INTEGRATED SAFEGUARDS DATA SHEET APPRAISAL STAGE Report No.: ISDSA692 Public Disclosure Copy Date ISDS Prepared/Updated: 25-Mar-2013 Date ISDS Approved/Disclosed: 11-May-2013 I. BASIC INFORMATION 1. Basic Project Data Country: Brazil Project ID: P126452 Project Name: Rio Grande do Norte: Regional Development and Governance (P126452) Task Team Maria de Fatima de Sousa Leader: Estimated 22-Feb-2013 Estimated 14-Jun-2013 Appraisal Date: Board Date: Managing Unit: LCSAR Lending Specific Investment Loan Instrument: Sector(s): General agriculture, fishing and forestry sector (30%), Public administration- Information and communications (20%), General educati on sector (20%), Health (20%), Irrigation and drainage (10%) Theme(s): Rural markets (40%), Public expenditure, financial management and procurement (20%), Gender (10%), Education for the knowledge econo my (10%), Health system performance (10%), Municipal governance and institution building (10%) Public Disclosure Copy Is this project processed under OP 8.50 (Emergency Recovery) or OP No 8.00 (Rapid Response to Crises and Emergencies)? Financing (In USD Million) Total Project Cost: 400.00 Total Bank Financing: 360.00 Total Cofinancing: Financing Gap: 0.00 Financing Source Amount Borrower 40.00 International Bank for Reconstruction and Development 360.00 Total 400.00 Environmental B - Partial Assessment Category: Is this a No Repeater project? 2. Project Development Objective(s) The objectives of the Project are to support the Borrower's efforts to: (i) increase food security, Page 1 of 21 access to productive infrastructure, and access to markets for family agriculture; (ii) improve access to, and quality of, health, education and public security services; and (iii) improve systems for public expenditure, human resource and physical asset management in the context of a results-based Public Disclosure Copy management approach. 3. Project Description 1. The proposed Project would be a US$ 360 million Specific Investment Loan (SIL) to support implementation of the State’s Strategic Development Plan (PPA) and its Poverty Reduction Strategy (RN Sem Miséria) over a five-year period. The Project design represents the State’s integrated approach to promote social and economic development to stimulate sustainable and inclusive growth, and the reduction of poverty and extreme poverty. The Components would be organized in the following fashion in support of the State’s strategy: 2. Component 1: Sustainable Regional Development and Productive Inclusion (US$ 200.5 million of which US$ 180.3 million IBRD financing). This Component aims to reduce regional inequalities and increase productive inclusion in support of the State’s Sustainable Regional Development Strategy through the following Subcomponents: i) Subcomponent 1.1: Strategic Investments and Local Governance Strengthening (US$ 130.2 million, of which US$ 117.0 million IBRD financing) to support the expansion, improvement and integration of regional socioeconomic infrastructures (e.g. innovation, technology and trade centers, irrigation systems upgrading, pisciculture stations, phyto-sanitary inspection units, physical facilities and equipment for production of seedlings and breeding animals, etc.) This Subcomponent will also include activities to strengthen the capacities of municipal and territorial government agencies to implement the Sustainable Regional Development Strategy through, inter alia: strategic studies, diagnoses, and business plan development; capacity building of Technical Assistance and Rural Extension Services (ATER); increased information dissemination and marketing support, etc. ii) Subcomponent 1.2: Productive and Socio-Environmental Subprojects (US$ 70.4 million, of Public Disclosure Copy which US$ 63.3 million IBRD financing) to support to Producer Organizations (within selected APLs), Social Organizations and Networks of Social Organizations (such as community associations and women’s groups), to increased productive inclusion of the target populations in the State’s lagging development regions. Sub-projects under this Component will support actions to strengthen and consolidate the enterprises of small farmers and their organizations in an economically, socially and environmentally sustainable manner. The provision of Sub-Project grants and technical assistance support will focus on improving and increasing productivity and market access (including through fair trade initiatives), enabling increased integration of family farmers in higher value-added production chains (agricultural and non-agricultural). In addition to market-oriented ‘Productive Sub- Projects’, this Sub-component will also support ‘Socio-environmental Sub-projects’ aimed at promoting food security and good environmental practices through the recovery of environmentally degraded areas and/or enhancement of climate resilience. Subproject categories are described further in Annex 2 (Detailed Project Description.) 3. Component 2 – Improving Public Services (US$ 130.0 million of which US$ 116.9 million IBRD financing) aims to improve the quality of, and access to, basic public services and would be divided into three subcomponents i) Subcomponent 2.1: Health. This component would support three strategic priorities for the health sector, through the SESAP in the Borrower’s territory, namely:: (a) the reduction of maternal Page 2 of 21 and infant mortality rates; (b) increased availability of early detection and quality treatment for breast and cervical cancer patients; and (c) establishment of a State-wide, regionalized, emergency health services network. Public Disclosure Copy ii) Subcomponent 2.2: Education. This subcomponent would promote the basic education quality improvement and regional development for the education sector, in the Borrower’s territory, through: (i) the provision of support to SEEC; and (ii) the provision of support to School Councils (SC) for Schools Subprojects design and implementation to promote educational innovations at the school level. iii) Subcomponent 2.3: Public Security. This subcomponent would support integrated management processes within the Secretaria de Segurança e da Defesa Social (SESED) to enhance the secretary’s capacity to provide citizen security. It will also help to strengthen public security information systems and promising state programs focused on violence prevention and education. 4. Component 3 – Public Sector Mana gement (US$ 65.5 million of which US$ 58.9 million IBRD financing) would provide support for the modernization of the State’s public sector management in strategic sectors in order to strengthen the efficiency and effectiveness of central budget, finance and planning resources and management, as well as in service delivery in health, education and public security sectors. It would be divides into three subcomponents:. (i)integrated and results-oriented planning, budgeting and finance management; and (ii) modernization of State Institutions and administrative systems; and (iii) Strategic and Efficient Human Resources, Assets and ICT Management. Component 1: Sustainable Development and Productive Inclusion. 