Document of The World Bank FOR OFFICIAL USE ONLY Report No: ICR00004054 IMPLEMENTATION COMPLETION AND RESULTS REPORT IBRD 7952-BR ON A LOAN IN THE AMOUNT US$ 90 MILLION TO THE State Government of Santa Catarina FOR THE SANTA CATARINA RURAL COMPETITIVENESS ( P118540 ) December 22, 2017 Agriculture Global Practice Latin America And Caribbean Region CURRENCY EQUIVALENTS (Exchange Rate Effective {Nov 27, 2017}) Currency Unit = Brazilian Real R$ 3.228 = US$ 1.00 US$ 0.3098 = R$ 1.00 FISCAL YEAR July 1 - June 30 Regional Vice President: Jorge Familiar Calderon Country Director: Martin Raiser Senior Global Practice Director: Juergen Voegele Practice Manager: Preeti S. Ahuja Task Team Leader(s): Diego Arias Carballo ICR Main Contributor: Barbara Cristina Noronha Farinelli ABBREVIATIONS AND ACRONYMS ATER Agricultural Technology and Rural Extension BP Business Plan CADEF Forest Area Register CAS Country Assistance Strategy CEPA Center for Socio-economic and Agricultural Planning CEURH State Registry of Water Resource Users CIDASC Integrated Company for Agricultural Development of Santa Catarina CMDR Municipal Rural Development Councils CPMA Military Environmental Police Battalion CPORG Organic Production Committee of Santa Catarina State CPS Country Partnership Strategy DLI Disbursement-Linked Indicator DIME Development Impact Evaluation DRHI Water Resources Management Directorate (of SDS) EA Environmental Assessment EEP Eligible Expenditure Program EFA Economic and Financial Analysis EMP Environmental Management Plan EPAGRI State Agro-Livestock and Rural Extension Enterprise of Santa Catarina FAF Family Agriculture Farm FAO United Nations Food and Agriculture Organization FAPO Family Agriculture Producer Organization FATMA State Environmental Management Foundation FEHIDRO State Water Resources Fund FRL Fiscal Responsibility Law FRR Financial Rate of Return FUNAI National Indigenous Foundation FUNASA National Health Foundation IGASC Institute of Water Management IP Indigenous Peoples IPPF Indigenous Peoples Planning Framework IRR Internal Rate of Return ISR Implementation Supervision Report LA Loan Agreement MAPA Ministry of Agriculture, Livestock and Supply MB II Microbacias II M&E Monitoring and evaluation MI Manifestations of Interest MPSC Public Attorney's Office of Santa Catarina MTR Mid-term Review NPV Net Present Value PAD Project Appraisal Document PDO Project Development Objectives PDTI Planos de Desenvolvimento da Terra Indígena PE Projetos Estruturantes PEEA State Environmental Education Policy PEFA Public Expenditure and Financial Accountability PIU Project Implementation Unit PMA Environmental Military Police PRONAF National Family Agriculture Program RBM Results-Based Management RDF Rural development Fund SAR State Secretariat for Agriculture and Fisheries SAFF Sistema de Acompanhamento Físico e Financeiro SC Rural Santa Catarina Rural Competitiveness Project SDS State Secretariat for Sustainable Economic Development SEE State Executive Secretariat (Project Executing entity/State-level) SER Secretarias Executivas Regionais SFF Small family farmer SICC Conservation Credit System SIE State Secretariat of Infrastructure SIE State Inspection Services SIEE Integrated Economic-Ecological Systems investments SIF Sustainable Investment Fund SIL Specific Investment Loan SIM Municipal Inspection Services SIRHESC State Water Resources Information System SOL Secretariat for Tourism, Culture and Sports SoSC State of Santa Catarina SPS Sanitary and Phytosanitary Services SSP State Secretariat of Public Security and Citizens’ Protection SWAp Sector Wide Approach TA Technical Assistance UGT Unidades de Gestão Territorial WRM Water Resource Management TABLE OF CONTENTS DATA SHEET .......................................................................................................................... 1 I. PROJECT CONTEXT AND DEVELOPMENT OBJECTIVES ....................................................... 6 A. CONTEXT AT APPRAISAL .........................................................................................................6 B. SIGNIFICANT CHANGES DURING IMPLEMENTATION (IF APPLICABLE) .......................................8 II. OUTCOME .................................................................................................................... 10 A. RELEVANCE OF PDOs ............................................................................................................ 10 B. ACHIEVEMENT OF PDOs (EFFICACY) ...................................................................................... 11 C. EFFICIENCY ........................................................................................................................... 15 D. JUSTIFICATION OF OVERALL OUTCOME RATING .................................................................... 17 E. OTHER OUTCOMES AND IMPACTS (IF ANY) ............................................................................ 17 III. KEY FACTORS THAT AFFECTED IMPLEMENTATION AND OUTCOME ................................ 19 A. KEY FACTORS DURING PREPARATION ................................................................................... 19 B. KEY FACTORS DURING IMPLEMENTATION ............................................................................. 21 IV. BANK PERFORMANCE, COMPLIANCE ISSUES, AND RISK TO DEVELOPMENT OUTCOME .. 23 A. QUALITY OF MONITORING AND EVALUATION (M&E) ............................................................ 23 B. ENVIRONMENTAL, SOCIAL, AND FIDUCIARY COMPLIANCE ..................................................... 24 C. BANK PERFORMANCE ........................................................................................................... 26 D. RISK TO DEVELOPMENT OUTCOME ....................................................................................... 27 V. LESSONS AND RECOMMENDATIONS ............................................................................. 28 ANNEX 1. RESULTS FRAMEWORK AND KEY OUTPUTS ........................................................... 30 ANNEX 2. BANK LENDING AND IMPLEMENTATION SUPPORT/SUPERVISION ......................... 53 ANNEX 3. PROJECT COST BY COMPONENT ........................................................................... 55 ANNEX 4. EFFICIENCY ANALYSIS ........................................................................................... 57 ANNEX 5. BORROWER, CO-FINANCIER AND OTHER PARTNER/STAKEHOLDER COMMENTS ... 67 1. INTRODUÇÃO. .............................................................................................................. 73 2. CONQUISTAS IMPORTANTES......................................................................................... 73 3. PRINCIPAIS FATORES QUE AFETAM O DESEMPENHO. .................................................... 78 4. FATORES QUE PROMOVEM A SUSTENTABILIDADE. ....................................................... 79 5. PRINCIPAIS LIÇÕES APRENDIDAS. .................................................................................. 80 ANNEX 6. SUPPORTING DOCUMENTS (IF ANY) ..................................................................... 82 ANNEX 7. ADDITIONAL DETAILS ........................................................................................... 84 The World Bank Santa Catarina Rural Competitiveness ( P118540 ) DATA SHEET BASIC INFORMATION Product Information Project ID Project Name P118540 SANTA CATARINA RURAL COMPETITIVENESS ( P118540 ) Country Financing Instrument Brazil Investment Project Financing Original EA Category Revised EA Category Partial Assessment (B) Partial Assessment (B) Organizations Borrower Implementing Agency State Government of Santa Catarina Secretaria Executiva Estadual - SEE Project Development Objective (PDO) Original PDO The objective of the Project is to increase the competitiveness of Family Agriculture Producer Organizations while providing support for an improved framework of structural competitiveness inducing public services activities in the Borrower's territory. PDO as stated in the legal agreement N/A Page 1 of 89 The World Bank Santa Catarina Rural Competitiveness ( P118540 ) FINANCING Original Amount (US$) Revised Amount (US$) Actual Disbursed (US$) World Bank Financing 90,000,000 90,000,000 90,000,000 IBRD-79520 Total 90,000,000 90,000,000 90,000,000 Non-World Bank Financing Borrower 99,000,000 99,000,000 99,450,000 Total 99,000,000 99,000,000 99,450,000 Total Project Cost 189,000,000 189,000,000 189,450,000 KEY DATES Approval Effectiveness MTR Review Original Closing Actual Closing 02-Sep-2010 24-Dec-2010 18-Nov-2013 30-Sep-2016 30-Jun-2017 RESTRUCTURING AND/OR ADDITIONAL FINANCING Date(s) Amount Disbursed (US$M) Key Revisions 26-Mar-2014 33.00 Change in Disbursements Arrangements 11-Jun-2014 33.00 Change in Results Framework Change in Disbursements Arrangements Change in Legal Covenants 07-Apr-2016 68.97 Change in Results Framework Reallocation between Disbursement Categories 07-Jun-2016 75.71 Change in Loan Closing Date(s) KEY RATINGS Outcome Bank Performance M&E Quality Satisfactory Moderately Satisfactory Substantial Page 2 of 89 The World Bank Santa Catarina Rural Competitiveness ( P118540 ) RATINGS OF PROJECT PERFORMANCE IN ISRs Actual No. Date ISR Archived DO Rating IP Rating Disbursements (US$M) 01 02-Mar-2011 Satisfactory Satisfactory .23 02 05-Oct-2011 Satisfactory Moderately Satisfactory 1.36 03 11-Jan-2012 Satisfactory Moderately Satisfactory 1.36 04 10-Jul-2012 Moderately Satisfactory Moderately Satisfactory 8.99 05 27-Jan-2013 Moderately Satisfactory Moderately Satisfactory 9.28 06 19-Jun-2013 Moderately Satisfactory Moderately Unsatisfactory 9.78 07 17-Dec-2013 Moderately Satisfactory Moderately Satisfactory 10.10 08 02-Jul-2014 Moderately Satisfactory Moderately Satisfactory 33.22 09 06-Jan-2015 Moderately Satisfactory Moderately Satisfactory 36.32 10 29-Jun-2015 Moderately Satisfactory Moderately Satisfactory 44.01 11 09-Dec-2015 Satisfactory Satisfactory 60.89 12 26-May-2016 Satisfactory Satisfactory 69.19 13 30-Nov-2016 Highly Satisfactory Satisfactory 77.00 14 03-Jun-2017 Highly Satisfactory Satisfactory 84.01 15 21-Nov-2017 Highly Satisfactory Satisfactory 90.00 SECTORS AND THEMES Sectors Major Sector/Sector (%) Agriculture, Fishing and Forestry 100 Other Agriculture, Fishing and Forestry 61 Water, Sanitation and Waste Management 100 Other Water Supply, Sanitation and Waste 10 Management Page 3 of 89 The World Bank Santa Catarina Rural Competitiveness ( P118540 ) Industry, Trade and Services 100 Agricultural markets, commercialization and agri- 29 business Themes Major Theme/ Theme (Level 2)/ Theme (Level 3) (%) Finance 4 Finance for Development 4 Agriculture Finance 4 Urban and Rural Development 77 Rural Development 77 Rural Markets 34 Rural Infrastructure and service delivery 43 Environment and Natural Resource Management 75 Climate change 56 Mitigation 39 Adaptation 17 Environmental Health and Pollution Management 9 Air quality management 3 Water Pollution 3 Soil Pollution 3 Water Resource Management 10 Water Institutions, Policies and Reform 10 ADM STAFF Role At Approval At ICR Regional Vice President: Pamela Cox Jorge Familiar Calderon Country Director: Makhtar Diop Martin Raiser Senior Global Practice Director: Juergen Voegele Page 4 of 89 The World Bank Santa Catarina Rural Competitiveness ( P118540 ) Practice Manager: Ethel Sennhauser Preeti S. Ahuja Task Team Leader(s): Alvaro Juan Soler Bavosi Diego Arias Carballo Barbara Cristina Noronha ICR Contributing Author: Farinelli Page 5 of 89 The World Bank Santa Catarina Rural Competitiveness ( P118540 ) I. PROJECT CONTEXT AND DEVELOPMENT OBJECTIVES A. CONTEXT AT APPRAISAL Context 1. The Rural Competitiveness Project – using a Sector Wide Approach (SWAp) – was the Bank’s first rural SWAp, and the third in a series of successful and innovative Bank loans to the agriculture sector of the Brazilian State of Santa Catarina (SoSC). The first two operations, known as Microbacias I and II (MB I and II) advanced the State’s water resources management (WRM) and environmental agenda by investing in infrastructure, education, river basin organization/formalization, ecological corridor planning, and creating the State’s WRM information and water rights systems, applying an integrated, decentralized approach. Studies showed the need to build on these gains, stressing technical assistance (TA) and training, productive investments for income generation and increased competitiveness, as well as consolidating the underlying technical strategy as a public policy instrument. A SWAp was considered the best instrument and already had a strong track record in the States of Ceara and Minas Gerais. 2. At appraisal, about 20% of the State’s population of 6.1 million was rural and of these, 90% were farmers. Of the State’s 187,000 holdings, 90% were small Family Agriculture Farms (FAF) of 50 ha or less – 34% were 10 ha or less – contributing 70% of the State’s agricultural GDP. Even so, competitiveness was a formidable challenge for such farmers (small farm families, rural workers and indigenous people) about 140,000 of whom faced, variously: poverty; lack of organization, scale, value-addition, access to credit and/or expertise; poor productivity and product quality; a fragile natural resource base and weak environmental compliances; poor logistics and related infrastructure; WRM issues and water disputes; and, a public policy, sector management and institutional framework unevenly responsive to their needs. 3. The State was implementing a strong development agenda, reflected in its 2008-2011 Multi-Year Development Plan (PPA) and the Santa Catarina 2015 Development Plan. An important strategic and technical foundation for the project was the State’s study: “Diagnosis of agro-industries and other value-added activities – agricultural and non- agricultural – and cooperation networks in family agriculture and artisanal fishing” (EPAGRI, 2010). This study identified the legal status, main products, sales and markets, management and labor structure of agribusinesses and non-agricultural enterprises, and supported the project baseline. MB II was closely-aligned with the State’s plans, assisting FAF, rural workers and indigenous people to adopt more sustainable natural resources management (NRM) practices, which improved their incomes and living conditions. Government sought to build on MB II by adding the element of competitiveness, to be achieved through complementary private and public sector investments. 4. The Bank’s long sector experience in Brazil, successful use of SWAp, and the client’s sophistication and demonstrated capacity, supported the rationale for Bank assistance and the instrument proposed. The project responded directly to the higher-order objective of sustained rural competitiveness in Brazil, anchored in the Bank’s Country Partnership Strategy (CPS), 2008-2011 and Progress Report (#53356-BR) under the pillar “a Competitive Brazil”. It also supported an “Equitable Brazil”, by focusing on family farms at the bottom of the pyramid and promoting accountability, and, a “Sustainable Brazil”, by financing sustainable production systems. It reflected the CPS’ focus on the Bank’s role at the state level in Brazil and on using integrated, multi-sector solutions. The project rationale was consistent with the Bank’s scaled-up focus on raising agricultural productivity, reducing risk and vulnerability and linking organized farmers to markets, while promoting environmental services. Page 6 of 89 The World Bank Santa Catarina Rural Competitiveness ( P118540 ) Theory of Change (Results Chain) 5. Theory of Change diagram can be seen in Annex 1.C. Project Development Objectives (PDOs) 6. As stated in the Loan Agreement (LA), the PDO was “to increase the competitiveness of family agriculture producer organizations while providing support for an improved framework of structural, competitiveness-inducing public services activities in the Borrower’s territory”. Key Expected Outcomes and Outcome Indicators 7. As stated in the PAD, the objective outcomes and outcome indicators were as follows: Table 1: Objective Outcomes and Indicators (PAD) OBJECTIVE OUTCOMES OUTCOME INDICATORS Objective 1: Increase the Increase in total value of annual sales for participating FAPO. Competitiveness of Family Agriculture Producer Organizations Objective 2: Provide Coordinated implementation of six public programs to improve the rural business environment, as support for an improved measured by: framework of structural (a) share of state’s water resources under decentralized and participatory planning and management; competitiveness-inducing (b)share of state territory managed under an “ecological corridor” concept (coexistence of sustainable public services activities production and preservation) (c)100% rehabilitation of rural roads associated with business plans; (d)share of public financing to family agriculture enterprises channeled through the new extension/TA strategy; (e) re-structured SPS Services, generating the following results in support of FAFs: (e i) Number of registered and certified crop and forest production units [DLI];1 (e ii) Number of registered and certified fruit processing units [DLI]; (e iii) Number of enterprises legalized, complying with sanitary standards; (e iv) Number of farms certified for absence of animal tuberculosis and brucellosis [DLI]; (f) rural schools carrying out interdisciplinary actions under PEEA (State Environmental Education Policy). Components 8. Component 1. Family Agriculture Competitiveness and Increased Access to Markets (estimated total cost US$95.95 million/actual total cost US$82.19 million, 85.7% of the original estimate): Implement the selected Eligible Expenditure Programs (EEP) and provide technical assistance (TA) to stakeholders to increase organizational and participation skills through: Sub-component 1.1 - Pre-Investments: (i) TA, rural extension and training to create/consolidate added-value arrangements of FAPO and other stakeholders; (ii) identify business opportunities and prepare proposals; (iii) prepare Business Plans; and (iv) build/strengthen capacity of technical service providers to support rural competitiveness; and, Sub-component 1.2 – Productive and Value-Added Investments: Demand- 1 Disbursement Linked Indicator. There were 13 at appraisal, 3 of which were PDO Outcome Indicators and 10 were Intermediate Outcome Indicators. Formal restructuring in 2014 and 2016 reduced the DLI to 11, dropped or added several, and revised the wording and/or targets of others. See Annex 7. Page 7 of 89 The World Bank Santa Catarina Rural Competitiveness ( P118540 ) driven, productive system and added-value investments benefiting directly 25,000 farm families, through the State’s Sustainable Investment Fund (SIF) supporting: (i) diversification/improvement of production/farming systems; (ii) agro-processing; (iii) legal, environmental and sanitary compliance for FAPO market access; (iv) marketing and logistics; and (v) off-farm/non-agricultural investments (e.g., rural tourism). 9. Component 2. Complementary Public Investments for Rural Competitiveness (estimated total cost of US$80.28 million/actual total cost US$93.32 million, 116.2% of the original): Improve the structural framework for rural competitiveness, financing: (i) Environmental management (WRM, corridors, Conservation Credits); (iii) Regulatory framework compliance (phytosanitary and environmental compliance, land regularization); (iv) TA and rural extension services; (v) Rural tourism (non-agricultural income). 10. Component 3. Support to the Rural Competitiveness Institutional Framework (estimated total cost of US$12.54 million/actual US$13.7 million, 109.3% of the original): Improved public administration performance, supporting rural competitiveness by implementing the EEPs and providing TA for: (i) more efficient financial management and procurement systems; (ii) results-based management in the Project and the Borrower’s main sector institutions; and (iii) Project coordination, monitoring and evaluation (M&E). 11. The SWAp: The project involved total estimated expenditures of US$189.0 million, not including beneficiary contributions, required but not quantified at appraisal. Bank support was a Specific Investment Loan (SIL) of US$90.0 million to be disbursed against both SWAp-related, priority Eligible Expenditure Programs (EEP) with associated Disbursement Linked Indicators (DLI) considered essential to achieving government’s rural competitiveness program, and a traditional SIL technical assistance category, comparatively large relative to other Brazil SWAp. The SWAp and SIL modalities represented 92.69% and 7.31% respectively, of the Bank loan. SoSC was at that time implementing eight regular rural programs (see Annex 7) under its 2008-2011 Multi-Year Development Plan (PPA) and all eight were considered essential to the State’s rural development policies and agenda.2 The SWAp supported those eight programs using disbursement-linked performance targets and extensive TA.3 B. SIGNIFICANT CHANGES DURING IMPLEMENTATION (IF APPLICABLE) Revised PDOs and Outcome Targets 12. The statement of PDO and associated outcome targets were not revised. Revised PDO Indicators 2 Eight implementing agencies: SIE, SDS/FATMA, SDS/DRHI, SAR, SAR/CIDASC, SAR/EPAGRI, SOL and SSP/PMA. See Acronym List. 3 Several features distinguished the SC SWAp: multi-sector (as per Ceara and Minas Gerais); Bank’s first rural SWAp; activities such as phytosanitary certification, correlating to markets and export potential; focus on the Theory of Change and indicators, including monitored secondary; sufficient DLI to “cover” the range of EEP; use of the PEFA in strument (Public Expenditure and Financial Accountability) for good governance; and, EEP represented the main sector activities, the DLI were well-linked to the EEP, harmonized with state priorities and legitimate. The DLI is the primary disbursement mechanism, and represents the EEPs’ much wider scope of activities. Disbursement is based on a percentage of all expenditures across the full eligible budget line, i.e., measured by the DLI but de-linked from the physical activity reflected by the DLI. EEPs are managed by government and executed as they wish, as long as they meet the DLI and present eligible expenses to the Bank. The Bank agrees with the Borrower to support their budget lines which are closest to the development theme supported under the Project, so the Bank pays for most activities under EEP. Page 8 of 89 The World Bank Santa Catarina Rural Competitiveness ( P118540 ) 13. The two primary PDO Outcome Indicators were not revised but two “sub-indicators” of public program (e) were dropped: (e i) “number of registered and certified crop and forest production units” and, (e ii) “number of registered and certified fruit processing units” (both DLI). These were replaced by an improved, consolidated sub-indicator/DLI: “Family Agriculture Units and Processing Units registered and certified as complying with phytosanitary requirements” with the target of 2,740, an aggregate of the two original targets. 