

(b) it would take all actions to enable the Borrower and CHESF to carryout the financial covenants detailed in paragraph 3.48.

4.02 During negotiations, ELETROBRAS provided assurances that:

(a) project accounts, including the Special Accounts, would bemaintained and audited annually according to practices satisfactoryto the Bank; terms of reference for the auditors would includeverification of expenditures made under statement of expenditures(SOEs); and copies of the audit reports would be submitted to theBank within six months of the close of each fiscal year (para3.47);

(b) .he financial covenants detailed in paragraph 3.48 would be adheredto;

4.03 During negotiations, CHESF provided assurances that:

(a) CHESF would, in accordance with sound administrative and technicalpractices, commence the filling up of the future Itaparicareservoir only after the physical relocation of the populationresiding in the area has been completed (para 3.10);

(b) CHESF would, not later than December 31, 1939, acquire title to allthe land required for the project for eventual transfer to thepopulation resettled by the project (para 3.11).

(c) CHESF would pay month.y support payments to farmers up to ninemonths after water becomes available on their fields (para 3.12);

(d) CHESF would, not later than six months after the signing of theproject agreement, amend the existing agreement with FUNAI todefine CHESF's and FUNAI's responsibilities fort

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(i) the resettlement of some 180 Tusa Amerindian families toIbotirama and Rodelas in the State of Bahia;

(ii) FUNAI's responsibility in providing social and agriculturalextension services to the resettled Amerindian population and

(iii) CHES?'s obligations to transfer not later than January 1, 1990to FUNAI, on behalf of the Tuxa Amerindian communities, theland to be occupied by them (para 3.14).

(e) CHESF would, not later than June 30, 1988, furnish to the Bank, forits commentq, the results of the environmental impact study andfollov the recommendations of the study, taking into account thecomm'nts made by the Bank, in the carrying out of the Project (para3.1').

(f) should problems of salinity occur within five years of settlementwhich a.e not a result of farmer negligence, CHESF would providethe affected farmers with a new plot of irrigated land (para 3.20);

Cg) farm families would receive full title to their land from CHESF notlater than five years after resettlement and CUESF would authorizethe farmers to use their land until title is transferred or untilCHESF would notify the farmers that, as a result of their failureto farm the land, their right to farm the land had been terminated(para 3.20);

(h) CHESF would not later than April 1, 1988 employ a consultingfirm(s), under terms of reference satisfactory to the Bank, for theprovision of agricultural production and social support servicesand employ the supervising extension specialist (para 3.24).

(i) CHESF would, not later than six months after the signing of theproject agreement, make arrangements, satisfactory to the Bank,with the appropriate state and municipal authorities for themaintenance of the roads to be constructed and improved under theproject (para 3.27).

(j) CHESF would maintain a project implementation unit withorganization, structure and functions satisfactory to the Bank, andstaffed with personnel in numbers and with qualificationssatisfactory to the Bank; (pars 3.42)

(k) project accounts, including the Special Account, would bemaintained and audited annually according to practicessatisfactory to the Bank; and that the terms of reference for theauditors would include verification of expenditures made understatement of expenditures (SOEs); and that copies of the Auditreports would be submitted to the Bank within six months of theclose of each project fiscal year (para 3.4.7);

(1) the financial covenants detailed in paragraph 3.48 will be adheredto.

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(m) CHESF would, not later than six months after the date of theproject agreement, furnish to the Bank a satisfactory proposal,for compensating farmers for their increased pumping costsresulting from their resettlement further away from the source ofwater and at a higher elevation and subsequently implement theproposal (para 3.57).

4.04 Conditions for loan effectiveness would be that:

(a) CHESF would be in possession, with utilization rights, of all landrequired for the project (para 3.11) and

(b) CHESF would have selected firms, with qualifications satisfactoryto the Bank, to present proposals for the provision of agriculturalproduction and social support services (para 3.24); and

(c) a Subsidiary Loan Agreement, satisfactory to the Bank, has beenexecuted on behalf of the Borrower and CUESF (para 3.50).

4.05 Subject to the above agreements, the proposed project would besuitable for a Bank loan of US$132.0 million equivalent with a term of 15years, including a 3 year grace period.

October 27, 1987

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Annex 1Page 1 of 11

BRAZIL

ITAPARICA RESETTLEMENT AND IRRIGATION PROJECT

URBAN AND RURAL RESETTLEMENT

A. Urban Resettlement

1. Site Selection. Four urban settlements with a total population of3,767 families require relocation as a result of the flooding of theItaparica reservoir - Petrolandia (2,403 families) and Itacuruba (527families) in the State of Pernambuco; and Rodelas (577 families) and Barrado Tarrachil (260 families) in the State of Bahia. Petrolandia, Itacurubaand Rodelas are municipalities which provide public services (education,health, markets, slaughterhouses, cemeteries, cadasters, police, post andtelecommunication and other administrative services) and banking,commercial, religious and recreational facilities for their urban and ruralpopulations. Barra do Tarrachil is a small township located at a ferrycrossing on the Sao Francisco river, within the municipality of Chorrocho,with two primary schools, a health post, cemetery, church, and limitedcommercial facilities. Each of the settlements is located on the riverwhich has historically played an important role in the physical andeconomic development of these settlements and the adjacent rural areas.The economic role of the river has declined in recent years with the growthof road transport, but the location of these settlements, close to theriver, is still important to the residents, and played a major role in theoriginal site selection. Among urban dwellers, most of those whoseprincipal activity is farming (671 families or 182 of the urbanpopulation), opted for relocation to agrovilas. The remaining 3,096families are being relocated in new towns. A further 100 rural familiesopted for relocation to the new town of Petrolandia. The total populationof the new towns would be 3,196 families.

2. Site selection for the new towns took place between 1980 and 1984.Throughout this process, CHESF ensured that the concerns of the residentsand the views of municipal, state and federal authorities were taken intoaccount in the determination of criteria for the evaluation and selectionof suitable sites. The following criteria were used for site selection:

(a) proximity to the existing settlement and to the edge of thefuture reservoir;

(b) maintenance of existing inter-relationships with towns in thevicinity;

(c) adequate topographic and soil conditions to facilitate drainage;

(d) use of existing regional infrastructure (roads, power, etc);

(e) centralized location with respect to the entire municipalgeographical area (to optimize access by the rural population tomunicipal services);

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Annex 1Page 2 of 11

(f) sufficient area to accommodate present uses and allow for futureexpansion; and

(g) proximity to land with potential for agricultural development.

3. A total of twelve alternative sites for the towns were identifiedand discussed with the residents of each settlement. The final selectionwas decided by plebiscite, followed by the publication of a State decreepermitting the expropriation of the site area by CHESF and by the signingof agreements between CHESP and the respective municipalities. All of theselected sites are located on the edge of the proposed reservoir at varyingdistances from the existing sites. Although all of the selected sites meetthe selection criteria, not all are in proximity to land with agriculturalpotential, requiring the relocation of urban residents working primarily inagriculture to agrovilas.

4. Urban Planning. CHESF prepared urban planning layouts for Rodelasand Barra do Tarrachil in the State of Bahia, and delegated to the StateSecretariat for Housing (SEHAB-PE) the preparation of layouts forPetrolandia and Itacuruba in the State of Pernambuco. In all cases, urbandesign concepts and final layouts were discussed with the residents andapproved by the municipalities at special meetings in which all residentsparticipated. All layouts meet urban planning and design standards, arecost effective in concept, and respect the cultural traditions and desiresof the residents. This is especially evident in the care in which thechurch, the single most important element in the lives of the inhabitants,has been located to provide both a visual and functional focal point to thenew settlements. The layouts respect the topographic, ecological andclimatic conditions of the area, provide sufficient area and urbaninfrastructure for the relocation of the present population and allow forthe adequate provision, development and expansion of urban services, bothwithin and beyond the present (1987-88) built-up area. The urban planningstandards of the new settlements represent a major improvement over thoseof the existing settlements in every respect and provide a sound basis forthe socio-economic development of their urban residents.

5. Urban Infrastructure Services. Existing set,tlements have belowminimum standards of urban services, which is common for towns of this sizeand location in the Northeast of Brazil. All are served with electricityand water (untreated in the case of Rodelas and Barra do Tarrachil in theState of Bahia). However, only some 60Z of properties have access to waterand 702 have access to electricity. Sanitation is provided by individualpit latrines and septic tanks. Garbage collection is non-existent, exceptin Petrolandia where it is rudimentary. The majority of roads are unpavedand unmarked and street lighting is sporadic. Despite the lack of urbanservices, the residents take pride in their towns and keep them remarkablyclean and well mainta ned given the circumstances.

6. At the express demand of the residents and municipal authorities,the new settlements have been provided by CHESF with a more than adequatestandard of services. All plots have access to potable water, electricity,and sewerage and have frontage road access. The respective State companies(Empresa Bahiana de Saneamento - EMBASA for water and sewerage in Bahia andCompanhia Pernambucana de Saneamento - COMPESA in Pernambuco; COELBA for

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Annex 1Page 3 of 11

electricity in lahia and CELPE in Pernambuco) are responsible for theoperation and maintenance of these services, with the exception of u-banroads which is a municipal responsibility. Costs of operation andmaintenance are included in the water and electricity tariffs (capitalinvestment costs are met by CUESF). Each system has been designed to allowfor future expansion, the capital costs of which would be borne by therespective state companies. Roads are paved within the central area of thenew settlements, and residential access roads are aligned and marked toallow for subsequent paving as and when warranted. All roads, includingresidential access roads, have adequate street lighting and have beenplanted with avenues of trees. Public squares and open air market siteshave been paved and planted with trees. Adequate sites are provided forgarbage disposal for each settlement (sanitary landfill sites).