5. As described above, this first Component holds priorities investments focused on the implementation of key elements of the development strategy of the state in the actions of economic and social inclusion,. The beneficiaries of these actions would be organizations/cooperatives/ Public Disclosure Copy networks/ formal alliances of family farmers, waste pickers organizations of recyclable materials, individual entrepreneurs engaged in productive activities both agricultural and non-agricultural and, also including youth and women, remaining quilombolas, indigenous and gypsies. 6. Potential activities to be supported under this first component are expected to include, for subcomponent A.1, inter alia: (i) improving the competitiveness and productive inclusion of Local Productive Arrangements (APL) with focus on access to markets in priority areas; (ii) promoting of good environmental practices with emphasis on sustainability, coexistence with the semiarid and environmental preservation; (iii) implementation of civil works of water supply, sanitary sewage, solid waste management (creating a unit manager and technical solid waste at state level, as an instrument of advice to municipalities, encouraging installation of Public Consortia, the participation of citizen and waste pickers; and also the priority in conducting studies on the treatment and final disposal of health services waste; not including the construction of new landfills or plants), and also the recovery of degraded areas and the implementation of groundwater dams and others hydro environmental works; and, (vi) strengthening governance both focused on sustainable regional development; aiming at fostering sustainable agriculture in those micro-catchment areas most susceptible to environmental degradation. Regarding the spatial distribution of investments, some activities are spread out across the state, with 8 development regions already defined by the State’s government, and others are more concentrated. Most of investment followed the regional strategic development plan proposed by the state, which is organized around three axes: (i) the recovery of the Page 3 of 21 ancient center of the region's dynamic Seridó - antigo centro dinâmico da região do Seridó, (ii) the development of the State’s central region – cinturão central, characterized by a real void of development, and (iii) the development of the west Potiguar – faixa ocidental, characterized by an Public Disclosure Copy absence regarding the provision of public services and very limited penetration of formal economic activity. Component 2: Improving Public Services. 7. This Component holds priorities investments focused on the expansion and implementation of logistics infrastructures of health, education, such as the building of rural schools, productive infrastructures with small facilities to support production and health facilities. In the health sector, the beneficiaries would be the two spheres of the SUS – Sistema Único de Saúde management in Rio Grande do Norte (the State and Municipal Health), and its service users. Beneficiaries would also be students and education professionals from public state and local education. 8. For this second Component, project activities include, inter alia: (i) construction, renovation and provision or upgrading of health care equipment, (ii) construction of the Infant and Maternal Hospital in Mossoró; (iii) implementation of continuous training program for the family health teams; (iv) improvement of the Referral Center of Diagnosis on Cancer Diseases; (v) structuring of state labs for cancer tests and diagnosis; and, (vi) implementation of continuous training and educational program for health professionals and managers. For subcomponent A.3, project activities include, inter alia: (i) development of a new curricula and programs for basic education; (ii) promote educational innovations at the school level through the design of school subprojects (iii) finance a monitoring and evaluation system, by establishing an Education Observatory to monitor school quality and a State Education Evaluation System to assess students and schools’ performances (iv) implement minimum operational standards in basic education schools; and (v) develop instruments and actions to support regional development activities, including construction of rural schools; provision of literacy and technical-vocational training programs for youth and adults participating in productive inclusion activities. Activities to be supported under the third subcomponent, Public Public Disclosure Copy Security management, includes: investments in technologies to strengthen SESED public security management capacity; investments in technologies to improve the Integrated Center for Public Security Operations; and, investment in materials, equipment and technologies to support specific ongoing drug and violence prevention efforts and support to victims of violence against women, the elderly and minorities (including LGBT). Compone nt 3: Public Sector Management 9. This Component supports the modernization of the State’s public sector management. Central themes of this component include: (i) introducing integrated results-based planning and management systems, (ii) modernization of administrative structures and systems, (iii) strategic human resources, integrated assets and ICT management, and (iv) improvement of public security management. This component will require careful sequencing, alignment, and coordination of actions by central and line secretariats to achieve results through measures grouped around the following four subcomponents: 10. Subcomponent 3.1: Results-based Planning, Budgeting and Finance Management Integration. Strengthening planning capacity, monitoring, evaluation and policy making will also be supported under this subcomponent. The new administration has already initiated efforts to revamp its planning capacity and use the multi-year plan (PPA) as a tool for expressing the State’s policy Page 4 of 21 intentions, as per the available fiscal space. These efforts have made clear that some sectors will need additional help in clarifying their key goals and strategies, as well as defining intermediate and results indicators. Activities to strengthen the budgeting procedures and to allow for strategic Public Disclosure Copy allocation of resources to policy priorities will also be supported. Activities under this sub- component include: (i) Process of alignment of planning and medium with long-term strategic management, focusing on result-oriented management, comprising staff training, envisaging the necessity of redistributing HR; and (ii) design, development and implementation of a dashboard hall, based on the PEFA model, and a bureau of projects to monitor the management of strategic programs and projects, comprising the definition of indicators, strengthening of infrastructure, purchase of software, and changes and improvements in the State’s financial system. 