The World Bank Agroecology and Sustainable Rural Development in Pernambuco (P500431) @#&OPS~Doctype~OPS^blank@pidaprcoverpage#doctemplate Project Information Document (PID) Appraisal Stage | Date Prepared/Updated: 04-Dec-2024 | Report No: PIDA0258 The World Bank Agroecology and Sustainable Rural Development in Pernambuco (P500431) @#&OPS~Doctype~OPS^dynamics@pidaprbasicinformation#doctemplate BASIC INFORMATION A. Basic Project Data Project Beneficiary(ies) Region Operation ID Operation Name Agroecology and LATIN AMERICA AND Sustainable Rural Brazil, Brazil, Brazil, Brazil P500431 CARIBBEAN Development in Pernambuco Financing Instrument Estimated Appraisal Date Estimated Approval Date Practice Area (Lead) Investment Project 09-Dec-2024 30-May-2025 Agriculture and Food Financing (IPF) Borrower(s) Implementing Agency Government of IPA - Agronomic Institute Pernambuco of Pernambuco Proposed Development Objective(s) The proposed Project Development Objective (PDOs) is to increase the adoption of agroecological and sustainable environmental practices by targeted family farmers and regions in the State of Pernambuco and, in case of an Eligible Crisis or Emergency, to respond promptly and effectively to it. Components Strengthening Agroecological Family Farming Enhancing Environmental Practices Institutional Strengthening Project Management Contingency Emergency Response Component (CERC) @#&OPS~Doctype~OPS^dynamics@pidprojectfinancing#doctemplate PROJECT FINANCING DATA (US$, Millions) Maximizing Finance for Development Is this an MFD-Enabling Project (MFD-EP)? Yes Is this project Private Capital Enabling (PCE)? Yes SUMMARY Total Operation Cost 62.50 Total Financing 62.50 Page 1 The World Bank Agroecology and Sustainable Rural Development in Pernambuco (P500431) of which IBRD/IDA 50.00 Financing Gap 0.00 DETAILS World Bank Group Financing International Bank for Reconstruction and Development (IBRD) 50.00 Non-World Bank Group Financing Counterpart Funding 12.50 Local Govts. (Prov., District, City) of Borrowing Country 12.50 @#&OPS~Doctype~OPS^dynamics@envsocriskdecision#doctemplate Environmental And Social Risk Classification Moderate Decision Other Decision (as needed) B. Introduction and Context A. Country Context 1. Brazil’s real GDP grew by 2.9 percent in 2023 and is projected to expand by 2.8 percent in 2024, driven by strong consumption, supported by a resilient labor market and fiscal transfers. Growth in 2023 was fueled by private consumption, fiscal stimulus, and declining inflation, while exports benefited from a record grain harvest and favorable external conditions. In the first half of 2024, GDP grew 2.9 percent, driven solid consumption and recovering investment. Growth is expected to moderate to 2.2 percent in 2025 and stabilize at 2.3 percent in the medium term, reflecting structural reforms. The government has made progress in reforms to improve the business environment, financial sector, and indirect taxes. However, faster, inclusive, long-term growth requires additional reforms to enhance competitiveness, reduce financial and market distortions, expand infrastructure investment, integrate into global value chains, and improve education quality. Page 2 The World Bank Agroecology and Sustainable Rural Development in Pernambuco (P500431) 2. In 2023, the poverty rate (US$ 6.85 per day) fell to 21.8 percent, linked to improvements in economic conditions and social protection policies. In July 2024, the unemployment rate fell to 6.8 percent (the lowest since 2014), and real household incomes rose 4.8 percent year-over-year. The rapid decline in the poverty rates from 2022 and 2023 has slowed down in 2024 as Bolsa Familia transfers have stabilized. Still, the poverty rate (US$ 6.85/day per capita, 2017 PPP) continued to decrease gradually to 21.3 percent in 2024, driven by a 3 percent increase in the real minimum wage and the strong labor market. Sustained job growth, strengthening the targeting of the social protection system and lowering inflation could support faster poverty reduction over the coming years. 3. Although deforestation has dropped by 21.8 percent in the Amazon region in 2023, climate change risks are still high due to emissions from land use change in the Amazon and Cerrado ecosystems. Brazil’s greenhouse gas (GHG) emissions are dominated by land use change (40.1 percent) and agriculture (30.4 percent). Climate change is altering temperature and rainfall patterns in the country, resulting in reduced water availability and extended droughts; it could push another 800,000 to 3 million Brazilians into extreme poverty as soon as 2030. B. State Context 4. Pernambuco is located in the Northeast region of Brazil and has an economy mostly based on services, that has seen modest growth over the past two decades. Pernambuco accounted for 1.2 percent of Brazil’s territory, 4.5 percent of its population and 2.6 percent of its GDP in 2022. About 80 percent of the State’s territory is semiarid1, which has been considered a constraint for socio-economic development2. Its economy heavily relies on the services sector (75 percent of the GDP as of 2022). Between 2002 and 2020, Pernambuco’s economy grew at an average of 2.2 percent/year, like Brazil as a whole3. Pernambuco is the 10th largest economy among Brazil 27 federal units; its GDP/capita of R$20,101 in 2020 occupies the 20th place nationwide and 3rd place among the nine Northeast states. 5. Pernambuco’s population is mostly urban, while its rural residents are particularly vulnerable to water scarcity, which is being exacerbated by climate change. The State has a population of 9.67 million inhabitants, of which 83 percent is urban and mostly located near the coast4. Population is expected to peak at 10.37 million in 2044 and then start to decline5. While Pernambuco’s urban population has been increasing, its rural population decreased by 12 percent over the past 20 years, from 1.83 million in 2000 to 1.6 million in 2019. This has been attributed to rural-urban migration as cities offer better services, including water supply and sanitation (WSS), and better economic opportunities than rural areas. Most of the rural population relies on agriculture and animal husbandry for its livelihood, which is generally of low productivity and vulnerable to droughts, with limited potential for irrigation due to water scarcity. The Country Climate and Development Report (CCDR) for Brazil notes that the projected warmer climate could convert the semiarid Northeast into an arid region, and impact water availability for all uses, commercial and subsistence farming and population health, forcing people to migrate to other regions. 1 The semiarid zone is an area that is defined by both a minimal amount of annual rainfall (i.e., 800 mm. per year on average) and a concentration of that rainfall during only a few months per year. (World Bank, Living with the Semi-Arid and Proactive Drought Management In Northeast Brazil: a New Perspective, 2015) 2 World Bank, Growth and Poverty Reduction in Pernambuco: Developing a Sustainable Development Framework, 2002 3 IBGE. Sistema de contas regionais: Brasil 2020. 4 IBGE. https://cidades.ibge.gov.br/brasil/pi/panorama [Access on 03.09.2023] 5 IBGE, population projections, edition 2018. Page 3 The World Bank Agroecology and Sustainable Rural Development in Pernambuco (P500431) 6. Pernambuco is among the poorest states of Brazil (Challenge #2 of the MPA). In 2023, Pernambuco had the 4th highest poverty rate among the 27 states of Brazil and the 3rd of the Northeast region, with about 50 percent of its population below the poverty line, against about 30 percent for Brazil as a whole6. Extreme poverty rate in rural areas is more than double the rate in cities (23 percent against 10 percent with extreme poverty below US$2.15/day, 2017 PPP). During the pandemic, between 2019 and 2021, Pernambuco’s poverty increased by 8.14 percentage points, the highest rise among Northeast states8. The average monthly household per capita income (R$1,010) is among the lowest in the country, as Pernambuco stands at 24th among the 27 Brazilian states in 20227. Poverty is concentrated in rural areas, characterized in many cases by small-scale, low-productivity agriculture, as described below. Its Human Development Index (HDI) was 0.673 in 2010, ranked 19th in Brazil. Food insecurity remains a major problem in the State of Pernambuco, reaching 59.1 percent according to the II National Survey of Food and Nutritional Insecurity (2022)8. The access to food for residents of rural areas is even worse compared to urban areas, with food insecurity there reaching more than 60 percent of rural households and acute insecurity, 18.6 percent9. Recent data indicate that, in 2018, 1.5 million families (approximately 4.8 million people) in Pernambuco lived with some degree of food insecurity10. Following the national trend, this situation worsened in the context of the COVID-19 pandemic and climate shocks11. 7. In Pernambuco, climate change impacts the well-being of its population, economy and environment principally through increased droughts, floods and water scarcity risks (Challenge #3 from the MPA). These are the main climate risks in the state that threaten agricultural sustainability and productivity (droughts can lead to water scarcity, reduced crop yields, and livestock losses, while floods can destroy crops and infrastructure) and disrupt food production and supply chains, leading to food shortages and price spikes. In 2023, about 12 per cent of Pernambuco’s population lived in areas vulnerable to climate change, placing the state third nationwide in terms of population exposed to such risks12. As a result, Pernambuco is at risk of increased food insecurity as climate change continues to exacerbate these vulnerabilities13. Moreover, climate change coupled with deforestation has been a driver for desertification in rural areas. B. Sectoral and Institutional Context 8. Agriculture is fundamentally important to Pernambuco’s rural economy. Even if agriculture accounts for only 4.8 percent of the state’s GDP, it is the main source of economic activities in rural areas, particularly for smallholding 6 FGV Social. Mapa da Pobreza. 2022 a 2024. https://cps.fgv.br/mapa-grafico/mapa-da-pobreza-2022-2024 The poverty line is estimated at R$497 a day (equivalent to USD5.5/day, 2021 PPP). The states with higher poverty rates are Maranhão (57.90 per cent), Amazonas (51.42 per cent) and Alagoas (50.36 per cent). 