Dowses of

The World Bank

FOR OFlCLAL USE ONLY

Report No. P-4272-BR

REPORT AND RECOMMENDATION

OF THE

PRESIDENT OF THE

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

TO THE

EXECUTIVE DIRECTORS

ON A

PROPOSED LOAN

IN AN AMOUNT EQUIVALENT TO US$48.0 MILLION

TO THE

FEDERATIVE REPUBLIC OF BRAZIL

FOR THE NORTHEAST IRRIGATION ENGINEERING

AND TECHNICAL ASSISTANCE PROJECT

April 1, 1986

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.

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Currency Equivalents

Currency Unit - Brazilian Cruzeiro (Cr$)US$1.00 _ Cr$8,186.5 (October 1985)1/CR$ 1 - US$0.000122Cr$ 1 illion - US$122.16

Government of Brazil Fiscal Year - January 1 to December 31.

Glossary of Abbreviations

CODEVASF Companhia de Desenvolvimento do Vale do SaoFrancisco

(Sao Francisco River Valley Development Company)

DNOCS Departamento Nacional de Obras Contra as Secas(National Department of Drought-Related Works)

DNOS Departamento Nacional de Obras de Saneamento(National Department of Sanitary Works)

POLONORDESTE Programa de Desenvolvimento de Areas Integradas doNordeste

(Development Program for Integrated Areas in theNortheast)

SERTANEJO Programa Especial de Apoio ao Desenvolvimento daRegiao Semi-Arida do Nordeste

(Special Program of Support for the Development ofthe Semi-arid Region of the Northeast)

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

Northeast)

1/ Exchange rate at time of appraisal.

FOR OFICIAL USE ONLYBRAZIL

NORTHEAST IRR.APTION ENGINEERINGAND TECHNICAL ASSISTANCE PROJECT

Loan and Project Sumary

Borrower: Federative Republic of Brazil

Amount: US$48 million equivalent

Terms: Repayment in 15 years, including 3 years of grace, withinterest at the Bank's standard variable rate.

ExecutingAgencies: Executive Secretariat for 2.Le National Irrigation

ProgramSao Francisco River Valley Development Company(CODEVASF)Natiodal Department for Drought-Related Works (DNOCS)National Department of Sanitary Works (DNOS)Superintendency for Northeast Development (SUDENE)

ProjectObjectives: Create an adequate stock of well prepared irrigation

projects for appraisal and construction, and providetechnical assistance and training for the staff ofCODEVASF, DNOCS and DNOS.

ProjectDescription: The proposed project consists of (i) irrigation sector

studies; (ii) preparation for appraisal of twelveirrigation projects, covering an area of 500,000hectares, and preparation for construction of some ofthese projects, involving a potential area of 300,000hectares; (iii) construction of two pilot irrigationschemes; (iv) institution building measures affectingthe executing agencies; and (v) drafting of safetyguidelines for small dams.

Risks: The proposed project do.s not involve any specialrisks. The strong support lent to irrigationdevelopment in the Northeast by the Federal Governmentshould ensure the adequate and timely provision oflocal funds for project execution. Satisfactoryquality of consulting services appears to be assuredowing to selection procedures which follow BankGuidelines. In coordinating and supervising theexecution of the project, the Government would beassisted by outside experts and this should warrantsmooth and efficient progress.

This document ha a restricted distribution and may be used by recipients only in the perforceof their oficial duties. Its contents may not otherwie be disclosed without World Bank authoration.

Estimated Cost:Local Foreign Total

Sector Studies -US$million--Public irrigation 1.5 0.3 1.8Private irrigation 2.7 0.3 3.0

Total 4.2 0.6 4.8

PreParation of Irrigation Projectsin CODEVASF area 20.7 8.3 29.0in DNOCS area 8.9 3.8 12.7in DNOS area 7.6 3.3 10.9

Total 37.2 15.4 52.6

Pilot Irrigation SchemesConstruction 12.0 8.0 20.0Settlement training and

production support 0.5 - 0.5Total 12.5 8.0 20.5

Instltution BuildingTechnical assistance 1.2 3.4 4.6Staff training 0.7 0.6 1.3Civil works and equipment 0.5 0.2 0.7

Total 2.4 4.2 6.6

Dam Safety Guidelines 0.2

Base Cost /a 56.4 28.3 84.7Physical contingencies 8.4 4.3 12.7Price contingencies 6.8 3.5 10.3Total Cost 71.6 36.1 107.7

Financing Plan:Local Foreign Total X

-Us$million--Government 59.7/b - 59.7 55IBRD 11.9 36.1 48.0 45

Total 71.6 36.1 107.7 100

Estimated Disbursement:

Bank FY 87 88 89 90

---US$milliou -Annual 12.7c 16.2 12.8 6.3Cumulative 12.7 28.9 41.7 48.0

Rate of Return: Not applicable

Staff Appraisal Report: None

Map: IBRD 19467

/a At October 1985 prices./b Includes local taxes of about US$11.7 million.IE Includes initial deposit to the Special Account.

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

REPORT AND RECOMMENDATION OF THE PRESIDENTTO THE EXECUTIVE DIRECTORS

ON A PROPOSED LOAN OF US$48 MILLIONTO THE FEDERATIVE REPUBLIC OF BRAZIL

FOR THE NORTHEAST IRRIGATION ENGINEERINGAND TECHNICAL ASSISTANCE PROJECT

1. I submit the following report and recommendation on a proposedloan to the Federative Republic of Brazil for the equivalent of US$48million to help finance the Northeast irrigation engineering and technicalassistance project. The loan would have a term of 15 years, including 3years of grace, with interest at the Bank's standard variable rate.

PART I - THE ECONOMY 1/

2. An economic report entitled 'Brazil: Country EconomicMemorandum- (Report No. 5373-BR, dated February 26, 1985) was distributedto the Executive Directors on March 7, 1985.

3. Brazil's Government changed in March 1985 following indirectelections in January for the first civilian president in 21 years. Thiscompleted a major stage of the return to fully democratic government andinvolved a change in regime as well as administration, re-establishing theauthority of elected Federal and state representatives throughout Brazil.In this changed environment the inability of the successful presidentialcandidate, Dr.Tancredo Neves, to take office, created a crisis for the newGovernment. On his death in April 1985, Vice-President Jose Sarney becamePresident and has since faced the task of pursuing the objectives stated byDr. Neves, while also establishing his own authority in the New Republic.

4. The Sarney government is committed to a program of reform,economic growth and inflation control, with a strong social andanti-poverty orientation. Its first National Development Plan for 1986-89,presented to Congress in November 1985, stresses social objectivesincluding the gradual recovery of real wages and, among Governmentprograms, a concentration on improving health, nutrition and housing forlow-income Brazilians. Reform of the public sector is a strategicobjective. The Government intends to concentrate more on "traditional"functions, such as the provision of social services and basicinfrastructure, leaving directly productive activities increasingly forprivate sector initiative. Given population growth of 2.2% p.a., and amore rapid increase in the labor force, the Plan states as an essentialcondition a return to GDP growth of at least 6% a year. Three majorstabilization aims are embodied in the Plan: reductions in the publicsector deficit, renegotiation of the external debt, and the control ofinflation.

1/ Parts I and II of this report are similar to that of the President'sReport for the Agricultural Extension II Project (Report No. P-4266-BR,dated March 26, 1986).

- 2-

Recent Economic Performance

5. Brazil achieved a remarkable 11% average annual growth in realGDP in the years 1967 to 1973, with declining domestic inflation and asignificant liberalization of both foreign and domestic trade. Furthersubstantial growth occurred in the years from 1974 to 1980, at an annualaverage rate of 7%, but in greatly changed circumstances. Following thelarge increases in 1973 in the price of imported oil, the internationalrecession, and the sharp deterioration in the terms of trade, successiveBrazilian governments sought to maintain output and employment growththrough policies characterized by generous credit and tax incentives forindustrial and agricultural exports and import substitution; rising importbarriers; investment in domestic energy resources to substitute forimported oil; the expansion of state enterprises; and heavy foreignborrowing. Between 1975 and 1980, Brazil's medium and long-term debt morethan doubled from US$23.5 billion to US$56.5 billion, with totalobligations of approximately US$70 billion, including short-term debt. Theefforts to redress the external imbalance after 1974 created stronginternal pressures and increased inflation. The economy remainedvulnerable to external shocks, and when further increases in oil pricesoccurred in 1979 and 1980, and international interest rates increased, thecurrent account deficit more than doubled to US$12.4 billion. Domesticinflation accelerated to 110Z.

6. Stabilization measures, relying heavily on monetary policy,resulted in a decline of GDP in 1981, ending the long period of sustainedgrowth. Incipient recovery was checked in 1982 by a combination ofexternal developments, including declining world commodity prices, economicproblems of some major trading partners, and regional events leading to thedebt crisis of August 1982. Faced with the loss of its reserves, thereluctance of foreign banks to roll over existing loans or extend newcredits, and bleak international market prospects, Brazil sought assistancefrom the International Monetary Fund in support of an intensifiedadjustment program. In February 1983, the IMF pledged financial assistanceof the order of US$5.4 billion through the Extended Fund Facility andcompensatory financing for the years 1983-85. Associated with this werecommercial bank commitments for 1983 of US$4.4 billion in new loans, therescheduling of US$4.6 billion in loan repayments due in 1983, and othermeasures of financial support. A similar agreement for 1984 provided,inter alia, for the rescheduling of US$4.7 billion in loan repayments, andthe commitment of US$6.4 billion in new commercial bank loans.

7. With this support, and through adjustment measures which includeda 30% devaluation of the cruzeiro early in 1983, import restrictions, andtight monetary and fiscal restraints, Brazil weathered its foreign exchangecrisis. A trade surplus of US$6.5 billion was achieved in 1983 as importsdeclined by 21Z and exports increased by 9%; the current account deficitwas reduced from US$14.8 billion in 1982 (equivalent to about 5% of GDP) toUS$6.2 billion in 1983.

8. The short-run cost of these adjustments was nevertheless high.Inflation reached 211% in 1983 as a whole, exacerbated by crop shortages,very high real interest rates, and the effects of devaluation. Real GDPfell by 3.2% in 1983, with the greatest reductions concentrated in the

industrial and commercial sectors. Per capita GDP declined by over 12zduring 1981-83 and industrial employment by over 20%, with the largestreductions in incomes and employment concentrated in the main industrialcenters. Much of the social progress made in the 1970s-when all incomegroups gained from economic growth and the expansion of education, health,housing and urban and rural development programs-was undermined by therecession.

9. The recovery began in 1984. Balance-of-payments performance wasagain highly positive, aided by exchange rate changes which fully accountedfor domestic inflation and by the strong growth of the US economy. Anunprecedented trade surplus of US$13.1 billion was generated. Althoughtotal imports, especially of oil, continued to fall, much of this surplusresulted from export expansion. Measured in current US dollars, totalexports for 1984 were 23% greater than in 1983; the comparable increase forindustrial exports was 37%. Reflecting the favorable trade performance,and substantial net capital inflows, Brazil's international reserveposition also improved markedly in 1984 with a net increase of over US$7billion. Sparked by the export resurgence, GDP for 1984 is estimated tohave grown by 4.5% in real terms, or over 2% per capita. The increase inmanufacturing exports helped industrial recovery, despite the fact that formost sectors the proportion of total output which is exported remainedsmall. Overall expansion was still inhibited by depressed domestic marketconditions, high inflation (224%), and real interest rates of 30-40%.

10. In 1985, GDP growth accelerated and is estimated to have reached8.3% in real terms for the year as a whole. The recovery was led byindustry, which expanded by an estimated 9.0%, though investment spendingremained low. Industrial employment inareased by at least 6%. Openunemployment declined significantly in 1985, in the major urban centers.Agriculture expanded by an estimated 8.8%, contributing both to the balanceof payments and to domestic supply. Temporary price restraints imposed bythe new Government resulted in a reduction in price increases from nearly12% a month in the first quarter of 1985 to 7.6% in the second. Subsequentincreases, however, brought the 1985 annual rate back to 235%,significantly above the 1984 figure. Externally, the trade surplusamounted to over US$12.4 billion, the current account deficit was about0.5% of GDP, and gross international reserves remained at a levelequivalent to about 8 months of imports.

11. The high GDP growth of 1985 was achieved by relaxing demandpolicies in the belief that the increased demand could be absorbed by thesubstantial excess capacity in the economy. The public sector deficit,adjusted for monetary correction, increased from about 1.6% of GDP in 1984to an estimated 3.3% in 1985. Generous wage settlements in the organizedindustrial sector, including partial quarterly adjustments of wages,resulted, at least temporarily, in real wage gains of 8-10% for theseindustries, and Federal Government salaries were also increased tocompensate for large previous declines. Profits were high in many privatesector activities. Monetary policy from August 1985 was accommodating; infact, some of the expansion in the monetary aggregates that occurred wasaimed at reducing interest rates. With a sharp reduction in foreignfinancing, the growing public debt was financed domestically at high,though later declining, real interest rates. The real rate on Government

- 4 -

securities declined from 21% in August to 15% by the end of the year. Forthe year, as a whole, the monetary aggregates increased faster than the235% inflation: 251% for the monetary base, 312% for Ml, and 262% for M3.

12. By the end of 1985, inflation was causing new concern. The rateof inflation increased late in the year because of the need to raise publicsector and other regulated-prices that had been held down in previousmonths and through anticipation of the effects of a drought in the Southwhich damaged food crops and coffee. Inflation reached monthly rates of11% in November and 13% in December, followed by rates of 16% and over 14%in January and February of 1986, respectively. In late 1985, theGovernment had prepared a program to reduce inflation gradually which wascentered around the reduction of the fiscal deficit to 0.5% of GDP. Taxeswere increased and there were cuts in Federal Government and stateenterprise expenditure. Budgetary control was strengthened in January 1986by the unification of the fiscal and monetary budgets, transferring to theTreasury the responsibility for programs previously financed by the CentralBank and Bank of Brazil; the termination of the Bank of Brazil's role as asecond monetary authority; and the establishment of a National TreasurySecretariat to centralize budget disbursements. A program forrestructuring and selective privatization of state enterprises wasinitiated. Alarmed by the spurt in inflation in December and January, theGovernment tightened consumer credit and announced a plan to increase foodimports to offset the drought-related increase in agricultural prices. Atthe same time, a shock-treatment approach to stopping inflation was beingprepared.

