Report No. , 939
World Bank Approaches to the Environment
in Brazil: A Review of Selected Projects
(In Five Volumes) Volume IV: The Middle and Lower San Francisco Valley
April 30, 1992
Operations Evaluation Department
FOR OFFICIAL USE ONLY
Document of the World Bank
This document has a restricted distribution and may be used by recipients
only in the performance of their official duties. Its contents may not otherwise
be disclosed without World Bank authorization.


ABBREVIATIONS AND ACRONYMS
AMZA              Amazonia Hineracoeo S.A.
(Amazon Mining Inc.)
CETESB            Companhia do Technologia de Saneamento Ambiental
(Environmental Sanitation Technology Company)
CHESP             Companhia Hidro-eletrica do Sao Francieco
(Sao Francieco Hydroelectric Company)
CIDA              Canadian International Development Agency
CODEVASP          Companhia do Deaanvolvimento do Vale do San Francioco
(Sao Francisco Valley Development Company)
CONAMA            Coneolho Nacional de Het Ambionte
(National Environmental Council)
CVRD              Companhia Vale do Rio Doce
(Rio Doe Valley Company)
ELETROBRAS        Centraia Eletricas Brasileiras S.A.
(Brazilian Central Electical Company Inc.)
S8MAP             Energy Management Assistance Program
ESW               Economic and Sector Work
FAO               Food and Agricultural Organization, United Nations
FUNAI             Fundacao Nacional do Indio
(National Indian Foundation)
IBAMA             Instituto Brasileiro do Meao Ambiente a Recuraoe Naturale
Renoveveis
(Brazilian Institute for the Environment and Renewable Natrual
Resources)
ID?               Inter-American Development Bank
INCRAI            Instituto Nacional do Colonizacao a Reforma Agraria
(National Colonization and Agrarian Reform Institute)
INPES             Instituto Nacional se Pesquisas Economicas a Sociais, IPEA
(National Economic and Social Research Institute, IPEA)
IPEA              Instituto do Pesquisa Economica Aplicada
(Institute of Applied Economic Research)
NGO               Non-governmental Organization
OAS               Organization of American States
OD                Operational Directive, World Bank
OECD              Organization for Economic Co-operation and Development
OED               Operations Evaluation Department, World Bank
OHS               Operational Manual Statement, World Bank
PGC               Programa Grande Carajas
(Greater Carajas Program)
PLANVASP          Plano do Desenvolvimento do Vale do Sao Francisco
(Development Plan for the Sao Francisco Valley)
POLONOROESTE      Programs do Desenvolvimento Integrado do Norceste do Brasil
(Northwest Integrated Development Program)
POLOSINDICAL      (Rural labor union confederation, lower-middle Sao Francisco
valley)
PROCOP            Programs de Controls de Poluicao, CETESB
(Pollution Control Program, CETESB)
RIMA              Relatorio de Impacto sobre o Meo Amblente
(Environmental Impact Report)
SDR-PR            Secretaria  de  Desenvolvimento   Regional,  Presidencis   da
Republica
(Secretariat of Regional Development, Presidenzy of the
Republic)
SEAIN             Secretaria de Assuntos Internacionais, SEPLAN
(International Affairs Secretariat, SEPLAN)
SEMA              Secretaria Especial do Meio Ambiente, Ministerto do Interior
(Special Environmental Secretariat, Ministry of the
Interior)
SEMAH             Secretaria do Meio Amblente, Presidencie do Republica
(Environental Secretariat, Presidency of the Republic)
SEPLAN            Secretaria de Planejamento, Presidencia da Republica
(Secretariat of Planning, Presidency of the Republic)
SISNAMA           Sietema Nacional do Meto Amblente
(National Environmental System)
SPHA              Sao Paulo Hetropolitan Area
SUDECO            Superintendencia de Desenvolvimento do Centro-0eote
(Superintendency for the Development of the Center-Weat)
UNDP              United Nations Development Program


FOR OFFICIAL USE ONLY
ABBREVIATIONS AND ACRONYMS
ATIR              Asistencia Teonica para Implantacao de Reservatorios, CHESF
(Technical Assistance for Implementation of Reservoirs, CHESF)
BNB               Banco do Nordeste do Brasil
(Bank of Northeast Brazil)
CDM               Conselho de Desenvolvimento Municipal
(Municipal Development Council)
CDR               Conselho de Desenvolvimento Rural
(Rural Deelopment Counci3j
CEPA-AL           Comissao do Planejamento Agricola - Alagoas
(Agricultural Planning Commission - Alagoas)
CEPED             Centro de Pesquisa e Desenvolvimento, Bahia
(Research and Development Center, Rahia)
CHESF             Companhia Hidro-eletrica do Sao Francisco
(Sao Francisco Hydroelectric Company)
CODEVASP          Companhia de Desenvolvimento do Vale do Sao Francisco
(Sao Francisco Valley Development Company)
COPPE             Coordenacao do Programas de Pos-graduacao em Engenheria,
Federal University of Rio de Janeiro
(Coordination of Poet-graduate Programs in Engineering, Federal
University of Rio do Janeiro)
CNEN              Comissao Nacional do Energia Nuclear
(National Nuclear Energy Commission)
CONAMA            Conselho Nacional Ae Meio Ambiente
(National Environmental Council)
CPATSA            Centro do Pesquisa Agricola do Tropico Semi-arido
(Semi-Arid Tropics Agricultural Research Center)
CPRH              Companhia para o Controle do Poluicao Ambiental e Administracao
de Recursos Hidricos, Pernambuco
(Environmental  Pollution   Control  and   Water   Resource
Administration Company, Pernambuco)
CPT               Comissao Pastoral da Terra
(Pastoral Land Commission)
CRA               Centro de Recursos do Meio Ambiente, Bahia
(Environmental Resource Center, Bahia)
CVSF              Comissao do Vale do Sao Francisco
(Sao Francisco Valley Commission)
This document has a restricted distribution and may be used by recipients only in the performance
of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.


DIR               Departamento de Implantacao do Reservatorios, CHESF
(Department for Implementation of Reservoirs, CHESF)
DNOCS             Departamento Nacional de Obras contra as Secas
(National Department of Works against the Drought)
DNPA              Departamento Nacional de Planejamento e Avaliacao, MEFP
(National Department of Planning and Evaluation, MEFP)
EDI               Economic Development Institute, World Bank
ELETROBRAS        Centrais Eletricas Brasileiras S.A.
(Brazili.an Central Electrical Company Inc.)
ELETRONORTE       Centrais Eletricas do Norte
(Central Electrical Company of the North)
EMATER            Empress do Asistencia Teenica e Extensao Rural
(Rural Technical Assistance and Extension Enterprise)
EMBRAPA           Empresa Brasileira de Pesquisa Agricola
(Brazilian Agricultural Research Enterprise)
PAO               Food and Agricultural Organization, United Nations
PIPE              Fundacao Instituto de Pesquisas Economicas, Universidade de
Sao Paulo
(Institute of Economic Research Foundation, University of Sao
Paulo)
FUNAI             Fundacao Nacional do Indio
(National Indian Foundation)
GEIDA             Grupo de Irrigacao para o Desenvolvimento Agricola
(Irrigation Group for Agricultural Development)
IAEA              International Atomic Energy Agency
IBAMA             Instituto Brasileiro de Meio Ambiente e Recursos Naturais
Renovaveis
(Brazilian Institute of the Environment and Renewable Natural
Resources)
IBRD              International Bank for Reconstruction and Development
IDB               Inter-American Development Bank
ILO               International Labor Organization, United Nations
INCRA             Instituto Nacional do Colonizacao e Reforma Agraria
(National Institute of Colonization and Agrarian Reform)
IPEA              Instituto de Pesquisa Economica Aplicada
(Institute of Applied Economic Research)


IPLAN             Instituto do Planejamento, IPEA
(Institute of PlanninS, IPEA)
IRGA              Institute Riograndense do Arroz
(Rice Institute of Rio Grande do Sul)
Kwh               Kilowatt hour
MEFP              Ministerio de Economia, Financas e Planejamento
(Ministry of Economy, Finance and Planning)
MME               Ministerio de Minas e Energia
(Ministry of Mines and Energy)
NGO               Non-governmental organization
QAS               Organization of American States
OED               Operations Evaluation Department, World Bank
OMS               Operational Manual Statement, World Bank
OPN               Operational Policy Note, World Bank
PAPP              Programa de Apoio so Pequeno Produtor Rural
(Small Farmer Support Program)
PA IV             Paulo Afonso IV Hydroelectric Project
PCR               Project Completion Report
PDRI              Projeto de Desenvolvimento Rural Integrado
(Integrated Rural Development Project)
PIN               Programs de Integracao Nacional
PLANVASF          Plano de Desenvolvimento do Vale do Sao Francisco
(Development Plan for the Sao Francisco Valley)
PNRA              Programs Nacional de Reforms Agraria
(National Agrarian Reform Program)
POLONORDESTE      Programs do Desenvolvimento de Areas Integradas do Nordeste
(Northeast Integrated Area Development Program)
POLOSINDICAL      (Rural labor union confederation, lower-middle Sao Francisco
valley)
PPAR              Project Performance Audit Report
PROALCOOL         Programs Nacional do Alcool
(National Alcohol Program)


PROCANOR          Programa de Desenvolvimento da Area Canaviera do Nordeste
(Northeast Sugar Cane Area Development Program)
PRODIAT           Programa de Desenvolvimento da Bacia Araguaia-Tocantins
(Araguaia-Tocantins Basin Development Program)
PROFIR            Programa de Financiamento de Equipamentos (e Irrigacao
(Program to Finance Irrigation Equipment)
PROHIDRO          Programa de Uso de Recursoa Hidricos
(Water Resource Use Program)
PROINE            Programa de Irrigacao do Nordeste
(Northeast Irrigation Program)
PRONI             Programa Nacional de Irrigacao
(National Irrigation Program)
PROTERRA          Programa de Redistribuicao de Terras e Estimulo a Agroindustria
(Land Redistribution and Agro-industrial Incentive Program)
PROVALE           Programa de Desenvolvimento do Vale do Sao Francisco
(Sao Francisco Valley Development Program)
PROVARZEAS        Programa de Desenvolvimento dae Varzeas
(Programa for the Development of Floodplains)
RIMA              Relatorio de Impacto sobre o Meio Ambiente
(Environmental Impact Report)
SAR               Staff Appraisal Report
SEMA              Secretaria Especial do Meio Ambiente, Ministerio do Interior
(Special Environmental Secretariat, Ministry of the Interior)
SEPLAN            Secretaria de Planejamento e Coordenacao, Presidencia da
Republica
(Secretariat of Planning and Coordination, Presidency of the
Republic)
SF I              Lower Sao Francisco Polders Project
SF II             Sao Francisco II Irrigation Project
SISNANA           Sistema Nacional de Meio Ambiente
(National Environmental System)
SUCAM             Superintendencia de Campanhas de Saude Publica
(Superintendency of Public Health Campaigns)
SUDENE            Superintendencia de Desenolvimento do Nordeste
(Superintendency for the Development of the Northeast)


SUDEPE            Superintendencia de Deeenvolvimento da Peaca
(Superintendency for Fisheries Development)
SUVALE            Superintendencia do Vale do Sao Francisco
(Sao Francisco Valley Superintendency)
UNDP              United Nations Development Program
UNICAMP           Universidade Estadual de Campinae, Sao Paulo
(State University at Campinas, Sao Paulo)