7 IBGE. https://cidades.ibge.gov.br/brasil/pi/panorama. [Access on 02.03.2023] 8 Rede-PENSSAN. (2022). II VIGISAN - Inquérito Nacional sobre Insegurança Alimentar no Contexto da Pandemia da Covid-19 no Brasil. Suplemento I: Insegurança Alimentar nos estados. Retrieved from https://olheparaafome.com.br/wp-content/uploads/2022/09/OLHEEstados- Diagramac%CC%A7a%CC%83o-V4-R01-1-14-09-2022.pdf [Access on 21/07/2023] 9 Idem, as above. 10 IBGE. Pesquisa de Orçamento Familiar (POF). 2018. 11 Climate change will increasingly cause adverse impacts on agricultural production through diminishing water supplies, increases in extreme events like floods and severe storms, heat stress, and increased prevalence of pests and diseases. The link between food insecurity and climate vulnerabilities in Pernambuco is explained in paragraph 10. 12 Secretaria Especial de Articulação e Monitoramento, Nota Técnica No. 1/2023. Pernambuco ranks third in climate vulnerability, with 11.6 percent of its population living in high-risk areas, following Bahia (17.3 percent) and Espírito Santo (13.8 percent). Link 13 For instance: (i) prolonged droughts in the Northeast region have led to decreased agricultural output, affecting the livelihoods of farmers and contributing to food shortages for local communities, (ii) in coastal areas, rising sea levels and temperatures can harm fishing activities, changing the nutritional value and the market value of the products, and (iii) the increase in pest to new climate conditions damage crops and could lead to an increase in food prices and a negative impact on the nutritional quality of diets. Page 4 The World Bank Agroecology and Sustainable Rural Development in Pernambuco (P500431) family farmers. The agricultural sector provides work for 779,727 individuals14 and is directly related to food and nutritional security. According to the latest Agricultural Census (IBGE, 2017), Pernambuco has 281,688 farms or agricultural production units, covering nearly 4.5 million hectares15. Around 83 percent of these farms are considered family farms (with an average size of less than 10ha), that fulfil the four criteria set out in the Brazil’s Farming Law (Law 11.326/2006)16. These family farms work on 2.3 million hectares (or 52 percent of the area), and account for 37.3 percent of the Gross Production Value (GPV). Land ownership, production and income generated by the agricultural sector in Pernambuco are unevenly distributed across the state17. Whilst only 17 percent of establishments belong to commercial farming, they use around half of the state's land (2.2 million hectares). Pernambuco’s main agricultural products are sugar cane, grapes, mango, banana, cassava, corn, tomatoes, and beans. Animal rearing is also important in Pernambuco, including large herds of cattle, sheep, and goats, as well as poultry. In the more humid coastal ‘Zona da Mata’ (Atlantic Rainforest) region, covering 20 percent of the state land, sugar cane is the main crop, grown for sugar and ethanol production. Irrigated agriculture is prevalent in the São Francisco River Valley, where fruit is the main crop. The other regions of the state are semiarid. Family farms of these regions produce different food crops (maize, beans, cassava) and tend to their herds. Large landholdings of the semiarid regions are mainly cattle ranches. 9. In Pernambuco, family farming18 holdings constitute the vast majority (82.6 percent) of agricultural and livestock production farms, much like almost the entire country19. It is noteworthy that family farming represents a significant portion of the land, accounting for 51.9 percent of the area. According to the 2017 Agricultural Census, the number of individuals employed in family farming holdings in Pernambuco exceeds 578,000. Taking into account all family members involved, this social group includes nearly one million people20, a tenth of the state population. 10. Family farming in Pernambuco is characterized by a low productivity, reduced production, and high climate change vulnerability. Family farmers in the state of Pernambuco are numerous and many work on small and often degraded areas. In the search to overcome these limitations, the general trend seen on family farms, has been to seek an intensification of production on their land, motivated by low productivity (and frequent harvest losses). Often, there has been the expansion of the traditional ‘roçado’ agricultural system, cultivated repeatedly on the same plots of land, eliminating rotation and the natural recovery of fertility by letting land lie fallow. In the search for innovations, the installation of monocultures, including cultivated pastures, expanded significantly in the State (often with buffel grass, in the semiarid region). These processes have made systems even more susceptible to the effects of droughts, thus increasing their vulnerability to the effects of climate change. The use of main-stream agricultural technologies, such as limestone and fertilizer application is limited, with 38.7 percent of family farmers in the state using some sort of fertilizer 14 IBGE 2017 Agricultural Census data, from SETTE, A. B. P.; FORTINI, R. M.; BRAGA, M. J. Um novo retrato da agricultura familiar do estado de Pernambuco [recurso eletrônico] : a partir dos dados do censo agropecuário 2017. Viçosa, MG: IPPDS, UFV Disponível em: www.aksaam.ufv.br, 2021. 15 IBGE. Censo Agropecuario 2017. 16 Law 11.326 (2006) defines family farmers as follows: (i) does not have under any tenure regime an area of more than four fiscal modules; (ii) predominantly relies on its own family labor; (iii) household income predominantly originates in the family farm; and (iv) family members operate the farm. 17 Also reflecting challenge number 2 of the MPA. 18 That fulfil the four criteria set out in the Brazil’s Family Farming Law (Law 11.326/2006). It defines family farmers as follows: (i) does not have under any tenure regime an area of more than four fiscal modules; (ii) predominantly relies on its own family labor; (iii) household income predominantly originates in the family farm; and (iv) family members operate the farm. 19 SETTE, A. B. P.; FORTINI, R. M.; BRAGA, M. J. Um novo retrato da agricultura familiar do estado de Pernambuco [recurso eletrônico]: a partir dos dados do censo agropecuário 2017. Viçosa, MG: IPPDS, UFV Disponível em: www.aksaam.ufv.br, 2021. 20 Idem, as immediately above. Page 5 The World Bank Agroecology and Sustainable Rural Development in Pernambuco (P500431) and 22.1 percent using pesticides21. Only 13.4 percent of Pernambuco farms use irrigation22. Until recently, practically no cases of agroecological and climate resilient systems could be found among Pernambuco family farms. Underlying these low rates is a limited access to adequate new technologies and inputs, extension services (only 6 percent of family farms accessed this kind of service) and investments (only 4.5 percent of family farmers in the State access credit)23. In recent years, agroecological production systems have been implemented24, leading to increased production, better management of natural resources, and greater resilience and adaptability to climate change, largely as a result of the work of emerging partnerships with social movements and NGOs working in the semiarid. This process, which is still at a very early stage, has allowed the emergence of several farmer organizations dedicated to participatory organic certification25, including participatory guarantee systems, such as Social Control Organisms (OCSs) and Participatory Organisms for Conformity Assessment (OPACs). By the end of 2023, the CNPO (National Register of Organic Producers)26 registered 1,099 certified organic farmers across various regions of Pernambuco. Thirty-three participatory guarantee systems and two conventional third-party certifiers are currently active in the state. This certification allows for added product value and access to organic products markets. The agroecological approach promoted by the Project is closely aligned with the rise of organic practices in the state, both supporting practices that enhance soil fertility, reduce reliance on synthetic inputs, and strengthen local biodiversity. 11. The state of Pernambuco faces important challenges in terms of environmental degradation. As a result of increasingly intensive human occupation, the state of Pernambuco has lost a significant part of its original vegetation cover, both in the Atlantic Forest biome27 and in the Caatinga biome28. Confirming this information, a recent study by SEMAS29 states that the Caatinga vegetation of the Semi-Arid zone has been altered due to anthropic action, showing land degradation process with systemic consequences and often cumulative effects. Deforestation and degradation are correlated with another problem: the processes of desertification. According to 2018 data30, 40 percent of the area studied had a severe degree of susceptibility. Desertification and periodic droughts, aggravated by climate change, may result in a series of socioeconomic and productive challenges, such as increased unemployment, the worsening of migratory processes, the decrease in crop production, and, consequently, worsening of food and nutritional insecurity. 21 IBGE. 2017. Censo Agropecuário 22 Idem. 23 Idem. 24 Examples include the Agroecological Consortia in Pernambuco, which produce various crops in rainfed fields, with the main ones being cotton, corn, and sesame. These products are organically certified by two OPACs. There are also over 90 agroecological markets in Pernambuco, spread across different regions (including Recife). The products sold at these markets come from family farming units in Pernambuco. 25 According to True Trade, “to be able to put the word “Organic� on products, a certification process is needed. Each country has devised certain standards for organic farming, organic diary, organic livestock, organic processing and organic trading. (…) The world over there are 2 different kinds of organic certification methodologies: 1) Third party certification 2) Participatory guarantee system (PGS).� Both are present in Brazil today. For more details, see Link 26 Link. 27 BRAGA, R.; COSTA JÚNIOR, A.; UCHOA, T. A Reserva da Biosfera da Mata Atlântica no Nordeste. In: 5º Congresso Nordestino de Ecologia, 1993, Natal, RN. – apud LIMA, M. L. F. d. C. A Reserva da Biosfera da Mata Atlântica em Pernambuco. Situação atual, ações e perspectivas. São Paulo: Conselho Nacional da Reserva da Biosfera da Mata Atlântica, 1998. 