7. Public Buildings and Services. Services provided by State andFederal authorities (education, health and post and telecommunications) inthe existing settlements are adequate. A total of 52 State and Federalbuildings are being relocated by CHESP. The State and Federal authoritiesare responsible for operation and maintenance of these facilities.Mlunicipal services and buildings are sub-standard in all existing

settlements. CHESF has provided for the construction of 57 buldings forboth existing and currently unavailable services. The operation andmaintenance costs of municipal facilities will be met by the respectivemunicipalities.

8. Housing. The housing stock of the existing towns totals 3,767units of which 2,403 (642) are located in Petrolandia, 527 (14S) arelocated in Itacuruba, 577 (1SS) are located in Rodelas, and 260 (7X) arelocated in Barra do Tarrachil. CUESF has classified the structuralcondition of the existing housing stock into five categoriest (1)precarious, (2) below standard, (3) average, (4) good, and (5) special.Housing conditions are generally of a poor standard.

9. The following options were defined by CHESF for the relocation ofdwelling units according to ownershipt

(a) for property owners, either (i) the payment of a cash indemnityfor the value of the existing dwelling and the provision offreehold title to a serviced plot (1.2 times the area of theexisting plot) upon which they may construct their own house totheir own specifications and at their own cost; or (ii) theprovision of freehold title to a serviced plot and theconstruction, by CHESF, of a new house (1.2 times the area of theexisting house); and

(b) for non-property owners, the provision of freehold title to aserviced plot and the provision of sufficient materials for theconstruction of a dwelling unit 55 m2 in area.

10. Although moderate, the standard of dwelling units provided byCHES? for lower income groups (which make up the majority of the urbanpopulation) would be beyond their affordability limits, were they to payfor them. These standards were, to a great extent, dictated by theresidents themselves and represent the minimum conditions under which they

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Annex 1Page 4 of 11

were prepared to move from the existing cities. They, therefore, representthe opportunity costs of dislocation and are warranted in a resettlementproject of this nature. They constitute a major socio-economic benefit tothe affected residents.

11. Commercial Activities. A total of 418 existing conmmercialactivities are being relocated to the new towns. CHESF is payingcompensation to owners of commercial property and is providing centrallylocated serviced plots in the new towns for them to construct newcommercial premises. Those who have decided not to opt for relocation tothe new towns have been compensated for land and loss of trade. In thesecases, replacement plots have been allocated in the new towns in order tomaintain the present balance of commercial activity. These plots will besold to new entrepreneurs. In the case of federal and state bankingservices, CHESF is providing for the construction of new buildings inaccordance with the specifications of each bank, as in the case of otherpublic buildings. A paved area has been set aside in each new town toaccommodate weekly open-air markets. Covered markets are being constructedin each new town with sufficient capacity to accomodate existing stallholders and allow for expansion.

12. Municipal Management. Finance and Maintenance. The municipalitiesfinance less than loX of their expenditure budgets, of which the majorityrepresents recurrent expenditures, from own source revenues (taxes andfees). As is the case with most municipalities in Northeast Brazil, theyrely on grant transfers from state and federal authorities for theprovision of municipal services and administrative costs. As a result ofthe resettlement project, the municipalities will have inherited from CHESFnew towns designed and constructed to much higher standards than thev havemanaged in the past. This would put a strain on already inadequatemunicipal finances and on the technical staff of the municipalities wholack experience in the operation and maintenance of urban services. TheBahia State Secretariat for Urban Development (SEDU-BA), the PernambucoState Secretariats for Planning (SEPLAN-PE) and Housing (SEHAB-PE), and theSuperintendency for Development of the Northeast (SUDENE) will assist themunicipalities in fiscal management, operation and maintenance of urbanservices and in the socio-economic development of the urban population.CHESF would co-operate with the State authorities in the provision ofengineering staff for the training of municipal technicians in maintenancetechniques and procedures. The state authorities would provide training infiscal management (revenue administration, cl-dastral and property appraisaland valuation, programming and budgeting of ::acurrent and capitalexpenditures) and in the management of municipal services designed todevelop the socio-economic base of the towns ana their lower incomepopulations. The recently established (1986) Northeast Urban DevelopmentTraining Program in SUDENE (UNDP Project BRA/85/008 financed under theRecife Metropolitan Development Project, Loan 2170-BR) would assist in thefinancing and operation of these training programs.

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Annex 1Page 5 of 11

Implementation and Costs

13. Construction of the new towns is scheduled for completion by end-December 1987. Considerable delays occurred in 1986 and the first quarterof 1987 due to the use of small local contractors who had neither theexperience nor the capacity to undertake urban construction work of thisnature. In order to ensure the completion of all construction work onschedule, CHESF then contracted large firms which have the capacity,experience and proven reputation of constructing large complex projects ontime. Contracting was undertaken at a time of exceptionally high inflationand of uncertainty with regard to the management of the Brazilian economy.Consequently, average costs per capita are about 202 higher than thoseincurred in the construction of low income housing in 1985-86 in the Bank-financed Recife Metropolitan Development Project (Loan 2170-BR).

14. At the time of appraisal, construction had advanced sufficientlyin Petrolandia for people to begin moving into their houses, open shops andmarket stalls, and for one primary school and the municipal administrationto begin operations. Progress has been slower in Rodelas and Barra doTarrachil, but Itacuruba was already one third complete at the time ofappraisal. Table 1.1 below summarizes construction costs by town and byimplementation schedule.

Table 1.1: Construction Costs by Town(US$ million)

Town Completed To be Completed Total Cost Cost per Capita(04/87) (05187 - 12187)USSm US$m 2 USSm 2 US

Petrolandia 1.2 14.2 92 15.4 32 1,470Itacuruba 1/ 0.5 9.5 95 10.0 21 7,418Rodelas 0.6 11.1 95 11.7 25 3,671B. Tarrachil 1/ 0.1 10.3 99 10.4 22 8,732

Total 2.4 45.1 95 47.5 100 2,933 average

1/ Cost per capita are higher in Itacuruba and Barra do Tarrachil because ofthe smaller population and because of topographical problems.

B. Rural Resettlement

15. Aprovilas. The resettlrment program includes the relocation of 4,310families to 121 agrovilas located in the five irrigation sub-projects. Thedistribution of agrovilas by irrigation project is presented in Table 1.2 below:

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Annex 1Page 6 of 11

Table 1.2: ARrovilas by Irrigation Prole t

Irrigation Project Agrovilas Rural Houses PlotsNo. 2 No. I No. 2

1. Bordo do Largo PE a/ 30 25 1,458 32 1,798 352. Brigida b/ 10 8 456 11 429 83. Caraibas b/ 47 39 1,550 34 1,603 314. Bordo do Largo BA a/ 15 12 239 5 577 115. Pedra Branca b/ 19 16 794 18 763 15

Total 121 100 4,497 100 5,170 100

a/ 340 families in Bordo do Largo PE and 338 families in Bordo do Largo BAwill live in the adjacent new towns.

D/ More housing is being provided than farm plots, to accommodate theadministrative and technical personnel working in the subprojects.

16. Some 84X of the farmers will live in agrovilas, the remainder inthe new towns. The agrovilas are located within a maximum distance of 2km. of the irrigated lots. On average, each agrovila comprises 38 houses,a primary school and sufficient land for the construction of a communityhall. The agrovilas are located at the cross roads of the internalsubproject road network and are thereby linked to the subproject centerwhich contains the services for the community (project administrationoffices, church, primary and secondary schools, community center, healthpost, covered market, recreational facilities and housing for the projectadministrative and technical staff). The subproject centers are locatedwithin a maximum distance of 6 km. of the agrovilas in each subproject.

17. The design and construction details of the rural housing unitswithin each agrovila were finalized after extensive discussions with therural workers' union, which represents the interests of the rural familiesinvolved in the resettlement program. The following range of housingoptions is available within the agrovilas:

(a) a one bedroom house 45 m2 in the area for non-property owners; and

(b) one bedroom (49 m2), two bedroom (60 m2), and three bedrooms (65m2) houses, each with a veranda, for property owners in exchangefor their existing dwellings.