Economic Outlook

13. On February 28, the Government initiated its new program forstabilization and currency reform. Until then, the inflation outlook for1986 was threatening. There were a number of inflationary factors needingto be dealt with, including the disappearance of excess capacity in anumber of industries, the pressures to raise wages to pre-recession levelsand to protect workers from higher future inflation, the poor agriculturalharvest, and the need to raise some public sector tariffs and prices.Moreover, there was a growing awareness that maintaining inflation at200-250% a year, the rate of the prior three years, was likely to be verydifficult over the medium term. The economy was reacting very quickly tonew, negative shocks, and the indexation system made it hard to bringinflation down, once the shocks were reflected in the pri_~e index. Inaddition, the small size of the monetary base relative io GDP (about 2%)and the high liquidity of Government bonds complicated the use of monetarypolicy to reduce aggregate demand.

14. The new program seeks both to eliminate the impact of past,indexed inflation and to change future inflation expectations. It featuresa currency reform, with the new cruzado initially worth 1,000 cruzeiros;temporary price fixing for all goods and services; an exchange rate set atCz$13.8 to the US dollar for a period to be determined; wage adjustments totheir average real value over the previous 6 months, with annualadjustments thereafter, at least partly indexed to inflation; the freezingfor one year of rent and mortgage payments; prohibition of indexation offinancial contracts for periods of less than a year, except for personal

savings accounts; the conversion of nominal cruzeiro contracts toappropriate cruzado values; the conversion of indexed Government bonds tocruzados at the parity existing on February 28, without any adjustment, atleast for one year, in the nominal value of the new bonds; and a number ofmeasures intended to liberalize the financial system. These sweepingfinancial reforms were accompanied by plans to eliminate the fiscal deficitand to use monetary policy to stabilize and, if possible, reduce realinterest rates. A limited unemployment insurance program was introduced.Initial political and public reactions were highly positive.

15. Preliminary assessments suggest that the reforms will provideincreased stability and encourage productive private sector investment,although there are risks inherent in the reforms, including problems ofadjustment for the financial sector. The transition period could be markedby a temporary reduction in growth, which will also be reduced in 1986 bylow or negative growth in the agriculture sector following the recentdrought. The exchange rate remains competitive-previous mini-devaluationsagainst the US dollar, and the decline of the dollar, are estimated to haveprovided a safety margin of 15-20%-and the February 28 wage adjustments donot raise real wage costs. The large trade surplus remainsa positive factor for growth. While progress needs to be carefullymonitored, the economic outlook has on balance been improved by themeasures to restore internal stability to complement the strong Brazilianperformance in external trade and the balance of payments.

16. The medium-term economic prospects for Brazi'l are thusencouraging, assuming the maintenance of sound exchange rate policies,reasonable success in the implementation of the new stabilization package,and the present determination to eliminate the public sector deficit, whichthe reforms will help to achieve. A focus on further export promotion,greater productive efficiency, improved resource allocation and increasedsavings and investment will be required if annual GDP growth rates are toremain high enough (6-7% on average) to restore living standards andgenerate the employment growth (at least 4% per annum) to fit new entrantsinto the labor force and reabsorb those still affected by the recentrecession.

17. The prospects depend on external factors outside the control ofBrazilian policy makers as well as on economic and social policies pursuedwithin the country. Recent developments, including the decline ininternational interest rates and the fall in oil prices, have been positivefor Brazil. A 1% drop in average interest rates means a balance-of-payments gain of about US$800 million. The agreement reached in March withcommercial bank creditors, rescheduling maturities on 1985, rolling over1986 maturities until early 1987, and reducing interest rates on this debtfrom 2-1/8 to 1-1/8% over LIBOR, will reduce annual interest payments bysome US$140 million. A reduction of a dollar per barrel in oil pricesmeans a net gain of over US$100 million a year.

18. Brazil remains dependent on its success in exporting andtherefore on the international economy, market access, and its own tradepolicies. However, major structura'l changes in its trade accounts inrecent years, including substantial export growth and recent efficientimport substitution in both industrial products and petroleum, should make

it feasible to continue to generate large trade surpluses for severalyears, even with nominal growth in non-oil imports of up to 20% a year.

External Assistance and Creditworthiness

19. On the basis of relatively cautious assumptions about theinternational environment, but assuming continued domestic economic growth,Brazil could achieve substantial improvements in its balance of paymentssituation, external debt outlook, and creditworthiness indicators. Bankanalysis, based on expected macro-economic and sector performance undercurrent and planned economic policies, results in projections of GDP growthaveraging nearly 7% in 1985-90, with additional foreign assistance. Totalmedium and long-term debt is projected to grow, in nominal terms, at anannual rate of about 3.8% from 1985 to 1990, below the projected rate ofinternational inflation. If all principal on this debt were repaid onschedule, gross disbursements would need to rise from US$10.7 billion in1985 to about US$17.7 billion in 1990, and amortization from US$9.8 billionto about US$14.0 billion in the same period. Net medium- and long-termlending, which is estimated at under US$1 billion in 1985, is projected atan average of US$3.6 billion annually in the period 1986-90. For privatemedium- and long-term debt, the projections are consistent with reductionsof total real commercial bank exposure to Brazil. Nevertheless, continuednet lending will be required, at a projected average level of approximatelyUS$2 billion annually.

20. The projections suggest that interest payments on all debt wouldfall from 39% of exports of goods and non-factor services in 1985 to about24% in 1990. The total medium and long-term debt service ratio would fallfrom 69% of goods and non-factor service exports in 1985, before the Marchrescheduling, to a projected 52% in 1990. In the short run, in the absenceof continued debt rescheduling, debt service payments would have reachedlevels threatening the recovery. The ratio of total external debt to goodsand non-factor service exports, which amounted to 3.6 in 1985, is projectedto decline to 2.6 by 1990. The results of any projections must be viewedcautiously because of the uncertainties regarding domestic developments andfuture international conditions. Nevertheless, Brazil has the economicstrength, and appears to have the management capabilities and the capacity,to attract the relatively modest infusions of external capital needed tomaintain satisfactory rates of growth while continuing to meet itsinternational obligations. Thus, Brazil is creditworthy for new borrowingon conventional terms in the magnitudes indicated above.

PART II - BANK OPERATIONS IN BRAZIL

21. By September 30, 1985, the Bank had made 144 loans to Brazil,amounting to US$11,124.8 million (net of cancellations), of which 66 werenot yet fully disbursed. During FY70-75, disbursements averaged US$150million per year, reaching US$202 million in FY76, US$472 million in FY82,US$764 million in FY83, US$1,405.0 million in FY84, and US$1,054.5 millionin FY85. The undisbursed amount as of September 30, 1985 was US$4,278.9million. Annex II contaius a summary statement of Bank loans and IFCinvestments.

22. Over the FY77-84 period, annual Bank lending to Brazil rangedfrom US$425 million to about US$1,573 million per year. In FY84, 10 loanstotalling US$1,573.8 million were approved. Nine loans totallingUS$1,523.0 million were approved in FY85. They were a US$300.0 millionloan for a third development banking project, a US$72.0 million loan for ascience and technology project, two loans totalling US$122.7 million forrural development projects in the Northeast region, a US$16.3 million loanfor a technical assistance and pilot rural water supply and sanitationproject, a US$200.0 million loan for a railway project, two loans totallingUS$712.0 million for a power transmission project and a power distributionproject and a US$100.0 million loan for a land tenure improvement projectin the Northeast. Thus far in FY86 two loans have been approved: one fora small towns improvement project in the amount of US$24.5 million and thesecond for the Northeast Urban Reconstruction project for US$100 million.Work is advanced for a second agricultural sector project; a power sectorproject; a public sector management project; and several projects in theNortheast region including five rural development projects, a metropolitanurban development project, an agricultural extension project, an irrigationproject, and a health project.

23. Brazil's external medium- and long-term public and private debtoutstanding and disbursed is estimated to have been US$88 billion at theend of 1985. The Bank's share in this total is estimated at 4.8% while itsshare in total debt service is estimated at 4.1%.

24. As of September 30, 1985, IFC commitments to Brazil totalledUS$1,032.95 million, of which US$685.73 million had been sold, repaid orcancelled. Of the balance of US$347.22 million, US$262.07 millionrepresent loans and US$85.15 million equity. A summary of IFC'sinvestments as of September 30, 1985 is given in Annex II.

Lending Strategy

25. Brazil has been through a difficult transition period, achievingonly at substantial domestic cost, and with international cooperation, theadjustments required to regain reasonable equilibrium in its balance ofpayments. Economic recovery, export-led, began in 1984 when the GDPincreased by some 4.5%. For 1985, growth is estimated at over 8%. Thedomestic stabilization measures which were introduced on February 28,1986, improved the prospects for maintaining satisfactory growth rates inthe medium term. Stability and growth will depend on tighter public sectorexpenditure and deficit control, increased savings and investment, and asound balance of payments. External and domestic resources will continueto be constrained. The Bank lending strategy is therefore designed tosupport the ongoing restructuring pro,cess, promote the mobilization andeffective use of resources, and contribute to the attainment of social andregional development objectives to which high priority is being attached bythe Government.

26. In the short run, the Bank will continue to help ease Brazil'sfinancing constraints through several modalities of the Bank's SpecialAction Program, approved by the Executive Directors on February 22, 1983.These include working capital financing and financing of a higher share of

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project costs. Also, greater use is being made of Project Special Accountsinto which Bank funds are deposited in advance in order to reduce the needfor the Government to prefinance the Bank's share of project costs.

27. The Bank's longer-run lending strategy is directed toward helpingBrazil in sustaining efficient growth. One focus of the lending program ison structural transformation and efficient resource use. Expanding exportcapacity in industry and agriculture will ease the foreign exchangeconstraint on development while promoting efficiency through exposure tointernational competition. Sector loans to industry and agriculture,envisaging a restructuring of incentive and trade policies in support ofGovernment initiatives, have been approved by the Executive Directors.Follow-up loans designed to support the next steps in this adjustmentprocess are under preparation. Given agriculture's large potentialcontribution to export growth and import substitution, adjustments in thissector will be crucial to Brazil's stabilization and growth. Sector loansin support of financial and fiscal reforms will help promote the flow ofresources to the private sector. Lending in support of the financialrestructuring, rehabilitation and development of the energy and industrialsectors is also envisaged.

28. Another lending priority is the rehabilitation and development ofinfrastructure. Lending for energy development has addressed the need toreduce petroleum imports while providing the energy required formaintaining high rates of economic growth in the future. In the electricpower sector, the Bank's role will be to assist the Government and sectorauthorities in their efforts to improve the financial condition of thesector through realistic investment and financial policies. Lending fortransportation will be directed toward the rehabilitation and maintenanceof the existing transportation network with expansion in areas whereeconomic activity is outgrowing present capacity.

29. A third lending objective is to help intensify the efforts of theGovernment to increase the productivity of the lowest income segments ofthe population, to broaden the opportunities open to those groups, and toimprove their living conditicns. Previous loans for primary education,vocational training, agricultural research, agricultural extension, polderconstruction in the lower Sao Francisco river basin, and integrated ruraldevelopment were designed to assist low-income groups in rural areas,especially those in the Northeast and the Northwest. Loans for watersupply and sewerage projects throughout Brazil, loans for urban transportin several major cities, a loan for sites and services and low-costhousing, and four loans for urban development in two metropolitan areas, inmedium-sized cities, and in small market towns, are assisting theimprovement of the living conditions of the urban population, particularlyof the urban poor. Following up on a nutrition research and developmentproject and a first health project for the northwest region, a basic healthcare project in the state of Sao Paulo and a national health studiesproject are helping promote efficiency, cost effectiveness and equity inthe delivery of health services in Brazil. Future lending in the healthsector will seek to extend coverage of basic health services in theNortheast, and to combat endemic diseases in the Northeast and theNorthwest. Continued lending for integrated rural development and

-9-

irrigation projects in the Northeast of Brazil will support the Governmentobjectives to further alleviate poverty, by addressing the region'svulnerability to drought, inadequate structure of regional institutions,and concentration of land ownership. Further lending for urban developmentwill address ways to improve urban services and infrastructure, whilesimultaneously strengthening the financial basis of municipalities,particularly in the Northeast region, with a view toward self-financing ofinvestments and cost recovery. New projects for water supply and seweragewill also foster these goals while extending services to rural areas and tothe low-income urban population. Education lending will continue tostrengthen financial and administrative institutions while also increasingthe contribution of education to the development process, especially in theNortheast. The proposed project, the third aiming at the development ofirrigation in Brazil, would meet the urgent need for an adequate stock ofthoroughly prepared and engineered irrigation projects, which could belaunched in the semi-arid zones of the Northeast as soon as the necessaryfinancing has been secured. These projects would provide water to smallfarmers settled on family plots of land, thus enabling them to increaseproduction and earn better incomes.

30. Improving the efficiency of the public sector and supporting theGovernment's efforts to reduce the public sector deficit are importantcomponents of the Bank strategy for Brazil. A special Public SectorManagement project, designed to strengthen planning and managementcapabilities at Federal level, is advanced in preparation. The Bank isalso undertaking a review of public sector investment programs and issupporting the Government's efforts to rehabilitate state enterprises.

31. Continued lending by the Bank in Brazil is regarded by theinternational financial community as a sign of confidence in Brazil'suevelopment prospects. In some sectors, especially in electric power andindustry, Bank participation helped Brazil in the past to obtain additionalresources from bilateral credit agencies and private financialinstitutions. Since 1976, 11 cofinancing operations for about US$570million were arranged and signed with private financial institutions.Cofinancing opportunities were rather limited in Brazil in the past fouryears, as the volume and terms of commercial bank financing available toBrazil were determined within the framework of debt reschedulingnegotiations. Given Brazil's recent progress in restoring balance ofpayments stability and the current efforts to control inflation, theprospects for obtaining new external financing from commercial sources arenow improving. Cofinancing could become important again in the nearfuture, and the new cofinancing instruments developed by the Bank couldplay a role in encouraging commercial banks to provide Brazil additionalresources for high priority projects, with better financing terms.'