4 Annex 7 shows the overall evolution of the project Results Framework (RF), including DLI. Revised Components 14. At the Borrower’s request, and based on findings of the 2013 Mid-term Review (MTR), the project was restructured and the Loan Agreement amended on June 11, 2014, resulting inter alia, in adjustments to components: Component 1: Family farms with aquaculture, sea-culture and artisanal fishery activities were included as targeted beneficiaries, with financing for pre-investments and business plans (productive systems and added-value investments). Rural youth became a priority population to benefit from rehabilitated training centers, business and computer skills, leadership and environmental management; Component 2: Creation of an Institute of Water Management (IGASC) was dropped to re-align with state priorities. Component 2 was re-appraised in April 2016 to include: (i) financing just 16 additional staff of the Water Resources Directorate (DRHI); and, (ii) financing the formalization of “executive secretariats” for some watershed management committees; and, Component 3: New procurement procedures were agreed for the selection of individual consultants. Other Changes 15. The project was restructured four times: • March 26, 2014: The Loan Agreement was amended to modify the Eligible Expenditure Programs to include programs 0150-Urban Mobility and 0315-Sanitary Defense as approved by Law No. 15/722/2011. • June 11, 2014: Changes included: aquaculture and artisanal fisheries included as beneficiaries under Component 1, and phyto-zoo-sanitary services eligible under Component 2; budget code and associated requirements strengthened; more stringent procurement procedures to select individual consultants; the SWAp disbursement rules were liberalized, adjusting the 70 percent rule, and increasing the percentage from 50 to 100 of the amounts spent under the EEP; the DLI were revised (entailing by default, adjustments to the RF); and, EPAGRI was required to hire rural extension technicians through a public, competitive process. • April 7, 2016: The Loan Agreement was amended to fully replace the table on Category of Eligible Expenditures and the table on Disbursement Linked Indicators, with specific changes. • May 27, 2016: Closing date was extended nine months from September 30, 2016 to June 30, 2017. Rationale for Changes and Their Implication on the Original Theory of Change 16. The rationale for the main changes - not all of which are listed above and none of which affected the Theory of Change - was as follows: • Alignment with Federal Government policies: Changes to Component 1 were driven by: (i) Law No. 11,326 of July 24, 2006, which defined family aquaculture and artisanal fishery producers as target beneficiaries of the 4 The PAD statement of “key results indicators” (page 8) and PAD Annex 4 included a third PDO indicator “500 Business Plans and 20,000 ancillary production systems improvement plans executed with project support, benefiting 25,000 rural producers participating in FAPOs and indigenous peoples’ groups”. However, the PAD Annex 3 Results Framework and Arrangements for Results Monitoring table, did not include this PDO indicator, dividing it into two Intermediate Outcome Indicators of similar meaning. Page 9 of 89 The World Bank Santa Catarina Rural Competitiveness ( P118540 ) National Program for Family Agriculture (PRONAF); (ii) project objectives, which supported the competitiveness of PRONAF-eligible family farmers; and, (iii) these groups were demanding participation. • Alignment with State Government policies: The rationale for changing Component 2 was: (i) restrictions on state public expenditures under the Fiscal Responsibility Law (FRL); (ii) uneven political will among state public stakeholders to lead the water reform process; and, (iii) the State’s preference for strengthening the existing Directorate of Water Resources (DRHI). On staffing, ongoing constraints under the FRL limited increases in public sector staff; a strategic staffing exercise by DRHI showed which functions were feasible with just 16 added staff. • Improved project management/implementation: Component 3 was changed to optimize/facilitate the recruiting of skilled professionals for key activities and avoid further delays given the many pending/unfinished project activities. The closing date was extended to: maximize project impact given a tripling of demand for productive investments in the final year; permit those subprojects to be financed and continue with the same executing methodology and SEE support; provide continuity to the project unit and ongoing activities, and support dialogue and preliminary preparation of a possible follow-on; and, systematically disseminate project results. • Making the SWAp work: Institutional challenges associated with implementing the SWAp mechanism – as well as shifts in state policy and priorities - drove some changes, including: (i) several adjustments of the DLI and their targets, and adding new budget lines (see Annex 7); and, (ii) amendments to facilitate understanding and application of the 70 percent rule and other SWAp-related financial/disbursement related requirements, misinterpretation of which was found to be limiting the project’s financial execution (see ICR Section III). II. OUTCOME A. RELEVANCE OF PDOs Assessment of Relevance of PDOs and Rating 17. The project development objectives were highly relevant at the time of appraisal and remained so at closing. Project appraisal and implementation coincided with three Bank Country Partnership strategy reports, the first already discussed in Section I. The PDO sustained its high relevance through alignment with the CPS of 2012-2015 (Report #63731-BR), based on two key defined challenges: (i) seizing opportunities for innovative and integrated approaches to climate-smart, inclusive economic growth, focusing on rural productivity; and (b) addressing the competitiveness issues that Brazil was facing in agriculture and natural resources management. At closing, the primary themes of the PDO remained in the mainstream of the new Bank Brazil Country Partnership Framework (CPF) FY18-FY23, Report No. 113259-BR, endorsed by the Executive Directors on July 13, 2017, and relevance remained high. The Focus Area “Inclusion and Sustainable Development” calls for “promoting the socioeconomic development of small rural producers and vulnerable groups”. Ongoing challenges are defined as productivity, investment and innovation, improving the business environment and access to capital, and increasing competitiveness. The CPF calls for more efficient and better-targeted government spending linked to improved access to/quality of public services; and, smarter management of natural resources and better mitigation of environmental and natural risks, targeting water resources and environmental management, and property rights. Overall relevance at closing is rated High. Page 10 of 89 The World Bank Santa Catarina Rural Competitiveness ( P118540 ) B. ACHIEVEMENT OF PDOs (EFFICACY) Assessment of Achievement of Each Objective/Outcome 18. The project was designed to address priority challenges hindering the market competitiveness of Family Farmers, a population at high risk of rural exclusion without productive modernization. Its trajectory reflected the pattern/type of difficulties characteristic of such operations globally, regardless of the client’s capacity. Strong institutional performance marked by rapid learning, flexibility, decentralized approaches and problem-solving were instrumental in the project’s success. SC Rural substantially achieved its two objectives, as shown by impact evaluation and complementary studies; met or exceeded all its DLI and PDO Indicators; exceeded eight and met 11 of its 20 Intermediate Outcome Indicators; and, performed consistently well across all secondary output indicators monitored for the SWAp. The PDO had two themes: the competitiveness of FAPO, as indicated by increased sales, and a parallel effort to improve the broader framework of public services deemed essential to improve FAFs’ business environment longer-term, with key elements of those financed activities intersecting with farmers’ productive lives, affecting them directly and positively. The following assesses achievements under each Theme and discusses causal relationships. 19. Objective Outcome/Theme 1: Increase the competitiveness of family agriculture producer organizations. • The project Impact Evaluation (EPAGRI/CEPA, 2016) shows that “the total value of annual sales by participating FAPO” increased by 62.1%5 in the period from 2009 to 2015, compared to the original target of 30% and to non- participating FAPOs (Control Group). • 32,394 farm families (129.6% of target), were financed directly via SIF grants for added-value arrangements through 723 Business Plans (144.6%) benefiting 10,903 families, and productive system improvement plans benefiting 21,491 families (Table 2 below).6 • 259 new, value-added arrangements were established such as alliances, networks and cooperatives (188% of target), facilitating more systematic public service support and business empowerment. • Rural youth benefited from 902 direct investments. A perception survey of 518 young producers (31% of the total) showed 64.5% reporting that project interventions caused their household income to increase from 15- 50%, depending on the type of productive activity and other related factors. • The territorial reach of sales expanded: sales to municipalities well beyond beneficiary farmers’ region were 15.7% of total compared to just 1.3% in 2009; and, the Treatment Group expanded its average numbers of sales locations from 13 to 24.5 compared to the Control Group’s expansion from 15 to 17 sales points, in the same period. 5 Relative percentage increase of total annual sale values of the sample of participating FAPOs in the project compared to non-participating FAPOs, derived from the project Impact Evaluation (EPAGRI/CEPA, 2016). 6 The 25,000 target was to cover two types of plan-based investments via grants from the Rural Investment Fund (RIF): improved farming practices/attributes (technology, certification, land regularization, training), and Business Plans. Actual investments flowed through the Sustainable Investment Fund – a unit within the RIF created for SC Rural grants, an instrument not normally used by the RIF. Page 11 of 89 The World Bank Santa Catarina Rural Competitiveness ( P118540 ) Table 2: Direct beneficiaries of SIF grant investments Activity S-Comp Beneficiaries 1A: PE7 – Business Plans 1.2 10,903 1B: PE – Production system improvement 1.2 4,699 2. Youth Projects 1.2 902 3. PSA Beneficiaries 1.2 281 4. SIEE Beneficiaries 1.2 697 5. Beneficiaries of Reference Units 1.2 531 6. Indigenous Beneficiaries 1.1 1,920 7. Plant Sanitary Certification 1.1 1,670 8. Animal Sanitary Certification 1.1 728 9. Digital Inclusion Kits 1.2 2,285 10. Forage Kits (milk production) 1.2 7,778 Total: 32,394 Source: SEE 2017 • SC Rural increased its budget/spending to some US$63.0 million in an intensive effort to ensure that identified FAF/FAPO met eligibility criteria, were well-organized and trained, and that their “plans”, whether for value added or productive system investments, were: (i) based on local and regional realities/demand; (ii) formally compliant with sanitary and environmental laws governing market participation (including eligibility for credit); (iii) were economically and financially viable; and, (iv) that FAF/FAPO understood/adopted superior, environmentally conservative and climate-resilient farming practices. • Overall, some 59,8348 farm systems improvement plans (292% of target) were implemented for individual FAF over a six-year period (including via the 21,491 SIF-financed grants mentioned above), a key driver of Family Farmers’ confidence in their productive potential, sustainability and capacity to access markets successfully. • EPAGRI’s restructured ATER services – a project goal - delivered SC Rural-financed TA and extension on a regularized basis to 134,460 FAF state-wide; more specifically, 1,436 EPAGRI courses, seminars, field days and reference units demonstrated improved technologies for productive chains in fish farming, apiculture, grains, fruits and vegetables, livestock/dairy and oil-culture, to 22,930 priority participants including youth and indigenous groups. • Phytosanitary compliance/certification is a key determinant of market access in Santa Catarina and Brazil more widely: 2,788 FA processing and production units were registered and certified as compliant with phytosanitary requirements (144% of target); 728 Family Farms were certified as free of brucellosis and tuberculosis. 20. The project effectively delivered support services to Family Farmers, in FAPO or not, to modernize and professionalize their agricultural operations with an emphasis on planning, i.e. defining and delivering what farmer organizations and/or their productive enterprises needed to satisfy market and regulatory demands, which varied by FAPO and FAF. The project did this successfully, resulting inter alia, in SC Rural beneficiaries increasing their sales revenue far beyond that of non-participants, in the same period. 7 Projeto Estruturante (PE): A set of basic investments within a value chain, potentially involving several Business Plans for physical plant, primary materials, rural infrastructure, management systems and business development (e.g., brands, trademarks). 8 59,834 includes the 21,491 SIF-financed grants mentioned and another 38,343 farm systems financed by Federal and State funds. programs, but implemented under the SC Rural policy coordination approach. Page 12 of 89 The World Bank Santa Catarina Rural Competitiveness ( P118540 ) 21. Objective Outcome/Theme 2: Provide support for an improved framework of structural competitiveness- inducing public services activities 22. Public services programs financed by the SWAp, of which activities representing each program were specified in the RF, were improved, and PDO Theme 2 was achieved. All Theme 2-related PDO Indicators were met or exceeded. These investments were a state priority intended, depending on the activity, to have both immediate and wide- ranging, longer-term effects on farmers and/or the rural, competitive business environment. Results are as follows and their causal connection to FAF competitiveness and outcomes under Theme 1 are discussed. 23. Environmental management as a key component of rural competitiveness was strengthened: • Water resources: 65% of the State’s water resources (100% of target) came under decentralized, participatory planning and management through Watershed Management Committees in 26 state River Basins; 16 River Basin Committees were trained in decentralized management; and, 14 River Basin Plans were prepared. A results assessment (EPAGRI, 2017) demonstrated that: users were more aware of water as a natural resource conservation issue of direct importance to their long-term farming operations; rates of voluntary registration of users in the DRHI cadaster increased markedly; and, rates of forest preservation and active recovery of degraded areas prejudicial to water quality and availability increased. Farmers understood that stewardship of water was tightly-linked to their productive future, as was their compliance relationship with state and federal laws. • Some 74,420 (114.5%) users were registered in the State Register of Water Resources Users (Portuguese: CEURH), enabling the estimation of water demand from the State’s River Basins. State systems implemented/modernized under the wider competitiveness framework included: Water Resources Information System; aerial photogrammetric and hydro-geological mapping of the State; installation of a State Hydro- meteorological Monitoring and Warning System. The planned IGASC was not feasible for fiscal and political reasons. • Ecological Corridors (EC) were a state priority under broader environmental commitments. Some 10% of the State came under an Ecological Corridor concept (100% of target) where sustainable farm production and preservation/biodiversity are mutually dependent (a landscape approach). Studies prepared under MB II were the foundation for establishing the Timbó and Chapecó corridors, managed through inter-institutional partnerships and Ecological Corridor Management Groups with farmer representation. • EC management tools introduced included the Forest Area Register (CADEF), and the Conservation Credit System (Portuguese: SICC), a database of incremental forest areas totaling 128,445 ha, used to evaluate and monitor areas for Payment for Environmental Services (PES). SICC is an innovative tool - without precedent in Brazil – which uses private resources from the suppression of vegetation for biodiversity conservation in the EC. Land owners/farmers and entrepreneurs can acquire Conservation Credits to pay off environmental commitments. Some 1,631 ha of forests came under SICC (171% of target). • Rural schools sought to inculcate environmental awareness in school-age youth as an investment in future rural conservation and stewardship of land. Schools carrying out inter-disciplinary activities under the State Environmental Education Policy were 1,437 (144% of an increased target). Page 13 of 89 The World Bank Santa Catarina Rural Competitiveness ( P118540 ) 24. Rural infrastructure investments had direct, positive benefits for project beneficiaries: • Rural road improvements were linked directly to BP demand and correlated closely with farmers’ logistical needs to move product and acquire inputs in a timely manner to maintain competitiveness. Rehabilitation of around 475 km of degraded tertiary roads (110.4% of target) through SIE agreements with 29 affected municipalities, provided an immediate agro-logistic benefit to affected FAPO seeking market access.9 An environmental assessment of rehabilitated rural roads rated sustainability as high for 85.3%, 11.4% had regular risk and 3.2% more serious issues. • Communications systems improvement and training had a demonstrated pay-off, especially youth. Some 43 pilot Digital Inclusion projects (143% of an increased target) in 11 municipalities with internet connection supported project enterprises connected to networks. Municipalities invested in modern towers and equipment and signal maintenance for internet and mobile telephony. A Digital Inclusion evaluation (EPAGRI, 2016) of young rural participants in rural Leadership, Management and Entrepreneurship courses verified internet access/digital inclusion benefits: improved farm management (47%); market knowledge (43%); and, reduced information search times (31.3%). 25. Regulatory compliance is a pivotal component of FAF competitiveness and the State has a direct interest in ensuring farmer’s capacity to comply: • Some 2,788 FAPO (102% of target) were registered and certified as complying with animal and phytosanitary requirements; 728 farms (104%) were certified as free of brucellosis and tuberculosis; and, 477 FAPO were legally in compliance with sanitary standards (104%). SPS compliance is fundamental for market acceptability and has implications for the state economy should compliance standards, monitoring and FAF performance on SPS be lax. CIDASC, recognizing the importance of the new, SC Rural-financed agricultural defense system streamlining animal transit guides and making data publicly available, also certified the State as free of classical swine fever. • Land regularization benefited 2,804 families (there was no target). Land tenure regularization is essential for credit-worthiness, as is the requirement that farmers demarcate and establish a “legal reserve” on 20% of their farmland, which cannot be done if land tenure is not regularized. 26. Extension services were at the heart of Family Farmers’ competitive status: • EPAGRI’s restructured ATER system played a pivotal role across a wide range of important project activities directly benefiting FAF/FAPO, youth and indigenous peoples under Components 1 and 2. At closing, government was channeling 60% of public funding for FAPO through EPAGRI’s restructured ATER services (100% of target). EPAGRI adopted a bottom-up strategy, empowering its regional and municipal offices and decentralizing project execution, bringing ATER services to the doorstep of Family Farmers, who uniformly expressed high satisfaction with these services. EPAGRI also implemented 1,685 reference (or demonstration) units on rural properties to stimulate farmers’ use of more productive and less environmentally impactful, technologies. EPAGRI supported FAPO marketing efforts through direct technical advice and promotional events. An impact assessment of EPAGRI’s “Feira Exposuper 2016” (EPAGRI 2017) showed that participating FAPO increased their sales an average 30%. • EPAGRI’s livestock program implemented 242 reference units, formally monitoring their activities and progress. Performance indicators show major increases in pasture stocking rates and average productivity/animal, reduced use of concentrated feed, improved milk production/feed ratios, and a striking increase in milk production, from 3,285 liters/year to 8,760 liters/year (267%). Page 14 of 89 The World Bank Santa Catarina Rural Competitiveness ( P118540 ) • EPAGRI heavily promoted sustainable farming practices reducing pollution and degradation of riparian forest areas by fencing rivers and streams bordering over 2,863 ha and reducing the human footprint and labor force through improved milking ergonomics and reduced silage needs. 27. Rural Tourism, well-organized, is an important non-agricultural, rural income generator for Family Farmers: • Rural tourism is clearly a potentially lucrative activity (see impact evaluation) requiring a broad, integrated approach. This was the only activity which did not achieve its RF target, financing just five itineraries and two pilots, barely 25% of target. Post MTR, and given the minor nature of the indicator compared to the breadth of rural tourism activities within the EEP, the Bank flexed the disbursement rule to enable SOL to aggregate sufficient eligible expenses to present to the Bank. The entire EEP was financed and thus actual achievements went far beyond what the indicator suggests, covering state-wide promotional events, extensive farmer organization, publicity campaigns/other. Justification of Overall Efficacy Rating 28. Efficacy is rated Substantial for the following reasons: (i) Themes 1 and 2 of the PDO were substantially achieved; (ii) the project met or exceeded all PDO Indicators, all DLI and 19 of 20 Intermediate Outcome Indicators; (iii) performance was equally strong under monitored secondary (output) indicators required by the SWAp and linked causally to the Theory of Change (see Annex 1 B); (iv) direct beneficiaries of financing under the SIF exceeded the project target, financing 32,394 families, 129.6% of the targeted 25,000, and in aggregate terms, overall beneficiary numbers exceeded appraisal expectations; (v) beneficiary Family Farmers increased their value of sales in the period from 2009-2015 by 118% compared to the targeted 30%, and compared to an increase of 44% for the Control Group in the same period; and, (vi) strong causal connection between outputs of the six public programs (Theme 2) as measured through their representative indicators and outcomes.10 C. EFFICIENCY Assessment of Efficiency and Rating 29. Implementation efficiency: Implementation efficiency is assessed as Substantial based on the following: (i) All DLI and PDO Indicators were met or surpassed and Results Framework performance overall, was strong (Section II and Annex 1A/1B); (ii) Key subcomponents were executed with less budget that originally planned (Annex 3), the most notable example being 1.2, Productive Investments, whose final cost was less than one-third of its original estimate (not including beneficiary cost share of US$19.73 million). Extension services (EPAGRI) were quite efficient with costs just 4% above appraisal estimates, but with results delivery far exceeding original expectations. Some sub- components exceeded their original cost estimates: pre-investments, regulatory framework compliance, rural tourism and central administration strengthening (see Annex 3). The final cost of Pre-Investments was 116% above the original estimate due primarily to outputs vastly exceeding targets, a result of government’s decision to intensify the entire pre-investment process/cycle to ensure quality Business Plans and prepare farmers for key activities. 9 The 1300 km was an indicative estimate at appraisal, given that demand was to emerge directly from Business Plans, which did not exist pre-effectiveness. Further, two pilot road rehabilitation exercises revealed that costs/km were very high and this also, contributed to target reduction (June 2014 restructuring). Inflationary pressures also pushed up construction costs in the project’s ini tial years. 10 The inconsistency between the Highly Satisfactory rating for Development Objectives in the final ISR and the ICR’s Substantia l rating for Efficacy is noted. The ICR considered a wider range of factors in reaching a final Efficacy rating. Page 15 of 89 The World Bank Santa Catarina Rural Competitiveness ( P118540 ) Unrealistic unit costs at design and restructuring were also a factor. The cost of Regulatory Framework Compliance, was 43% above the approval estimate. Actual results were close to targets, implying somewhat weak implementation efficiency and/or initial budget planning. The final cost of Rural Tourism was 15 times the original estimate. Due to complex factors associated with SOL’s EEP and the minute portion represented by the DLI, the Bank agreed at MTR that the loan would finance the entire SOL budget line/EEP. Finally, the cost of Central administration strengthening was 212% of the initial budget evidence of weakness mainly in planning, as the initial budget was reduced when it needed to be increased; and, (iii) Extension of the closing date enhanced project efficiency, enabling surging 2016 demand for productive investments to be financed, using the same methodology and SEE support; important dialogue on and preliminary preparation of, a new operation pending decisions by the Bank and Federal Government; and, systematic dissemination of project results. Implementation efficiency is on balance, substantial. 30. Economic efficiency: In terms of economic efficiency, to assess financial and economic results, 206 collective and family business plans (BPs), and production system improvements, were selected randomly from 28 subprojects (PE) in the 10 Territorial Management Units (Portuguese: UGT). Key elements of this analysis – categories/types of Business Plans and types of productive activity are discussed further in Annex 4 (with data in Tables 1-8). In broad terms, BP investments included: diverse works and equipment, plantations, grazing management systems and irrigation systems. The outcomes they generated were mainly production and income increases, generally coupled with increased production costs. Labor costs were either increased or maintained at the same level. Enhanced sales were generally channeled through existing markets – around 15% of BP explored new market channels. 