Portflio Do Projeto Piloto
Pilot Project Portfolio
Area - Transportation
Ministry - Transportation
Project – Rehabilitation of Roads
Main Aspects
The maintenance and rehabilitation program aims at ensuring that at least 60% of the
existing federal roads network be rated as in “good” condition by 2008. Today, only 16,1%
of the network is ranked as “good”, and 47,8% is ranked as “bad”, with 36% ranked as
“acceptable”. The goal is to reduce the share of roads ranked as “bad” to 1%, with
between 1/3 and 2/5 of the network ranked as “acceptable”. The project wil cover 12
federal roads in most of the 27 states, helping accelerate rehabilitation work on about
7,000 km and maintenance work on another 8,000 eligible km.
Indicators for the Project
Financial
2005 => R$ 874 MM from PLO (budget draft law) + R$ 952 MM from PP = R$ 1.826 MM
2006 => R$ 1.500 MM
2007 => R$ 1.500 MM
Time span
2005/2006/2007
Benefit
WB methodologies estimate that the reduction in operational costs derived from the
projected investment conservatively at R$ 0,025/ vehicle/km (the typical operational cost is
of $ 1,20/vehicle.km, including fuel, wear and tear and standard costs). The aggregate
economy was estimated at about R$ 2,5-3,0 billion a year, after five years of investments,
well above the yearly cost of the program at its peak (R$ 1,5 billion). Savings would also
derive from stopping the deterioration process of the roads. The WB HDM model suggests
that the net present value of the project in constant prices is around R$ 14,1 billions,
considering a 10% discount rate and no increase in traffic. Additional fiscal gains would
stem from the enhanced chances of promoting new concessions after the upgrade of
many of the road segments targeted by the program.
Conditionality
Conduct and prepare, in 2005, the auctioning of at least five segments to be operated by
the private sector.
1
Pilot Project Portfolio
Area - Transportation
Ministry - Transportation
Project – Rehabilitation of Roads …Continuation
List of Roads
Total Investments in Maintenance and Rehabilitation of Federal Roads (2005)
Rehabilitation /
Road States
Crossed
Maintenance
km
R$ million
BR-020
BA;CE;DF;GO
440 88
BR-040 MG
100
20
BR-050 MG
30
6
BR-116
BA;CE;MG;PB;PE;PR;RS
938
187
BR-153
GO;MG;PR;RS;SC;SP;TO
1.151
230
BR-158
GO;MS;MT;PR;RS;SC
278
55
BR-163
MS;MT;PR;SC
408
81
BR-222 CE,PI,MA
85
17
BR-242
BA
342
68
BR-262
ES;MG;MS
525
105
BR-280
SC
80 16
BR-324
BA
194
38
BR-364
GO;MG;MT;RO
289
58
BR-365 MG
270
54
BR-392
RS
55
11
BR-459 MG
249
50
TOTAL
5.433
1.086
Most of the projects will be done under the CREMA mechanism.
The CREMA (Contrato de Reabilitação e Manutenção de Rodovias) mechanism
transfers to the private sector the decision on the best allocation of resources to
achieve government-established levels of road quality, in line with the principle of
PPPs and concessions. About 3,700 km of roads in the program are eligible to
become a concession, after being upgraded. By allowing the concessionary to
pick up the maintenance costs, the government can save up to R$
10,000/year/km. Hence the concession of 3,700 km may imply future savings of
up to R$ 37-40 million a year—or R$ 400 million over a 10-year period (concessions
typically last for 20 years). For those roads with enough traffic, the concession can
raise additional revenues, further helping recover the cost of the investments
made in the next two or three years. Achieving effective and efficiency
evaluations of this approach and of CREMA will be a side benefit of the Pilot
Project.