11. Subcomponent 3.2: Institutional Modernization of State Institutions and Administrative Systems. As part of its strategy, the State intends to undertake a functional review, identifying the key roles of its agencies and promoting a discussion on alternative service delivery modes. Modernization efforts will focus on updating administrative structures, procedures and processes, with the aim of increase efficiency and alignment with the new integrated results-based management systems introduced under Subcomponent B1, with special focus in SESED, SESAP and SEEC, including sector investment addressed to improve management. The State is also interested in a review of the role and administrative structure of government entities which can inspire a rationalization of the current structure of the same Government. Activities under this subcomponent will include: (i) identification and revision of macro-processes and processes of the Secretariats of Education, Health and Public Security and Social Defense, with the objective of maximizing administrative effectiveness, activity leaded by SEPLAN in cooperation with the three mentioned sector Secretariat to guarantee the coherence of the model; (ii) diagnosis for the State’s Government on the suitability of structures and distribution of competences of all the State Secretariats, to identify possible dis-functionalities proposing corrective measures; and (iii) a package of sector investments coordinated by SENPLAN to improve infrastructure and management. 12. Subcomponent 3.3: Strategic and Efficient Human Resources, Assets and ICT Management. Public Disclosure Copy A more effective and efficient public administration would require strengthening the State’s workforce more strategically by focusing on attracting and retaining professional personnel, in particular in the center-of-government institutions. Rio Grande do Norte’s aspires to be a performance-based and equal opportunity employer with the goal of moving goal should be to move gradually from a pyramidal to a quasi-diamond-shaped staff structure, increasing the quality of personnel expenditures. Professionalization efforts would require, in turn, putting in place adequate controls over the State’s payroll to create the fiscal space needed. The State also needs to establish an integrated assets management (including planning purchases, register, management, maintenance, and defense) to optimize the use of its patrimony according to an advanced model more complex that the traditional simple register and assets accounting. Finally, the State’s ICT (INFOVIA) shall also be optimized, arriving to all the units in an effective manner. Activities under this subcomponent will include: (i) improvement of HR management through the implementation of management and payroll auditing modules, planning of HR resources and design of a result-based management model (including a gender and minorities approach) and its implementation through a contractual system; (ii) implementation of the integrated assets management system, including the register of all the assets; and (iii) Modernization of the State’s Archive for a better treatment of its content. This subcomponent also comprises all the training activities needed for the implementation of its activities; and (iv) improvement of State’s ICT INFOVIA to face deficiencies in territorial connectivity. This subcomponent also comprises all the training activities need for the implementation of all the activities comprised in the project. Page 5 of 21 13. As described, this second component will provide technical and financial support in sector priority actions that are part of the Government's strategy to promote: greater efficiency in the Public Disclosure Copy management and delivery of public services, reduction of current expenditure; elevated rate of public investment; unblocking bottlenecks and conditions to promote a more favorable and attractive, in the form of positive externalities, for increasing private investment and conducive to social and economic development of RN society on a sustainable basis. 14. Potential activities to be supported under this second component are expected to include, inter alia: (i) planning of medium and long strategic management, focusing on result-oriented management; (ii) design, development and implementation of a dashboard hall, based on the PEFA model, and a bureau of projects to monitor the management of strategic programs and projects; (iii) identification and revision of macro-processes and processes of the Secretariats of Education, Health and Public Security and Social Defense; (iv) improvement of HR management through the implementation of management and payroll auditing modules, planning of HR resources and design of a result-based management model (including a gender and minorities approach), among others, such as monitoring and assessment systems for the planning and implementation of HRM reforms. 4. Project location and salient physical characteristics relevant to the safeguard analysis (if known) 15. For Component 1 – Integrated Economic and Human Development, the project interventions will be located across the State territory. Most of investment followed the regional strategic development plan proposed by the state, which is organized around three axes: (i) the recovery of the ancient center of the region's dynamic Seridó - antigo centro dinâmico da região do Seridó, (ii) the development of the central region of the RN State – cinturão central, characterized by a real void of development, and (iii) the development of the west Potiguar – faixa ocidental, characterized by an absence regarding the provision of public services and very limited penetration of formal economic activity. Public Disclosure Copy 16. The selection of targeted beneficiaries and areas were based on explicit demands from vulnerable groups and in sensitive environmental areas, as well as on beneficiaries below extreme poverty line. In order to promote more efficient allocation of resources, the borrower created a strategy of focus and scope of the Project Sustainable RN based on the spatial distribution of fifteen indicators related to the areas of intervention and also the premise of recovery/consolidation of urban areas as polarizer’s regional development. The preparation, by the client, of the Project’s Environmental and Social Impact Assessment (ESIA) was also an exercise and a good practice to help support integration of environmental and social aspects of projects into the decision making process. 17. Component 1 includes some proposed activities such as the building of rural schools, productive infrastructures with small facilities to support production, health facilities, and the expansion of logistics infrastructures, such as feeder roads rehabilitation for better connectivity between areas of production and consumption. 18. Regarding environmental physical characteristics relevant to the Project, it should be emphasized aspects related to access to water, fertile soil, the supply of natural resources especially minerals and the existing areas in undergoing desertification process. Desertification is in moderate stage in the Alto Oeste region and part of the Sertão do Apodi; severe form of the remainder of the latter, the Acu-Mossoró region, in significant part of the Sertão Central and Litoral Norte, and about Page 6 of 21 half the territory of Mato Grande; and, very serious in almost all of the territory of Seridó, which includes a core of desertification in its eastern portion. Actions planned by the project, especially those of Typology 2, seek to promote environmental recovery actions in these areas, as previously Public Disclosure Copy described. 19. The Project does not entail any potential large scale, significant and/or irreversible negative impacts. For Component A – Social and Economic Development, with an integrated and sustainable development focus, the Project has statewide relevance focused on reducing regional inequalities and enhanced efficiency of health and education public services in support of an integrated and territorially balanced development of the State of Rio Grande do Norte. As key benefit, the Project is expected to contribute to increased competitiveness of the productive organizations in the priority areas, as well as encouraging good environmental practice especially in the semiarid region. 