42 p. (Série 1 - Conservação e �reas Protegidas) 28 Cf. link: https://www.diariodepernambuco.com.br/noticia/vidaurbana/2020/04/estudo-aponta-que-pernambuco-perdeu-mais-da-metade-da- caatinga.html 29 SECRETARIA-DE-MEIO-AMBIENTE-E-SUSTENTABILIDADE-DE-PERNAMBUCO. Zoneamento das áreas suscetíveis à desertificação do estado de Pernambuco. Recife, PE: 2020. 120 p. 30 SECRETARIA-DE-MEIO-AMBIENTE-E-SUSTENTABILIDADE-DE-PERNAMBUCO. Zoneamento das áreas suscetíveis à desertificação do estado de Pernambuco. Recife, PE: 2020. 120 p. Page 6 The World Bank Agroecology and Sustainable Rural Development in Pernambuco (P500431) 12. The implementation of the Rural Environmental Cadastre (Cadastro Ambiental Rural - CAR) in Pernambuco is an ongoing process (349,953 registries in the Rural Environmental Cadastre System - SICAR by April 2023, covering more than 7.4 million hectares) (Challenge #3 of the MPA). Nonetheless, despite the progress in SICAR’s enrolment, which is based on landholders’ self-declaration, the following steps are still necessary to achieve the landholdings’ environmental regularization: registries’ analyses, resolution of data conflicts and inconsistencies; and support preparation and implementation of the Degraded Areas Recovery Plan (PRAD), as necessary. Challenges found by the State include: the high number and low quality of records, and scarce cartography data and technical and human resources to perform analyses and provide support for the preparation of PRAD to meet the requirements of the Forest Code31, as necessary. 13. Rural Pernambuco has a substantial number of Indigenous Peoples, other Traditional Peoples and Communities and Quilombolas (IP and PCT per the Brazilian acronyms). According to the Palmares Cultural Foundation, there are 47 quilombola32 communities (CRQ) in Pernambuco33, with an estimated 54,411 inhabitants (in 2020)34. There are also at least 12 Indigenous Territories (ITs) registered in the state, in distinct phases of demarcation procedure and occupying an area of 190,000 hectares35. According to the IBGE, the indigenous population living in ITs in Pernambuco was estimated at 80,000 inhabitants (for 2020). Other traditional populations include artisanal fishing folk and shellfish gatherers. The Project will seek to work with part of these populations of Indigenous People and Traditional Peoples and Communities36. Pernambuco has the fourth largest population of Indigenous People of all 27 states of the Federation, after Amazonas, Bahia and Mato Grosso do Sul. 14. Women in Pernambuco’s rural areas face strong specific challenges (Challenge #5 from MPA). Current challenges include: (i) lower access to productive inputs, credit and land than men; (ii) insufficient access to information, technical assistance and extension services; (iii) limited participation in decision-making processes, which hinders their ability to influence resource allocation and productive system selection, and (iv) less time available to participate in learning events and producer organizations. In PE, only 28 percent of rural producers who run agricultural establishments are women37. From 2006 to 2017, there was a 46 percent increase in the number of women-led family farms in Pernambuco, signalling women have become more involved in the decision-making and management of family farms. Despite this progress, men remain the primary decision-makers in 77 percent of family farms in Brazil, with only 20 percent reporting shared decision-making between spouses38. The Gender Strategy (Annex 4) also identified that, in other 31 Native Vegetation Protection Law of Brazil (Law 12,651 of 2012) 32 Article 2 of Decree 4,887/2003 defines quilombolas as ethnic groups, according to self-attribution criteria, with their own historical trajectory, endowed with specific territorial relations, with a presumption of black ancestry related to resistance to historically suffered oppression. Available at: https://educa.ibge.gov.br/images/educa/livreto-quilombolas-v4.pdf 33 F. Cultural Palmares. Comunidades Certificadas: Certidões expedidas às comunidades remanescentes de quilombos (CRQ). Available at: https://www.palmares.gov.br/wp-content/uploads/2015/07/quadro-geral-por-estados-e-regioes-30-06-2022.pdf. [Access on 22/07.2023] 34 IBGE. Dimensionamento emergencial de população residente em áreas indígenas e quilombolas para ações de enfrentamento à pandemia provocada pelo Coronavírus: subsídios para o Ministério da Saúde visando ao Plano Nacional de Operacionalização da Vacinação contra a COVID-19. Rio de Janeiro, 2020. Available at: https://biblioteca.ibge.gov.br/index.php/bibliotecacatalogo?view=detalhes&id=2101859. [Access on 25/05/2023] 35 ANAI. Monitoramento Terras Indígenas no Leste e Nordeste do Brasil. Salvador, Associação Nacional de Ação Indigenista, 2021. Available at: https://drive.google.com/file/d/1ijxLwqplboSWlpySjotdNt623SeRfFxP/view [Access on 02.08.2023] 36 For more detailed information on PIPCT, please consult Annex 8. 37 IBGE. Censo Agropecuário 2017 data. In Sette, A. B. P., Fortini, R. M., & Braga, M. J. (2021). Um novo retrato da agricultura familiar do estado de Pernambuco [recurso eletrônico]: a partir dos dados do censo agropecuário 2017. Retrieved from Link[Access on 19/06/2023] 38 IBGE (2017) Page 7 The World Bank Agroecology and Sustainable Rural Development in Pernambuco (P500431) projects39 supporting family farmers and productive organizations, despite women (or women-led organizations) being direct beneficiaries, the decision-making process in relation to the use of resources and the selection of the productive systems is predominantly defined by men. Moreover, only 6.1 percent of women family farmers in the Northeast region have access to some type of technical assistance40. This is the lowest proportion of all regions, placing women farmers in the Northeast in an extremely vulnerable situation. 15. The state government has recently been working to implement a policy framework to mitigate the high level of climate driven vulnerability faced by family farmers (Challenge #3 of the MPA). In January 2021, the Legislative Assembly approved Law No. 17,15841, which institutes the ‘’State Policy for Agroecology and Organic Production’’ and establishes the guidelines for the ‘’State Plan for Agroecology and Organic Production of the State of Pernambuco�. Once finalized, it will define government policy and the activities that will be implemented to support the transition from traditional family farming to agroecological systems. This transition is particularly crucial in rainfed agriculture systems in Pernambuco, especially in the Semi-Arid region, where agroecological production allows for an intensification of production that the conventional model has not achieved. By enhancing resilience to climate impacts and enabling more sustainable use of resources, agroecology directly addresses the vulnerabilities of family farmers. In addition, Pernambuco created the Family Farming Purchasing Plan (PEAAF) in 2020, through which the State procures food products from individual family farmers and farmer organizations with the goal of strengthening family farming, promoting economic and social inclusion, and supporting agroecological production42. At least 30 percent of the total financial resources provided by the state government for direct and indirect institutional purchases of food will be reserved for acquiring products through PEAAF. 16. At the federal level, the Government has created PLANAPO43 (National Agroecology and Organic Plan 2024- 2027), to support the development of Agroecological Family Farming, mainly through access to credit support44, but the Plan is yet to be implemented and operational details are still to be officially published. Other federal-level policies and programs to support family farmers in the adoption of agroecological practices include: (i) ATER (technical assistance) support through state-level extension services, (ii) the family farming credit program (PRONAF) with a dedicated credit line for agroecology, and (iii) public food purchasing programs that source products from family farmers for school feeding (PNAE) and food aid (PAA). However, although these federal-level program currently exist, family farmers in Pernambuco still require to overcome significant barriers to access them. For example, in the case of the ATER support, although there were significant efforts by the Federal Government between 2003 and 2015, the 2017 Agricultural Census shows that, in Pernambuco, only 6 percent of establishments accessed ATER (while the rest of the Northeast region was 7.4 percent)45. 39 Including the former Pernambuco Project funded by the Bank and other projects that the implementation agencies have in their own portfolio. 40 IPEA (2022). Technical Assistance and Rural Extension in Brazil and the World: What is the Role of Public ATER? Available at: https://repositorio.ipea.gov.br/bitstream/11058/11410/1/Extensao_rural_cap10.pdf. 41 https://www.legisweb.com.br/legislacao/?id=407724 42 As per the law Nº 16.888, individual family farmers under PEAAF include family farmers, beneficiaries of land reform, foresters, aquaculturists, extractivists, urban family farmers, artisanal fishermen, indigenous communities, and members of rural quilombola communities, all of whom must hold the (PRONAF - DAP). The farmer organizations consist of cooperatives and other entities formally established as private legal entities with the (PRONAF - DAP for Legal Entities). The program prioritizes organizations led by women and traditional communities, ensuring that at least 50% of the participating producers are women. Link 43 PLANAPO – Plano Nacional de Agroecologia e Produção Orgânica. Link. 44 PLANAPO also includes support for public food procurement from agroecological production chains, research and innovation initiatives, policies to strengthen organic and agroecological production chains, and inclusion of women, youth, Indigenous Peoples, and quilombolas. 