$ Report No: RES00014 RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF THE Sustainable Multiple Use Landscape Consortia in Brazil APPROVED ON 04-Nov-2022 TO THE INTER-AMERICAN INSTITUTE FOR COOPERATION ON AGRICULTURE - IICA Agriculture and Food Global Practice Latin America And Caribbean Region Regional Vice President: Carlos Felipe Jaramillo Regional Director: Benoit Bosquet Country Director: Johannes C.M. Zutt Practice Manager: Diego Arias Task Team Leaders: Leonardo Bichara, Bernadete Lange The World Bank Sustainable Multiple Use Landscape Consortia in Brazil (P172497) ABBREVIATIONS AND ACRONYMS ATER Technical Assistance and Rural Extension (Assistência Técnica e Extensão Rural) CPF Country Partnership Framework FMA Financial Management Assessment FM Financial Management GEF Global Environmental Facility GoB Government of Brazil Inter-American Institute for Cooperation on Agriculture (Instituto Interamericano de IICA Cooperação para a Agricultura) MAPA Ministry of Agriculture, Livestock and Supply (Ministério da Agricultura e Pecuária) Ministry of Environment and Climate Change (Ministério do Meio Ambiente e Mudança MMA do Clima PDO Project Development Objective PIU Project Implementation Unit POM Project Operation Manual SENAR National Rural Learning Service (Serviço Nacional de Aprendizagem Rural) SFB Brazilian Forest Service (Serviço Florestal Brasileiro) SLM Sustainable Landscape Management i The World Bank Sustainable Multiple Use Landscape Consortia in Brazil (P172497) @#&OPS~Doctype~OPS^dynamics@restrhybridbasicdata#doctemplate BASIC DATA Product Information Operation ID Operation Name P172497 Sustainable Multiple Use Landscape Consortia in Brazil Product/Financing Instrument Geographical Identifier Investment Project Financing (IPF) Brazil Approval Date Current Closing Date 04-Nov-2022 30-Nov-2027 Environmental and Social Risk Classification (ESRC) Moderate Organizations Borrower Responsible Agency Ministério da Agricultura, Pecuária e Abastecimento (MAPA), IICA Ministério do Meio Ambiente (MMA) @#&OPS~Doctype~OPS^dynamics@restrhybridoperationstatus#doctemplate OPERATION STATUS Project Development Objective (DO) Original Development Objective To increase the area under sustainable land management and promote the integration of food systems and sustainable landscapes, conservation of biodiversity and recovery of degraded areas in selected beef cattle and soybean landscapes. Disbursement Summary (in USD million) Source of Funds Net Commitment Disbursed Balance % Disbursed IBRD -- -- -- 0 The World Bank Sustainable Multiple Use Landscape Consortia in Brazil (P172497) IDA -- -- -- 0 Grants 24.58 0.00 24.58 0.00 Policy Waivers Does this restructuring trigger the need for any policy waiver(s)? No @#&OPS~Doctype~OPS^dynamics@restrhybridmpa#doctemplate @#&OPS~Doctype~OPS^dynamics@restrhybridmpa#doctemplate TABLE OF CONTENTS I. PROJECT STATUS AND RATIONALE FOR RESTRUCTURING ........................................................................................1 II. DESCRIPTION OF PROPOSED CHANGES ....................................................................................................................2 III. PROPOSED CHANGES ................................................................................................................................................3 IV. DETAILED CHANGE(S) ...............................................................................................................................................4 The World Bank Sustainable Multiple Use Landscape Consortia in Brazil (P172497) I. PROJECT STATUS AND RATIONALE FOR RESTRUCTURING A. Introduction 1. This Restructuring Paper seeks the Board’s approval for a Level 2 Restructuring of the Sustainable Multiple Use Landscape Consortia in Brazil (P172497). The proposed restructuring would comprise: (a) a transfer of the proposed Grant Recipient and executing agency from the Serviço Nacional de Aprendizagem Rural (SENAR) to the Inter- American Institute for Cooperation on Agriculture (IICA); (b) a new Grant Agreement closing date of October 31, 2029; and (c) inclusion of the Brazilian Forest Service (Serviço Florestal Brasileiro, SFB) as a Project Implementation Entity, to reflect the new Federal Government’s organigram. 