WORLD BANK APPROACHES TO THE ENVIRONMENT IN BRAZILs
A REVIEW 0F SELECTED PROJECTS
THE MIDDLE AND LOWER SAO FRANCISCO VALLEY
TABLE OF CONTENTS
Page No.
Preface ............................................*.....          i
Summary and Conclusions .....................................       iv
I.    INTRODUCTION ........................                            I
II.   BACKGROUND ............................     ..............     4
A. The Role and Early Development of the Lower and
Middle Sao Francisco Valley ...................      4
B. CHESF and Hydropower Development in the Sao
Francisco Valley ............................       5
C. CODEVASF and Early Irrigation Development
in the Sao Francisco Valley ...................      6
D. SUDENE and the First Regional Development Efforts       7
E. Regional Development Since the Mid-1970's ........      8
1. POLONORDESTE ................................     9
2. Projeto Sertanejo ..........................     10
3. Water Resource Use Program (PROHIDRO) ......     11
F. Parallel Rural Development Projects ..............     11
1. PROVARZEAS, PROFIR and PRONI ...............     11
2. Projeto Nordeste ........................       12
G. Conclusion .......................                     13
III. THE MIDDLE AND LOWER SAO FRANCISCO VALLEY .................      14
A. Project Areas of Influence .......................     14
B. Ecological Characteristics of the Sao Francisco
Valley ........................................     14
1. General Features of the Sao Francisco Valley     14
2. Surface Water Resources: Competing Uses ....     15
3. Climate and Salinization ...................     17
C. Demographic Characteristics ...................... 18
D. Socio-Economic Characteristics ...................     19
1. Middle Sao Francisco Valley ................     19
2. Lower Sao Francisco Valley .................     20
E. Conclusion ....................................      22
IV.   BANK-ASSISTED DEVELOPMENT PROJECTS ........................     23
A. The Paulo Afonso IV Hydropower Project ...........     23
1. Origins, Objectives and Description ........     23
2. Implementation Experience and Principal
Results .................................     28
3. The Bank's Role and Lessons Learned ........     31


Table of Contents (Cont'd)
B. The Lover Sao Francisco Polders and Second
Irrigation Projects ...........................     34
1. Origin, Objectives and Description ........     34
2. Implementation Experience and Principal
Results .................                     40
3. The Bank's Role and Lessons Learned ........     45
C. The Itaparica Resettlement and Irrigation Project       46
1. Origins, Objectives and Description ........     46
2. Implementation Experience and Preliminary
Results .................                     51
3. The Bank's Role and Lessons Learned ........53
D. Conclusion ......................................       54
V.    PHYSICAL ENVIRONMENTAL IMPACTS AND PROTECTION MEASURES ....      57
A. Paulo Afonso IV Hydropower Project ...............      57
1. Environmental Problems Associated with the
Sobradinho Dam ........................      57
2. Water Evaporation From Sobradinho Lake .....     60
3. Water Scarcity in the Valley: Energy Versus
Irrigation ................                   60
B. Lower Sao Francisco Polders and Second Irrigation
Projects  ........... . . . . . . . . . . . .  .    61
1. Changes in Land Use .                            61
2. Integrated Pig-Rice-Fish Farming ...........     62
3. Major Problems .............................     62
C. Itaparica Resettlement and Irrigation Projects ...      63
1. Water Quality and Fish Production
Potential at Itaparica ..................     63
2. Lake Itaparica and Flooded Areas ...........     64
3. The Rescue of Terrestrial Fauna ............     64
4. The Environmental Protection Plan for
Itaparica ...............                    65
5. Licensing Problems for Itaparicat the Role
of State Environmental Protection Agencies    66
6. Likely Future Problems ..................... 67
D. Conclusion   ....................................       67
VI.   HUMAN ENVIRONMENTAL IMPACTS 4ND RESETTLEMENT EXPERIENCE ...      69
A. Paulo Afonso IV Hyaropower Project ...............      69
1.  Introduction  .............................    69
2. Population Displacement and Resettlement ...      70
3. The Serra do Ramalho Colonization Project ..      70
4. Rural Resettlement Around Sobradinho .......     72
5. Urban Resettlement .........................      75
B. The Lower Sao Francisco Polders and Second
Irrigation Projects ...........................      76
1. Introduction .............................      76
2. Population Displacement and Agricultural
Development   ...........................     77
3. Expropriation and Compensation Procedures ..     81


Table of Contents (Cont'd)
4. Decrease in Agricultural Production and
Rural Land Use Changes   .                    83
5. Project Implementation and Farmer Recruitment     83
6. Project Performance ........................     84
7. Cooperative Organization and "Emancipation"      86
C. Itaparica Resettlement and Irrigation Project ....      87
1.  Introduction  ...............................   87
2. Local Participations the Role of
POLOSINDICAL  s  .......  ..................  88
3. Expropriation and Compensation .............     91
4. Displacement and Resettlement of the
Population ..............................     92
5. The Impact of Itaparica on Amerindians .....      95
6. The Transition Period: Employment, Social
Services and Pre-Production Preparation .     97
7. Costs of Project Implementation, Farmer
Incomes and Equity ...................... 101
8. Archaeological Sites .......................     105
D. Other Human Environmental Impacts ................     105
1. Population, Migration and Employment .......    105
2. Rural Development ..........................     108
3. Agro-Industrial Development ................     110
4. Urban Development   ....................      111
5. Public Health Aspects ......................     112
E.  Conclusion  ........ . . . . . . . . . ............   113
VII. THE WORLD BANK AND THE ENVIRONMENT IN THE SAO
FRANCISCO VALLEY ...................os..............       114
A. Bank and Borrower Perceptions of Environmental
Issues  . . . . . . . . . . . .  . . ...........    114
1. The Bank .............. .......    ......    114
2. The Borrower ... .... ....  . ... . * . ... .. . . .  116
B. Project Design and Effectiveness with Regard to
Environmental Issues .......................       117
C. Project Limitations in Relation to Wider
Environmental Issues ..........................     119
1. Physical Environmental Impacts .............    119
2. Human Environmental Impacts ............... .   120
D. Lessons From the Sao Francisco Valley Experiences.     122
1. Paulo Afonso IV/Sobradinho Project .........    122
2. Lower Sao Francisco Polders and Second
Irrigation Projects .....................    127
3. Itaparica Resettlement and Irrigation Project    132
E. Implications for Future Bank Operations ..........     135
1. In the Sao Francisco Valley ................    135
2. For Large Hydropower Projects in General ...     136
3. For Irrigation Projects in General .........     138
4. For Involuntary Resettlement Programs ......     139
5. For River Basin Development in General .....     140
F. Implications for Bank Procedures ................     141
1. Country Policy Dialogue ..........    .......   141


Table of Contents (Cont'd)
2. Project Identification, Preparation
and  Appraisal  ...........................  142
3. Project Implementation and Supervision .....    143
0. Recommendations for Future Research and
Impact Evaluation .............................   144
1. In the Sao Francioco Valley ................   144
2. In Large River Basins in General ...........    145
ANNEXES
I.    Distribution of Landownership in Key Areas of the
Middle Sao Francisco Valley, 1970-85
II.   Irrigated Area in "Development Poles" Along the
Sao Francisco River Valley.
III. Organizational Structure of CRESF (Environmental Units).
Mapes Itaparica Resettlement Project
Sao Francisco II Irrigation Project


WORLD BANK APPROACHES TO THE ENVIRONMENT IN BRAZIL: A EVIEW OF SELECTED PROJECTS
THE MIDDLE AND LOWER SA0 FRANCISCO VALLEY
PREFACE
1.          This is a report on the third of four c- se studies undertaken by OED
and the (then) Brazilian federal Secretariat of C aining (SEPLAN) as part of a
larger study entitled "The World Bank and the Env %>nment in Brazilt A Review
of Selected Projects." From the perspective of OED, the objective of che larger
study is to determine how -- and how well -- the World Bank has perceived and
dealt with environmental issues and problems in the context of several major
infrastructure and regional development projects in one particular country.
Brazil was selected both because it is ene of the Bank's principal borrowers and
because Bank operations have encounterad A wide range of ecological conditions
and environmental issues in the country. SEPLAN (as of March 1990 part of the
newly created Ministry of the Economy, FirRnce and Planning - MEFP), in turn,
is focusing on how the federal government and its agencies have addressed
environmental issues in the course of project preparation and implementation.
2.          In addition to hydropower, irrigation and resettlement projects in
the middle and lower Sao Francisco River valley, the OED/SEPLAN exercise examines
Bank-assisted operations in the eastern (Carajas iron ore) and vestern
(POLONOROESTE) parts of the vast, tropical Amazon region and (pollution control)
in the highly urbanized and industrialized state of Sao Paulo. In these distinct
geographic settings, more concretely, the study is concerned with the principal
physical and human environmental impacts of Bank-financed investments. Where
applicable, mor;eover, it also attempts to assess the adequacy, effectiveness and
sustainability of specific project components (or parallel programs) designed
to protect the natural environment and/or vulnerable social groups, including
both Amerindian communities and populations that are forced to relocate on
account of such interventions as dam and port construction.
3.          The objective of the present case study is to determine how -- and
how effectively -- the Bank and its Borrowers and Executors (the Brazilian
Government, the Sao Francisco Hydroelectric Company - CHESF, and the Sao
Francisco Valley Development Company - CODEVASF) anticipated and dealt wich the
principal environmental consequences of the major infrastructure (Sobradinho
dam and reservoir) and productive (irrigation) activities whose installation was
co-financed by the Bank. Unlike the other case studies in the series, the Sao
Francisco study will concentrate primarily, although by no means exclusively,
on the human environmental impacts of Banks-supported investments in the region.
This will be the focus both because the involuntary dislocation of substantial
numbers of rural and urban inhabitants occurred in connection with these
interventions and because one of the operations reviewed, the Itaparica
Resettlement and Irrigation Project, is the Bank's first free-standing
resettlement operation.


4.          Unlike the other studies in. this series, moreover, the present case
study examines an operation (the Itaparica Resettlome-at and Irrigation Project)
that was approved relatively recently (November 1987) and is still under
implementation. This project was included in the study at the specific request
of the Brazilian Government. The joint -- although, in the case of Itaparica,
obviously preliminary -- review of the resettlement experiences associated with
construction of the Sobradinho and Itaparica dams over a period of nearly two
decades, however, offers the possibility of assessing the extent to which lessons
learned as a result of the former intervention were effectively applied in
connection with the latter both by the Bank and by the principal government
agencies involved.
5.          Located in the heart of the semi-arid Northeast, in addition to the
challenges presented by the need for involuntary resettlement, recent
developments in the Sao Francisco valley also raise another complex and important
longer-term environmental issue confronting Brazil and other countries, that of
comprehensive river basin or regional water resource management.      In this
particular case, the major -- and increasingly competing -- demands for the
utilizatica of Sao Francisco River water are hydropower generation and private
and public irrigated agriculture, although urban, industrial, recreational and
other "uses" including evaporation are also a factor. The principal trade-offs
and institutional problems, as well as some of the broader physical environmental
considerations, associated with this issue are touched upon in the report. How
and how well the Bank and the Brazilian Government have dealt with this issue
to date is likewise preliminarily assessed.
6.          The present report is based on a detailed review of Bank project
files, Staff Appraisal and President's Reports, Loan and Guarantee Agreements,
Project Completion and Performance Audit Reports (where available), minutes of
the Bank Board meetings at which the respective operations were approved and
other relevant documentation. It is also based on interviews with Bank staff
involved in project appraisal and/or supervision and a three week field mission
including visits to the headquarters of CHESF (Recife) and CODEVASF (Brasilia)
and to the lower and middle Sao Francisco valley region in July-August 1989
during which CHESF and CODEVASF staff, other federal officials, state
environmental agencies (Pernambuco and Bahia), universities, research institutes,
local labor unions, church groups and other NGOs, together with affected urban
and rural communities, were contacted. With the logistical support of CHESF and
CODEVASF, the lower and middle Sao Francisco valley was surveyed by a combination
of air and ground transportation and project-supported or related facilities were
visited at Ibotirama (Tuxa Amerindians) and Bom Jesus da Lapa (Serra do Ramalho
colonization project) in the upper-middle Sao Francisco valley; Petrolina,
Juazeiro, Sobradinho, Pau a Pique, Remanso, Fazenda Ouro Verde, Bebedouro, Sento
Se, Santana, Casa Nova, Algodoes, Piri and Sao Joaquim in the middle valley;
Paulo Afonso, Itaparica, Belem do Sao Francisco, Manga de Baixo and Brigida
irrigation projects, Itacuruba, the Pankaruru indigenous reserve, Petrolandia
and Nova Rodelas in the lower-middle valley; and Penedo, Propria, Betume and
Cotinguiba-Pindoba in the lower valley. The assistance provided to the OED/
SEPLAN mission by CHESF and CODEVASF is gratefully acknowledged.     Numerous
helpful comments by CHESP, CODEVASF, FUNAI. the Ministry of Infrastructure and
the National Departments of Planning and Evaluation (DNPA) and DEAIN of MEFP have
been incorporated in the present version of this report.