20. While most direct impacts on environment from the projects are expected to be limited in time and localized near the interventions sites, cumulative impact with potential pressure on environment might result from the regional economic growth expected as an outcome of the Project. Notwithstanding, the Project, under Component B for public sector management, will encompass a wide strengthening planning capacity, monitoring, evaluation and policy making, also including environmental institutions. 21. The most commonly expected negative impacts would arise from the construction activities under Component A, which includes interventions to improve feeder roads rehabilitation for better connectivity between areas of production and consumption implementation of civil works of water supply, sanitary sewage, solid waste management, not including the construction of new landfills, and also the recovery of degraded areas and the implementation of groundwater dams and others hydro environmental works, with no construction of new dams. Impacts from these interventions are expected to be limited, transitory and of short duration. In this sense, the environmental risks associated with this project are limited due to the nature of the proposed interventions, which will mostly take place in sites associated with projects. Public Disclosure Copy 22. To better address issues that arise from the ESIA, the Borrower prepared a set of mandatory Implementation Manuals to be applied for all types of interventions: Works Environmental Manual, Social Communication Plan, Environmental Education Plan, and also a Natural Disaster Prevention Plan (Annex 1 of ESIA). The ESIA report comprises three main parts: (i) Part A: an Environmental and Social Assessment; (ii) Part B: an Environmental Management Framework; and, (iii) Part C: an Institutional Strengthening Program to support environmental and social management demands coming from the project. 23. Recently, the economy of the state of Rio Grande do Norte has grown faster than the Northeast Region and Brazil, but this economic development has not been homogeneous among the state regions and, indeed, has increased inter-regional inequalities, favoring the territories surrounding the two major cities (Natal and Mossoró) and been detrimental of the most rural economies of the semi-arid territories. Although the extreme poverty rate has been reduced from 34.3 percent in 1995 to 12.8 percent in 2010 (lower than the regional average), this fast economic growth has not speeded up the rate of poverty reduction in rural areas, and the state continues to rank low in the country when key socio-economic indicators – such as the Human Development Index, the average per capita monthly family income and social inequality indicators – are considered. The urbanization rate has also increased and reaches 78 percent, but the capacity of the urban labor market to absorb the new waves of workers has not improved. Page 7 of 21 24. One fourth of the state population lives in rural areas with limited access to basic infrastructure and public services. The probability of being poor is much higher among those who Public Disclosure Copy work on the agriculture. The poor population comprises small-landholders and family farmers, sharecroppers and landless workers, whose livelihood strategies still heavily rely on subsistence crops and are much more vulnerable and less resilient to rain shortages as they lag behind in terms of access to modern technologies for processing and storing their production as well as in terms of access to technical assistance and financial markets. 25. The most vulnerable social groups in rural areas include the families single-headed by women, indigenous peoples (three ethnic groups), and quilombola communities (twenty-one communities certified by the Palmares Foundation). Indigenous peoples are present in the project area and will be among the potential beneficiaries. Adverse effects are not expected for them under this project. The Borrower conducted a social assessment that underscored the pressures and threats faced by these indigenous peoples in their livelihoods and their degree of social and economic vulnerability. The main constraints they face are related with land constraints due to sluggish processes of land regularization, encroachment and land conflicts, land inadequate use and degradation; inadequate housing and sanitation conditions; poverty and food shortage; social discrimination and outside resistance to acknowledge their cultural identities; lack of technical assistance and barriers to their access to markets and finance; lack of income alternatives and huge dependence upon retirement pensions and governmental cash transfer programs. 26. The Rio Grande do Norte Regional Development and Governance project will address the main reasons of the reproduction of poverty in the state s rural areas and will promote the dynamism of local economies, by focusing its actions on the regional areas characterized by the greatest challenges in promoting the generation of jobs and incomes, highest concentration of rural poor people and vulnerable social groups, and highest risks of environmental degradation. The project will prioritize poor family farmers. It aims to enhance productive inclusion, to improve their food security, and to promote environmental sustainability. It will address key bottlenecks to poverty Public Disclosure Copy reduction by productive inclusion in rural areas which are related with low competitiveness and precarious access to markets given poor family farmers lack of technological innovation and low access to proper technical assistance, their low managerial and productive skills, their low organizational capacity, their low human capital development and precarious access to quality public services, which result in poorer living standards in rural areas as well as in low resilience to cyclical natural hazards (related the most with water shortage and desertification processes). 