2
Pilot Project Portfolio
Area - Transportation
Ministry - Transportation
Project – Rehabilitation of Roads … Continuation
Summary of CBA for the selected projects
Traffic Assumption: 0% growth
Millions of Reais
(except where indicated otherwise)
Reduction
Net Effect
Opportunity cost
in vehicle
Maintenance
Savings in
due to reduction in
Year
Investment
Gain for users
operating
Cost
public outlays
(Benefits -
traveling time per
costs
Costs)
vehicle (per km)
(per km)
Net Present Value at different discount rates
(R$ / 100)
NPV - 10%
10.170,4 2.125,2
-3.354,9
17.450,6
14.095,7
NPV - 12%
9.061,7 1.864,9
-3.172,4
15.387,3 12.214,8
Annual Flows (not discounted)
1
1.499,9 250,8
-1.199,7 990,2 -209,5 0,0
0,0
2
1.499,9 250,8
-1.199,7 990,2 -209,5 0,9
0,0
3
1.485,0 249,9
-1.186,1 2.905,8 1.719,6 1,0
0,0
4
1.485,0 249,9
-1.186,1 2.905,8 1.719,6 2,4
0,1
5
1.483,5 249,3
655,9 3.241,3
3.897,1 2,7 0,1
6
1.483,5 249,3
655,9 3.241,3
3.897,1 1,8 0,0
7
653,2 249,0
101,2 2.352,3
2.453,5 1,5 0,0
8
653,2 249,0
101,2 2.352,3
2.453,5 2,1 0,0
9
653,2 249,0
101,2 2.352,3
2.453,5 1,8 0,0
10
653,2 249,0
101,2 2.352,3
2.453,5 1,8 0,0
11
1.059,5 249,2
-223,7 1.482,9
1.259,2 1,7
0,0
12
1.059,5 249,2
-223,7 1.482,9
1.259,2 1,5
0,0
13
1.059,5 249,2
-223,7 1.482,9
1.259,2 1,6
0,0
14
1.059,5 249,2
-223,7 1.482,9
1.259,2 1,1
0,0
15
1.059,5 249,2
-223,7 1.482,9
1.259,2 1,1
0,0
16
1.059,5 249,2
-223,7 1.482,9
1.259,2 0,9
0,0
17
1.059,5 249,2
-223,7 1.482,9
1.259,2 0,8
0,0
18
1.059,5 249,2
-223,7 1.482,9
1.259,2 0,7
0,0
19
1.059,5 249,2
-223,7 1.482,9
1.259,2 0,5
0,0
20
1.059,5 249,2
-223,7 1.482,9
1.259,2 0,5
0,0
3
Pilot Project Portfolio
Area - Transportation
Ministry - Transportation
Project – BR 101/SUL – duplication
Main Aspects
The duplication of Florianópolis-Osório road will improve traffic conditions on the BR 101/Sul
road, creating a “Thoroughfare” connecting Mercosul markets as far as Buenos Ayres and
Belo Horizonte. This duplication is part of an IADB loan, and of 10-year effort to improve
roads in the South-Southeast part of Brazil conceived more than ten years ago. All required
studies are complete and the IADB has already set a monitoring unit to provide the
oversight of the construction. Part of the contracts has been signed, allowing for a quick
implementation of the project, ahead of the conclusion of the concession process (which
may happen during the construction period).
Indicators for the Project
Financial
2005 => R$ 135 MM from PLO (BUDGET DRAFT LAW) + 285 MM from PP = 420,00 MM
2006 => R$ 600,00 MM
2007 => R$ 700,00 MM
Time span
2005/2006/2007
Benefit
The cost-benefit analysis points to a real internal rate of return of 30,7%. The cost/benefit
ratio was estimated at 2,7. Considering an average daily traffic of 5,000 trucks and a toll of
R$ 5/100 km, the revenue potential was estimated at R$ 250,000/km.year, well above the
typical maintenance cost of R$ 10,000/ km/year. Toll revenues would generate only R$ 60-
100 million of free cash a year over the 300km of the road, after deducting maintenance
costs. This would not be enough to recover the construction cost, estimated at around R$ 2
billion. The shortfall can, nonetheless, be minimized if the concession is extended to
include the road linking Curitiba to Florianópolis, which was duplicated by 2003 with public
funds and is planned to become a tol road. The Ministry of Transportation estimates that
about ¼ of the construction prices accounts for taxes.
Conditionality
At the beginning of 2005, the Ministry of Transportation will present a feasibility study
regarding the concession of Curitiba-Florianópolis-Osório as a single undertaken. The
Ministry of Transportation is contemplating the possibility of making the concession during
the construction, which has been initiated, while making the latter dependent on the
former. The winner would run existing contract to their completion.
4
Pilot Project Portfolio
Area - Transportation
Ministry - Transportation
Project – BR 381/MG - duplication
Main Aspects
This duplication will improve traffic conditions from the steel-producing district of Minas
Gerais, north of Belo Horizonte, to São Paulo and the Mercosul “Thoroughfare”. The region
is also the home to several timber and cellulose projects, and a fledging agrobusiness
centered in coffee and corn production, which are largely dependent on road
transportation. The road has received inadequate maintenance in the last ten years, in
part because maintenance and rehabilitation work was neglected on the expectation of
the duplication. Accelerating this investment will help reverse the deep deterioration
process suffered by the road, which is also one of the main links of Minas and Central Brazil
to the Northeast.