45 IBGE (2017) Page 8 The World Bank Agroecology and Sustainable Rural Development in Pernambuco (P500431) Regarding the credit support programs (like PRONAF), only 4.5 percent of family establishments accessed some form of financing in Pernambuco46. C. Proposed Development Objective(s) Development Objective(s) (From PAD) (i) PDO Statement 17. The proposed Project Development Objective (PDO) is to increase the adoption of agroecological and sustainable environmental practices by targeted family farmers and regions in the State of Pernambuco and, in case of an Eligible Crisis or Emergency, to respond promptly and effectively to it. (ii) PDO Level Indicators Table 2. PDO outcome indicators Project Development Unit PDO Indicators Objectives Number PDO 1: Increase the adoption People benefiting from increased resilience of livelihoods, jobs or firms (disaggregated by female, of of agroecological practices. and youth) (ScoreCard); (PrDO 4). people PDO 2: Increase sustainable Landscapes under enhanced conservation and/or sustainable management (terrestrial and inland Hectare environmental practices. water areas) (ScoreCard); (PrDO 3). Strategic Approach 18. The Project will promote the adoption of agroecology47 techniques and practices48 and environmental practices across 12 development regions (RDs) and 119 municipalities in Pernambuco49. The agroecological approach supported by the Project will fulfil the Climate-Smart Agriculture (CSA)50 triple objectives of sustainably increasing 46 IBGE (2017) 47 Agroecology is hereby defined as practices maintaining and enhancing biological and ecological processes in agricultural production, in order to generate enhanced ecosystem services (including more products such as food, fibers, fuel, etc.) and drastically reduce the use of purchased inputs and, thereby, to create more diverse, resilient and productive agroecosystems. Therefore, while agroecological production integrates ecological and social principles aligned with CSA objectives, organic production is more narrowly focused on minimizing synthetic inputs, without necessarily addressing the broader social and ecological dimensions. 48 Potential agroecological practices to be supported by the Project are listed under Component 1, as the Project follows a demand driven approach. These will include practices related to: (i) soil health and preparation (i.e. production and use of bioinputs such as biopesticides and pest control inputs, organic compounds and bio-stimulants based on bioferments, inoculants and other beneficial microorganisms, installations to improve the composting process of crop residues, etc.), (ii) seed saving, storage, and quality (i.e. productive backyard management, nurseries, seed banks 49 The intervention area eligibility criteria included: (i) levels of food insecurity; (ii) presence of Indigenous peoples and traditional communities (shellfish gatherers, artisanal fishers, quilombolas); (iii) presence of agroecological initiatives; (iv) climate vulnerability (droughts and floods); and (v) Municipal Human Development Index (HDI). Refer to the map with the 119 municipalities in Annex 3. 50 CSA farming practices and technologies, as defined by FAO’s sourcebook, are those contributing to climate change resilience, and/or climate change mitigation while achieving two or more of the CSA pillars: (i) improving productivity, (ii) adapting and improving resilience to climate change, and (iii) mitigating climate change. https://www.fao.org/climate-smart-agriculture-sourcebook/en/ Page 9 The World Bank Agroecology and Sustainable Rural Development in Pernambuco (P500431) productivity, adapting to climate change and reducing greenhouse gas emissions where possible. By pursuing the CSA objectives through an agroecological approach, the Project seeks to create more climate resilient and productive agroecosystems that contribute to both sustainable agriculture and sustainable management of the environment. 19. Overview of the Project’s methodological framework. The Project will launch public calls to hire technical assistance and rural extension service providers (ATER entities) that will support the state government to undertake a diagnosis of the targeted Project regions (details of the diagnostic will be included in the Project Operations Manual (POM). The diagnosis will focus on identifying the status of: agroecological production, environmental protection, food security, income generation activities, and access to public policies by family farmers. After the diagnosis stage, the Project will launch public consultations51 and calls of expression of interest to identify and select organized family farming groups (e.g., Community Associations52 (CAs) and Producer Organizations53 (POs). Next, with support from the ATER entities, CAs and POs will develop their Agroecological Production Systems Plans (PFSPAs) or Business Plans (BPs) respectively. For subcomponent 1.1, the development of PFSPAs will allow CAs to strengthen their agroecological production and marketing. PFSPAs will include the CAs broader vision to improve production, income and market access, specifying investment actions, practical innovations, and activities aimed at developing human and organizational capital necessary for a more climate-resilient and productive agroecosystem. For subcomponent 1.2, the development of BPs will allow POs to improve their management capacity and integrate them into value chains for sustainable agroecological products. 20. The Plans (PFSPAs and BPs), or subprojects, will then be submitted by the CAs and POs to an Evaluation Committee54 to ensure alignment with the Project’s development objectives and compliance with the technical, economic, environmental and social criteria outlined in the POM and the environmental and social instruments. At the same time, the Project will share the selected Plans with Banco do Brasil and other Banks55 in order to maximize the number of family farmers capable of accessing formal private credit in the state of Pernambuco. At this stage, ATER agencies will also ensure that the Plans from CAs and POs include the required technical support needed to implement the Plan in accordance with the CA or PO’s organizational capacity. Plans’ eligibility and selection criteria will be detailed in the POM and will be based on the following: (i) geographical location in the priority regions; and (ii) viability56 of the proposed Plan, including beneficiary counterpart contribution and organizational capacity of the CA/PO. Additionally, the selection of PFSPAs and BPs will prioritize youth, quilombolas, Indigenous People, and traditional communities by offering them differentiated 51 The public consultation process will occur across the twelve development regions, engaging representatives from CAs, POs, and traditional groups like quilombolas and Indigenous Peoples. Special priority will be given to vulnerable populations, including those in extreme poverty and female- headed households, who are invited to submit calls for expressions of interest. 52 The Project will consider any civil association (CA) formed by members of a community, or any private association, all duly established in the Borrower’s territory in accordance with the Guarantor’s laws, including communities of Indigenous People and Quilombola Peoples, and which meets the criteria set forth in the Operational Manual (as hereinafter defined) for participating in the Project. An association of beekeepers, goat herders, or market vendors, which are not strictly community associations but are similar in nature can be considered. 53 The Project will consider cooperatives or large associations as Producer Organizations (PO) that (i) operate in rural areas and/or associations with a degree of maturity and that already operate in the markets, (ii) have been formally established for at least 2 years from the date of issuance of the CNPJ (National Registry of Legal Entities), (iii) possess Declaration of Aptitude to Pronaf (DAP) or National Register of Family Farming (CAF) for all farmers/rural producers, (iv) show a declaration from the organization committing to comply with the Project's regulations, (v) have mandatory inclusion of at least one gender affirmative action in the proposal, and (vi) further details included in the POM (Project Operation Manual). 54 The Project Evaluation Committee will assess and approve the PFSPAs and BPs and its composition will be defined in the POM. The Project Evaluation Committee is directly related to the preparation of plans and differs from the Project Steering Committee which is related to the overall Project. 55 Other private banks may be included. 56 The Plans’ implementation plan proposal assessment submitted by the organizations will undergo evaluation for technical, economic, financial, social, and environmental viability, with all criteria being eliminatory. Page 10 The World Bank Agroecology and Sustainable Rural Development in Pernambuco (P500431) scores and specific calls for proposals for each group. Women will also be offered targeted calls57. Once the Plan is approved, the Project will co-finance the specified investments and provide implementation support to the CA/PO. The approved Plans will become formal agreements between the Project and each CA/PO that will guide investments and activities. ATER entities will support the CA/POs and the Project Management Unit (PMU) in administrative, fiduciary, and management of environmental and social risks and processes, including implementing an integrated monitoring system for all PFSPAs and BPs. The POM will outline the detailed subproject process for identifying and approving each Plan for financing under Components 1 and 2. Additionally, the POM will set forth guidelines and criteria for assessing organizational capacity of POs and CAs, beneficiary counterpart contribution requirements for the Plans, and the terms of reference of the ATER entities for their support to POs and CAs in preparing and implementing their Plans. 21. The Pernambuco Project is aligned with the pillars of the MPA, as its second phase. Component 1 links to Pillar 1 of the MPA, enhancing access to direct support by family farmers, reducing the financial, liquidity, knowledge, and market access constraints these beneficiaries face when adopting new technologies and practices. Component 2 is linked to Pillar 2 of the program, promoting the development of agricultural and environmental public goods and services that will support the transformation of agrifood systems towards increased environmental sustainability. Additionally, the proposed Project is aligned with the MPA goal of leveraging private sector investment to achieve agrifood system transformation. ATER entities will provide advisory services to support Community Associations (CAs) and Producer Organizations (POs) to leverage their Plans to access additional lines of credit. D. Project Description 22. Component 1 – Strengthening Agroecological Family Farming (total estimated cost: US$ 39.47 million; US$ 33.67 million IBRD financing, and US$ 5.8 million counterpart financing). This component will finance: (i) the integration of family farmers, their families and their organizations into value chains and improving their access to markets; and (ii) the dissemination and adoption of agroecological production by beneficiary family farmers, their families and organizations, including strengthening their environmental management and preservation. All financing under this component will support agroecological activities, aiming to strengthen the climate resilience of the beneficiaries through climate change mitigation and adaptation strategies, and towards low-carbon development. Component 1 is linked to Pillar 1 of the MPA as it finances direct support to family farmers to overcome market failures, helping them to adopt new technologies and farming practices. 