5. Environmental and Social Safeguards Specialists Alberto Coelho Gomes Costa (LCSSO) Clarisse Torrens Borges Dall Acqua (LCSEN) 6. Safeguard Policies Triggered? Explanation (Optional) Environmental Assessment OP/ Yes According to OP 4.01 Environmental BP 4.01 Assessment, mandatory safeguard policy, the Borrower has addressed safeguards policy issues by conducting a regionally focused Environmental and Social Impact Assessment (ESIA). An Environmental and Social Management Framework (ESMF) was also Page 8 of 21 prepared to outline the set of guidelines, procedures and criteria to be used for screening activities and ensure that such activities will not Public Disclosure Copy cause any potential large scale, significant and/or irreversible negative environmental and social impacts. Therefore, criteria and screening procedures for the selection of interventions to be financed was defined during preparation and the final selection of interventions will be done during implementation. The Borrower would apply the environmental “screening� before the final selection of each investment subproject, as an action of support to decision making process during implementation. The final documents of this study was reviewed by the Borrower, and approved after the Bank team analysis. Component 1 of the proposed project may support small and medium-scale investments in rural development, health and educational infrastructure, as well as actions to promote regional development. Possible negative impacts from these investments are expected to be small, localized and reversible. Given these characteristics of the project, a category B is proposed. The ESMF focused on project-specific aspects, such as institutional arrangements and capacity, regulatory framework, environmental screening Public Disclosure Copy procedures and criteria and licensing. The ESMF also provides guidance on: (i) identifying the potential impacts associated with the typology of subproject investments; (ii) minimizing potential impacts for productive and infrastructure projects; (iii) specifying procedures to be used in assessing environmental and social impacts during the subproject design stage; and (iv) addressing identified impacts during the subproject implementation. The study, to be finalized prior to Project Appraisal, will include a budget and implementation schedule, both of which will be integrated into the overall project operational manual. The Borrower also carried out an Environmental and Social Management Strengthening Program, to better support demands for building capacities, after doing an institutional capacity assessment of the borrower, defining the main functions related Page 9 of 21 to Environmental Management Project: (i) Coordination of Environmental Management: exerted by the PMU (linked to SEPLAN), Public Disclosure Copy supported by subproject executing units linked to different state departments partner (UES – Unidades Executoras de Subprojetos); (ii) Environmental Monitoring Works: exerted by UES, which are responsible for monitoring, tracking and targeting of environmental action plans relating to Basic/Executive Plans contained in Environmental Manual for Construction and mitigation measures indicated in the environmental permits and detailed set of actions in this Environmental Management Framework; and (iii) Environmental Planning Works: the actions of environmental planning of the works are the responsibility of the construction companies that must follow the Manual of Environmental Works and implement mitigation measures contained in the environmental licenses and bidding documents. The implementation agency has shown adequate procedures and capacity to identify and mitigate similar impacts under the previous Bank funded operations. Principles of OP 4.01 with regards to proper consultation was applied as part of project preparation and ESMF was reviewed by the Bank and publicly disseminated prior to appraisal. Public Disclosure Copy Given the multiple stakeholders and third parties affected by the activities to be supported by this project, the ESMF was supported and informed by high quality social assessment and robust consultation processes. This social assessment will include: an initial socio-cultural scoping; stakeholders mapping, broad information and consultation; and the analysis of risks and potentially beneficial and adverse impacts. A draft ESIA was submitted to the Bank and published on the Borrower’s website (www. seplan.rn.gov.br) prior to public consultations. The final version was disclosed on the Borrower's website (www.seplan.rn.gov.br), on February 15, 2013 and will be disseminated in the Bank website after the Decision Meeting. Natural Habitats OP/BP 4.04 Yes The Natural Habitats policy safeguard (OP 4.04) was triggered and the ESIA addressed the safeguard requirements, screens out all Page 10 of 21 subprojects resulting in any significant conversion or degradation of critical natural habitats, and includes provisions to regenerate Public Disclosure Copy and reforest degraded area, as well as Management Plans for Protected Areas, as needed, Component 1 of the proposed project may also support investments for the recovery of degraded areas in rural areas, whose selection activities will follow the prioritization and definitions of the State Program to Combat Desertification and also the provisions of the Brazilian Forest Code. Furthermore, all planed activities in areas considered by the state to be environmentally sensitive (i.e., in riparian areas) - Permanent Preservation Areas (APP) and Legal Reserves (RL), will undergo an environmental screening and any potential direct or indirect impacts on those areas will be assessed). The OP 4.04 is triggered and all planning activities that may affect natural habitats must follow World Bank policies, identifying monitoring and management activities to prevent or mitigate any possible negative impact. Springs and river margins areas are classified as Permanent Preservation Areas (APP) and legally protected by Brazilian Legislation (Federal Law 4771/65). APP use for water systems Public Disclosure Copy development, intake and pipelines, requires specific permitting, mitigation and regeneration measures. Despite the expected positive impacts, the ESIA and ESMF include clear guidance regarding direct and indirect impacts on natural habitats. Special attention will be given to areas where desertification process was already identified by the State (SEMARH, PAE, 2010). In all the activities planned for the subcomponent 1.1 are the recognition and dissemination of good practices with an emphasis on environmental sustainability in the coexistence with the semiarid and environment preservation. The more critical area is the desertification process in Seridó, considered one of the three strategic priorities for intervention. Forests OP/BP 4.36 Yes OP 4.36 was triggered as a precautionary basis, particularly focused on Subcomponent 1.1, as Page 11 of 21 needed, as particular local development activities, unknown at preparation, could imply using forest in a productive fashion and/or using water Public Disclosure Copy resources from existing dams. Finally, to further mitigate Project environmental risk, a negative list, recorded in the ESIA, was agreed with the Borrower, with types of project activities that will not be supported by the loan as described in the ISDS. Activities under the Project Component 1.1 – subproject for productive chains will include a Negative List (as defined by the ESIA and ESMF) and also consistent with the Brazilian Forest Code. The Negative List includes types of project activities that will not be supported by the loan, including: (i) productive activities that require commercial forest harvesting, wood extraction or firewood use in the production chain; (ii) interventions that include purchase of equipment for use in tropical forests; (iii) interventions that promote degradation of critical natural habitats, deforestation or loss of native vegetation; (iv) interventions in the productive chains located in areas under the process of degradation without the adoption of appropriate management plans; (v) interventions in areas of high risk of natural disasters; (vi) interventions in areas of dispute and/or petition for recognition as Public Disclosure Copy indigenous lands; and (vii) interventions in water supply and irrigation that rely on existing dams 15 meters or more in height. So, subprojects with the potential