UNITED NATIONS ENVIRONMENT PROGRAMME

UNITED NATIONS ENVIRONMENT PROGRAMME

PROJECT DOCUMENT

SECTION 1 - PROJECT IDENTIFICATION

1.1 Title of Sub-Programme: Sustainable Management and Use of Natural Resources - Caring for Freshwater, Coastal and Marine Resources

1.2 Title of Project: Integrated Management of Land-based Activities in the São Francisco Basin.

1.3 Project Number: GF/1100-99-14

1.4 Geographical Scope: Latin America and the Caribbean (LAC)

1.5 Implementing Organization: General Secretariat of the Organization of the American States (GS/OAS)

1.6 Duration of the Project: Three years and eight months

Commencing: September 1999

Completion: April 2003

1.7 Cost of Project: (Expressed in US $)

_____________________________________________________________________________________ US$ %

_____________________________________________________________________________________

Cost to the Environment Fund (in kind)[1]: 175,000 1

Cost to Trust Fund (GEF) [2]: 4,771,000 21

Cost to Counterpart Contribution (country)[3]: 8,543,000 38.5

Cost to the Implementing Organization (in kind)[4] : 100,000 0.5

Cost to the World Bank (Proagua loan)³ : 8,625,000 39

____________________________________________________________________________________

Total Cost of the Project: 22,214,000 100

____________________________________________________________________________________

Signatures:

For the General Secretariat of For the Environment Fund of UNEP

the Organization of the American

States (GS/OAS):

_________________________________ __________________________________

César Gaviria Edmundo Ortega

Secretary General Chief, Budget and Fund Management Unit, UNON

Date: ___________________________ Date: ____________________________

Box 1: Identifiers of project brief as approved by the GEF

1. Identifiers

Project Identifier: Project number not yet assigned (GF/1100-98-#)

Project Name: Integrated Management of Land-based Activities in the São Francisco Basin

Duration: 2.5 years. [5]

GEF Implementing Agency: UNEP

Executing Agency: GS/OAS

Secretaria de Recursos Hidricos (SRH) do Ministerio do Meio Ambiente, dos Recursos Hidricos e da Amazonia Legal do Brasil (MMA)

Requesting Country: Brazil

Country eligibility: Under paragraph 9(b) of the Instrument.

Focal areas: International waters with relevance to the cross-cutting area of Land Degradation

GEF Programming Framework: OP 10 Contaminants based Operational Program, GPA element.

2. Summary

This project develops a watershed management program for the Rio Sao Francisco Basin, which discharges into the South West Atlantic Large Marine Ecosystem and Brazil Current. The strategic, integrated and sustainable program for the management of this system and its coastal zone to be formulated during this project will address the physical, biological, chemical and institutional root causes of the progressive degradation which is affecting the basin and, particularly, the coastal ecosystems. The project will focus on the use of economic instruments and catalyze implementation activities with incremental costs to restore and sustain the coastal zone through improved river basin management included in the watershed management program. The project will complement basin-scale interventions by the Government of Brazil, financed in part from national sources and by The World Bank through the Program for Water Development (PROAGUA) and other donors. The project forms the Latin American demonstration project under the Global Program of Action for the Protection of the Marine Environment from Land-based Activities (GPA) GEF operational program element.

3. Project Cost and Financing

GEF Project: US $ 4,080,000

PDF B: US $ 341,000

Project Support Costs: US $ 280,000

Monitoring/Evaluation: US $ 70,000

Subtotal GEF US $ 4,771,000

Co-financing: UNEP US $ 175,000

WB(PROAGUA loan) US $ 8,625,000

GS/OAS US $ 100,000

Government US $ 8,543,000

Subtotal US $17,443,000

Total Project Costs: US $22,214,000

4. Associated Financing

SRH/MMA US $ 3,500,000 (National PROAGUA)

SEPRE US $ 10,000,000 (coastal zone impact assessment)

JICA US $ 1,500,000 (State of Sergipe watershed management grant)

5. Country Operational Focal Point Endorsement

Name, Daniel Ribeiro de Oliveira; Title GEF Operational Focal Point; Organization, Secretario de Assuntos Internacionais, do Ministerio do Planejamento e Orcamento, Brasil. Date: May 27, 1998

6. IA Contact:

Mr Ahmed Djoghlaf, Executive Co-ordinator, UNEP/GEF Co-ordination Office, UNEP, Nairobi, Tel: 254 2 624166; Fax: 254 2 520825; Email: ahmed.djoghlaf@unep.org

SECTION 2 - BACKGROUND AND PROJECT CONTRIBUTION TO OVERALL

SUB-PROGRAMME IMPLEMENTATION

2.1 Background:

Background and context

2.1.1 GEF Programming Context. This project meets the objectives of the GEF Operational Program #10 International Waters Land-based Activities Demonstration Project component (paragraph 10.13). The project will identify specific strategies, investment projects and activities that will meet GEF criteria, catalyze preparation of an integrated watershed management program (WMP), and serve as a demonstration project for the implementation of the Global Programme of Action for the Protection of the Marine Environment from Land-based Activities (GPA) in Latin America.

2.1.2 Implementing Agency Programming Context. The proposed actions are consistent with the GEF principle of linking project elements with major cross-cutting issues such as land degradation, and with the UNEP Environmentally Sound Management of Inland Waters (EMINWA) integrated watershed management planning process and related, regional seas programme. The proposed actions are also consistent with UNEP’s role under the GPA.

2.1.3 GPA Programming Context. (Annex 9) The goal of the GPA (adopted by 109 governments at the Washington Conference in November 1995) is to prevent degradation of the marine environment from land-based activities by assisting States in preventing and reducing major threats to the health, productivity and biodiversity of the marine environment resulting from human activities on land and in coastal areas. Thus, the GPA is designed to be a source of conceptual and practical guidance to assist States in taking action, individually or jointly within their respective policies, priorities and resources, that will lead to the prevention, reduction, control and/or elimination of degradation of the marine environment, as well as to its recovery from the impacts of land-based activities.

2.1.4 National Programming Context. Activities in the Brazilian Coastal zone are regulated by Federal Law No 7661/88, the National Environment Program, that, inter alia, establishes the National Coastal Management Plan, the principle objectives of which are the sustainable use of natural resources in the Coastal Zone, and preservation, conservation and rehabilitation of ecosystems in the Coastal Zone to promote sustainable development. A coastal zone inventory and macrodiagnostic, including the Rio Sao Francisco estuary, was completed in 1996 by the Government of Brazil with support from The World Bank. This study identified in a mapping format the major human uses of the coastal zone of Brazil, environmentally sensitive sites, and conservation units and reserves, which, in the Rio Sao Francisco coastal zone, are related primarily to agricultural use and conservation of endangered species, including sea turtles.

2.1.5 The Master Plan for the Development of the Sào Francisco River Valley (PLANVASF) was completed in 1989, with the assistance of the GS/OAS, and was designed to provide incentives to the public and private sectors for the development of the basin. This plan included proposals for the development of natural and water resources, increased food production through irrigated agriculture, increased power generation supplying the National Network, increased water and sanitation services, improved river navigation, and enhanced environmental protection. This plan was adopted as a part of Federal Law 8851/94, as the Plan of Economic and Social Development of Northeastern Brazil.

2.1.6 Subsequently, the Federal Government passed Law 9433/97, creating the National Policy on Water Resources and establishing public institutions such as the basin committees for the issuance of water rights and implementation of water use payment systems. With the approval of the National Policy Committee on Water Resources, as established by the National Constitution, the Federal Government is promulgating criteria and guidelines to be followed by states in implementing federal law 9433/97. Presently the States of Bahia, Pernambuco and Sergipe, within the Rio Sao Francisco Basin (SFRB), have passed legislation consistent with these objectives, principles and guidelines and are creating institutions to implement the new law at the State level, and the States of Minas Gerais and Alagoas are presently modifying or creating water legislation in order to comply with federal regulations.