2. The Project Development Objective (PDO) is to increase the area under sustainable land management and promote the integration of food systems and sustainable landscapes, the conservation of biodiversity and recovery of degraded areas in selected Beef Cattle and Soybean Landscapes. The Project has four components: (a) Development of a Sustainable Land Management (SLM) approach; (b) Promotion of sustainable food production practices and responsible agrifood value chains; (c) Conservation and restoration of natural habitats and mainstreaming biodiversity practices; and (d) Project Management and Knowledge Management. The selected beef cattle and soybean landscapes are located across the Brazilian Cerrado (Goiás, Bahia, Minas Gerais, Mato Grosso do Sul, Mato Grosso and the Federal District), in an area of approximately 47.2 million hectares. It also aligns with the private sector investment and productivity goals of the 2022 Brazil’s Performance and Learning Review, discussed by the Board on May 24, 2022, as it aims to induce beef and soybean producers to adopt low-carbon and sustainable environmental practices, reduce land degradation, and engage with private actors committed to pursuing sustainability and environmental benefits beyond business as usual. The Project is also consistent with the current Country Partnership Framework for Brazil (FY2024-FY2028). It is aligned to CPF’s three focus areas: (a) Greater productivity and employment; (b) Greater inclusion of the poor and underserved populations; and (c) Greener economy with reduced vulnerability to climate shocks. B. Project Status 3. The Project, in the amount of US$24.58 million, financed by the Global Environmental Facility (GEF) was first approved by the International Bank for Reconstruction and Development (IBRD) Board of Executive Directors on November 4, 2022, and the initial Grant Agreement was signed on November 28, 2022. The signing of the Technical Cooperation Agreement between the Ministries and SENAR, which is an effectiveness condition, is pending. With the withdrawal of SENAR as Grant Recipient, the Bank withdrew the original Grant offer. 4. Since the Government of Brazil (GoB) has appointed IICA as the Project’s Grant Recipient and executing agency, both IICA and the GoB have confirmed their agreement with the current project design and structure, and are fully aware of their responsibilities. All project documents have been revised and updated to reflect the new partner, including the Operational Manual. Additionally, the Implementation Entities and IICA have started preparing the Cooperation Agreement, which will be cleared by the Bank and the Legal teams in each institution. 5. Integrated Fiduciary Risk Rating. Both Procurement and Financial Management have been duly assessed for the new executing agency (IICA) and the integrated fiduciary risk rating remains Moderate. 6. Financial Management. The Project financial management risk is Moderate. The Financial Management Assessment (FMA) was carried out in accordance with Bank Policy: Investment Project Financing and Bank Directive: Investment Project Financing and the Financial Management in Bank-Financed Operations and Other Operational Matters (effective on March 10, 2023). The scope of the FMA included: (a) an evaluation of existing FM systems to be used for Page 1 The World Bank Sustainable Multiple Use Landscape Consortia in Brazil (P172497) Project monitoring, accounting, and reporting; (b) a review of staffing arrangements; (c) a review of the flow of funds arrangements; (d) a review of internal control mechanisms in place, including internal audit; (e) a discussion with regards to reporting requirements; and (f) a confirmation of the external audit arrangements. 7. The overall conclusion of the FMA is that: (a) the FM arrangements for the new proposed Project Executing Agency are considered adequate; (b) the funds flow, disbursements, monitoring, auditing, and supervision arrangements have been designed in a way to respond to the Project's implementation arrangements; and (c) the residual FM risk associated with the Project is rated as Moderate. 8. Procurement. The Project procurement risk is Moderate. The capacity assessment in May 2024 revealed that the procurement policy framework, regulation, procedures, and documents in use at the new executing agency (IICA) are documented and publicly available and are designed to meet the core procurement principles of value for money, economy, efficiency, effectiveness, integrity, transparency, fairness, and accountability. IICA produces and adequately maintains written records of all procurement and contract documents, and its complaint-handling system works well and effectively. IICA is not impacted by fraud and corruption risks. The procurement methods chosen are appropriate and consistent with the legal framework. 9. Environmental and Social Compliance. The screening of the environmental and social risks and impacts of the proposed list of activities agreed with the Client remains the same and indicates that this is currently considered a moderate-risk project under the Bank’s Environmental and Social Framework, where both environmental and social risks are Moderate. Documents will be revised accordingly to reflect the new institutional arrangement and each partners’ responsibilities. 10. The Project’s overall risk rating continues to be assessed as Moderate. II. DESCRIPTION OF PROPOSED CHANGES 11. The Level 2 restructuring will consist of the following: (a) a transfer of the proposed Grant Recipient and executing agency from the Serviço Nacional de Aprendizagem Rural (SENAR) to the Inter-American Institute for Cooperation on Agriculture (IICA); (b) a new Grant Agreement closing date of October 31, 2029; and (c) inclusion of the Brazilian Forest Service (Serviço Florestal Brasileiro, SFB) as a Project Implementation Entity, to reflect the new Federal Government’s organigram. 