for conversion or degradation of natural forest or other natural habitats that are likely to have significant adverse environmental impacts, which are sensate, diverse or unprecedented, are ineligible. Nevertheless, OP 4.36 is triggered given the potential for rehabilitation activities for APPs and Legal reserves. Pest Management OP 4.09 Yes The Project would not finance any pesticides or other chemical amendments that would trigger OP 4.09. Nevertheless, minor amounts of pesticides would probably continue to be used in the short term by a small portion of targeted small-scale farms. The Project would encourage and support technical assistance for the adoption of organic agriculture and of proven, Page 12 of 21 economically-and environmentally-sustainable Integrated Pest Management (IPM). This approach would increase farmer’s productivity, Public Disclosure Copy reduce input costs and human health risks, and minimize adverse environmental impacts through the virtual elimination of pesticide use. The IPM approach further improves the sustainability of agro-ecosystems by focusing on the knowledge and skills of farmers to better enable natural resource management. The need to use pesticides or herbicides will be indicated in each subproject, as well as the IPM measures to be adopted. When the use of pesticides or herbicides is justified, an analysis of potential negative impacts resulting from the use of these chemicals and the risks associated with the inappropriate handling or storing of their containers will be conducted. The projects will also include measures to reduce those risks, in compliance with Law No. 7,802/89. A Pest Management Plan (PMP) will be prepared and incorporated into the ESMF and the Project Operational Manual. The PMP would make use of the World Health Organizations Recommended Classification of Pesticides by Hazard and Guidelines to Classification (GENEVA; WHO 1994-95). The PMP would also exclude finance under the proposed project Public Disclosure Copy for formulated products that fall into WHO classes IA and IB, or formulation of products in Class II, if: (i) the country lacks restrictions on their distribution and use, or (ii) they are likely to be used by, or be accessible to, lay personnel, farmers, or other without training, equipment, and facilities to handle, store, and apply these products properly. Physical Cultural Resources OP/ Yes Project implementation would not cause any BP 4.11 negative impact on known physical cultural resources (PCR). Proposed sub-projects with expected direct and negative impact on known archaeological, paleontology’s, historical or other culturally significant sites will not be eligible. However, they may include historical sites and/or archaeological findings. As such, impacts and procedures for "chance findings" from specific investments under Component 1 (if applicable) assess within the ESIA, and the ESMF includes Page 13 of 21 relevant provisions to mitigate any potentially adverse impacts. Such provisions includes compliance with the guidelines defined by the Public Disclosure Copy National Institute for Historical and Cultural Heritage (IPHAN) regarding historical sites and/ or archaeological findings. Indigenous Peoples OP/BP 4.10 Yes OP 4.10 – Indigenous Peoples has been triggered. A screening was carried out using information from the Brazil’s National Indian Foundation (FUNAI) and the Socio- Environmental Institute (ISA) indicating that presently seven social groups declare to have indigenous ancestry and claim the recognition of their indigenous identity in the State of Rio Grande do Norte. FUNAI has opened a Technical Office at the state and started studies to recognize these indigenous groups and works for assisting them. They comprise about 3,170 people and live in seven communities. Indigenous groups will be eligible to project actions according to their expressed interest in participating. Proposals must originate from indigenous demands validated by their respective communities and organizations, through participatory processes. Project actions involving indigenous groups are expected to contribute to (a) reduce their social and economic vulnerability; (b) promote development Public Disclosure Copy alternatives that are ethnically, culturally and environmentally adequate, and sustainable in the short, medium and long term; and (c) revert the processes of impoverishment, economic exploitation, discrimination, social exclusion, and cultural devaluation. A broadly consulted Indigenous Peoples Policy Framework was prepared to define the ways and means of project involvement with indigenous groups and ensure adequate procedures for the participation of this population in the project, which will focus on culturally appropriated dissemination activities and capacity building and institutional strengthening strategies, aiming to promote the effective participation of Indigenous Peoples in social networks and in the project’s territorial and deliberative councils. A Indigenous Peoples Policy Framework was submitted to the Bank and published on the Page 14 of 21 Borrower’s website (www.seplan.rn.gov.br) prior to public consultations. The final version was disclosed on the Borrower's website (www. Public Disclosure Copy seplan.rn.gov.br), on February 15, 2013 and will be disseminated in the Bank website after the Decision Meeting. Involuntary Resettlement OP/BP Yes OP 4.12 – Involuntary Resettlement has also 4.12 been triggered. The project is not expected to fund any subprojects that could potentially cause significant physical displacement and economic losses. In principle, the project will seek to avoid involuntary resettlement, wherever possible. Nonetheless, The team has evaluated the types of subprojects proposed under Component 1 and concluded that some proposed activities (such as the building of rural schools, productive infrastructures with small facilities to support production, health facilities, and the expansion of logistics infrastructures, such as feeder roads rehabilitation for better connectivity between areas of production and consumption) might require land acquisition and, consequently, could potentially cause involuntary resettlement. It is expected that, in these cases, the potential numbers of people who might be affected would be quite small and any land acquisition would be relatively small. Given that the subprojects to be developed under the project and the potential sites Public Disclosure Copy of intervention are not yet known and will not be selected until during project implementation, a Resettlement Policy Framework (RPF) was chosen as the adequate instrument and prepared. It will serve as the guide to the site-specific formulation of Resettlement Action Plans (RAP), if needed. A RPF was submitted to the Bank and published on the Borrower’s website (www.seplan.rn.gov. br) prior to public consultations. The final version was disclosed on the Borrower's website (www. seplan.rn.gov.br), on February 15, 2013 and will be disseminated in the Bank website after the Decision Meeting. Safety of Dams OP/BP 4.37 Yes The OP 4.37 is triggered as a precautionary measure, not to limit any eventual possibility of using existing water sources in subcomponent 1.1, with interventions in productive activities. Possible investments may include the use of Page 15 of 21 water from existing dams for irrigation or for water