PART III - AGRICULTURE IN THE NORTHEAST

Agriculture in the National Economy

32. Although its relative importance within the Brazilian economy hasdeclined, agriculture remains an important sector, employing - as of 1982 -

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about 30% of the labor force, and contributing about 11% to the GDP andabout 38% to total export earnings. During the 1970s, the gross value ofagricultural production grew at an annual rate of nearly 5%. Since 1980,however, it has declined, reflecting lower international commodity prices,adverse domestic pricing policies and a restricted supply of agriculturalcredit, in addition to unfavorable climatic conditions. Per capitaproduction of basic foods, such as maize, beans, rice and cassava, has alsofallen. While in most years Brazil has remained self-sufficient in food,except for wheat, periodic imports of beans, maize and rice have occurred,particularly in bad crop years.

33. In recent years, the share of agricultural land devoted toindustrial and export crops (sugarcane, cocoa, soybeans, citrus andtobacco) has risen sharply. Brazil is now the world's largest producer ofcoffee and sugarcane, the second largest producer of soybeans, and thelargest exporter of coffee and orange juice. The changing structure ofagricultural production reflects the fact that most productivity gains,expansion in production area and increased market integration have occurredin the South and Southeast, while the North and Northeast have continued tofollow traditional agricultural practices. Because of the sector's keyrole im increasing food supplies and rural incomes, and improving thecountry;s balance of payments, the Government has shown a strong commitmentto agricultural development.2/

The Rural Northeast

34. The Northeast is comprised of the States of Maranhao, Piaui,Ceara, Rio Grande do Norte, Paraiba, Pernambuco, Alagoas, Sergipe andBahia, as well as the northern portion of the State of Minas Gerais and thefederal island territory of Fernando do Noronha. Its area exceeds 1.5million km2, or 18% of the country's total area. The country's wealthiestregion during the colonial period, it subsequently lagged behind asindustrial, agricultural and commercial activity shifted to the south, and-- since the late 1800s -*-* has been viewed as the nation's foremost problemregion.

35. Drought and uncertain rainfall, highly skewed land distributionand limited urban employment opportunities have resulted in widespreadpoverty and underemployment. From 1970 to 1983, 3.3 million peoplemigrated from the Northeast. The large number of recent migrants ispartially the result of five successive years of severe drought affectinglarge areas of the Northeast from 1978 to 1983. In 1980, the Northeast hada population of 35 million (about 29% of the national total), growing at2.2% per annum, and an average population density of 22.5 Inhabitants perkm2. About one-half of the population lives in rural areas, and more thanone-half of the regional work force is engaged in agriculture. Ownershipof agricultural land throughout the Northeast is highly concentrated: farmsunder 10 ha., accounting for 70% of all farms, occupy less than 6% of totalfarm area; farms over 500 ha., or 1% of all farms, more than 40%. Ruralincomes are very low. As of 1980, over 80% of the rural population earnedone minimum salary of about US$675 annually or less, i.e., a little over35Z of the national average; and the poorest 50% received only about 10% oftotal regional income.

2/ Subject to change prior to Board presentation.

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36. The Northeast contributes about one-fifth to the total value ofBrazilian crop production; many regionally produced commodities (sugar,cocoa, cotton, sisal and cassava) represent significant shares of nationalproduction. In terms of climate, topography and vegetation, the region canbe sub-divided in four zones. An eastern coastal forest zone, coveringabout 8 percent of the area contains about 30 percent of the regionalpopulation, and a major proportion of industry and plantation agriculture(largely sugarcane and cocoa). The agreste, accounting for some 16 percentof the area and about 20 percent of the population, is a transition zonewith some semi-arid areas, dominated by mixed farming for the domesticmarket, as well as the raising of beef and dairy cattle. The semi-aridsertao, by far the largest zone, takes up 50 percent of the land; it issparsely populated by one third of the inhabitants of the region and is themost vulnerable to periodic drought. The fourth zone, the Middle North,consisting of Maranhao and most of Piaui, occupies 25 percent of the areaand claims 20 percent of the people of the Northeast.

37. Rainfed agriculture in much of the Northeast, and especially inthe sertao, is limited mainly to subsistence crops and to extensivelivestock production. Due to high climatic risks, difficulty in obtainingland, lack of access to credit, and inadequate production support services,most rainfed farmers in the 'drought polygon' including large parts of thenortheastern states, except for Maranhao, hava not adopted high value cropproduction methods. The large sums spent by the Government in theNortheast for disaster relief in drought years have gone primarily tosupport rural small-holders in the sertao whose rainfed crops have failed.

Government Policy for the Rural Northeast

38. Until the 1950s, most of the Federal Government interventions inthe rural Northeast were limited to drought relief works and emergencyprograms, and to incentives for export crops. The slow pace ofsocio-economic development led to the creation in 1959 of theSuperintendency for the Development of the Northeast (SUDENE). Originallyattached to the Office of the Presiden. of the Republic, SUDENE had beenresponsible for regional policy planning, and for the coordination of allpublic investment activities and of fiscal and credit incentives to attractnew private investment. During the 1960's, public investment in transport,power and other infrastructure, and tax and other incentives, spurred thedevelopment of private industry. While the resulting migration from ruralto urban areas affected to some extent the living conditions among thepeasantry, the Government's industrialization measures did not make anymeaningful dent in poverty and underemployment prevailing on the land.Recognizing this fact, the Government adopted - in the 1970s - policies toease the situation in the rural Northeast, by increasing the productivityof local farmers and opening up the Northwest to new settlers. Policyformulation for the Northeast became more and more the responsibility ofthe Ministry of Interior. Development of agriculture was being promoted,with SUDENE largely concerned with the coordination of federally-fundedspecial rural programs.

39. The special rural programs have followed two approaches. Thefirst approach was integrated rural development, focusing on specific

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target groups. Programs following this approach included the DevelopmentProgram for Integrated Areas In the Northeast (POLONORDESTE), which seeksto raise productivity on small farms by providing a variety of investmentsand services, and the Special Program of Support for the Development ofthe Semi-Arid Region of the Northeast (SERTANEJO), largely concerned withmaking agricultural pursuits more resistant to recurring drought. Severalcomplementary programs, including the Northeast Water Resources Program andthe Drought Emergency Relief Program, as well as federal irrigationprojects involving mainly construction of storage reservoirs in theNortheast, have attempted to increase the productive use of scarce water orto provide temporary drought relief.

40. The second approach to the problems of rural development, whichevolved in 1982, implied more attention to the security of tenure, thequality of the soil and the availability of water on the farm. The specialrural programs were no longer to be integrated area by area, but consideredon a state-wide basis along functional lines. A series of region-widesector programs has been worked out to support this approach. One of theseprograms is a fifteen-year Federal Irrigation Program based on acomprehensive regional policy framework and dealing with irrigation workswhich are part of rural development projects.

Past Bank Lending in the Northeast

41. The Bank has made 33 loans, totalling US$2,045.6 million,2 / foragricultural and rural development in Brazil. Many of these loans were forprojects with nation-wide impact, but about fifteen were for varioussettlement, irrigation and rural development projects, located in theNortheast3/. The Project Performance Audit Report of December 29, 1982,for the Alto Turi Land Settlement Project (Loan 853-BR) showed that theproject raised settler incomes beyond expectations, but was less successfulin the areas of environmental protection, community organization and thestrengthening of cooperatives. The Project Performance Audit Report of May23, 1985, for the Lower Sao Francisco Polders Project (Loan 1153-BR)demonstrated that despite long delays due to substantial design changesduring project execution and to social tension in the area, net familyincomes increased beyond original estimates and small farmers were capableof moving successfully from subsistence to commercial agriculture. Theongoing Sao Francisco Second Irrigation Project (Loan 1729-BR) isprogressing satisfactorily and should be completed by CODEVASF in aseven-year period ending in Decenber 1986.

42. Ten of the Bank-financed projects in the Northeast are integratedrural development projects of the POLONORDESTE type located in eightStates. Approved between 1976 and 1982, all these projects haveexperienced execution and disbursement delays, and only two have beencompleted to date. Among the reasons are the unusually severe andprolonged 1978-83 drought, delays in providing local funds, limitedexecution capacity for carrying out small-scale irrigation activities, andinitial lags in the generation of drought-resistant technology for smallfarmers. As yet, no project completion report has been prepared.

2/ Subject to change prior to Board presentation.

3/ A preliminary evaluation of impact is provided in the World BankCountry Study, Brazil: An Interim Assessment of Rural DevelopmentPrograms for the Northeast, Washington, D.C., 1983.

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43. As part of the Northeast Rural Development Program of 1984, theExecutive Directors approved in April 1985 the first and second NortheastRural Development Projects in Sergipe and Rio Grande do Norte, respectively(Loans 2523-BR and 2524-BR). A loan for the third Northeast RuralDevelopment Project in Bahia has been negotiated. Land tenure improvementactivities in the Northeast are being financed under Loan 2593-BR made onOctober 15, 1985.

Irrigation in the Northeast

44. The National Irrigation Law of 1979 defines national irrigationpolicies, rights, obligations and institutional responsibilities. The Lawdistinguishes between 'public- and 'private" irrigation. Federal publicirrigation systems in the Northeast are planned, constructed and operatedby the Sao Francisco River Valley Development Company (CODEVASF) and theNational Department of Drought-Related Works (DNOCS). CODEVASF, aGovernment owned company established in 1974 and run along privateenterprise lines, is responsible for the execution of major publicirrigation systems in the Sao Francisco Valley. DNOCS, established in 1945as a Government agency and subordinated to the Ministry of Interior untilFebruary 1986, is responsible for the development of public irrigationelsewhere in the semi-arid Northeast. In the last few years, the NationalDepartment of Sanitary Works (DNOS), another Government agency establishedin 1940 and subordinated to the Ministry of Urban Development andEnvironment until February 1986, has also begun to develop irrigationprojects in the Northeast. Private irrigation projects are those carriedout through private initiative with - or without - Government assistanceand incentives. Most of them are financed with the help of the nation-wideProgram for Irrigation of Flood Plains and the Financing Program forIrrigation.

45. At present, CODEVASF operates 18 irrigation projects, includingthe Bank-financed Lower Sao Francisco Polders and Sao Francisco SecondIrrigation Projects, with some 40,000 ha. fully developed and 25,000 ha. invarious stages of construction. DNOCS has 27 irrigation projects inoperation, covering a total area of about 26,800 ha. However, agriculturalproduction in the irrigated perimeters has been generally disappointing.The principal obstacles to achieving originally expected results have beenconstruction delays due to design errors and poor supervision, and erraticannual budgetary allocations to CODEVASF and DNOCS for operation andmaintenance which tended to be related to the incidence and severity of thedrought.

46. Cost recovery through water charges is stipulated in Decree89.496 of March 29, 1984, which regulates public irrigation in the montextof the National Irrigation Law. The Decree provides for an area-basedcharge levied to recover all or part of the cost of investment made incommon infrastructure by Federal Government agencies, and for avolume-based charge intended to meet in full their operation andmaintenance expenses. To comply with the provisions of the Decree,CODEVASF has - over the past two years - gradually increased its billing ofsmall farmers for water charges, achieving in recent months (i) fullrecovery of operation and maintenance expenses for 11 of the irrigation

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projects operated by it, including the two Bank-financed projects (paras.41 and 45 above); and (ii) a 60Z recovery in the case of the 7 projects,which are to be rehabilitated under the proposed loan for the Upper andMiddle Sao Francisco Irrigation Project. In addition, CODEVASF has beenrecovering a modest 15Z-20Z of the cost of the capital investment, adjustedfor inflation but without interest from farmers in the irrigated perimetersof all its 18 projects. At present, 90% of the farmers in the irrigatedarea of the two Bank-financed projects pay their water bills in full,whereas only 45% to 90% of the farmers in the irrigated perimeters of theremaining 16 projects are meeting their payments. DNOCS has beer strivingto match the record of CODEVASF but information about the rate of costrecovery from irrigation projects operated by it is fragmentary.

47. Under the proposed loan for the Upper and Middle Sao FranciscoIrrigation Project, the Federal Government and CODEVASF would committhemselves to set water charges at levels sufficient to reduce the 40Zsubsidy for the operation and maintenance of the 7 projects to berehabilitated, and to take several measures - culminating in the evictionof delinquent farmers - to enhance the collection of water bills and reduceaccounts receivable. As to the capital investment made in publicirrigation projects, CODEVASF would commit itself to achieve the recoveryof its cost in accordance with the respective provisions of the 1984Decree; in addition, CODEVASF, DNOCS and DNOS look to the conclusions ofthe study, which would be carried out under the sector studies' componentof the proposed project and should, inter alia, show which level ofrecovery of the investment cost could be sustained by representative typesof individual farms (para. 56 below).

48. The traumatic effects of the 1978-83 drought have caused theGovernment to review its development policies, priorities and pl;ns for theNortheast. In the outcome of the review, a five-year Irrigation Programfor the Northeast was enacted by Decree on January 29, 1986. Its targetis quite ambitious: it proposes to increase the area under public andprivate irrigation in the Nvrtheast by one million hectares during theyears 1986-90. Two weeks later, in order to streamline the decision-makingand speed up the preparation and execution of irrigation projects, thePresident of the Republic appointed a "Minister of State Extraordinary forIrrigation Affairs- for a term of three years. The appointment was made inthe Decree of February 12, 1986, instituting a three-year National Irriga-tion Program and subordinating to the Minister the three Federal irrigationagencies, DNOCS, DNOS and CODEVASF, with all their personnel and otherresources. The Minister is being assisted and advised by an ExecutiveSecretariat for the National Irrigation Program. Responsibility forirrigation components of rural development projects remains with SUDENE;SUDENE will also assist the Minister in managing private irrigationmatters.

PART IV - THE PROJECT

The Background

49. The Bank's involvement in the proposed Northeast IrrigationEngineering and Technical Assistance project started in late 1983, afterthe Federal Government asked the Bank to help finance the execution of the

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proposed Sao Francisco River Transbasin Project, which would divert watersfrom the Sao Francisco River to the parts of the semi-arid sertao locatedoutside the river basin. At that time, the Bank recommended that theTransbasin proposal be reviewed by independent consultants and presented inthe form of an Action Plan. The Action Plan would bring together thetechnical, economic, social and environmental aspects, and help decidewhether the merits of the Transbasin proposal would justify a lengthypreparation effort. The Government having accepted the Bank'srecommendation, the studies were carried out under terms of reference drawnup by DNOS in agreement with the Bank and were paid for out of the proceedsof the Bank's 1979 loan for rural development in the State of Rio Grande doNorte (Loan 1195-BR).