Indicators for the Project
Financial
2005 => R$ 45 MM from PLO (BUDGET DRAFT LAW) + 153 MM from PP= 198,00 MM
2006 => R$ 130,00 MM
2007 => R$ 195,00 MM
Time span
2005/2006/2007
Benefit
The project will sharply reduce the operational costs for trade in the region. The HDM-4
model points to a 13% real rate of return for the resources employed in the duplication. This
rate of return may rise depending on some new projects currently under consideration by
local firms.
Conditionality
Completion by the Ministry of Transportation of the detailed engineering project and a
feasibility study for conceding the road.
5
Pilot Project Portfolio
Area - Transportation
Ministry - Transportation
Project – BR 101/NE – duplication
Main Aspects
This duplication will complement infrastructure projects supported by the IADB throughout
the Northeast Region through the PRODETUR loan program. This successful infrastructure
program has been crucial to attract private investment in the tourism sector with great
impact on jobs and growth in the region. The R$ 1,9 billion project, which has not benefited
from low-cost financing from multilateral institutions, will also help increase the
competitiveness of the Suape Terminal in Pernambuco, increasing the yield of substantial
sums of public money invested in this port in the last several years.
Indicators for the Project
Financial
2005 => R$ 95,90 MM from PLO (BUDGET DRAFT LAW) + 307,00 MM from PP= 402,90 MM
2006 => R$ 550,00 MM
2007 => R$ 950,00 MM
Time span
2005/2006/2007
Benefit
The duplication of the BR 101-NE will increase the safety of this road, which presents
significant commercial as well as passenger traffic. Heavy truck traffic is today one of the
main causes of accidents involving passenger cars in this road that links several popular
tourism destinations (the road ranges from Natal to the south shore of Pernambuco). The
Ministry of Planning considers the road a potential candidate for a PPP. The highway, in
addition of its potential to support the development of tourism, will help integrate several
economic areas to the SUAPE port, which is poorly serviced by road and railways as of
today. It will also reinforce (private) investments plans around the port, which hold the
potential to transform SUAPE into an important regional gateway for coastal and overseas
trade.
Conditionality
The Ministry of Transportation wil present a study of feasibility of concession at the end of
2005, including the possibility of a PPP for part of the road.
6
Pilot Project Portfolio
Area - Transportation
Ministry - Transportation
Project – Rio Beltway – duplication & construction
Main Aspects
This road is one of the three segments of a beltway around Rio de Janeiro. The Beltway
construction has been called for by local business leaders, who have also supported the
concession of the road, in view of the positive impact it could have on the economic
fortunes and competitiveness of the region. The Sepetiba port was one of the last of the
large ports envisaged in the 1980s. It was completed around 2000, after important outlays
made between 1995 and 1998. This is a deep port (a draft of more than 50 feet) with good
links by rail, but precarious road accesses, despite being located less than 20 miles away
from the main highway in Brazil, the Rio-São Paulo Dutra Expressway, and counting with an
important container terminal. There is growing consensus among local players about the
convenience of building the road planning from the outset to make it into a turnpike with a
toll system, most likely geared towards servicing truck traffic.
Indicators for the Project
Financial
2005 => R$ 49,00 MM from PLO (BUDGET DRAFT LAW) + 88,00 MM from PP= 137,00 MM
2006 => R$ 140,00 MM
2007 => R$ 250,00 MM
Time span
2005/2006/2007
Benefit
The beltway wil link Sepetiba to three other main roads: BR 040 to Belo Horizonte
and Brasilia, BR116 to Bahia, and BR 101 to Espírito Santo. These links will lower
export costs for many industries in those states, as they create an alternative to the
Rio de Janeiro container port, as well as to the 60-year old roads that cross the
now heavily-populated west side of the city. Preliminary studies show high
potential of cost recovery via integrated toll charges, especially if the first
construction phase is aimed at servicing mainly truck traffic.
Conditionality
Conduct a study of concession feasibility of the different parts of the Beltway.