supply. However, no new dam construction will be financed by this operation. Public Disclosure Copy The Borrower has prepared a conceptual framework of procedures to be adopted during the implementation phase of the project. If needed, the Borrower should arrange for one or more independent dam specialist to: (i) inspect and evaluate the safety status of the existing dam, its appurtenances, and its performance history; (ii) review and evaluate the owner’s operation and maintenance procedures; and (iii) provide a written report of findings and recommendations for any remedial work or safety-related measures necessary to upgrade the existing dam to an acceptable standard of safety. Previous assessments of dam safety or recommendations of improvements needed in existing dam may also be accepted by the Bank. If the Borrower provides evidence that (i) an effective dam safety program is already in operation, and (ii) full-level inspections and dam safety assessments of the existing dam, which are satisfactory to the Bank, have already been conducted and documented. Projects on International No Not applicable. Waterways OP/BP 7.50 Projects in Disputed Areas OP/BP No Not applicable. 7.60 Public Disclosure Copy II. Key Safeguard Policy Issues and Their Management A. Summary of Key Safeguard Issues 1. Describe any safeguard issues and impacts associated with the Restructured project. Identify and describe any potential large scale, significant and/or irreversible impacts: The Project does not entail any potential large scale, significant and/or irreversible negative impacts. For Component 1 – Sustainable Regional Development and Productive Inclusion, with an integrated and sustainable development focus, the Project has statewide relevance focused on reducing regional inequalities and enhanced efficiency of health and education public services in support of an integrated and territorially balanced development of the State of Rio Grande do Norte. As key benefit, the Project is expected to contribute to increased competitiveness of the productive organizations in the priority areas, as well as encouraging good environmental practice especially in the semiarid region. While most direct impacts on environment from the projects are expected to be limited in time and localized near the interventions sites, cumulative impact with potential pressure on environment might result from the regional economic growth expected as an outcome of the Project. Notwithstanding, the Project will encompass a wide strengthening planning capacity, monitoring, evaluation and policy making, also including environmental institutions. Page 16 of 21 The most commonly expected negative impacts would arise from the construction activities under Component A, which includes implementation of civil works of water supply, sanitary sewage, Public Disclosure Copy solid waste management, not including the construction of new landfills, and also the recovery of degraded areas and the implementation of groundwater dams and others hydro environmental works, with no construction of new dams. Impacts from these interventions are expected to be limited, transitory and of short duration. In this sense, the environmental risks associated with this project are limited due to the nature of the proposed interventions, which will mostly take place in sites associated with projects. To better address issues that arise from the ESIA, the Borrower prepared a set of mandatory Implementation Manuals to be applied for all types of interventions: Works Environmental Manual, Social Communication Plan, Environmental Education Plan, and also a Natural Disaster Prevention Plan (Annex 1 of ESIA). The ESIA report comprises three main parts: (i) Part A: an Environmental and Social Assessment; (ii) Part B: an Environmental Management Framework; and, (iii) Part C: an Institutional Strengthening Program to support environmental and social management demands coming from the project. Given the participatory approach of the Project, the key social-related risk refers to the low organizational level of producers associations (particularly those representative of the most vulnerable social groups), which may not be enticed to answer the calls for projects and/or face great challenges on managing and accounting for the funds they receive. This risk will be mitigated by activities of technical assistance and institutional strengthening, the definition of a special strategy to mobilize and open opportunities for the participation of more vulnerable groups and the mainstreaming of gender issues in project design and implementation. Gender mainstreaming is reflected on the project s emphases on the roles that women play on achieving food security and protecting environmental biodiversity in rural communities, health policies that address reproductive health and the prioritization of women as the main target group of literacy class for adults, as well as on the establishment of a monitoring system based on gender sensitive Public Disclosure Copy indicators. 2. Describe any potential indirect and/or long term impacts due to anticipated future activities in the project area: Not applicable as no significant adverse impacts are foreseen for the project as designed. 3. Describe any project alternatives (if relevant) considered to help avoid or minimize adverse impacts. Not applicable as no significant adverse impacts are foreseen for the project as designed. 4. Describe measures taken by the borrower to address safeguard policy issues. Provide an assessment of borrower capacity to plan and implement the measures described. The Borrower’s institutional capacity for safeguard issues management is considered adequate. The Bank team assessed the capacity of the State, including the implementing agency and partners. Rio Grande do Norte has benefited from continued Bank support in the environmental area since the 1993. Although the Project executing agencies have experience with World Bank safeguards policies and instruments from previous Bank financed operation, many of these did not require any land acquisition, nor did they operate in indigenous areas. For these reasons, the Project has sought to strengthen measures and systems already in place, such as: Environmental and Social Screening requirements, independent environmental and social supervision contracts, public consultation and participatory decision-making processes, and gender disaggregated social Page 17 of 21 impact assessments, among others. Capacity building for safeguards management has also been an instrumental part of project preparation, for example workshops were conducted on environmental assessment issues during preparation missions in January and April 2012. Public Disclosure Copy The PIU will be responsible for ensuring that all Bank safeguards triggered by the Project are complied with and that all works under implementation apply the ESMF, RPF and IPPF. The PIU will also provide support to the beneficiary agencies on the preparation of specific social assessments, public consultations and preparation of resettlement / indigenous peoples plans, whenever they may be required. To do this, the PIU has hired qualified social and environmental specialists to support project implementation. The Bank team will also continue to work closely with State counterparts to ensure adequate adherence to all Brazilian and Bank social and environmental standards. The approach for identifying and managing environmental and social impacts and risks under the Project is considered adequate. The Environmental Assessment safeguard is mandatory to all sub- projects that may potentially have an environmental and social impact. Most of the other safeguards policies have been triggered on a precautionary basis. The Borrower has addressed safeguard policy issues by preparing a satisfactory Environmental and Social Impact Assessment (ESIA) and an Environment and Social Management Framework (ESMF) in accordance with the set of guidelines, procedures and criteria for screening activities and to ensure that the Project will not cause any potential large scale, significant and/or irreversible negative environmental and social impacts. 