18. Each dwelling unit is constructed on a plot of 680 m2, providedwith drinking water supply, electricity and a septic tank (sanitaryfacilities are provided.in separate outhouses at the back of each plot).Each family is provided with title to the residential plot (with the same

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Annex 1Page 7 of 11

sale and transfer conditions applicable to the irrig&ted lots). Houseconstruction standards and internal finishes are comparable to the simplerhouses provided by CHESF in the new towns. At appraisal, CHESF hadinstructed the contractors to construct all houses to type (a) standardsuntil all property owners were relocated in their agrovila, at which timethe extra bedrooms, verandas, and internal finishes would be completed.From data available at appraisal, the distribution of rural families byhouse type would be as follows:

Table 1.3: Distribution of Rural Families by House Type

Irrigation Project Non-Property Property Owners Total Houses(House type (a)) (House type (b))

No. I No. Z No. X

1. Bordo do Largo PE 437 32 1,021 32 1,458 322. Brigida 137 10 319 11 456 113. Caraibas 465 35 1,085 34 1,550 344. Bordo do Largo BA 72 5 167 5 239 55. Pedra b;anca 238 18 556 18 794 18

Total 1,349 100 3,148 100 4,497 100

C. Water SuDDlY and Sanitation

19. Rural Settlements. The rural water supply systems would beconstructed in two stagess (a) a provisional stage, to be completed byDecember 1987, which would supply a limited quantity of drinking water intime for the relocation of the population; and (b) a permanent systemcompleted together with the irrigation infrastructure during 1988. Theprovisional system would draw raw water from the Sao Francisco River andone of its tributaries, while for the permanent system, raw water would besupplied from the irrigation reservoirs constructed in each of theresettlement areas. Reserved storage capacity in the reservoirs wouldensure a raw water supply of at least five days.

20. The permanent systems would be designed with house connections fora supply of 80 liters per day, per person. Treatment of raw water would bein each agrovila, to facilitate the eventual transfer of operation andmaintenance responsibilities to the farner beneficiaries. Treatment wouldbe by slow down-flow sand filters and desinfection. Each agrovila wouldhave a clean water reservoir with a capacity equivalent to three days ofsupply. The water treatment equipment is compact, enclosed in a steelcontainer and simple to operate. The farmers would be trained by FSESP inits operation. Septic tanks for each house would dispose of waste water andsewage.

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Annex 1Page 8 of 11

21. Urban Centers. Drinking water supply systems have been designedto the specifications of the Pernambuco and Bahia state water supplycompanies (COMPESA and EMBASA), with a unit demand of 150 liters per personper day, Kl and K2 coefficients of 1.5 and 1.2 respectively, 24 houroperation and clear water storage equivalent to one third of the dailymaximum consumption. Treatment facilities would be conventionally designed(mixing, flocculation, sedimentation, filtration and desinfection). Onlythe township of Rodelas would use a direct up-flow filtration method.The water supply systems would be completed in time for the relocation ofthe population.

22. The urban waste water and sewage disposal networks would beconstructed with ceramic pipe collectors and the effluent treated inoxidation ponds. The low organic content of the waste water, combined withthe shallow depth of the oxidation ponds and the favourable climaticconditions in the area would guarantee aerobic treatment of waste. However,since the ponds are relatively close to built-up areas in the townships,they would be separated from the residential areas by a "tree barrier". Fortwo of the townships, the designs call for pumping of all sewage effluents.The mission requested a redesign of the collector pipe networks to reducethe amount of effluents which have to be pumped. This seems feasible if theresidential areas are divided into a belt with gravity flow from therelatively small, higher lying areas requiring pumping. The new designshave been reviewed by the mission's water supply and sanitation expert.

D. Resettlement Procedures

23. Conditions for the preparation, implementation and consolidationof the physical move of the population, their households and livestock aredifficult, because of a very constrained timetable resulting from previousdelays in resettlement preparation. There is limited time available forthe contracting and training of field teams, the final cadastre of allhouseholds, the process of allocating houses and farm lots and the moveitself. So far, however, the detailed timetable for the resettlement isbeing observed. It is well understood by CHESP that any undue haste inhandling the resettlement process could jeopardize the project in general;delays would have to be accepted in case prescribed procedures turn out torequire more time than anticipated, or because of slippage in thepreparation of resettlement sites.

24. Resettlement procedures have been discussed with and approved bythe rural workers' union which represents the interests of the settlers. InDecember 1986, a detailed agreement was signed by CHESF and the union,which sets out the prinziples to be observed under the resettlement plan;some of the provisions under this agreement have since been furtherdetailed by the two parties. Resettlement procedures have been designed onthe basis of these agreements and on evaluations of earlier resettlementexperiences, most importantly, from the neighboring Sobradinho project.

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Annex 1Page 9 of 11

25. Some of the relocation areas are at great distance from familiarsurroundings and in an inhospitable environment. Conditions for thestabilization of families in these locations would initially be difficult.Irrigation infrastructure would not be ready, and, during the first year,families would be unable to support themselves through agriculture. Theconsolidation of the resettlement immediately following relocation would inlarge part depend on the effectiveness of the "guaranteed employmentschemes". Under these schemes, at least one family member would earn 2 1/2minimum salaries per month, starting from resettlement and ending not laterthan nine months after water has become available on the farmer's field;this follows an agreement between CHESF and the Rural Workers Union datedJuly 1, 1987. Resettlers, most of them unskilled laborers, would beemployed mostly in the construction of irrigation infrastructure and inland clearing. The socio-economic consolidation process would also dependon the quality of services provided by the ntv schools and health posts, onadequate access to markets to provide for local needs, on the assistance tofamilies provided by social extensionists, and on effective communalorganization and representation.

26. The following principal parameters for the resettlement procedureshave been agreed between CHESF and the rural workers unions

(a) as a precondition for the physical transfer of the population tothe resettlement sites, adequate housing, drinking water andappropriate reception areas for livestock would be available;

(b) CHESF would assure that the families fully understand their rightsand resettlement options, i.e., (i) cash compensation andrelocation assistance; or (ii) resettlement to sites designatedfor their community;

(c) the desire of communities and neighborhood/family groups toresettle jointly would be respected;

(d) individual entitlements and needs of families would be assessedand accommodated; conflicting claims to specific locations ofagricultural lots or rural housing would be settled by lottery;

(e) every effort would be made to keep 'attrition of families" to aminimum, by providing assistance in the preparation and logisticsof the move and during the months immediately followingrelocation;

(f) mechanisms would be put in place for the expeditious resolutionof conflicts;

(g) throughout the resettlement process, project management would beadvised of emerging problems and receive feedback on the views ofthe resettled population (monitoring and evaluation).

27. The resettlement procedures involve:

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Annex 1Page 10 of 11

(a) a final cadastral updating for each family, to determineentitlements on the basis of current possessions and availablefamily labor, in accordance with criteria established by CHESF andthe Rural Union;

(b) a communication campaign, to familiarize the population withtheir resettlement options, involving meetings at the communityand family levels, visits to the resettlement sites, etc.

(c) the definition of the type of house and size of lot for which eachfamily is eligible;

(d) inventory of livestock to be transferred (two head of cattle perfamily);

(e) ratification of resettlement agreements by each family (includingspecial treatment of difficult cases); and final consolidation ofplans for land allocation and houses in the agrovilas and ofalternative resettlement options (e.g., families opting forfinancial indemnification);

(f) consolidation of 'community resettlement plans", including thedefinition of neighborhood clusters and the distribution ofirrigated lots in accordance with entitlements and preferencesexpressed by the community; and,

(g) arrangements for the actual transfer of families and theirbelongings, in terms of timing, packing, sanitary control,transport of livestock, transport of households, setting up ofcollection points, special arrangements for the sick, old, and atthe resettlement sites, preparations of reception centers, foodand other supplies, emergency medical care, and livestockreception areas.

28. Upon arrival at resettlement destinations, families would receivefood and assistance in settling into their new houses. Their livestockwould be guarded and fed for up to 72 hours following arrival. New arrivalswould be informed about local services and would receive individual homevisits by the social support staff. They would be encouraged to designatelocal representatives for each agrovila. In the first days followingrelocation, the community would be given work plans for construction andcommunity service (under the guaranteed employment schemes), and familieswould be registered and their employment situation defined. The time neededfor the construction of irrigation infrastructure and for the preparationof plots would also be used for farmer training in new farm technologies.Since May 1987, 37 teams, each with one social and one technicalextensionists and support staff and led by a sociologist with relevantresettlement experience, have been trained and fielded to assist with therelocation of the population and their resettlement in the new locations. Adetailed description of the resettlement sequence (Quadro de atividades doreassentamento) is available in the project files.

- 36 -

Annex 1Page 11 of 11

29. Following resettlement, families would receive preliminary titleto their land (Autorizacao do OcuRacao) from CUESY, which has acquired allresettlement land on behalf of the population. Definitive land titles wouldbe contingent on agricultural production on the land; they would be issuedby CUES? and registered with the local registries five years afterresettlement.

30. Title to the land designated for the Tusa Amerindians would betransferred to FUNAI, which would receive the land on behalf of the Tuxaco=munity, as soon as CHESY has completed the construction of irrigationand other infrastructure works for the comunity. FUNAI is responsible forassistance to the Tuxa Amerindian community, which is being resettled torural and urban sites (including irrigation perimeters and grazing lands)in Ibotirama and Rodelas; the Indian communities would receive social andagricultural extension services from FUNAI. Urban resettlement and theresettlement of the Tuxa Indian Community have already begun.

E. Monitoring and Evaluation

31. Because of the sensitivity of the resettlement process, there is aneed for close monitoring and independent evaluation, to provide feedbackon the ways in which resettlement is carried out and on the reaction of theaffected population. Responsibilities for monitoring and evaluation areshared by CHESF, ELETROBRAS and the Fundacao Joaquim Nambuco, anindependent research institute.