50. Completed in 1984, the Action Plan determined that the diversionof the Sao Francisco River into the sertao, to irrigate large tracts ofland in the States of Ceara, Rio Grande do Norte, Paraiba and Pernambucoshould not be initiated for another 12 to 15 years; in the meantime,however, the Government should proceed with a first phase of the Transbasinproposal, namely, the development of local water resources to irrigate110,000 ha. in the States.of Ceara and Rio Grande do Norte. The initialstep in the context of this first phase would be the preparation oftechnical and economic feasibility studies for local water development inthe Jaguaribe-Apodi area of Ceara and the Piranhas-Acu area of Rio Grandedo Norte, covering 82,000 and 28,000 ha., respectively.

51. In July 1985, the new Federal Government notified the Bank of thehigh priority accorded to irrigation in the Northeast and requested it tohelp finance final engineering and construction of the two pilot irrigationschemes in the Jaguaribe-Apodi and Piranhas-Acu areas. The Government alsoasked the Bank to help finance the preparation of certain sector andfeasibility studies, and of engineering designs, which would pave the wayfor the exec'ition of a number of high priority public irrigation projectsincluded in the five-year Irrigation Program for the Northeast. Thisprogram, enacted in January 1986 (para. 48 above), had been drawn up by atechnical commission set up by SUDENE, which recognized that the lack ofproperly prepared irrigation projects has been the foremost obstacle tolarge-scale execution of public irrigation works. An appraisal missionvisited Brazil in October and December, 1985. Negotiations were held atthe Bank's headquarters between March 18 and 21, 1986, with a Braziliandelegation led by Ms. Stael Martins Baltar of the Planning Secretariat.

The Need for Technical Assistance

52. The Irrigation Program for the Northeast, as drawn up in 1985,aims at irrigating 1 million ha. in the Northeast in the next five years.It includes about 50 projects, which have been identified over the past 20years, or so, and are in varying stages of preparation. Some of theseprojects require topographic and soil surveys, some call for technicaland/or economic feasibility studies, and most are lacking detailedengineering designs and tender documents. In order to prepare them forappraisal by potential financiers, Federal Government agencies in charge ofirrigation in the Northeast need the help of consultants to carry out thenecessary studies and engineering. These agencies are also in need ofstrengthening to enable them to manage an extensive program of studies, not

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to mention the eventual construction, operation and maintenance ofirrigation projects.

53. Although there are a number of Brazilian consulting firms capableof carrying out most of the studies required, including several firms whichhave successfully performed such work under Bank Group fiuaanced projects inother countries, the scale and complexity of the work involved in a numberof the proposed studies would probably exceed the present capacity of theBrazilian firms. Consequently, there would be a need to seek expertiseoutside Brazil to assist both CODEVASF, DNOCS and DNOS, and the localconsulting firms.

Project Objectives

54. In the longer perspective, the proposed project would aim atraising rural incomes and increasing farm output by making the Northeastless vulnerable to periodic drought and the vagaries of rainfall. Itsim ediate objectives would be to: (i) create an adequate stock ofthoroughly studied and well designed irrigation projects, the constructionof which could be launched as soon as the necessary financing has beensecured; and (ii) provide technical assistance and training to the staff ofthe Executive Secretariat, CODEVASF, DNOCS and DNOS, with a view toenhancing professional skills, and managerial competence and efficiency.As a point of departure for feasibility studies and engineering forspecific irrigation projects, several sector studies would be carried outto complete and refine the information available to the Government. Inconsidering the proposed project as a vehicle for a loan at this time, theBank looks forward to being associated in the future with the constructionof some thoroughly prepared and evaluated irrigation projects in theNortheast.

Project Description

55. The proposed project would consist of the following components:

(a) sector studies;

(b) basic surveys, feasibility studies and preliminaryengineering for twelve pre-selected irrigation projects,covering an area of over 500,000 ha., and final engineeeringdesign and bidding documents for some of these projects,involving a potential area of about 300,000 ha.;

(c) final engineering and construction of two pilot irrigationschemes of 1,000 ha. each, and training and productionsupport for small farmers to be settled on the land;

(d) technical assistance to, training for the staff of, andcivil works and equipment for, the executing agencies; and

(e) preparation of safety guidelines for small dams.

The Federal Governmfent would coordinate and - assisted by the US Bureau ofReclamation and/or another organization - supervise the execution of the

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proposed project. It would also directly manage some of the componentparts. CODEVASF, DNOCS and DNOS would be the executing agencies for theother components.

56. The studies of the irrigation sector would be conducted by theExecutive Secretariat for the National Irrigation Program with the help ofconsultants. A ranking official of SUDENE, well known to the Bank, wastransferred to the Secretariat to be in charge of all sector studies. Thepurpose of one set of studies would be to provide support for thepreparation of public irrigation projects included in the IrrrigationProgram for the Northeast, whereas the other - more expensive - set ofstudies would be designed to support the improvement and expansion ofprivate irrigation schemes. The first set would comprise six sectorstudies. One of them would be a marketing study to analyze - in the firstnine months of the implementation of the proposed project - the prevailingand projected supply and demand conditions in local and foreign markets,taking into account yield and production increases expected under theIrrigation Program for the Northeast. The findings of this study, and thealready available information on the agricultural production potential,would make it possible to formulate recommendations on cropping patternswhich would be passed on to the consulting firms retained to carry outfeasibility studies for the twelve pre-selected irrigation projects. Asecond study would deal with the recovery of the cost of completed publicirrrigation projects, taking into account the water charges, and would alsoconsider issues related to the cost of land borne by the farmer, and tovarious levies and taxes payable by him. This study should show the impactof different cost recovery levels on the cash flow of representative typesof individual farms. A third study would assess the settlement capacity ofpotential irrigation areas and the training needs of farmers, who would besettled on irrigated land and expected to obtain high yields throughcorrect use of water resources. The conclusions of this study would alsobe used by the consulting firms in the preparation of the feasibilitystudies. The other three studies would be concerned, respectively, withland tenure issues, with the influence of the cost of energy on irrigationdevelopment, and with irrigation technology and applied research.

57. The second set of sector studies would address the privateirrigation schemes situated along the perennial rivers of the Northeast.In the past, SUDENE had identified a large number of potential sites forimproving or expanding river-bank irrigation. The work involved wouldinclude a review of already existing surveys and studies, an inventory ofinfrastructure on each of the sites, an evaluation of water resources andrequirements for each site (emphasizing competing private and publicclaims), the ranking of the individual sites in function of theiragricultural potential, and - subject to the Bank's approval - thepreparation of further studies and of engineering designs for someinfrastructure works required to facilitate the development of privateirrigation.

58. The basic surveys, feasibility studies and preliminaryengineering needed to prepare the twelve pre-selected projects forappraisal, and the final engineering design and bidding documents necessaryto get some of the projects ready for construction, make up the largestcomponent of the proposed project. This work would be conducted by private

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consulting firms in six states of the northeast region and would includedifferent levels of surveys, studies, and engineering design. Six of theprojects to be prepared are situated in the State of Bahia, two in theState of Ceara (one of them being Jaguariba-Apodi), and one each inPernambuco, Minas Gerais, Rio Grande do Norte (Piranhas-Acu), and Piaui.CODEVASF would be the executing agency for the work oTn six projects andDNOCS for the preparation of four projects, while DNOS would handle theremaining two.

59. The twelve pre-selected public irrigation projects are themainstay of the Irrigation Program for the Northeast. They are of highpriority and represent about 75% of the area to be put under irrigation inthe medium term. Most of these projects would take three years to prepare,but some would be ready for appraisal in twc years or even earlier. Thereview of the available material and the basic work, including aerialphotography, cadastral surveys, soil surveys and land classification forirrigation, would be put in hand first and completed by the end of December1987. Feasibility studies and preliminary engineering designs would bestarted in the course of the first year; their conclusions would bereviewed and approved by the Executive Secretariat and the Bank. Finalengineering and the preparation of specifications would be carried outthereafter. The sites being surveyed for future execution of thepre-selected projects would vary from 3,600 ha. to 75,000 ha and the costof preparation of a single project would vary from US$400,000 to US$7.5million, depending on the area to be irrigated, the nature of civil worksand equipment, and the availability and quality of surveys, studies anddesigns already carried out. These costs are consistent with wellestablished engineering practice, namely, about US$80 per ha. forfeasibility studies and about US$100 per ha. for detailed engineeringdesign and preparation of bidding doccuments.

60. The surveys and feasibility studies would cover a total area ofabout 500,000 ha. and detailed engineering an area of over 300,000 ha.Land ownership in the total area is preponderantly private, although someland is owned by the States. Much of the land is used for extensivegrazing. Some of the privately owned holdings have been expropriatedalready and all of them will be expropriated before any of the irrigationprojects prepared under the proposed loan are carried out, with 80% of theland being allotted to small farmers and the remainder leased on long-termin medium-sized lots. The distribution of most of the expropriated land inowner-operated family-size units to landless farmers reflects the policyadopted by the Goverrment. Depending on potential market outlets, futureproduction on irrigated farms would consist mainly of such food crops asbeans, maize, rice, grain sorghum and potatoes, and of industrial cropslike cotton, soybeans and groundnuts; and, to a lesser extent, of freshfruit and vegetables, and of milk or meat.

61. The third component of the proposed project would be the finalengineering and construction of pilot schemes to test the potential forirrigated agriculture on the plateaux of Jaguaribe-Apodi and Piranhas-Acu,compare alternative systems of water command and control, and gain theexperience that would affect the redistribution of land on the plateaux.It would also include settlement training and production support for smallfarmers, who will be allotted family plots on the irrigated land.

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Preliminary studies for this component have been completed and consultantsare being retained to proceed with detailed design. The component wouldrequire a four-year period of execution, if useful lessons are to belearned for the carrying out of future irrigation projects. The mainpurpose of the two pilot schemes of about 1,000 ha. each would be tostudy the different approaches to large-scale irrigation development on75,000 ha. in the DNOS area and on 25,000 ha. in the DNOCS area,respectively, using local water resources. Both schemes would providewater for four irrigation blocks of 256 ha. each. The main elements ofirrigation works would be the headworks, a distribution network supplyingwater to the individual blocks, and an irrigation network within eachblock. One of the four blocks of each pilot scheme would be reserved foragricultural research, training and extension, and for seed production.Theremaining three would be used to test, respectively, settlement on 4 ha.family plots, leasing medium-size units to small enterprise, and leasingthe entire block to an agro-industrial company. In addition to irrigationworks, the pilot schemes would include surface drainage, land clearing,access roads and some infrastructure.

62. The purpose of the institution building component of the proposedproject would be to strengthen the Government agencies and departments incharge of irrigation,and develop a permanent mechanism for sector planningand for identification and preparation of specific projects. The componentwould include technical assistance to the Executive Secretariat, CODEVASF,DNOCS and DNOS, training for their respective staffs, ci'7il works andequipment for SUDENE's training center (CETREN), a microcomputer tomodernize CODEVASF's accounting systems and project supervision, andterminals to improve data processing in DNOCS Hydrology Division. In thecase of CODEVASF, these activities would supplement the institutionbuilding measures to be financed under the proposed loan for the Upper andMiddle Sao Francisco Irrigation Project.

63. There is evidence that professional, technical and administrativeshortcomings would hamper CODEVASF, DNOCS and DNOS in carrying out theproposed project. To help remedy this situation, 24 man/months oftechnical assistance would be provided under the proposed project toupgrade management skills and arrive at a smooth and efficientdecision-making process. In addition, 240 man/months of resident expertisewould be supplied to the Executive Secretariat, CODEVASF, DNOCS and DNOS asand when required. The retained experts would be specialized, inter-alia,in planning, design, agricultural economics, hydrology and geology.

64. Missing or inadequate skills in numerous disciplines, includingsector planning, and identification and preparation of projects, would beaddressed by way of in-service training and more formal training courses ofa duration of 1 to 12 weeks for 250 professionals at headquarters and inthe field, and for all clerical staff. A staff training program would beprepared and furnished to the Bank by the Executive Secretariat not laterthan September 30, 1986 and annually thereafter. Building repairs andexpansion, and the re-equipment of CETREN to raise its capacity to about100 trainees at any one time, appears to be the most cost-effectivesolution for accommodating the multiple training activities for the staffof the agencies and departments involved in the implementation of theproposed project.

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65. The last component of the proposed project would involve thepreparation of guidelines, which would enable the Federal Government andseveral State agencies to ensure the safety of small dams (i.e. dams nothigher than 10 meters above the stream bed) throughout the Northeast, thuspreventing their washing out during heavy rains. These guidelines would bepresented to the Bank for review before being put into effect and not laterthan December 31, 1987.

66. The proposed project, as described above, would call for anestimated 800 man/months of foreign consulting services and 6,000man/months of services of local consultants. Foreign consultants, whowould be mostly of a senior level, would work primarily on feasibilitystudies and on sector studies. Their employment in detailed engineeringdesign would be limited.

Environmental Impact

67. The stud,.s dealing with the improvement and expansion of privateirrigation schemes (para. 57 above) and the feasibility studies for publicirrigation projects (para. 58 above) would assess the environmental effectsof their future construction and operation. In that assessment, specialattention would be given to the pollution of water with agro-chemic.als,channel erosion and siltation, the risk of water logging, poor drainage andsalinization, and the control of waterborne diseases. Conservation ofwatersheds through reforestation, and the possible use of water facilitiesfor fishing and for recreation, would also be taken into account.

Cost and Financing

68. The cost of the proposed project has been estimated at US$107.7million, including local taxes equivalent to about US$11.7 million. Thedirect and indirect foreign exchange component of the total cost amounts toUS$36.1 million, or about 34 percent; the local cost component isequivalent to US$71.6 million, or about 66 percent. A breakdown of theestimated cost is shown in the Loan and Project Summary. Baseline costsreflect prices in October, 1985. Physical contingencies were calculated at15 percent. Price contingencies were calculated in terms of US dollarsbased on international inflation rates estimated at 7 percent for 1986 and1987, and at 7.5 percent for 1988. It was assumed that periodic localcurrency devaluations, estimated on a purchasing power parity basis, wouldcompensate for the difference between projected US dollar inflation andlocal inflation rates.