31. Results at subproject level: The economic NPV and IRR of the assessed 206 BPs (involving 771 families) were: USD 18.9 million and 96% respectively, when only incremental BP investments are considered; and USD 12.8 million and 30% when in-kind and/or existing investments are considered. The aggregate investment cost was USD 2.7 million of which USD 1.3 million were provided by the BP participants (48%) and USD 1.4 million were funded by SC Rural (52%). In-kind and/or existing BP investments were valued at USD 6.1 million. Average figures per participating family are: USD 3,400 as incremental net income per year with a 60% increase in sales and over four-fold increase in net income; and 12 person-days as incremental annual labor use. 32. Aggregated results: SC Rural channeled USD 189.2 million in total, from Bank loan and government contributions. Participating families and FAPO added USD 19.7 million of complementary investments. From the USD 189.2 million, USD 128.6 million (68% of total costs) were related to the BP life cycle: selection, planning and implementation. SC Rural also channeled USD 60.7 million to complementary areas related to rural competitiveness, but independent of the BPs. While these complementary investments generate long-lasting benefits, only some of them were assessed since the nature of investments and the available information did not allow for quantitative assessment of social costs and benefits. Based on Borrower reports, there are rough estimates of economic feasibility for: forage production kits; carbon sequestered due to environmental management actions; rural roads improvements; and, impacts of research linked to extension services. Considering both BP investments and all other project costs: the overall economic IRR would be 26.6%, or 16.4% when in-kind and/or beneficiaries’ existing investments are considered (both higher than the appraisal estimated IRR of 15.9%); and, the economic NPV would be USD 127.3 million, or USD 62.3 million when considering in-kind/existing investments. Including complementary benefits (Annex 4 - Table 9), the economic IRR and NPV is 39.2% and USD 156.1 million, or 25.0% and USD 98.0 million, without and with in-kind investments, respectively. The overall financial IRR considering all project costs is 29.0 % or 17.9% and the financial NPV is USD 134.7 million or USD 76.7 million without or with in-kind/existing investments, respectively. Page 16 of 89 The World Bank Santa Catarina Rural Competitiveness ( P118540 ) 33. Sensitivity analysis: To assess the sensitivity of economic and financial indicators of BP considering BP investment and other BP-related costs, Switching Values (percentage factor that reduces the overall economic IRR to 12%) were estimated for gross annual income or revenues, annual input costs and annual labor costs. As shown in Table 10, SC Rural is moderately sensitive to production and/or price reductions, since a 12% reduction in gross income would reduce economic IRR to 12%. Such price sensitivity is partly due to the small-scale of most BPs supported. On the one hand, changes on sales income can reduce net income or profits substantially since farm costs cannot adjust in the same proportion. On the other hand, most farms and supported businesses participate in their product or service markets as price takers, since their scale is so small that they cannot influence prices. SC Rural is also moderately sensitive to input cost increases since a 22% cost increase would generate a marginally acceptable return. In contrast, SC Rural is quite resilient to labor cost and investment cost changes, since they would need to increase by 80% and 4.5 times respectively, to generate a marginally acceptable return. D. JUSTIFICATION OF OVERALL OUTCOME RATING 34. Overall Outcome is rated Satisfactory, based on the following: • High ongoing relevance of the PDO based on its initial and sustained alignment with key Bank strategy documents for Brazil: the FY08-11 and FY12-15 CPS, and FY18-FY23 CPF. • Substantial rating for Efficacy, based on achievement of the PDO’s two primary themes. Evidence includes strong performance on the PDO, DLI and Intermediate Outcome Indicators within a coherent Theory of Change demonstrating causal relationships; impact evaluation results showing that beneficiary FAPO increased their sales far beyond similar farmers who did not benefit; direct beneficiaries at 129% of the PAD target; direct evidence that farmers responded to and understood the benefit of the project’s supporting investments/services, injecting US$19.73 million of own resources into their Business Plans; and, Moderate risk to development outcome. • Substantial rating for Efficiency, taking into account an economic IRR exceeding appraisal, under several scenarios; higher level of achievement in key activities, at lower than originally estimated cost; substantially higher number of direct beneficiaries than the original estimate; strong quantitative results of impact evaluation; and, likely sustainability of project activities, rated Moderate for Risk to Development Outcome. E. OTHER OUTCOMES AND IMPACTS (IF ANY) Gender 35. SC Rural’s focus on family farming translated into an investment strategy with important impacts on women – as key actors in Family Farms and FAPO - either through increased sales and income, and/or reduced family labor and improved quality of life. Businesses managed and/or executed by women were included in the structural investments (Projetos Estruturantes – PE), productive alliances and farm systems improvement activities financed. Productive chains involving dairy and egg production, bakeries, processed fruit products, craft works and flowers, and agro- tourism, typically have substantial women’s participation/leadership - some 350 such ventures were financed. Another 2,850 farm properties were supported under the “farm systems improvement” rubric in milk production, fruits and vegetables. Institutional Strengthening • Capacity-building: Executing institutions reported important capacity gains from the results-based management and other elements introduced by the SWAp. SEE developed expertise in brokering inter-institutional Page 17 of 89 The World Bank Santa Catarina Rural Competitiveness ( P118540 ) coordination to improve planning, service delivery and monitoring; and, institutions’ cyclical planning/budgeting came to be based directly on performance quantity and quality. EPAGRI restructured its ATER strategy and systems, building in FAPO, youth and indigenous people; improved its planning by developing or adapting tools/methods for measuring results and impact; and, adopted FAO’s RuralInvest instrument for evaluating the economic results of Business Plans. SAR improved its professional staffing to prepare, manage and monitor special projects/programs, and its capacity to access/manage RDF resources. • FAPO moved towards a more business-oriented, institutional model: SEE, in partnership with EPAGRI and CIDASC, integrated and customized existing programs, such as EPAGRI’s ATER services, and CIDASC’s animal and phyto-sanitary services, building solid support for FAPO before initiating the physical, added-value investments. Those processes were incorporated during the restructuring of EPAGRI and CIDASC and are now mainstreamed legally and operationally in their regular service delivery. • Organization of water user committees/groups: While the planned IGASC was not created, the management of water resources, control and planning mechanisms were strengthened, especially by a robust base of hydrographic information systems and better-organized, informed and registered users, increasing their capacity both to respond to the State’s requirement for water use permits (outorgas) and efficient water monitoring processes, and to demand the State’s support. • State environmental management improved: The goal was to change farmer’s behavior to improve their socio- economic and environmental sustainability, thereby preventing the encroachment of degraded lands and promoting forest regeneration. To strengthen the overall approach, 74,000 water users were registered by SC Rural in CEURH (English: State Water Resources User Registry). The Secretariat of Sustainable Development (SDS) integrated its water resources database into the national-level system, markedly increased the issuance of water permits, improved its emergency warning system and dam inspections in line with state law, and initiated a system of water permits for irrigation. With SC Rural TA, River Basin plans were improved/consolidated, an essential condition for good water planning and management, benefiting smaller farmers by strengthening water security and disaster prevention/warning systems. Databases on forest stocks are improving monitoring capacity and are aligned to state PES and Conservation Credits goals. Many such actions required partnerships, an essential institutional and policy tool which expanded under SC Rural. Mobilizing Private Sector Financing 36. The project forged partnership with private sector organizations – FAPO, value-added entities and alliances - by financing from 20-80% of their Business Plans, depending on the investment and type of beneficiary. SEE reported that beneficiary cost-sharing of Business Plans was around US$19.7 million, garnered from beneficiary family savings, PRONAF loans and/or in-kind contributions. The BCR (2017) asserts that the stimulus provided by access to project resources encouraged private cost-sharing of business investments under Sub-component 1.2. Page 18 of 89 The World Bank Santa Catarina Rural Competitiveness ( P118540 ) Poverty Reduction and Shared Prosperity 37. The project had no explicit poverty objectives, but the target population of “Family Farmers” included high numbers of poor, and special attention was paid to indigenous peoples and youth. EPAGRI partnered with the federal poverty program Brazil sem Miseria, benefiting directly 4,316 very poor families targeted by that program with SC Rural-financed TA and organization to prepare/implement farm improvement proposals; and, delivered capacity- building and organizational support to around 1,920 indigenous farm families – among the poorest. Eight productive projects were financed through Indigenous Land Development Plans: fruit production, food security and apiculture (Xokleng ethnic group); two dairy production ventures and an animal feed plant (Xapeco Indigenous Territory); a community bakery (Guarani ethnic group in Terra Tekoa Marangatu); and, crafts and orchids (Guarani indigenous land of Itaty). Training and financing were aligned to the State’s strategy for retaining young families in rural areas. Some 55 courses in Digital Inclusion and Rural Tourism trained over 1800 youth. Some 902 young “graduates” of the project-sponsored Leadership, Management and Entrepreneurship courses received R$7.8 million of project resources through the SIF to implement their BP. An economic analysis of 31 such BP showed incremental net income per year of R$13,895 and an average IRR of 31%. Perception surveys showed high approval ratings and demand for these courses. Results were widely disseminated. EPAGRI and SAR partnered to convert this youth program into official state public policy. Other Unintended Outcomes and Impacts 38. N/A III. KEY FACTORS THAT AFFECTED IMPLEMENTATION AND OUTCOME A. KEY FACTORS DURING PREPARATION 39. The following preparation factors fostered the project’s successful outcomes: 40. While the SWAp entailed an inherently more complex operation, its technical strategy and operational logic were coherent. The project would address new issues which surfaced during MB II: FAF market access and the soundness of the framework for sustainable rural competitiveness. FAF competitiveness depended on two complementary approaches: direct collective added value and individual production systems investments; and, indirect, complementary investments in state development programs and policies in core, competitiveness-inducing activities. Support targeted pre-existing FAPO with better business skills, and new project-created FAPO, as well as individual FAF. The operational logic included landscape-level, decentralized, regional approaches. 41. The State was a sophisticated, knowledgeable client with the institutional and technical capacity to implement a SWAp. The SWAp’s disbursement conditions required the State to budget and implement programs while complying with results-based indicators. Distinguishing the Brazil SWAp was its use of DLI, which the client was obliged to monitor and report annually, to trigger disbursements. Monetization of the indicators was a transparent incentive for government to make the structural and institutional reforms needed by rural beneficiaries. Components were clearly-structured with the activities, prima facie, linked causally to the competitiveness agenda. The institutional structure and responsibilities were rational. The disbursement conditions/processes however, while articulated clearly and based on precedent, were complex, overly restrictive and not uniformly well-understood by the client (see below). Page 19 of 89 The World Bank Santa Catarina Rural Competitiveness ( P118540 ) 42. Project objectives were clearly stated, not overly ambitious in the context and encompassed achievable goals while the Results Framework was sound and the Theory of Change rational. They reflected sound analysis/diagnosis of key constraints affecting the competitiveness of the target population. They were not intended to resolve the gamut of rural challenges but to align rationally with and support government’s rural competitiveness agenda/programs. The State’s 2010 study produced a solid information base to support an appropriate design, activities and operational strategy to achieve this PDO, but its baseline utility was only to the PDO Theme 1 (see below and Section IV). Indicators and targets – with some caveats - were aligned with operational objectives and the causal relationship was evident. 43. Project design accounted for key lessons in rural competitiveness, natural resources management and rural poverty reduction. These included: market orientation and support contingent on verifiable market opportunities; FAPO participation at all stages of the investment cycle including tangible counterpart contributions; focus on value addition; multi-sector interventions including complementary private, productive investments and public, socio- economic investments; and, decentralized project implementation. Important lessons of the SWAp in the States of Ceará and Minas Gerais were factored into design, e.g., the focus on TA and on primary and secondary, DLI and conditionality. 44. Other preparation factors contributed to implementation challenges, including: 45. Targeted beneficiary groups and areas were identified and quantified at appraisal but the 2010 survey foreshadowed operational difficulties which might have triggered upstream design adjustments: The targeted FAPO were defined as per PRONAF (National Family Agriculture Program) criteria. SC Rural was to directly and indirectly reach around 90,000 small family farms, 2,000 rural workers and 1,920 indigenous families. Of these, 25,000 families were considered priority beneficiaries for direct financial support from the State’s Sustainable Investment Fund (SIF) to improve productive systems and value-added arrangements. However, the 2010 study showed: (i) regional concentration of viable groups in a project intended for state-wide coverage; (ii) smaller than expected size of groups; (iii) modest participation in groups of women and youth; and, (iv) the intensive, time- consuming effort likely to be needed to define, organize, formalize and train less-organized farmers in the pre- investment phase, and to prepare quality proposals and BP. 46. Monitoring design and arrangements for data collection were satisfactory but their focus was on DLI: there were insufficient mechanisms to assess outcomes or results for both themes of the PDO. The SWAp included eight, regular EEP and 13 DLI. Extensive secondary monitoring indicators (see Annex 1B) and TA supported the development and implementation of the required institutional/organizational capacity and systems to track and report outputs. The goal was to create sustainable capacity to conduct results-based management including the development and vetting of a hierarchy of sector indicators, regular, systemic monitoring and reporting, feeding back into budget processes and accountability. This approach was successful in practice, but the measurement of outcomes and results required early re-assessment to ensure equal focus on PDO Theme 2 and better illustrate inter- Theme causality. See Section IV, M&E. 47. Identified risks both to the PDO and components were prescient but incomplete. The project was inherently riskier than a SIL. Mitigation measures leaned heavily on the State’s proven performance, technical assistance and training and institutional/stakeholder commitment. Risks not discussed or rated too low, included: multiple challenges at the pre-investment phase; shortages and turnover of skilled technical and operational professionals Page 20 of 89 The World Bank Santa Catarina Rural Competitiveness ( P118540 ) which affected several key institutions and activities, most directly, the WRM elements; and, uneven institutional understanding of and commitment to, the SWAp mechanism and rules. Other risks such as fiscal constraints on state counterpart availability and institutional staffing, were not predictable in 2010 but a prescient risk analysis might have factored them in. B. KEY FACTORS DURING IMPLEMENTATION 48. Factors subject to government and/or implementing entities’ control: 49. Borrower agencies’ experience and capacity proved critical in the initial years. The transition to a new State Government and the resulting unclear management and bureaucratic situation in project executing institutions caused delays. The time, manpower and resources needed to identify, organize and train farmers to ensure quality BP was also under-estimated at appraisal. Lack of technical professionals in key agencies affected momentum, and was increasingly difficult to resolve in the fiscal climate. SEE disseminated the project to “equalize” information state- wide; greatly expanded the scope and intensity of TA/training to stimulate farmer demand; improved institutions’ grasp of the SWAp; implemented a staffing plan; and, accelerated launching of the Physical/Financial Monitoring System (SAFF). 50. The 2013 Mid-Term Review was an important diagnostic exercise which influenced subsequent project implementation and outcomes. The MTR’s diagnostic, randomized assessment of PE with Business Plans and Property Development Plans and extensive consultations with state counterparts revealed the degree of achievement as well as issues needing close attention: procurement, disbursement and the need to adjust the Results Framework/DLI. Progress on the PDO Indicators was positive but WRM, roads and rural tourism faced constraints. The project was restructured in 2014, formalizing agreements with project agencies on actions to accelerate project execution and increase disbursements. The pace of both increased substantially. 51. EPAGRI, in partnership with CIDASC and other agencies, played a pivotal role in the project’s success. This role covered: beneficiary prioritization and organization; systems development; development and consolidation of value chains and local productive arrangements in cooperation networks; preparation of PE; training and TA; research and studies; training and preparation of investment proposals for rural youth; and extension services for indigenous peoples and in the Ecological Corridors. EPAGRI also restructured its rural extension services (ATER) and organized training in and testing of FAO’s simplified, participatory results evaluation system, working with regional ATER coordinators. 52. SEE’s established system of in situ oversight of investment projects (PE) was an important factor in their success. SEE ensured that local counterparts in the project’s administrative regions were engaged and oversight was conducted by three teams. The objective was not only correct execution, but a uniform regional understanding of project activities, and to demonstrate to beneficiaries that government was present, transparent and serious about the use of public resources. It also kept beneficiaries alert to the implementation schedule as well as the effectiveness of the support provided. Surveys showed unanimous beneficiary and stakeholder approval of SEE’s system/approach. 53. Rural extension professionals and FAPO leaders showed weak adherence to the PE concept early on, but SEE’s proactivity secured their support. Demand was initially limited to cooperatives and pre-existing agribusiness groups; less-structured, weaker producers of primary products faced challenges in formulating/presenting demands for Page 21 of 89 The World Bank Santa Catarina Rural Competitiveness ( P118540 ) project investments. SEE organized regional events to exchange experiences and work with PE proposals, backed by extensive training. SEE promoted standardization of PE presentation and BP. The readily-accessible Makemoney software was used for all complex enterprises and a Property Development Plan became standard. SEE’s quality- enhancement process clearly facilitated the operational stage. 54. Weak understanding of SWAp rules had implications for project execution but effective solutions were found. The MTR found that SEE had not requested significant disbursement due to misinterpretation of the SWAp’s “70% rule”. The latter was being applied using only eligible expenditures and not total execution of EEP, preventing the project from reaching the required 70%. Actual disbursement should have been around US$16.15 million, 29% of the loan. Other disbursement rules were found to be limiting the project’s financial execution, despite strong DLI performance. Restructuring in 2014 resolved these issues (see Section 1) but a related situation recurred in 2016 with key institutions believing the project was operationalized through the SIL. The lesson for Bank mentoring is clear. 55. Strengthening WRM within River Basins was challenging but successful, although some issues defied resolution. Improved WRM, especially at the River Basin level, was an important project objective with multiple activity lines. DRHI did well on training and awareness-building but had difficulty mobilizing and/or retaining qualified professionals. Water agencies resisted collaboration and did not grasp basic resource management functions. DRHI lacked essential systems/tools and, complicating its role, water rights, procedures and technical aspects were poorly- defined. The Bank urged SDS/DRHI to take leadership on water reform, diagnose institutional needs and plan a strengthening strategy, and to be more consultative to promote collaboration. EPAGRI was urged to permit its technicians to remain in DRHI at least until project closing, and/or ensure that their knowledge was transferred before leaving. 56. Political and fiscal factors prevented the creation of a new water resource management entity. The new State Government (2012) vacillated on creating IGASC, preferring to establish an environmental management institution with an autonomous WRM entity. Political commitment was low and, as time passed, growing fiscal constraints impeded institutional expansion. IGASC became non-viable: State thinking shifted to strengthening the DRHI team and improving salaries. Meanwhile, EPAGRI was ambivalent about lending its technical staff to DRHI, fearing the depletion of its own staffing in a tight fiscal situation, as well as State Accounting Office restrictions on the transfer of professionals across public institutions. DRHI never fully-resolved staffing and related problems, suppressing its performance. 57. Factors subject to World Bank control: 58. Bank procurement rules created difficulties. Institutional efforts to contract essential technical expertise were challenging. The project could not pay reimbursable expenses to third parties outside the State, which prevented the contracting of individual, external consultants. DRHI, with its chronic staffing issues, insisted on contracting under Brazilian Procurement Law 8,666 but the Bank considered such expenditures ineligible under Bank rules which also required, under the SWAp/SIL hybrid, that a percentage of the activity be SWAp and the rest SIL. Also, misunderstanding about the application of Brazilian procurement law created a complex situation for the acquisition of goods and services by FAPO until joint action by SEE, SAR, the State Court of Accounts and Secretary of Finances resulted in simplified procedures based on three price quotations, built into the 2014 restructuring. This risk was not identified ex-ante. Page 22 of 89 The World Bank Santa Catarina Rural Competitiveness ( P118540 ) IV. BANK PERFORMANCE, COMPLIANCE ISSUES, AND RISK TO DEVELOPMENT OUTCOME A. QUALITY OF MONITORING AND EVALUATION (M&E) M&E Design 59. SC Rural at appraisal included eight regular Eligible Expenditure Programs (EEP) and thirteen Disbursement- Linked Indicators (DLI), the latter within a broader Results Framework (RF). These were supported by comprehensive secondary indicators which the State committed to monitor for the SWAp. SEE customized and strengthened state monitoring systems to manage the project’s physical and financial progress. The design of the PDO Indicators was straightforward: a single indicator “increase in total value of annual sales for participating FAPO” would be the primary evidence that project support services had been effective. The second PDO Indicator “coordinated implementation of six public programs to improve the rural business environment” with its sub-indicators, involved primarily outputs. This framework addressed both the big picture and specific farmer needs. The RF was generally sound, with minor exceptions (see Annex 7). Ex ante, mid-term and ex-post evaluations were planned, using an experimental method with Treatment and Control groups. However, there were insufficient mechanisms to assess the gamut of outcomes or results; and, without compensating efforts, the scope of impact evaluation was likely to be limited to PDO Theme 1, since only for these direct beneficiaries and a similar non-beneficiary group, was there baseline data from the 2010 EPAGRI study. M&E Implementation 60. The planned mid-term evaluation was not feasible operationally, and because of scant information on farm enterprises supported in the initial years. The ICR asserts that a strong baseline exercise could have been mounted in the first year to fill gaps and include Theme 2. The project did however, support a range of complementary M&E efforts including FAO’s new methodology for assessing the financial results of PE11 based on farmers’ experiences; and, complementary studies by the executing agencies on Theme 2 activities.12 Monitoring and reporting to the Bank on the DLI, RF and secondary indicators/outputs was efficient throughout (see Annex 1). Restructuring in 2014 and 2016 adjusted DLI/RF and some targets for clarity, relevance and/or measurability (see Annex 7). None of these changes affected the Theory of Change. The agreed impact study using random sampling was not feasible.13 A quasi- experimental methodology was agreed, using a “difference in difference” methodology and propensity score matching. The impact evaluation study was completed in 2016 and reviewed by the Bank. M&E Utilization 61. System data on DLI compliance was used for decision-making and loan disbursements. The secondary indicators were an important planning/budgeting tool used by the executing agencies for results-based and project management. FAO’s assessments of financial results supported ATER planning at decentralized levels (EPAGRI’s Technical Management Units) and the final EFA (Annex 4). Comparing the with and without BP situation allowed 11 FAO. Ruralinvest: Formulation and Assessment of Small-scale Rural Investments (http://www.fao.org/support-to- investment/knowledge-resources/learning-tools/ruralinvest/en/) 12 Land regularization (SAR); phytosanitary certification (CIDASC); watershed management (DRHI); and, rural roads (SIE) (Annex 6). 