iii
7.          While all field visits made in connection with this and the other
case studies undertaken as part of the larger OED/SEPLAN exercise were carried
out jointly, due to the differences in focus mentioned above, the two agencies
decided from the outset to prepare separate reports. During the Sao Francisco
case study, SEPLAN was represented by an environmental economist from the
Institute of Economic Research of the Institute of Social and Economic Planning
(IPEA/INPES) and a hydrological engineer and an anthropologist from the
Environmental Analysis Unit of the Secretariat of Economic and Social Planning
(SEPES/CAA) under the overall guidance of the then Secretariat, now Department
of International Affairs (DEAIN). OED, in turn, was represented by one regular
staff member during part of the visit and specialized consultants, possessing
considerable prior familiarity with the project region, in the areas of physical
and human environmental impact evaluation.     Members of CHESF's Technical
Assistance for Reservoir Implementation (ATIR) Unit and CODEVASF's central and
local staff accompanied the OED/SEPLAN mission while visiting the project areas.
8.          The report which follows will be divided into seven chapters having
the following organization. After a short introduction (Chapter I), Chapter II
summarily reviews the general regional development and institutional context in
which the specific projects surveyed in this document were undertaken. This
includes a brief discussion of the role and early development of the lower and
middle Sao Francisco valley, particularly in the areas of hydropower generation
(CHESF) and irrigation (CODEVASF). Other regional and rural -- including water
resource -- development agencies and programs affecting the lower and middle Sao
Francisco valley since the mid-1970's will also be briefly described. Chapter
III sketches the principal ecological, demographic and socio-economic
characteristics of the lower and middle Sao Francisco valley as of the early
1970's when the Bank-assisted interventions examined in this report were
initiated; particular attention is given to the major physical environmental
issues and constraints affecting the region's development. Chapter IV, in turn,
summarizes the basic characteristics of the Bank-supported projects Per se,
highlighting their implementation experience and the principle lessons learned
to date in each case.
9.          Chapters V and VI, which constitute the bulk of the report, assess
the physical and human environmental impacts of the Sao Francisco projects,
respectively.   In each case, the Paulo Afciso IV, lower Sao Francisco
polders/second irrigation and Itaparica resettlement and irrigation projects are
analyzed separately. In Chapter V, much of the focus is on water quality and
water resource management issues. In Chapter VI, in turn, while most of the
discussion concerns the rural and urban resettlement experience, other human
environmental impacts of the projects considered, including their effects on
migration and employment, rural and agro-industrial development, urbanization
and public health, at the regional level are also briefly examined. Finally,
Chapter VII looks more closely at how the Bank and the Brazilian Government
perceived and attempted to deal with the environmental aspects and impacts of
the hydropower, irrigation and resettlement projects undertaken over the past
two decades in the lower and middle Sao Francisco valley and puts forward the
principle conclusions and lessons to be drawn from this experience to date. The
latter include implications for Bank procedures and future operations both in
the Sao Francisco valley itself and elsewhere where similar issues may arise.


iv
WORLD A( APPROHES T TTHE E      %ROlMENT IN BRAZZL: A REVIEW OF SELECTED PROJECTS
TE MIDDLE AND LOWER SAO FRANCISCO VALLEY
SUMMARY AND CONCLUSIONS
Bank-Assisted Projects and Malor ggats
1.          The four Bank-supported projects considered in this report have had
a profound impact on the Sao Francisco valley in Northeast Brazil.        The
development of hydropower and associated irrigation facilities at Sobradinho,
on the lower Sao Francisco "polders" and, most recently, in connection with the
on-going Itaparica scheme have helped precipitate wide-ranging human and physical
environmental changes in the area. In choosing to become closely involved with
the development of the middle and lower valley, the Bank shares responsibility
for subsequent outcomes, both positive and negative, direct and indirect. The
projects in question have, foic e_-ample, displaced about 170,000 people from their
lands and homes, requiring resettlement solutions which have been tackled in
contrasting and frequently unsatisfactory ways.     At the same time, these
interventions have had a important catalytic effect on wider development
processes in the region.
2.          The Bank-funded schemes under review are especially critical in light
of the historically important role of the Sao Francisco River in the northeastern
economy as the region's only significant perennial waterway, a fact which has
conveyed to the valley a number of distinctive features and advantages. A major
transport route into Brazil's interior and a privileged region in terms of
climate when compared with the surrounding dry caatinga, it has acquired a
relatively dense population of small farmers, as well as growing urban centers.
The total population of the middle and lower valley stood at 1.4 million in 1970,
three-quarters of which was rural. The resulting physical, economic and social
characteristics of the valley have had fundamental implications for the nature
and scale of subsequent environmental impacts induced by the operations under
consideration, greatly extending their areas of influence beyond immediate
project boundaries.
3.          In 1974, the Bank approved a loan in the amount of US$ 81 million
to assist CHESF, the regional power company, with the Paulo Afonso IV Hydropower
Project, comprising construction of the Sobradinho regulating dam, the
installation of additional generating capacity near Paulo Afonso falls, the
expansion of transmission lines and other components. Although the project has
clearly resulted in substantial economic and social benefits due to the increased
generation and distribution of electric energy to hundreds of thousands of people
in the region, it has also had a number of less positive consequences on the
physical and, especially, human environments.     The project's most direct
environmental impact was displacement by the reservoir of some 65-70,000 people,
consisting of over 9,000 farm families and 3,000 families from four small towns.
While urban relocation was fairly successful, the rural resettlement program


V
was seriously flawed.    It was erroneously assumed that half of the rural
displacees would opt for relocation to an official colonization project at Serra
do Ramalho nearly one thousand kilometers upstream, while only a small minority
would want to remain near the lakeside. The reverse, in fact, turned out to be
the case, while the colonization scheme at Serra do Ramalho, near the town of
Bom Jesus da Lapa in the upper Sao Francisco valley, proved to be an economic
failure and was subsequently abandoned by most of the settlers from Sobradinho,
who were, thus, deprived of vital social and production support.
4.          Similarly, the poorly planned and ill-equipped Sobradinho lakeside
communities (agrovilas) have not prospered, with farmers frequently being denied
the official credit and other support necessary to overcome problems caused by
poor soils, lack of irrigation facilities, changing water levels and increased
distances to markets.    Nor was a Bank-recommended fisheries program -ver
developed. In addition, social infrastructure in the agrovilas is often 2kon-
existent or inadequate, failing to meet people's basic needs. Consequently, Vany
families have either abandoned the area outright or sold their lands to
commercial farmers from outside, resulting in the reconcentration of holdings.
A large number of previously independent smallholders, moreover, has migrated
to the towns and/or become agricultural laborers on nearby private irrigation
schemes.
5.          Many of the problems currently experienced by small farmers at
Sobradinho, more than ten years after their original displacement, can be traced
to inadequate Government indemnification policies which compensated only those
possessing legal titles for the loss of their lands and effectively decapitalized
a large number of long-standing producers whose livelihoods as riverine
cultivators had been wiped out by the project. Furthermore, ;he passage of time
should not be allowed to obscure the fact that resettlement for many was a highly
traumatic experience, occasionally associated with violent confrontational
situations in which local populations were subjected to extreme and often illegal
pressures to rapidly vacate the areas to be flooded. While such tensions are
to some degree inevitable :i situations of this kind, the enduring psychological
stress of displacement, which is still evident over a decade later, was
exacerbated by CHESF's use of strong-arm tactics during project implementation.
6.          The physical environmental impacts of Sobradinho have also been
significant. Downstream, regulation of the Sao Francisco River resulted in a
large increase in the lowflow, thus threatening to flood some 9,000 hectares of
fertile rice-paddy and necessitating the lower valley "emergency" polders and
irrigation projects discussed below. Upstream of the dam, in turn, a number of
problems have become evident including the lose of fertile riverine lands and
the destruction of floodplain (vazante) farming, progressive siltation and over-
fishing due to the uncontrolled use of illegal methods. An increasingly serious
problem is likely to arise in the future, moreover, from potential water
shortages due to growing competition among consumers in different sectors (and
subregions), namely electricity generation, irrigation and urban domestic and
industrial use. Increased evaporation due to the formation of large reservoirs
will heighten the water scarcity problem, while the impact of Sobradinho -- which
is the second largest (and the largest man-made) lake in South America -- on the
regional climate is still uncertain.


vi
7.          The Lower Sao Francisco Polders and Second Irrigation Projects (SF
I and II), in turn, were "emergency" measures prompted by the increase in minimum
flow in the lower valley caused directly as a result of the construction of
Sobradinho dam. Bank loans totalling over US$ 66 million were approved in 1975
and 1979, respectively, to protect the floodplains (or varzeas) near the mouth
of the river through a series of dikes and pumping stations and to establish five
irrigated "polders" on some 25,000 hectares of land which was to be expropriated
and redistributed in small plots to roughly 3,800 farmers from the region. The
solution adopted was found by Bank staff to be the only feasible alternative
considering the physical, economic and social environment, while the resulting
projects had to be implemented under considerable time pressure and social
tension created by the conclusion of the dam and power station upstream at
Sobradinho, a factor over which the executing agency, the Sao Francisco Valley
Development Company (CODEVASF), ha. no control.
8.          The lower Sao Francisco projects, moreover, were justified not just
on "emergency" grounds (ie. as a compensatory scheme to ameliorate the adverse
impacts of Sobradinho on the rural population in the lower valley), but, more
broadly, as a conscious intervention to promote the economic and social
advancement of the rural poor. Prior to these operations, the lower valley was
characterized by a heavy concentration of land and income, as fewer than 100
landowners controlled 90% of the project area.   Incomes were skewed, but the
majority of the population was very poor, with average per capita income in the
area on the order of half the national average.    In this context, the land
redistrib-ation component of the polders project represented a pioneering attempt
to promote small-scale agrarian reform in the region. The projects included
large investments in social infrastructure, particularly schools and health
posts, in an area that was traditionally one of the poorest in the country and
were among the first externally supported efforts to raise the living standards
of the rural poor on an area specific basis in Brazil. As such, they were also
the direct precursors of a large number of small-farmer oriented integrated rural
development operations in the Northeast undertaken during the latter 1970's and
throughout the 1980's.   In many respects, however, despite the "reformist"
rhetoric which has accompanied them, these interventions may have been as
disruptive for much of the population affected as the events upstream at
Sobradinho.
9.          In the first instance, these "emergency" projects were accompanied
by the eviction of more than 50,000 rural dwellers in the lower valley, while
the new irrigation schemes absorbed only 15,000 to 20,000, apparently resulting
in a ncit displacement of at least 30,000 people. Unlike Sobradinho, there was
no attempt to devise a wider resettlement strategy, the absence of which
contributed to significant out-migration, clearly reflected in the low or
negative rates of both rural and urban demographic growth in the area during the
1970's which were atypical of the Sao Francisco valley as a whole. A number of
factors contributed to this net displacement including delays of several years
between land expropriation and project operation, limited financial compensation,
heavy-handed eviction methods, the relatively low labor-absorption capacity of
the new irrigation schemes and selective recruitment methods by CODEVASF which
disqualified many local applicants, together with such non-project factors as
serious flooding and the rapid expansion of sugar cane production in parts of
the area. Because most of the people living in the lower Sao Francisco varzeas