23. Subcomponent 1.1: Supporting the Implementation of PFSPAs (total estimated cost: US$ 29.81 million; US$ 25.43 million IBRD financing, and US$ 4.38 million counterpart financing). This subcomponent will finance activities58 57 To improve gender equity, in addition to the minimum of 60 percent of the funds allocated women-led POs, the Plans selection criteria will include a weighted score in favor of organizations with at least 40 percent women members, and additional scores for prioritizing will be applied to the advantage of the proposals from women-led family farms for investments in agroecological backyard gardens. 58 Activities to be adopted under the Agroecological Production Systems Plans (PFSPA), but not limited to, may include: (i) improved soil and water management, (ii) implementation of agroforestry systems (AFS) for diversified production, (iii) production and use of bioinputs, (iv) improved compost manure processes, (v) intercropping, (vi) productive backyard management, (vii) improved pasture management and agro-silvopastoral systems, (viii) improved animal husbandry systems, (ix) improved water use and management, (x) farmer-led irrigation and small-scale collective irrigation schemes, (xi) energy efficient water pumping systems, including renewable energy, etc. All these activities will contribute to improve net carbon balances, for example, through emission reductions from improved cropping systems and livestock management and will increase carbon storage in soil and vegetation, reducing on farm- GHG emissions and protecting and restoring degraded areas, while contributing to climate change mitigation. Page 11 The World Bank Agroecology and Sustainable Rural Development in Pernambuco (P500431) included under the PFSPAs for Community Associations59 (CAs). The implementation of the PFSPAs will support the agroecological transition60 of family farmers in the region, thus enhancing the adaptation of productive systems to climate change and increasing availability of quality foods that could improve the nutrition status of the beneficiaries. The PMU will oversee the implementation support to the PFSPAs. CAs will submit their PFSPAs for approval, ensuring ownership. This subcomponent will use a demand-driven participatory approach to inform the CAs of the options available regarding agroecological technologies and practices that the CA can then include in their PFSPA. The options of agroecological technologies and practices will be outlined in the POM. This support will contribute to the Private Capital Enabling (PCE) strategy, with an estimated contribution of US$500 thousand. As the inclusion of agroecological practices and technologies in the PFSPAs proposals is an eligibility criterion61, all financing under this subcomponent will contribute to climate-resilient and low carbon development outcomes62. Every PFSPA under this subcomponent will also include a set of activities for the enhancement of sustainable use of natural resources (including water, soil and biodiversity) by the family farms served. The selection of PFSPAs will prioritize youth, quilombolas, Indigenous People, and traditional communities by offering them differentiated scores and specific calls for proposals for each group. Women will also be offered targeted calls63. 24. Subcomponent 1.2 – Supporting the Implementation of Business Plans (BPs) (total estimated cost US$ 1.28 million; US$ 1.09 million IBRD financing, and US$ 190 thousand counterpart financing). This subcomponent will finance the activities included under the BPs of Producer Organizations64 (POs). Under this subcomponent, the POs will prepare their BPs, which will outline their overall business objective, marketing and growth strategy, and required investments. The type of investments in the BPs to be financed under this subcomponent may include (among other aspects): (i) physical infrastructure65 (such as processing, storage, and warehouses)66,67, (ii) marketing and promotion efforts, (iii) purchasing of 59 Any civil association (CA) formed by members of a community, or any private association, all duly established in the Borro wer’s territory in accordance with the Guarantor’s laws, including communities of Indigenous People and Quilombola Peoples, and which meets the criteria set forth in the Operational Manual (as hereinafter defined) for participating in the Project. An association of beekeepers, goat herders, or market vendors, which are not strictly community associations but are similar in nature can be considered. 60 Agroecological transitions are complex multi-scale processes that unfold in the communities and territories of food providers, and involve social, political, economic, ecological, spiritual and cultural dimensions. They imply several simultaneous transitions at different scales and can involve the optimization of management practices to increase production efficiency, input substitution, or the redesign of the food system.. 61 Plans under subcomponent 1.1 must, as a criterion for funding, incorporate agroecological practices and technologies, that contribute to climate resilience and/ or climate mitigation. Furthermore, the practices and technologies included in each Plan will respond to the specific environmental and climatic challenges of each case. 62 The agroecological approach supported by the Project will fulfil the CSA triple objectives of sustainably increasing productivity, adapting to climate change and reducing greenhouse gas emissions where possible. By pursuing the CSA objectives through an agroecological approach, the Project seeks to create more climate resilient and productive agroecosystems that contribute to both sustainable agriculture and sustainable management of the environment. 63 To improve gender equity, in addition to the minimum of 60 percent of the funds allocated women-led POs, the Plans selection criteria will include a weighted score in favor of organizations with at least 40 percent women members, and additional scores for prioritizing will be applied to the advantage of the proposals from women-led family farms for investments in agroecological backyard gardens. 64 The actions of this subcomponent will directly benefit cooperatives or large associations that (i) operate in rural areas and/or associations with a degree of maturity and that already operate in the markets, (ii) have been formally established for at least 2 years from the date of issuance of the CNPJ (National Registry of Legal Entities), (iii) possess Declaration of Aptitude to Pronaf (DAP) or National Register of Family Farming (CAF) for all farmers/rural producers, (iv) show a declaration from the organization committing to comply with the Project's regulations, (v) have mandatory inclusion of at least one gender affirmative action in the proposal, and (vi) further details included in the POM (Project Operation Manual). 65 All activities that involve physical assets will include a risk analysis and mitigation measures proposal. It will also incorporate lower energy consumption aspects to their design when building or renovating existing buildings/facilities, using the best available technology and avoiding the use of fossil fuel generators as the primary source of energy. 66 For obtaining sanitary and other types of seals (IE, SIF, distinctive collective seals). 67 Consideringthat organic certification can represent an important tool for value addition, when relevant, the development of Participatory Guarantee Systems (PGS) oriented towards this type of certification will also be supported. Page 12 The World Bank Agroecology and Sustainable Rural Development in Pernambuco (P500431) equipment, and (iv) technical support, advisory services, and training for the successful implementation of the BP68. POs will submit their BPs for approval, ensuring ownership and committing to implement counterpart-financed activities. These BPs will be assessed and approved by the Evaluation Committee. This subcomponent will use a demand-driven participatory approach to inform the POs of the options available regarding agroecological technologies and practices that the PO can then include in their BP. This subcomponent will contribute to the Private Capital Enabling (PCE) strategy, with an estimated contribution of US$500 thousand. As indicated for subcomponent 1.1, the selection of BPs in subcomponent 1.2 will also prioritize quilombolas, Indigenous People, and traditional communities with differentiated scores and targeted calls for proposals for each group. Women will also be offered targeted calls69. 