32. Monitoring of physical and financial progress would be carried outby CHESF, which has a well established system of controls. ELETROBRAS'environmental aepartment would also monitor project implementation. Inaddition, the independent 'Blue Ribbon Panel' which watches over theimplementation of the Electrical Power Sector's Environmental Master Plan,has included Itaparica among its priorities.

33. Evaluation would be carried out by researchers from the InstitutoSoaquim Nambuco, which is based in Recife and is well known for its work inthe economic and social sciences. They would provide continuous action-oriented feedback to project management during the resettlement process,and at longer intervals during the subsequent resettlement consolidationperiod. The reports from the field would keep project management informedabout the reactions and feelings of the local population and about any needfor changes in strategy or resettlement procedures.

34. Evaluation data would be gathered by participant observation, indepth interviews with affected families (based on carefully selectedcommiunity level samples) and from parties representing their interests,such as community, church and union leaders, and through case studies.

35. In addition to its immediate impact on the Itaparica resettlement,the careful evaluation of strategies used and performance achieved isexpected to make an important contribution to the formulation of bectoralstrategies for involuntary resettlement, both under the EnvironmentalMaster Plan of ELETROBRAS and in other countries where involuntaryresettlement is an unavoidable consequence of development.

- 37 -

Annex 2Page 1 of 7

BRAZIL

ITAPARICA RESETTLEMENT AND IRRIGATION PROJECT

PRODUCTIVE INFRASTRUCTURE

A. Irrigation Subprojects

1. Location and Natural Features. All project resettlement sites arelocated in the Sao Francisco River Basin (Map IBRD 20488), in the driestarea of the Northeast drought poligon and in need of irrigation forsustained agricultural production. Annual rainfall averages 350 m,concentrated in a three to four month period. The important climaticfeature of the region is the extreme variability of the rainfalldistribution within the year and between years. Since 1900, there havebeen 13 droughts, lasting between one to six years. In some years the costof Government emergency relief consumed some 102 of the national budget.

2. High temperatures (average 27C) and about 2,800 hours of sunshineper year allow for rapid plant growth, wherever soil and water supplies areadequate. Winds of high intensity (3.5 m/sec to 4.8 m/sec) are commonduring most of the year.

3. Most of the region has shallow soils characterized by lighttextures and low water holding cape4tiy and fertility.''nowever, for theproposed irrigation developments, areas of good irrigable soils have beenselected. About 27Z of the areas are class 2 soils, 601 class 3, and 13Xclass 4 using the USBR Classification. All projects have good qualitywater supply from the Sao Francisco River.

4. General. All subprojects would be sprinkler irrigated. Thelayout of the basic irrigation network is based on 250 ha irrigationcommand areas, pressurized by a secondary pumping station. Some of thesubprojects would have fixed sprinkler systems, because of sandy soils andhigh evapotranspiration rates. These call for daily irrigation during peakwater demand periods. All other subprojects would be equipped with semi-fixed sprinkler systems and mobile laterals. Main features of the fiveirrigation subprojects are summarized below. Further information on areas,farm size distribution, land classification, and average investment costsper hectare and family are shown in Table 2.1.

5. Borda do Lago - Pernambuco. The subproject comprises eightirrigation blocks, six covering areas of about 250 ha each; one block is2,130 ha and the other 2,350 ha. For the six small blocks, pumpingstations on the Itaparica reservoir and directly pressurized distributionnetworks would provide water for irrigation. Water would be lifted 100 mon average. Pressure variations would be controlled by constant pressure

- 38 -

Annex 2Page 2 of 7

regulating valves located at the discharge pipes of the pumping stations.Each pumping station would have three centrifugal pumps and an auxiliaryunit for pumping during the off-season. Water demand would control theoperation of the main pumps. The small auxiliary pump would be activated

by pressure changes.

6. The 2,130 ha block comprises: (a) a pumping station on thereservoir (five 350 HP pumping units); (b) a one kilometer long pressurepipe; (c) a 49,000 m3 compensation reservoir; and td) an irrigationdistribution network directly supplied by gravity from this reservoir.Changes in water levels in the compensation reservoir would controloperation of the pumping station. The general layout of the 2,350 ha block

would be similar. It, however, would also include four booster pumpstations which would maintain the required pressure for the sprinklersystems. The boosters would be equipped with variable speed pumps toaccommodate pressure variations.

7. Borda do Laao - Bahia. The subproject would irrigate 15 smallareas of between 45 ha and 210 ha. A typical network would be similar to

the small Borda do Lago - Pernambuco subprojects. Water would be pumpeddirectly from the reservoir into a pressurized pipe network. Pressureregulation valves would be installed at the entrance of each irrigation

block.

8. Brizida. The irrigation infrastructure of this project consistsof (a) a pumping station on the Sao Francisco River to lift 1.7 m3lsec

water against a head of 65 m; (b) 6.6 km of pressure pipe (1.1 m diameter);(c) one main and two secondary compensation reservoirs with a totalcapacity of 46,600 m3; (d) 5.2 km of open canals; (e) a pressurized pipe

distribution network, including five secondary pumping stations, and (f) a

surface drainage network. The main pumping station on the Sao FranciscoRiver would be equipped with four pumps. Two surge tanks would protect the

pumps against pressure fluctuations. Control levels in the maincompensation reservoir would activate the pumps on the Sao Francisco River,and control water levels in the two secondary reservoirs.

9. Caraibas. The subproject comprises: (a) a pumping station on the

Sao Francisco River for 7.7 m3/sec. against a head of 51 m; (b) 1.75 km of

pressure pipe (2.0 m diameter); (c) a 31 km conveyance canal; (d) a second

pumping station lifting 5.1 m3/sec. against a head of 36 m; (e) a system ofcompensation reservoirs for 44,000 m3 capacity; (f) a 55 km open canaldistribution network; and (g) 19 pumping stations, each serving a sprinklerirrigation network of about 285 ha. The main pumping station on the Sao

Francisco River would have four horizontal centrifugal pumps. A system of

motorized gates would regulate the discharge of the main canal inaccordance with water levels in the main compensation reservoir.Simultaneous operation of these gates would allow a reduction in the size

of the canal. The canal would be kept permanently full to avoid uplift.

- 39 -

Annex 2Page 3 of 7

10. Pedra Brancas. The irrigation infrastructure of this subprojectconsists of: (a) a pumping station on the Sao Francisco River lifting 2.9m3/sec, 27 m; (b) a conveyance network of 400 m pressure pipeline (1.3 m

diameter) and 7.5 km of open canal; (c) a 10,000 m3 compensation reservoir;(d) a second pumping station to lift water an additional 70 m; and (e) adistribution network consisting of 42 km of pressurized pipes and 66 smallpumping stations (40-100 HP). The main and secordary pumping stationswould have four centrifugal pumps. Automated water level controls in thecompensation reservoirs would activate the pumps. The conveyance canalwould be equipped with bico de pato (duck bill) type concrete weirs toprotect the concrete lining against uplift.

B. Agricultural Production

11. Farmers would be settled on 1.5 ha, 3.0 ha, 4.5 and 6.0 ha lots,depending on the size of their family and whether they previously ownedland. Lake area farms have light soils, which during peakevapotranspiration periods would require daily irrigation. Croppingpatterns in all subprojects would be similars industrial tomatoes, onions,pulses, and to a lesser extent, watermelons, potatoes and peanuts (thelatter two mainly on the light lake area soils). Cropping patterns are notexpected to change during the project period; farmers would continue togrow crops which they grew in the reservoir area. Only gradually wouldbeans aad vegetable crops be replaced by grapes and fruit trees. Thesecrops would require sizeable capital investments before the first cropswere harvested.

12. Cropping intensities would increase gradually, depending on farmsize, to 180?, 1731, 1602 and 1502 for the 1.5 ha, 3.0 ha, 4.5 ha and 6.0ha farms, respectively. These cropping intensities are feasible,considering the relatively small farm size and soil conditions which allowfor quick land preparation. Yields would be:

Yields (tlha)Crop Lake Area Special Projects

Onions 10.0 15.0Peanuts 2.5 -Potatoes 10.0 -Pulses 1.0 1.4Tomatoes 25.0 30.0Watermelon 20.0 22.0

- 40 -

Annex 2Page 4 of 7

In year seven, the annual marketable production from the subprojects wouldreach about 222,000 tons of tomatoes, 83,000 tons of onions, 15,000 tons ofwatermelons, 12,000 tons of pulses and 5,000 tons of peanuts; the totalestimated value of production is US$31 million, (June 1987 farmgateprices). Table 3.4 shows the marketable production and the estimated valuefor the various crops.

C. Cost Estimates

13. Total project costs, over the seven year implementation period,are estimated at US$303.7 million. Tables 3.1 and 3.2 show project costsby year and a summary account by project components.

D. Proiect Management

14. CHESF would have the overall responsibility for resettlement andconstruction of all project facilities; it would delegate to CODEVASI, whowould be assisted by private firms, agriculture development and managementof the irrigation subprojects. Participation of other agencies are definedthrough specific agreements (convenios) or other satisfactory arrangements.Table 2.2 lists the main executing and collaborating agencies by activity.Agreements have already been signed between CHESF and CODEVASF foroperation and management of the irrigation sulAp5cj^cts. For thc i:rindiansubproject CHESF would collaborate with FUNAI. An agreement between thetwo institutions was signed in 1986. Agreements with the State of Bahiaand the State of Pernambuco for construction, operation and maintenance ofhealth and educational facilities have been signed. A list of allagreements signed or to be agreed to and their status at the time ofappraisal is available in project files.