vii
were sharecroppers, tenants or salaried workers, moreover, there was no reliable
information concerning their number when the polders project was initially
appraised.   As at Sobradinho, however, local church groups made vociferous
protests to the Government in an attempt to win greater compensation for
dispossessed communities, attracting unfavorable publicity over both CODEVASF's
and the Bank's perceived roles in this process.
10.         The subsequent economic performance of the five CODEVASF-run
irrigation schemes in the lower valley has been largely disappointing,
registering a 7% rate of return which is well below the appraisal estimate of
22%. Problems of inadequate drainage, salinization and lack of extension support
for colonists have produced poor rice yields, low production levels and highly
variable individual farmer incomes, despite promising results with integrated
"pig-rice-fish" farming.    There is some evidence, moreover, that farmer
indebtedness may be leading to premature abandonment of the land and the
concentration of holdings.    Initial steps have been taken by CODEVASF to
introduce a system of irrigation cooperatives with administrative and financial
autonomy ("emancipation"), but the economic and managerial feasibility of these
entities have yet to be carefully studied.
11.         In terms of physical environmental impacts, the substitution of
traditional vazante agriculture by "polder" irrigation schemes has given rise
to a number of problems. The trapping of alluvium by Sobradinho has rendered
soils in the lower valley less fertile, necessitating increased applications of
chemical fertilizers which could have serious public health consequences. Yields
are also affected by poor water quality in many of the affluents of the Sao
Francisco which cross the polder irrigation projects, leading to soil
salinization as the result of periodic flooding and inadequate drainage. The
predominance of rice monoculture may aggravate risks of infestation by pests and
disease and is already reportedly encouraging the excessive and potentially
dangerous use of agrotoxic substances by farmers.
12.         Itaparica, the final Bank-funded project under review, marks a
significant breakthrough in dealing with large-scale population displacement in
Northeast Brazil. Unlike the situation at Sobradinho and in the lower valley,
dam and reservoir construction were accompanied by a comprehensive resettlement
program in which the affected communities had some involvement in the decision-
making process. Even though this participation has, in practice, been limited
and had to be actively fought for by the rural trade union consortium, known as
POLOSINDICAL, it, nevertheless, represents a major innovative step that has
potentially profound implications for future policy-making and project
implementation in the valley, both for CHESF and the Bank. Following appraisal
of the first power sector loan for Brazil in 1985, the Bank approved an initial
US$ 132 million in 1987, followed by an as yet unsigned supplemental loan of
US$ 100 million in 1990, to fund agricultural production and rural infrastructure
and services in five major irrigation projects in connection with the new
Itaparica reservoir, formed in 1988.
13.         The campaign for a comprehensive resettlement program at Itaparica
was started by POLOSINDICAL in 1979.    While CHESF had hoped to follow past
practice by rehousing the displaced urban population and offering only monetary
compensation to eligible farmers, POLOSINDICAL negotiated with CHESF over a


viii
prolonged period for the right of those evicted to alternative land and
livelihoods. In the face of long official silences over their proposed fate,
the local population, sensitized by the earlier experiences at Sobradinho and
in the lower valley, resorted to mass public demonstrations which received
national and even international media coverage. As a result, the population was
able to exert some influence over project design and POLOSINDICAL negotiated a
written agreement with CHESF in 1986 over such crucial aspects as site selection
for the irrigation subprojects and the provision of maintenance payments to all
relocated families, pending operation of these schemes.
14.         Due largely to the actions of POLOSINDICAL and well-organized local
resistance, together with later Bank participation, the outcome of this on-
going project has thus'far been significantly different from that of the previous
experiences at Sobradinho and in the lower valley. Despite minor problems with
compensation procedures, relocation of some 40,000 people during 1987-88 went
smoothly, with three-quarters of the total opting for resettlement in 109
agrovilas, equipped with basic health, sanitation and educational infrastructure.
About 5,000 farm families have been transferred to six irrigation schemes
covering 20,000 hectares. However, as of early 1990, only half of these families
had received their plots and none of the large projects was operational. The
first of these schemes are now expected (perhaps optimistically) to come on
stream in December 1990, some two years behind schedule.
15.         Although the physical transfer of people has been carried out
relatively successfully, problems have subsequently arisen at Itaparica due to
the long delay in commencing irrigated agricultural production. Intra-communal
violence, alcohol abuse, family disintegration, low morale and a generally tense
atmosphere characterized the agrovilas during much of 1988 and 1989. Prolonged
idleness, limited local employment opportunities and the occasionally poor
quality of social services in the agrovilas have all contributed to a climate
of uncertainty and frustration. This has been exacerbated by the slowness to
establish local administrative and management structures to cope with the
transition from traditional to more modern and capital-intensive irrigated
agriculture under the new system.
16.         The final cost of resettlement at Itaparica may reach more than US$
63,000 per family which is high and considered excessive by Brazilian Government
authorities. Nonetheless, the proposed interventions are still considere6 to
be the least-cost solution for carrying out a comprehensive resettlement program
of this nature and indicate the financial repercussions that are likely when
executing and funding agencies are required to meet full relocation obligations
to the affected populations. This again contrasts with earlier situations, such
as Sobradinho, in which the real social and economic costs are hidden by the
provision of only partial resettlement requirements or the failure to relocate
a majority of the displaced population, as was the case in the lower Sao
Francisco valley.
17.         The immediate ecological impacts of Itaparica, in turn, have thus
far been modest and seem to have been largely attenuated by CHESF's advance
planning to institute appropriate controls in the physical, biological and socio-
cultural spheres, following negotiations with state environmental authorities
in Pernambuco and Bahia (although, at the time of the OED/SEPLAN mission in mid-


ix
1989, the latter had yet to grant CHES an operating license for Itaparica).
These controls include soil use and water quality monitoring, as well as an
animal rescue plan and an aquatic fauna conservation program. On the evidence
of Sobradinho, however, future problems are likely to include the risk of lake
contamination by agrotoxic chemicals used in irrigated agricultural activities,
together with untreated urban and industrial wastes, while yields on irrigation
schemes may be undermined by salinization.   Excessive evaporation, moreover,
could exacerbate the growing problem of competition among water users (mainly
power versus irrigation) in the middle valley.   These phenomena will require
careful monitoring since both public and private irrigation projects are expected
to expand significantly in the region over the next decade.
18.         While the direct, localized human and physical environmental impacts
of the three schemes examined have been profound, these projects have also had
wider consequences for the Sao Francisco valley as a whole.      In terms of
production, the creation of Lake Sobradinho has facilitated the expansiori of
capital-intensive irrigated agriculture (about 177,000 hectares by 1988, well
over half of which was in private hands). Much of this production is oriented
toward higher-value export crops and is largely concentrated in the area
polarized by Petrolina and Juazeiro. There has been a corresponding spread of
agro-industrial processing enterprises, served by an increasingly sophisticated
transport and communications network.   This has had an important multiplier
effect, helping to stimulate local commerce and creating employment, especially
temporary wage labor.
19.         The impressive economic growth in the middle valley over the past
two decades, however, has also been accompanied by a process of land
concentration as small farming has become less viable and land values have risen,
encouraging land sales and out-migration. As a result, the traditional class
of independent semi-subsistence smallholders is gradually being eroded and
replaced by more capitalized and commercially oriented farmers, many of whom have
come to the area from other parts of Brazil or abroad. Although it is difficult
to predict how far this process will advance, more traditional tenure relations
such as sharecropping are finding a place in the new production systems.
Nevertheless, these marked alterations in cropping patterns, landownership and
employment structures may have an adverse impact on local poverty levels and food
security, while also contributink to the rapid growth of urban squatter
settlements.
20.         Recent agrarian changes have led in no uncertain terms to the rapid
pace of urbanization in the middle Sao Francisco valley where the major centers
have probably quadrupled in size since 1970. Yet, much of this expansion is
accounted for by the spread of low-income settlements, generally characterized
by inadequate housing and local services -- even in the new townships around
Sobradinho -- and accompanied by a worsening of social problems associated with
unemployment and poverty. The geographic distribution of urban impacts along
the valley, moreover, has been uneven. While Petrolina-Juazeiro and smaller
urban centers near Sobradinho have benefitted from substantial industrial and
commercial spin-off generated by irrigated agriculture, towns such as Belem do
Sao Francisco and Itacuruba in the middle valley and Penedo and Propria near the
mouth of the river have derived little advantage, appearing instead to have
stagnated economically in part as a result of the projects in question.


x
21.         The major ecological hazard facing the valley as a whole springs from
the largely uncontrolled use of agrotoxic substances such as fertilizers,
herbicides and pesticides for irrigated agriculture. Contamination of domestic
water supplies, crops and even fish could present a major danger to public health
in the future, with some initial symptoms already being apparent. The impact
of Lakes Sobradinho and Itaparica on climate at the regional level, in turn, is
presently unclear and requires close monitoring. As the area of irrigated land
continues to expand, finally, soil salinization, which is a potential problem
with any irrigation project and has already occurred in other areas under
irrigation in the Northeast, may become more widespread unless local water
management techniques continue to be improved.
Principal Concluaions and Lessons Learned
22.         The experience with the Bank-supported projects surveyed in this
report has often been unsatisfactory, especially from a human environmental
standpoint. Without denying that considerable progress has occurred over the
past decade, the projects undertaken during the 1970's resulted in substantial
human costs. The most critical consideration at this juncture, however, is the
extent to which the organizations involved have learned from previous errors and
oversights so as to correct present and future policies and practices. In this
context, there is no doubt that all three schemes have yielded important lessons
for planners and policy makers which have implications for both the Bank and
Borrower institutions.
23.         During the 1970's, when Paulo Afonso IV/Sobradinho and the lower Sao
Francisco operations were appraised, the Bank lacked a policy on involuntary
resettlement to guide project planning and execution. Although CHESF and the
Bank had been alerted to potentially adverse environmental impacts, Sobradinho
was conceived essentially as a hydropower scheme, while social, ecological and
other local development considerations were marginalized. During this period,
the Bank clearly did not pay adequate attention to human and physical
environmental issues in project design and implementation and was poorly staffed
to tackle such dimensions.     The Sobradinho experience was, nevertheless,
instrumental in the formulation of subsequent Bank policies on involuntary
resettlement, namely the 1980 Operational Manual Statement (OMS), the 1986
Operational Policy Note (OPN) and the extensive guidelines published in 1988.
The existence of a resettlement policy, however, does not guarantee its full
adoption, a point which is brought home both by the execution of SF II in the
lower valley and the Bank's relatively late participation in the Itaparica
resettlement program, discussed below.
24.         The Borrowers/Executors (CHESF and CODEVASF), similarly, lacked a
coherent resettlement policy and tended initially to conceive relocation
primarily as a set of relief and welfare measures, rather than as a longer-term
development exercise.   In the cases of both Sobradinho and the lower Sao
Francisco polders and irrigation schemes, this led to the adverse consequences
described above as a combination of an authoritarian strategy that largely
ignored the needs of the affected local populations and inadequate monetary
compensation resulted in the destruction of livelihoods and, ultimately,
increased poverty and human suffering. This narrow approach can be explained


xi
in good measure by a number of contextual factors including the top priority
attached to energy production in Brazil during the oil crises of the 1970's, the
institutionalized engineering bias within CHESF and CODEVASF, the prevailing
repressive political climate under military rule during much of the period under
review and straightforward and understandable desires to minimize project costs.
While significant changes have subsequently occurred in many areas, improvements
are, nevertheless, still required in others. Brazil, for example, still lacks
a national policy on involuntary resettlement.
25.         From the Bank's point of view, Sobradinho clearly demonstrates the
undesirable consequences of not having explicit environmental protection and
resettlement policies and, thus, of having had to rely on ad hoc procedures to
deal with complex ecological and social issues. The lack of proper guidelines
for Bank personnel, together with the failure to provide adequate physical and
human environmental expertise, contributed to the setting of insufficient loan
conditionalities, incomplete appraisal and supervision from an environmental
standpoint and late participation in the project which reduced the Bank's
influence on project design and execution.
26.         In the lower Sao Francisco valley, in turn, the fact that neither
the Bank, nor the Borrower had a comprehensive resettlement plan resulted in the
anomaly of an "emergency" project with social objectives that appears to have
failed to compensate over 30,000 people for the loss of livelihood induced by
construction of the Sobradinho dam.    This contributed to large-scale out-
migration from the area, a phenomenon which is glossed over in Bank supervision
and completion reports. The problem is more serious in view of the fact that
the irrigation projects under SF II were implemented after the Bank had published
its OMS on resettlement in 1980. The Bank, thus, forfeited an opportunity to
ensure that inequities were minimized and benefits were spread more widely among
the entire affected rural population.
27.         Itaparica is the first comprehensive involuntary resettlement program
undertaken in Brazil and, for those directly affected, represents a major advance
in relation to the traumatic earlier experiences at Sobradinho and in the lower
Sao Francisco valley. Unfortunately however, this progress was not primarily
the product of enlightened policy and procedures on the part of CHESF, but,
rather, was largely due to sustained political pressure by rural labor unions
and other groups throughout the 1980's.     Itaparica, thus, illustrates the
potential usefulness to planners and policy makers of vigorous "grass root"
popular participation.
28.         The  Bank's  involvement  at  Itaparica, where pre-construction
activities began in the late 1970's, also came rather late and in response to
environmental concerns first raised in 1985 in connection with the preparation
and subsequent appraisal of the power sector loan for Brazil, approved the
following year. Although the Bank performed a crucial role in responding to
CHESF's request for assistance and in helping to cement the power company's
agreements with POLOSINDICAL, because of its relatively late entry into the
process, the Bank's influence on project design was less than it might otherwise
have been. Perhaps the principal lesson that can be learned from the experience
at Itaparica at this point, accordingly, is the danger of entering a
(resettlement) project so late in the cycle of a related (hydropower) operation


