Brazil: Loan Supports Innovative Multisector Integrated Development in Northeastern

Contacts:                          

In Brasília: Mauro Azeredo (+55-61) 3329-1059

mazeredo@worldbank.org

In Washington: Gabriela Aguilar (+1 202) 473-6768

gaguilar2@worldbank.org

WASHINGTON, September 30, 2008 – The World Bank Board of Executive Directors approved today a loan to the State of Ceará, in Brazil’s Northeastern Region, for the Ceará Inclusive Growth Project (SWAp II).  The US$ 240 million loan will support growth, economic competitiveness, social service provision and infrastructure in the state, one of the poorest in Brazil. This operation is the second Sector Wide Approach (SWAp) loan of a program in support of Ceará’s Inclusive Growth Strategy.

“With the help of the first project, Ceará has been able to achieve relatively high levels of coverage in several key social development areas, such as education and health. The focus of the State’s Strategy is now on improving the quality and the results in these areas,” said Cid Gomes, Governor of Ceará. “For this, it is essential to also improve the Government’s public sector management capacity so that scarce public resources achieve the best possible benefits.”

The broad objective of the project is to expand and consolidate the social advances and institutional modernization of the State, continuing and expanding the work began in the first project. Ceará has made solid progress in improving both economic and social indicators in recent years. Between 1985 and 2006, the state’s GDP grew by an accumulated 95.1%, well above the Brazilian average (71.0%). From 1992 to 2005, the average years of schooling per adult in Ceará rose by 50.0%, out-performing the Northeastern growth rate (42.9%). Other social indicators, including infant mortality and life expectancy, also have shown significant improvement over the last two decades. In addition, the State has maintained a solid fiscal situation.

The project is comprised of a $235.7m SWAp component and a $3.7m technical assistance component. The SWAp supports the Government’s development program in a) public sector management, b) education, c) health, d) water resources management & water and sanitation, and e) business environment and innovation. For each sector, disbursement-linked indicators will monitor success in meeting the project development objectives. The TA component provides analysis and institutional strengthening to support reforms in these sectors in furtherance of the development program objectives.

“The Bank is proud to have been a partner of Ceará for twenty years, during which the State has made extraordinary progress.  We work with Ceará on some of the state’s most important development priorities, including economic growth education, health, rural poverty, water resources management and urban development,” said John Briscoe, World Bank Director for Brazil. “This loan fits squarely within the new Country Partnership Strategy, which highlights the Bank’s increasing role at the state level in Brazil, the focus on economic growth and the importance of addressing complex development challenges.”

Actions in the five sectors include:

• Public Sector Management - Strengthening fiscal and fiduciary oversight and institutionalizing Results-Based Management in policy setting and public administration will have a positive impact upon the efficiency and effectiveness of the entire government, including the other targeted sectors. In this second SWAp, fiscal indicators have been selected to reflect the emphasis on growth: instead of using the more commonly-adopted primary surplus indicator, the project will target the current fiscal balance, which takes into account the need to preserve—or even expand—the level of public investment while maintaining fiscal discipline.
• Education - Focus on (i) children in the early primary school years (grades 1-4) are still not achieving satisfactory literacy levels, and (ii) youth who finish middle school but are unable to enter universities or find jobs owing to their academic deficiencies; extending the coverage of annual exams to rural and small schools and tracking test results as an input to school development plans and to address weaknesses.
• Health – Considering that healthcare coverage is now relatively high, interventions supported in the project focus on improving quality of healthcare. The program will: (i) advance the government’s results-based framework by supporting downstream results-based management that can influence behaviors at the point of service delivery, and (ii) focus on improving the quality of care, especially in terms of improving processes, raising standards, and measuring results.
• Water resources - Strengthening the financial health of the water companies, and sending economic signals to consumers about the true cost of water in Ceará’s arid climate and the need to rationalize its use across competing demands. In addition, the provision of potable drinking water and improved sanitation are essential to improving quality of life and combating water-borne health and pollution problems.
• Business Environment & Innovation - Mobilize private sector resources and entrepreneurship to achieve sustainable growth. Strengthen municipal development clusters outside of the Fortaleza Metropolitan Region, including support for programs designed to foster technology innovation, research and scientific development.

“The Government’s commitment to these sectors is clear from the continuity of programs since the first project, in 2005,” said José Guilherme Reis, Project Manager for the World Bank. “The Bank looks forward to working with the State Government on the project's implementation, in order to help achieve the important results that will benefit all of Ceará’s population, but especially the poorest."

This fixed-spread loan from the International Bank for Reconstruction and Development (IBRD) to the State of Ceará is guaranteed by the Federative Republic of Brazil and has a total term of 22 years, including 7 years of grace.

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