15. During the construction and resettlement period, CHESF wouldfinance, coordinate and implement all project activities, including therelocation of the displaced population. Chart 1 shows the organization ofCHESF for the construction and resettlement period. Within CHESF,responsibility for the coordination of the Itaparica resettlement lies withthe Directorate of Engineering which reports directly to the President ofCHESF.

16. The Directorate of Engineering has been organized into planningunits and executing departments. The planning units for the Itaparicaresettlement comprise the:

(a) General Coordination Unit for the Itaparica Project (CRI);

- 41 -

Annex 2Page 5 of 7

(b) Technical Assistance Unit for the Construction of Reservoirs(ATIR); and

(c) Technical Assistance Unit for Environmental Aspects (ATMA).

CRI is responsible for planning, control, and integration of all projectactivities, including physical and financial aspects and for coordinationwith other participating agencies. It has organized and established ajoint working group with CODEVAS! for the design and implementation of theirrigation subprojects. ATIR would contract technical studies and surveysand supervise project implementation. Its responsibility includesengineering, agricultural and social aspects. ATHA is concerned withenvironmental aspects related to the Itaparica resettlement.

17. The executing units for project implementation are:

(a) Department of Power Generation (DEG)

(b) Department of Power Transmission (DET)

(c) Department for the Construction of Reservoirs (DIR). (two projectmanagers in the field)

The latter has set up a special group (CORI) for the resettlement of theItaparica population.

18. During the production build-up and consolidation period, CODEVASFwoul. -be delegated responsibility for the operation of the irrigationsubprojects, with CHESF limiting its functions to financing, supervisionand monitoring of project development. CODEVASF would set up a small -office at Itaparica to coordinate project activities. CHESF would retain aspecialized consulting firm to provide agricultural production and socialsupport services to the newly resettled farmers, including the overallmanagement of the irrigation subprojects, coordination of the operation andmaintenance contractors in the subproject areas, extension, marketing,plant protection services, organizational support to farmers organizationsand social services. The consulting firm would provide a project managerfor each of the subprojects. It would coordinate its activities with thestate extension service of Pernambuco and, to the extent possible,integrate professional manpower of the service in its operations. Alloperation and maintenance activities would be carried out by one or twocontractors. Chart 2 shows the organization for the production build-upand consolidation period and indicates the managerial positions to beprovided by CODEVASF, the consultant and the contractor(s).

E. Proiect Implementation

19. The project implementation schedule is shown in Chart 3. Allurban and rural infrastructure required for resettlement of the population

- 42 -

Annex 2Page 6 of 7

would be completed by December 1987. Relocation of the population wouldtake place between October and December 1987. The irrigation subprojectswould start operation in late 1988 or early 1989. Thereafter, the projectwould continue to finance agricultural production and social supportservices, the operation of health and educational facilities on a decliningbasis, and the lake fisheries research program.

F. Proiect Benefits

20. The estimated production of marketable produce was derived fromvarious farm models for the different sized farms in the five irrigatedareas (Annex 3). The farm models disregard income from grazing and otherrainfed-farming activities. The principal objective of the project is torestore the income of farmers affected by the resettlement. All on-farminvestments except for farm implements are paid out of project funds.

21. Projected cropping patterns and yields at full development areshown in Annex 3. Cash flows for a 1.5 ha lake area and 6 ha subprojectfarm are shown in Annex 3, Tables 3.5 and 3.6. Cash flows for other farmmodels are available in project files. At full development in year seven,average family incomes would be:

Lake Area Sub-Proiects Other Proiects

1.5 ha farm US$2,100 US$3,0003.0 ha farm US$4,400 US$4,0004.5 ha farm US$4,800 US$5,0006.0 ha farm US$5,200 US$5,900

G. Economic Viability

23. The overall economic rate of return on all productive inves:.mentsfor the six subprojects has been estimated at 13f (Annex 3, Table 3.7).Rates of returns for individual subprojects are as follows:

Borda do Lago, Pernambuco 14?Borda do Lago, Bahia 10XBrigida 13ZCaraibas 11?Pedras Brancas 111

24. Calculations of the economic rate of return consider an analysisperiod of 25 years and include all capital and recurrent costs, exceptthose related to the construction and operation of the social

- 43 -

Annex 2Page 7 of 7

infrastructure. Farmgate prices were considered economic prices, as farmoutputs are mostly perishables and would be marketed locally. The pricesreflect the supply and demand situation in the Brazilian market.

25. Sensitivity tests show that the rate of return is sensitive topossible variations in costs and benefits (Annex 3, Table 3.7). A delay ofone year in project benefits would depress the economic rate of return to11.32, and a 102 decrease in benefits, together with a 10 increase inproject costs, would lower the overall rate of return to 10.0o. Results ofthe sensitivity tests are as follows:

Best estimate 13.0XBenefits delayed by one year 11.3ZBenefits delayed by two years 10.02Costs increased by 10? 11.5%Costs decreased by 102 14.6?Benefits increased by 10? 14.41Benefits decreased by 10? 11.41Benefits decreased by 10? andcosts increased by 1OZ 10.0?

Further details are available in project files.

'~~~~~~~~~~~.N~~~~ ~ ~ ~ ~ ~ ._

- 44 -

Table 2.1

BRAZIL

ITAPARICA RESETTLEMENT AND IRRIGATION PROJECT

Summary Information on Irrisation Suboroiects

Borda do Lazo Other 'Special* ProjectsUnit BA PE Brigid& Caraibas P.Brancas

Net Area ha 1,878 5,961 1,502 5,606 2,670

USBR Irr.Suit.

Class: 1 ha - - - -2 ha 260 800 760 3,366 -3 ha 1,618 5,161 630 2,240 8004 ha - - 112 - 1,870

Farm Sizes

1.5 ha No 83 312 66 247 1173.0 ha No 359 973 223 83* 3974.5 ha No 89 336 71 266 1276.0 ha No 46 177 69 256 122

Productive Investments

Ave per ha US$ 8,100 5,800 6,200 8,200 8,000Ave per family US$26,500 19,200 21,800 28,800 28,100

BRAZIL

ITAPARICA RESETTLEMENT AND IRRICATION PROJECT

List of Executi!M and Cotlaborating Agencies *nd Contractual A _reements Available sad Rewired

Project Activity Ex*cuting Agency Collaboretin Aency -Contractual Agreement

1. ConstructionIrrigation lInfrdstructure CHESF/Contracters CODEVASF CONTRACTS TO rE K Si _

Fader.l Roads (8R-316) CHESF/DER-PE1Contractors ONER CONTRACTS SI#D

Stat. Roads CHESF/DR-PE/D-4A/Contractors - COUlU SI_

Municipal Roads CHESF/Costractoer/Ow I IpaltIIts - CoNRACTS slow

Electrification CHESF/COUM/CELPE/Contractoe - CSITRACTS TO 0E S J

Water Supply and Sanitation CHESF/Coetr ctrs COWfRStA/EASA/Prftc rea conowACTS RI ff,

Public/Co_ua I Infroetrwcture QIESF/MmmIcipalities SEY-FE CONTRATS S14MS

2. ServicesNative Rsottl_ment CHESF FUAI COWNENIO 106IEDEducation Estedo/Socretarlas do Educa"ca CNESF C _NI@ slowPublic Hoelth Estado/Secrotariae do Savd* sWater Supply and Sanitation COWPESA/ESBASA Muacicalptite AGNMMMENTS IN FORCEControl of Endemic Disease. Ministerio do Saude/SUCAM CHESF %Fnhaorios Research Estabtitshmnt CHESF CONTRACTS TO K SIam /Supply of Seeds SEMEMPE/SEM.for:oa/EMBRAPA CPESF CONTRATS TO KE SISID 41 'Agriculture Production andSupport Services EMPRESA PRIVADA/EMATER CHESF/COOEVASF CQNTRACTS TO KE SISeD y Monitoring of the Rosettlement Fundacoo Joaqui- Nabuco CHESF CONTRACT SICO'Agricultural Dovolop ent CODEVASF CHESF CONVEIJO SINED

1J Contracts will be signed by CHESF in accordance with the agree construction time table2/ Convenios will bs signed not lat r thon Juno 30, 19883/ Contract signature before April 1, 1988

g l¢

BRAZILITAPARICA RESETTLEMENT AND IRRIGATION PROJECT

CHESF'S DEPARTMENT OF ENGINEERING

g t"s eoacQ 5 u@ 66uA O

of gtAt,aSSPMS OSC CmOuwAa

GOW as "^* . >M

con A .4@ DI C SO .coow Same worn I IftOl

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I*~~~~~ ~ ~~~~ ~ __a _*^ a s*|" 4 oe"o* t^ t " _

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BRAZILITAPARICA RESETTLEMENT AND IRRIGATION PROJECTOrganization for Agricultural Development

ORGANIZAC7O PARA 0 v-.SE.NVOI.VIMENTO AGRICOLA E

OPERWk,AO E MANUTENCXO

COORDENA;AO GERAL CONSELWO TEC:*ICO

CO¢DEVASF (ITAPAR1OCA) AjENCUS P%T1C1FAXTES |

GEREN'E GERAL DE PRODUC.OC

- Firma Consultora 1

I~~~~~

ESPECIA.LSTAS

F'irma Consultur.a

Borda do lago (BA) Borda do Lago (PE) Brfgida Cara{bas Pcdra Branca

Gerente de Produ. Gerente de Produ. Gerente de Produ. (ecente de Produ. Gerente de Proou.