5. Identify the key stakeholders and describe the mechanisms for consultation and disclosure on safeguard policies, with an emphasis on potentially affected people. Key stakeholders include small family farmers, community and rural producer associations, users of public health and education services. Women headed households, youth groups, Indigenous Peoples, and quilombola communities are among the most vulnerable social groups that will benefit from project activities. Representative entities and leaderships of these different social Public Disclosure Copy groups have been consulted during the process of preparation of the Environmental and Social Management Framework and the Indigenous Peoples Policy Framework. Description of public consultation process, participation and outcomes are described in the Environmental and Social Evaluation Report. B. Disclosure Requirements Environmental Assessment/Audit/Management Plan/Other Date of receipt by the Bank 04-Feb-2013 Date of submission to InfoShop 19-Feb-2013 For category A projects, date of distributing the Executive Summary of the EA to the Executive Directors "In country" Disclosure Brazil 15-Feb-2013 Comments: www.seplan.rn.gov.br/paginas/noticias/detalhe_noticias.aspx?coNoticia=433 Resettlement Action Plan/Framework/Policy Process Date of receipt by the Bank 04-Feb-2013 Date of submission to InfoShop 19-Feb-2013 Page 18 of 21 "In country" Disclosure Brazil 15-Feb-2013 Comments: www.seplan.rn.gov.br/paginas/noticias/detalhe_noticias.aspx?coNoticia=433 Public Disclosure Copy Indigenous Peoples Development Plan/Framework Date of receipt by the Bank 04-Feb-2013 Date of submission to InfoShop 19-Feb-2013 "In country" Disclosure Brazil 15-Feb-2013 Comments: www.seplan.rn.gov.br/paginas/noticias/detalhe_noticias.aspx?coNoticia=433 Pest Management Plan Was the document disclosed prior to appraisal? Yes Date of receipt by the Bank 04-Feb-2013 Date of submission to InfoShop 19-Feb-2013 "In country" Disclosure Brazil 15-Feb-2013 Comments: www.seplan.rn.gov.br/paginas/noticias/detalhe_noticias.aspx?coNoticia=433 If the project triggers the Pest Management and/or Physical Cultural Resources policies, the respective issues are to be addressed and disclosed as part of the Environmental Assessment/ Audit/or EMP. If in-country disclosure of any of the above documents is not expected, please explain why: C. Compliance Monitoring Indicators at the Corporate Level OP/BP/GP 4.01 - Environment Assessment Public Disclosure Copy Does the project require a stand-alone EA (including EMP) Yes [ ] No [ ] NA [ ] report? If yes, then did the Regional Environment Unit or Sector Yes [ ] No [ ] NA [ ] Manager (SM) review and approve the EA report? Are the cost and the accountabilities for the EMP incorporated Yes [ ] No [ ] NA [ ] in the credit/loan? OP/BP 4.04 - Natural Habitats Would the project result in any significant conversion or Yes [ ] No [ ] NA [ ] degradation of critical natural habitats? If the project would result in significant conversion or Yes [ ] No [ ] NA [ ] degradation of other (non-critical) natural habitats, does the project include mitigation measures acceptable to the Bank? OP 4.09 - Pest Management Does the EA adequately address the pest management issues? Yes [ ] No [ ] NA [ ] Is a separate PMP required? Yes [ ] No [ ] NA [ ] Page 19 of 21 If yes, has the PMP been reviewed and approved by a Yes [ ] No [ ] NA [ ] safeguards specialist or SM? Are PMP requirements included Public Disclosure Copy in project design?If yes, does the project team include a Pest Management Specialist? OP/BP 4.11 - Physical Cultural Resources Does the EA include adequate measures related to cultural Yes [ ] No [ ] NA [ ] property? Does the credit/loan incorporate mechanisms to mitigate the Yes [ ] No [ ] NA [ ] potential adverse impacts on cultural property? OP/BP 4.10 - Indigenous Peoples Has a separate Indigenous Peoples Plan/Planning Framework Yes [ ] No [ ] NA [ ] (as appropriate) been prepared in consultation with affected Indigenous Peoples? If yes, then did the Regional unit responsible for safeguards or Yes [ ] No [ ] NA [ ] Sector Manager review the plan? If the whole project is designed to benefit IP, has the design Yes [ ] No [ ] NA [ ] been reviewed and approved by the Regional Social Development Unit or Sector Manager? OP/BP 4.12 - Involuntary Resettlement Has a resettlement plan/abbreviated plan/policy framework/ Yes [ ] No [ ] NA [ ] process framework (as appropriate) been prepared? If yes, then did the Regional unit responsible for safeguards or Yes [ ] No [ ] NA [ ] Sector Manager review the plan? OP/BP 4.36 - Forests Public Disclosure Copy Has the sector-wide analysis of policy and institutional issues Yes [ ] No [ ] NA [ ] and constraints been carried out? Does the project design include satisfactory measures to Yes [ ] No [ ] NA [ ] overcome these constraints? Does the project finance commercial harvesting, and if so, Yes [ ] No [ ] NA [ ] does it include provisions for certification system? OP/BP 4.37 - Safety of Dams Have dam safety plans been prepared? Yes [ ] No [ ] NA [ ] Have the TORs as well as composition for the independent Yes [ ] No [ ] NA [ ] Panel of Experts (POE) been reviewed and approved by the Bank? Has an Emergency Preparedness Plan (EPP) been prepared and Yes [ ] No [ ] NA [ ] arrangements been made for public awareness and training? The World Bank Policy on Disclosure of Information Have relevant safeguard policies documents been sent to the Yes [ ] No [ ] NA [ ] World Bank's Infoshop? Page 20 of 21 Have relevant documents been disclosed in-country in a public Yes [ ] No [ ] NA [ ] place in a form and language that are understandable and Public Disclosure Copy accessible to project-affected groups and local NGOs? All Safeguard Policies Have satisfactory calendar, budget and clear institutional Yes [ ] No [ ] NA [ ] responsibilities been prepared for the implementation of measures related to safeguard policies? Have costs related to safeguard policy measures been included Yes [ ] No [ ] NA [ ] in the project cost? Does the Monitoring and Evaluation system of the project Yes [ ] No [ ] NA [ ] include the monitoring of safeguard impacts and measures related to safeguard policies? Have satisfactory implementation arrangements been agreed Yes [ ] No [ ] NA [ ] with the borrower and the same been adequately reflected in the project legal documents? III. APPROVALS Task Team Leader: Maria de Fatima de Sousa Approved By Regional Safeguards Name: Glenn S. Morgan (RSA) Date: 09-May-2013 Advisor: Sector Manager: Name: Laurent Msellati (SM) Date: 11-May-2013 Public Disclosure Copy Page 21 of 21