xii
that could not have been slowed down. The tense social situation generated to
a large degree by the inadequate planning of the latter vie-a-vis resettlement
of the displaced population forced both the implementing agency and the Bank into
accepting design criteria and a mode of operation that greatly increased the cost
of the former.   Despite this shortcoming, if the Itaparica Resettlement and
Irrigation Project is implemented as designed, it could become a major
development pole in the lower-middle Sao Francisco valley, directly and
indirectly providing employment and income for thousands of people.
Recommendations
29.         A number of recommendations arise from the Bank's experience in the
middle and lower Sao Francisco valley to date. As far as future Bank operations
in the valley and elsewhere are concerned, these should be prepared and appraised
with greater sensitivity to the human and physical environmental dimensions of
local development. This is justified on the grounds of both economic efficiency
and social equity. Project preparation and appraisal procedures, additionally,
should ensure that resettlement and environmental protection costs are fully
assessed and considered in the economic evaluation of the infrastructure and/or
productive projects that give rise to them in the first place and that the
necessary mitigatory, corrective or compensatory measures are fully defined,
coated and financed. As the cases of SF II and Itaparica reveal, moreover, it
is not sufficient for the Bank to have resettlement and environmental protection
policies alone.    A firm institutional commitment to the full and timely
application of the associated guidelines must also exist throughout the project
cycle.
30.         Allied to this commitment, there is a clear need to make more
extensive and systematic use of environmental and social expertise in the
preparation, appraisal and supervision of hydropower, irrigation and resettlement
(among other types of) projects. More generally, rather than relying on ad hoc
and often imperfectly gathered information, the Bank should more actively promote
the institutionalized integration of social science and environmental knowledge
in all phases of project development, but especially during the identification
and preparation stages. In addition, greater participation by local communities
and non-governmental organizations should be encouraged so as to ensure that
borrowing country planners and policy makers and Bank technical staff give
adequate priority to these issues and to help them to design interventions which
are more responsive to the needs of local ecosystems, project beneficiaries and
other impacted populations.
31.         Itaparica, furthermore, illustrates the importance of adequately
assessing the potential physical and human environmental problems associated with
individual projects supported, if only indirectly, through sector loans.   In
relation to large hydropower projects in particular, the Bank, in consultation
with executing agencies and the affected communities, should attempt to identify
the likely impacts of dam construction and other infrastructure components as
early as possible, so that prompt action can be taken to design effective
measures to avoid or alleviate potential adverse human and physical environmental
consequences at the project level. Power sector investment and/or adjustment
loans, moreover, should specifically seek to create, improve and/or reinforce


xiii
environmental impact assessment mechanisms and procedures at the sectoral level,
as, in.fact, is presently occurring in Irazil.
32.         Such early participation by the Bank in sector or project loans
involving or requiring major involuntary resettlement efforts should likewise
aim at obtaining a clear and unequivocal commitment by executing agencies to
adopt a comprehensive relocation plan which gives adequate attention to the
socio-economic reestablishment of displaced populations, rather than the largely
piecemeal welfare type solutions froquently attempted in the past. The level
of forced removal, moreover, should be minimized, and full compensation and
alternative employment within a longer-term structured rural development program
should be offered to those who desire such support. The choice of technological
inputs, such as new irrigation methods, however, should be made only after
consultation with intended beneficiaries has taken place.   To help executing
agencies meet these requirements, the Bank should give greater emphasis to
strengthening institutional capacity in the pertinent areas. More generally,
countries such as Brazil should be encouraged to develop explicit national
involuntary resettlement policies.
33.         With respect to physical environmental issues, in turn, in view of
the growing competition among large water users (particularly hydropower and
public and private irrigation), there is a need for improved cross-sectoral,
multi-state water resource planning and management in the Sao Francisco valley.
In the process, the inevitable trade-offs and differing institutional interests
involved in long-run water resource use decisions for the Sao Francisco basin
should be clearly identified and explicitly dealt with by federal planning and
environmental agencies, in consultation with CHESF, CODEVASP and other relevant
actors, including state and local governments. In appraising future irrigation
projects in the valley, moreover, the Bank should be fully aware of the potential
ecological hazards involved, especially salinization and agrotoxic pollution,
and assist in defining and monitoring the implementation of appropriate
safeguards.
34.         As far as possible, critical and, especially, large-scale Bank-
supported infrastructure and productive sector projects that are likely to have
a catalytic effect on the local economy should also be viewed within their
regional context, rather than as isolated interventions having purely extra-
local objectives such as the increased supply of power to distant state capital
cities. In this context, additionally, due consideration should be given to both
the potential positive and negative local development impacts of these
investments. All of the projects under review in this report have had, or will
have, significant broader repercussions on their immediate and larger areas of
influence, yet this dimension was largely ignored in project preparation. Again,
consultation with a range of representative local organizations, such as trade
unions, church groups, community associations and other non-governmental
organizations, during project preparation can help to build a more comprehensive
picture in relation to the likely physical and human environmental impacts of
large investments at the regional level and, thus, inform decisions about the
nature and scale of the financial and other assistance required in order to deal
adequately with them.


xiv
35.         Finally, even though these projects have yielded useful lessons,
critical gaps in our knowledge still exist. Accordingly, it would be helpful
for the future design and implementation of similar operations if further
research were to be carried out in a number of key areas. The most important
of these includes (i) the wider socio-economic impacts of different resettlement
outcomes in the Sao Francisco valley (comparing Sobradinho with Itaparica, for
example); (ii) the organization and management of irrigated production at
Itaparica, including the feasibility of "emancipated" public projects; (iii) the
effects of increasing competition within the valley for water resource use,
especially energy versus irrigation; and (iv) climate monitoring and modelling
studies to determine changes in local weather (and, possibly, production)
patterns arising from the formation of large reservoirs. Such research, in all
likelihood, would also be of relevance for river basin development in semi-arid
regions more generally.


WORLD BANK APPROACHES TO THE ENVIRONMENT IN BRAZIL: A REVIEW OF SELECTED PROJECTS
THE MIDDLE AND LOWER SAO FRANCISCO VALLEY
I. INTRODUCTION
1.01        Loan 1008-BR in the amount of US$ 81.0 million was approved on June
4, 1974 to help finance the Paulo Afonso IV Hydroelectric (PA IV) Project. The
Borrower and Executor of the project was the Companhia Hidro Eletrica do Sao
Francisco (CHESF), the regional electrical power company for Northeast Brazil,
and the federal government was the Guarantor of the loan. CHESF was one of the
Bank's first borrowers, as one of the latter's earliest operations, approved in
1950, supported installation of the initial hydropower plant near Paulo Afonso
falls on the Sao Francisco River. At appraisal, the PA IV operation was expected
to have a total cost of US$ 692.6 million.     In addition to the Bank loan,
external funding was to be provided both by the Inter-American Development Bank
(US$ 84.8 million) and by bilateral sources (US$ 71.9 million). The project was
closed on June 30, 1983, at which time an unused loan balance of US$ 1.23 milli- I
was cancelled.
1.02        With the objective of expanding hydropower development in the Sao
Francisco River valley, PA IV, as appraised, consisted primarily of the
construction of a large dam and reservoir at Sobradinho, some 790 kilometers from
the mouth of the river, the expansion of generating capacity at Paulo Afonso,
470 kilometers downstream from Sobradinho, and the installation of transmission
lines, substations and related facilities. Creation of the Sobradinho reservoir
was expected to flood an area of roughly 4,150 square kilometers and displace
about 70,000 rural and urban residents upstream of the dam. In order to relocate
these families, a specific resettlement program was implemented parallel to
construction of the Sobradinho dam. Below the dam, the project was expected to
regulate water flow in order to improve hydropower generation at Paulo Afonso
and other points along the river, subsequently also including Itaparica, in the
process substantially altering traditional flooding patterns in subsistence rice
producing areas in the lower Sao Francisco valley.
1.03        In order to protect rice production and the livelihood of small
farmers adversely affected by the modification of river flow in the lower Sao
Francisco valley an "Emergency Plan" was prepared by the then Superintendency
for the Sao 7rancisco Valley (SUVALE), which was later transformed into the
present-day Company for the Development of the Sao Francisco Valley (CODEVASF).
Implementation of this plan was financed by the Bank through two complementary
projects, the Lower Sao Francisco Polders Project (hereafter SF I) and the Sao
Francisco II Irrigation Project (SF II).     These operations were among the
earliest Bank-supported projects in the agricultural sector in Northeast Brazil,
as well as the first such projects specifically involving irrigation in the
country. The polders project was partially funded by Loan 1153-BR in the amount
of US$ 23.0 million, approved on June 9, 1975. The SF II operation, in turn,
was supported by Loan 1729-BR for US$ 28.0 million, approved on June 19, 1979.


2
In both cases, the Brazilian Government was the Borrower and CODEVASF was the
Executor.   SF I and II closed on September 30, 1983 and June 30, 1987,
respectively. Both loans were fully disbursed.
1.04        The two lower Sao Francisco projects, as appraised, consisted of a
combination of physical infrastructure -- particularly dikes and pumping stations
-- agricultural support services and social facilities, together with measures
to provide land tenure to low-income rice farmers, the majority of which had
formerly occupied areas along the floodplain (or varzeas) as sharecroppers. SF
I, more specifically, was intended to preserve rice production in six large and
some 15 to 20 smaller varzeas and to fully develop irrigation works in two of
the  large varzeas   i while SF    II would   provide additional  irrigation
infrastructure, support services and social facilities in the other four large
varzea areas. SF II, in short, was a direct extension of the polders project
and, thus, for purposes of the present report, the two operations will be
considered as two overlapping stages of a single undertaking implemented over
a twelve year period.
1.05        Finally, Loan 2883-BR in the amount of US$ 132.0 million for the
Itaparica Resettlement and Irrigation (hereafter Itaparica) Project was approved
on November 17, 1987. This loan has an expected closing date of June 30, 1994.
Due to significant dollar cost overruns experienced during implementation thus
far, together with a shortage of local counterpart funds, a supplementary loan
(2883-1-BR) in the amount of US$ 100 million was approved for this operation on
February 20, 1990 without altering the projected closing date. In both cases,
the Borrower is the Central Electrical Holding Company of the Brazilian
Government (ELETROBRAS) and the Executor is CHESF. As of February 28, 1991,
roughly US$ 112.6 million of Loan 2883 had been disbursed, but Loan 2883-1 had
not yet become effective.
1.06       The principal declared objective of the project is to restore and
improve the living standards of some 8,100 families displaced by installation
of the Itaparica dam and reservoir, located some 30 kilometers upstream from
Paulo Afonso.   Although the Itaparica dam and hydropower plant wero not
themselves financed by the Bank, the need to accelerate and upgrade resettlement
provisions for the population to be relocated was identified during the course
of a Bank review of environmental and social issues in connection with appraisal
of the first power sector operation for Brazil (Loan 2720-BR in the amount of
US$ 500 million) which was approved i1n June 1986. In contrast to the earlier
resettlement measures taken in parallel to the construction of Sobradinho dam,
the Itaparica Project involves not only the physical relocation of rural and
urban populatione, but the provision of substantial productive (ie. irrigation)
infrastructure and support services for rural development activities. Unlike
the earlier experience at Sobradinho, moreover, the design and impleme.tation
of the resettlement program for Itaparica has involved significant beneficiary
participation, largely through the intervention of a local rural trade union
consortium known as POLOSINDICAL. .
1.07       Although the Bank has recently approved other irrigation loans for
or including the Sao Francisco valley -- specifically, Loan 2680-BR (US$ 48
million) for the Northeast Irrigation Engineering Project, approved in April
1986; Loan 2719-BR (US$ 57.0 million) for the Upper and Middle Sao Francisco