Assistencia Trcni Assistencia T&cni Assistincia Tecni Assistincia Tecni- Assistencla Tecni-ca e Extensao Ru- ca e Extensio Ru ca e Extensio Ru ca e Extensao.Ru- ca e Extctisao Ru-rat ral ral ral ral

Firm. Consultora Firma Constltora ] Firna Consultora FJrma Consultora Firna Consulcora

Operacio e Operaiao e Opera.io c Operar;4o 1 CperaCao a

Manuteneao _ 'anutencao M_nut nniao _ Wanucntenao| ta:utencwo

CONTRATAUDA CONIRATADA C(M.TRATADA fCONTRATADA CONTRATAiIA A

NOTA: 0 Cerente de Producao seri a pessoa de ir.terligacLo .ontre a Assoca;acao tou Cooperativa e a OperaCao do perimetro.

- 48 -

ANNEX 2

ITARARICA RESET!LnCnT AND TRRZGA?ON ?ROECT

ACTIVITIES 1987 198 1989 1990 1991 1992 l993

1. Relocation of Exiostt Itnf rastructure

- Road$ a- Poyer Lines Provisional

!Parmanent uu

2. - eveloLwet Of Irri2atedAreas

- Bidding Process- Detailed Engineering l'-'''' '- Implementation Projects

- Lake Irrigation PE u- Brigida _ -- Caraib _ _- take Irrigation A_- Pedras Brancas

- Construction of RuralVillages - e

3. Urban Resettlement

- Petrolandia- Itacuruba _m- Rodelee __n- Barra do Tarrachil

4. Rural Resettleant u

- Population Relocation- Training of Farmers- Agricultural Development _ _ _ au Iu8mua

S. Reservoir filling

6. Fisheries M(onitoring ProLram

*~~~ -. A..

DRAZILITAPARICA RESETTLEENT PROJCT

Project Cowaonets bi Year(US$ '000)

Base Costs Total

1986 1987 1999 199 190 1991 1992 1993 US$ (USS '000)=== == _=== === _= = =

A. IRRIGATION AND AGRICULTURAL PRODUCTION

1. IRRIGATION SUBPROJECTS - 16376.0 108,750.4 3,874.7 - - - - 129,001.0 129,001.02, AGRICULTURAL PRODUCTION SUPPORT - - 250.0 34821.1 2,537,4 19402.6 1,352.6 85.4 10#349.1 10,349.1

Sub-Total IRRIGATION AND AGRICULTURAL PRODUCTION - 16,376.0 1099000s4 7.695.8 2,537.4 1.402,6 1,352.6 f95.4 139.350*1 139,350*1D. RURAL INERASTRUCTUtE AND SERVICES

1. RURAL HQOSING - 54t733.8 - - - - - - 54,733.8 54733,82. ROAD SYSTENS - 800.8 79207.1 - - - - - 8,007.9 8007,93. ELECTRIC POER SYSTEMS - 1,158,2 109420,4 - - - - - 11,578.6 11,578.64. EDUCATION, HEALTH# AND SOCIAL SEICES - - 2.916.4 457.4 376.7 269.1 134.5 - 4,154.1 4.154.1

Sub-%o'al RURAL INFRASTRUCTURE AND SERVICES - 56,692,7 20,543,9 457.4 376.7 269.1 134.5 - 78,474.4 78,474.4C. URDAN INFRASTRUCTURE

1. TUINS 19,0 55,071,0 - - - - - 55,269.0 55,269.02. ROAD SYSTEMS 50,0 79237.0 2,220.1 - - - - - 9,507.1 9,507.13. ELECTRIC POSER SYSTEMS - 189,0 172.0 - - - - - 361.0 361.0

Sub-Total URBAN INFRASTRUCTURE 248.0 629497.1 2,392,1 - - - - - 65.137.1 65,137.1

Total DASEIINE COSTS 248.0 135565.7 131P936,4 8,153.2 2,914.1 1,671.7 1,487*1 985.4 282,961.7 282M61.7Ptwsical Continsuncies .99 8,738.6 7,152*4 169*3 6.3 8.8 6.3 2*5 16,094.0 16,094.0Price Contirdencies - 1,082*3 2,792.2 252.0 118.5 112*0 163.3 151,9 49672*1 49672*1

Total PROECT COSTS 257.? 145,386.6 141,881.0 8,574.5 3.038.8 17M25 1,6567 19139,6 3037M7. 3030727*I-s= === =2= = = = as_m =s=s

Taxes 1.0 2.038,7 16,125.0 - 1 - - - 185164.8 18164.3foreign Exchange 69.7 426539, 759464.0 4,526.5 1,731t? 668.7 68,9 554.8 126A356*4 126356*4

October 16. 1987 1510

RAIL AITAPARICA RESETTLEEN PR.ECT

Sutary kcomt bs Project Casronent A(US$ '000)

IRRIGATION AND AGRICULTURAL RURAL IWRASTRUCTURE AND SERVICESPRODUCTION ------- -- ULM IWRASTECM

-------- ------------- EDWUATION, ----- PtwsicalAGRICULTURAL ELECTRIC HEALTHt AND ELECRIC Cntirdcies

IRRIGATION PRODUCTION RURAL ROAD POIR SOCIAL ROAD POBERSUIROJCTS SUPPORT HOUSING SYSTENS SYSTEMS SERVICES TOMYS SYSTEMS SYSIENS Total Z Ammmt

t. INVESTMENT COSTS_______ _______

A. CIVIL VORKS

BUILDINGS 3,826.2 54,733*8 - - 1.502#2 559269.0 - - 115,331.2 7.1 8v217*0ROADS - - - 8,007.? - - - 95407.1 - 174515.0 2.2 360.3IRRIGATION SYSTENS 22,259.1 - - - - - - - - 22,259.1 10*0 29225.9

Sub-Totl1 DIU;1L WORS 261085.3 - 54,733.8 8.007.9 - 1,S02.2 55t269.0 9,507.1 - 155t105.3 7.0 10v923.2B, EgUIPMENT 91,622.6 300.0 - - 11#578.6 876.1 - - 361.0 104,738.3 5.0 59233*3 0C. STUDIES - 750.1 - - - - - - - 750.1 5.0 37.5P. CoNSULTANTS 1i ,23.1 9,299.1 - - - - - - - 209592.1 0.0 0.0

Total INVESTHENT COST3 12?.0019 0 10,349.1 54,733.8 8#007.? 11,578.6 237.2 55P269.0 96507,1 361.0 281,185.8 5.7 169094.0

II. RECURRENT COSTS

A. SALAR:ES - - - - - t7759 - - - 7759 00 00

Total RECURRENT COSTS - - - - 1-775. - - - 1775.? 0.0 0*0Total BASELINE COSTS 1294001.0 10,349.1 54,733.8 8#007.9 11,578.6 4,154.1 55,269.0 9,507.1 361.0 282,961*7 5.7 16,094.0Fh,sical Contingencies 7,189.7 52.5 5,473.4 - 578.9 194,0 2,210.8 380.3 14.4 16,094.0 0.0 0.0Price Contingencies 2,560.3 619.2 451.6 150.7 228.8 124.2 429.6 102.8 51 4,672.1 4.6 216.2

Total PROJECT COSTS 138,751.0 11,020.8 60.658.7 8,158.6 12,386.3 4,472.3 57,909.4 9#90#2 380.5 303.727.8 5.4 16,310*1

Taxes 15885.8 - - 13.2 1,849.6 26.8 - 1998 39.6 18,164.8 4.8 B80.6Foreign EAcharge 79f925.6 64521.6 15,164.7 2,855.5 2,648.2 1,181.4 149477.3 39496.6 85.5 126,356.4 4.8 69120*9 .-

_____________ __ --------- -- ____------------------------------------ ---- -- ------ -------- ---------------------f m xOctober 16, 1987 IS:IC

- 51 -

ANNEX 3Table 3.3

BRAZIL

ITAPARICA RESETTLEMENT AND IRRIGATION PRC.JECT

Marketable Production and Value of Crops, at Full Development

Crop Annually Marketable Value of ProductionCropped/Area Production Price Total Total

(ha) (t) Cz$/t. Cz$ million US$ million

Onions 6,830 84,012 8,000 672.1 13.0Peanuts 2,065 5,162 7,000 36.1 0.7Potatoes 2,092 20,920 10,000 209.2 4.10Pulses 9,244 12,000 15,000 180.0 3.5Tomatoes 7,859 222,275 2,170 482.3 9.3Watermelons 722 15,198 2,500 38.0 0.7