2.1.7 In this context, the Government of Brazil requested technical assistance in developing more integrated approaches to the management of land-based activities in the SFRB. The present project has been prepared using GEF PDF-B funds and is based upon extensive public consultation with stakeholders in the participating states, and initial agreement concerning institutional arrangements for implementation of the project. This proposed project is citizen-driven, and public and stakeholder participation remains an integral part of all components identified in this project. PDF-B funds were used to identify a framework for the development of: mechanisms to control the movement of priority contaminants from the land surface to nearshore marine waters; mechanisms for managing releases of water within this regulated river system; conservation of aquatic biological diversity; prevention of land degradation and rehabilitation of degraded lands in critical watersheds; and implementation of environmentally sound development proposals throughout the basin that will benefit the watershed and coastal zone.

2.1.8 Building upon previous studies, the primary objective of this project will be to conduct planning and feasibility studies required to formulate a WMP that will promote environmentally sustainable development of the basin as a means of managing environmental degradation of the coastal zone. The WMP will include the identification and implementation of appropriate economic instruments, required to incorporate land-based environmental concerns affecting the coastal zone into the future development policies, plans and programs of the riparian states. Evaluation of the use of economic instruments as a policy mechanism to achieve environmentally sustainable modes of development is viewed as a key element of the WMP. The project will guide the Ministry of Environment, Water Resources and Legal Amazon (MMA) of the Federal Government of Brazil in their implementation of complementary World Bank loan financed programs (e.g., the Program for Water Development, PROAGUA) as well as those actions with incremental global benefit that might be implemented in subsequent activities.

2.1.9 System Boundaries. The SFRB, which extends over approximately 640,000 km², comparable to the drainage basins of the Colorado or Columbia rivers of North America, discharges across the North East Brazil Shelf to the Southwest Atlantic Large Marine Ecosystem (LME) and Brazil Current (Annex 7). The river covers a large portion of the area known as the “Drought Polygon of Brazil” as it traverses climatic zones ranging from humid to arid as it flows through five states in Northeastern Brazil (the States of Alagoas, Bahia, Minas Gerais, Pernambuco, and Sergipe, plus the Federal District and State of Goias at the headwaters of tributary streams). Land-based activities in these riparian states include mining, agricultural, urban and industrial activities, that deliver contaminants to the river system and thence to the coastal zone. Hence, the SFRB forms an appropriate case study under the GPA (Annex 9) and the GPA operational program of the GEF.

2.1.10 The basin is divided into the upper, middle, lower middle, and lower sub-basins, plus the oceanic end point, each with distinct environmental and socio-economic characteristics. The estuarine wetlands located at the debouchment of the river into the South West Atlantic form a particularly important and environmentally sensitive habitat. The ecological structure and function of this habitat, as well as its physical integrity, is currently under threat due to unsustainable hydrological management and land use practices within the basin. Except for flood flows during the wet season, flow originates in the humid and semi-humid areas near the headwaters. Tributaries in the arid and semi-arid regions of the middle and lower middle sub-basins are largely intermittent, although flood flows in these streams may cause localized problems of flooding, erosion and sedimentation which affect the entire lower portion of the river system and the coastal zone. Some 13 million people are resident in this basin, principally concentrated in the upper sub-basin.

2.1.11 Immediate and Intermediate Problems. The priority environmental concerns in the SFRB are thought to include soil loss, and contamination by organic pollutants and heavy metals which will be systematically identified and quantified through the activities of this project. The SFRB is a very complex area, in which development has occurred in an historically haphazard and sectoral manner, with relatively little integrated planning, and within a relatively weak institutional framework. This has resulted in a less than optimal use of its water resources and degradation of the coastal zone, the root causes of which will be identified during the conduct of this project. Large stretches of river have been regulated, altering natural river flows that coincided with fish spawning periods. In addition, flow modifications have affected the deposition of sediments, nutrients and other contaminants in the system; altered erosion and deposition patterns; accelerated land degradation; and, modified the delivery of nutrients to the lower reaches of the basin and the coastal zone. As a consequence, significant modifications in the freshwater, estuarine and marine fauna and flora have occurred.

2.1.12 Serious environmental problems identified in the Upper sub-basin include the direct discharge of untreated municipal effluents, and industrial and mining effluents containing heavy metals and cyanides. In addition, there is widespread use of agro-chemicals, and deforestation is occurring on a large scale due to the demand for charcoal and the clearing of land for agricultural use and mining. River contamination, and the existence of large and medium size dams, further impact fish and aquatic fauna in this sub-basin. In the Middle sub-basin, environmental problems, while limited in comparison to the other sub-basins, include water quality problems (largely from upstream sources), land degradation, and accelerating erosion and desertification. Environmental problems in the Lower-middle sub-basin include water quality problems, contaminant deposition in reservoirs, impaired fish migration, high rates of soil erosion due to agricultural activities, contamination of surface and ground waters by runoff from irrigated lands, and modification of river basin and estuarine geomorphology due to the presence of flow regulation structures.

2.1.13 All of these upstream problems contribute to, or are related to, environmental problems in the lower sub-basin and coastal zone which include: sedimentation; eutrophication in the reservoirs; and oligotrophication of coastal waters; alteration of river flow regimes; reductions in numbers and diversity of fish populations and populations of threatened and endangered species such as the sea turtle which nests along the coast; and increased incidence of endemic diseases.

2.2 Project Contribution to overall Sub-Programme implementation:

2.2.1 GEF Programming Context. This project meets the objectives of the GEF Operational Program #10 International Waters Land-based Activities Demonstration Project component (paragraph 10.13) The project will identify specific strategies, investment projects and activities that will meet GEF criteria, catalyze preparation of an integrated watershed management program (WMP), and serve as a demonstration project for the implementation of the Global Programme of Action for the Protection of the Marine Environment from Land-based Activities (GPA) in Latin America.

2.2.2 UNEP Programming Context. The proposed actions are consistent with the UNEP Environmentally Sound Management of Inland Waters (EMINWA) integrated watershed management planning process and related, regional seas programme. The proposed actions are also consistent with UNEP’s role under the GPA.

2.2.3 GPA Programming Context. The goal of the GPA (adopted by 109 governments at the Washington Conference in November 1995) is to prevent degradation of the marine environment from land-based activities by assisting States in preventing and reducing major threats to the health, productivity and biodiversity of the marine environment resulting from human activities on land and in coastal areas. Thus, the GPA is designed to be a source of conceptual and practical guidance to assist States in taking action, individually or jointly within their respective policies, priorities and resources, that will lead to the prevention, reduction, control and/or elimination of degradation of the marine environment, as well as to its recovery from the impacts of land-based activities.

SECTION 3 - NEEDS AND RESULTS

3.1 Needs:

3.1.1 As mentioned in section 2 above, the SFRB is a very complex area, in which development has occurred in a historically haphazard and sectoral manner, with relatively little integrated planning, and within a relatively weak institutional framework. This has resulted in a less than optimal use of its water resources and degradation of the coastal zone, the root causes of which will be identified during the conduct of this project. The major SFRB needs are as follows;

· Urgent need for incorporation of land-based environmental concerns into development policies, plans and programs for the São Francisco River Basin for the protection of its coastal zone.

· Urgent need for implementation of an integrated approach to management of the SFRB watershed and coastal zone.

3.2 Results:

3.2.1 The present project is designed to support an integrated approach in the planning and management of the SFRB and its coastal zone. Integrated sustainable management and development of the basin will generate significant environmental benefits to the region and potential global benefits through demonstration of integrated approaches to freshwater basin and coastal zone management.

Specific results include:

· Improved river basin and coastal zone environmental concerns public and scientific awareness and knowledge within the basin and its coastal zone.

· Improved public and stakeholder participation through hands on-type involvement of communities in the remedial measures.

· Improved organizational structure and staffing capabilities needed to implement financial mechanisms for water rights and water charges, as provided for under federal law 9433/97.

· Improved quantification of Water Use, Use Conflicts and Hydrological Management.

· Improved integrated management and environmentally sustainable development of the SFRB.

3.3 Assumptions to achieve results:

It is assumed that the Government of Brasil will provide support for the parallel local actions that will complement and facilitate project development objectives.