69. The proposed loan of US$48 million equivalent would meet 50percent of the estimated project cost, excluding taxes. The Bank wouldfinance the entire direct and indirect foreign exchange cost andapproximately 17 percent of the local cost. The remainder of the localcost would be provided by the Federal Government. The proposed Bank shareis in line with the policy concerning socially-oriented projec1s in thenortheast region. The proposed loan would have a life of 15 yee:rs,including a three-year grace period. It would be made to the FederativeRepublic of Brazil, which would assume the foreign exchange risk. As acondition for making the proposed loan effective, the Government wouldfurnish to the Bank evidence that its contribution to expenditures on theproject in the first year of execution has been included in the Federal

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budget being revised at present in the context of the Government'sstabilization program and currency reform (para. 14 above). Part of theproceeds of the proposed loan would be made available to CODEVASF, DNOCS,DNOS and SUDENE in accordance with the agreements referred to in paras. 71and 75 below.

The Agencies in Charge

70. On behalf of the Federal Government, the Executive Secretariatassisting and advising the new Minister for Irrigation Affairs (para. 48above) would coordinate and supervise the work of the other executingagencies. Several ranking members of the Secretariat are experienced andcompetent officials well known to the Bank. Moreover, the Bank has beenassociated for well over a decade with some of the other executingagencies. Institution building measures have been a feature of severalBank loans for irrigation, rural development and other agriculturalprojects. Nevertheless, CODEVASF, DNOCS and DNOS are still in need ofspecialized assistance in the managerial, technical and administrativespheres, in order to carry out a complex program of studies and engineeringdiligently and efficiently, and to develop the capacity for independentsector planning and project preparation.

Project Execution

71. The proposed project would be carried out in four years andshould be completed by December 31, 1989. The preparation of the specificirrigation projects would be done by private consulting firms retained byCODEVASF, DNOCS and DNOS. In addition to coordinating and supervising theexecution of the proposed project through the Executive Secretariat forthe National Irrigation Program, the Federal Government would beresponsible for the sector studies conducted by private consultants, forthe preparation of safety guidelines for small dams, and - with someassistance by SUDENE - for the institution building component. It hasagreed to introduce procedures for the use of consultants which areconsistent with the Bank's guidelines, and to establish, and apply,technical standards for the different levels of surveys and studies.CODEVASF, DNOCS and DNOS had prepared terms of reference and invitations toconsultants to submit proposals for each study, which have been presentedto the Bank for approval. Signature of an -Implementation Agreement",satisfactory to the Bank, between the Federal Goverument on one part, andCODEVASF, DNOCS and DNOS on the other, setting forth their respectiveresponsibilities, would be an additional condition for making the proposedloan effective.

72. To avoid delays, some sector studies, aerial mapping, soilsurveys and technical assistance activities were started after theappraisal of the proposed project and in the susbequent months.Consequently, retroactive financing not exceeding US$2.4 million equivalentwould be allowed for this purpose; expenditures incurred prior toOctober 1, 1985 would not be eligible.

73. During negotiations, the Government provided assurances that it,and the executing agencies, would keep separate accounts for the proposedproject and that these accounts would be audited in accordance with soundauditing principles by independent auditors acceptable to the Bank. The

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audit would cover all statements of expenditure, including those presentedto the Central Bank with applications for withdrawal from the SpecialAccount (para. 76 below). Audit reports would be furnished to the Banknot later than six months after the end of each fiscal year.

Procurement and Disbursement

74. Sector studies, and feasibility studies and detailed engineeringfor specific irrigation projects, estimated to cost US$4.8 million andUS$52.6 million, respectively, would be carried out by consulting firmsselected according to Bank guidelines. Civil works and equipment for pilotschemes would be procured through international competitive bidding (ICB)following Bank guidelines. Technical assistance and training, estimated tocost US$5.9 million, would be provided under agreements with specializedorganizations or experts acceptable to the Bank. All civil works contractsover US$1.0 million, and contracts for equipment over US$200,000 would besubject to prior review by the Bank of bidding documents, tender evaluationand award proposals. Other contracts would be subject to selectivepost-award review.

75. The proceeds of the proposed loan would be disbursed at the rateof 100 percent of foreign expenditures and 30 percent of local expendituresfor consultants' services and for goods; and at the rate of 50 percent and30 percent of total expenditures, respectively, for training and civilworks. Disbursement of loan proceeds for the rehabilitation of CETRENwould hinge on the signing of an agreement, satisfactory to the Bank,between the Federal Government and SUDENE. The Closing Date would be June30, 1990. The projected disbursement period of four years, is commensuratewith the nature of the irrigation projects to be prepared for appraisal andconstruction, and with the nature of investment in the pilot schemes. Noregional disbursement profile is available for this type of engineeringloan, but the projected disbursement period is consistent with experiencewith engineering loans generally.

76. Disbursement for eligible expenditures under contracts of up toUS$200,000 would be made against statements of expenditure certified by theGovernment. Supporting documents would not be submitted to the Bank butwould be made available during project supervision. Standard documentationfor eligible expenditures over US$200,000 would be submitted to the Bank.In order to reduce the Govexnment's prefinancing requirements, a SpecialAccount would be opened at the Central Bank of Brazil, where the Bank would- at the Government's request - make an initial deposit of up to US$4.0million. Withdrawals in cruzados from the Special Account, supported bystatements of expenditure and other required documentation, would be madeat the exchange rate that prevailed on the date of expenditure. TheCentral Bank would send the corresponding withdrawal applications to theBank, which would then replenish the Special Account.

Benefits and Risks

77. By means of preparing irrigation projects for appraisal andconstruction thoroughly and competently, the proposed project would make itpossible for the Federal Government to put in hand a number ofimportant irrigation works for the Northeast. These works, which wouldprimarily benefit small farmers, should be instrumental in raising rural

- 23 -

incomes and increasing farm output by making the Northeast less vulnerableto periodic drought and erratic rainfall. The proposed project shouldfurther strengthen the management and enhance the professional skills ofthe staff of the Government entities in charge of irrigation.

78. The proposed project does not involve any special risks. Thestrong support lent to irrigation development in the Northeast by theFederal Government at the highest level should ensure the adequate andtimely provision of local funds for project execution. As the term ofoffice of the new Minister for Irrigation Affairs expires in three years(the same being true ef the Executive Secretariat assisting and advisinghim), and the execution of the proposed project is expected to last fouryears, the draft Loan Agreement provides for two additional events ofsuspension, namely, that the Borrower shall have (i) failed to designate asuccessor to the Executive Secretariat satisfactory to the Bank, forpurposes of carrying out the project; and (il) modified the legislationestablishing such successor. Satisfactory quality of consulting servicesappears Lo be assured, owing to selection procedures which follow Bankguidelines. In coordinating and supervising the execution of the project,the Government would be assisted by outside experts and this should warrantsmooth and efficient progress.

PART V - RECOMMENDATION

79. I am satisfied that the proposed loan would comply with theArticles of Agreement of the Bank and I recommend that the ExecutiveDirectors approve the proposed loan.

A. W. ClausenPresident

Attachments

April 1, 1986Washington, D.C.

ANNEX I-24- Page I of 7

BRAZIL - SOCIAL INDICATORS DATA SlEETRRAZIL BcEPRZENLE COrIPs (WEIGHTED AVERAGES) In

HOST ptMDSTIUE ESTUWATET) lbRGNT NICOLE INCOM MIDDLE INCoIS

i96dkb 19701tb ESTINATL/ b LAT. AeRLICA A CAR EUROPE

ARE (TNIIUAND 30. R)ToTAL 8512.0 6512.0 8512.0AICULTURAL 1636.4 1991.2 2352.7

C0 PEE CAPITA 03S$) 330.0 600.0 2240.0 21019.6 2345.3

MERY WCONSMPTIO PEt CAPITA(KILOGRAMS OF OIL EQUIVALENT) 264.0 412.0 740.0 ns.s5 122.6

FrULATIOT AMD VITAL SETISTICSPoPULATLON.MLD-YEAR (THOUSANDS) 72594.0 95647.0 126806.0UREAN POPULATION (Z OF TOTAL) 44.9 55.8 68.3 66.5 66.8

PUPULATION PRECTIONSPOPULATION IN YEAk 2000 (HILL) 131.1STATIONARY POPULATION (MILL) 303.6POPULATION IHENTrLI 1.3

POPULATION DENSITYPER Sq. Km. 8.5 11.3 14.b 35.7 82.9PER SQ. NM. AGRI. LAND 44.4 48.4 52.7 9Z.4 158.9

POPULATION AGE STRUCTURE (Z)0-14 YRS 43.6 42.7 40.9 39.9 31.b

15-64 YRS 53.8 54.3 55.6 56.0 61.165 AND ABOVE 2.6 3.1 3.5 4.3 7.1

POPULATION GkWRT RATE (2)TOTAL 3.1 2.6 2.3 2.4 1.6URAN 5.7 5.0 4.L 3.6 3.7

CKUDE BIRTH RATE (PER THOUS) 42.7 35.0 31.2 31.3 23.4CRUDE DEATH RATE (PER THOUS) 12.9 10.3 8.1 8.1 s.8CROSS REPR;.IUCTlON RATE 3.0 2.4 1.9 2.0 1.6

FANILY PLANNINCACCEPTORS. ANNUAL (TRDUS) .. 111.0 203.6 IcUSERS CZ OF HARRIED WOMEN) .. .. .. 40.3

FOOD AND SIUITIONINDEX OF FOOD FROD. PER CAPITA(1969-71-100) 89.0 102.0 133.0 114.3 114.5

PER CAPITA SUPPLY OFCALORIES (2 OF REQUIREMENTS) 106.0 104.0 107.0 110.6 125.6PROTelIS (GUNS PER DAY) 64.0 62.0 60.0 67.3 89.7

OF WHICH ANIMAL AND PULSE 35.0 34.0 36.0 Id 34.1 34.5

CHILD (ACES 1-4) DEATH RATE 19.4 12.5 8.0 5.7 5.2

REAL71LIFE EXECT. AT 11RrH (YEARS) 54.7 58.9 63.8 647 67.4INFANT KURT. RATE (PER THOUS) 118.2 98.6 73.4 60.6 54.2

ACCESS TO SAFE WATER (IPOP)TOTAL .. 55.0 77.1 le 65.4URa .. 78.0 8.87; 76.1 RURAL .. 28.0 56.8 4. 46.2

ACCESS TO EXCRETA DISPOSAL(x OF POPULATION)

TOTAL .. 58.0 64.8 Ie 52.9URBAN .. 85.0 63.7 7r 67.0RURAL .. 24.0 31.7 7r 24.5 -

POPULATION PEa PHYSICIAN 2210.0 2130.0 .. 1937.7 1065.6POP. PER NURSINc PERSON 2810.0 1120.0 .. 815.6 72.44POP. PER HOSPITAL BEDTOTAL 310.0 270.0 250.0 /e 367.2 326.3URBAN 250.0 320.0 .. 411.5 201.5RURAL .. .. .. 2636.3

ADMtSSIONS PER HOSPITAL RED .. 18.4 .. 27.3 20.0

NOISINCAVERAGE SIZE OF HOUSEHOLD

TOTAL 5.1 4.8 4.9 IeURAN .. 4.6 4.7 7rRUIIAL .. 5.2 5.3 7

AVERAGE NO. OF PERSONSIROOMTOTAL .. 1.1URBAN .. 1.0RURAL -. 1.2

ACCESS TO ELECT. (Z OF WELLINGS)TOTAL 35.7 47.6 67.4UR .. 75.6 69.5RURlz. .. 9.4 20.6

- 25 -

ANNEX IPage 2 of J

-astL otUT mIT

Km (MM SN &STINAT) lb

~~..a ~ ~ CIN KinDDi lEONE KZO0LzTUCONI190A 1970ik U Ti~d LAT. UCI A CAR lftlPE

ADJUStD EIOUMUST RATIOnDEARU TOML 95.0 4.0 93.0 105.4 101.1

PAIZ 97.0 84.: 93.0 L10.3 105.5TAL 93.0 34.0 93.0 104.5 96.7

SIECOIIDAIt TOTAL 11.0 26.6 32.0 a *4.2 59.1MALB 11.0 26.0 29.0 7 42.3 68.9tu"= 10.0 27.0 35.0 4.5 50.6

VOCATIOML (2 01F UEcONMZT) 16. 16.7 59.2 /b 33.6 21.6

PUL-UlACU DATInDan 33.0 20.0 26.0 30.1 23.1UECOUDET 13.0 13.0 14.0 16.5 20.5

ADLT LITOACt I= CX) 61.0 662 76.0 It 79.5 75.6

1AI6EJ CAUSS 0EWMA 11 PP 7.6 16.6 46.9 41.0 54.73*110=9EIVUSJTIOUU Po 65.4 106.4 165.1 225.6 164.9TV 3c a/musuc Par 16.5 44.3 119.7 107.2 123.6NUSPAPU ("DAIU 0UE3SI

INTSUIT') CIxCULAOKP TUOUAD POPULATI 52.9 35.6 44.0 /h 43.5 96.3

I N UAL ATTZ CIMCE/CAPrT 4*1 2.0 1.6 ti 2.6 2.9

TOTAL iAJOR 101OC (tD0) 23326.0 30411.0 40365.0131. C13T) 17.2 20.1 23.2 23.2 34.5AMXCULTU (PERCENT) 51. 9 45.6 29.9 31.5 40.7INDUSZKY (PERCE) 14.6 16.3 24.4 23.9 23.3

PA*XCIPATZOI NM (FIRCENT)TOtAL 32.1 31.7 31.6 32.2 42.9AIZ 52.7 50.3 48.9 49.3 54.7

1Z3ALC 11.2 12. 14.6 15.2 31.0

RCONOIlC _ YUCT RATIO 1.4 1.4 1.4 1.4 0.9

im -Rican S! Or WIDUNBOUDSIClU3T 201 0r IW O 60.0 63.5 62.0 ..10UNOS 200 Or NOUWEWM 3.6 3.2 2.6 ..LOWE" 402 Or 16U01z6 10.6 9.0 9.4 .

020I!E A310L55 POVERTY INCCmLvEL US U CAPITA)

UNDI .. .. .. 2U6.2 .RURAL .. .. 150.0 /d 14.0

ESTDtATE RZATZTE POMRTT IKLEmL (US P CAPITA

Ulm .. .. 465.0 id 522.8RURAL .. .. 332.0 Id 372.4

ZSTD POP. BE0OW AUSOLVSZ DIcONa LEVL (X)

ma ........

RRAL ..