Total 28,812 1,579.7 31.2

-52 - Annex 3

Table 3.4

ITOAPRICA RAZEIm I TIO ON PR4C-T

Esltimatd Ara sagd Ylied of CrossI ai ul Dev.ougman

Farm Model Crop As Cropped Ylild Totl Yield_ Mg~~~~~~bl _ -

A. Bods do I.gg Projeldt

1.6 ha Farm Onions 1.6 1.Q 16.6Pulses 11 6.5 1.6 0.5To"toe 1.6 25.6 23.6Water Maleon o 20.0 4.6Total APe Cropped 2J

3.6 ha For Onlons 1.5 16.0 13.6Peanuts 1. 2. 2.Potato" 1.0 1.6 16.Pulse U2 0.5 1.0 e.gTomatoes 1.6 23.0 23.6Wate. Melons 29.6 4.0Total Ar Cropped

4.5 ha Form Onlons 2.6 16.0 26.Peanuts I.2 2.5 3.0Potatoes 1. 10.6 16.@Pule" It 1.3 1.0 1.3Tomatoes 25.0 $7.5Total Are Crop pe

6.6 ha Pars Onilo 2.6 16.0 20.0Peanuts 1.0 2.3 2.5Potatoe 1.3 IS.0 15.0Pulses U 8.0 1.0 3.6Tomatoes 25.0 37.5Total Ares Cropped

S. Oter Proect

1.5 he Farm Onions 1.0 13.. 15.6Puls s 0.9 1.5 6.75Tomto" s1.6 2.0 U 6.0Water Mw1 t226.0 4.4Total Are Cropped

8.6 ha Fare Onion 1. 15. 15.0Pulso I 2.0 * 1.5 8.6Tomato" 2.5 s6.6 so.6Water Melons220 .lb*Ze bl0" 22.6 4.4Total Area Cropp e

4.5 he Pars Onion 1.5 15.6 22.5Pulse I 1.6 1.5 1.6Pules It 2.7 1.2 3.2Tomatoes 86. 60.6Total Aes Cropp e

6.6 he Fam Onlons 2.6 13.0 36.Pulse 1S 2.6 1.5 3.6pulse It 3.0 1.2 3.6Tomatoes 86.0 6.Total Aes Cropp 8.

mutt

far ISpt

Late A, Preojets - 1.5 ba iare

lie CIaS 0

lea I Y"r 2 Vear 3 1w 4 fws 5-10 Vla II Year 12 Year 13 a 14 Vuasl5-20 leao 21 le 22 ea 23 Vea 24 er 25

Sales

Industrial Tmstues 43.40 47.74 52.00 54.25 54.25 54.25 54.25 54.25 54.25 54.25 54.29 s4.2s 54.25 54.23 54.25unions 24.00 51.20 89.00 90.00 B0.00 90.00 80.00 80.00 80.00 80.00 60.00 90.00 B0.00 80.00 60.00Puls 11 6.00 4.75 7.50 7.50 7.50 7. 5 7.50 7.50 7.50 7.50 7.50 7.50 7.50 7.so 7.50Iatereela. 0.00 3.00 4.80 7.60 8.00 a.0o 8.00 8.00 8.00 8.00 8.00 B.00 8.00 8.00 8.00

Total Sales 73.40 108.69 144.38 149.35 84.75 14".75 849.75 14t.75 149.75 149.75 149.75 149.75 149.75 149.75 14.73

Costs Of PrOuKtIse

Iodustrial Tstets 8.06 8.08 8.08 8.08 8.0e s.d0 8.08 8.08 L.OB 8.06 8.08 8.08 9.08 6.08 3.08onions 7.13 11.41 14.24 14.24 14.24 14.24 14.24 14.26 14.2 14.26 14.26 14.24 14.26 14.24 14.24Puols It 1.70 .78 1.70 1.70 1.70 1.70 1.70 1.70 1.70 8.70 8.70 1.70 1.70 1.70 1.70laterale 0.0" 0.65 1.31 1.31 1.31 1.31 1.31 8.38 1.31 1.31 1.31 1.31 1.31 1.31 8.31 S

Hired Labr 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Irrgatlia Syste 0.00 0.00 0.00 0.00 0.00 57.65 0.00 0.00 0.00 0.00 57.65 0.00 0.00 0.00 0.00FPee 0.00 0.00 0.00 0.00 0.00 3.1e 0.00 0.00 0.00 0.00 3.88 0.00 0.00 0.00 0.00Fareiq Eqipnt 82.71 0.00 0.00 0.00 0.00 12.71 0.00 0.00 0.00 0.00 12.71 0.00 0.00 0.00 0.00

0 9.53 1.53 9.53 9.53 9.53 9.53 9.53 9.53 9.53 9.53 9.53 9.53 9.53 9.53 9.53Tae 42.51 of 6SPI 1.84 2.72 3.4 3.73 3.74 3.74 3.74 3.74 3.74 3.74 3.74 3.74 3.74 3.74 3.n4

total Cats O.9 34.09 38.54 38.61 38.62 112.16 38.42 38.62 38.62 38.62 212.18 38.4 .62 38.42 3B.42

Net Fare ICe 32.41 74.40 107.84 110.74 111.13 37.59 111.83 111.13 111.13 811.13 37.59 111.13 111.13 111.13 138.13

Finantinq Beqred 12.71 0.00 0.00 0.00 0.00 73.54 0.00 0.00 0.00 0.00 73.54 0.00 0.00 0.00 0.00Priscipal I Interest 0.00 4.84 4.84 4.84 0.00 9.00 28.02 28.02 28.02 0.00 0.00 28.02 28.02 28.02 0.00

Repaymat 1/ 51

let lIcoe after 45.12 49.75 103.00 105.89 2I8.13 188.13 83.10 83.10 83.10 831.13 111.13 83.10 93.10 83.10 111.13Finanactin 1d

3/ lIterest rate was calculated at 7? p.a.

bRAZIL

ITTAPRICA RESEITLENENT PIOJECI

Fars Dudqet

Special Projects - 6.4 ha fare

lin CZ$ 0001

vear I Year 2 Year 3 Yeafr 4 Years 5-10 Year 11 Year 12 Year 13 Year 14 YearslS-20 rear 21 fear 22 fear 23 Year 24 Year 25

Sales

industrial Tomatoes 65.10 74.81 112.04 121.52 130.20 150.20 130.20 130.20 130.20 130.20 130.20 130.20 130.20 130.20 130.20Onions 160.00 292.00 224.00 240.00 240.00 240.00 240.00 240.00 240.00 240.00 240.00 240.00 240.00 240.00 240.00Pulses 1 27.00 39.00 42.00 $5.00 45.00 45.00 45.00 45.00 45.00 45.00 45.00 45.00 45.00 45.00 45.00Pulses 11 7.50 19.80 50.40 54.00 54.00 54.00 54.00 54.00 54.04 54.00 54.00 54.00 54.00 54.00 54.00Matereloen V.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Total Sales 259.60 325.67 429.24 460.52 4U9.20 4U9.20 469.20 469.20 469.20 469.20 469.20 469.20 469.20 469.20 469.20

Costs of Production

Industrial Tomatoes 19.46 23.35 25.95 25.95 25.95 25.95 25.95 25.95 25.95 25.95 25.95 25.95 25.95 25.95 25.95Onions 37.47 37.47 37.47 37.47 37.47 37.47 37.47 37.47 37.47 37.47 37.47 37.47 37.47 37.47 37.47Pulses 1 7.58 10.11 10.31 10.11 10.21 10.21 IO.1I 10.21 0.11 10.21 10.11 10.11 20.11 10.11 10.21Polses 11 1.70 4.08 9.53 10.21 10.21 10.21 10.21 10.21 10.21 10.21 10.21 10.22 10.21 10.21 10.21Iaternelon 0.00 0.00 0.00 0.00 0.0 0.0u 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Hlred Labw 17.94 24.48 30.35 30.77 30.77 30.77 30.77 30.77 30.77 30.77 30.77 30.77 30.77 30.77 30.77

Irrtgation System 0.00 0.00 0.00 0.00 0.00 230.60 0.00 0.00 0.00 0.00 230.60 0.00 0.09 0.00 0.00Fence 0.00 0.00 0.00 0.00 0.00 12.71 0.00 0.00 0.00 0.00 12.71 0.00 0.00 0.00 0.00Farrng Equipmnt 50.85 0.00 0.00 0.00 0.00 50.85 0.00 0.00 0.00 0.00 50.85 0.00 0.00 0.00 0.00

OUI 38.14 38.14 38.14 38.14 38.14 38.14 38.14 38.14 38.14 38.14 38.14 38.14 38.14 38.14 35.14Taxes (2.5 of soP) 6.49 8.14 t0.73 21.51 11.73 32.73 11.73 11.73 1.73 12.73 £1.73 11.73 12.73 11.73 11.73

total Costs 179.63 145.77 162.27 164.16 164.37 458.54 164.37 164.37 164.37 364.37 458.54 164.37 164.37 164.37 164.37

Net Farn income 79.97 179.89 266.97 296.36 304.83 10.66 304.83 304.63 304.83 304.83 10.66 304.83 304.63 304.63 304.83

Fsnancino Required 50.85 0.00 0.on 0.00 0.o0 294.17 0.00 0.00 0.00 0.00 294.17 0.00 0.00 0.00 0.00Principal & Interest 0.00 1 9.3 8 19.38 0.00M0 0.0 1. 12.09 312.09 It2.09 0.00

Repament IU f 0

Net Income aiter 130.82 360.51 247.6 276.99 304.83 304.83 192.73 192.73 192.73 304.83 304.83 192.73 192.73 192.73 304.83 L u

Finaecinn

1/ Interest rate oas calculated at 7Z p.a.