SECTION 4 - OUTPUTS, ACTIVITIES, WORKPLAN AND

TIMETABLE, BUDGET, FOLLOW-UP

4.1 Project activities and outputs:

Rationale and Objectives

4.1.1 Objectives. Building upon the previous studies and the PDF-B phase, the objective of this GEF-GPA demonstration project is to assist the Government of Brazil to promote sustainable development of the SFRB and its coastal zone, based upon the implementation of an integrated approach to management of the watershed and coastal zone. The goal of this integrated and sustainable management program for the SFRB and its coastal zone is to catalyze, through planning and feasibility studies documented within a WMP, the incorporation of land-based environmental concerns into development policies, plans and programs for the SFRB for the protection of its coastal zone. If appropriate, implementation proposals, with incremental costs, will be prepared subsequently for submission to the GEF Council for consideration.

4.1.2 This project proposal is being compiled at a time when the Government of Brazil and the riparian states of the Rio São Francisco Basin are commencing the implementation of Federal Law 9433/97. The establishment of mechanisms and means for the integrated management of the SFRB under this law can beneficially affect the South West Atlantic LME and Brazil Current into which the river discharges. The implementation of the public participation and grass-roots level water resources management structures, especially, provides an opportunity for the creation and implementation of effective structures, legal controls, and fiscal instruments to mitigate land and water management practices that degrade water quality, modify hydrological and hydraulic characteristics of the basin, and/or adversely affect the water resources of the Basin and its coastal zone.

Project activities and outputs

4.1.3 Proposed Project Components are designed to provide information for, and permit formulation of, a WMP for the SFRB and its coastal zone, and are concentrated in four principal components as set forth below. Specific terms of reference and identification of individual contractors will be developed for each component as one of the first actions initiated by the SRH, in consultation with UNEP and the GS/OAS. The schedule of activity implementation is presented in Table 1 of section 4 hereafter. More detailed information about the following components can be found in the work program presented in Annex 8. Elaboration of the work program will be the first action carried out by the project steering committee upon implementation of this project.

COMPONENT I: River Basin and Coastal Zone Environmental Analysis

Component I comprises the river basin and coastal zone diagnostic study. The objective of Component I is to provide the sound scientific and technical basis for the strategic remedial actions for the protection of the marine environment from land-based activities identified during the WMP process. Activities will include:

· Quantification of priority issues identified during the PDF phase, thereby updating and consolidating older data, and providing for the forecasting of potential future scenarios within the linked land, water and marine system.

· Identification and quantification of the extent to which land-based activities and river regulation in the Rio Sao Francisco influence hydrology, water quality (especially, sediment and nutrient transport), and fisheries and aquatic ecology throughout the system and, especially, at the coastal zone in the vicinity of its estuary.

· Identification and assessment of the most probable reasons for changes in river morphology and aquatic faunal community composition and distributions necessary to determine the root causes of these changes.

· Provide the quantitative basis for the determination of strategic actions to optimize the multiple purpose utilization of the water resources of the basin and the protection and restoration of the coastal zone ecosystems currently adversely affected by land-based activities.

The outputs of this component will include:

· an inventory of the aquatic fauna, flora and hydroclimate in the lower SFRB and historic changes in its composition; and,

· an evaluation of the environmental impacts of the river on the coastal zone including wetlands, beaches, and fish habitat;

· an analysis of the floods and the use of artificial floods as an hydrological management mechanism;

· an assessment of different scenarios for reservoir operation to minimize environmental impacts on the estuary and coastal zone.

The execution of these activities will be undertaken by the relevant federal and states agencies such as CODEVASF, CHESF, CPRM and EMBRAPA, and CEMIG and IGAM; federal universities; municipal consortia and civil associations; and local NGOs. The coordination and supervision will be ensured by the Technical Coordinator at the SRH/MMA. Specific detailed Terms of Reference will be prepared by the Technical Coordinator in close consultation with UNEP and GS/OAS, during the first quarter of the project period. This component is anticipated to be initiated according to the timetable presented in Table 1 of Section 4. A detailed preliminary workprogram is presented in Annex 8 of this document. GEF: US $ 990,000; co-funding: US $ 1,918,000; total: US $ 2,908,000.

COMPONENT II: Public and Stakeholder Participation

Component II provides for public involvement. The objective of Component II is to provide for the practical, hands on-type involvement of communities in the identification and field testing of remedial measures, as well as the establishment of a dialogue process between persons and agencies having economic interests in the basin. Actions formulated through this process will have the advantage of benefiting from community insights and experiences, and of being acceptable to the communities as economically and environmentally sustainable alternatives to presently destructive practices. Although the major effort in this area is expected to be undertaken subsequently, the acquisition of specific information necessary for the determination of water rights and water rate allocations, and methodologies for controlling sediment movement within the basin (especially as it impacts the movement of sediments within the estuary), will be undertaken during this project. This information will also contribute to implementation of specific actions under the World Bank-financed PROAGUA program, and is a prerequisite for the implementation of water charges under Component IV. Activities will include:

· mapping at an appropriate scale to determine land ownership and condition, and a framework for establishing a water use allocation system;

· identification of, and establishment of coordination between, persons and agencies having commercial or institutional responsibilities within the basin, including the fisheries, navigation, mining and agro-industrial sectors and public sector at all levels of government;

· demonstration of sustainable agricultural and streambank management measures for implementation under community-based land management programs (supported through the World Bank-financed PROAGUA program that will demonstrate sound soil and water management techniques, appropriate utilization of agro-chemicals, and improved methods of crop management, irrigation design and maintenance of infrastructure such as roads and irrigation ditches); and,

· creation of community-based information and training programs to support community land management programs.

The outputs of this component will include:

· a sound basis to determine land ownership and condition together with the framework for establishing a water use allocation system and will contribute to the rational allocation of water and water charges,

· strengthened community-based and governmental initiatives that contribute to the determination of water use and its impact on the hydrology of the system, and facilitate implementation of water use charges, including the creation of public, private and public-private partnerships as appropriate,

· pilot-scale demonstration projects to identify methods of stabilizing degraded lands and riparian areas, and promulgation of appropriate remedial measures,

· training programs through which to communicate the measures to farmers and communities.

The execution of these activities will be undertaken by the relevant federal and states agencies such as CODEVASF; and municipal consortia, and civil associations. The coordination and supervision will be ensured by the Technical Coordinator at the SRH/MMA. Specific detailed Terms of Reference will be prepared by the Technical Coordinator in close consultation with UNEP and GS/OAS, during the first quarter of the project period. This component is anticipated to be initiated according to the timetable presented in Table 1 of section 4. A detailed preliminary workprogram is presented in Annex 8 of this document. GEF: US $ 520,000; co-funding: US $ 1,150,000; total: US $ 1,670,000.

COMPONENT III: Organizational Structure Development

Activity III strengthens and improves institutional and staffing capabilities to implement new laws, regulations, and procedures. The objective of Component III is to equip and train institutions and individuals identified during the PDF Activities. Such institutional strengthening and capacity building will contribute to the longer-term success of the watershed management measures identified in the WMP. This component targets specific institutions and skills needed within the basin at all levels of government, including the determination of appropriate inter-governmental structures to facilitate coordination between federal, state, municipal and local governments and agencies. Where appropriate, partnerships based upon the inclusion of nongovernmental organizations, industry councils and other institutions within the coordination mechanisms will be developed. In addition, this component supports the development of an effective and integrated Rio Sao Francisco Basin Committee structure, as provided for under federal law 9433/97. Activities, in concert with actions funded under PROAGUA, will contribute to the implementation of an effective, integrated basin committee, and ancillary agencies and organizations, at both the federal and state levels. Activities will include:

· an evaluation of the efficacy of several policy instruments for implementing the water law and related state legislation;

· pilot scale implementation in order to relate measured improvements in both rate of water use and degree of protection of downstream water quality; and,

· development of a framework for the implementation of the law in other sub-basins.

The outputs of this component will include:

· a framework for the creation of a financially-sustainable basin management agency that will contribute to the sustainable use and management of the water resources of the basin, including integration of environmental and coastal zone concerns into the overall management strategy for the system,

· the establishment of an integrated river basin committee consistent with the spirit of Federal Law 9433/07 in, inter alia, the Maranhao River sub-basin, and potential extension to the entire SFRB,

· a framework for the conduct of inter-agency discussions within a multiple purpose basin through the creation of a forum for the interaction of sub-basin committees and water agencies, and public and stakeholders participating in the decision-making process.