.YO AVAILANENMT APFLXCA=L

NOS CAUZ~~NTE11 O T L S

/ a rup goaverag for each ndicator ane populEnlo-we.htad erithetl_c _se. Coerage of countriea aong thendicators depend. on avalability of dta ands not uform

U UeS atherule noted. netot for 1960" refer to my year between 1959 and 1961; bte faor 1970" betwen 1969 end1971; and data for 'Mbot _rent Istl:mte betwee 196 and 1962.

a L 977; / 1976; I1979; UL enin 1973 primny nd secondary edwation coper *g groups 7-14 and 15-17otef 7-1and 11-1 In arlier years; tberefore. at recet satintee ere not coarable witb earller data;

A 1976.

JUE 1964

-26- ANNEX IPage 3 of 7

DEFINMONS OF SOCIAL INDICATORSNotw: Although thedata aredrawn from sourcs generalyjuded themot tauthoritativeand reliable, it sud alo be noted that they may not be internutionallycomparble because of the lack of sandardized definitions and concpts used by diffreent countrim in colklting the data. The data arc, nonethes umerl todecribe orden of magntude indicate tredKI and chacerize ertain major diffenc between countriesThe rerenmc groups are (I) the Same country group of the aubjet country and (2) . country group with somewhat higher aveage income than the countrygroup of the sublet country (except for -High Income Oil Exporte group whee "Midde Inoxme North Africa and Middle Ear is chosen because of strongersocio-cultural alfinities). In the refeence grup data the avrg amre popuation wveghted arithmetic moans ror each indicator and hown only when majorityafthe countries in a group has data for that indicator Since the coverage ofcountries among the indicators depernd on the avaiabilty ofdata and is not uniform,caution must be exercised in reating averags ofone indicator to another Thee avrage are only useful in compring the value ofone indicator at a tine amongthe country and reference groups.

AREA (thousand sq.kmin) Crud NinA Rite (perthorsand)-Numberoflive births in the year

Feral-Total surface area comprising land area and inland waters; per thousand of nid-year population; 1960. 1970. and 1983 data.1960. 1970 and 1983 data. Crude Deah RAte (per thouawd)-Number of deaths in the year

Agricafrural-Estirnate Of agricultural area used temporarily or per thousand of mnid-year population; 1960. 1970, and 1983 data.permanently for crops. pastures. market and kitchen gardens or to Gross Repredutiea Rate-Average number of daughters a womanlie fallow. 1960. 1970 and 1982 data. will bear in her nornal reproductive period if she experiences

present age-specific fertility rates; usually five-year averages endingGNP PER CAPITA (USS)-GNP per capita estimates at current in 1960,1970, and 1983.market prics, calculated by sa(m conversion method as World Famly PlAnig-Acceptors. Annual (houandrs)-Annual num-Rank Atlas (I1981-83 basis):. 1983 data. ber of acceptors of birth-control devices under auspices of national

ENERGY CONSUMPTION PER CAPITA-Annual apparent family planning program.consumption of commercial primary energy (coal and lignite, Fassly Planning-Vserts (percen of married -Wnen)-The peren-petroleum. natural gas and hydro-. nuclear and geothermal elec- tage of married women of child-bearing age who are practicing ortricity) in kilograms of oil equivalent per capita: 1960. 1970. and whose husbands are practicing any form of contraception. Women1982 data. of child-bearing age are generally women aged 15-49, although for

some countries contraceptive usage is measund for other agePOPULATION AND VITAL STATISTICS groups.

Total Popltiem, Mid-Year (shousant)-As of July 1; 1960. 1970. FOOD AND NUTRMONand 1983 data.Urban Ppuation (percet of totalJ-Ratio of urban to total Index ofaFeed Production Per Capita(1969-71= I -indx xofpcr

Poplaion dffentdefinitions of urban areas may afetcopr capita annual production of all food commodities. Productionpopulation; different countio of 1970n and may ata. excludes animal feed and seed for agriculture. Food commoditiesability of data among countnies. 1960.1970, and 1983 data.inldprmyco oite(egsgaceisedofua)- ' ' m~~~~~~~~~~~~icludc primary commnodities (e.g& sugarcanc instcad Of sugar)Popuatio Rejectio which are edible and contain nutrients (e.g. coffee and tca arePopulation in year 2000-Thc projection or population for 2000. excluded); they comprise cereals. root crops. pulses. oil seeds,made for each economy separately. Starting with information on vegetables, fruits, nuts. sugarcane and sugar beets, livestock. andtotal population by age and sex, fertility rates, mortality rates, and ivestock products. Aggregate production of each country is basedinternational migration in the base year 1980. these parameters on riational average producer price weights; 1961-65, 1970. andwere projected at five-year intervals on the basis or generalized 1982 data.assumptions until the population became stationary. PerCpitaSupplyofCatories(percenofrequire- J-Comput-Stationary populatior-Is one in which age- and sex-specific mor- ed from calorie equivalent of net food supplies a ......-.e in countrytatity rates have not changed over a long period. while age-specific per capita per day. Available supplies comprise domestic produc-fertility rates have simultaneously remained at replacnment level tion. imports less exports. and changes in stock. Net suppies(net reproduction rate = 1). In such a population. the birth rate is exclude animal feed. seeds for use in agriculture. quantities used inconstant and equal to the death rate, the age structure is also food processing, and losses in distribution. Requirements wereconstant. and the growth rate is zero. The stationary population estimated by FAO based on physiological needs for normnal activitysize was estimated on the basis or the projected characteristics of and health considering environmental temperature. body weights.the population in the year 2000. and the rate of decline of fertility age and sex distribution of population. and allowing 10 percent forrate to replacement level waste at household level; 1961, 1970 and 1982 data.Population Momenntu-Is the tendency for population growth to Per Cpta Sppy of Protein (grams per day)-Protein content ofcontinue beyond the time that replacement-level fertility has DoM percapita net supply of food per day. Nct supply of food is definedachieved: that is. even after the net reproduction rate has reached as above. Requirements for all countries established by USDAunity. The momentum of a population in the year t is measured as provide for minimum allowances of 60 grams of total protein pera ratio of the ultinate stationary population to the population in day and 20 grams of animal and pulse protein. of which 10 gramsthe year t. given the assumption that fertility remains at replace- should be animal protein. These standards.are lower than those ofment klvel from year t onward. 1985 data. 75 grams of total protein and 23 grams of animal protein as an

Poptimi Densiy averagc for the world, proposed by FAO in the Third World FoodPer sq.km.-Mid-year population per square kilometer (100 hec- Supply; 1961. 1970 and 1982 data.tares) of total area: 1960. 1970, and 1983 data. Per Capita weein Supply From Anhna and PM-Protein supplyPer sqkm. agricultural land-Computed as above for agricultural of food derived from animals and pules in grams per day; 1961-65.land only. 1960. 1970, and 1982 data. 1970 and 1977 data.

Popuaion Age Struture (percent)l-Children (0-14 years). work- Child (ages 14) Death Rate (per thousand)-N umber of deaths ofingage (15-64years).and rtired(65 years-and over)as percentagc children aged 1-4 years per thousand children in the same ageor mid-year population: 1960, 1970. and 1983 data. group in a givcn year. For most developing countries data derived

Pbpultion Greoth Rate (percentj-sotal-Annual growth rates of from life tables; 1960. 1970 and 1983 data.total mid-year population for 1950-60. 1960-70. and 1970-83. HEALTH

Popuamtion Growth Rate (percent)-whan-Annual growth rates Li Expectray at Birth (yers)-Number of years a newbornof urban population for 1950-60. 1960-70. and 1970-83 data. infant would live if prevailing patterns of mortality for all people

ANNME I-27- Page 4 of 7

at the time of of its birth were to stay the suae throughout its lire. Paplt-eachr Retio - priMary, and secondary-Total students en-1960. 1970 and 1983 data. rolled in primary and secondary levels divided by numbers oflnfant Mnetiay Rate (per shnsand)-Number of infants who die teachers in the corresponding levels.before reaching one year of age per thousand live births in a givenyear, 1960, 1970 and 1983 data. CONSUMPIIONAccess to Sife Water (pecmt ef popadtion)-4t, _ rba, ad Pasqer Caus (per thoad pepidshd)-Passenger cars com-r=Wa-Number of people (total, urban, and rural) with reasonable prise motor cars seating less than eight persons; excludes ambul-access to safe water supply (includes treated surface waters or ancets hearses and military vehicles.untreated but uncontaiinated water such as that from protected Raio Recivers (pr * ndpq pa on)-All types of receiversborholes, springs and sanitary wells) as percentages of their espec- for radio broadcasts to general public per thousand of population:tive populations. In an urban area a public fountain or standpost excudes un-licensed receivers in countries and in years whenloated not more than 200 meters from a house may be considered rcgistmtionofradio waw in effct; dtrecent years mayas beng within reasonable access of that house. In rural araei not br comp radb since most countries abolished licensing.reasonable access wouJ imnply that the housewife or members of thehousedhold do not have to spend a disproportionate part of the day TVRecelers (per thosusnd popsltatk-TV reervers for broadcastin fetching the famifils water needs. to generl public per thousand population; excludes unlicensed TVAccess to Excreta Disposal (percent of populatonl-toral, mbx, receivers in countries and in years when registration of TV sets was

in effect.ad rural-Number of people (total, urban. and rural) served by mWcxcreta disposal as percentages of their respective populations. wspaper CGadon (per tsad sSpopulan bhows the aver-Excreta disposal muy include the collection and disposal. with or age circulation of 'daily general interest newspaper. defined as awithout treatment. af human excreta and waste-water by water- periodical publication devoted primarily to recording general newstborne systems or the use of pit privies and similar installations. It is considered to be -daily' if it appears at least four times a week.Populeatioper Physias-opulation divided by number of pinc- Cinem Auna Andance per Capita per Year-Based on thetising physicians qualified from a medical school at university level. number of tickets sold during the year. including admissions toPtp.lian per Nursing Pesn-Pbpulation divided by number of drive-n cinemas and mobile units.practicing male and female graduate nurses,' assistant nurses,practical nurses and nursing auxiliaries. LABOR FORCEPwt'11 per Hospital rd-toa4 urban, and woL-Population Total Labor Force f(rhusnss--Economically active persons, in-(total. urban, and rural) divided by their respective number of dluding armed forces and unemployed but excluding housewives.hospital beds available in public and private, genawl and speciaEled s tudents, etc.. covering population of all ages. Definitions inhospitals and rehabilitation centers. Hospitals are establishments vanous countries are not comparable: 1960. 1970 and 1983 data.peanentdy staffed by at least one physician. Establishments prov- Femak (perentl-Female labor force as percentage of total laboriding principally custodial care are not included. Rural hospitals, force.however, include health and medical centers not permanently staffed Agricakwe (percentl-Labor force in rarming. forestry. huntingby a physician (but by a medical assistant, nurse, mnidwife. etc.) and fishing as percentage of total labor force, 1960. 1970 and 1980which offer in-patient accommodation and provide a limited range data.of medical facilities. Industy (perceart)-Labor force in mining, construction. manu-Adnixsiou per Hospietl Bed-Total number of admnissions to or facturingand electricity. waterand gas as percentageof total labordischarges from hospitals divided by the number of beds. force, 1960. 1970 and 1980 data.

Pawiciparo Rate (percxtr)-rt, malk, andfemaL-ParticipationHOUSING or activity rates are computed as total. male. and female labor forceAvera g we of Househld (pers per ho.ehhW)-tol, -bmn as percentages of total, male and female population of all agesaurarafl-A household consists ofagroup of individuals who share respectively, 1960. 1970. and 1983 data. These are based on ILO'sliving quarters and their main meals. A boarder or lodger may or participation rates reflecting age-sex structure of the population. andmnay not be included in the household for statistical purposes. long time trend. A few estimates are from national sources.Aveae Number of Persons per Roomn-total auban, ad rural- Economc Dependency Rato-Ratio of population under 15. andAverage number of persons per room in all urban. and rural 65 and over. to the working age population (those aged 15-64).occupied conventional dwellinEs. respectively. Dwellings excludenon-permanent structures and unoccupied parts. INCOME DISTRIBUTIONPecetage of DueNags with Eectricity-rtral urba, ad rural- Percentage of Total Disposable me (both in cash ad kind)-Conventional dwellings with electricity in living quarters as percen- Accruing to prcentile groups of households ranked by total house-tage of total, urban. and rural dwellings respectively. hold income.

EDUCATION POVERTY TARGET GROUPSA4usted Enroment Ratios The following estimates are very approximate measures of povertyPrinary school - total. male and ferale-Gross total. male and levels. and should be interpreted with considerable caution.female enrollment of aDl ages at the primary level as percentages of Estimted Ahbsote Poverty Incoe Levd (USS per capita fr-urbanrespective primary school-age populations. While many countries ad rua--Absolute poverty incomc level is that income lcvelconsider prinary school age to be 6-11 years. others do not. The below which a minimal nutritionally adequate diet plus essentialdifferences in country practices in the ages and duration of school non-food requirements is not affordable.are reflected in the ratios given. For sorme countries with universal Esimated Relative Pvety oni Levwe (USS per capita)--urbaneducation, gross enrollment may exceed 100 percent since some ad rua-Rural relative poverty income level is one-third ofpupils are below or above the country's standard primary-chool average per capita personal income of the country. Urban level isage- derived from the rural level with adjustment for higher cost ofSecondy school - roal. male andfemal-Computed as abovc; living in urban areas.secondary education requires at least four years of approved pr- Esimated Popuaio Below Absoblte Poverry Income Level (per-mary instruction; provides geneaL vocationaL or teacher training cse)-urban md rur- Percent of population (urban and ruralinstructions for pupils usuaDly of 12 to 17 years of agc correspond- who are -absolute poor.-ence courses are generaly exduded.Vocational Enrollmeni (percent of secondery)-Vocational institu- Comparative Analysis and Data Divisiontions include technical. industriaL or other programns which operate Econonic Analysis and Projections Departmentindependently or as departments of secondary institutions. June 1985

mIrIs S f 7

L - 8: -S

PqmaIaLm t129.7 dI1li (ald-1983)GN Far uptt: 1UI M30 (1953)

assj~f t hrn ~I lati 0wct Prim

Indicator (1984) Actual Projected

1975 1980 1961 1962 1983 19tLf 1911 E 19U6 3 1966 1989 1990

latiurl cmt

_a mticP W-il3

212,300 5.6 7.2 -1.6 0.9 -3.2 4.5 8.3 6.2 7.0 7.0 7.0 7.0Ip1azlotu~ 24.2S L7 6.2 6.4 -2.5 2.2 4.3 8. 2.0 4.5 6.5 4.5 4.5liutry 2,7M2 5.3 7.9 -L2 0.8 -6.8 5.9 9.0 8.0 8.5 8.5 8.5 8.5S Ai 103.825 10.3 7.3 *4.1 1.7 -1.5 3.0 7.8 6.0 6.5 6.5 6.5 6.5

amu-dm 165.571 L4 3.5 0.2 3.3 -2L0 0.6 8.3 4.7 52 6.5 6.3 6.1Cz, __b 34,817 -7.0 1L2 -15.9 -4.2 -37.5 1.0 I.2 2A.9 IL3 32.0 11.8 11.6bzqio of OWS D.399 12.4 22.7 20.9 -8.4 13.6 21.9 -3.2 -1.0 5.. 3.4 2.3 5.3