3
Irrigation Project, approved in June 1986; Loan 3013-BR (US$ 71.0 million) for
the Jaiba Irrigation Project, approved in December 1988; and, most recently, Loan
3170-BR (US$ 210.0 million) for the Northeast Irrigation I Project, approved in
February 1990 -- the present report is restricted to the four operations
mentioned in the preceding paragraphs. Among these earlier operations, however,
there is a clear linkage between the PA IV/Sobradinho Project and the two
irrigation projects in the lower Sao Francisco valley since the latter are a
direct consequence of the change in river regime generated by the former. The
Itaparica Project, in turn, was a response by the Bank to the need to resettle
population dislocated by construction of another major dam in the Sao Francisco
valley and, thus, to confront a similar situation to that encountered a decade
earlier in connection with Sobradinho. Accordingly, a preliminary examination
of the on-going Itaparica Resettlement Project presents an opportunity to
determine how effectively the lessons arising out of the Sobradinho experience
were learned by the Bank and the Brazilian agencies involved and incorporated
into the design of the more recent operation. The evolving Itaparica experience
likewise raises several additional issues with which the Bank will need to deal
more adequately in the future.
1.08        The present case study also illustrates several problems related to
regional natural resource -- especially water resource -- management and to
river basin development more generally. These problems cut across sectors --
particularly power and agriculture -- and, thus, necessarily involve different
sectoral institutions such as CHESF and CODEVASF, among others. In the present
case, they also cut across the boundaries of several states (ie. Bahia,
Pernambuco, Sergipe and Alagoas), thereby requiring coordination among different
state governments, including different state environmental protection agencies,
as well as overall guidance, monitoring and control on the part of federal
planning and environmental institutions.  Furthermore, in cases like the Sao
Francisco valley, where cempetiticn for resource use among different sectors may
increase to the point where the un, irlying resource base may ultimately be unable
to sustain projected levels of future economic activity, basic public sector
policy and investment decisions affecting regional (including water) resource
utilization should take development alternatives and constraints (including
environmental constraints) extending beyond the region itself clearly into
account. Such decisions that potentially involve several regions, as well as
a variety of sectors, will likewise require improved planning and coordination
at the federal level.


4
II. BACKGROUND
2.01        The Sao Francisco River valley has historically played an important
role both in the development of the impoverished and drought-prone Northeast
and in that of the larger Brazilian ecormy and society as a whole. Furthermore,
since the Second World War, the Sao Francisco valley has received increasing
attention by the federal government as part of its evolving efforts to reduce
widening income and other disparities between northeastern and South-Central
Brazil and, in particular, to promote urban-industrial development and combat
rural poverty in the Northeast. The Bank-assisted projects reviewed in this
report have contributed directly to these broader government initiatives. Before
examining these operations in further detail, therefore, it is useful to situate
them in terms of the larger government interventions affecting the Sao Francisco
basin undertaken over the past several decades.     Many of the difficulties
encountered in the programs briefly considered below, moreover, have also
characterized Bank-supported irrigation projects in the lower and middle Sao
Francisco valley.
A. The Role and Early Development of the Lower and Middle Sao Francisco Valley
2.02        Discovered by Amerigo Vespucci on October, 4, 1501, the Sao Francisco
River served as a major route into the interior of northeastern Brazil throughout
the colonial period. The town of Penedo, located near the mouth of the river,
was founded in 1560 and prospered as a major port for ocean-going vessels and
center of the Amerindian slave market. Expeditions by frontier explorers and
the granting of large tracts to individuals favored by the Portuguese Crown, in
turn, led to establishment of a livestock-based economy in the valley. This was
supplemented in the nineteenth century by cotton production, stimulated by high
prices resulting from shortages caused by the American Civil War.     Gradual
occupation by small farmers also gave rise to floodplain (varzea) production of
staple food crops to support the growing population.    Until the significant
expansion of the federal and state road networks in the 1950's and 1960's,
moreover, the river served as a major transportation corridor for both passengers
and freight over the distance of more than 2,000 kilometers between Paulo Afonso
falls in northern Bahia and the town of Pirapora in north-central Minas Gerais.
The twin cities of Juazeiro (Bahia) and Petrolina (Pernambuco) in the middle Sao
Francisco valley owe their origins to this traffic.    The river continued to
perform this role, albeit at a reduced level, until formation of 'the Sobradinho
reservoir in 1977.
2.03        During the 1930's and 1940's, the federal government began to turn
its attention away from the semi-arid interior (sertao) of the Northeast, where
a policy of reservoir construction (acudagem) by the National Department of
Works against the Drought (DNOCS) had produced few positive results in terms of
drought alleviation, to the Sao Francisco basin. 1 The comparatively much vaster
1 The history of federal government efforts through the early 1960's to
deal with the periodic droughts and, subsequently, to promote regional
development, including that of the Sao Francisco valley, is well documented by
Albert 0. Hirschman (Journeys Toward Progress, Twentieth Century Fund, New York,


5
water resources of the letter seemed to offer substantially greater potential
for "drought-proofing" the region.   One early, if grandiose, propopal, for
example, was to divert some of the Sao Francisco's waters northward to regulate
the flow of the non-perennial Jaguaribe River in Ceara state. Later, embryonic
ideas were put forward for establishing irrigation schemes that would serve as
a haven for drought victims farther to the north. Dam construction to stabilize
seasonal flow variations would also help the river fulfil its traditional role
as the main transportation artery between the northeastern interior and the
Center-South of Brazil. Following the end of the tiat Vargas administration
in 1945, the federal government specifically earmarked funds to develop the Sao
Francisco valley and help preserve national unity. With these objectives also
in mind, CHESF and the predecessor agencies to the present-day CODEVASF were
established in the late 1940's.
B. CHESF and Hydropower Development in the Sao Francisco Valley
2.04        Small-scale electricity generation had been initiated in the Sao
Francisco valley by private entrepreneurs as early as 1913 in order to power
cotton yarn and textile production near Paulo Afonso. However, State involvement
in regional hydropower development started with the formation of the Companhia
Hidro Eletrica do Sao Francisco (CHESF) in 1945. The company was initially
granted a concession to develop the hydropower resources of the Sao Francisco
at Paulo Afonso and was given responsibility for supplying power to the
distributing utilities of the region's largest cities, Recife and Salvador.
CHESF eventually provided electricity to nine distribution companies, although
this number was later reduced to eight (Ceara, Pernambuco, Paraiba, Rio Grande
do Norte, Piaui, Alagoas, Sergipe and Bahia) run by the respective state
governments. CHESF is presently one of four regional operating subsidiaries of
ELETROBRAS, the mixed economy holding company of the Brazilian power sector
established in 1967, under the jurisdiction of the Ministry of Mines and Energy
(MME). 2  In 1975, CHESF relocated its headquarters from Rio de Janeiro to
Recife, losing about 80% of its personnel in the process.
2.05        The Bank first assisted CHESF in 1950 through Loan 25-BR for US$ 15
million to finance the initial stage (120 MW) of the Paulo Afonso hydroelectric
project.  This first significant attempt to use the river's power generating
potential was completed in 1955. Since then, CHESF has substantially increased
both its installed capacity and electricity sales.     By 1974, CHESF had an
installed capacity of 1,346 MW and sales of 3,215 GWh. Ten years later these
figures had increased to 6,076 MW and 24,269 GWhl, respectively, while the company
operated some 12,250 km of transmission lines and 72 substations. Much of this
expansion was undertaken on the basis of studies sponsored by MME in 1969, which
projected rapid growth in regional demand for electricity at least through the
early 1980's.    Hydroelectric development of the Sao Francisco valley was
1963, Chapter I) and Stefan H. Robock (Brazil's Developing Northeast, The
Brookings Institution, Washington, 1963).
2  The other subsidiaries are ELETROSUL, ELETRONORTE and FURNAS for the
sou*h, north and eastern (ie. Rio de Janeiro, Espirito Santo and Minas Gerais)
regions, respectively.


6
determined to be the least-cost alternative for meeting this expected demand and
a multi-year development program was proposed consisting of a large regulating
dam at Sobradinho, complemented by the progressive construction of hydropower
plants at Moxoto (400 MW), 3 Paulo Afonso IV (1,900 MW) and Xingo (4,000 MW),
to be followed at a later date by the installation of generating capacity at the
foot of Sobradinho dam.
C. CODEVASF and Early Irrigation Development in the Sao Francisco Valley
2.06        Soon after C1ESP was established in 1945, the Comissao do Vale do
Sao Francisco (CVSF) was set up in 1948. CVSF was modelled on the American
Tennessee Valley Authority and assigned the ambitious objective of overseeing
the integrated development of the entire river basin covering an area of some
630,000 square kilometers. To achieve this goal, the commission was allotted
several tasks including river flow regulation, flood control, irrigation, the
improvement of river and road transport and communications and regional land use
planning.   CVSF was renamed the Superintendencia do Vale do Sao Francisco
(SUVALE) in 1967 and acquired its current name, the Companhia do Desenvolvimento
do Vale do Sao Francisco (CODEVASF), in 1974.    Initially located in Rio de
Janeiro, its headquarters were subsequently transferred to Brasilia after
inauguration of the new federal capital in 1960. The organization's early record
is generally agreed to have been disappointing, its achievements largely limited
to the construction of feeder roads and social infrastructure, together with the
provision of water and electricity to towns in the valley. ' Originally under
the jurisdiction of the Ministry of the Interior and, more recently, the (now
defunct) Ministry of Irrigation, CODEVASF was subordinated to the Ministry of
Agriculture in January 1989.
2.07        CODEVASF first became involved with irrigation in a minor way during
the 1950's when it introduced and encouraged the spread of waterwheels and,
later, small diesel-fuelled pumps along the river banks, a practice which
subsequently became widespread throughout the middle Sao Francisco valley. This
relatively simple technology has, in fact, generated a large class of small
irrigation farmers (including owner-occupiers, tenant farmers and sharecroppers)
with a substantial number of dependents. Largely as a result, the middle valley
has become a major onion-producing area, as well as a supplier of fruits and
vegetables to markets in both northeastern and southern Brazil.  In the late
1960's, the regional development superintendency for the Northeast (SUDENE) and
the United Nations' Food and Agricultural Organization (FAO) jointly undertook
3 The Moxoto Project, involving a total cost estimated at roughly US$ 690
million, was implemented between 1970 and 1977. It was partially financed by
three loans totalling US$ 57.2 million approved by the Inter-American Development
Bank (IDB) in October 1972.    This project was evaluated by the Operations
Evaluation Office of IDB in a report (No. OER-41/84) dated December 1984.
4 In its observations on an earlier version of this report, CODEVASF noted
that, in addition to smaller works of local interest, CVSF carried out a number
of important large projects, such as the Tres Mariae dam in Mines Geraist, and
left a heritage of indispensable technical knowledge with respect to project
implementation to its successor agencies.