The execution of these activities will be undertaken by the relevant federal and states agencies such as CODEVASF, CEEIVASF, IGAM; and municipal consortia and civil associations. The coordination and supervision will be ensured by the Technical Coordinator at the SRH/MMA. Specific detailed Terms of Reference will be prepared by the Technical Coordinator in close consultation with UNEP and GS/OAS, during the first quarter of the project period. This component is anticipated to be initiated according to the timetable presented in Table 1 of section 4. A detailed preliminary workprogram is presented in Annex 8 of this document. GEF: US $ 450,000; co-funding: US $ 845,000; total US $ 1,295,000.

COMPONENT IV: Watershed Management Program Formulation

Component IV is the formulation of the WMP. The objective of Component IV is the synthesis of data and experiences, feasibility assessments and cost analyses developed in the three preceding components. Included in the principal activities within this component are four elements that address the legal, institutional, and human and natural resources bases essential for implementation of the remedial actions identified through the WMP process. Component IV explicitly provides for the cooperative development of a comprehensive WMP by both the public and private sectors, based on a multi-sectoral, holistic approach to environmental management and economic development in this Basin and its coastal zone, as provided for in Chapters 18 and 21 of Agenda 21.

A. Information Sharing and Dissemination - The goals of this element are (1) to promote (a) popular participation at the grass roots level throughout the basin, where some representative community-based institutions exist, and (b) to empower decentralized decision-making relating to the determination and implementation of management policies and practices at the community level, and (2) to facilitate sharing of technical information between states and agencies, as well as the extension and upgrading the data collection system to facilitate an holistic overview of hydrological and water quality conditions in the system. Achievement of these goals will contribute to flood forecasting, environmental and hydrological management, reservoir operations, and an informed community. Activities will include:

· the conduct of workshops, training programs for officials and community leaders, and informational campaigns within schools, civic groups and communities;

· the convening of two international seminars to facilitate discussion of the water resources issues of priority concern as a means of building appreciation for the unitary nature of the Rio Sao Francisco hydrological system and related coastal zone;

· the dissemination of the experiences gained in the determination and initial implementation of management actions through the professional literature, seminars, public informational meetings, and training programs to enhance the transfer of knowledge as encouraged under Chapter 15 of Agenda 21; and,

· the use of, and support for, the Inter-American Water Resources Network (IWRN) as a means of disseminating information regarding the conduct and findings of this activity.

· the development of a framework to extend and harmonize the existing hydrometeorological data collection network, unifying data gathering objectives and methodologies in order to enhance the dissemination of data and information throughout the basin.

The outputs of this element will include:

· meeting and workshop reports,

· a compendium of appropriate methods and means of integrating community-based decision-making into the structure and function of the integrated basin management committee proposed to be created under Component III,

· a regional water information system, including the publication of a magazine for basin-wide distribution to raise awareness, build participation and inform citizen across sectoral line,

· a framework for addressing the priority issues inherent in the management of the SFRB.

The execution of these activities will be undertaken by the relevant federal and states agencies such as CODEVASF, IGAM. The coordination and supervision will be ensured by the Technical Coordinator at the SRH/MMA. Specific detailed Terms of Reference will be prepared by the Technical Coordinator in close consultation with UNEP and GS/OAS, during the first quarter of the project period. This component element is anticipated to be initiated according to the timetable presented in Table 1 of section 4. A detailed preliminary workprogram is presented in Annex 8 of this document. GEF: US $ 430,000; co-funding: US $ 671,000; total: US $ 1,101,000.

B. Quantification of Water Use, Use Conflicts and Hydrological Management - The objective of this element is to develop a quantitative framework for identifying and resolving quantitative water use and allocation conflicts within the basin in a transparent and equitable manner. This element creates the framework for the decision-support system to be designed under activities conducted under PROAGUA and the determination of an appropriate economic framework. Building upon the detailed hydrological and contaminant budgets to be completed under Component I, activities will include:

· the quantification of the volumes of water consumed by irrigated agriculture, the levels of contamination of surface and ground waters arising from agricultural water use, and the degree to which abstraction and contamination of waters impacts the ability of waters to be used by downstream users;

· an assessment of the need to develop the computational instruments needed to analyze water use conflicts through an integrated, quantitative, mathematical modeling of natural water flows, sectoral consumptive uses, projected inter-basin transfers into and out of the basin, and modifications of natural flows resulting from the operation of dams and reservoirs; and,

· the development of the parameters for models that will contribute to the sustainable, conjunctive management of the water resources of the SFRB.

The outputs of this element will include:

· a documented review of the stakeholders and their water requirements to be met from the water resources of the Rio Sao Francisco,

· the quantitative basis for the formulation of related fiscal and legal mechanisms, including allocation of water rights and development of water charges and use regulations, for the sustainable management of the river and its coastal zone,

· a framework for the development and use of a system of mathematical models of river hydraulics, hydrology and water use in the basin, to be included in the proposed PROAGUA decision support system, that will contribute to informed decision-making by stakeholders and agencies.

The execution of these activities will be undertaken by the relevant federal and states agencies such as CODEVASF, and CHESF; federal universities; and municipal agencies and civil associations. The coordination and supervision will be ensured by the Technical Coordinator at the SRH/MMA, in close consultation with the PROAGUA project team. Specific detailed Terms of Reference will be prepared by the Technical Coordinator in close consultation with UNEP and GS/OAS, during the first quarter of the project period. This component element is anticipated to be initiated according to the timetable presented in Table 1 of section 4. A detailed preliminary workprogram is presented in Annex 8 of this document. GEF: US $ 640,000; co-funding: US $ 3,059,000; total: US $ 3,699,000.

C. Financial Mechanisms - The objective of this element is to develop and implement a system of water rights and water charges, as provided for under federal law 9433/97, in representative sub-basins of the Rio Sao Francisco. This element builds upon activities funded under PROAGUA and the experiences obtained in the pilot-scale demonstration projects developed in Component III. Activities conducted under this component will:

· review of federal and state legal and financial mechanisms relating to the sectoral uses of water (e.g., agricultural subsidy schemes, urban land use planning regulations, etc. which affect disturbances of the land surface that encourage erosion, water pollution, etc. to the detriment of water courses and water resources management);

· identify and propose amendments as appropriate to those mechanisms that affect sustainable use of water resources and the management of watersheds within the SFRB

· develop a detailed framework of the allocation and determination of water charges and introductions of watershed management measures, including proposals for legislation and strengthening of administrative mechanisms necessary to implement an equitable water pricing scheme and enhance the institutional capability to determine and implement a water use charges program; and,

· identify appropriate mechanisms to place water resources management within the basin on a sustainable footing, and encourage the optimization of water resources management policies, practices and programs, thereby creating a sound economic and legal basis for the sustainable development of the basin and its coastal zone.

The outputs of this element will be:

· a documented review of existing water resources management and protection legislation and recommended actions for the harmonization and optimization of such legislation in the basin,

· a program of proposed legislative initiatives to harmonize and optimize water resources management and protection legislation in the basin,

· a documented framework for the implementation of water use charges and restructuring of related fiscal, financial and legal mechanisms for water quantity and quality management in the five basin states consistent with an holistic concept of the SFRB,

· a compendium of appropriate mechanisms for the sustainable utilization and management of the Rio Sao Francisco.

The execution of these activities will be undertaken by the relevant federal and states agencies such as CEEIVASF. The coordination and supervision will be ensured by the Technical Coordinator at the SRH/MMA, in close consultation with the PROAGUA project team. Specific detailed Terms of Reference will be prepared by the Technical Coordinator in close consultation with UNEP and GS/OAS, during the first quarter of the project period. This component element is anticipated to be initiated according to the timetable presented in Table 1 of section 4. A detailed preliminary workprogram is presented in Annex 8 of this document. GEF: US $ 350,000; co-funding: US $ 300,000; total: US $ 650,000.