-55 -BRAZIL Annex 3

Table 3.7ITW6MICA ESETLEIT PO.ECt

.lt ~~~~EMIJC NlKYtSS

c@iwtnt JJJn I98 Czi 000)

-- - .,.,.- ------------ ------ - -,,.,. -- - -- - - -- - - - - - - -_- -- - - -*- -- -- -.-- -- - - -*- -,-- - -- -- -___

1 2 3 4 5 6 7 8-13 14 15-23 24 25

MRJECT COSTS...... ... .

IRRIGATION UfRMCJECTS ;61.V-5 5034896.4 190779.4AGRICULTRA FFCUCT1ON SUPPORT - - 027323 1 49.6 47348.3 647.2 47447.# 47447.8 47447.8 47447.8 47447.8

TOTAL COSTS - 62167,5 5033.4 393510.7 125249,6 674.3 647.2 47447.8 47447.8 47447.8 47447.8 47447.8

PRJCT BtNE1T

BENEFITS - ALL AREAS - - - 4422915 3848.8 9402.3 10 01.5 1114509.9 2372.3 11145.9 27137.3 1114509.9- -- - - - --- -- -- - -- - - -- - -- - - -- -- -

TOTAL ME TS - - 442291.5 638483 452.3 1087801.5 111409.9 271372.3 1145.9 271372.3 1114509.9

NtE 1NCRIENEA, RENEFITS

,)AL - -762167.5 -5034896.4 48780.8 513234,2 873504.0 1022884.3 1067062.1 223924.5 1067062.1 223924.5 1067062.1

ctober 16, 1997 151:8

Internal Rates of Rtum od bt Strome

MOT 1.942

NI!NMI RATES OF MEIM ET STI9

B.TOT UPl UP 2O UPSO0 WM IC WM20% DO S00 AOi I50W L O 2TMIW LAS 3 ES

c.To 12.MM 14.425 15.54 19.878 11.385 9.745 4.019 11.353 10.150 9.998UP 1 11.529 12.939 14.292 19.091 10.050 8.486 2.992 10.167 9,121 8.285Ut 20X 10.302 11.649 :2.939 16.550 8.886 7.385 2.063 9.124 8.208 7.472Ui 5 7.385 8593 9.745 12.939 6.106 4.741 -0.191 6.602 5.979 5.468O 102 14.86 16.164 17.685 21.92 12.9 11.207 5*207 12.M 11.329 10.237

OM 20S 16.550 18,243 19.878 24.512 14.787 12,939 6.5 14.323 12.699 11.437M 502 25.984 28.279 30.507 36.811 23.613 21.150 12.939 21.694 18.799 16.676

LAO I IFlA - - - 12.939 11.353 10.150LAO 2 YE- - - - - - - - 12.939 11.353.AG 3tEG- - - - - - - - 12.939

SUITCIIING L no A 11%:2222222213**222#2

A SAL SWITCHING PEI AGESTR5 cJLE '!u.'A -2*23::2= 2:3:::22t S;:2*22***33222t2J:r:2: :3222322

MTOT 5.567.063.49 4976989.?9 -:2.sO:

:.TOT 4.87.6,39.99 556tW063. 9 4315U

4It PrOWnt Mulue at OC I 3 690 :73.3Internal Rat of Ratumn 12.9%

_ 56 -

Annex 3Table 3.8

BRAZIL

ITAPARICA RESETTLEMENT AND IRRIGATION PROJECT

Estimated Schedule of Bank Disbursements(USS million)

Bank Quarter Disbursed During Cumulative BalanceFiscal Year Ending Quarter Disbursement of Loan

Amount 2 of Total

1988 -Dec. 31, 1987 - - - 132.0March 31, 1988 45.0 45.0 1/ 34 87.0June 30, 1988 32.0 77.0 - 55.0

1989 Sept. 30, 1988 18.0 95.0 72 37.0Dec. 31, 1988 14.0 109.0 - 23.0March 31, 1989 14.0 123.0 93 9.0June 30, 1989 2.0 125.0 - 7.0

1990 Sept. 30, 1989 1.0 126.0 95 6.0Dec. 31, 1989 1.0 127.0 - 5.0March 31, 1990 1.0 128.0 97 4.0June 30, 1990 1.0 129.0 - 3.0

1991 All Quarters 1.0 130.0 98 2.01992 All Quarters 1.0 131.0 99 1.01993 All Quarters 1.0 132.0 100 .0

_1 Includes initial deposits of US$40 million into Cruzado (CESA) and US$5million into Foreign Currency Special Accounts (FESA)

- 57 -

Annex 3Table 3.9

'BRA2IL

ITAPARICA RESETTLEMENT AND IRRIGATION PROJECT

Allocation of Loan Proceeds

Categorv tse Amounm(US$ million)

I. Civil works in rural and urban areas includinghousing public buildings, roads, water supplysewage, power supply networks, and irrigationsystems. 44*.0

II. Equipment for pumping and power supply excludingvehicles. 71.0

III. Agricultural production and social supportservices, and fisheries research program. 7.0

V. Unallocated. 10.O

132.0

- 58 -

ANNE~X 4.

BRAZIL

ITAPARICA RESETTLEMENT AND IRRIGATION PROJECT

Documents Available in Proiect Files

A. Technical Pa2ers

Al Feasibility Reports for the Irrigation Perimeters

AZ Technical Specifications for the Irrigation Subpzojects

A3 U.S. Bureau of Reclamation reports on technical matters related to thedesign of the irrigation projects

A4 Proposal for Operation of Irrigation Subprojects, CODEVASF

AS Reports and Guidelines on Resettlement of the Rural Population

A6 Working Papers on the Urban and Rural Resettlement, Water Supply,Roads, and Education and Health Components

B. Other Documents

BI Agreements entered into by project participating entities

B2 Sample resettlement contract to be signed between CHESP and individualfarmers

R3 Terms of Reference for Procurement of Training, Technical Assistance,and Rural Extension Services, HESF

B4 Status of the Companhia Hidroeletrica do Sao Francisco (CHESF)

B5 Decree No. 89.496/84 of March 29, 1984 Regulating the NationalIrrigation Law (No. 6662 of June 25, 1987)

COLOMBIA) J (fR jGUtAN4A -- ,400390T

g O Nosel w ' <;. 2,Jp~~Nota

u_~~~~~~~~~At c. MoB R oRecgfe ')

PEcRO S/R.e

`1 BO;IV,A ..

\ / wy r2~~~~CBelo Howizonte

Cl11tEY ffi <;q;t °S O~Rio de Jone.to ^tpE R NAMB

(ARGFNTINA

. \, l~~~~~~URvUVAY }$

"JaXr plf;J a 635 40'30 B AA1A RIGIDA ev < ,Cabrobo}

8 t5 9$ ~~~~~~~~~PEDRA BRANCA

\ 't, ~~~~~~~~~~~~~~~~~~~~~S. Mor;ct do Bo6 VistJ (B qC

's_ _, osRstlodo a/

-9100 ' -/puroS6

>< \ >. pAsros iON5 g / , ~ ~ ~~ ~~~~~~~~~~~~~~~~~~~~B A h

R , P'elt-roln fr * 7,, ~~~~~~~~~~~~~~~~~~~~Barro Vermelho

e, ! A t J~~~~uazeiro

-9 30 f.C.3

Tt , vvl &"c S S4W>

S~~~~~o T- t%,l .

co- '3t .. e -a-

s Tre bWVcIJ s grdow SSal theJts' Se

'teed v Te tlu OS'A thedrJ

w. Ie,af-n�nf oSFr`e <;e C"`f 4.~Crrlb

ofe Snx f e toy es A hrKUot

r O t0^30 ToC Sdodo 40ot0 39'30'te

IBRD 20448

39;#0T lo Fooafezo 39100 38230 38'00 3730

8100O

BR 232Salgueiro Satgueirc~~~~~~ BRAZIL

Mirondiba

ITAPARICA RESETTLEMENT PROJECT

M B LU C 0 0 10 20 30 40 50

KItOMETERS

IDA " Cobrobo 8°30-

Floresta

'EDRA BRANCA / ltacuruba 4?

(B C) kBle

" ir i \ 9 ~BORDO Do LAGO - PE

Borro do Rodelos )Torrachil

i V \~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ni

Petrolandia o--.r -BORDO 7'

Tacarotu

A Mocururd GloriaO a,

ATH i. rO Sot/addo, Paulo 80

Afonso .T''-70

8 w-- ALAGOAS Resettlement Irrigated Areas ALA OA

0 New Project Cities

i Existing Dams and Reservoirs 9'30'

Dam Under Construction

c Existing Cities and Towns

Future Reservoirs -

Rivers Sonta N

BR-428 rFederal Rods 8rigida0

PE570 Stote Roods NUou6

U0 State Boundaries | SERGIPE

International Boundaries /ro Araooj ap

T30' 39000 38030' To Solv-dor 3800\ 3r330 10,00AUGUST 1987