13 Experience showed that few BP involved more than 10 families, making the number of investments with effects by MTR too small; and, beneficiaries were not known a priori, hindering random selection and the definition of beneficiary and control groups. Page 23 of 89 The World Bank Santa Catarina Rural Competitiveness ( P118540 ) ATER agents, FAPO and farmers to visualize the incremental contribution of investments, not captured by the ex- ante analysis conducted during PE and PN preparation. The qualitative assessment of results by executing agencies supported the ICR. Importantly, SC Rural and executors grasped the importance of advanced planning for such outcome monitoring. Finally, the impact results enabled the State Government to demonstrate evidence to the public, the Federal Government and the Bank. Even so, given that the evaluation covers agro-industries and non- farm enterprises, future impact evaluation programs need to plan for assessments at the farm level and to cover all key concepts in the PDO. Justification of Overall Rating of Quality of M&E 62. SC Rural conducted M&E activities with the DLI/RF indicators constantly on the radar screen, but the evaluation program/framework had some design weaknesses, primarily the skew towards the EEP/DLI nexus. Responsible agencies identified this deficiency early on, and designed/executed complementary studies on the perceived results of key investment lines. The program overcame unanticipated circumstances which prevented the application of the impact evaluation methodology foreseen in the PAD. Considering this capacity to adapt and resolve, along with the commitment to M&E more generally, and moderate nature of shortcomings, the overall rating is Substantial, but important lessons were learned. B. ENVIRONMENTAL, SOCIAL, AND FIDUCIARY COMPLIANCE 63. The project was rated as Category B and triggered: Social safeguards OP/BP 4.12 Involuntary Resettlement and OP 4.10 Indigenous Peoples; and, Environmental safeguards OP 4.01 Environmental Assessment; OP 4.04 Natural Habitats; OP 4.36 Forests; OP 4.09 Pest Management; and, OP 4.11 Physical Cultural Resources. Bank social and environmental safeguards policies would apply to all SWAp EEP expenditures, with specific focus on activities in agricultural production/processing, WRM, tertiary rural roads rehabilitation and restoration of agro-ecosystems and degraded forest eco-systems, as they appeared to represent the more important safeguards risks. See below. 64. Social Safeguards: 65. Involuntary Resettlement (OP/BP 4.12): To minimize potential involuntary resettlement events caused by rural road investments, SEE and SIE strategically financed existing stretches of roads and limited adjustments in areas of public domain. No works were carried out in private areas. Migration measures for road and other investments were governed by a Resettlement Policy Framework and no adverse impacts requiring involuntary resettlement are referred to in Bank supervision documents. Compliance with this safeguard is assessed as satisfactory. 66. Indigenous Peoples (OP 4.10): The project’s work with indigenous populations successfully complied with the project’s Indigenous Peoples Planning Framework (IPPF) and performance is judged highly satisfactory. It was based on annually reviewed Development Plans for Indigenous Territories, using the MB II work strategy. Technicians provided services in a culturally appropriate manner in eight Indigenous Territories with the largest populations. EPAGRI internalized ATER for the indigenous into its regular municipal-level work plans. Institutional partnerships proved essential: with municipal authorities, universities, NGOs, Bank of Brazil, FUNAI and FUNASA. Changes in self- esteem, cultural valuation and nutritional habits were evident, along with other robust and measurable results. Eight subprojects valued at R$1.5 million benefited directly 411 indigenous families, about 20% of all families receiving EPAGRI’s ATER services under the project. Nine Reference Units were established to demonstrate improved technologies and income-generating productive activities. Indigenous groups also received Integrated Economic- Page 24 of 89 The World Bank Santa Catarina Rural Competitiveness ( P118540 ) Ecological Systems investments (Portuguese: SIEE) for dairy, oilseeds and agro-forestry. 67. Environmental Safeguards: 68. The project had a strong environmental conservation, protection and educational ethic with many activities designed to directly benefit the environment. Compliance with environmental safeguards is judged highly satisfactory. Activities with potential to generate impacts included: (i) productive and value-adding investments; (ii) environmental management activities; and, (iii) public infrastructure. SEE organized and conducted environmental management training of regional technicians responsible for designing and monitoring the PE. All PE triggered Environmental Assessment and Natural Habitats safeguards, while the Pest Management safeguard was only triggered in PE involved with fruits and vegetables. A 2015 compliance evaluation concluded that all PE conducted an environmental assessment, complied with relevant environmental laws, and had planned/implemented mitigation measures to avoid and/or minimize possible environmental impacts from activities. Finally, the rehabilitation of tertiary rural roads was an activity with moderate environmental impacts. Seven road projects were evaluated in loco, at randomly selected points. Some 85.3% of the evaluated sections presented high environmental sustainability, 11.4% regular and only 3.2% low. The technology showed certain limitations on likely sustainability, but the roads evaluated showed better environmental sustainability than similar roads in most state municipalities. 69. Fiduciary Compliance: 70. Financial Management and audit: The ISR records demonstrated a consistent and satisfactory Financial Management (FM) performance and overall fiduciary risks were rated low throughout. Even though Bank FM supervision identified delays in the customization of the Physical and Financial Monitoring System (SAFF) in the early years of the project, information on financial and physical execution was provided on time and with acceptable assurance and accuracy. During the project, and as part of the effort to introduce and institutionalize results-based management, a Public Expenditure and Financial Accountability (PEFA) study was conducted and results are being used by the SC Secretariat of Planning to guide the State’s investment portfolio. Finally, audit performance was uniformly strong. Annual, independent audits of Project accounts were delivered on time and produced clean, unqualified opinions for all years. The audit for 2017 is due by April 30, 2018. The final ISR rated FM performance as Satisfactory. 71. Disbursement: As discussed in previous sections, project disbursement performance was low up to the MTR, due to the restrictive SWAp disbursement rules, and executor institutions’ weak understanding of how they worked. Once the SWAp rules were liberalized to allow financial resources to follow physical progress, and executing agencies were re-briefed on how the SWAp disbursement framework functioned, disbursement picked up and 100% of loan funds were disbursed by end of the project. Clearly, such situations - at least in Brazil - need continuous Bank monitoring. 72. Procurement: Although the Borrower team had accumulated considerable procurement experience under the previous Bank-financed projects, the SWAp modality introduced a new layer of complexity. This caused delays in the acquisition of goods and services by FAPO and the transfer of project resources to them, stemming from an assumption that the project’s use of public funds mandated application of the Brazilian Procurement Law 8.666/93. A joint effort by SEE, the State Court of Accounts and the Secretary of Finance resulted in the project’s adoption of a simplified budgeting system for procurement, using three price quotations/budgets, for any value. Such changes were evaluated by independent audits conducted by the State Court of Accounts, without any objection. For the selection and contracting of Category 2, SIL-financed activities, Procurement Plans were prepared based on norms Page 25 of 89 The World Bank Santa Catarina Rural Competitiveness ( P118540 ) and procedures stipulated in the IBRD Guidelines. Once those difficulties were addressed, procurement processing stabilized and the final ISR rated Procurement as Satisfactory. 73. Project Costs: As shown in Annex 3, and discussed in Section II Efficiency, with few exceptions, the actual costs of components/subcomponents differed markedly from PAD estimates (and restructured), most notably in the case of sub-components 1.1 (Pre-Investment) and 1.2 (Productive and Value-added Investments); and, subcomponent 2.5 (Rural Tourism). The ICR also notes very high restructured estimates in certain cases, given final tallies. In the case of Pre-Investment costs, the costly intensification of pre-investment efforts was matched by an exceptionally high level of achievement; for subcomponent 1.2, the scale of individual investments was smaller than envisaged; and, rural tourism costs were much higher than expected, for reasons explained in Section II Efficiency. C. BANK PERFORMANCE Quality at Entry 74. The Bank’s performance in ensuring Quality at Entry (QAE) is assessed based on a series of positive and negative factors. Positive factors include: (i) justified introduction of the SWAp instrument, given the SoSC’s known technical and institutional capacity, rural strategy and farmers’ needs; (ii) effort to heed the lessons of other Brazilian SWAp; (iii) preparation of SC Rural by the MB II Bank team, facilitating dialogue and design; (iv) sound project risk assessment, with some exceptions; (v) effective inclusion of youth and indigenous peoples; (vi) strong technical support and consultancies during preparation to incorporate a detailed planning and business cycle for the productive and value-added investments; and, (vii) exceptionally strong focus on TA and training in project design, directed to beneficiaries, sector technical teams and other stakeholders. Weaknesses include: (viii) under-estimation of identified risks through low ratings and/or weak mitigation measures; (ix) inadequate focus in M&E design on impact evaluation of Theme 2 public services - monitoring was prioritized because it anchored the SWAp and was critical for the DLI, but it shifted attention to processing and disbursement; (x) under-estimation of the challenges in mobilizing and preparing FAPO/FAF for the investment phase; (xi) restrictiveness of the SWAp disbursement procedures and their impact on the project’s financial performance even with strong physical progress; and, (xii) inadequate perception, despite long experience with MB I and II, of the depth of administrative weakness in WRM. Quality of Supervision 75. Bank supervision performance is assessed on the following: (i) efficient use of the allocated supervision norm to provide effective, well-coordinated support through formal supervision missions, frequent informal visits and remote assistance over the project lifetime; (ii) transparent implementation and performance reporting, well- documented in Aide Memoires, ISRs, PPA, FM and other reports; (iii) stable task team leadership and staffing of the multi-sector Bank team for the project duration and consistent Bank efforts to help the Borrower resolve identified institutional, technical and operational problems; (iv) proactive, flexible Bank engagement with senior state authorities to leverage political and budgetary support for implementation and outcomes; (v) experienced safeguards support, crucial to guaranteeing the quality and results of activities for indigenous people and youth, and to implementing the ambitious environmental and water resources interventions; (vi) strong fiduciary support within a complex inter-institutional framework, with consistent, timely follow-up; and, (vii) flexible, constructive and adaptable approach to restructuring when necessary to facilitate operational processing and disbursement. The ICR notes the rating of Highly Satisfactory for Development Objective in the final ISR, a rating not based on the ICR’s more holistic view of the project. Page 26 of 89 The World Bank Santa Catarina Rural Competitiveness ( P118540 ) Justification of Overall Rating of Bank Performance 76. On balance, accounting for both the strengths and flaws of the preparation phase as they affected quality at entry, along with a generally strong supervision performance, Bank performance overall is rated Moderately Satisfactory. D. RISK TO DEVELOPMENT OUTCOME 77. Risk to Development Outcome is rated Moderate, based on the following factors: 78. The institutional response to Family Farmers is more dynamic: EPAGRI and CIDASC now incorporate the project’s FAPO and FAF in their regular budget and planning and have organized large-scale promotional events to expand market access for FAFs, partnering with the Federal University of Santa Catarina (UFSC). Government also established a targeted, low-cost credit line to consolidate and expand investments in the SC Rural-supported Business Plans, and has created the Center for Innovation in Family Agriculture – NITA, supported by the Bank Launchpad Initiative. 79. WRM is better-positioned for the post-project phase. SDS conducted an internal reorganization in the final year and continued to contract delegate entities, ensuring an institutional and legal basis for the adequate allocation of resources by FEHIDRO (State Water Resources Fund). The River Basin Committees are better-positioned to implement their Basin Plans. SDS’ steadily increasing issuance of water use permits also indicates more efficient and sustainable management. 80. FAPOs’ financial contribution to their BP indicates sustainability. FAPO and Family Farmers contributed close to US$20.0 million to their BP suggesting the valuation they placed on the opportunity. Further, the demonstrated sales results and intensity of the SC Rural outcomes dissemination effort is likely to boost sustainability of the physical investments themselves, and farmers’ commitment to further consolidation and growth. 81. Ecological Corridor governance and sustainability is positive: The Ecological Corridors were instituted by a State decree and established local Management Committees. This has created a forum and an inter-institutional management process, with the participation of public and private organizations and local communities, building commitment to the permanence of the corridors. Further, FATMA and SDS are consolidating the PES and SIEE to ensure the continuity of project interventions. This is a longer-term but very promising effort. 82. Executor institutions are budgeted to sustain key achievements: Government provided budget and financial resources to sustain – and where necessary complete - project activities beyond closing, consolidating the commitments made by individual executor institutions, project organizations and farmers, for the short to medium- term. 83. EPAGRI and other executors incorporated/integrated the project's operational methodology into their own. EPAGRI’s budget planning and allocation mechanisms now take technical elements and targets into account, using employee awards to achieve performance targets. Exceptions appear to be SIE and SOL. SIE faces challenges in implementing and monitoring activities on municipal roads, which are the responsibility of municipal governments. SOL’s structural and staffing issues affected its performance, but collaboration with EPAGRI brought visibility and Page 27 of 89 The World Bank Santa Catarina Rural Competitiveness ( P118540 ) better working conditions. 84. Sustainability of rural roads investments seems uncertain: Demand for rural roads investments stemmed from FAPO Business Plans and a transparent framework of standards and responsibilities was established. The project’s emphasis on governance however, may be fragile, and some erosion of the technical procedures for road maintenance could occur. There is no formal mechanism for monitoring and/or requiring municipalities to properly maintain rehabilitated roads, except for pressure exerted by proponent organizations and local, resident beneficiaries. The outlook is uncertain. 85. The State Government is seeking follow-on support from the Bank. The State submitted a Carta Consulta to the Federal Government, based on consultation with public and private sector interests and academia to understand remaining challenges and next steps. A seven-year IPF operation totaling US$ 180 million, with a Bank loan of US$126 million, is proposed for: modernization of rural policies and mechanisms; and, competitiveness-related infrastructure, e.g., renewable energy, agro-logistics, rural sanitation, preservation/recovery of environmental assets, technology innovation and further expansion of rural connectivity. V. LESSONS AND RECOMMENDATIONS 86. Lack of familiarity with innovative and complex project instruments such as the SWAp entails implementation risks regardless of the experience and proven capacity of the client. The Bank needs firstly, to carefully define the rationale for using this instrument as opposed to others, work with the client to prepare the technical and administrative teams in all executive institutions to commit to its use, and understand its values and rules. Such mentoring must be repeated periodically on the assumption that staff turnover, electoral change and leadership transitions erode and fragment corporate understanding of the SWAp and must be remedied so that the client can execute the instrument properly. 87. The complexity of the pre-investment phase of projects seeking major behavioral transformation in FAPO should not be under-estimated. The client, with Bank guidance, needs to develop a plan, realistic timetable and the human/financial resources for beneficiary identification and organization, and the preparation, approval and financing of Business Plans. Global evidence from productive alliance and value chain operations suggests that a protracted foundational period is the norm. The client needs to disseminate the project early and widely to generate interest in participating, while building appropriate support teams in executive institutions and at decentralized levels. Bank supervision can motivate, mentor and support the client to resolve issues causing delays in this process. 88. The pre-existing organizational level of Family Farmers is a key determinant of their participation in such projects, at least in the initial years. The Bank needs to support the client in exerting a strong and structured effort early on to reach out to weaker but promising potential beneficiaries with information, mobilization and organizational support designed explicitly to promote their timely participation in investment activities. The goal is to promote stronger overall demand earlier, and to accelerate the investment phase, limiting the dampening effects of a protracted foundational period. 89. Inadequate supply of or the conditions for retaining, high quality technical professionals, can negatively affect the trajectory and outcomes of complex project activities. The client needs to provide the minimum conditions for accessing such resources and/or retaining them, while executive institutions need to define upstream their staffing and consultant needs and how they will be obtained. The Bank has a crucial role in helping the client identify staffing Page 28 of 89 The World Bank Santa Catarina Rural Competitiveness ( P118540 ) constraints and planning for their resolution. This requires continuous Bank supervision focus and proactivity. Loan covenants can be useful but do not guarantee that the client will follow through, especially under conditions of economic downturn and fiscal tightness. Flexible arrangements which can bypass bureaucratic/other hurdles, may be needed. 90. Successful support for Indigenous Peoples results from a combination of culturally sensitive and participatory planning and capacity building, backed by financial resources for productive investments. The use of participatory Indigenous Lands Development Plans to anchor project actions proved highly positive and simple to replicate. The Bank can assist relevant client institutions to develop innovative methodologies adaptable to specific groups, stressing environmental, social and income generating agronomic elements best executed via multi-disciplinary teams. The client is responsible for ensuring the formation of teams, to include field technicians, social specialists and legal professionals. Bank supervision can foster the essential inter-institutional collaboration which makes this work. 91. The financial motivation to demonstrate achievement under SWAp DLIs through intensive output monitoring can erode focus on evaluation mechanisms which capture the breadth of such projects’ impact. It is recommended that Bank and client teams collaborate upstream to define an evaluation program which is feasible, methodologically sound and captures the full range of impacts typical of a multi-sector operation. The Bank’s access to DIME and FAO specialists – brought in early – can improve the quality of evaluation work. Both the Bank and client need to be aware of the risks associated with baseline formation and the potential pitfalls inherent in under-estimating the lead time required to execute the full investment cycle across sectors, i.e., having something concrete to evaluate. . Page 29 of 89 The World Bank Santa Catarina Rural Competitiveness ( P118540 ) ANNEX 1. RESULTS FRAMEWORK AND KEY OUTPUTS A. RESULTS INDICATORS A.1 PDO Indicators Objective/Outcome: Objective Outcome 2: Increase the competitiveness of Family Agriculture Producer Organizations (FAPO) Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Increase in total value of Percentage 0.00 30.00 62.00 annual sales for participating FAPOs 05-Mar-2010 30-Sep-2016 24-Apr-2017 Comments (achievements against targets): Exceeded: 62% of targeted 30% The EPAGRI/CEPA (2016) impact evaluation showed that sampled beneficiary Family Farmers (Treatment Group) increased the value of their sales in the period from 2009 to 2015 by 118.4% compared to 44% for the Control Group. Note: Portals did not permit the entry of percentage signs for values in this case. Objective/Outcome: Objective Outcome 1: Provide support for an improved framework of structural, competitiveness-inducing public services activities. Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Coordinated implementation Text 0 6 public programs 6 public programs of six public programs to improve the rural business 05-Mar-2010 30-Sep-2016 30-Jun-2017 environment, as measured Page 30 of 89 The World Bank Santa Catarina Rural Competitiveness ( P118540 ) by: share of state's water Text 0 65% 65% resources under decentralized and 05-Mar-2010 30-Sep-2016 30-Jun-2017 participatory planning and management. share of state's territory Text 0 10% 10% managed under an "ecological corridor" 05-Mar-2010 30-Sep-2016 30-Jun-2017 concept ( coexistence of sustainable production and preservation) share of public financing to Text 0 60% 60% family agriculture enterprises channeled 05-Mar-2010 30-Sep-2016 30-Jun-2017 through the new rural extension/Technical Assistance strategy Restructured Sanitary Text 0 2,740 2,788 Phytosanitary and Services (SPS), generating the 05-Mar-2010 30-Sep-2016 30-Jun-2017 following results in support of FAFs: (ii) Number of enterprises Text 440 460 (Increm) 477 (Increm) Page 31 of 89 The World Bank Santa Catarina Rural Competitiveness ( P118540 ) legalized, complying with 05-Mar-2010 30-Sep-2016 30-Jun-2017 sanitary standards (iii) Number of farms Text 0 700 728 certified for absence of animal tuberculosis and 05-Mar-2010 30-Sep-2016 30-Jun-2017 brucellosis (i) Number of Family Number 6000.00 2740.00 2740.00 2788.00 Agriculture production and processing units 05-Mar-2010 30-Jun-2017 registered and certified as complying with phytosanitary requirements rural schools carrying out Text 0 600 1,000 1,437 interdisciplinary actions under PEEA (State Environ. 05-Mar-2010 30-Sep-2016 30-Sep-2016 30-Jun-2017 Education Policy) 100% rehabilitation of rural Text 0 100% 110.4% roads associated with business plans 05-Mar-2010 30-Sep-2016 30-Jun-2017 Comments (achievements against targets): Achieved: 100 % The project successfully implemented in a coordinated, cross-institutional manner, all six programs as measured by the indicators (a) to (e) (and sub-indicators) presented below. It should be noted: (i) the post Mid-Term Review restructuring of June 2014 adjusted the sub-indicators of program (e) (Restructured Sanitary and Phytosanitary Services (SPS)) as follows: (i) the sub-indicators "Number of registered and certified crop and forest production units" and "Number of registered and certified fruit processing units" were dropped and replaced by an aggregate indicator (also a DLI) of similar meaning: "Number of Family Agriculture production and processing units registered and certified as complying with phytosanitary requirements", with the target of 2,740, a slight increase over the PAD target of 2,500; (ii) the rural roads PDO target and results are Page 32 of 89 The World Bank Santa Catarina Rural Competitiveness ( P118540 ) expressed in percentage terms but reflect a similar, numerical target under the Intermediate Outcome Indicators. The original (PAD) target was 1300 km of rural roads rehabilitated. However, this was indicative only as kilometers rehabilitated was linked directly to Business Plan demand and at approval, no Business Plans had been approved. Further, two pilot road rehabilitation exercises showed that costs per km were much higher tan foreseen. The target was formally reduced to 430 km in June 2014. The project achieved 474.83 km, 110.4% of the revised target; (iii) Results for indicators under the six programs are presented below. Note that the Portals does not permit comments for the six public programs or their "sub-indicators" as the system does not account for SWAp-type operations. A.2 Intermediate Results Indicators Component: Component 1: Family Agriculture Competitiveness and Increased Access to Markets Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Number of existing, small Number 0.00 500.00 723.00 agro-businesses made compliant with sanitary and 05-Mar-2010 30-Sep-2016 30-Jun-2017 phytosanitary (SPS) standards, and new agro- processing and non- agricultural businesses created Comments (achievements against targets): Exceeded: 144.6% Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion New added-value Number 55.00 138.00 259.00 Page 33 of 89 The World Bank Santa Catarina Rural Competitiveness ( P118540 ) arrangements established 05-Mar-2010 30-Sep-2016 30-Jun-2017 (63) or strengthened (75) (i.e. alliances / networks and cooperatives) Comments (achievements against targets): Exceeded: 188% The target of 138 was incremental over the baseline of 55 with an end-of-project total of 193. Achievement was 259. Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Number of ancillary, climate- Number 0.00 20000.00 20514.00 59834.00 resilient production systems improvement and tourism 05-Mar-2010 30-Sep-2016 30-Sep-2016 30-Jun-2017 plans executed through subprojects, with project support Comments (achievements against targets): Exceeded: 225% Some 59,834 farm systems improvement plans and tourism plans were implemented for individual Family Farmers over six years, 21,491 of which were financed by Sustainable Investment Fund (SIF) grants. Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Number of tourism plans Number 10.00 30.00 20.00 5.00 implemented with project support 05-Mar-2010 30-Sep-2016 30-Sep-2016 30-Jun-2017 Comments (achievements against targets): Not achieved: 25% The target of 30 was incremental to the baseline of 10. The target was formally reduced Page 34 of 89 The World Bank Santa Catarina Rural Competitiveness ( P118540 ) in 2014, Rural tourism activities were a small sub-component with potentially important income-generation effects. Design and implementation of the planned "itineraries" proved more difficult than envisaged. However, this indicator does not show the breadth of achievement within the EEP, which the Bank agreed post-MTR to fully-finance as the indicator activity/value was so small it did not permit SOL to meet the SWAp disbursement conditions. A wide range of activities were financed and achieved. Component: Component 2: Complementary Public Investments for Rural Competitiveness Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Number of Executive Number 0.00 2.00 2.00 Secretariats (“Entidades Delegatarias”) formalized by 05-Mar-2010 30-Sep-2016 30-Jun-2017 a legal instrument with the State Government Comments (achievements against targets): Achieved: 100% Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Number of additional Number 0.00 16.00 16.00 tenured technical staff in the Water Resources Directorate 05-Mar-2010 30-Sep-2016 30-Jun-2017 Comments (achievements against targets): Achieved: 100% This indicator was new/formally added by the June 2014 restructuring to obligate DRHI to find/contract the additional professionals needed to fulfill its project responsibilities. Indicator Name Unit of Measure Baseline Original Target Formally Revised Actual Achieved at Page 35 of 89 The World Bank Santa Catarina Rural Competitiveness ( P118540 ) Target Completion Number of new regular Number 510.00 176.00 176.00 Technical Assistance and Rural Extension professional 05-Mar-2010 30-Sep-2016 30-Jun-2017 staff allocated by EPAGRI in priority project municipalities, by CIDASC to phytosanitary certification and by FATMA to SIEE Comments (achievements against targets): Achieved: 100% EPAGRI played a crucial role in modernizing and restructuring ATER services, and its decentralized approaches, operating at the regional and municipal levels contributed to Farmers' productive and financial results. CIDASC boosted its professional cohort to expand phytosanitary services to FAF/FAPO, and FATMA was instrumental in successful introduction of the SIEE including through dedicated professional staffing. Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Kilometers of rural roads Number 0.00 1300.00 430.00 474.83 rehabilitated associated with business plans 05-Mar-2010 30-Sep-2016 30-Sep-2016 30-Jun-2017 Comments (achievements against targets): Exceeded: 110.4% The original target of 1,300 km was indicative since the number of km in practice was linked directly to Business Plan demand and there were no Business Plans at the time of project approval. Also, a preliminary pilot road rehabilitation exercise showed much higher than expected costs/km. The target was formally reduced to 430 km by the June 2014 Restructuring and the project achieved 474.83 km. Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Page 36 of 89 The World Bank Santa Catarina Rural Competitiveness ( P118540 ) Farm properties with SIEE Number 0.00 200.00 461.00 (Integrated Economic- Ecological Systems) 05-Mar-2010 30-Sep-2016 30-Jun-2017 implemented (SIEE of livestock [meat and milk], grains, forestry, SAF and tourism) Comments (achievements against targets): Exceeded: 230.5% Some 461 farm properties introduced SIEE strengthening their productive arrangements through a focus on natural resources management. Implementation of SIEE was done through TA, capacity building, financial incentives including incentives obtained through the Sustainable Investment Fund - SIF) for adoption of improved production systems, or to establish private protected areas.. Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Hectares of forests under Number 0.00 950.00 1631.00 Conservation Credits 05-Mar-2010 30-Sep-2016 30-Jun-2017 Comments (achievements against targets): Exceeded: 171.7% Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Number of self-declaratory Number 3.00 54050.00 65000.00 74419.00 water users registered in River Basins 05-Mar-2010 30-Sep-2016 30-Jun-2017 30-Jun-2017 Comments (achievements against targets): Exceeded: 114.5% The indicator was added by the June 2014 restructuring with a target of 54,050 self- Page 37 of 89 The World Bank Santa Catarina Rural Competitiveness ( P118540 ) declared water users. The target was increased by the 2016 restructuring given strong performance in registration activities. Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Studies completed to Number 0.00 2.00 2.00 implement target Ecological Corridors supporting 05-Mar-2010 30-Sep-2016 24-Apr-2017 biodiversity-friendly land use mosaics Comments (achievements against targets): Achieved: 100% The studies were conducted but the project went further and actually implemented/formally established the Ecological Corridors (EC) in the Timbo and Chapeco regions; and, tools were developed and implemented through partnerships and specialized consultancies: the Forest Area Registry; Conservation Credit System (SICC); and, Ecological Corridor Management Groups. Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Number of Pilot Digital Number 0.00 10.00 30.00 43.00 Inclusion proejcts implemented with internet 16-Mar-2015 30-Sep-2016 30-Sep-2016 30-Jun-2017 connection to support enterprises connected to networks Comments (achievements against targets): Exceeded: 143.3% The Digital Inclusion projects were especially attractive to rural youth. See main text Section B. Indicator Name Unit of Measure Baseline Original Target Formally Revised Actual Achieved at Page 38 of 89 The World Bank Santa Catarina Rural Competitiveness ( P118540 ) Target Completion New, market-oriented, Number 0.00 1.00 1.00 regional, rural extension strategy implemented 05-Mar-2010 30-Sep-2016 30-Jun-2017 Comments (achievements against targets): Achieved: 100% EPAGRI restructured its operational model to implement the project's new approach to supporting the sustained competitiveness of FAPO and FAF; and, to mainstream as clients of its extension services, rural youth, indigenous peoples and artisanal fishing groups. Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Agro-livestock SPS Services Number 0.00 1.00 1.00 restructured to include specific support for FAPO 05-Mar-2010 30-Sep-2016 30-Jun-2017 Comments (achievements against targets): Achieved: 100% Agro-livestock SPS services were restructured and mainstreamed FAPO as regular clients. Component: Component 3: Support to the Rural Competitiveness Institutional Framework Program Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Strategic planning developed Number 0.00 1.00 1.00 and Results-Based Management implemented 05-Mar-2010 30-Sep-2016 30-Jun-2017 at the sector level (Rural, WRM, Environment) levels Page 39 of 89 The World Bank Santa Catarina Rural Competitiveness ( P118540 ) Comments (achievements against targets): Achieved: 100% Results-based management was introduced by SEE, EPAGRI, SAR, SDS (Environment, WRM) and other key sector institutions. See main text, Section E. Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Project Strategic Plan Number 0.00 1.00 1.00 prepared and implemented at the sector level (Rural, 05-Mar-2010 30-Sep-2016 30-Jun-2017 WRM, Environmental levels) Comments (achievements against targets): Achieved: 100% The project prepared and periodically updated a sector level Project Strategic Plan. Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Annual Operations Plans Number 0.00 6.00 6.00 successfully implemented 05-Mar-2010 30-Sep-2016 30-Jun-2017 Comments (achievements against targets): Achieved: 100% Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Satisfactory technical, Number 0.00 6.00 6.00 financial and procurement audits 05-Mar-2010 30-Sep-2016 30-Jun-2017 Page 40 of 89 The World Bank Santa Catarina Rural Competitiveness ( P118540 ) Comments (achievements against targets): Achieved: 100% Formally Revised Actual Achieved at Indicator Name Unit of Measure Baseline Original Target Target Completion Compliance with Project Number 0.00 1.00 1.00 Operational Manual, including Safeguards and 16-Mar-2015 30-Sep-2016 30-Jun-2017 Anti-corruption Policies Comments (achievements against targets): Achieved: 100% Page 41 of 89 The World Bank Santa Catarina Rural Competitiveness ( P118540 ) B. KEY OUTPUTS BY COMPONENT Objective Outcome 1: Increase the competitiveness of family agriculture producer organizations Outcome Indicators 1. Increase in total value of annual sales for participating FAPO (Target 30%) Exceeded: 106.7% Component 1: Family Agriculture Competitiveness and Increased Access to Markets (Increased and sustained factor productivity for participating FAPO): 1. New, value-added arrangements established or strengthened, such as alliances, networks and Intermediate Results cooperatives (Target 138). Exceeded: 187.7% (DLI) Indicators 2. Number of existing small businesses in conformity with sanitary and phytosanitary standards (SPS), and new agro-processing and non-agricultural businesses created. (Target 500) Exceeded: 144.6% (DLI) 3. Climate-resistant production systems improvements implemented as part of Business Plans. (Target 20,514) Exceeded: 291% (DLI) Sub-component 1.1 Pre-Investments: 1. Number of projects building/structuring new networks (logistics and infrastructure) (Target 34). Exceeded: 126.4% 2. Number of projects to improve existing municipal and local cooperation Key Outputs by alliances/networks/cooperatives (Target 66). Exceeded: 198.4% Component 3. Number of new regional cooperation networks created (central cooperatives) (Target 5). Partially (linked to the achieved: 20% achievement of the 4. Number of projects to improve existing regional cooperation networks (Target 2). Exceeded: 150% Objective/Outcome 1) 5. Number of new cooperatives created (by product) (Target 30). Exceeded: 123.3% 6. Training of Beneficiaries (under Sub-component 1.1): SC Rural – through its executor institutions (SAR, EPAGRI, CIDASC, FATMA, SOL, PMA and others) - financed numerous beneficiary training events in a wide range of subjects associated directly with project activities and goals). Principal indicators and results/performance were as follows (monitored via the 2ndy monitoring function): Page 42 of 89 The World Bank Santa Catarina Rural Competitiveness ( P118540 ) Indicator Target Achieved Rural families trained 45,000 92,504 Leaders trained 4,787 11,301 Rural youth trained 2,500 4,872 Workshops on sanitary standards and food production 1,500 2,859 Events to classify plant products 100 130 Farmers trained in the classification and standardization of plant products 2,400 3,562 Events associated with animal health certification and compliance 1,172 1,405 Farmers trained in diverse aspects of family agriculture-based, rural tourism in 10 10 300 touristic regions of the State State-level events for agricultural enterprises and no. participants - 3/1,648 Environmental Management Persons trained/sensitized in key themes associated with the Ecological Corridors. 180 1,295 Persons trained in water resources management 780 659 School-age youth trained as “Environmental Protectors” 1,800 3,538 Rural Environmental Education Educational Reference Units implemented in rural communities 100 178 Educational Reference Units established in schools 1,000 1,780 Environmental Education field visits for students and teachers 400 557 Environmental issue and cultural events for students/teachers 600 1,970 Training of Indigenous families No. indigenous trained 841 1,100 Educational Reference Units established in indigenous lands - 9 Workshops with indigenous groups in food sanitation and production 31 53 Educational field visits with indigenous 15 32 Source: EPAGRI/CEPA 2017 7. EPAGRI, through its institutional programs/extension role, also developed/delivered numerous training events for farmers including excursions, courses, seminars, field days and reference units to present and Page 43 of 89 The World Bank Santa Catarina Rural Competitiveness ( P118540 ) disseminate improved agricultural technologies for implementation on-farm and by rural enterprises under the project. The following table summarizes these by productive chain: Productive Chain No. Events Participants Fish farming (freshwater) 56 1,226 Artisanal Fishing 29 475 Apiculture 196 3,587 Grains (rice, corn, beans) 207 n.a. Fruit Production/Horticulture 40 2,033 Livestock and Dairy 838 13,946 Olericulture 70 1,662 Total: 1,436 22,929 Source: EPAGRI/CEPA 2017 Planning, Diagnostics, Innovation/Demonstration and Studies: 8. No. of technicians contracted to strengthen phytosanitary certification services (Target 20). Achieved: 100% 9. No. technicians contracted to strengthen animal product inspection services (Target 40). Partially achieved: 45% 10. No. of technical agents contracted to provide services to Indigenous Lands Associations (Target 9). Achieved: 100% 11. No. of EPAGRI technical agents working with indigenous populations (Target 11). Achieved: 100% 12. No. of technicians contracted to strengthen ATER in the municipalities (Target 176). Exceeded: 100% 13. No. technicians contracted/available to strengthen the area of the Ecological Corridors (Target 6). Exceeded: 233% 15. No. technology validation units implemented (Target 39). Achieved: 100% 16. No. of research projects developed (Target: 14 traditional and 14 participatory on rural properties, total 28). Exceeded: 132% Sub-component 1.2: Productive and Added-Value Investments Page 44 of 89 The World Bank Santa Catarina Rural Competitiveness ( P118540 ) Legalization of properties and enterprises: 1. No. of properties with land regularized (Target 3,000). Substantially achieved: 93% 2. No. families with adequate use of animal waste (Target 3,500) Exceeded: 197% 3. Area of mata ciliar and legal reserve rehabilitated or protected (Target 2,000) Exceeded: 143% Regularization of existing enterprises and implementation of new ones. 4. Number of projects to rationalize and formalize existing agro-industrial businesses (Target 200). Exceeded: 207% 5. No. projects designed to constitute new agro-industrial enterprises (Target 193). Exceeded: 102% Improvement and diversification of production systems: 6. Improved production systems with climate resilience (Target 20,000). Exceeded: 291% (Note: This was also an Intermediate Outcome Indicator). Support to non-agricultural enterprises: 7. No. of rural tourism projects supported (i.e. non-agricultural enterprises) (Target 20). Modest achievement: 25% 8. Number of new, non-agricultural businesses created (Target 110). Exceeded: 104% Objective Outcome 2: project support for an improved framework of structural, competitiveness-inducing public services activities Outcome Indicator: “Coordinated implementation of six public programs to improve the rural business environment”, as measured by: 1. Share of the State’s water resources under decentralized and participatory planning and management (Target 65%). Achieved: 100% Outcome Sub-Indicators 2. Share of the State’s territory managed under an “ecological corridor” concept (coexistence of sustainable production and preservation) (Target 10%). Achieved: 100% 3. Recuperation of rural roads associated with Business Plans (Target 100%) Exceeded: 110.4% (See Annex 1A, for explanation of how this result was calculated) 4. Share of public financing to family agriculture enterprises channeled through the new extension/Technical Assistance Strategy (Target 60%). Achieved: 100% Page 45 of 89 The World Bank Santa Catarina Rural Competitiveness ( P118540 ) 5. Restructured SPS Services, generating the following results in support of FAFs: (a) Number of enterprises legalized, complying with sanitary standards (Target 420). Exceeded: 104% (b) Number of farms certified for absence of animal TB and Brucellosis (Target 700). Exceeded: 105% (DLI) (c) Number of Family Agriculture Units and Processing Units registered and certified as having achieved phytosanitary requirements (Target 2,740). Exceeded: 101.8% (DLI) 6. Rural schools carrying out inter-disciplinary actions under PEEA (State Environmental Education Policy) (Target 1,000). Exceeded: 143.7% Component 2: Complementary Public Investments for Rural Competitiveness (Greater capacity of complementary public goods and services to promote rural competitiveness): 1. Increased number of self-declared water users registered in River Basins (Target 54,050). Exceeded: 137.7% (DLI) 2. Directorate of Water Resources (DRHI) strengthened with a minimum of 16 public servants added to the technical team, totaling a minimum of 24 by 2015. Achieved: 100% (DLI) 3. Studies completed to implement target Ecological Corridors in support of biodiversity-friendly land use mosaics (Target 2). Achieved: 100% 4. Ha of forests under “Conservation Credits” (Target 950 ha). Exceeded: 170.5% 5. Farms with SIEE (Integrated Economic-Ecological Systems) implemented (SIEE of livestock – meat and Intermediate Results milk – grains, forestry, SAF and tourism) (Target 200). Exceeded: 230.5% (DLI) Indicators 6. Km of rural roads associated with Business Plans, rehabilitated (Target 430 km). Exceeded: 110.4% (DLI) 7. Pilot, digital inclusion projects implemented with internet connection to support enterprises connected to networks (Target 30). Exceeded: 143.3% (DLI) 8. Number of new, regular TA and Rural Extension professional staff allocated by EPAGRI in priority project municipalities by CIDASC to phytosanitary certification, and by FATMA to SIEE implementation. (Target, incremental 176). Achieved: 100% (DLI) Component 3: Support to the Rural Competitiveness Program (Effective public sector management of rural competitiveness initiatives) Note: Several Intermediate Outcome Indicators linked to Component 3 are considered important to the 2nd element of the PDO, going beyond “basic project management”. Page 46 of 89 The World Bank Santa Catarina Rural Competitiveness ( P118540 ) 1. Project Strategic Plan prepared and implemented at the sector level (Rural, Water Resources Management and Environment) (Target 1). Achieved: 100% 2. Strategic planning developed and Results-Based management implemented at the sector level (Rural, Water Resources Management, Environment) (Target 1). Achieved: 100% Sub-component 2.1: Environmental Management 2.1.1 Water Resources Management: 1. Number of Executive Secretariats (delegated entities) formalized by a legal instrument, in the State Government (Target 2). Achieved: 100% 2. Aerial photo-grammatic survey of the State (1). Achieved: 100% 3. Reformulate and update the Information Portal of SIRHESC (Target 1). Achieved: 100% 4. Conduct hydro-geologic mapping (1). Achieved: 100% 5. Expand the State hydro-meteorological monitoring and alert system (Target 77). Partially achieved: 71.4%. 6. Integrated structuring and management of the State hydro-meteorological monitoring and alert system (Target 1). Achieved: 100% Key Outputs by 7. Implement an administrative system for the granting and use of water resources (Target 1). Achieved: Component 100% (linked to the 8. Develop the content and system of distance training for the water resources registry/cadastral system achievement of the (CEURH) (Target 1). Achieved: 100% Objective/Outcome 2) 9. Prepare an administrative and technical system for grants and reformulation of the State registry system of water resource users (Target 1). Achieved: 100% 10. Number of Basin Plans under preparation (Target 13). Achieved: 100% 2.1.2 Eco-system Management: 1. Develop and structure a registry of Areas of Incremental Forest Stocks CADEF) (Target 1). Achieved: 100% 2. Study for a proposal for a management and governance model for a Conservation Credits System (Target 1). Achieved: 100% 3. Area of Conservation Credits commercialized, in has/year (Target 950). Exceeded: 170.5% 4. Number of properties with SIEE implemented (Target 200). Exceeded: 230.5% Page 47 of 89 The World Bank Santa Catarina Rural Competitiveness ( P118540 ) 5. Management groups created and functioning (in FATMA) (Target 2). Achieved: 100% 6. Corridors implemented (average 50% SIEE and 50% SICC properties supported) (Target 100%). Achieved: 100% 2.1.3 Environmental supervision of Ecological Corridors: 1. Number of environmental oversight operations executed (Target 11,400). Exceeded: 132.7% 2.1.4 Environmental Education: 1. Educational Reference Units implemented in schools (Target 110). Exceeded: 110% 2. Educational Reference Units implemented in rural communities and Indigenous Lands (Target 100). Exceeded: 178% 3. Number of events with CIEA for the State Plan for Environmental Education (Target 2). Exceeded: 150% 4. Number of events about EPAGRI’s Ecological School Prize, with prizes for 60 schools (Target 6). Achieved: 100% Sub-component 2.2: Rural Infrastructure 1. Km of rural roads rehabilitated (Target 430 km). Exceeded: 110.4% (474.83 km) 2. Number of pilot projects for rural digital communities implemented and fixed telephones (Target 30). Exceeded: 143.3% Sub-component 2.3: Agro-livestock Sanitation 2.3.1 Plant health: 1. Number of samples of organic products collected on family agriculture properties (Target 900). Achieved: 100% 2. Number of samples of organic products collected from varejista businesses (Target 900). Exceeded: 101.2% 3. Plant product classification services structured (1). Achieved: 100% 4. Number of production units with phytosanitary certification (Target 2,500). Achieved: 100% 5. Number of consolidation units with phytosanitary certification (Target 240). Exceeded: 120% 2.3.2 Animal health: Page 48 of 89 The World Bank Santa Catarina Rural Competitiveness ( P118540 ) 1. Number of exams conducted on dairy cows to certify properties free of Brucellosis and TB (Target 55,000). Substantially achieved: 92.1% 2. Number of properties certified as free of Brucellosis and TB (Target 700). Exceeded: 104% 3. Number of pilot projects implemented and monitored to eradicate animal Brucellosis (Target 2). Achieved: 100% 4. Number of epidemiological enquiries conducted for classic Swine Pest (Target 2). Exceeded: 150% 5. Examinations of family agriculture poultry breeding to detect Salmonella (Target 540). Exceeded: 106.6% 6. Number of family agro-business enterprises legalized by the State Inspection Service (Target 420). Exceeded: 104% 7. Number of family agriculture establishments monitored via analysis of micro-biological, physico- chemical, fraud and adulteration of water and processed products samples (Target 400). Exceeded: 115.5% 2.3.3 Agro-livestock vigilance: 1. Number of existing, fixed posts re-equipped, including construction of 4 supervision bases (Target 70). Achieved: 100% 2. Number of mobile animal and phyto-sanitary enforcement units re-equipped (Target 6). Achieved: 100% 2.3.4 Institutional strengthening: 1. Computerized animal health monitoring and surveillance system developed (1). Achieved: 100% 2. Study of needed legislative changes to standardize sanitary inspection of animal and plant products (Target 1). Achieved: 100% Sub-component 2.4: Extension and Technical Training Services to Improve Competitiveness: Strengthening of rural extension: 1. Number of CMDR (Municipal Rural Development Councils) assisted (Target 254). Exceeded: 273.6% 2. Number of Multi-Year Plans prepared (Target 295). Substantially achieved: 98% 3. Number of youth groups trained (Target 50). Exceeded: 132% 4. Number of technology reference units implemented (Target 800). Exceeded: 210.6% Page 49 of 89 The World Bank Santa Catarina Rural Competitiveness ( P118540 ) 5. Hectares of area with mata ciliar in recovery (Target 2,000 ha). Exceeded: 143% 6. Number of families with conservation systems implemented and monitored (Target 20,000 families). Exceeded: 147.3% 6. Total area with conservation systems implemented and monitored (Target 100,000). Exceeded: 128.4% (128,445 ha) 7. Area with pasture systems implemented and monitored (Target 55,000 ha). Exceeded: 113.6% 8. Number of rural families assisted (Target 108,000). Exceeded: 124.5% 9. Number of youth assisted (Target 31,000). Exceeded: 137.8% 10. Number of indigenous families assisted (Target 1,920). Exceeded: 101% Training of technicians: 1. Number of extension technicians trained by EPAGRI (Target 2,000). Exceeded: 573.7% 2. Number of workshops by EPAGRI for extension technicians and teachers (48). Exceeded 141.6% 3. Number of workshops by EPAGRI for technicians on animal/plant health and food production (Target 70). Exceeded: 102% 4. Number of technicians trained by CIDASC (Target 338). Exceeded 532% 5. Number of military police trained by BPMA (Target 284). Exceeded: 562.3% 6. Number of persons trained by SIE in the maintenance or rehabilitation of tertiary roads (Target 211). Partially achieved: 52.6% 7. Number of technicians trained by SOL (Target 11). Partially achieved: 36.3% 8. Number of technicians trained in different themes associated with the Ecological Corridors (Target 611). Exceeded: 116.8% Sub-component 2.5 Rural Tourism: 1. Rural tourism projects supported by the project (Target 20 new projects). Modest achievement: 25% 2. Technical visits to analyze the feasibility and opportunities for rural tourist routes (Target 15). Partially achieved: 46.7% 3. Meetings to present the SC Rural project and its methodology, and to form working groups on rural tourism (Target 20). Achieved: 100% 4. Meetings with GT-TRAF SC to articulate and regulate TRAF legislation in Santa Catarina (Target 6). Achieved: 100% Page 50 of 89 The World Bank Santa