25. Subcomponent 1.3 – ATER for Agroecological Production (total estimated cost: US$ 8.38 million; US$ 7.15 million IBRD financing, and US$ 1.23 million counterpart financing). This subcomponent will finance: (i) the provision of Agricultural Technical Extension Services (ATER) to enable the design and implementation support of PFSPAs from subcomponent 1.1; (ii) the provision of ATER70 for the design and implementation support of BPs under subcomponent 1.2; and (iii) the training of ATER specialists of ATER entities. Under this subcomponent, ATER entities will organize the initial community diagnostic process71 and support CAs and POs in the development of their PFSPAs and BPs. This includes supporting CAs and POs in: (i) agreeing on their development goal for their Plan; (ii) identifying clear marketing goals and strategies, and (iii) identifying the material investments and knowledge needed to strengthen the production systems and implementing their Plans. Once the PFSPA or BP is approved, ATER entities will support CAs and POs in its implementation through any (or all) of the following activities according to the organizational capacity assessment of each CA and PO: (i) fiduciary aspects (including procurement and contracting); (ii) Technical Assistance for general management, governance and administration; (iii) technical assistance on technical72, environmental and social risks and knowledge of Plan implementation; (iv) facilitate CAs and POs and their members to access additional sources of financing73, services providers, as well as public food purchasing programs (PNAE, PAA) and to create opportunities for integration into value chains; (v) monitor the progress and quality of the Plan's implementation; and (vi) support to share experiences across CAs. ATER services provided under this subcomponent will be detailed in each PFSPA and BP and will be tailored to the organizational capacity of the supported CAs and POs (e.g less structured CAs may benefit from capacity-building in governance and management). The subcomponent will implement training events for ATER entities to enhance their skills and qualifications74. Financing under this subcomponent is intended to support investments that improve climate change resilience and mitigation75. 68 i.e. infrastructure investments or large equipment purchases. 69 To improve gender equity, in addition to the minimum of 60 percent of the funds allocated women-led POs, the subproject selection criteria will include a weighted score in favor of organizations with at least 40 percent women members, and additional scores for prioritizing will be applied to the advantage of the proposals from women-led family farms for investments in agroecological backyard gardens. 70 Specialized consultants (i.e. marketing, accounting, governance). 71 Including climate risk diagnosis. 72 This may include new knowledge on: (i) agroecological production processes and the sustainability of this production, considering expected climate impacts; (ii) sustainable natural resources management and landholdings’ environmental regulation compliance, including support to compliance of family farmers with the Forest Code; (iii) food security and nutrition and healthy diets, in particular those benefitted under subcomponent 1.1 to identify effective adaptation strategies to cope with main climate risk affecting food and nutrition security and empower family farmers with the expertise needed to assess, plan, and implement them in the context of climate change; (iv) institutional aspects and governance issues; (v) administrative, procurement, and financial management, and (vi) marketing and access to public policies. 73 Such as PRONAF credit lines. 74 In addition, all ATER staff will be trained on gender sensitive approaches to allow them to correctly assess gender-related issues, identify the economic contribution of women to family farming, and identify and address the barriers that may exclude women from participation and leadership in POs, and encourage women’s full participation in Project activities. 75 As its activities will ensure the sustainability of the practices financed in the agroecological production systems plans from subcomponent 1.1 and the transition to low-carbon and climate resilient development by securing additional resources and access to new markets. Page 13 The World Bank Agroecology and Sustainable Rural Development in Pernambuco (P500431) 26. Component 2 – Enhancing Environmental Practices (total estimated cost: US$ 13.86 million; US$ 11.11 million IBRD financing, and US$ 2.75 million from counterpart financing). This component will support environmental management, by promoting conservation and restoration initiatives, as well as sustainable practices76. The activities implemented by the component should contribute to combating degradation and desertification that affects several regions of the state and to mitigating greenhouse gas (GHG) emissions. Component 2 will seek to serve family farmers, including Indigenous People and quilombola communities, land reform settlements and women's agroecological networks. The component is linked to Pillar 2 of the MPA as it will strengthen public goods and services on agricultural and environmental innovation that will lead to farmland under environmentally sustainable management practices. 27. Subcomponent 2.1 – Environmental protection and restoration initiatives (total estimated cost US$ 11.15 million; US$ 8.94 million IBRD financing, and US$ 2.21 million counterpart financing). This subcomponent will finance the preparation and implementation of: (i) Community Environmental Management Plans (CEMPs) benefiting family farmers through Community Associations77 (CAs), designed to support initiatives for the protection and conservation of water resources78 and the conservation and restoration of degraded Permanent Preservation Areas (APPs) and Legal Reserves79, keeping ecosystem's function. The CEMPS may be incorporated into the PFSPA, in the case of CAs that receive both types of support simultaneously. This subcomponent will also benefit family farmers through CAs and finance: (ii) Business Plans for Nurseries (BPNs)80 and Business Plans for Community Seed Banks (BPSBs)81, supporting the production of seedlings and the collection and commercialization of native seeds82,83; (iii) the implementation of a model nursery84, and (iv) preparation and Deployment of Renewable Energy Plans (REPs) (photovoltaic panels85), enhancing sustainability and reducing carbon emissions. These Plans may include investments such as resources for inputs, equipment, tools and other goods, and training and provision of Technical Assistance, which will support beneficiaries at all stages of the process. 76 The areas to benefit from Component 2 activities must predominantly be the same communities and family units covered by Component 1 activities, in communities that will be served with Agroecological Production Systems Plans, in order to act in an integrated and complementary manner, from the perspective of sustainable planning for family rural properties. In other cases, when appropriate, Component 2 will intervene in areas not directly covered by Component 1, but always respecting the profile of the project's beneficiary public. 77 Any civil association (CA) formed by members of a community, or any priva te association, all duly established in the Borrower’s territory in accordance with the Guarantor’s laws, including communities of Indigenous People and Quilombola Peoples, and which meets the criteria set forth in the Operational Manual (as hereinafter defined) for participating in the Project. An association of beekeepers, goat herders, or market vendors, which are not strictly community associations but are similar in nature can be considered. 78 In rural areas, more frequent and severe climate events, such as droughts and floods, may cause major impacts on the delivery of water and sanitation services due to dwindling water supply. Additionally, the use of outdated farming practices leads to soil degradation and water pollution. 79 This work will include awareness-raising and training activities alongside some of the following potential practices: (i) Installation of Agroforestry Systems with native woody and fruit trees, attractive to fauna, which can be intercropped with agricultural crops, forage crops, etc.; (ii) Restoration with planting of seedlings and direct sowing; (iii) Intervention with native species densification and enrichment; (iv) Environmental restoration with assisted regeneration; (v) Intervention to protect Legal Reserves, APPs and other relevant natural areas. The use of native seeds is an adaptation strategy as they have been proven efficient for habitat restoration efforts as they have adapted to their local environments over the course of years. 80 BPNs are structured plans for establishing or strengthening nurseries that produce native seedlings tailored to local biomes. These nurseries will support environmental restoration and sustainable agriculture by supplying plants suitable for local ecological needs. 81 BPSBs are detailed plans for establishing or strengthening seed banks that preserve and distribute locally adapted seeds, especially heirloom varieties. These banks will promote biodiversity and ensure communities have access to seeds for sustainable, agroecological practices. 82 Encouraging both the practice of public acquisition of these seedlings and their commercialization in private markets. 83 Forest seedling nurseries and community seed banks will allow family farmers to conserve different seeds to develop crops with greater tolerance to flooding and high temperatures while resisting drought, pests, and diseases. These nurseries will feed from rescued genetic material from appropriate biodiversity and agrobiodiversity from the state. 84 With space for environmental education and climate vulnerabilities identification, and the ability to carry out training courses and demonstration projects. 85 The total value for the renewable energy kits supported by the Project is estimated at US$730,000. Page 14 The World Bank Agroecology and Sustainable Rural Development in Pernambuco (P500431) 28. Subcomponent 2.2 – Capacity development for Environmental Practices (total estimated cost: US$ 2.71 million; US$2.17 million IBRD financing, and US$540 thousand counterpart financing). This subcomponent will finance: (i) training and hiring of local environmental agents86, for ATER; and (ii) carrying out ATER for the preparation, implementation, and monitoring of the different Plans listed under subcomponent 2.187. The technical consultancies provided by this subcomponent will have similar duties and operational arrangements to the Technical Assistance mentioned in subcomponent 1.3. A specific consultancy will be hired to carry out studies on the subject of valuing environmental assets and ecosystem services, aiming at the design of financial incentive mechanisms for conservation88. 29. Component 3 – Institutional Strengthening (total estimated cost: US$ 5.07 million; US$ 2.07 million IBRD financing, and US$ 3 million counterpart financing). This component will develop the institutional capacity (in technical, organizational, and operational aspects) of the different actors concerned with the development of agroecological family farm production. It will also support the Learning Agenda of the MPA, by undertaking analyses and evaluation of various programs and policies (i.e. on agroecological production) implemented in the State of Pernambuco, to analyze conditions for replicability in other participating states. 