7
Pilot Project Portfolio
Area - Transportation
Ministry – Transportation
Project – Rio Beltway – duplication & construction ….Continuation
CBA- Benefit Analysis of Rio Beltway
Savings
Gains in
Benefit to the
Total
In Traveling Operational
Operation of
Year
Time
Cost
Sepetiba Port
BENEFITS
0 0
0
0
0
1 0
0
0
0
2 0
0
0
0
3 12.249.715
19.099.756
45.329.960
76.679.431
4 12.764.203
19.901.946
54.072.602
86.738.751
5 13.300.300
20.737.827
65.207.159
99.245.286
6 13.858.912
21.608.816
79.265.603 114.733.331
7 14.440.986
22.516.387
89.934.525 126.891.898
8 15.047.508
23.462.075
102.330.171 140.839.754
9 15.679.503
24.447.482
116.793.611 156.920.596
10 16.338.042
25.474.276
133.511.005 175.323.323
11 17.024.240
26.544.196
150.511.428 194.079.864
12 17.739.258
27.659.052
170.058.697 215.457.007
13 18.484.307
28.820.732
191.474.828 238.779.867
14 19.260.648
30.031.203
216.043.941 265.335.792
15 20.069.595
31.292.513
244.298.673 295.660.782
16 20.912.518
32.606.799
266.324.960 319.844.277
17 21.790.844
33.976.285
286.425.577 342.192.705
VPL 53.202.373
82.953.142
373.733.080 509.888.594
VPL 73.928.443 115.269.230
549.733.293 738.930.966
Year
Total Cost of Construction and Maintenance
Total
Alt. I
Alt. II
Alt. III
Alt. IV
Benefits
VPL
(16%) 333.574.260 247.741.448 364.195.268 278.362.456 509.888.594
VPL
(12%) 351.729.086 260.444.926
383.803.217 292.519.057 738.930.966
The review of traffic projections and the extension of the planning horizon to 20-25
years, together with the geographic optimization of toll stations and supporting
services, point to strong economic potential for a concession, which is likely also to
stimulate savings during the construction phase.
8
Pilot Project Portfolio
Area - Transportation
Ministry - Transportation
Project – Tucuruí Locks
Main Aspects
Tucuruí is a large electric power point built in the 1980s. The associated dam is not
particularly high, but inevitably blocked river navigation. The government is
committed to complete theses locks to grant large regions in the eastern Amazon
access to a deep port near Belém do Pará. The resources already sunk in the
construction of the port (in the 1980s) and the lock are considerable, and the
potential volume of grain crops that could be effectively and cheaply shipped
through the Tocantíns river is substantial. The acceleration of works would help
finish the locks by 2006, after a decade-long construction effort. Inclusion of such a
project on Pilot will also help address in an effective and transparent ways existing
implementation issues.
Indicators for the Project
Financial
2005 => R$ 70,00 MM from PLO (BUDGET DRAFT LAW) + 150,00 MM from PP= 220,00 MM
2006 => R$ 150,00 MM
Time span
2005/2006
Benefit
The completion of the project wil reduce transportation costs of grains from a large area in
the Central region of Brazil, opening up the Araguaia-Tocantins river and a large port ,
which is the closest in Brazil to the Panama canal. CBA, considering only the cost related to
concluding the locks (i.e., considering past expenditure as sunk costs), points to an IRR of
17% in real terms. Also, increasing grain exports from Central Brazil through this route is likely
to reduce the impact of the expansion of the northern agricultural frontier.
Conditionality
Evaluation of implementation aspects.
9
Pilot Project Portfolio
Area – Transportation
Ministry - Transportation
Project – Port Agenda
Main Aspects
The Agenda is a concentrated effort to address the most urgent needs of 11 major
ports, including Santos. A first batch of investments will include dredging, means to
accelerate the consolidation under one roof of administrative staff from different
federal agencies at each port, the rehabilitation of weights at port gates, and
improvements in existing electronic links with the Federal Revenue Service (SRF).
The overall cost of this first batch of initiatives, excluding the links with the SRF, is
estimated at around R$ 75 million. A second batch wil focus on the construction
of road accesses to the selected ports, parking spaces for large trucks, and further
dredging and cleaning up of access channels.
Indicators for the Project
Financial
2005 => R$ 101,00 MM from PLO (BUDGET DRAFT LAW) + 226,10 MM from PP= 327,10 MM
Time span
2005
Benefit
There is no formal CBA for theses initiatives, which are, however, the result of an extensive
analysis of needs of individual ports that respond to more than 80% of Brazil´s international
trade. This analysis involved bottom-up reviews and a coordination effort conducted by
the Casa Civil together with the Ministries of Transportation, Planning and Finance, as well
as consultation with the private sector. It wil involve new approaches to procurement of
services and a systematic dialog with environmental authorities.