D. Formulation of the Watershed Management Program - The formulation of a WMP is the goal of this project. The objectives of this element are the identification and harmonization of development initiatives in the SFRB and coastal zone, and the implementation of strategic actions to integrate and optimize the initiatives and proposals for sustainable development in the region. This element will enhance the capacity of basin organizations to manage the water resources of the basin, and contribute to the development of an operational procedure that will optimize economic use of the water resources in the basin, including environmental use. This element also will strengthen institutional capacities to implement national and sub-national (state, municipal, and local governmental) actions consistent with national undertakings relative to the GPA so as to manage water flows in a climate of changing water demands and in a manner consistent with maintenance of environmental conditions at the river estuary. Such actions will conserve biological resources and minimize deleterious environmental impacts related to river flows. Thus, activities to be undertaken under this element will include:

· an environmental evaluation of the basin, emphasizing the analysis of priority problems and socio-economic issues relating to environmental practices and their relationship with the education, health, income and organization of population especially in the coastal zone, as well as the identification and coordination of organizational arrangements;

· support to Government efforts at introducing environmental considerations into the laws and regulations at the national and state levels; and,

· the incorporation of strategic measures for the mitigation and prevention of land degradation, protection of aquatic flora and fauna, and control and minimization of persistent contaminants into regional development programs, thereby incorporating methods and procedures for resolving priority environmental problems and obtaining global benefit into activities that directly affect the sustainability of the use of the water resources of the Rio Sao Francisco and development in the basin and its coastal zone.

Specific strategic actions for the integrated management of the SFRB and the rehabilitation of its coastal zone will also be identified.

The outputs of this element will be:

· knowledge of the impact of land-based activities on the coastal zone,

· strengthened governmental agencies and organizations, pursuant to federal law 9433/97,

· a documented strategy and programme of action for the integrated management of the SFRB and its coastal zone.

The execution of these activities will be ensured by the project team at the SRH/MMA with the active participation of UNEP, the OAS, and the World Bank (mainly the PROAGUA project team), together with the relevant federal and state organizations and non-governmental organizations. Specific detailed Terms of Reference will be prepared by the Technical Coordinator in close consultation with UNEP and GS/OAS, during the first quarter of the project period. This component element is anticipated to be initiated according to the timetable presented in Table 1 of section 4. A detailed preliminary workprogram is presented in Annex 8 of this document. GEF: US $ 700,000; co-funding: US $ 621,000; total: US $ 1,321,000.

4.1.4 A minimum of 30 copies of each of these above mentioned published outputs i.e. ten copies for the GS/OAS, ten copies for UNEP and ten copies for distribution to the GEF Secretariat by UNEP will have to be produced in English. It is assumed that SRH will keep a sufficient number of copies of the above mentioned outputs in Portuguese language.

4.2. Risk and Sustainability

4.2.1 To effect the sustainable management of the SFRB and its coastal zone, it is necessary to formulate a comprehensive program of coordinated actions by the Federal Government of Brazil and the riparian states. The federal water law and other legislation provides a sound basis for implementation of actions necessary to introduce sustainable management actions into this basin. The main risk facing the activity is that the legal mechanisms provided under the water law are not fully implemented by the basin states and that the basin committee remains relatively ineffectual in implementing cross-sectoral integration activities that will benefit the river system and coastal zone. However, recent moves toward adoption of complementary legislation by the basin states would suggest that this risk is small. Nevertheless, some emphasis on strengthening the basin committee is given in this project as a means of catalyzing and encouraging a more effective cross-sectoral role of the committee in managing water resources and related development in the basin on a sustainable basis.

4.2.2 The risk of unsustainable development in the SFRB is that continued development following current trends might result in serious undesirable environmental side effects, such as the catastrophic decline in the fisheries, damage to the underlying natural resource base, flooding or drying of critical habitats, and pollution of downstream ecosystems, including economic units of production. Such degradation of the natural resource base would severely limit reclamation and rehabilitation options available for implementation following formulation of the WMP. Notwithstanding, opportunities exist for the reclamation of some natural resources, such as soils, natural vegetation and forests, by strategically introducing effective and adequate environmental management practices and procedures. GEF funded activities, in conjunction with other state, national and international co-funded activities, could make a difference in the development of this basin and its coastal zone by helping to promote the adoption of actions which will contribute to the sustainable development of this important river and ocean system.

4.2.3 Project Components and their implementation, including the participation process, are designed to achieve sustainability. Demonstration projects have been selected on the basis of their sustainability, both from the ecological as well as the economic points of view, and to achieve the maximum degree of beneficial impact on the coastal zone and adjacent marine and freshwater ecosystems, while other project components have been proposed for the purpose of quantifying the causes and effects of degradation of water and natural resources in the basin, and of identifying strategic means of reclaiming once productive areas and keeping them productive. Wherever possible the project will develop opportunities for the establishment of financial incentives, private sector investment and cost recovery in environmental management, as in the reclamation of eroded or mined lands, pastures and forests, rational management of natural forests, exploitation of newly forested areas or newly irrigated areas. The project also will provide actual, working examples of the new or refined land management actions necessary for the sustainable development of the watershed consistent with the procedures and processes embodied in the federal water law and related state legislation previously adopted or currently under consideration. The steering committee will be responsible for transmitting recommendations to the appropriate governmental bodies.

4.2.4 The national and state governments have pledged their support to actions proposed to be implemented with the incremental financial assistance of the GEF by allocating state and national financial resources in excess of US $ 20 million, including the JICA grant to the coastal state of Sergipe, and federal governmental initiatives in the upper and lower middle portions of the basin. Further, the SRH/MMA has already put into place management and administrative structures to ensure the complementary of the various national and international efforts proposed for implementation within the SFRB, and, through federal water law 9433/97 and PROAGUA, respectively, has created the necessary legal and financial structures to promote successful and sustained application of environmentally-sound principles of multiple purpose river basin and coastal zone management to the SFRB.

4.4 Budget:

4.4.1 GEF Project Approach. GEF incremental financing of strategic actions within this watershed at this time provides additional opportunities to incorporate global environmental concerns (i.e., the rehabilitation of the coastal zone and estuarine environments and critical ecosystems affecting the South West Atlantic LME and Brazil Current) within a coherent framework of actions and policies as set forth in the WMP, the net result of which will be the sustainable use, including environmental use, of the land and water resources of the SFRB and its coastal zone extending into the South West Atlantic LME.

4.4.2 Complementary Interventions. Components proposed for implementation during the project period will be conducted in parallel with numerous on-going and proposed planning and development activities. Activities that directly relate to the conduct of the proposed project include, inter alia, the proposed US $ 25 to US $ 30 million river basin planning element of the Program for Water Development (PROAGUA) financed by The World Bank, and coordinated by the OAS, to promote rural water supply in semi-arid Northeast Brazil including parts of the SFRB (US $ 8.625 million of this loan amount has been earmarked for use as co-financing in support of this project for pilot projects in environmental management and institutional strengthening as described in Annex 5), and national initiatives for the development of agriculture and hydro-power development by various parastatal corporations (CODEVASF, CHESF, etc.). A complementary project extending the concepts of PROAGUA throughout Brazil (the “National PROAGUA”) is also being implemented with an additional nationally financed investment, a portion of which will be allocated to water resources management in the SFRB.

4.4.3 The Secretariat for Water Resources (SRH/MMA) is initiating implementation of a US $ 3.5 million program of infrastructure improvement in the State of Minas Gerais. The Secretariat for Regional Policy (SEPRE) is initiating a US $ 10 million basin-wide assessment of likely coastal zone impacts that could arise from the construction of the proposed inter-basin transfer scheme. The Japanese International Cooperation Agency (JICA) is initiating a US $ 1.5 million watershed management program in the State of Sergipe, with emphasis on the state portion of the SFRB. Coordination of these programs within the SRH/MMA will be by common project teams appointed by the Secretary for Water Resources. These teams will be responsible for liaison with other project teams operating within the basin: strengthening of interagency communication to facilitate information exchange is an explicit element of the organizational structure development activity identified below.