30. Subcomponent 3.1 - Strengthening of the Agronomic Institute of Pernambuco (IPA) for the provision of services for agroecological Family Farming (total estimated cost US$ 1.49 million; US$ 610 thousand IBRD financing, and US$ 880 thousand counterpart financing). The Project will support IPA in the creation, implementation, development, and maintenance of an agroecological family farming inter-institutional digital platform89, which will seek to compile, organize, and disseminate strategic data90 relevant to the agroecological production sector of the state. The subcomponent will also finance: (i) the enhancement of bio-input production by IPA's Headquarters Laboratory, (ii) the upgrading of the Agroecological Experimental Station in the municipality of Vitória de Santo Antão and the IPA Training Centre (CETREINO) in Carpina, and (iii) Training and exchange visits programs to strengthen GEMA (IPA Agroecology Group)91. Resources will be also allocated for works in the IPA Territorial Units and Headquarters infrastructure improvements, as well as for staff training, knowledge management initiatives and the hiring of consultants to carry out analytical services. This subcomponent is linked to pillar 2 of the MPA as it strengthens agriculture public services on agricultural innovation and rural information and communications technology. 31. Subcomponent 3.2 – Institutional strengthening of the State Secretariat of Environment, Sustainability and Fernando de Noronha (SEMAS) (total estimated cost US$1.07 million; US$ 440 thousand IBRD financing, and US$ 640 thousand counterpart financing). The Project will finance activities to strengthen the institutional capacity of SEMAS, including: (i) acquisition of equipment and technology92, and (ii) training for staff, technicians, and consultants. 32. Subcomponent 3.3 - Strengthening of partner organizations (total estimated cost US$ 2.51 million; US$ 1.03 million IBRD financing, and US$ 1.48 million counterpart financing). This subcomponent will seek to strengthen the institutional capacity of all partner organizations, whether from the government sphere, civil society or the private sector 86 A group of these Agents may join Regional Environmental Management Reference Centers. This initiative, currently under study, aims to stimulate the use of long-term agroecological production practices, and promote the protection and restoration of environmental resources. 87 These include CEMPs, BPNs, BPSBs and IREPs). 88 such as PSA, carbon credits, biodiversity credits, which could be a strategy to optimize the use of ICMS Socio-environmental resources for socio- environmental management. 89 The Project will develop a disaster risk management plan to ensure continuous operation of systems and platforms under this subcomponent in the case of an event and it will prioritize low-carbon energy sources for their operation. 90 including a state-wide registry of Production Units, the type of production, forms of commercialization, as well as information on other relevant topics. 91 GEMA – portuguese acronym for ‘Studies, Systematization and Methodology Group in Agroecology of the Agronomic Institute of Pernambuco’. 92 All purchases under this subcomponent will use the best available technology and avoid the use of fossil fuels as the primary source of energy. Page 15 The World Bank Agroecology and Sustainable Rural Development in Pernambuco (P500431) and will finance: (i) training activities93 for partner organization teams; and (ii) support for Forums94 and other collegiate consultation and coordination bodies. In the government sphere, funds will also support the State General Coordination of Internal Control of Pernambuco (SCGE-PE), a key investment aimed at achieving most Key Performance Areas (KPAs) of levels 2 and 3 of the Internal Audit Capability Model (IA-CM) by the Project's Closing Date95. 33. Component 4 – Project Management (total estimated cost: US$ 4.1 million; US$ 3.14 million IBRD financing, and US$ 950 thousand counterpart financing). This component will fund the Program Management Unit (PMU) for the technical and administrative management, including: (i) procurement and financial management; (iii) monitoring and evaluation; (iv) monitoring and managing compliance with social and environmental standards; (v) institutional communication and knowledge management; (vi) operating expenses and personnel costs of the PMU; (vii) information technology equipment and software for project management; (viii) hiring consultants in key project management areas; (ix) capacity building and training for the PMU staff; (x) design and implementation of information management and communication systems; and (xi) implementation and/or improvement of project management systems. 34. Component 5 – Contingency Emergency Response Component (CERC) – (US$ 0.0). This component will provide an immediate response to an eligible crisis or emergency, as needed. In the event of such an emergency (defined in the Contingency Emergency Response Operational Manual to be prepared and adopted by the Government of Pernambuco), this component will finance eligible emergency activities and expenses through the reallocation of Project funds. @#&OPS~Doctype~OPS^dynamics@pidaprlegalpolicy#doctemplate Legal Operational Policies Triggered? Projects on International Waterways OP 7.50 No Projects in Disputed Area OP 7.60 No Summary of Screening of Environmental and Social Risks and Impacts 35. The overall environmental and social risk is considered moderate. The Project is expected to have a positive impact on environment and beneficiary families and communities in the intervention areas by directly supporting small-scale farmers in strengthening agroecological practices and enhancing environmental stewardship, thereby creating socioeconomic opportunities in areas of interest. The Project will be implemented in rural areas and will target family farmers who are over-represented among the state's poor population, including quilombolas, indigenous groups and traditional communities. It is also expected to have positive environmental impacts through enhanced water storage and 93 This training will include a series of levelling events on the content, principles, and methodology of the Project, involving both governmental as well as third sector and private sector organizations. These actions are foreseen in the Project's PEPI. It will also include training events for the technical staff of these agencies, including modules on climate change mechanisms for mitigation and adaptation, as well as combatting desertification processes. 94 These forums should enable, among other things: i) the definition of institutional agreements between agencies and sub-sectors; ii) improvement of operational coordination between the Project and the agencies involved in its execution. 95 Activities included to support SCGE will include developing internal audit competencies, enhancing the management framework, integrating organizational information, conducting Value-for-Money audits, and strengthening the capacity to provide assurance on governance, risk management, and control. Page 16 The World Bank Agroecology and Sustainable Rural Development in Pernambuco (P500431) management practices and adoption of agroecological and organic techniques that will promote soil health, carbon sequestration, and water retention, contributing to climate change mitigation. Although some subprojects are expected to support beneficiaries located inside protected areas, the Project will promote sustainable practices that will not generate adverse impacts or loss or degradation of habitats, on the other hand, they are designed to enhance ecosystem services, support primary ecological functions, and preserve species diversity. Environmental risks include potential contamination of water and soil due to inadequate disposal of liquid effluents from construction activities and agro- industries, as well as the release of other pollutants. Air pollution is also a concern, with the generation of dust and emissions potentially degrading air quality. OHS hazards and risks are expected to be proportional to the nature of activities in business plans or subprojects. These risks are predictable, temporary, and reversible, with low magnitude and site-specific characteristics. From a social perspective, there are concerns about the access of potential beneficiaries to Project-related information and benefits. However, this risk will be mitigated through measures embedded in the design of the project that will prioritize the most vulnerable populations and through robust stakeholder engagement. To manage E&S risks, by Appraisal, the Borrower has developed and disclosed for the purposes of consultations a draft Stakeholder Engagement Plan (SEP). The Borrower will also develop, consult, submit to the Bank for clearance and disclose an Environmental and Social Management Framework (ESMF) and an Indigenous Peoples Planning Framework (IPPF). The ESMF includes identified risks and impacts, analyzing regulatory frameworks, understanding environmental licensing requirements, collecting baseline data, and developing risk management tools. Moreover, it incorporates criteria for the eligibility of subprojects and an exclusion list including resettlement and activities that cause serious impacts on biodiversity. All subprojects will require an environmental and social management assessment with mitigation measures aligned with ESSs and EHS guidelines. The mitigation measures will be proportional to the subproject's risks and impacts. Additionally, civil works will follow the Good Construction Practices Guide, and these guidelines will be shared via rural extension activities. Those instruments will be updated based on consultations, cleared by the Bank, and disclosed by the Borrower and the Bank within 30 days of project effective date. Additionally, the Bank and the Borrower have agreed on a draft Environmental and Social Commitment Plan (ESCP) which was disclosed prior to appraisal and will be finalized during negotiations. While the Borrower does not have direct experience implementing the ESF or the previous safeguards policies, it has strengthened its knowledge during project preparation and led the development of required E&S instruments. During implementation, the Bank will provide technical guidance and support the strengthening of the Borrower’s E&S capacity. 