12. With the inclusion of IICA as the Grant Agreement recipient and executing agency of the Project, along with the SFB as an Implementing Entity, the initially proposed design for governance and management needs to be adjusted to the new set of institutions through agreements to be established between IICA, and the GoB; this will be done through a new Technical Cooperation Agreement to be signed by all agencies, which will also serve as an effectiveness condition of the new Grant Agreement. It will comprise the governance, management, and implementation structure of the project, notably: the Ministry of Agriculture and Livestock (MAPA), the Ministry of the Environment and Climate Change (MMA), and the Brazilian Forest Service (SFB). 13. The Bank task team assessed the choice of IICA as the new Grant Recipient and found it Satisfactory, given: (a) its solid track-record in implementation of agriculture projects in Brazil relevant to this Project, in particular the beef and soybean value chains, as well as conservation of natural ecosystems and recovery of degraded lands; (b) its experience as an implementing partner of large and complex projects financed by international organizations, including the World Bank; (c) its credentials as a leader of projects originating from the private sector, governmental and Page 2 The World Bank Sustainable Multiple Use Landscape Consortia in Brazil (P172497) intergovernmental organizations and civil society alike; and (d) its technical and fiduciary skills needed to adequately implement the Project. 14. Technical coordination and supervision. The technical coordination and supervision will continue to be the responsibility of the GoB, as originally established. MAPA, MMA, and SFB are the GoB institutions designated for this coordination. The technical execution of the project should be defined and negotiated in light of the new governance and management structure and regional and local management and ATER strategy, as indicated earlier. 15. Process and Results Management. The management of processes and results will now be the responsibility of IICA (the new executing agency). 16. The new Closing Date is being proposed to compensate for the 21-month delay in launching the project and to ensure the achievement of the PDO, thereby maintaining the original implementation timeframe. 17. No changes to project scope or activities are proposed. Since no new activities are proposed, this Restructuring does not require an assessment for Paris Alignment. @#&OPS~Doctype~OPS^dynamics@restrhybridsummarychanges#doctemplate Summary changes III. PROPOSED CHANGES Operation Information Proposed Changes Operation Information Proposed Changes Disbursements Estimates Yes Loan Closing Date Extension Yes Disbursements Arrangements Yes Financial Management Yes Development Objective No Procurement Yes Summary Description No Institutional Arrangement Yes (Operation Abstract) Legal Operational Policies No Implementation Schedule Yes MFD/PCE No Loan Cancellations No Results No Reallocations No Reliance on Alternate Risks No No Procurement Arrangement Legal Covenants No Conditions No Implementation Modalities No DDO No Page 3 The World Bank Sustainable Multiple Use Landscape Consortia in Brazil (P172497) Clients No Appraisal Summary No Components No @#&OPS~Doctype~OPS^dynamics@restrhybriddetailedchanges-disclose#doctemplate IV. DETAILED CHANGE(S) COSTS & FINANCING Private Capital Facilitation Is this an MFD-Enabling Project (MFD-EP)? Is this project Private Capital Enabling (PCE)? LOANS Loan Closing Original Revised Proposed Proposed Deadline Loan/Credit/Trust Status Closing Closing(s) Closing for Withdrawal Fund Applications Not TF-B9662-001 30-Nov-2027 30-Nov-2027 31-Oct-2029 28-Feb-2030 Effective DISBURSEMENTS Operation Dates & Projection Details Reasons to change the full Disbursement date and/or the projection Implementation Start Date Operation Closing Date 04-Nov-2022 30-Nov-2027 Projected Date for Full Disbursement 31-Mar-2030 Expected Disbursements (in US $) (Absolute) Page 4 The World Bank Sustainable Multiple Use Landscape Consortia in Brazil (P172497) Original Estimation at Preparation Actual Year Revised Estimation (Approval Package – 04 Nov 2022) FY2023 910,615.26 0.00 0.00 FY2024 2,231,102.02 0.00 0.00 FY2025 3,834,012.98 2,230,100.00 0.00 FY2026 6,990,035.82 3,850,000.00 0.00 FY2027 9,877,522.16 6,991,000.00 0.00 FY2028 675,507.56 9,878,000.00 0.00 FY2029 0.00 1,000,000.00 0.00 FY2030 0.00 628,882.00 0.00 ENVIRONMENTAL & SOCIAL Environmental & Social Assessment According to the E/S Specialist are there changes proposed to the operation’s design that Yes would impact the Bank’s E&S assessment?” Page 5