Catarina Rural Competitiveness ( P118540 ) 5. Preparation of best practice manuals on rural tourism involving family agriculture (TRAF) (Target 2). Achieved: 100% 6. Creation of a promotional site for TRAF in SC containing rural tourism routes structured by SC Rural (Target 1). Achieved: 100% Obs: Of the 20 indicators within the Rural Tourism sub-component implemented by SOL, only 4 were fully- achieved or exceeded. Most showed low or no achievement. See Main Text. Component 3: Outputs: Coordination, management and communication: 1. Strategic Plan prepared for SC Rural to ensure improved public sector management of agriculture and water resources based on strategic and effective planning of central financial management and procurement (Target 1). Achieved: 100% 2. Administrative, budgetary and financial coordination and management of Santa Catarina operationalized (Target 1). Achieved: 100% 3. Communication plan for SC Rural prepared and implemented (Target 1). Achieved: 100% Monitoring, evaluation and dissemination of results 1. Computerized system to monitor physical and financial operations and implementation (Target 1). Achieved: 100% Page 51 of 89 The World Bank Santa Catarina Rural Competitiveness ( P118540 ) C. THEORY OF CHANGE (RESULTS CHAIN) Page 52 of 89 The World Bank Santa Catarina Rural Competitiveness ( P118540 ) ANNEX 2. BANK LENDING AND IMPLEMENTATION SUPPORT/SUPERVISION A. TASK TEAM MEMBERS Name Role Preparation Supervision/ICR Diego Arias Carballo Task Team Leader(s) Frederico Rabello T. Costa, Michele Martins Procurement Specialist(s) Joao Vicente Novaes Campos Financial Management Specialist Anna F. Roumani Team Member Katia Lucia Medeiros Social Safeguards Specialist Carla Zardo Team Member Isabella Micali Drossos Counsel Maria Elizabeth Rehnfeldt Spaini Social Safeguards Specialist Erwin De Nys Team Member Gregoire Francois Gauthier Team Member Clarisse Torrens Borges Dall Acqua Environmental Safeguards Specialist Barbara Cristina Noronha Farinelli Team Member Wanessa De Matos Firmino Silva Team Member Carmen Molejon Quintana Team Member Fernando De Melo E Silva Team Member Page 53 of 89 The World Bank Santa Catarina Rural Competitiveness ( P118540 ) B. STAFF TIME AND COST Staff Time and Cost Stage of Project Cycle No. of staff weeks US$ (including travel and consultant costs) Preparation FY10 25.312 209,494.86 FY11 7.846 43,833.55 Total 33.16 253,328.41 Supervision/ICR FY11 7.320 61,679.36 FY12 11.640 85,426.29 FY13 19.439 97,921.92 FY14 23.974 122,787.22 FY15 15.508 113,021.70 FY16 11.992 70,042.88 FY17 17.675 91,322.34 FY18 .612 3,259.44 Total 108.16 645,461.15 Page 54 of 89 The World Bank Santa Catarina Rural Competitiveness ( P118540 ) ANNEX 3. PROJECT COST BY COMPONENT A. PROJECT COST BY COMPONENT Amount at Actual at Amount at Percentage Restructuring Project Components Approval of Approval (US$M) Closing (US$M) (US$M) (US$M) Component 1 - Family Agriculture Competitiveness and Increased Access 95.95 85.03 82.19 85.66 to Markets 1.1 Pre-Investments 29.03 24.96 62.76 216.20 1.2 Productive and Added Value 66.92 60.07 19.43 29.03 Investments Component 2 - Complementary Public 80.28 96.41 93.32 116.24 Investments for Rural Competitiveness 2.1 Strengthening Environmental 38.29 25.98 26.55 69.34 Management 2.2 Rural Infrastructure Activity 16.78 44.91 12.49 74.43 2.3 Regulatory Framework 11.25 10.38 16.11 143.20 Compliance 2.4 Extension Services Activity 12.35 11.67 12.80 103.64 2.5 Rural Tourism Activity 1.61 3.46 25.36 1,575.15 Component 3 - Support for Rural Competitiveness Infrastructure 12.54 7.56 13.71 109.33 Framework 3.1 Central Administration 1.04 0.12 3.24 311.54 Strengthening 3.2 Results-Based Management 10.40 6.27 9.40 90.38 3.3 Coordination, Monitoring and 1.10 1.17 0.83 75.45 Evaluation Front-end Fee 0.23 0.23 0.23 100.00 Total Project Costs 189.00 189.22 189.45 100.24 Page 55 of 89 The World Bank Santa Catarina Rural Competitiveness ( P118540 ) B. FINANCING Amount at Actual at Amount at Percentage Restructuring Project Sources of Funds Approval of Approval (US$M) Closing (US$M) (US$M) (US$M) Borrower (counterpart) 99.00 99.00 99.45 100.45 IBRD (Loan) 90.00 89.77 90.00 100.0 Beneficiaries na na 19.73 na Total 189.00 188.77 209.1814 110.67 14Beneficiary families contributed USD 19.73 million in own funds (family savings and/or PRONAF/other loans) and in-kind contributions, around 52% of the cost of Business Plans and in line with what was expected. Page 56 of 89 The World Bank Santa Catarina Rural Competitiveness ( P118540 ) ANNEX 4. EFFICIENCY ANALYSIS 1. During appraisal, a financial and economic (efficiency) analysis was conducted based on twelve farm models involving seven major crops. Such farm models were based on the experience of the previous WB operation – Program Microbacias II. For this final evaluation, 206 collective and family business plans (BP), and production system improvements, were randomly-selected from 28 subprojects or Projetos Estruturantes (PE) in the 10 Territorial Management Units or Unidades de Gestão Territorial (UGT) of Santa Catarina (based on the territorial classification used by EPAGRI). These 10 UGTs correspond to the 10 Regional Executive Secretariats or Secretarias Executivas Regionais (SER) of the Program. The sample was obtained from a list of 680 PE involving cooperative and family BP benefiting around 3,500 families or 10,000 people. The sample of 206 BPs benefited 771 families representing 2,286 people (around 5% of the overall beneficiary population). Additionally, rough estimates on economic benefits were provided for some investments dissociated from PEs and their BPs. 2. Key elements of this analysis are as follows: (i) the project costs are presented in Table 1 below by components and by relationship with investments on Business Plans; (ii) the summary of aggregate results of the analysis is presented in Table 2 of supporting tables below; (iii) the five categories/types of Business Plans analyzed here can be seen in Table 3; (iv) the 13 types of productive activity analyzed are listed in the first column of Table 4 below; (iii) benefit estimates of non PE/BP investments are presented in Table 9and, (v) the details of the analysis summarized in Tables 5-8 below are presented in Excel models available in project files. 3. In broad terms, the investments made by the various BPs included a wide variety of works and equipment, plantations, grazing management systems and irrigation systems. The outcomes generated by the various BPs were mainly production and income increases, generally coupled with production costs increases. Labor costs were either increased or maintained at the same level. Enhanced sales were generally channeled through existing markets – only around 15% of BPs explored new market channels. The selected BPs were assessed through group workshops and individual working sessions conducted by trained EPAGRI extension officers. Due to the relatively small selection universe of PEs, the financial and economic results obtained from this analysis provide unbiased estimates of feasibility at the aggregate level, but conclusions by BP category and economic activity may be less accurate. 4. During appraisal, ex-ante financial NPV and IRR were calculated for the twelve representative farm models. In turn, economic NPV and IRR were calculated for the overall project, including all project costs. Analytical parameters essentially included a 12 percent annual discount rate and a 20-year evaluation period. The cost-benefit analysis performed for this ICR uses the information gathered through the above-mentioned final evaluation, and similar analytical parameters used at appraisal: the annual discount rate was kept at 12% while the evaluation period was extended to perpetuity. The NPV and IRR for a 20-year period are similar to those obtained at perpetuity, but the underlying calculations are much simpler and more manageable at perpetuity. Aggregate project returns were estimated both at perpetuity and for 20 years to allow for comparison with analysis at appraisal. The exchange rate considered was 3.0 BRL/USD, close to the average of the last three years. For the financial analysis, family labor involved in farm BPs was not included since it does not represent a cash expenditure. For the economic analysis, family labor was included and valued at market wages. The economic price of labor was assumed to be equal to the financial or market price, since the unemployment rate in recent years was reported to be Page 57 of 89 The World Bank Santa Catarina Rural Competitiveness ( P118540 ) around 5%, considered by the Brazilian Institute for Geography and Statistics (IBGE) as a voluntary/mobility unemployment (or full-employment) rate. Fiscal impact was not assessed since most of the beneficiary families would be exempt from the ICMS (value added tax) under current legislation. Finally, benefit estimates from carbon sequestration in Table 9 was based on a conservative carbon value of USD 40/tCO2eq. 5. Summary results are presented in Tables 1-9 in Appendix 4.1 below. When comparing the BP distribution among economic activities, the assessed sample provides conservative estimates with respect to the overall BP distribution, since the proportion of most profitable activities is smaller in the sample than in the selection PE/BP universe. Economic Analysis 6. Table 3 provides basic features of BPs by BP category groupings. Such features include participating population (families and persons), labor use and gross income with and without BP. Table 4 provides basic features by economic activity groupings. Table 5 provides assessed economic results by BP category grouping. Table 6 provides assessed economic results by economic activity grouping. 7. As shown in Tables 5-6, the economic NPV and IRR of the assessed 206 BPs (involving 771 families) were: USD 18.9 million and 96% respectively, when only incremental BP investments are considered; and USD 12.8 million and 30% when in-kind and/or existing investments are considered. The aggregate investment cost was USD 2.7 million of which USD 1.3 million were provided by the BP participants (48%) and USD 1.4 million were funded by SC Rural (52%). In-kind and/or existing BP investments were valued at USD 6.1 million. Average figures per participating family are: USD 3,400 as incremental net income per year with a 60% increase in sales and over four-fold increase in net income; and 12 person-days as incremental annual labor use. 8. Based on Table 1 below, SC Rural channeled USD 189.2 million in total, of which USD 90.0 million were WB loan resources and USD 99.2 were Government counterpart resources. Additionally, participating families and FAPOs added USD 19.7 million of complementary investments. From the USD 189.2 million of total costs, around USD 128.6 million (68% of total costs) were related with the BP life cycle: selection, planning and implementation. Such costs involved: pre-investments, value added productive investments, rural extension and training services, agro-tourism support, institutional strengthening, monitoring, evaluation and communication. SC Rural also channeled USD 60.7 million to complementary areas related to rural competitiveness, but independent from the BPs. Such areas include: environmental services, land tenancy regularization, digital inclusion, rural roads, animal health and phytosanitary support. While these complementary investments generate long-lasting benefits, only some of them were assessed since the nature of investments and the available information did not allow for quantitative assessment of social costs and benefits. Based on borrower’s reports, there are rough estimates of economic feasibility for: forage production kits, carbon sequestered as a result of environmental management actions, rural roads improvements; and impacts of research linked to extension services. 9. Project rate of return: To estimate the overall IRR, the economic flows from the sample of 206 BPs was extrapolated based on the ratio of SC grants of all BPs against the SC grants of the sample – such Page 58 of 89 The World Bank Santa Catarina Rural Competitiveness ( P118540 ) a ratio was 10.74. Other Project costs and other BP related project costs (Table 1) were incorporated into the aggregate NPV and IRR estimation. Based on Table 2: (i) incremental BP investments plus other Project costs generated an economic NPV of USD 118.2 million and IRR of 30.1%; whereas (ii) incremental and in- kind/existing BP investments plus other Project costs generated an economic NPV of USD 60.2 million and IRR of 18.0%. When adding benefits from forage production kits, environmental management improvements, rural roads improvements and research linked to extension services, the economic NPV and IRR were: USD 156.1 million and 39.2% or USD 98.1 million and 25.0% without and with in- kind/existing beneficiaries’ investments, respectively. Such returns are higher than the partial IRR estimated at appraisal. These results clearly reflect a better economic performance due to substantive investments in processing activities and not only in farm activities (as assumed at Appraisal). 10. While recognizing that the analysis offers unbiased economic indicators at the aggregate project level, Tables 5, and 6 permit preliminary comparisons by BP category and economic activity. Both in terms of economic NPV and IRR, BP for collective enterprises generated higher returns, while family farm and non-farm BPs generated lower returns. Among the economic activities, agro-processing (milk, fruits, vegetables and cassava), fruticulture, horticulture and dairy cattle production generated the higher returns, while meat processing, agro-tourism, commerce, apiculture and meat cattle production generated the lowest returns. Financial Analysis 11. Table 7 provides assessed financial results by BP category grouping. Table 8 provides assessed financial results by economic activity grouping. 12. As shown in all Tables 7-8, the financial NPV and IRR of the assessed 206 BP (involving 771 families) were: USD 20.8 million and 105% when only incremental BP investments are considered; and USD 14.8 million and 32% when in-kind and/or existing investments were are considered. Average financial indicators per participating family are: USD 3,700 as incremental net financial income per year with a 60% increase on sales and over 4-fold increase of net income. 13. Based on Table 2, Based on Table 2: (i) incremental BP investments plus other Project costs generated a financial NPV of USD 134.7 million and IRR of 32%; whereas (ii) incremental and in- kind/existing BP investments plus other Project costs generated a financial NPV of USD 76.7 million and IRR of 20%. Sensitivity Analysis 14. To assess the sensitivity of economic and financial indicators of BP considering BP investment and other BP-related costs, Switching Values (percentage factor that reduces the overall economic IRR to 12%) were estimated for gross annual income or revenues, annual input costs and annual labor costs. As shown in Table 10, SC Rural is moderately sensitive to production and/or price reductions, since a 12% reduction in gross income would reduce economic IRR to 12%. Such price sensitivity is partly due to the small-scale of most BPs supported. On the one hand, changes on sales income can reduce net income or profits substantially since farm costs cannot adjust in the same proportion. On the other hand, most farms and supported businesses participate in their product or service markets as price takers, since their scale is so Page 59 of 89 The World Bank Santa Catarina Rural Competitiveness ( P118540 ) small that they cannot influence prices. SC Rural is also moderately sensitive to input cost increases since a 22% cost increase would generate a marginally acceptable return. In contrast, SC Rural is quite resilient to labor cost and investment cost changes, since they would need to increase by 80% and 4.5 times respectively, to generate a marginally acceptable return. Table 10. Sensitivity Analysis of Financial and Economic Returns considering all Project costs Economic Financial Scenario Average IRR of BP (%) Average IRR of BP (%) Base-case scenario 30 32 88% of income or revenues with BP 12 14 122% of input costs with BP 12 13 180% of labor cost with BP 12 32 550% of BP investment costs 12 13 Page 60 of 89 The World Bank Santa Catarina Rural Competitiveness ( P118540 ) Appendix 4.1. Tables 1-9 of Efficiency Analysis Table 1. Project Costs by Components including co-investment of participating/beneficiary families Actual at Incremental Actual + Amount at Amount at Project Percentage BP life Beneficiary co- Beneficiary co- Components Approval Restructuring Closing of Approval related costs Investment investment Component 1 - Family Agriculture Competitiveness and Increased Access to Markets 95.95 85.02 82.19 86 76.72 19.73 101.92 1.1 Pre-Investments 29.03 24.96 62.76 216 62.13 62.76 1.2 Productive and Added Value Investments 66.92 60.06 19.43 29 14.59 19.73 39.16 Component 2 - Complementary Public Investments for Rural Competitiveness 80.28 96.39 93.32 116 38.16 - 93.32 2.1 Strengthening Environmental Management 38.29 25.98 26.55 69 - 26.55 2.2 Rural Infrastructure Activity 16.78 44.91 12.49 74 - 12.49 2.3 Regulatory Framework Compliance 11.25 10.38 16.12 143 - 16.12 2.4 Extension Services Activity 12.35 11.66 12.80 104 12.80 12.80 2.5 Rural Tourism Activity 1.61 3.46 25.36 1,575 25.36 25.36 Component 3 - Support for Rural Competitiveness Infrastructure Framework 12.54 7.56 13.48 108 13.48 - 13.48 3.1 Central Administration Strengthening 1.04 0.12 3.25 312 3.25 3.25 3.2 Results-Based Management 10.40 6.27 9.41 90 9.41 9.41 3.3 Coordination, Monitoring and Evaluation 1.10 1.17 0.83 76 0.83 0.83 Front-end Fee 0.23 0.23 0.23 100 0.23 Total Project Costs 189.00 189.20 189.23 100 128.37 19.73 208.96 BP investments (Million USD) 14.59 19.73 34.32 Other BP related costs (Million USD) 113.78 - 113.78 Other non BP related costs (Million USD) - - 60.86 Page 61 of 89 The World Bank Santa Catarina Rural Competitiveness ( P118540 ) Table 2.a. Summary Results of Aggregate Financial and Economic Analysis considering Incremental BP Investments Project Costs Appraisal Analysis at 20 Years Ex- Post Analysis at Perpetuity Ex- Post Analysis at 20 Years Approval Final NPV IRR NPV IRR NPV IRR Fin. Eco. Fin. Eco. Fin. Eco. Fin. Eco. Fin. Eco. Fin. Eco. BPs 50.86 39.16 - - - - 223.55 202.91 105% 96% 202.22 185.70 118% 109% BPs with other BP related costs 106.32 128.37 - - - - 163.16 142.52 34% 31% 148.30 131.78 38% 35% BPs with other Project costs 189.00 208.96 - 35.14 - 15.9% 147.98 127.34 29% 27% 134.75 118.23 32% 30% BPs with other costs and benefits 172.64 156.12 42% 39% Table 2.b. Summary Results of Aggregate Financial and Economic Analysis considering Incremental plus In-kind/Existing BP Investments Project Costs Appraisal Analysis at 20 Years Ex- Post Analysis at Perpetuity Ex- Post Analysis at 20 Years Approval Final NPV IRR NPV IRR NPV IRR Fin. Eco. Fin. Eco. Fin. Eco. Fin. Eco. Fin. Eco. Fin. Eco. BPs 50.86 39.16 - - - - 158.53 137.89 32% 30% 144.17 127.65 36% 34% BPs with other BP related costs 106.32 207.78 - - - - 98.14 77.50 20% 18% 90.25 73.73 22% 20% BPs with other Project costs 189.00 288.36 - 35.14 - 15.9% 82.96 62.32 18% 16% 76.69 60.17 20% 18% BPs with other costs and benefits 114.59 98.07 27% 25% Table 3. Basic features of assessed business plans (BPs) by BP type or category grouping Type of BPs Participants Labour utlized Income/year Families Persons Unit without BP with BP without BP with BP Business plans for collective enterprises 575 1,670 Person-years/year 22.8 43.0 3,782,803 5,495,233 Business plans for family enterprises 53 168 Person-years/year 75.7 85.7 1,501,736 2,565,704 Plans for family production systems 109 365 Person-years/year 176.4 184.2 1,705,111 3,105,649 Business plans for youth 31 74 Person-years/year 43.0 42.3 391,662 617,472 Business plans for indigenous people 3 9 Person-years/year 4.1 5.0 3,254 30,532 BP aggregate results 771 2,286 Person-years/year 321.3 341.7 7,384,566 11,814,591 BP aggregate results per family 1 3 Person-years/year 0.4 0.4 9,578 15,324 Page 62 of 89 The World Bank Santa Catarina Rural Competitiveness ( P118540 ) Table 4. Basic features of assessed business plans (BPs) by major economic activity grouping Activities of BPs Participants Labour utlized Income/year Families Persons Unit without BP with BP without BP with BP Milk value addition 246 741 Person-years/year 9.5 11.0 1,785,025 2,320,836 Meat value addition 3 14 Person-years/year 13.5 16.5 326,533 508,492 Value addition of fruits and vegetables 178 515 Person-years/year 13.6 32.0 2,229,988 3,623,019 Value addition of grains and cassava 9 19 Person-years/year 16.4 17.8 167,434 360,153 Agro-tourism 12 47 Person-years/year 12.8 16.0 100,395 217,183 Artisanal handcrafting 9 24 Person-years/year 15.3 15.2 108,743 143,860 Commerce 128 368 Person-years/year 5.0 6.0 217,356 230,708 Fruticulture 12 34 Person-years/year 27.7 29.1 274,233 633,617 Horticulture 39 94 Person-years/year 18.4 21.9 253,347 494,830 Aviculture 3 7 Person-years/year 5.0 4.7 124,963 171,500 Apiculture 9 24 Person-years/year 2.6 2.8 47,272 59,187 Meat cattle production 3 12 Person-years/year 3.2 3.3 30,712 68,310 Dairy cattle production 120 387 Person-years/year 178.9 183.9 1,718,564 2,982,896 BP aggregate results 771 2,286 Person-years/year 322.0 360.2 7,384,566 11,814,591 Results per participating family 1 3 Person-years/year 0.4 0.5 9,578 15,324 Table 5. Economic returns of assessed business plans (BPs) by BP category grouping Type of BPs SC Rural Counterpart BP related Participants Annual Annual net income (NI) With BP NPV Return Inc. NPV Return Grant Commitment Investment co-investment Reserve without BP with BP Inc. (ΔNI) at 12% rate ΔNI/Inv at 12% rate ΔNI/Inv BPs for collective enterprises 454,684 399,127 853,811 1,010,697 53,824 307,682 1,645,359 1,337,677 9,282,803 72% 10,293,499 157% BPs for family enterprises 419,677 457,221 876,898 2,031,225 131,794 261,110 701,021 439,910 757,796 15% 2,789,021 50% BPs for production systems 312,347 405,632 717,979 2,746,672 153,860 (85,473) 575,189 660,662 2,040,866 19% 4,787,538 92% Business plans for youth 163,061 69,163 232,224 265,373 19,983 7,012 150,598 143,586 698,953 29% 964,327 62% BPs for indigenous people 8,198 8,198 16,396 - 1,834 (7,018) 1,917 8,935 58,063 54% 58,063 54% BP aggregate results 1,357,967 1,339,340 2,697,307 6,053,968 361,295 483,313 3,074,083 2,590,771 12,838,480 30% 18,892,448 96% BP aggregate results / family 1,761 1,737 3,498 7,852 469 627 3,987 3,360 16,652 30% 24,504 96% BPs with other BP related costs 6,980,784 1,339,340 8,320,124 6,053,968 361,295 483,313 3,074,083 2,590,771 7,215,663 18% 13,269,631 31% BPs with BP rel. costs / family 9,054 1,737 10,791 7,852 469 627 3,987 3,360 9,359 18% 17,211 31% BPs with other Project costs 8,394,214 1,339,340 9,733,555 6,053,968 361,295 483,313 3,074,083 2,590,771 5,802,233 16% 11,856,200 27% All Project costs / family 10,887 1,737 12,625 7,852 469 627 3,987 3,360 7,526 16% 15,378 27% NPV and Investment Return at perpetuity Page 63 of 89 The World Bank Santa Catarina Rural Competitiveness ( P118540 ) Table 6. Economic returns of assessed business plans (BPs) by economic activity grouping Activities of BPs SC Rural Counterpart BP related Participants Annual Annual net income (NI) With BP NPV Return Inc. NPV Return Grant Commitment Investment co-investment Reserve without BP with BP Inc. (ΔNI) at 12% rate ΔNI/Inv at 12% rate ΔNI/Inv Milk value addition 128,555 112,359 240,915 166,499 9,732 153,532 481,064 327,532 2,322,018 80% 2,488,516 136% Meat value addition 57,567 68,281 125,848 379,584 18,098 37,479 59,514 22,035 (321,809) 4% 57,775 18% Value add. of fruits and veg. 234,959 245,649 480,608 1,018,179 61,827 266,359 1,382,829 1,116,470 7,805,128 74% 8,823,307 232% Value add. of grains & cassava 52,423 58,750 111,173 155,089 12,825 11,358 113,479 102,122 584,753 38% 739,842 92% Agro-tourism 97,473 104,536 202,008 853,122 41,835 2,383 7,745 5,362 (1,010,450) 1% (157,327) 3% Artisanal handcrafting 80,603 39,293 119,896 46,786 6,361 13,233 36,082 22,849 23,727 14% 70,513 19% Commerce 111,967 23,001 134,968 33,857 3,344 14,361 8,977 (5,384) (213,689) -3% (179,832) -4% Fruticulture 52,174 47,358 99,531 539,622 34,454 16,074 289,075 273,001 1,635,853 43% 2,175,475 274% Horticulture 150,910 201,119 352,028 127,734 18,387 70,670 180,445 109,775 435,029 23% 562,762 31% Aviculture 15,683 13,404 29,087 87,580 6,217 (860) 34,109 34,969 174,739 30% 262,318 120% Apiculture 23,524 17,813 41,336 28,465 4,328 12,037 16,658 4,621 (31,291) 7% (2,827) 11% Meat cattle production 13,995 12,816 26,811 56,250 3,506 5,277 12,001 6,725 (27,022) 8% 29,228 25% Dairy cattle production 338,137 394,961 733,098 2,561,203 140,380 (118,589) 452,107 570,695 1,461,494 17% 4,022,697 78% BP aggregate results 1,357,967 1,339,340 2,697,307 6,053,968 361,295 483,313 3,074,083 2,590,771 12,838,480 30% 18,892,448 96% Results per family 1,761 1,737 3,498 7,852 469 627 3,987 3,360 16,652 30% 24,504 96% BPs with other BP related costs 6,980,784 1,339,340 8,320,124 6,053,968 361,295 483,313 3,074,083 2,590,771 7,215,663 18% 13,269,631 31% BPs with BP rel. costs / family 9,054 1,737 10,791 7,852 469 627 3,987 3,360 9,359 18% 17,211 31% BPs with other Project costs 8,394,214 1,339,340 9,733,555 6,053,968 361,295 483,313 3,074,083 2,590,771 5,802,233 16% 11,856,200 27% All Project costs / family 10,887 1,737 12,625 7,852 469 627 3,987 3,360 7,526 16% 15,378 27% NPV and Investment Return at perpetuity Page 64 of 89 The World Bank Santa Catarina Rural Competitiveness ( P118540 ) Table 7. Financial returns of assessed business plans (BPs) by BP category grouping Type of BPs SC Rural Counterpart BP related Participants Annual Annual net income (NI) With BP NPV Return Inc. NPV Return Grant Commitment Investment co-investment Reserve without BP with BP Inc. (ΔNI) at 12% rate ΔNI/Inv at 12% rate ΔNI/Inv BPs for collective enterprises 454,684 399,127 853,811 1,010,697 53,824 307,682 1,645,359 1,337,677 9,282,803 72% 10,293,499 157% BPs for family enterprises 419,677 457,221 876,898 2,031,225 131,794 624,756 1,150,374 525,617 1,472,022 18% 3,503,247 60% BPs for production systems 312,347 405,632 717,979 2,746,672 153,860 684,024 1,483,348 799,324 3,196,381 23% 5,943,053 111% Business plans for youth 163,061 69,163 232,224 265,373 19,983 172,282 316,388 144,106 703,287 29% 968,660 62% BPs