36. Citizen Engagement. The Project has a robust citizen’s engagement approach. The participatory process, that includes consultations during preparation and implementation, will play a key role in engaging with stakeholders and receiving feedback from beneficiaries. The Project will use grassroot-level committees (e.g. Rural Development Forums/Collegiate Bodies and community associations) or other local participatory forum to support community participation and monitoring. These participatory fora will, for example, support participatory monitoring of the works and quality of the Project and support the use of the grievance redress mechanism (GRM) at the community level, and in generating feedback on the progress of Project activities. The GRM will be linked to the Project’s monitoring and will collect information on beneficiary feedback and close the feedback loop with stakeholders. The Project will track the percentage of grievances responded to and resolved, in relation to the delivery of Project’s act ivities. The Projectis also conductinga beneficiary satisfaction survey, disaggregated by gender. Culturally appropriate materials and differentiated strategies will be used so that indigenous peoples and vulnerable groups are not excluded from surveys and instruments, and monitoring and evaluation strategies. E. Implementation Page 17 The World Bank Agroecology and Sustainable Rural Development in Pernambuco (P500431) 37. The Agronomic Institute of Pernambuco (Instituto Agronômico de Pernambuco - IPA) will be the Project implementing agency on behalf of the State of Pernambuco, which will be the Borrower for the loan. The Federative Republic of Brazil serving as the Guarantor. IPA will establish a Project Management Unit (PMU), in a form and substance satisfactory to the Bank, as a condition of effectiveness. The PMU will be responsible for overall management, planning, coordination, monitoring and evaluation of all Project activities, as well as for the Project’s environmental and social risk management, financial management, procurement, disbursements and accounting. Given its primary responsibilities and technical expertise, IPA will be responsible for the Project Information System and, with support from the technical assistance services (ATER) entities contracted by the Project, the delivery of technical assistance services. Inter-agency coordination and oversight will be facilitated by a Project Steering Committee. The committee will be comprised of representatives from the Secretariats involved and be chaired by SEPLAG. It will be responsible for, inter alia, coordinating and providing the necessary state budget for Project implementation, allocating Loan resources into relevant accounts, as well as for providing technical support to the PMU regarding interactions with the Bank and the Guarantor, with composition, responsibilities, and sufficient resources, all acceptable to the Bank, all as set forth in the Project Operations Manual. The financed Plans shall be implemented by CAs and POs, and they may include: (i) implementation support by the PMU (and ATER agencies) for activities such as fiduciary and environmental and social risks and processes; (ii) additional technical assistance on governance, administration, and participation in exchange/visits with other CAs/POs, and (iii) facilitating linkages with commercial banks. 38. The proposed Project will have as co-executing body the State Secretariat of Environment, Sustainability and Fernando de Noronha (Secretaria de Meio Ambiente, Sustentabilidade e Fernando de Noronha – SEMAS). As a co-executor, SEMAS will be responsible for implementing actions under Component 2, which focuses on environmental strengthening, along with its linked agency, the State Environmental Agency (Agência Estadual de Meio Ambiente – CPRH). 39. The Secretariat of Planning and Management (Secretaria de Planejamento, Gestão e Desenvolvimento – SEPLAG) will act as an oversight partner in the Project, tasked with providing the necessary state budget, including both counterpart funding and allocations related to the influx of resources from the Loan Agreement, as well as technical support to the PMU regarding interactions with the World Bank and the Federal Government, given its experience with various national and international loan agreements. B. Results Monitoring and Evaluation Arrangements 40. IPA, through the PMU and overseen by SEPLAG, will have overall responsibility for project data collection, monitoring and evaluation (M&E). The M&E responsibilities include tracking progress on the indicators of the Results Framework at the end of each semester (biannually), as well as tracking project progress at the technical, fiduciary, and social and environmental levels. The PMU will coordinate the project M&E strategy, including the collection and systematization of data in collaboration with SEMAS, public and private sector service providers, and other partners as needed. Project data will be consolidated in a computerized information system that will be housed at IPA within the PMU. One tool of this system will be a comprehensive digital registry of beneficiaries reached by the project. The M&E approach will include feedback loops to allow beneficiaries, in particular historically marginalized groups (PI and PCT, Quilombolas , women, youth) to express their views and share their concerns. Project M&E will follow the indicator definitions, data sources, and methodologies as set out in the Results Framework and detailed further in the POM. The Project M&E will follow the indicator definitions, data sources, and methodologies as set out in the Results Framework and detailed in a POM. Page 18 The World Bank Agroecology and Sustainable Rural Development in Pernambuco (P500431) C. Sustainability 41. The sustainability of the processes supported by the Project is an integral part of its design. It will be monitored and adjusted throughout its implementation, during support, supervision, and mid-term review missions, thus avoiding the sustainability issue to be addressed only at the Project's conclusion phase. The sustainability strategy of the Pernambuco Agroecological Project is based on the following points: 42. Design of implemented/strengthened productive systems, requiring little or no external input and promoting the protection of their basic resources (soil, water, genetic resources, etc.), should create conditions for the continuous renewal of their productive cycles. Thus, systems for protection, restoration, and sustainable forest management, as well as productive and environmental strengthening of cultivated areas, will generate lasting benefits at different scales: local, regional, and even global by protecting and conserving the environmental resources worked on. A set of restored and protected areas, as well as a set of sustainable and resilient productive units, will be an important part of the legacy of the Pernambuco Agroecological Project. 43. Institutional strengthening of state government secretariats, municipalities, and private organizations. The Project will develop capacities in terms of human resources, information systems, strategy design, and implementation of policies/actions, programs, and projects related to agroecological family farming production (such as the PNAE, and others). To expand field operations, government, civil society, and private technical assistance entities will be trained in agroecology methodologies and practices, creating conditions to broaden the dissemination of knowledge and best practices generated in Project actions to a wider audience. 44. Strengthening the capacities of rural organizations and beneficiaries with an emphasis on women and youth. One of the important premises of the Project is to promote the empowerment of the target audience so that they can transform their reality according to their own goals and needs. An intensive training program and knowledge exchange are planned through various means such as training courses, workshops, demonstration units of best practices, and exchanges, aiming at strengthening the capacities of beneficiaries and their organizations, combining technical-scientific knowledge with traditional knowledge. 45. Access to markets for agroecological products. The Project foresees the structuring/strengthening of value chains, usually short marketing circuits, for agroecological products, with the implementation/reinforcement of sales points/markets and marketing networks. It will also promote the construction and adaptation of processing units with well-founded business plans, good management and manufacturing practices, low environmental impact, and well- established marketing channels. The integration of value chains with environmental conservation will allow the maintenance of sustainable livelihoods, increased income, and food and nutritional security of beneficiaries in a more permanent and secure manner. The continuity of the action is based on income generation through permanent sustainable production, which, in turn, strengthens the interests of the population in continuing this process. The experience gained by an organization of the target population in the elaboration of its proposal and in its implementation, with technical support from the Project, may qualify it for obtaining new sources of funding. Based on the experience of previous Projects, initiatives proposed and managed by communities and their associations generally bring benefits in terms of social organization, inclusion of youth and women, installation of infrastructure, and self- esteem. Page 19 The World Bank Agroecology and Sustainable Rural Development in Pernambuco (P500431) @#&OPS~Doctype~OPS^dynamics@contactpoint#doctemplate CONTACT POINT World Bank Leonardo Bichara Rocha Senior Agriculture Economist Maria Bernadete Ribas Lange Senior Environmental Specialist Borrower/Client/Recipient Government of Pernambuco Raquel Lyra Governor governo@governadoria.pe.gov.br Implementing Agencies IPA - Agronomic Institute of Pernambuco Ellen Viégas President ipa@ipa.gov.br FOR MORE INFORMATION CONTACT The World Bank 1818 H Street, NW Washington, D.C. 20433 Telephone: (202) 473-1000 Web: http://www.worldbank.org/projects @#&OPS~Doctype~OPS^dynamics@approval#doctemplate APPROVAL Task Team Leader(s): Leonardo Bichara Rocha, Maria Bernadete Ribas Lange Approved By Practice Manager/Manager: Country Director: Sophie Naudeau 04-Dec-2024 Page 20 The World Bank Agroecology and Sustainable Rural Development in Pernambuco (P500431) Page 21