4.4.4 Incremental Costs and Project Financing. Recognizing that domestic benefits will accrue from this project, the Government of Brazil, the riparian state and municipal governmental units, and other participating parties defined herein, have committed substantial baseline funding to this project, both in the form of direct national appropriations for projects in Minas Gerais and those associated with the proposed inter-basin transfer scheme, and in the form of loans secured from The World Bank under the PROAGUA project, as described above. In addition, these governmental and nongovernmental entities have proposed counterpart contributions under the alternative project that represent a substantial percentage of the total funds required, thereby demonstrating their full support for, and interest in, this program. These investments are assumed to provide national benefits. Incremental GEF financing will promote consideration of issues of global environmental concern, within a strategic, sustainable development framework. The baseline and alternative costs are presented in Annex 1.

Project Financing

The breakdown of project financing, as approved by the GEF, is presented in Table 2 below. A more detailed budget broken down by workelements is presented in Table 2 of Annex 8.

Table 2. GEF approved project budget by Activity (US $).

		CO-FINANCING
ACTIVITY	GEF	Government	World Bank	UNEP	GS/OAS	TOTAL
I. River Basin and Coastal Zone Environmental Analysis	990,000	1,918,000	--^a			2,908,000
II. Public and Stakeholder Participation	520,000	1,150,000	--^a			1,670,000
III. Organizational Structure Development	450,000	845,000	--^a			1,295,000
IV-A. Information Sharing and Dissemination	430,000	671,000	--^a			1,101,000
IV-B. Quantification of Water Use and Hydrological Management	640,000	3,059,000	--^a			3,699,000
IV-C. Financial Mechanisms	350,000	300,000	--^a			650,000
IV-D. Formulation of the Watershed Management Plan	700,000	396,000	--^a	150,000	75,000	1,321,000
PROAGUA			8,625,000			8,600,000
TOTAL (Project Costs)	4,080,000	8,339,000	8,625,000	150,000	75,000	21,244,000
Project Support Costs	280,000					280,000
Monitoring and Evaluation	70,000					70,000
PDF Preparation	341,000	204,000		25,000	25,000	620,000
GRAND TOTAL	4,771,000	8,543,000	8,625,000	175,000	100,000	22,214,000

^a The application of the US $ 8,625,000 World Bank PROAGUA loan-financing will be determined during the first quarter of operation of the project and will be endorsed at the first Steering Committee Meeting.

The budget in UNEP format is presented in Annex 11 of this document.

4.5 Cash Advance Requirements:

An initial cash advance will be made upon signature of the project document by both parties and will cover expenditures expected to be incurred by the GS/OAS during the first six months from the UNEP contribution (i.e. GEF Funds provided by UNEP on behalf of the GEF) (see format in Annex 16). Subsequent advances are to be made quarterly, subject to:

(I) Confirmation by the GS/OAS, at least two weeks before the payment is due, that the expected rate of expenditure and actual cash position necessitate the payment, including a reasonable amount to cover "lead time" for the next remittance; and

(ii) The presentation of:

(1) a satisfactory financial report showing expenditures incurred for the past quarter, under each project (see format in Annex 15).

4.6 Follow-up:

As a result of this project, based on the outcomes of the ‘Transboundary Diagnostic Study” and the subsequent formulation of the Watershed Management Plan (WMP), prioritized project designs necessary to implement high priority strategic actions emanating from the WMP., will be submitted to the GEF Council for consideration.

SECTION 5 - INSTITUTIONAL FRAMEWORK

Stakeholder Participation and Implementation Arrangements

5.1 Formulation of this proposal has involved extensive and broad-based participation by representatives of the municipal, state and national Governments, academic and research institutions, private sector representatives and non-governmental organizations. The participation process was facilitated by a series of consultative workshops, conducted in Belo Horizonte in the upper sub-basin during November 1997; Penedo in the lower sub-basin and estuary during December 1997; and, Petrolina in the middle and lower middle sub-basins during February 1998. Follow-up consultations were held with participants in the workshops and with other selected personnel from the SRH/MMA during February 1998 to prepare the project brief, which was subsequently endorsed by the GEF project preparation steering committee, which met in Brasilia and subsequently discussed and agreed at a meeting in Washington between representatives of the GEF Implementing Agencies and the GS/OAS in March 1998.

5.2 Approximately 270 persons representing more than 100 institutions, government agencies and NGOs, participated in the public meetings and provided inputs in drafting this proposal, many of which are expected to participate in the implementation of the project. This proposal is based on some 135 project concept documents prepared during the PDF-B process (Annex 4).

5.3 All the proposed activities will be driven by a Project Steering Committee comprised of representatives of SRH/MMA; UNEP, as Implementing Agency of the GEF; and GS/OAS, as the Implementing Organization of UNEP. The other GEF Implementing Agencies will be informed of, and may participate in, meetings of the Steering Committee in an ex officio capacity. The Steering Committee, at its first meeting to be convened at the earliest possible moment following project approval by the GEF and UNEP, will be chaired by the Secretary for Water Resources of Brazil, who will act as Executive Director of the Project, in consultation with UNEP and the GS/OAS. One Technical Coordinator, to be contracted by GS/OAS as the UNEP Implementing Organization in consultation with UNEP, will also be confirmed at this inaugural meeting of the Steering Committee.

5.4 The Steering Committee will agree administrative and reporting procedures consistent with UNEP standards and GS/OAS requirements including financial reporting. The Steering Committee will determine a proposed concept of execution for the program of work outlined herein. This program of work will be elaborated jointly by the UNEP Implementing Organization (GS/OAS) and the SRH/MMA, in consultation with UNEP, prior to the second meeting of the Steering Committee and inauguration of project Components. Finally, the Steering Committee, at its inaugural meeting, shall conduct any other such business as may be required to initiate project Components, and set a date for the second meeting of the Steering Committee.

5.5 Participation of the national, state and municipal agencies of Brazil with competence in the region, scientific and academic institutions, and concerned civil organizations (NGOs) will be by way of sub-committees of the Steering Committee. Subsequent meetings of the Steering Committee shall be scheduled by the Steering Committee but shall be at least every six months during the project period. The activities of the Steering Committee will be supported by the SRH/MMA, with funds provided by GEF through its Implementing Agency (UNEP). UNEP and GS/OAS will support Project execution. GS/OAS, due to its historic involvement in the basin, its partnership with UNEP in similar projects within the region, and its role in implementing activities under related projects, will act as UNEP Implementing Organization and manager of the funds provided to the project by UNEP on behalf of GEF, consistent with UNEP financial reporting requirements.

5.6 Activities of national personnel, with the support of the international agencies, will be based upon preparatory work and Terms of Reference agreed with and approved by the SRH/MMA, in consultation with UNEP and GS/OAS. To the extent possible, all Components will be executed by national agencies of Brazil and/or by consultants from Brazil under the direct supervision of the SRH/MMA and GS/OAS. The SRH/MMA and UNEP Implementing organization (GS/OAS) will coordinate field activities, as directed by the Steering Committee, through coordinators appointed from their staff. The main Coordination activities will be directed from Brasilia, Brazil. All project activities will be conducted within the basin.

5.7 The Ministry of Environment, Water Resources and Legal Amazon (MMA) of the Government of Brazil is responsible for the implementation of the National Water Resources Policy and the National Environmental Policy. Within the MMA, the SRH is the institution responsible for the general implementation of the National Water Resources Policy established by Law No. 9433, from January 8, 1997, and, therefore, for programming in the basin, and the organization responsible for regional cooperation and coordination of development activities related to water resources management. Within this background the SRH is the most appropriate agency for the execution of the project at the country level.

5.8 Under the supervision of UNEP as the GEF Implementing Agency, the General Secretariat of the Organization of American States (GS/OAS), the UNEP Implementing Organization, will be responsible for the overall management of the project through their Unit for Sustainable Development and Environment (USDE). The GS/OAS will assign a Project Manager who will be responsible for the timely execution of the project activities, for co-ordinating the inputs of SRH/MMA and the various consultants hired under the project, and will liaise with UNEP (The Division of Environmental Assessment and Early Warning/Environmental Science and Research cluster (hereafter referred to as DEAEW) but also the GEF Coordination Office - see below) on all matters regarding the project. At the end of the project, the Project Manager will be responsible, in cooperation with UNEP/DEAEW and UNEP/GEF Coordination Office for preparing prioritized project designs necessary to implement high priority strategic actions formulated under the Watershed Management Plan, to be submitted to the GEF Council for consideration. For the implementation of the activities the GS/OAS will work through co-executing arrangements with SRH/MMA.