Conditionality
Given the fragmented nature of the initiatives under this umbrel a, the main conditionality
will be in implementation. A special unit has been created in the Casa Civil to monitor the
implementation of this “Agenda”, which will liaise with the unit to be created at the
Treasury to conduct the Pilot.
10
Pilot Project Portfolio
Area - Transportation
Ministry - Transportation
Project – Port Agenda … Continuation
List of Projects and Cost (R$ million)
PORT
ACTION
PILOT
PLO TOTAL
PORT
ACTION
PILOT
PLO
TOTAL
Navigation signs
3,0
3,0
Dredging
20,0
20,0
RIO
Dredging 11,5
4,5
16,0
Access
BR101
7,5 7,5
GRANDE
SEPETIBA
(RS)
Truck parking area
1,5
1,5
Security System
2,0
2,0
(RJ)
Subtotal 16,5
4,5
20,5
General
Works
9,0 9,0
Subtotal 27,5
11,0 38,5
Deepening of
access channel
6,0
6,0
Rehabilitation pier
7,5
7,5
General Works
10,0
10,0
Road Access
16,0
16,0
Energy system
4,0
4,0
Dredging
22,0
22,0
Secondary
ITAJAÍ (SC)
Subtotal 29,5
29,5
Dredging
4,0 4,0
RIO DE
JANEIRO
Weights
0,4
0,4
Rehabilitation
(RJ)
SÃO
berths 102/103
12,8 12,8
Warhf
demolition
2,0
2,0
FRANCISCO
Access BR 280
2,0
2,0
Security System
4,0
4,0
DO SUL
Dredging access to
(SC)
Energy system
0,8
0,8
Niteroi
2,0 2,0
Deepening of
access channel
19,2
19,2
Subtotal 46,4
2,0 48,4
Subtotal 34,8
34,8
Cleaning access
Road access
channel 3,0
3,0
(Capuaba) 4,7
1,2 5,9
Dredging 42,0
42,0
General
Works
7,2 7,2
Deepening of
access channel
10,0
10,0
Office building
2,5
2,5
Security System
2,0
2,0
SANTOS
VITÓRIA
Cleaning up access
Deepening of
(SP)
(ES)
channel 2,5
2,5
access channel II
2,5
2,5
Deepening of Porto
Security System
9,5
9,5
Barra do Riacho
4,5
4,5
Road Access
50,0
50,0
Dredging
2,5
2,5
Road Access II
10,0
10,0
Pier defenses
2,5
1,5
4,0
Subtotal 57,5
69,5
127,0
Subtotal 14,4
14,2 28,6
TOTAL
TOTAL
137,8
74,0
211,8
88,3
27,2
115,5
11
Pilot Project Portfolio
Area - Transportation
Ministry – Urban Development
Project – Belo Horizonte Subway
Main Aspects
The completion of the first line of the Belo Horizonte—BH mass transportation line is
important for several reasons. First, delays have entailed additional costs to the Federal
government because the program envisages the transfer of the system to local authorities
upon completion, and the current arrangement of shared responsibility does not foster
efficient operation and decision-making. Also, delays reduce the profitability of the line,
because incomplete lines do not attract enough users to pay for financial commitments
with lenders and builders. Although at least four other cities are in similar situation, the BH
system is where construction is most advanced. It was chosen to be the test case for the
overal program, including with respect to the transfer of responsibilities (the inclusion of this
project in the Pilot is independent from budget allocations for subways in other cities).
Indicators for the Project
Financial
2005 => R$ 20,40 MM from PLO (BUDGET DRAFT LAW) + 81,60 MM from PP= 102,00 MM
Time span
2005
Benefit
Ex-ante, rail systems typically passed a CBA sponsored by the financer (WB, IADB, JBIC,
etc). Fluctuation of the exchange rate and other economic and demographic changes
may have affected theses estimates. Hence plans, including for additional lines, may need
a revaluation in some cities, with possible consideration of more affordable alternatives,
such as special buses in exclusive lanes. The right choice in this case was to concentrate
resources to ensure completion and the ultimate transfer to local authorities. Although this
reasoning may not be extended to other cases, WB report n° 29806-BR suggests that the
rate of return for completing the works would be of 17,1% in real terms (the exercise
considers the past outlays as foregone costs, which is an exceptional assumption).