7
a study of irrigation potential in the middle Sao Francisco valley, resulting
in a Master Plan for the area, while a similar exercise was carried out for the
Jaguaribe River valley in the state of Ceara by SUDENE and a French technical
cooperation mission. SUDENE also initiated the Bebedouro irrigation project near
Petrolina in 1969, but this remained a small-scale venture with only some 100
families installed through the mid-1970's. Since the 1960's, CODEVASF's main
activities have been to identify priority areas for larger-scale irrigation and
agricultural development, to implement selected public irrigation projects and
to encourage expansion of private irrigation schemes in the valley. $
D. SUDENE and the First Regional Development Efforts
2.08        The need to coordinate the development activities of a growing number
of agencies in the region (including CHESF, CVSF, DNOCS and the Bank of Northeast
Brazil - BNB, among others) led the Government to establish the Superintendencia
do Desenvolvimento do Nordeste (SUDSNE) in 1959. It's creation was inspired by
an analysis of the Northeast's deep-seated social and economic problems carried
out by a working group under the leadership of Celso Furtado, SUDENE's first
Superintendent. The working group criticized discriminatory national economic
policies which worked against the interests of the Northeast, while also
demonstrating the limited relevance of both short-term drought relief efforts
and the longer-term strategy of reservoir construction in the sertao which, it
was argued, failed either to increase agricultural productivity or to transfer
benefits to the bulk of the rural population.
2.09        SUDENE's proposed development program for the region was based on:
(i) industrialization; (ii) increasing agricultural productivity in the humid
coastal zone to supply rapidly growing urban areas; (iii) improving agricultural
performance and drought-resistance in the semi-arid interior; and (iv) directed
colonization in the state of Maranhao to absorb so-called "excess" rural
population. 6 Headquartered in Recife, SUDENE was at first linked directly to
the office of the Brazilian President, enjoying ministerial status until 1965,
after which time it became a dependency of the Ministry of the Interior. SUDENE
was also initially allocated a 2% share of federal tax revenues which was
specifically earmarked to finance a succession of regional development plans
(Planos Diretores) produced by the agency during the 1960's and 1970's.
2.10        Although, in principle, the establishment of SUDENE opened the way
for a .comprehensive program cf regional development for the Northeast, in
practice this initiative faced numerous obstacles. Lack of cooperation among
5 The expansion of public and private irrigation which has taken place
since the 1970's, facilitated by construction of the Sobradinho dam and
reservoir, is discussed in section D of Chapter VI below.
6 SUDENE attempted to achieve this latter objective through implementation
of a colonization project in the transition area between the Northeast and the
Amazon basin. In its first specific intervention in the agricultural sector in
the region, the Bank supported this venture through the Alto Turi Land Settlement
Project (Loan 0853-BR), approved in July 1972. See OED Report No. 4242, dated
December 29, 1982, for a review of the experience under this operation.


8
sectoral agencies retuced their effective participation and only about half of
the funds proposed in the Planos Diretores were actually appropriated.     In
addition, political interference by hostile interests in the federal Congress,
as well as disagreements among the northeastern Governors on SUDENE's board
itself, seriously hampered achievement of the agency's major goals. As far as
development in the Sao Francisco valley is concerned, the Government did not
publish a systematic irrigation plan until 1971 (see section F. below). SUDENE
did implement two pilot irrigation projects near Petrolina which were
subsequently taken over by CVSF. Other measures for the Northeast as a whole
included a set of fiscal incentives (originally known as 34/18 and later renamed
FINOR) to encourage industrial, agricultural and livestock expansion, primarily
the former. '
2.11        By 1970, however, considerable disillusionment had set in at the
federal government level with the ineffectual nature of SUDENE's interventions
during the previous decade, a sentiment underlined by the impact of another
catastrophic region-wide drought that same year. As a result, the Plan for
National Integration (PIN) and the First National Development Plan (1972-74)
attempted to break new ground by linking the agricultural and industrial
development of the Northeast with a policy of government-sponsored colonization
in Amazonia. Public irrigation development was also to be encouraged, while a
new program entitled PROTERRA proposed an "agrarian reform" by attempting to
stimulate voluntary land sales for redistribution to tenant farmers. By 1976,
however, PROTERRA had attained less than one quarter of its land acquisition
target (170,000 hectares distributed to only 920 beneficiaries) and the emphasis
of regional policy shifted increasingly to the financing of agro-industrial
modernization.
E. Regional Development since the mid-1970's
2.12        Following the poor performance of PIN/PROTERRA, the federal
government established a number of new "special programs" for the rural Northeast
which would attempt to integrate the activities of existing public agencies by
focusing on the needs of specific geographical subareas and target populations.
Not coincidentally, this was very much in line with the "poverty-focused"
integrated rural development approach adopted by the Bank and other international
aid institutions at the time. These programs include POLONORDESTE and Projeto
Sertanejo, which covered the interior of the region, as well as PROCANOR for the
sugar-producing coastal zone which will not be discussed in this report.. Other
rural programs implemented simultaneously in the Northeast included DNOCS
irrigation projects, scattered throughout the semi-arid interior, and the
emergency drought relief program, neither of which will be touched upon further
here since they are not directly relevant to development of the Sao Francisco
valley. Other key interventions since the mid-1970's, such as the Water Resource
Use Program (PROHIDRO), PROVARZEAS and PROFIR, however, will be briefly assessed
in the following paragraphs. In addition, Projeto Nordeste or PAPP, the region-
' The experience with these incentives and with regional industrialization
more generally is analyzed in an unpublished report (No. 6077-BR) entitled
Brazil: Industrial Development Issues of the Northeast, World Bank, February 25,
1987.


9
wide successor to POLONORDESTE, will be summarily discussed as will PRONI, the
national irrigation incentive scheme. C
1. POLONORDESTE
2.13        The Northeast Integrated Area Development Program (POLONORDESTE) was
established in 1974 to stimulate agricultural and livestock development in
selected "growth poles" throughout the region. Initially, twenty-four areas were
chosen on the basis of agricultural potential and political criteria for the
implementation of integrated rural development projects (PDRIs), which would
target landless, quasi-landless and small farmer groups as the major
beneficiaries. By 1981, POLONORDESTE had expanded to include forty-three PDRIs
and four colonization schemes, covering more than 500,000 km' in all nine
northeastern states, with project areas that varied considerably in both
territorial and demographic size.    The World Bank and the Inter-American
Development Bank each financed a number of these projects. 9 Five of the PDRIs,
moreover, were located in or substantially overlapped sections of the Sao
Francisco valley.
2.14        Basic program instruments included investment in feeder roads, rural
electrification, crop storage facilities, agricultural research and extension,
subsidized credit and complementary investments in social infrastructure such
as health, education and water supply.     To these were added support for
cooperatives and small non-agricultural enterprises, land-titling and fisheries.
The management structure of POLONORDESTE, however, was unwieldy, with the program
being administered at four different levels: federal (Economic Development
Council), regional (SUDENE), state and municipal.
2.15        By 1980, POLONORDESTE's achievements had fallen far short of its
initial targets: only 37% of the projected number of farmers had actue`ly been
assisted, 18% had received credit, fewer than 6% of the anticipated land titles
had been distributed and less than a third of the planned health posts and water
supply systems had been built. Benefits, moreover, had for the most part been
monopolized by some 100,000 owner-occupiers, with the bulk of the program's three
million low-income rural families, especially landless farmers, being largely
excluded from credit and agricultural services.     There were several major
a The experience with POLONORDESTE and PAPP to date is the subject of a
separate OED evaluation by Judith Tendler, et. al. ii, a report entitled "New
Lessons from Old Projects: The Dynamics of Rural Development in Northeast Brazil"
(Washington, January 1991).   These two programs will, thus, be only briefly
described in the present document.
9   Project Completion Reports (PCRs) and/or Project Performance Audit
Reports (PPARs) have been sent to the Board for a number of the POLONORDESTE
projects supported by the World Bank. See OED Reports No. 6776 (Rio Grande do
Norte and Sergipe-Tabuleiros Sul Rural Development Projects), dated May 27,
1987; No. 7331 (Bahia-Paraguacu Rural Development), dated June 27, 1988; No.
7910 (Ceara-Ibiapaba, Paraiba-Brejo and Pernambuco-Agreate Setentrional Rural
Development Projects), dated June 28, 1989; and No. 8380 (Ceara-Second Rural
Development Project), dated February 9, 1990.


10
obstacles to implementation. 10 POLONORDESTE's complex administrative structure
made it difficult to achieve effective coordination among executing agencies with
multiple levels of responsibility, overlapping functions and complicated
mechanisms for allocating and transferring funds. These problems were compounded
by the impact of another major drought between 1979-83 and, more importantly,
by the persisting long-term land distribution and tenure problem in the
Northeast. 1   In addition, the program was excessively "top-down", allowing
virtually no local participation in the design of its components and individual
investments.
2. Projeto Sertaneio
2.16        A  second significant initiative was the Special Development
Assistance Program for Semi-Arid Regions (Projeto Sertanejo), established by
SUDENE in 1976 with the objective of increasing the productivity, incomes and
drought-resistance of the agricultural sector in the sertao. An interministerial
group in Brasilia and a regional team based at SUDENE were responsible for
overall coordination. This effort was to be implemented by DNOCS or CODEVASF
in areas where these agencies already had projects and by state. governments
elsewhere in the semi-arid interior.   Each Sertanejo "nucleus" would have a
30-kilometer radius within which agricultural services would be targeted at
small, medium and large landowners. Both irrigated and dryland farming were
supported through small reservoir construction, livestock production and soil
improvement, facilitated -through the provision of technical assistance and
heavily subsidized rural credit (carrying a 5% annual unindexed interest rate
with twenty year and six year repayment and  grace periods, at a time of 100%
annual inflation).
2.17         By 1981, some 46 operational "nuclei" had been established, all
except one under the jurisdiction of DNOCS or state agricultural secretariats.
According to a SUDENE evaluation at the time, Projeto Sertanejo's results had
already fallen far short of its original targets: irrigated land amounted to only
4,560 hectares (5.4% of the initial target), land placed under rainfed crops was
14,000 hectares (5.0%), land placed under pasture was 49,300 hectares (5.0%) and
permanent jobs created reached 9,800 (7.5%). In distributive terms also, the
results were disappointing. Medium-sized and large farmers with 100 hectares
or more received a disproportionately large share of the subsidized credit,
particularly for livestock development, while almost no funds had been made
available for land acquisition by small farmers. Once again, poor coordination
among implementing agencies, coupled with fundamental political distortions in
10 World Bank, Brazil: An Interim Assessment of Rural Development Programs
for the Northeast, Washington, 1983. For a more general review of the Bank's
experience with integrated rural development projects, see Operations Evaluation
Department, Rural Development: World Bank Experience 1965-86, Washington, 1988.
n The importance and intractability of land distribution and tenure
problems in the region were highlighted in a World Bank study reported in a book
by Gary Kutcher and Pasquale Scandizzo entitled The Agricultural Economy of
Northeast Brazil, Johns Hopkins University Press, Baltimore, 1981.


11
resource distribution at the local level and the failure to address the land
issue, seriously undermined the program, which was eventually abolished.
3. Water Resource Use Program (PROHIDRO)
2.18        PROHIDRO was set up in 1979 to complement the activities of DNOCS
and CODEVASF by increasing the availability of water to small farmers, both for
human and animal consuption and for irrigation, in the semi-arid Northeast.
Coordinated by SUDENE at the regional level and by the Ministry of the Interior
nationally, specific measures included the construction of public and private
reservoirs, installation and maintenance of community wells and the regulation
of the water flow (perenizacao) along the region's rivers, which experience
large seasonal fluctuations, through the construction of small dame. This was
intended to permit more regular use of the fertile valleys and floodplains
(varzeas) with small-scale irrigation technology.
2.19        In practice, however, the program was biased toward more traditional
water conservation techniques.     By the early    1980's, private reservoir
construction had advanced rapidly, achieving 75% of its target, while only 12%
of planned community wells had been built and just a handful of the twenty-five
proposed river flow regulation projects had been executed.     There was some
evidence, moreover, from the associated "Asa Branca" state water resource
development program in Pernambuco to suggest that rising land values in
benefitted valleys tended to drive out small farmers and lead to increased land
concentration.   Lack of extension assistance, technical flaws with dam
construction, the failure to include a land titling component, salinization and
pollution from agro-chemicals also threatened to undermine the effectiveness of
the scheme. 12
F. Parallel Rural Development Projects
1. PROVARZEAS, PROFIR and PRONI
2.20        The Program for the Development of Floodplains (PROVARZEAS) began
as a state initiative in Minas Gerais in 1975, but was extended to the rest of
Brazil, including the Northeast, by the Ministry of Agriculture in 1981. It is
essentially a program of subsidized credits and technical assistance for on-farm
investments in irrigation and drainage works for private farms of all sizes.
PROVARZEAS also assists farmers in securing investment credit from official
banks. In 1982, this program was supplemented by PROFIR to finance irrigation
equipment such as overhead pressure systems.   PROFIR was initially designed
primarily to help promote wheat production in the central Brazilian plateau
(cerrado), but was subsequently extended to the Northeast and is, at least in
principle, available to small, as well as medium and large, farmers.
2.21        Again, quantitative results have fallen well short of the ambitious
goals originally set. While the Brazilian Government hoped that PROVARZEAS and
PROFIR would irrigate no less than 750,000 hectares by 1986, the programs, in
12 Anthony Hall, "A Re-Appraisal of Government Irrigation Strategy in
Northeast Brazil," mimeo, London, 1983.