5.9 UNEP through DEAEW, and as the GEF Implementing Agency of this project, will be responsible for overall project supervision to ensure consistency with GEF and UNEP policies and procedures, and will provide guidance on linkages with related UNEP and GEF funded activities.. UNEP also has the responsibility for regular liaison with the GS/OAS on substantive and administrative matters; assisting SRH/MMA upon request; and participating in meetings and workshops as appropriate. The UNEP/GEF Coordination Office will provide assistance and advice to the GS/OAS and UNEP/DEAEW in project management (e.g. revisions of workplan and budgets) and policy guidance in relation to GEF procedures, requirements and schedules.

5.10 The GS/OAS will be responsible for timely production of financial and progress reports to UNEP as mentioned in section 4 and 6.

5.11 All the proposed activities will be managed at the country level on a day-to-day basis by SRH/MMA in consultation with the UNEP and GS/OAS.

5.12 The UNEP/GEF Coordination Office in close collaboration with UNEP/DEAEW will be responsible for clearance and transmission of financial and progress reports to the Global Environment Facility. UNEP/DEAEW in close collaboration with UNEP/GEF Coordination Office retains responsibility for review and approval of the substantive and technical reports produced in accordance with the schedule of work. UNEP/DEAEW will also be responsible in collaboration with the GS/OAS for the production of the GEF Quarterly Operational Reports and their submission to the UNEP/GEF Coordination Office (see format in Annex 17).

5.13 All correspondence on substantive and technical matters of the project should be addressed to:

(1) In GS/OAS:

Mr. R. Meganck

Director - Unit of Sustainable Development and Environment

With copy to:

Mr. J.Ruck, Chief Geographical Group II - Unit of Sustainable Development and Environment

1889 F Street, NW, Room 340

Washington, DC 20006 United Sates of America

Tel: + 1-202-458-3556/3862

FAX: + 1-202-458-3560

Email: rmeganck@aos.org

Email: jrucks@oas.org

and to:

Mr. Nelson da Franca

Project Manager - Unit for Sustainable Development and Environment - OAS Office in Brasilia

SGAN 601 - Lote 01 - Ed CODEVASF

4 Andar - Sala 424

70830-010 BRASILIA/DF - BRAZIL

Tel: +55-61-225-0741/8819

FAX: +55-61-225-2010

Email: dafranca@oas.org

(2) In MMA/SRH:

Secretary Water Resources

Attn.: Marcus Minervino

National Project Coordinator

Secretariat of Water Resources of the Ministry of Environment, Water Resources and Legal Amazon (MMA/SRH)

SGAN 601 - Lote 01 - Ed CODEVASF

4 Andar - Sala 424

70830-010 BRASILIA/DF - BRAZIL

Tel: +55-61-225-0741/8819

FAX: +55-61-225-2010

Email: oeamarc@mymail.com.br

(3) In UNEP:

Director Division of Environmental Assessment and Early Warning (DEAEW)

with copy to:

Ms. Isabelle Vanderbeck

Task Manager
DEAEW
P.O. Box 30552

Nairobi - Kenya

Tel: + 254-2-624339/4028

FAX: + 254-2-622798

Email: isabelle.vanderbeck@unep.org

and with copy to:

Mr. John Pernetta

Senior Programme Officer International Waters

GEF Coordination Office

P.O. Box 30552

Nairobi - Kenya

Tel: + 254-2-624153

FAX: + 254-2 623126/520825

Email: john.pernetta@unep.org

All correspondence administrative and financial matters should be addressed to:

(1) In GS/OAS:

Mr. R. Meganck

Director - Unit of Sustainable Development and Environment

Email: rmeganck@oas.org

With copy to:

Mr. Richard Sims - Administrative Officer

Unit of Sustainable Development and Environment

1889 F Street, NW, Room 340

Washington, DC 20006 - United Sates of America

Tel: + 1-202-458-3556

FAX: + 1-202-458-3560

Email: rsims@oas.org

(2) In MMA/SRH:

Secretary Water Resources

Attn.: Marcus Minervino

National Project Coordinator

Secretariat of Water Resources of the Ministry of Environment, Water Resources and Legal Amazon (MMA/SRH)

SGAN 601 - Lote 01 - Ed CODEVASF

4 Andar - Sala 424

70830-010 BRASILIA/DF - BRAZIL

Tel: +55-61-225-0741/8819

FAX: +55-61-225-2010

Email: oeamarc@mymail.com.br

(3) In UNEP:

Mr. Edmundo Ortega

Chief

Budget and Fund management Unit

UNON
P.O. Box 67578

Nairobi - Kenya

Tel: + 254-2-623637/ FAX: + 254-2-623755

With copy to

Ms. Nooriya Koshen

GEF Fund and Administrative Officer

GEF Coordination Office

P.O. Box 30552

Nairobi - Kenya

Tel: + 254-2-623662

FAX: + 254-2 623126/624041

SECTION 6: MONITORING AND REPORTING

6.1. MONITORING AND EVALUATION:

Monitoring, Evaluation and Dissemination

6.1.1 As described in section 5, the administrative, technical and financial reporting framework is provided by the GEF Implementing Agency (UNEP) through its Implementing organization (GS/OAS) and Steering Committee using standard UNEP reporting protocols. Utilizing key process and status indicators will be an intrinsic part of the project. These indicators will be implemented through the establishment and integration of monitoring tools into project components, as agreed by the Steering Committee at their second meeting, as set forth above. A monitoring and evaluation plan, consistent with GEF criteria, will be prepared by UNEP Implementing Organization (GS/OAS) and SRH/MMA, and approved by the Steering Committee and UNEP. The objective of this monitoring is to contribute to improving, and, if needed, adapting management of work program activities as well as creating the basis for project evaluation. GEF Implementing Agency supervision will be exercised through its Implementing organization (GS/OAS) and by participation in the regular meetings of the Steering Committee, the first and second meetings of the Steering Committee wherein the work plan and terms of reference for project staff and consultants will be discussed and agreed. A project implementation review would be undertaken jointly by the Government and UNEP two years after the end of the project.

6.1.2 During the conduct of the project, UNEP in cooperation with GS/OAS will undertake at least two evaluation missions to diagnose possible problems and suggest the necessary corrective measures. It will evaluate the efficiency of the project management, including delivery of inputs and activities in terms of quality, quantity and timeliness.

6.1.3 STAP Review. (Annex 3) This project proposal was reviewed by Prof. Bjorn Kjerfve of the Marine and Geological Sciences Department of the University of South Carolina, an International Waters Expert included in the STAP Roster of Experts. Comments made by Prof. Kjerfve did not require any changes in this document. In general, the comments of the STAP reviewer were strongly supportive of the project approach, methodology and design.

6.1.4 Incorporated into the WMP formulation are specific work program components (see Component IV in above mentioned section 4) which explicitly aim to promote and disseminate the experiences obtained through the WMP formulation process and GPA demonstration project to the water resources professionals Latin America, and to communities within the SFRB through a program of public information and education. As previously noted, work program activities encourage and facilitate technology transfer and information dissemination through programs of public participation, stakeholder involvement, and professional and community-based education and information dissemination. State and municipal governmental, NGO and citizen involvement in project execution, especially, will also contribute to the dissemination of information on specific technologies and techniques that contribute to the sustainable environmental management and economic development of the watershed. Finally, the publication of the WMP for the SFRB will communicate to all concerned organizations, agencies and citizens the comprehensive strategic approach for the management of this critical drainage basin. Copies of this management program will be widely disseminated within the planning project area.

6.1.5 Monitoring of the project will be undertaken by the GS/OAS in close consultation with UNEP. Data indicating project success will be compiled by SRH/MMA and will be reported to GS/OAS which in turn will verify execution performance, implement changes or adjustment to the project, if necessary.