for indigenous people 8,198 8,198 16,396 - 1,834 2,822 23,277 20,455 154,063 125% 154,063 125% BP aggregate results 1,357,967 1,339,340 2,697,307 6,053,968 361,295 1,773,647 4,595,066 2,821,420 14,760,555 32% 20,814,522 105% BP aggregate results / family 1,761 1,737 3,498 7,852 469 2,300 5,960 3,659 19,145 32% 26,997 105% BPs with other BP related costs 6,980,784 1,339,340 8,320,124 6,053,968 361,295 1,773,647 4,595,066 2,821,420 9,137,738 20% 15,191,706 34% BPs with BP rel. costs / family 9,054 1,737 10,791 7,852 469 2,300 5,960 3,659 11,852 20% 19,704 34% BPs with other Project costs 8,394,214 1,339,340 9,733,555 6,053,968 361,295 1,773,647 4,595,066 2,821,420 7,724,308 18% 13,778,275 29% All Project costs / family 10,887 1,737 12,625 7,852 469 2,300 5,960 3,659 10,019 18% 17,871 29% NPV and Investment Return at perpetuity Page 65 of 89 The World Bank Santa Catarina Rural Competitiveness ( P118540 ) Table 8. Financial returns of assessed business plans (BPs) by economic activity grouping Activities of BPs SC Rural Counterpart BP related Participants Annual Annual net income (NI) With BP NPV Return Inc. NPV Return Grant Commitment Investment co-investment Reserve without BP with BP Inc. (ΔNI) at 12% rate ΔNI/Inv at 12% rate ΔNI/Inv Milk value addition 128,555 112,359 240,915 166,499 9,732 171,412 514,289 342,877 2,449,895 84% 2,616,394 142% Meat value addition 57,567 68,281 125,848 379,584 18,098 107,929 155,427 47,498 (109,614) 9% 269,969 38% Value add. of fruits and veg. 234,959 245,649 480,608 1,018,179 61,827 282,794 1,403,120 1,120,326 7,837,267 75% 8,855,446 233% Value add. of grains & cassava 52,423 58,750 111,173 155,089 12,825 84,030 194,293 110,262 652,592 41% 807,681 99% Agro-tourism 97,473 104,536 202,008 853,122 41,835 62,897 96,628 33,731 (774,037) 3% 79,085 17% Artisanal handcrafting 80,603 39,293 119,896 46,786 6,361 71,953 95,469 23,516 29,283 14% 76,069 20% Commerce 111,967 23,001 134,968 33,857 3,344 14,361 8,977 (5,384) (213,689) -3% (179,832) -4% Fruticulture 52,174 47,358 99,531 539,622 34,454 137,349 424,970 287,621 1,757,692 45% 2,297,314 289% Horticulture 150,910 201,119 352,028 127,734 18,387 144,977 278,870 133,893 636,009 28% 763,743 38% Aviculture 15,683 13,404 29,087 87,580 6,217 17,300 50,989 33,689 164,072 29% 251,652 116% Apiculture 23,524 17,813 41,336 28,465 4,328 24,049 31,115 7,066 (10,916) 10% 17,548 17% Meat cattle production 13,995 12,816 26,811 56,250 3,506 14,813 22,665 7,851 (17,633) 9% 38,617 29% Dairy cattle production 338,137 394,961 733,098 2,561,203 140,380 625,703 1,309,935 684,232 2,407,634 21% 4,968,837 93% BP aggregate results 1,357,967 1,339,340 2,697,307 6,053,968 361,295 1,759,567 4,586,746 2,827,180 14,808,555 32% 20,862,522 105% Results per family 1,761 1,737 3,498 7,852 469 2,282 5,949 3,667 19,207 32% 27,059 105% BPs with other BP related costs 6,980,784 1,339,340 8,320,124 6,053,968 361,295 1,773,647 4,595,066 2,821,420 9,137,738 20% 15,191,706 34% BPs with BP rel. costs / family 9,054 1,737 10,791 7,852 469 2,300 5,960 3,659 11,852 20% 19,704 34% BPs with other Project costs 8,394,214 1,339,340 9,733,555 6,053,968 361,295 1,773,647 4,595,066 2,821,420 7,724,308 18% 13,778,275 29% All Project costs / family 10,887 1,737 12,625 7,852 469 2,300 5,960 3,659 10,019 18% 17,871 29% NPV and Investment Return at perpetuity Table 9. Economic Benefits from Other Investments of SC Rural Unit Result NPV (Million USD) Forage production kit Family 7,778 15.81 Strengthening Environmental Management tCO2eq 712,882 28.52 Rural Infrastructure - Roads Improvement Km 475 1.38 Extension Services - Research Research 7 8.00 Aggregate 37.89 Source: Programa Leite Sustentável - Terra Boa, EPAGRI Pesquisa, Borrower Completion Report. Carbon price USD 40/tCO 2 eq Page 66 of 89 The World Bank Santa Catarina Rural Competitiveness ( P118540 ) ANNEX 5. BORROWER, CO-FINANCIER AND OTHER PARTNER/STAKEHOLDER COMMENTS A. BORROWER COMMENTS Official Letter no. 915/2017 Florianópolis, 21 December 2017. Dear Madam, We acknowledge receipt, yesterday, of the revised version of the Implementation Completion Report (ICR) prepared by the Bank. Our technical team held a videoconference call this afternoon to analyze the document and discuss the most important adjustments. It should be noted that the current version of the ICR clearly and adequately portrays the primary results achieved by the operation - quite a significant improvement over the document previously submitted. After reviewing the current version of the document, certain issues remain that we believe are relevant for the team in charge of drafting the report. They are listed below. 1. The current version of the report more adequately incorporates aspects pertaining to the SWAP modality. However, we reiterate that this type of operation aims to support the State Government in executing expenditure programs - and their respective budgets - listed as eligible (during preparations for the program and in adjustments agreed upon later). It was meant to encourage the government to consolidate / expand programs executed under its Multiyear Plan (PPA, Plano Plurianual) to ensure future improvements and sustainability. Thus, in this modality, and unlike SIL operations, the financial plan is meant for indicative purposes only and has no direct correlation with physical targets; it is used to manage operations. In this particular operation, one of the challenges - and, as such, an intrinsic objective - was to improve the management of interinstitutional programs, in order to make products and services from family agriculture more competitive. It should be noted that increasing competitiveness is not just about direct investments to improve production in farmers' landholdings and organizations, but also the environment in which farmers and their organizations operate. As such, investments in training people and organizations, improving roads, deploying telephone and internet infrastructure, improving water resources management, expanding tourism Page 67 of 89 The World Bank Santa Catarina Rural Competitiveness ( P118540 ) infrastructure, improving public services, among others, are crucial for achieving the proposed development goals. 2. As for the relevance of the objectives, we praise the team's sensitivity in assessing the context and assigning its rating. 3. However, we challenge the general rating attributed to the achievement of objectives (effectiveness), for the following reasons: a) With regard to the competitiveness of family farming organizations, all the indicators were met and most of them were exceeded: i. A 62% sales increase in supported enterprises when compared to the control group, exceeding the target of 30%; ii. We reached 129.6% of the target for FIR beneficiaries - a total of 32,394; iii. 259 cooperation networks were supported - 188% of the original target; and iv. We supported 902 rural youths, by providing resources for the execution of productive projects. b) As for providing support to public services to improve the services aimed at increasing competitiveness: "All PDO indicators related to theme 2 were met or exceeded. These investments were a state priority, and depended on the activity, on the immediate and long-term effects they would have on farmers and / or the competitive rural trade environment”. (revised ICR text). The report lists the following achievements: i. 100% of the target in water resources management; ii. 114.5% of the target in registered water users; iii. 100% of the target in the implementation of ecological corridors; iv. 171% of the target in preserved / conserved areas; v. 143% of the target in Pilot Projects for Digital Rural Communities; vi. 102% of the target in properties with phytosanitary certification; vii. 104% of the target in properties certified to be free of brucellosis and tuberculosis; viii. 96% of the target in land regularization; ix. 100% of Epagri's restructuring target; and x. The exception was the 25% target achievement rate for implementing tourist routes, set at 20. Therefore, non-achievement of the rural tourism target should not be enough to downgrade the program's effectiveness rating. Information was sent on several additional activities carried out by SOL in the tourism industry. As such, we deem this rating to be unjust and ask that it be reconsidered as HIGH. Page 68 of 89 The World Bank Santa Catarina Rural Competitiveness ( P118540 ) 4. Regarding the efficiency of the operation, we also request that the assigned rating be reconsidered, for the following reasons: a. The DLIs were reached or exceeded; b. All subcomponents were implemented successfully; c. Economic performance was significant, as documented in the report. We believe that the only reason the rating was not "high" was the application of resources in the subcomponent 'Rural Tourism and Strengthening the Central Administration'. We again reiterate that there is no direct correlation between financial planning and physical targets in SWAP operations. Looking at the aide-mémoire of the midterm review, this aspect is more than clear. Therefore, we do not consider it fair to penalize the borrower for distortions between the financial execution and the plan. Such correlation is not possible in this operation, considering the monitoring and management milestones in place. As such, we request the rating be elevated from Substantial to HIGH, since there is nothing that demerits the operation based on the original agreement (as reviewed in the RMT) and what was executed. 5. As for assessment and monitoring, it should be noted that the borrower has questioned the implementation of the impact assessment since the beginning. After DIME withdrew from the process, a team of professionals from Epagri / Cepa - the Agricultural Social Ecology Center (Centro de Socio Economia Agrícola) designed and defined the methodology, in close collaboration with bank experts appointed by the Project Manager. At the end of 2015, during a supervisory mission, consultant Dino Francescutti had a discussion with the project team about the need to seek out additional information on the results, given the breadth of the program. From that date onwards, he began advising the team on how to consolidate these activities. Several actions were carried out in a short period of time, and with broad devotion and involvement by the Executive Secretariat and executing agencies. Therefore, given the conditions and deadlines set for impact assessment and monitoring activities, and considering that few Bank operations in Brazil have ever undertaken such a robust evaluation process as SC, we believe the rating should be HIGH. With regard to the Bank's performance, we believe a few considerations are in order: 1. During project preparations, the mechanisms to assess results were not designed adequately, with an initial focus restricted to impact assessments only. Discussions regarding the evaluation of results began in late 2015, and culminated in a series of actions by executing agencies to portray the results of the actions carried out. SAR / SEE hired a support specialist to develop evaluation activities, under the methodological guidance of the bank's team. This point should receive special attention in future operations. 2. The bank's staff was always present and available - a fact that was highly positive and demonstrated their commitment to the operation - and fostered a spirit of teamwork, presenting challenges and providing support in the search for solutions. Page 69 of 89 The World Bank Santa Catarina Rural Competitiveness ( P118540 ) 3. As such, we believe that the original design flaw regarding monitoring and evaluation is not enough to rate the Bank's performance as anything other than "high”. That said, there were, indeed, many challenges, but State Government and the World Bank rose together to face and overcome them. The achievements outlined in the Borrower's Report submitted to the Bank represent a summary of the primary results, but are far from fulfilling the full legacy that the Rural Program has left for the State, the executing agencies involved, and family farming and fisheries as a whole in the state of Santa Catarina. The assessment of the program's results by the beneficiaries and general society in Santa Catarina should also be considered. Whenever actions under SC Rural are carried out, there is no shortage of praise and requests to turn the program into public policy. These perceptions were included in the various evaluation documents sent to the Bank's staff, and depict how the operation was assessed. We therefore request that the Bank team responsible for preparing this particular report be sensitive enough to carefully and clearly capture the legacy of this operation. Our team is at your service, should you deem it necessary and pertinent, to clarify any issues and provide additional information with a view of assigning the operation the rating it deserves: "Highly Satisfactory”. A 'highly satisfactory' rating would be consistent with the ratings assigned to previous projects in Santa Catarina (MB1 and 2) and by ICR reports to agricultural projects in other Brazilian states and elsewhere in the world. Finally, considering that the workshop for reviewing the final assessment report prepared by the executing agencies and the ESS took place in February 2017 (11 months ago), and that we are only now receiving the ICR report from the Bank's staff, we request that sufficient time be granted to the government of State of SC to review and react before final approval and publication of the ICR report, given the considerations presented herein. Sincerely, Page 70 of 89 The World Bank Santa Catarina Rural Competitiveness ( P118540 ) B. EXECUTIVE SUMMARY OF BORROWER COMPLETION REPORT NOTE: An English translation of the Executive Summary of the Borrower’s Completion Report will be available in WB Docs for future reviewers Programa Santa Catarina Rural Relatório Final do Mutuário Anexo 5 - Resumo Executivo Page 71 of 89 The World Bank Santa Catarina Rural Competitiveness ( P118540 ) Sumário 1. Introdução. 3 2. Conquistas importantes. 3 3. Principais fatores que afetam o desempenho. 7 4. Fatores que promovem a sustentabilidade. 8 5. Principais lições aprendidas. 9 Page 72 of 89 The World Bank Santa Catarina Rural Competitiveness ( P118540 ) 1. Introdução. Santa Catarina é reconhecida como modelo quando se fala de agricultura familiar. Além da produção em pequenas e médias propriedades, a agricultura familiar é responsável por mais de 70% do valor da produção agropecuária e pesqueira do Estado, caracterizando-se pela mão de obra e gestão familiar, pelo emprego de baixa e média tecnologia, pela diversificação da produção e pela produção em pequena escala (IBGE, 2006). Apesar de se desenvolver em pequenas áreas, o setor eleva o Estado a destaque no cenário agrícola nacional, estando entre os seis principais produtores de alimentos e que apresenta os maiores índices de produtividade por área em diversas culturas. Também se destaca por ser o único Estado da federação reconhecido pela OIE, como zona livre de febre aftosa sem vacinação, mantendo também o “status” livre de peste suína clássica e africana, o que garante ace sso dos produtos catarinenses aos mercados nacional e internacional. O Programa SC Rural foi executado com um orçamento total de US$ 189 milhões, sendo US$ 90 milhões de um Empréstimo do Banco Internacional para Reconstrução e Desenvolvimento-BIRD (Banco Mundial) e US$ 99 milhões de contrapartida do Governo do Estado de Santa Catarina. O Programa pode ser considerado o terceiro estágio de uma estratégia pública de desenvolvimento rural, atuando de forma quase ininterrupta há mais de 30 anos no meio rural catarinense. Os programas em parceria com o Banco Mundial partiram do estágio conservacionista-produtivo, atacando problemas graves de degradação ambiental e queda da produtividade dos solos, passando no segundo estágio pela preparação e organização das comunidades rurais e alívio à pobreza e neste terceiro estágio focado no acesso ao mercado dos produtos e serviços da Agricultura Familiar, gerando competitividade. O SC Rural teve como objetivo geral aumentar a competitividade das Organizações de Agricultura Familiar, ao mesmo tempo apoiar um melhor arranjo de atividades estruturais dos serviços públicos que levem à competitividade, como parte do Plano Plurianual do Estado. Esse documento apresenta o resumo do relatório final do Programa SC Rural, descreve de forma sucinta os resultados mensuráveis, os fatores que afetam o desempenho, a sustentabilidade das ações e as principais lições aprendidas do Programa, que tem o reconhecimento da sociedade catarinense e obteve a nota máxima de avaliação do Banco Mundial. 2. Conquistas importantes. Entre as diversas ações executadas no âmbito do SC Rural, destaca-se a execução de investimentos em 217 projetos estruturantes, contendo 723 planos de negócios. O valor total investido nas melhorias implantadas foi R$ 102,9 milhões, tendo o SC Rural aplicado R$ 43,7 milhões. Os investimentos realizados nos PE beneficiaram diretamente 15.602 famílias rurais. O número de famílias rurais beneficiadas direta e indiretamente chegou a 134 mil. Os investimentos realizados nos PE beneficiaram diretamente 15.602 famílias rurais, itens 1A e 1B da Tabela 1. Page 73 of 89 The World Bank Santa Catarina Rural Competitiveness ( P118540 ) Tabela 1. Beneficiários diretos do Componente 1. Ação Sub-componente Beneficiários 1A. PEs – Planos de Negócio 1.2. Investimentos produtivos 10.903 1B. PEs – Melhoria de Sistema 1.2. Investimentos produtivos 4.699 2. Projetos Jovens 1.2. Investimentos produtivos 902 3. Beneficiários PSA 1.2. Investimentos produtivos 281 4. Beneficiários SIEE 1.2. Investimentos produtivos 697 5. Beneficiários URs 1.2. Investimentos produtivos 531 6. Beneficiários Indígenas 1.1 pré-investimentos 1.920 7. Certificação vegetal 1.1 pré-investimentos 1670 8. Sanidade animal 1.1 pré-investimentos 728 9. Kits Asas Inclusão Digital 1.2. Investimentos produtivos 2.285 10. Kit Forrageira (prod. Leite) 1.2. Investimentos produtivos 7.778 TOTAL 32.394 Outras ações realizadas no âmbito do Componente 1 beneficiaram 16.792 famílias, o que totaliza 32.394 famílias rurais beneficiadas diretamente pelo Programa SC Rural. A matriz de resultados do Programa apresenta como principal impacto a ser alcançado: “Aumentar o valor total das vendas anuais das Organizações da Agricultura Familiar (OAF) participantes”, apontando como meta um percentual de aumento de 30% nas vendas das organizações participantes. O estudo de avaliação de impactos realizado, apontou que o grupo de beneficiários apresentou um aumento das vendas de 118,4%. Quando comparado a um grupo controle, constatou-se que, entre 2009 e 2015, os empreendimentos beneficiados pelo Programa obtiveram um valor das vendas anuais 62,1% maior. Desta forma pode-se afirmar que as ações desenvolvidas pelo Programa, sejam investimentos físicos ou em capacitação das famílias, resultaram em expressivo aumento da competitividade das organizações apoiadas. Uma outra questão estudada pela avaliação de impactos foi a ampliação do mercado, por meio da expansão territorial das vendas. Verificou-se que o grupo de beneficiários apresentou melhores resultados em termos de alcance territorial. Houve incremento nas vendas para municípios da região, mas o mais importante foi o incremento nas vendas para outros municípios do estado, passando de 1,3% em 2009 para 15,7% das vendas em 2015. Observou-se também que quanto ao número médio de pontos de venda, o grupo de empreendimentos beneficiados apresentou um aumento mais acentuado (de 13 para 24,5 pontos) que o grupo de controle (de 15 para 17 pontos). O estudo também buscou avaliar a percepção dos beneficiários sobre o programa, e resumidamente obteve-se que: Para 53% houve diminuição do trabalho da família, 45% declarou que houve melhora na qualidade dos produtos, 40% que houve aumento no valor das vendas, 37% melhoria Page 74 of 89 The World Bank Santa Catarina Rural Competitiveness ( P118540 ) no sistema de armazenagem, 28% na redução de custos e 24,7% afirmaram que o programa viabilizou a legalização do empreendimento. Avaliação Econômico-financeira Durante a avaliação de preparação do Programa, realizou-se uma análise financeira e econômica (eficiência) com base em doze modelos de fazenda envolvendo sete grandes culturas. Esses modelos foram baseados na experiência anterior do Programa Microbacias 2. Para esta avaliação final, 206 Planos de Negócio (PN) familiares e melhorias do sistema de produção foram selecionados aleatoriamente de 28 Projetos Estruturantes (PE) executados em 10 Secretarias Executivas Regionais (SER) do Programa. A amostra foi obtida a partir de uma lista de 680 PN familiares, beneficiando cerca de 3.500 famílias ou 10 mil pessoas. A amostra de 206 PN beneficiou 771 famílias que representavam 2.286 pessoas (cerca de 7% do universo da amostra). Além disso, foram fornecidas estimativas aproximadas de benefícios econômicos para alguns investimentos dissociados de PEs e suas PNs. Após tabulação e análise dos dados se chegou ao Valor Presente Líquido (VPL) econômico de US$ 12,8 milhões e a Taxa Interna de Retorno (TIR) de 30%. Os indicadores médios por família participante foram de R$ 51,3 mil como VPL econômico e R$ 10 mil como receita líquida incremental por ano. O custo total de investimento total foi de US$ 8,8 milhões, dos quais US$ 7,4 milhões foram investidos pelos beneficiários (84%) e US$ 1,4 milhão pelo SC Rural (16%). A contribuição direta dos participantes dos PN foi cinco vezes maior do que o comprometido quando as PNs foram preparadas e aprovadas. Os valores médios por família participante são: US$ 16.700 como VPL econômico; US$ 3.400 como lucro líquido incremental por ano com um aumento de 62% nas vendas e mais de 4 vezes o aumento do lucro líquido; 0,1 ano-pessoa ou 12 dias-pessoa como uso anual incremental do trabalho; e US$ 11.400 como custo total de investimento, dos quais US$ 9.600 (84%) foram fornecidos por participantes da BP e US$ 1.800 (16%) foram fornecidos pela SC Rural. O Programa canalizou US$ 189,2 milhões no total, dos quais US$ 90,0 milhões eram recursos de empréstimo do Banco Mundial e US$ 99,2 foram recursos de contrapartida do governo. Além disso, famílias participantes e Organizações da Agricultura Familiar - OAF adicionaram US $ 19,7 milhões de investimentos complementares. Dos USD 189,2 milhões dos custos totais, cerca de USD 128,6 milhões (68% dos custos totais) foram relacionados ao ciclo de vida dos PN: seleção, planejamento e implementação. Tais custos envolvem: pré-investimentos, investimentos produtivos de valor agregado, serviços de extensão e treinamento rural, apoio agroturístico, fortalecimento institucional, monitoramento, avaliação e comunicação. O SC Rural também canalizou US $ 60,7 milhões para áreas complementares relacionadas à competitividade rural, mas independentes dos PNs. Tais áreas incluem: serviços ambientais, regularização fundiária, inclusão digital, estradas rurais, saúde animal e apoio fitossanitário. Embora esses investimentos complementares gerem benefícios duradouros, apenas alguns foram avaliados uma vez que a natureza dos investimentos e a informação disponível não permitiam a avaliação quantitativa dos custos e benefícios sociais Page 75 of 89 The World Bank Santa Catarina Rural Competitiveness ( P118540 ) Taxa de retorno do Programa SC Rural: para estimar a TIR geral, os fluxos econômicos da amostra de 206 PNs foram extrapolados com base na proporção de subsídios SC Rural de todos os PNs apoiados (723) contra as subvenções SC Rural da amostra - tal proporção foi de 10,74. Outros custos do projeto e outros custos de projetos relacionados aos PN foram incorporados na estimativa de VPL e TIR agregada. Os investimentos incrementais dos PNs mais outros custos do Projeto geraram um VPL econômico de US$ 118,2 milhões e TIR de 30,1%; Considerando os investimentos de PNs incrementais e em espécie/existentes mais outros custos do Projeto geraram um VPL econômico de US$ 60,2 milhões e TIR de 18,0%. Ao agregar benefícios de kits de produção de forragem, melhorias de gerenciamento ambiental, melhorias de estradas rurais e serviços de extensão e pesquisa, o VPL e a TIR econômico foram: US$ 156,1 milhões e 39,2% ou US$ 98,1 milhões e 25,0% sem e com investimentos existentes dos beneficiários, respectivamente. Esses retornos são maiores do que a TIR parcial estimada na avaliação inicial. Esses resultados refletem claramente um melhor desempenho econômico devido a investimentos substanciais em atividades de processamento e não apenas em atividades de produção nas propriedades (como assumido na avaliação inicial). Além dos investimentos em Planos de Negócio associados a Projetos Estruturantes, outra modalidade de apoio financeiro do Fundo de Investimentos foi a dos apoios especiais, repassados como estímulo às ações em áreas estratégicas e públicos específicos, como melhorias de sistemas de produção e pagamento por serviços ambientais nos Corredores Ecológicos, implantação de unidades de referência, projetos de educação ambiental em escolas rurais. Por meio desta modalidade foram implantadas nos Corredores Ecológicos Chapecó e Timbó, 697 projetos especiais em propriedades de agricultores, visando o incentivo a adoção de sistemas produtivos sustentáveis, com investimentos de R$ 2 milhões. Ainda nas áreas dos Corredores Chapecó e Timbó, estão sendo efetuados pagamentos por serviços ambientais para 281 famílias de agricultores como forma de incentivo à preservação ambiental nestas áreas. Verificou-se, por meio da avaliação de impactos, que a possibilidade de captação de recursos de subvenção do SC Rural, levou a um maior aporte de recursos para investimentos nos empreendimentos participantes do Programa. Também os números disponíveis na SEE demonstram que percentual significativo dos recursos investidos (58%) foi oriundo de outras fontes (próprio, Pronaf, Bancos, outros) e o valor médio por empreendimento aplicado pelo Programa foi R$ 207,68 mil, abaixo do teto máximo definido pelo FIS (R$ 300 mil). O Fundo apoiou ainda organizações da agricultura familiar, para atuar na certificação de produtos de origem animal e vegetal e na inspeção de produtos de origem animal, provendo recursos para contratação de serviços técnicos. Foram beneficiadas 30 organizações, com a contratação de serviços de 38 profissionais, por meio de apoio financeiro de R$ 8,4 milhões. Para reforçar a assistência em catorze aldeias