Conditionality
Participation of the BH mass transportation project will be conditioned to the agreement
by the local government to take over the whole project by the time of the conclusion of
Line 1, forsaking further financial support from the Union to operate, expand, or maintain
existing or futures lines. Participation of other mass transportation systems in the Pilot in the
following years will depend on the success of the BH pilot, on similar agreements by other
cities, and possibly on the revaluation of the project with financers.
12
Pilot Project Portfolio
Area – Profitable irrigation and water supply
Ministry – Interior
Project – Irrigation Projects
Main Aspects
This component of the Pilot will focus on several irrigation projects currently at different
stages of progress, with a view to ready them to private sector investment and operation.
Typically, private investors are expected to play the role of “anchor” to the projects,
completing the infrastructure and opening new distribution channels in Brazil and abroad.
This is an important step forward in the policies of the Ministry of Integration and comes in
the wake of several hundreds of millions of dollar committed to public irrigation projects in
the last 20 years. The new policy reflects the observation that, although, in many cases, the
production and export of high-quality tropical fruits and grape from irrigated areas have
been successful, several public projects have so far presented a negative present value
because large works were started but never finished, and the projects remain under-
utilized for a long period of time. The budgeted resources are to be used to complete
some of the projects and, in other cases, provide conditions to bring the private sector in.
Indicators for the Project
Financial
2005 => R$ 100,00 MM from PLO (BUDGET DRAFT LAW) + 50,00 MM from PP= 150,00 MM
Time span
2005
Benefit
The World Bank indicates that, under adequate design and implementation conditions,
standard CBA tools such as the FARMOD software indicate that irrigation can be profitable
and economically adequate. The Guadalupe Project in Piauí is typical among the 14
irrigation projects selected to participate in the Pilot. About ¼ of the envisaged area has
been built, but about half of this total of 3,000 ha is idle. Upon ful completion, the project is
planned to generate 40,000 direct and indirect jobs and about US$ 40 mil ion in sales. The
World Bank indicates its completion as one of the high priority and low cost initiatives to be
pursued by the state of Piaui (report n. 24484-BR, 2003). Recent biodisel projects by private
sector illustrate the potential of such an approach.
Conditionality
Participation in the pilot in 2006 will depend on the preparation of another 10 perimeters
(projects) to be put under a concession regime.
13
Pilot Project Portfolio
Area – Profitable irrigation and water supply
Ministry – Interior
Project – 14 Irrigation Projects
LIST OF SPECIFIC PROJECTS SUBJECT TO CONCESSION
Potential
Thousand Jobs
Production
(direct and
Project Location
(R$ M/year)
indirect)
Guadalupe PI
120
40
Tabuleiros Litorâneos
PI
70
25
Tabuleiro de São Bernardo
MA
35
116
Tabuleiro de Russas
CE
120
45
Baixo Acaraú
CE
139
40
GauagribeApodi CE
59
15
Salitre BA
320
90
Pontal PE
80
23
Irecê BA
600
180
Jaíba MG
700
190
São João
TO
21
10
Várzeas de Souza
PB
30
15
Luiz Alves do Araguaia
GO
70
30
Total
2350
819
14
Pilot Project Portfolio
Area – Profitable irrigation and water supply
Ministry – Environment
Project – Pró Agua
Main Aspects
The program aims at increasing the supply of difficult-to-obtain water in arid regions,
providing adequate price signals to ensure an efficient use and conservation of the
resource. The project has been subjected to rigorous CBA under the sponsorship of the
World Bank. It has involved the participation of states (10%-20% counterpart) and comprises
a direct investment and an institutional strengthening component. The main additionality in
this case will be ensuring a greater degree of protection to this program, together with R$
10 mil ion in new spending. That will safeguard the full disbursement of the remaining
balance of a World Bank loan.
Indicators for the Project
Financial
2005 => R$ 14,30 MM from PLO (BUDGET DRAFT LAW) + 9,70 MM from PP= 24,00 MM
Time span
2005
Benefit
Participation in the Pilot will help safeguard the financing of R$ 194 million in ongoing
construction and R$ 20 million in new works, in addition to support the institutional
strengthening component of the project. It is a low-cost but important component of a set
of coordinated policies to increase the supply of water in rural areas of the Northeast
vulnerable to droughts.
Conditionality
Those prescribe in the project financing.