I ta of OIFS 1,7865 -9.6 1.8 -334 -5.2 -17.2 4.5 -3.2 2L0 1.5 10.7 8.1 9.7

Ccm ti1 sa1mS 23.818 4.4 11.6 -16.6 -10.6 -34 Z.6 11.7 25L3 15.0 11.3 11.1 32.6

MP rt w (1910.100) 35 2,955 5.66 11.4B0 M2U1 90.561ZEh Rate C-01M.crS) 8.1 5L7 93.1 179.5 577.0 I.*,.9

IuaoE OP at I -ram _ 1) CQ I Amalooma CZ)(At Ozw&t Picm) (At Qwit 1984 krim)

1915 1986 195S/d 1990/C 1975480 l96D045 19859

GruDa estic Frahct L0O 1O.0 O 100.0 100.0 6.5 0.8 6.8Agrdttg 9.2 11.0 11.S 10.1 9.5 2.2 4.1Izu&trY 31.1 3.8 29J 3Z.1 4.6 .0.3 8.4swim 43.6 4.8 68. 47.8 7.8 1.3 8 A

Qtbm 76.6 81.3 78.0 74.3 7.7 -1.8 5a0 Ijnlbmb 27.3 21.1 17.0 2L.0 2.8 -4.2 13.7

19orrs 05 7.5 8A ILS 10.4 6.4 14.5 3.24qota 055 3L4 11.2 7.4 8.7 -1.3 -1A. 9.3

C-am Nariml Savq 22.1 16.1 1.1 Zl . -1.6 -4.5 13

Anf Z of CP(At 0mwt C PriB)

P,g i. F72mm (Gml e ) 1910 1975 1979 1980/x 19811 1987/'

o lamm 16.6 19.8 20.8 20.1 18.9 21.2Ornut lte 14.4 15.8 17.6 19.8 20.2 2S5S=plA (+) or tc(-) 2.2 4.0 3.2 0.3 -LI -4.2Cttal E itM 2.6 3.8 3.7 4.1 3.5 3.4PFiz_ Cl t) 0.4 -0.2 0.5 3.9 4.9 7.6

Oder 1nmtm 197540 19B6D.5 198540

OM Qidh Rate (Z) 7.0 0.5 7.3ON Par Grdta (kith Rate CZ) 3.0 -1.9 5.0& WutmGrwdr Rare (2) 6.5 - -

mI 3.3 20.7 3.0tlSqiz SwiA 0.0 0.5 0.4Iot E1sLdZy -02 -2.4 1.4

/ At Raa pri m d at fawl =t alsto fne t d to arCusura Mt Iu"-%=ctwas r'diss.7 197580 itimm ame for g itm for s*ns_ct -a fo, flmd k . ad. din tI stnf incirnin <AqucmTc P dmjet. yam at t-t-t m.i iitn uy.

F tiwe.7Tf 1e960-2 t _inc_ . uqitzm cted dma the azy bA*m ad at.mr 8w*. o lUn o r te the federal ttheEpm.

Ihrd 21.1916

wI

*UZIL-N. it.

Amt

MSe ulni at _m 1t RM ) - (at tw 197 )Ld-t Prim

Indiestor (1966) Actual Projectod

1975 1960 1981 1982 1963 18 my85! 19%6 1967 19U 1969 1960

1brdudi. tma 27D,OM 23.9 21.2 9.9 -3.0 2.5 21.1 2.6 -1.0 5.4 3.4 L3 5.3kl 10.357 30J 2.4 46.8 -0.1 14.3 3.8 24.5 -3.4 8.2 3.6 3.6 3.6

I Funt.cta~./b 16.648 0.0 2L5 40.6 7.4 43.5 21.3 15.5 0.7 3.6 3.2 1.5 6.6

jbrdiujm m prtu 13.916 -15.0 1.6 -9.4 -20.3 -15.9 -22 4.8 22.0 1.5 10.7 6.1 9.7F acd 9 r asr 1.53B 62 13.2 -548 -1.2 4.1 -L0 3.0 109.0 -43.6 2 7.7 6.7

1 _ttal 6.866 -3.8 -9.8 -5.0 -2.6 -10.6 -13.7 -18.7 -2.3 11.3 6.6 2.8 9.9Ihddn.y ad e*ipt 2.151 9. 6.4 -6.9 -32.2 -13.0 84 18.5 37.3 16.4 15.6 14.2 11.6Oth 3.361 -30.6 -2.2 3.8 -ZL3 -20.3 20.9 -9.0 3.0 10.9 10.1 9.4 8.6

Prim

alt Pfr1 Iid 89 147 124 114 97 I1 97 105 108 116 127 139lpwot Prilmld 71 125 136 152 143 I1O 99 96 98 1OS 112 120

a of tT e 125 118 93 75 68 I0 96 112 110 111 113 116

~aiwtim at )brudwim. Timb CZ) Aven Alml 1nameme CZ)

(at azrt PMM) (at amtat 1970 pdr)/d

1975 1960 1985 1990 1975480 196045 179659

E--O 10.0 1D.0 10D.0 100.0 5.8 11.0 3.2ft"Exxt 62.7 4.8 41.2 61.2 1.1 6 3.6

N.ufactumu/b 37.3 55.2 Z S.8 98.8 14.2 / 23.2 3.0

Imqorts M100 10D.0 10o.O 1o -1.4 -2.7 1L0Fod and tmr Com 9.8 11.1 12.0 1O.8 17.5 - 45 7.9

-'.m 25.4 64.4 62.1 3165 4.3 -7.3 6.4; ddzy ud Epm= 26.5 15.4 19.2 2L3 -7.5 -3.4 18.2Othr 3B.3 29.1 26.7 21.4 -1.9 -3.1 9.9

SINCE of a wth Q m oF t e idth 9 af trmh ith m11UdAcu)1 Cctmrm CZ) Ihwift cr_ (Z) acdrg CCmtdin ()

Tueailm aE Tzmde 1975 mUu 1963 1975 1960 1983 1975 1960 1983

70.2 57.3 S.7 23.5 2.5 23.9 2.8 10.1 8.8Imct 67.3 41.8 37.1 8.7 15.8 17.7 21.1 41.1 41.6

/a Fot tie ss 18-1960, Prlmny Pructs. Sirlul.1 om.gd tn ois oce

lb PFr tic IW5-19-960. mftm -tlu oclw RDh./l- PZElJmiuw7Td Pojected Is d m * t 1966 .

Srh21. 19a6

- 0-

ALANCE OP MYSUrrO. EIENAL CAPt " AN1 NW

Uh6 Milltosm at CeBrrut Prig,.)

gUl8emitons 82N.7 million (sId-19i1)ClIP Fur CopItet UNI3*60 (199)

-lstwd- r 1 s -1s9s 1mo0 3963 1962 392 1964 36s L 366 967 196 3s96 1990

Net mpart. of oeds end *ervice -0,702 -12.5k -33.292 -14.747 -6.250 345 -I99 -1.1,1 -170 8,038 -3,461 -671

Exprts Ot Omeda D,670 20,122 21,293 20,175 23,69 27,001 21.639 27,242 29,292 31,046 36,917 62.432Isprtsm of eds 12.210 21,955 22,091 19,295 35,429 13,914 11,36 15,15 36,84U 19,014 22,06l 21,799

Met Factor Inca_ -1,731 4621 -9,5112 -11,926 -10,111 -30,99 -113,40 -118II3 -11.265 -11,461 -12,003 -111311(of which tnLtrTnt pas.L. (2,.0) (6.338) (7.96) (v. 326 (11.472) (9".142 (9.2315 (5,14') (9,032) (9,279) (, 599) (9,156)

not 6m-FecLor SuTvIcaa -1,429 -1,320 -2,663 -3,5*9 .247 -1.875 -1.319 -,729 -2.,17 -1,579 -. ,296 -,3177

tL Tr fers 11 126 too -10 306 172 I50 0 0 0 0 0

Currnt Aecaunt BlnCe -6u9 -32,416 -31,D0I -13,757 -6,862 11 -349 -3,161 -706 -8,0 -3,443 -675

irect, Private eIusetmsL 692 1,121 13,51 998 64 8,076 196 19l 679 1,063 3,247 1,429

HLLT Leans (no) 4,630 4,.493 8,650 7.49 7,121 ,262 694 2,681 2.924 1,669 4.066 3,639Cre DtsburmeesuLs (6.962) (11.333) 116.0653 (14,993) (10,902) 36,096 30.651 36.358 16,226 17,121 86.26 17.660Anerltsation (2.1521 (6.,203 (13953 (7,4627. ) (157)f 7.686 9.151 12.70 183102 11.452 84.06O 34.021

ruIlo Abrad (N -190 -27 -921 -594 8Z2 634 D00 -8.400 -I8.61 -2,071 -2,30D -2,670

OLWm CaPItL1 (t4 1I.1mg rr reand _I-lo_n) -71 3.462 2.59 2.706 -1,993 -3.U62 -3.DI 539 -b96 666 -566 -410

Chunp In Eaer_a t- ladleclesIneroew) 1.226 2,389 -61 4,.151 24 -7.027 -437 -. 74 -246 959 -"9 -1.246

I-srttenotea Immerses 1. 5.719 6,912 7.505 1.250 3.757 131.39 12.42 11.201 13,554 14.534 81.t1 136,155(ol whIch meld) 36 1.143 903 65 207 n.e. n.e. -... n.e. n... n... n.e.

asrvwem, as elsl.. of tperta (GrS) 3.3 3.0 3.3 13. 2.3 6.2 6.9 7.6 7.4 6.9 6.4 1.9

EutOrl CeIttal mad Dbt

Crosm Disbmrnsmts 6.912 88,333 16.065 36.,03 10.902 16.096 30.653 16,352 86,226 17,122 16.26 17.660of 1fId10 Grants . - - - - - - - - -Cenceanlanal Lom 102 19 19 I3O - - - - - - - -

360 67AC* 317 360 - - - _ _ _ - _OGEc - - - - - - - - - - - -

IA - - - _ _ _ _ _ _ _

Other LS 3 2 - - - - - - - - -

Now-Caaceaetamal la1es 6.610 13.294 16.026 36.603 30,696 36,096 10.653 16.152 16,226 17,122 1.63 17.660OtfICIsl Zaport CruditA 311 3 12 uS 042 1.099 3.107 1,250 3,200 3.880 1.296 1.290 1.663

[NW 250 163 289 b23 1.204 1.294 790 8.409 1.720 1.819 3.650 3,611OtLhr lIultilteral 339 3g 39D 33 217 2U 15 232 256 101 371 421PrIwato 4.130 10,151 14,342 1.007 6.376 11.226 6.132 135311 13.050 13.167 14.627 12.721

ternal DObt

Debt DOtstnlqg ed Dibh-u d 23,441 56.499 64.625 73.036 79,160 3.613 66.017 98.,9 94.621 91.291 102.159 105,996ubtcisPuhtucry Curetd 33 1,649 ,6964 44,633 69.911 34,065 19.27 U.017 9,n69 94.623 90,291 102, 39 805.99

Priets _me-Cearntamd 9.,92 £.6601 19.792 23.123 21.512 19.226 n* -. c . n.m n.e _-

Ondlabersed Debt 2.763 11.026 12.,66 13.322 13.917 13.727 l3.304 14,931 15.432 I3.36 13.550 15.136

1I6 5D63M (23

11 dtebhresmctotl groemdlhrsts 1U. 3.2 2.4 4.2. 11.1 4.9 7.6 4.6 10.7 10.1 10.2 30.1

2311 DIOltotel 4M *.7 3.7 3.6 3.7 4.6 6.5 4.6 3.7 6.7 7.6 8.2 6.7IBM Oebt ertcs/toeel debt Zranes 2.5 2.1 2.1 2.5 4.2 1D. 4.1 4.0 4.7 1.7 1.6 7.5

Toitl Servic Paye /b 3,670 13,363 13,331 16.825 82,206 20.976 19.071 21.416 22.335 22.732 22.659 23.571ltrmrtfu 1.436 6.221 7.,92 9,.31 7.672 9.,56 9.315 6.746 9.033 9.279 9,s5 9.516

TsYomt.nc- Z tePortm (Cr) 20.6 3S.3 60.6 71.7 46.0/f 72.2 69.2 73.1 70.0 61J. 59.1 51.7

Aw r_ Interoet oate - 11CsertAed Let Wa (2) /c 8.7 12.? 15.3 12.7 11.4 11.9 9.8 9.6 9.2 9.2 9.2 9.0Of fICdl 6.0 9.1 10.6 10.9 30.5 n.e. .-. .-. n.e. n.e. n.e. n.e.PriveAte SOre 6.9 IL* 14.3 13.1 11.0 _. . .-. r. n.. n.. .-.

Avrag Maturity ef Ibuearesteed Lease (tarm) ic 9.0 9.7 9.7 £0.9 9.3 9.6 10.1 11.6 33.6 33.5 11.1 13.1

Oftfidel 16.4 112. 32.6 13.1 12.9 n.m. _*. _*. _*. _*. *.e. *.-.Privta Sttee 6.9 6.9 9.0 10.2 6.4 n. n.e. n. n. n.-. *.-. n.e.

A. *2f DebtOtstndies

Nbttrity ltrutre oat PUbei Debt 0ttetAdtiNeturitlee dee within 3 years 64.Fatritles _e dthin 10 jers 95.

Sner_c Struct at Debt awitae osttedIsnarest me withln te f*Irt eer -*-

fme uc 7 o i meld _n dellar sal_tim sdjmet_nte.IsTm t ad *nrtietlan Mas edmm, - leftI trer debt.