indígenas foram repassados recursos financeiros de R$ 1,6 milhões. Os projetos de 902 jovens egressos dos Cursos de Liderança, Gestão e Empreendedorismo contaram com R$ 9 milhões do FIS para investimentos. O curso de formação de Jovens Rurais, associado Page 76 of 89 The World Bank Santa Catarina Rural Competitiveness ( P118540 ) às demais estratégias de apoio, produziu uma nova realidade para este público e suas famílias, favorecendo a permanência do jovem na atividade rural e a sucessão familiar. Foram realizados 55 cursos de formação de jovens rurais, os quais tiveram duração que variaram de 8 a 10 semanas. Chega-se ao final do SC Rural com 1.806 jovens rurais formados (120% da meta planejada de 1.500 jovens). Dados da avaliação econômica de 31 planos de negócio de jovens rurais apoiados apresentaram uma receita líquida incremental média por ano de R$ 13.895,00 e uma TIR de 31%. Os cursos foram muito bem avaliados pelos jovens, suas famílias e pela sociedade em geral, havendo uma demanda crescente de participação no Estado. Assim, a Epagri e a SAR vêm trabalhado em parcerias para tornar a ação uma política pública de estado. A Epagri implantou, em parceria com as famílias rurais, 1.685 unidades de referência tecnológicas e de validação de pesquisas. Em cada unidade implantada foi realizado pelo menos um evento grupal de capacitação, o que representou o envolvimento de mais de 25.000 agricultores. Na atividade de produção de leite, de grande importância socioeconômica em SC, foram implantadas inúmeras unidades, das quais 242 foram acompanhadas e avaliadas. Os principais resultados apresentados por essas unidades foram: (i) Aumento da produtividade média por vaca de 12,4 para 14,8 litros por dia; (ii) Aumento da lotação das pastagens de 1,5 para 2,4 animais/ha e (iii) Aumento da produtividade de leite, passando de 3.265 litros/ha/ano para 8.760 litros/ha/ano. O Programa financiou a execução de 21 projetos de pesquisa tradicional e 16 de pesquisas participativas, com a aplicação de R$ 1,2 milhões. As pesquisas participativas geraram 69 produtos técnico-científicos e 190 eventos de atividade de extensão e divulgação de resultados. Uma estimativa de benefício econômico total de sete projetos foi feita para um período cinco anos (2015 a 2019) e resultou no valor de R$ 36 milhões de excedente econômico, o que representa mais de 30 vezes o valor investido. No âmbito da gestão ambiental se alcançou uma significativa ampliação do número de cadastros de usuário de água e das portarias de outorga, com destaque para o setor de empreendimentos hidrelétricos e início da outorga de água para uso em irrigação em 2017. A elaboração de 14 planos de bacia permite a consolidação dos instrumentos de gestão de recursos hídricos, onde estão propostos projetos e ações que, com a criação de duas entidades executivas regionais e recursos do Fehidro, as colocarão em prática. Ação de importância estratégica para as atividades da agropecuária foi a ampliação e reestruturação do sistema estadual de monitoramento e alerta hidro meteorológico, o que qualificou os serviços de previsão e alerta de eventos climáticos extremos. Experiência inédita de pagamento por serviços ambientais em SC foi implementada nos territórios dos Corredores Ecológicos Chapecó e Timbó. Nas áreas rurais destes territórios 281 famílias receberam pagamento pela manutenção da biodiversidade em 1.631 ha de florestas nativas. Page 77 of 89 The World Bank Santa Catarina Rural Competitiveness ( P118540 ) 3. Principais fatores que afetam o desempenho. Na preparação do Programa, procedimentos participativos foram conduzidos, envolvendo beneficiários e lideranças municipais e regionais. A consulta à sociedade por meio de seminários regionais buscou a efetiva participação de beneficiários, além de técnicos e lideranças. Os seminários foram realizados em 8 regiões, tendo a duração de um dia. No total foram realizados 15 seminários regionais, incluindo um seminário específico com a população indígena. O público participante totalizou 850 pessoas, tendo a presença de mulheres sido de 27% e de jovens rurais de 16,5%. Iniciativa importante realizada pelo Estado em 2010, por meio do “Levantamento das agroindústrias e de outras atividades de agregação de valor, agrícolas e não agrícolas, e redes de cooperação da agricultura familiar e pesca artesanal de Santa Catarina”, produziu uma sólida base de informações que subsidiou o desenho e as principais estratégias técnicas do SC Rural. O levantamento também disponibilizou dados de 1.894 agroindústrias e 496 empreendimentos não agrícolas (turismo rural, artesanato e serviços), os quais foram utilizados de linha de base da avaliação de impactos realizada em 2016. Com relação a riscos verificou-se dificuldades iniciais de implementação, advindos do cumprimento da legislação nacional de aquisições (Lei nº 8.666/93). Esta condição criou entraves, pela necessidade de práticas administrativas não dominadas pelos agentes, principalmente as Organizações de Agricultores, o que criou risco inicial para implementação dos projetos estruturantes. Em 2013, após identificar atrasos na execução dos primeiros projetos estruturantes, a SEE efetivou formas simplificadas de processos de aquisições pelas OAF, sem deixar de cumprir os requisitos legais. A Coordenação do Programa (SEE) teve como grande desafio promover a articulação das instituições executoras com vistas a atingir os objetivos do Programa com maior eficácia. Para tanto, atuou sistematicamente identificando dificuldades das executoras, estimulou a aproximação destas, construindo estratégias e planejamento de atividades em conjunto. A definição de metas comuns e o monitoramento de indicadores foi ferramenta importante para alcançar os resultados propostos. O Programa chegou ao seu final com um desempenho considerado satisfatório. Riscos moderados relacionados a nova modalidade de financiamento (SWAp) foram enfrentados de forma eficaz, resultando no atingimento de praticamente todas as metas físicas e financeiras estabelecidas, com resultados alinhados aos objetivos geral e específicos. A estratégia técnica e geral desenhada para dar suporte às OAF, por meio da organização de grupos de interesse, elaboração de projetos estruturantes e análise de viabilidade técnica, econômica e ambiental criteriosa gerou maior confiabilidade na realização de investimentos por parte do FIS e dos agricultores. O objetivo geral de aumento da competitividade das OAF foi plenamente alcançado. No quesito aumento da renda, a avaliação de impactos demonstrou um aumento de 64% das vendas dos Page 78 of 89 The World Bank Santa Catarina Rural Competitiveness ( P118540 ) empreendimentos participantes quando comparados aos não participantes. Também outras questões estruturantes foram trabalhadas para ampliar a competitividade, como: legalização sanitária e ambiental, melhoria da infraestrutura dos empreendimentos e propriedades, capacitação de beneficiários e jovens. 4. Fatores que promovem a sustentabilidade. No nível político estadual, é unanime o reconhecimento dos resultados gerados pelo SC Rural. O governador do estado foi um importante apoiador e se tornou presença constante em eventos do Programa, especialmente naqueles relacionados aos encontros estaduais de jovens rurais. As instituições executoras (empresas e secretarias) puderam atuar tendo disponibilidade financeira para execução das atividades durante o período do SC Rural. As ações de programas estaduais para o meio rural constantes no PPA do Estado deverão ter continuidade e vinculados ao cumprimento de metas de desempenho. Diversas estratégias técnicas criadas e/ou aperfeiçoadas no âmbito do SC Rural estão tendo continuidade no âmbito do Estado. Entre as mais importantes podemos citar o processo de formação de jovens rurais, a implantação de unidades de referência, pesquisas e inovação visando a capacitação de agricultores e o assessoramento dos empreendimentos da agricultura familiar com vistas a uma melhoria na gestão e no processamento e qualidade dos produtos. O atendimento às populações indígenas e pescadores artesanais continua sendo realizado pela Epagri. A estrutura de Assistência Técnica e Extensão Rural pública de SC foi a principal responsável pelas diversas ações junto ao público beneficiário. Foi por meio desta estrutura descentralizada e que conta com um alto nível de “confiabilidade” junto às famílias e organizações rurais, que se desenvolveu toda a estratégia técnica dos componentes do Programa. Também as ações ligadas a gestão ambiental ligadas a recursos hídricos e a proteção da biodiversidade constam do planejamento plurianual do Estado. A Secretaria de Estado de Desenvolvimento Econômico está dando continuidade à elaboração e execução dos planos estratégicos de bacia hidrográfica e fortalecimento dos comitês de bacia (recursos do Fehidro). A Fundação do Meio Ambiente publicou portarias criando dois grupos gestores dos corredores ecológicos e o sistema de créditos de conservação (SICC), ações desenvolvidas em parceria com a SDS e Epagri. No âmbito técnico e visando à preparação de novas iniciativas públicas de apoio à agricultura familiar, o Estado, através da Epagri, está realizando um novo levantamento de agroindústrias e iniciativas de agregação de valor da agricultura familiar em SC. A pesquisa foi iniciada em março de 2017 e no decorrer do ano deverá oferecer dados e informações atualizadas dos empreendimentos, possibilitando acompanhar a sua situação e evolução, tanto dos que obtiveram apoio do SC Rural como daqueles que acessaram outras fontes financeiras. Page 79 of 89 The World Bank Santa Catarina Rural Competitiveness ( P118540 ) 5. Principais lições aprendidas. a. O envolvimento dos órgãos da área financeira e regulatória do Estado no Programa propiciou a redução de riscos e melhorou o ambiente para solução de dificuldades administrativas relacionadas a legislação nacional de licitações. b. Existência de um Conselho Estadual de Desenvolvimento Rural, amparado por Lei Estadual facilitou o enfrentamento de dificuldades operacionais do Fundo de Investimentos do Programa. c. A coordenação deve promover oficinas de planejamento e avaliação sistemáticas com as instituições executoras, com vistas a aproximá-las, nivelar o conhecimento mútuo das ações, público e estratégias comuns. A construção de indicadores e metas comuns e o seu monitoramento deve ser responsabilidade de todos, assim como a preparação de estratégias de avaliação de resultados. d. Em novas modalidades de operações (SWAp) há necessidade de investir tempo para preparar as equipes técnicas e administrativas das executoras, proporcionando maior segurança e entendimento das regras aplicáveis. e. O apoio a redes de cooperação é uma estratégia eficiente para melhorar a competitividade da AF. A cooperativa descentralizada, modalidade de organização em rede desenvolvida em Santa Catarina, congrega diversos empreendimentos unifamiliares ou grupais, o que possibilita ganhos de escala, acesso a mercados e fontes de financiamento. Por meio destas estruturas os empreendimentos podem obter também benefícios relacionados a marketing, rotulagem e rastreabilidade de produtos, vendas em conjunto, serviços de assistência técnica, entre outros. f. O processo de chamada de PE contínua permite a maior troca de informações, recomendações e ajustes das propostas de investimentos. As equipes técnicas podem atuar de forma contínua junto às OAF buscando maior consistência e maturidade dos grupos de famílias envolvidas nos projetos. g. A juventude rural tem expectativa de permanecer no meio rural, desde que identifique oportunidades e autonomia para desenvolver atividades com geração de renda, maior conforto e qualidade de vida. h. A estratégia de formação de jovens incluiu ingredientes importantes para o sucesso da ação como: descentralização de conteúdos com grade geral mínima; elaboração e apresentação de “projeto de vida” pelos jovens; envolvimento sistemático da família; visibilidade e valorização do jovem rural perante a sociedade local/regional. i. Sugere-se que o Estado, na execução de programas de desenvolvimento, promova a formalização de convênios de cooperação com as Prefeituras Municipais participantes, determinando as Page 80 of 89 The World Bank Santa Catarina Rural Competitiveness ( P118540 ) responsabilidades de cada ente nas ações do Programa realizadas no seu território, especialmente nas etapas de projeto, execução e fiscalização das obras de infraestrutura. j. É central que políticas públicas e programas futuros, trabalhem aspectos de gênero e geração, promovendo a autonomia, igualdade de oportunidade e fortalecimento das mulheres e dos jovens no núcleo familiar e comunitário, para que aumentem os espaços para sua inserção, atuação e valorização. k. A necessidade de monitorar e cumprir metas e apresentar resultados foi um desafio e uma inovação gerencial bem avaliada pelos gestores das instituições executoras. Page 81 of 89 The World Bank Santa Catarina Rural Competitiveness ( P118540 ) ANNEX 6. SUPPORTING DOCUMENTS (IF ANY) Project Concept Note (PCN) and Project Information Document (PID) Project Appraisal Document (PAD) Loan Agreement Operational Manuals Restructuring Papers (2014, 2016) Supervision Aide Memoires Technical Papers (environmental, social, rural) Implementation Supervision Reports (ISR) Project Progress Reports Procurement PPRs and Aide Memoires Financial Management Reports and Aide Memoires Audit Reports Country Partnership Strategy (2008-2011, 2012-2015) Bank’s Agriculture Action Plan Implementing Agriculture for Development (FY10-12) Country Partnership Framework FY18-FY23 (CPF) Impact Evaluation, Epagri/Cepa, 2016 State’s 2008-2011 Multi-Year Development Plan (PPA) Santa Catarina 2015 Development Plan Diagnostic of agro-industries and other value-added activities – agricultural and non-agricultural – and cooperation networks in family agriculture and artisanal fishing” (EPAGRI, 2010) Digital Inclusion evaluation study (2016) Page 82 of 89 The World Bank Santa Catarina Rural Competitiveness ( P118540 ) Nature and the Guarani – Bilingual Notebook (EPAGRI, 2014) Way of Life: Mbya Guarani (EPAGRI, 2014) Learning about the Kaingang and Guarani Culture (EPAGRI, 2017) Avaliação do Trabalho com Povos Indígenas (EPAGRI/SEE 2017) Regularização Fundiaria: Produto 4, Contrato 3/2016/SC Rural Curso capacitação em Liderança Gestão e Empreendedorismo/Alternância Inclusão Digital, October 2016, Produto 4, Contrato 3/2016/SC Rural Certificação Fitosanitária, E. J Barni/SC Rural, October 2016 Rural Comité de Bacias Hidrográficas, September 2016, Produto 4/Contrato 3/2016/SC Rural FAO. RuralInvest – Formulation and assessment small-scale rural investments (http://www.fao.org/support-to-investment/knowledge-resources/learning-tools/ruralinvest/en/ ) Borrower Completion Report (Relatório Final do Mutuário, Programa Santa Catarina Rural) Page 83 of 89 The World Bank Santa Catarina Rural Competitiveness ( P118540 ) ANNEX 7. ADDITIONAL DETAILS Table 1: SWAp Eligible Expenditure Programs (EEP) and Values – Appraisal, Restructured and Actual (US$ ‘000) Component/EEP (non-TA activities) Sector and/or Main Types of Activities Supported Appraisal Restructured Actual Theme 2017 Family Agriculture Competitiveness and Increased Access to Markets 0310: Competitive Agribusiness Agriculture and Producer organization and capacity- 74,497 96,715 62,394 Environment building for investments in cooperation networks and productive alliances; improved production systems, regulatory compliance, diversification, processing/value- added innovation. Restructuring of March 26, 2014 added “Agricultural Sanitary Defense” (0315) to this line. 0340: Sustainable Environmental Development Environment Eco-systems and corridor 4,440 6,639 1,114 management; environmental compliance and enforcement activities; environmental education 0300: Quality of Life in Rural and Urban Areas Agriculture Compliance with land tenure, 14,121 14,121 12,926 sanitary/phytosanitary regulations 0640: Rural Tourism Tourism Capacity-building; awareness 3,425 3,465 5,389 campaigns, fairs and workshops; studies/inventories; information dissemination and direct investments to promote rural tourism. Complementary Public Investments for Rural Competitiveness 0340: Sustainable Environmental Development Environment Eco-systems and corridor 2,199 6,639 2,375 management; environmental compliance and enforcement activities; environmental education Page 84 of 89 The World Bank Santa Catarina Rural Competitiveness ( P118540 ) 0310: Competitive Agribusiness Agriculture and Producer organization and capacity- 22,218 96,715 53,969 Environment building for investments in cooperation networks and productive alliances; improved production systems, regulatory compliance, diversification, processing/value- added innovation. Restructuring of March 26, 2014 added “Agricultural Sanitary Defense” (0315) to this line. 0350: Water Resources Management WRM Continued WRM improvement 25,722 25,722 4,423 through planning at the State and river basin levels, water monitoring, strengthening of river basin committees, issuance of water user rights and upgrading of the State’s WRM information system. 0100: Rural Roads Infrastructure Improvement of tertiary roads to 13,251 13,251 5,454 facilitate access to market of beneficiaries’ agro-processing ventures. The restructuring of March 2014 added “Urban Mobility” (0150) to this EEP. 0640: Rural Tourism Tourism Capacity-building; awareness 40 3,465 19,971 campaigns, fairs and workshops; studies/inventories; information dissemination and direct investments to promote rural tourism. 0250: Digital Inclusion Agriculture Training in rural, digital connectivity, 1,426 1,426 1,890 especially youth, for improved access to information; innovation and implementation of networks. Support to the Rural Competitiveness Institutional Framework 0900: Administration and Management in the Public Sector Program execution as well as 4,476 4,476 10,859 Executive Management improved public sector performance through results-based management, Page 85 of 89 The World Bank Santa Catarina Rural Competitiveness ( P118540 ) and improved administrative and fiduciary management Total: 165,815 272,634 180,76415 Table 2: Results Framework (PAD) and Effects of Restructuring, 2010-2017 Project Development Objective Indicators PAD Target Restructured Observations (PAD) Target 1. Increase in annual sales of participating 30% na No change FAPO 2. Coordinated implementation of six public 6 na No change programs to improve the rural business environment: (a) share of state’s water resources under 65% na No change decentralized and participatory planning and management (b) share of state’s territory managed under 10% na No change an “ecological corridor” concept (coexistence of sustainable production and preservation) (c) 100% rehabilitation of rural roads 100% na No change associated with Business Plans (d) share of public financing to family 60% na No change agriculture enterprises channeled through the new extension/TA strategy (e) re-structured SPS Services, generating the following results in support of FAFs: (e i) number of registered and certified crop 2,500 DROPPED DROPPED. This sub-indicator/DLI was dropped at restructuring in and forest production units (DLI)16 June 2014, substituted by a clarified composite indicator (see below) of similar intent. 15 To fill the table, the following values were deducted: (i) USD 8.24 million referring to category 2 – SIL; and (ii) USD 225 thousand related to the credit front-end fee. Therefore, Table 1 specifies expenditure by program, by component, which totals UDS 180.76 million, which refers to category 1 – SWAp. 16 DLI: Disbursement-Linked Indicator for SWAp. Page 86 of 89 The World Bank Santa Catarina Rural Competitiveness ( P118540 ) (e ii) number of registered and certified fruit 240 DROPPED DROPPED. This sub-indicator/DLI was dropped at restructuring in processing units (DLI) June 2014, substituted by a clarified composite indicator (see below) of similar intent. NEW: Number of Family Agriculture na 2,740 NEW: This indicator was substituted for (e i) and (e ii) by June production and processing units registered 2014 restructuring and target is an aggregate of the dropped and certified as complying with indicators. phytosanitary requirements. (DLI) (e iii) number of enterprises legalized, 420 na No change complying with sanitary standards (e iv) number of farms certified for absence 700 na No change of animal TB and brucellosis (DLI) (f) number of rural schools carrying out inter- 600 1,000 ADJUSTED: Target increased to 1,000 by June 2014 restructuring, disciplinary actions under PEEA (State based on perceived strong progress at MTR. Environmental Education Policy) Intermediate Outcome Indicators PAD Target Restructured Observations (PAD) Target Component 1: Family Agriculture Competitiveness and Increased access to Markets New, added-value arrangements established 138 na No change (63) or strengthened (75) (i.e., alliances/networks and coops). (DLI) 500 Business Plans developed, approved and 500 DROPPED DROPPED: Indicator was dropped by the June 2014 Restructuring financed, and under implementation by and substituted by indicator “Number of existing, small agri - FAPO with project support businesses made compliant with sanitary and phytosanitary (SPS) standards, and new agro-processing and non-agricultural businesses created”. Target 500. Increased land and labor productivity 20% DROPPED DROPPED: Indicator was dropped by the June 2014 restructuring because it was not aligned with SC Rural’s focus to support FAPO and value-added investments. Climate-resilient production systems 20,000 20,514 ADJUSTED: Revised wording post 2014 Restructuring was improvement plans implemented as part of “Number of ancillary, climate-resilient production systems Business Plans with project support. (DLI) improvement and tourism plans executed through subprojects, with project support”. Target adjusted to 20,514. Small agribusinesses (200 existing farms, 190 500 na ADJUSTED: Revised wording post 2014 Restructuring was new agro-processors and 110 new, non- “Number of existing, small agri-businesses made compliant with agricultural businesses) compliant with SPS sanitary and phytosanitary (SPS) standards, and new agro- Page 87 of 89 The World Bank Santa Catarina Rural Competitiveness ( P118540 ) requirements and taking into consideration processing and non-agricultural businesses created”. Target was Climate Change adaptation and mitigation. not changed. (DLI) Rural tourism plans implemented with 30 20 ADJUSTED: Target reduced to 20 due to institutional capacity project support issues affecting progress and unanticipated difficulties in establishing rural tourism itineraries. Component 2: Complementary Public Investments for Rural Competitiveness River Basin Participatory Strategic Plans 14 DROPPED DROPPED: Indicator dropped by June 2014 Restructuring and completed (out of the State’s 23 River substituted by an improved indicator measuring the health of Basins). (DLI) River Basin Committees. River Basins with registration of users 14 DROPPED DROPPED: Indicator dropped by June 2014 Restructuring and completed. (DLI) substituted by an improved indicator measuring the health of River Basin Committees. Number of self-declared water users na 65,000 NEW: This indicator was seen to better-capture the intent of registered in River Basins. (DLI) relevant project activities with River Basins/Committees. Number of additional, tenured, technical na 16 NEW: New Indicator added by 2014 Restructuring. staff in the Directorate of Water Resources (DRHI). (DLI) Studies completed to implement target 2 na No change Ecological Corridors in support of biodiversity-friendly land mosaics Hectares of forest under “Conservation 950 na No change Credits”. (DLI) Farms with SIEE implemented (Integrated 200 na No change Economic-Ecological Systems of livestock [meat and milk] grains, forestry, SAF and tourism). (DLI) Km of rural roads rehabilitated (DLI) 1,300 430 ADJUSTED: Target was adjusted by 2014 Restructuring due to the original PAD estimate having been indicative only, as the adjusted indicator wording linked the target directly to Business Plan demand (430 km). Also, two road rehabilitation pilots showed that costs/km were much higher than expected. While the intention was always that road works would be linked to BP demand, the indicator did not explicitly state that. The June 2014 Page 88 of 89 The World Bank Santa Catarina Rural Competitiveness ( P118540 ) Restructuring adjusted wording to: “Kilometers of rural road rehabilitated, associated with Business Plans”. Internet Connectivity for 500 Business Plans 500 DROPPED DROPPED: Digital Inclusion indicator (below) considered involving 138 FAPO (networks/added-value adequate to capture project activities. arrangements). Pilot Digital Inclusion projects implemented 10 30 ADJUSTED: Target adjusted to 30 by 2014 Restructuring due to with internet connection to support excellent progress and prospect of financing significantly more enterprises connected to networks. (DLI) projects than originally planned. New, regionally-focused, market-oriented 1 na No change rural extension strategy implemented Restructured SPS System to include specific 1 na No change support for FAF Number of new, regular Technical Assistance 176 na ADJUSTED: Wording was slightly adjusted by June 2014 and Rural Extension professional staff Restructuring: 4“priority project municipalities” was changed to allocated by EPAGRI in priority project “priority municipalities and indigenous lands”, reflecting EPAGRI’s municipalities, by CIDASC to phytosanitary internalization of indigenous peoples in its regular work strategy certification and by FATMA to SIEE and activities. implementation. (DLI) 2.00 NEW: ‘Number of Executive Secretariats (Entidades Delegatarias) formalized by a legal instrument with the State Government”. Added by restructuring in 2016. Component 3: Support to the Rural Competitiveness Institutional Framework Program Project Strategic Plan prepared and 1 na No change implemented Strategic Planning developed and Results- 1 na No change Based Management implemented at the sector level (Rural, WRM, Environment) Annual Operations Plans successfully 6 na No change implemented Satisfactory technical, financial and 6 na No change procurement audits Compliance with Project Operational Yes na No change Manual, including Safeguard and Anti- Corruption policies Page 89 of 89