15
Pilot Project Portfolio
Area – R&D Facilities
Ministry – Science & Technology
Project – Meteorology Lab
Main Aspects
The lab wil help coordinate and develop efforts to improve meteorological forecast in the
short term. Good meteorological forecast can save billions of dollars, both in cash crops
and production for domestic consumption, helping also reduce price volatility and
inflation. Recent improvements have already helped reduce insurance costs, including
insurance underwritten by the government on behalf of small-farm owners.
Indicators for the Project
Financial
2005 => R$ 00 MM from PLO (BUDGET DRAFT LAW) + 15,12 MM from PP= 15,12 MM
2006 => R$ 21 MM
Time span
2005/2006
Benefit
Gains from better meteorological information are estimated at US$ 2 billion a year. In
recent years, better use of this type of information has already helped cut R$ 150 millions in
the cost of PROAGRO and public insurance schemes (Rossetti, 2002).
Savings can arise, for instance, from a more timely application of chemicals to prevent
diseases. Such an improvement is estimated to help reduce costs by US$ 300 million a year
and cut the amount of chemicals washed by rains.
Conditionality
To be detailed.
16
Pilot Project Portfolio
Area – R&D Facilities
Ministry – Science & Technology
Project – Meteorology Lab
Memmorandum items:
Insurance Premium (as % of crop value) paid by Proagro
before and after aligning planting with meteorological conditions
Traditional Technologies
CULTURE Before
Now
Projected
Wheat 11,7%
5%
2,5%
Rice and Beans
11,7%
6,7%
3,35%
Cotton, corn and soy
7%
3,9%
1,95%
Apple 3,5%
3,5%
1,75%
Sorgus 9,4%
5,5%
2,75%
New Technologies
CULTURE Before
Now
Projected
Wheat 11.7%
4%
2%
Rice and Beans
11,7%
5,7%
2,85%
Corn and soy
7%
2,9%
1,45%
Sorgus 9,4%
4,5%
2,25%
Cost of Pest Control Applications against Asian Rust Soy Pest (ferrugem asiática)
Traditional
With meteorological monitoring
Gain
3 applications
1,5 applications
US$ 1.6 billion
US$ 0.8 billion
US$ 0.8 billion
17
Pilot Project Portfolio
Area – R&D Facilities
Ministry – Land Development
Project – GPS land survey
Main Aspects
Law 10.267/2001 requires every land transaction to include in the associated deeds and
public register the GPS coordinates limiting the estate transacted. These data wil be filed in
a federal data center with a view to help improve the protection of property rights. The R$
28 million project under the responsibility of MDA (the Land Development Ministry) will make
a crucial contribution to the full implementation of this law. The project will help lower the
cost of land acquisition, lease and renting, and provide tools to improve the market for
small plots associated with family farming. Strengthening property rights, in addition to
promote investment and innovation in agriculture, is an important part of the new policies
of agricultural development, imparting a new ethos to government-supported programs to
increase land access to landless workers.
Indicators for the Project
Financial
2005 => R$ 28,82 MM from the original budget + 0,00 MM from PP= 28,82 MM
2006 => R$ 29 MM
Time span
2005/2006
Benefit
Apart from its economic benefits for commercial farming, the system will help ensure the
implementation of the Law, in particular in the case of medium- and small-scale farming,
for which the public sector is direct to borne out most of the cost of the land survey. The
project is part of a set of actions also developed with a view to reduce the chances of
forged sales of public land and the unlawful appropriation of protected areas, including
environmental reserves and ancestral land of minorities such as Indians and “Quilambolas”
(free communities created by individuals fleeing slavery in the XVII-XIX centuries).
Conditionality
To be detailed.
18
Pilot Project Portfolio
Area – R&D Facilities
Ministry – Industry & Trade
Project – Bio-Science Manaus Lab
Main Aspects
Manaus, at the heart of the Amazon has a diversified industrial base, which is growing
beyond electronics to take benefit from the biodiversity of the region. Currently, there is
little infrastructure in the biological sector, and local firms typically have to rely on labs in
other regions to conduct analysis and other services needed to research and product
development. The new lab will provide local capacity to conduct chemical,
pharmacological, toxic and microbiologic tests. The lab wil also help improve production
processes for local industry and will work as the center of a web or regional labs.
According with international academic studies, this type of spending typically yields a 30%
rate of return. This infrastructure will help the private sector to boost its production and
exports of environment based and friendly products in the coming years.