7-C 1tuc Dbt ely tsr 3975.fi t lliu,,

Intcernet mes, erdlsmeAiem ecesLaz pe1te.e.cumdew only larLftmlm sct-U7 Pddmbrch 21, 1966

- 31 -

ANNEX IIPage 1 of 3

THE STATUS OF BANK GROUP OPERATIONS IN BRAZIL

A. aSUMMARY STATEMENT OF LOANS(As of September 30, 1985)

Amotmt less Undis-Loan # Year Borrower Purpose Cancellations bursed

(US$ Millions)

Seventy eight loans fully disbursed 3,598.4

1317 1976 Brazil Agro-Industry 83.0 25.31452 1977 Brazil Education 32.0 1.91488 1977 Brazil Rural Development 11.0 1.51537 1978 Brazil Rural Development 24.0 12.31538 1978 ELETROBRAS Power 130.0 11.91557 1978 Brazil Roads 114.0 12.61568 1978 Brazil Agric. Extension 100.0 0.51589 1978 Brazil Rural Development 37.0 13.01656 1979 Banco Nacional da Habitacao Water and Sewerage 100.0 2.71714 1979 Brazil Rural Development 26.0 15.51720 1979 Brazil Urban Development 70.0 23.41721 1979 CDPEL Power 109.0 23.01728 1979 Brazil Rural Development 40.0 20.71729 1979 Brazil Irrigation 28.0 3.71730-5 1979 Brazil Roads 110.0 10.71822-5 1980 Brazil/BNDE Pollution Control 34.0 29.01823 1980 Banco Nacional da Habitacao Water Supply 130.0 2.91839 1980 Brazil Urban Transport 159.0 32.11850 1980 Banco Nacional da Habitacao Water Supply 139.0 30.61867 1980 Brazil Education 32.0 15.71877 1980 State of Minas Gerais Rural Development 63.0 48.51895 1980 ELEIROSUL Power 125.0 86.11924 1981 Brazil Rural Development 56.0 18.21939 1981 ELETRDBRAS Power 54.0 42.21965 1981 EBTU Urban Transport 90.0 52.61970 1981 Banco Nacional da Habitacao Water Supply 180.0 94.81989 1981 Brazil Alcohol Development 250.0 45.32015 1981 Brazil Agri-culture 29.0 15.02016 1981 Brazil Agriculture 60.0 9.72060 1982 Brazil Agriculture 67.0 28.72061 1982 Brazil Health 13.0 6.02062 1982 Brazil Highways 240.0 63.22116 1982 Brazil Agriculture 26.4 12.72138 1982 ELETROBRAS Power 182.7 144.12163 1982 Brazil Agriculture 26.4 17.02170 1982 Brazil Urban Development 123.9 103.52177 1982 Brazil Rural Development 42.7 29.72193 1982 Brazil Urban Development 8.9 3.32196 1982 CVRD Iron Ore 304.5 83.3

- 32 -

ANNEX IIPage 2 of 3

A. SUMMARY STATEMENT OF LOANS (Continued)(As of September 30, 1985)

Amount less Undis-Loan # Year Borrower Purpose Cancellations bursed

(US$ Millions)

2224 1982 Brazil Feeder Roads 154.0 119.12249 1983 Banco Nacional da Habitacao Water Supply 302.3 189.12268 1983 Brazil Agro-Industries 400.0 372.42269 1983 Brazil Rural Development 67.8 59.12343 1983 Brazil Urban Development 52.7 45.42347 1983 Brazil Export Development 352.0 0.82348 1983 Brazil Agriculture 303.0 2.02353 1983 Brazil Agriculture 65.2 60.51729-1 1983 Brazil Agriculture 7.7 7.62060-1 1983 Brazil Agriculture 22.8 22.72364 1983 Eletrobras Power 250.6 226.62365 1983 Eletrobras Power 222.8 155.72366 1983 Brazil Education 20.0 15.52412 1984 Brazil Education 40.0 33.72446 1984 Brazil Federal Highways 210.0 177.42447 1984 State of Sao Paulo Health 55.5 50.42448/1 1984 State of Sao Paulo Health Studies 2.0 2.02488/T 1985 Brazil Development Barnking 300.0 300.02489 1985 Brazil Education 72.0 70.32523/1 1985 Brazil Rural Development 61.3 61.325247f 1985 Brazil Rural Development 61.4 61.425 32 /T 1985 Brazil Rural WS&S Pilot 16.3 16.325637T 1985 Brazil Railways 200.0 200.02564/7 1985 Eletrobras Power Transmission 400.0 400.02565/T 1985 Eletrobras Power Distribution 312.0 312.02593/T/3 1985 Brazil Land Tenure 100.0 100.02623/3 1985 State of Santa Catarina Urban Development 24.5 24.5

Total 11,124.8 /2Of which has been repaid to the Bank 1,942.1Total now outstanding 9,182.7

Amount sold 45.8Of which has been repaid 45.8 0.0

Total now held by Rank 9,182.7

Total undisbursed 4,278.9

/1 Not yet effective./2 No IDA credits have been made to Brazil.7T Not yet signed. (This Loan was signed on October 15, 1985)

Note: The status of the projects listed in Part A is described in a separate reporton all Bank/IDA financed projects in execution, which is updated twice yearlyand circulated to the Executive Directors on April 30 and October 31.

ANNC It

Pqlp 3 of 3

11 SUUmW I1C 7Jltl5 C t_ Sd tma ou 30. 19B5)

FISCal Amua in U59 aIfl

Yea i b I I g a r ri1 fbtz lam. 1ut ty ToUl

1957 Simm dD lraU Cla. de Clectrldda Sletrical qipot 2.00 - LW

I955 OldLrft. S. A. Calulam * aPpl Ibdp ad Paer 1.20 - 1.20

195S D. L. L. PL _tia do rail. S. A. Atadti Parts 0.45 - 0.45

195 IIlyrOc rld do rail. S A. - Itmifla a O_rxo Xbor ladem 2.CS - L45

1959 Omdda H1LmIra de Clmto 3bLlmd. S. A. 1.20 - 1.20

1959 Oaupim Calulom_. S. A. pap 4.0 - 4.00

196/1968/1972 Aa. VIlIlzcg. S. A. teu1 8.00 1.93 9.93

1966/1969 Papl e Gaulfl O .tint. S. A. Iubp d Paper 3.71 5.71 9.49

1967/1972 Ultrafertll. S. A. - Ilduarri a C. vo do FeUrtilaa FartilgzAr 8.22 3.03 11.25

1969 FteLIqdm Thino, S. A. Fetrmduda1 5.50 2.8S 5.39

1970 PolIa1fi., S. JL Inditrla ae Co,wei Petrodudcaim 5.50 2e88 .35

1971 Osiw. S. A. blihtrin a rwdo FeLrodicls 4.60 1.64 6h.

1971 Rlo Crmde - 0,a d de Calalom. do Sul Mul 4.90 - 4.90

i172/1975/1951 l ida de Cito NacIrn de Mn m 169.14 6.70 175.58

19734/74M/815/83/8J Ciuia sdou do G,ubm - OEIO sti 76.97 15.27 92.24

1973 Capital MWkgtL Mv1qMU Rid - RFWP apu t M7kt D)ervdqt 5.00 - 5.00

39T/1970/19M3 e a-sa de Denolvinto do Pawmm Nlwra - aMaN. S. A. tfdml Tifd ad ssbg m 55 8.74 93.74

1974 _hxtrim VilMM. S. A. CEamL ad rLuirial Eqdpnt 6.00 - 6.m

3974 Fabric de Trado Tati pa. S. A. T11I 31.00 - 31.00

1975/1979 C4apua Caira, lumtra _Utt. Ctrbw BladL 6.3l 1.19 7.37

1975 Otdtew loditea. S. A. Fetrdimcals 10.00 - 10.00

1976 Sanmt 3odotria - Tatil do fte,"t S. A. W.1a 6.45 1.00 7.45

1976/1980 Teanor S. A. - Tamil 0atrinme do Noureke T etJlm 16.20 - 16.20

1977 RF S. A. PI&iri Ntta1rg3wa Irmn ad Alad-- C.atap 270.00 - 7.00

1977 tneraao RIo do NMrt S A. t niz is1. - 15.00

1978 COaeu uS1desogL A. Ion ad Steel 8.38 3.00 11.3

1979 Volvo do rmall nTtom, e VeiaYl., S. A. tor vehidam 60.00 5.2 65.27

1950 3frig do Ilortmte S. A. - ThIiu lyde Cmts 2.00 - 2LCO

1950 Dnde do Para S/A - 3 ^ _-m - Agriadtars, IAutria

e mclo de Ole0 in_m Palm-oil 3.50 1.00 4.50

1950 VhIRM 11ahitrim do lae S. A. - VIIASI rn ad Stat 5.00 - 5.00

1950 PIH - Ghia Irdiustrial de PbUEoilew Qadals ad PeLroda L. o 15.00 2.00 170

19B0 Dkttinria Clm te S. A. OhdmaU ad Petrodadrala - 0.25 0.25

3950 -tave Acis Qodaca e 1Mxral S/A Fertitara 35.00 6.00 41.00

L.!0 Polelbd PetroqPOnicd Oampla ad _Ieru mial o 43.00 S5 48.00

191ti lrilc- toEY ad C1pil a - L50 1.50

'Al rApamdi 1knamleim d! Agropamria - COWM Fbad ad Foad Pwa-Ug 5.50 3.0 8.50

1981 Irlimfa OdCid Mid Petrodudmla 46.00 4.00 50.0

1912 o,re 033 CMIML and 0xutrOstiCn MhLadAl. 40.00 5.00 45.0

1952 Agrilasirg S. - MnEp Capitl Nait 311.00 0.45 WA4

1953 Ca RLgmdeue d& PA micrpd (CP) rM- Caoptal 1kEt - .02 .02

1983 Al Prlwifla Fobod ad Foad Proonuizg 13.00 - 13.00

1953 CAqmwha De do hmpa (CM0) FaI 011 6.10 - 6.10

1983 PI P-pal deopna. S.A. hap 6 PaPer Pio&3ct 60.00 5.17 65.17

1953 Sooc/Ls. Food ad Food Ponnmig 3.0 2.50 5.50

1953 C9G Ce and (htrucUm Prterias 35.00 - 35.00

1984 OGpui. Alcoolqudi.ca Nadoud CtidrA ard PetruldscL 210.00 4.00 24.00

1985 Q0aim de Baia OCdhs ad Petrocdcals 3X. 1.80 4.80

TOW Cor uWAha-" 932.22 100.73 1.002.95

less Cocellattom. Aulnajoc.. Repriment and Saim 670.15 15.55 685.73

Total C rweld bd 3 C 26.L07 85.15 367.22

Total tkdLbsrmnd 63.78 10.75 74.53

October 22. 19S5

- 34 - ANNEX IIIPage 1 of 2

BRAZIL

NORTHEAST IRRIGATION ENGINEERING

AND TECHNICAL ASSISTANCE PROJECT

SUPPLEMENTARY DATA SHEET

Section I - Timetable of Key Events

(a) Time taken to Prepare Project: 6 months

(b) Project Prepared by: SUDENE, with Bank assistance

(c) First Presentation to the Bank: July 1985

(d) Appraisal Missions: October and December 1985

Ce) Completion of Negotiations: March 1986

(f) Planned Date of Effectiveness: July 1986

Section II - Special Bank Implementation Action

None

Section II! - Special Conditions

1. Ca) The Government would furnish to the Bank the resltts of se:torstudies dealing with private irrigation schemes before preparingfeasibility studies and engineering for related infrastructureworks (para. 57);

(b) Before putting in hand final engineering, the Government wouldfurnish to the Bank the recommendations arising from feasibilitystudies of the twelve pre-selected irrigation projects(para. 59);

(c) A training program for the staff of the Executive Secretariat,CODEVASF, DNOCS and DNOS would be drawn up and presented to theBank for comment by the Government not later than September 30,1986 and annually thereafter (para. 64);

- 35 - ANNEX IIIPage 2 of 2

(d) Dam safety guidelines would be presented to the Bank for reviewbefore being put into effect and not later than December 31,1987 (para. 65); and

(e) In preparing surveys and studies, the executing agencies wouldapply technical standard£ acceptable to the Bank (para. 71).

2. Additional conditions for making the proposed loan effectivewould be (i) provision by the Federal Government to the Bank ofsatisfactory evidence that it has approved the appropriation of counterpartfunds required in the first year of the execution of the proposed project(para. 69); (ii) signature of an 'Implementation Agreement" -satisfactoryto the Bank - between the Federal Government on one part and CODEVASF,DNOCS and DNOS on the other part (paras. 69 and 71), and (iii) registrationof the Loan Agreement by the Central Bank of Brazil.

3. Signature of an agreement - satisfactory to the Bank - betweenthe Government and SUDENE would be a condition of the disbursement of theproceeds of the proposed loan for the rehabilitation of CETREN (para. 75).

4. Two special events of suspension have been added, namely, thatthe Borrower shall have (i) failed to designate a successor to theExecutive Secretariat for the National Irrigation Program, satisfactory tothe Bank, for purposes of carrying out the project; and (ii) modified thelegislation establishing such successor (para 78).

r 4't - 7; | -4, -' - 4BRAZIL

4% >J +-f4 -IRRIGATION ENGINEERING ANDTECHNICAL ASSISTANCE PROJECT

PARA j \ -- - , o too 2a uo

/ ta\.s...wu~ *i W r_W >Po . KILOMET-

C--Awwomb. ~ ~ ~ ~ ~ ~ -A

.41 >4u k g;

Q , " NATAL

r wJ- /o A6 d- P

{.{;~~~~~~~~~~~~~~~~~d ,.C .. c-

12'

IRRIGATION SUBSPROJECT:

SALVADOR* r~

{, 7< g ' siv _ ~~~~~~~~~DNO

a :ok. E_ . Vesiedoc_j Airoods

Parts

RIven

e Stale Copkhoo Ta,m

-rPASIUA a rR I .

* ~ ~~~ / Stat _cnore

L ~~~~~~~~~~~~~~~~~~~~~~~Region Boundaries

sA;.,~~~ i.'I .26'- o ' , .S-- ;~ < 't 47 4N' ; - 4CM -- " JANU 1987 ,

- - * I~~~~~~~~~~~~~~~~~~~~~~~~~~~~~"WR1WEASTI

2V -~~~~~~~~~~~~~~~~~ORZI -N--

JANUARY 1916