6.1.6 Upon completion of the project, UNEP/DEAEW and UNEP/GEF Coordination Office will undertake a desk evaluation to measure the degree to which the objectives have been achieved and highlighting for the GEF in particular, lessons learned in the preparation of a project of national scope. The evaluation should also seek to reflect the views and feedback from the country involved in the achievement of the project goals. This final desk evaluation will be undertaken according to UNEP approved Monitoring and Evaluation procedures.

6.1.7 A post facto in depth evaluation will be conducted, under the supervision of the UNEP by the GEF Monitoring and Evaluation Unit two years after the project has been completed, to evaluate the environmental impacts and long term effects of the project, and to make recommendations for future action, identify the conditions for successful replication if appropriate and draw generic lessons. This evaluation of the overall performance of the project will be undertaken within the framework of the Monitoring and Evaluation programme of the GEF Secretariat and by an external and independent consultant.

6.2. QUARTERLY OPERATIONAL REPORTS:

6.2.1 As at 31 October 1999, 31 January 2000, 30 April 2000, 31 July 2000, 31 October 2000, 31 January 2001, 30 April 2001, 31 July 2001, 31 October 2001, 31 January 2002 30 April 2002, 31 July 2002, 31 October 2002, and 31 January 2003, 30 April 2003, GS/OAS shall submit to UNEP/DEAEW with a copy to UNEP/GEF Coordination Unit, using the format given in Annex 12 and 13, quarterly operational reports on the progress in project execution, scheduled to be submitted by GS/OAS within 15 days of the end of the reporting period.

6.3. TERMINAL REPORT:

6.3.1 Within 60 days of project completion, the GS/OAS shall submit to the Chief Fund Programme Management Branch with copies to UNEP/DEAEW and UNEP/GEF Coordination Office a project terminal report, using the format given in Annex 14.

6.4. SUBSTANTIVE REPORTS:

6.4.1 As per section 4 hereabove, copies of the substantive and technical reports produced in accordance with the schedule of work will be submitted to UNEP/DEAEW for technical review with copies to UNEP/GEF Coordination Office and to the Chief, Fund Programme Management Branch.

6.5. FINANCIAL REPORTS:

6.5.1 PROJECT EXPENDITURE ACCOUNTS

(i) Details of expenditures will be reported, every three months (as at 31 October 1999, 31 January 2000, 30 April 2000, 31 July 2000, 31 October 2000, 31 January 2001, 30 April 2001, 31 July 2001, 31 October 2001, 31 January 2002 30 April 2002, 31 July 2002, 31 October 2002, and 31 January 2003, 30 April 2003) on an activity by activity basis, in line with project budget codes as set out in the project document using the format given in Annex 15. All expenditure accounts will be dispatched to UNEP within 15 days of the end quarter to which they refer, certified by a duly authorized official of the GS/OAS.

(ii) The expenditures account as at 31 October 1999,2000, 2001, 2002, certified by a duly authorized official, should be dispatched to UNEP within 15 days, as for other quarters, but in addition, UNEP requires that the end of year expenditure account should be reported as part of an annual independent audit of the External Auditors of the GS/OAS.

(iii) Within 60 days of the completion of the project, the GS/OAS will supply UNEP with a final statement of account in the format as for the three-month statements. The General Secretariat confirms that the financial records of this programme will be an integral part of the financial records of the General Secretariat, which are subject to an independent audit by the board of External Auditors of the GS/OAS, and agrees to furnish copies of these audit reports to UNEP along with such other related information as may be requested by UNEP with respect to any questions arising from the audit report.

(iv) Any portion of cash advances remaining unspent or uncommitted by the GS/OAS on completion of the project will be reimbursed to UNEP within one month of the presentation of the final statement of accounts. In the event that there is any delay in such disbursement, the GS/OAS will be financially responsible for any adverse movement in the exchange rates.

6.5.2 CASH ADVANCE ACCOUNTS

A statement of advances of cash provided by UNEP should be submitted in the format shown in Annex 16.

SECTION 7: TERMS AND CONDITIONS

7.1. NON-EXPENDABLE EQUIPMENT

The GS/OAS will maintain records of non-expendable equipment (items costing $1500 or more as well as items of attraction such as pocket calculators) purchased with UNEP funds, and will submit an inventory of all such equipment to UNEP, indicating description, cost, date of purchase, and present condition of each item attached to the 2^nd and 4^th quarter reports (see Annex 18 for the inventory format). Upon completion of project activities, GS/OAS will attach to the terminal report a final inventory of all non-expendable equipment purchased under this project. All such equipment shall remain the property of UNEP until its disposal is authorized by UNEP, in consultation with the GS/OAS. The GS/OAS shall be responsible for any loss of or damage, ordinary wear and tear excepted, caused by GS/OAS to equipment purchased with UNEP funds. The proceeds from the sale of equipment duly authorized by UNEP upon completion of project activities shall be credited to the accounts of UNEP, or the appropriate Trust Fund or Counterpart Contribution.

7.2 RESPONSIBILITY FOR COST OVERRUNS

Any cost overrun (expenditure in excess of the amount budged in each budget sub-line) shall be met by the organization responsible for authorizing the expenditure, unless written agreement has been received by letter or cable, in advance, from UNEP. In cases where UNEP has indicated its agreement to a cost overrun in budget subline, either to transfer funds from one sub-line to another, or to increase the total cost to UNEP, a revision to the project document amending the budget will be issued by UNEP.

7.3. CLAIMS BY THIRD PARTIES AGAINST UNEP

The GS/OAS shall be responsible for dealing with any claims which may be brought by third parties against UNEP and its staff, in relation to work executed by GS/OAS under this Agreement and UNEP shall not be liable to GS/OAS in relation to those claims unless those claims were caused by the negligence or other conduct of UNEP or UNEP's staff. Nothing in this Agreement may be construed as a waiver of the immunities from suit, legal process, execution, of either UNEP or GS/OAS.

7.4. DISPUTES RESOLUTION PROVISION

Any controversy or claim arising out of, or in accordance with this Agreement or any breach thereof, shall, unless it is settled by direct negotiations, be settled in accordance with the UNCITRAL Arbitration Rules as at present in force.

The parties shall be bound by any arbitration award rendered as a result of such arbitration as the final adjudication of any such controversy or claim.

7.5. MODIFICATION

This Agreement may be modified or otherwise amended by the written agreement of the Parties, signed by their duly authorized representatives, dated, and attached hereto.

7.6. TERMINATION

Either party may terminate this Agreement with sixty days' advanced written notice to the other. In the event of such termination, each party shall provide the corresponding funding in accordance with its obligations herein to cover any

project costs up until the termination date, including, but not limited to, the costs of complying with third-party commitments made pursuant to the project that may run beyond the termination date and which cannot be revoked without incurring liability.

7.7. OAS CONTRIBUTION

The GS/OAS contribution under this project document is subject to the approval and non modification of the corresponding appropriation in the GS/OAS programme budget by the competent organs of the OAS.

CEEIVASF	Comite Executivo de Estudos Integrados do Vale do Sao Francisco
CEMIG	Companhia Energetica de Minas Gerias
CHESF	Companhia Hidrelectrica do Sao Francisco
CODEVASF	Companhia de Desenvolvimento do Vale do Sao Francisco
CPRM	Companhia de Pesquisa de Recursos Minerais
EMBRAPA	Empresa Brasileira de Pesquisa Agropecuaria
EMINWA	Environmentally-sound Management of Inland Water
GPA	Global Plan of Action for the Protection Marine Environment from Land-Based Activities
IFAD	International Fund for Agricultural Development
IGAM	Instituto Mineiro de Gestao das Aguas
IWRN	Inter-American Water Resources Network
JICA	Japanese International Cooperation Agency
LME	Large Marine Ecosystem
MMA	Ministry of Environment, Water Resources and Legal Amazon
OAS	General Secretariat of the Organization of American States
PLANEVASF	Master Plan for the Development of the Sao Francisco River Valley
PROAGUA	World Bank Program for Water Development
SFRB	Sao Francisco River Basin
SRH	Secretariat of Water Resources of the Ministry of Water Resources and Legal Amazon
WMP	Watershed Management Program