Indicators for the Project
Financial
2005 => R$ 11,00 MM from PLO (BUDGET DRAFT LAW) + 2,67 MM from PP= 13,67 MM
2006 => R$ 14 MM
2007 => R$ 14 MM
Time span
2005/2006/2007
Benefit
The main benefit will be to lower the cost of innovation development and dissemination of
environment-friendly businesses. Making available Public facilities able to provide fee-
based services that may not lend themselves to private-sector provision is a core element
of the industrial policy promoted by the government. The inclusion of this project in the Pilot
also helps provide a more diversified portfolio to the experiment.
Conditionality
Participation in the pilot in 2006 will require solving the issue of the administrative structure
the Laboratory, and further development of market research to identify specific potential
customers in the private sector.
19
Pilot Project Portfolio
Area –Transport, Business
Ministry - Finance
Requeriments
Project – Scanners, Custom Efficiency and Tax Integration with States
Main Aspects
SRF will implement this agenda, which includes the purchase and installation of large
container scanners required by the International Ship and Port Facility Security (ISPS) code.
In addition, the SRF will invest in surveil ance equipment in ports to increase security, reduce
smuggling, and speed up operations. Investment in information technology to increase
the responsiveness of Customs will also be part of this two-year effort. Another component
includes joint work with the states of São Paulo and Bahia aimed at addressing overlaps
and redundancies between levels of government in the area of business registration. The
modernization of the federal databank on corporation records (cadastro de pessoas
jurídicas) with a view to introduce electronic sale receipts will be an initial step towards tax
reform integrating the indirect taxes raised by the federal and state governments.
Indicators of Project
Financial
2005 => R$ 0,00 MM from PLO (BUDGET DRAFT LAW) + 400,00 MM from PP = 400,00 MM
2006 => R$ 500,00 MM
Time of project
During the year 2005/2006
Benefit
Adequacy with international security standards and improved efficiency on Customs will
likely generate efficiency gains, especially to foreign trade.
Speeding up custom operations, wil lower production costs (the overwhelming share of
imports in Brazil comprises intermediate and capital goods).
Simplify, integrate and reduce registration requirements are a priority identified by a study
prepared in the scope of the IMF program (structural benchmark). Those issues have been
also raised by the federal government level with states in the scope of the Tax Reform and
the microeconomic agenda pursued in 2004.
Conditionality
To be detailed.
20
Pilot Project Portfolio
Area –Business Requeriments
Ministry - Finance
Project –Simplification of Registration Requirements ….Continuation
Estimated time to complete the
requirements to Register a Firm
1 Pesquisar razão social
9 Obter autorização de emissão de notas fiscais (Município)
2 Pagar taxa de registro
10 Imprimir notas fiscais
3 Registro Junta Comercial
11 Obter alvará de funcionamento
4 Inscrição Receita Federal
12 Fiscalização municipal
5 Inscrição fAzenda Estadual
13 Abrir contas FGTS
6 Obter autorização de emissão de notas fiscais (Estado)
14 Registrar empregados no PIS
7 Inscrição Prefeitura
15 Notificar Ministério da abertura do livro de empregados
8 Pagar TFE à Prefeitura
180
14%
160
12%
140
Custo
s
10% per
120
100
,
dia
8%
nda a
o
it
p 80
re p
6%
ca
60
Tem
4%
40
Tempo
sto, %
2%
20
Cu
0
0%
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
Procedimentos
Source: Survey conducted by the IFC with selected practioneers in São Paulo
21
Pilot Project Portfolio
Area – Streamlining business Requirements
Ministry – Social Security.
Project – An efficient and responsive Social Security
Main Aspects
This agenda is part of a larger agenda aimed at fostering entrepreneurship and reducing
the informality in labor markets. A key step to that has been the overhauling of the Social
Security, with the creation of the autonomous Social Security Revenue Service (SSRS).
Strengthening the new SSRS will require investments, whose volume has estimated at
around R$ 100 million in 2005, complementing the R$ 40 millions from an IADB loan. This will
go mainly to provide the organ with adequate information technology.
Indicators of Project
Financial
2005 => R$ 00 MM from PLO (BUDGET DRAFT LAW) + 100,00 MM from PP = 100,00 MM
Time of project
During the year 2005
Benefit
A better distribution of the tax burden will increase the efficiency of the economy, fostering
formal employment.
Conditionality
The definition of a plan to strengthen the Social Security in 2005, resulting in enhanced
credit recovery and stronger mechanisms to administer the concession of new benefits.
22
Document Outline