12
fact, achieved less than 102 of this target (72,000 hectares), while only 3,300
hectares were benefitted in the Northeast during this period. 1      Problems
observed included the comparatively high cost of the scheme, the lack of adequate
soil and water surveys, the limited labor absorption capacity of newly irrigated
lands and the possibility of land concentration which would squeeze out smaller
farmers.
2.22        A first attempt to coordinate irrigation development in Brazil,
hitherto undertaken by a variety of federal, regional and state institutions,
was made in 1979 with publication of the Irrigation Law which set out the first
National Irrigation Policy under the direction of the Ministry of the Interior.
However, little action was forthcoming until the Irrigation Program for the
Northeast (PROINE) and the National Irrigation Program (PRONI) were established
in January and February 1986, respectively, under a new, if shortlived, Ministry
of Irrigation. PRONI has since absorbed PROINE and is now under the wing of the
Irrigation Secretariat of the Ministry of Agriculture, which coordinates the
activities of DNOCS and CODEVASF and oversees the private initiatives supported
through PROVARZEAS and PROFIR.   Between 1989 and 1995, it is envisaged that
350,000 hectares will be irrigated annually under PRONI, 100,000 of which would
be in the Northeast and at least 40% by private enterprise. 1
2. Proleto Nordeste
2.23        Following a decade of "special programs" for the Brazilian Northeast
which had made little impact on regional poverty or productivity, in an attempt
to define development goals more clearly and to rationalize and better coordinate
the activities of existing agencies, the Government created a new umbrella
program in 1985.   The first stage of Projeto Nordeste is being implemented
through the Program of Special Assistance to Small Producers (PAPP) and, in
practice, the two have become synonymous.    The major focus is on: (i) the
regulation of landownership, including land redistribution, titling and
resettlement; and (ii) water resource development, including public and private
small-scale irrigation and water supply and storage.    Supporting activities
include the provision of rural credit, adapted agricultural research, farm
extension services, marketing and official support for existing community
organizations.    While Projeto Nordeste covers the entire region, like
POLONORDESTE, its interventions are concentrated in priority areas including
those where land reform is underway, where development schemes have already been
initiated, areas of "social tension," along river valleys or where there is a
heavy concentration of poorer sharecroppers, squatters and tenant farmers.
2.24        In its first planning period (1985-89), Projeto Nordeste aimed to
benefit some 600,000 families at a cost of US$ 3.36 billion, 70% of which was
13  Programa Nacional de Irrigacao - PRONI, Ministry of Agriculture,
Brasilia, 1986.
14 Programa Nacional de Irrigacao - PRONI: Resenha Setorial de Irrigacao
no Brasil, Ministry of Agriculture, Brasilia, 1989.   For recent developments.
with respect to irrigation development in Brazil, see also World Bank, Brazil
- Irrigation Subsector Review, Report No. 7797-BR, 1989.


13
to be funded internally from domestic resources, with the World Bank providing
22% and the IDB the remaining 8%.   The program is overseen nationally by an
interministerial council and at regional level by SUDENE. At the state level,
in turn, a Rural Development Council (CDR) -- comprising various secretariats
and representatives of federal agencies such as DNOCS, BNB and CODEVASF -- is
responsible for coordination.   Unlike its predecessor, POLONORDESTE, Projeto
Nordeste/PAPP  places   substantial  emphasis  on   the  decentralization  of
decision-making to Municipal Development Councils (CDMs), composed of local
political leaders and trade union and other community representatives.
2.25        In the absence of concrete empirical evidence, it is not yet possible
to draw clear conclusions regarding the performance of Projeto Nordeste/PAPP to
date. The picture is further complicated by the withdrawal of the land component
from the regional sphere to the ill-fated National Agrarian Reform Program
(PNRA), introduced in 1985. Yet initial research provides some indications of
likely program resltG. 15 The omission from PAPP of certain components included
under POLONORDESTE is widely perceived to have limited the new program's impact;
these components include infrastructural investment in roads, electrification,
water supply, health and education, as well as working capital, credit and
subsistence crops (as opposed to longer-term investment credit and cash crops,
which have been effectively favored under PAPP) and support to small non-
agricultural enterprises.    These omissions have been compounded by the
persistence of institutional and political obstacles to the more widespread and
equitable distribution of program resources and, hence, of potential benefits.
Furthermore, the low political pay-off to state Governors of the remaining,
soopwhat concentrationist, agricultural components within PAPP, appear to have
decreased its attractiveness and, thereby, undermined its implementation.
G. Conclusion
2.26         Since the 1970's, the Brazilian Northeast has witnessed a series
of regional programs designed to promote rural development which have met with
only mixed success.   In view of the relatively unimpressive performance of
dryland-based initiatives, the tapping of relatively scarce hydrological
resources for energy and agricultural production has been perceived by planners
and policy makers as an increasingly important means of promoting rural
productivity and economic growth in the region. In the midst of a much larger
area which has consistently suffered from erratic rainfall distribution and
periodic and often catastrophic droughts, the comparatively privileged Sao
Francisco valley has become a focal point for the expansion of both hydropower
generation and irrigated commercial agriculture, building upon its traditional
role as a perennial waterway and center of rural subsistence activity in the
interior of the region.
1  Tendler, Judith, "Northeast Brazil Rural Development Evaluation: First
Impressions," mimeo, OED, December 1988, and "Northeast Brazil Rural Development
Evaluation," partial draft, OED, December 1989.


14
III. THE MIDDLE AND LOWER SAO FRANCISCO VALLEY
A. Proiect Areas of Influence
3.01        The four Bank-funded projects analyzed in this report have had wide
repercussions in the Sao Francisco valley and have helped to accelerate the pace
of social and economic change in the region. These changes include both the
direct impacts on affected populations in the immediate vicinity of the projects
themselves and their longer-term and more indirect, but no less important,
consequences for the on-going development process in and around the valley more
generally. Thus, the areas of influence of the schemes in question go far beyond
the nominal project boundaries. The broader influences of these initiatives on
the society and economy of the valley are dealt with below. 1 The construction
of the Sobradinho dam and associated reservoir, which was a crucial component
of the Paulo Afonso IV (PA IV) Hydropower Project, for example, has triggered
a major transformation in the demographic and productive structures of the
lakeside area, whose full consequences are just beginning to be felt.
3.02        Sobradinho also reveals the potentially profound and far-reaching
implications of hydropower development projects in densely populated valleys.
The lower Sao Francisco polders and irrigation (SF I and SF II) projects were
conceived as a direct response to the adverse consequences of Sobradinho on the
rural population living almost 800 kilometers downstream near the mouth of the
river.   Regulation of the Sao Francisco's seasonal variation increased the
lowflow and threatened to permanently flood large areas of productive farmland,
thereby disrupting the traditional rural economy of the region. Furthermore,
even though it is presently difficult to assess future broader impacts in the
Itaparica region, the installation of large irrigation schemes as part of a
structured resettlement program is likely to exert a significant influence on
the future development of a large area surrounding the reservoir, as well as
considerably farther upstream where a number of these subprojects are located.
B. Ecological Characteristics of the Sao Francisco Valley
1. General Features of the Sao Francisco Valley
3.03        The 2,700 kilometer Sao Francisco, traditionally known as the "river
of national integration," crosses five states in south-central (Minas Gerais)
and northeastern Brazil (Bahia, Pernambuco, Sergipe and Alagoas) and has
affluents in a sixth (Goias).   The entire river basin covers 640,000 square
kilometers -- or 7.5% of Brazilian territory -- representing an area roughly the
size of Afghanistan and larger than that of Spain and Portugal combined. Just
over half of the Sao Francisco basin is situated within the "drought polygon"
in the Northeast. The river, whose rate of flow averages some 2,000 m3/second,
rises in the Canastra mountains in Minas Gerais and flows northward, then
eastward, crossing several different ecosystems characterized by large variations
in soils and climate.   The upper Sao Francisco valley has a wet season from
November to March, with rainfall averaging 1,200 mm per annum, while the middle
1 See section D of Chapter VI below.


15
Sao Francisco has half this amount of precipitation at 600 mm per aunum. The
lower-middle valley -- site of the Sobradinho and Itaparica reservoirs -- in
turn, has a semi-arid climate, with 400 mm of yearly rainfall, in sharp contrast
to the lower Sao Francisco, which is characterized by tropical moist weather and
over 1,000 mm of annual rainfall. Unlike the upper valley, moreover, the wet
season in the lower Sao Francisco region extends from June to August.
3.04        The Sao Francisco River has 36 tributaries, roughly half of which
are porennial. TIe remainder, located in the semi-arid interior, are dry except
during the rainy season. The rate of flow of the Sao Francisco itself varies
considerably, from 14 liters per second at the source, to 4.8 liters/second
overall. Here also, there is a marked seasonal variation which has a dramatic
impact on the valley. In the upper and middle reaches, flooding occurs during
the wet summer months (ie. November-March) with drier conditions during the
winter. In the lower Sao Francisco, however, this sequence is reversed, with
the rainy season coinciding with the winter months.      Thus, the lower Sao
Francisco normally experiences two periods of flooding, one caused by rains
falling upstream of Paulo Afonso during the summer and the other due to winter
rainfall occurring in the lower valley itself.
3.05        Significant pluriannual variations also occur in this pattern.
During 1932-49, for example, there was above-average discharge, while from 1974-
77 the flow was below normal levels. Such changes have serious implications for
flow regulation by reservoirs which, in turn, may have drastic consequences for
riverine populations. As a result of damage caused by serious floods in 1979,
an "Interministerial Commission for the Study of Flooding on the Sao Francisco
River" was established. This body recommended that a quantity of 1,290 cubic
hectometers should constitute a reserve level in the Tres Marias reservoir in
the upper Sao Francisco valley. Although Sobradinho had not originally been
planned for this purpose, it was also decided to use this lake for flood control,
with a reserve of 8,200 cubic hectometers, the equivalent of 28% of its total
capacity.
3.06        The Tree Marias and Sobradinho reservoirs likewise reduce the impact
of the periodic droughts in the Northeast by guaranteeing minimal flows along
critical stretches of the river.   Nevertheless, there are periods of below-
average rainfall during which these dame cannot effectively ensure projected
minimum flow levels. Thus, for example, the discharge at Sobradinho in mid-
1989 was well below the planned constant minimum flow of 2,060 m3/second. The
worst flooding in the valley over the past half century ccurred in 1946, 1949,
1975, 1979 and 1985. The potential adverse impact of the 1979 flood, however,
was substantially reduced by Sobradinho, when the river flow rate at Juazeiro
of 18,000 m3/second was cut to 14,000 m3/second on account of the dam.
2. Surface Water Resources: Competing Uses
3.07        The waters of the Sao Francisco are utilized or otherwise "consumed"
by several competing activities, namely, electricity generation, irrigation, urban
development, navigation and evaporation.   Due to growing competition for water
resource use, there is likely to be a shortage of water from the Sao Francisco
during periods of below-average rainfall in the foreseeable future.    PLANVASF
estimates that the total volume of water stored in the more than one hundred large


16
and emall reservoirs in the Sao Francisco valley is on the order of 60.0 billion
m3, of which 54.7 billion m3 are stored along the main river itself for purposes
of electricity generation. 2 These reservoirs, especially Sobradinho, should enable
a minimum flow rate of 2,060 m3/second to be maintained downstream of the dam.
Water is currently used for the purposes briefly described below.
3.08        Hydropower Generation. According to PLANVASF, power stations in the
valley generated 5,913 MW of electricity in 1988. Adding the subsequent 1,000 MW
from the first stage of Itaparica gives a figure of 6,913 MW for 1989.       Two
additional turbines due to come on stream at Itaparica will raise this figure to
7,413 MW, only 49 MW of which is generated on affluents of the Sao Francisco.
3.09        Irrigation.  Irrigation projects in the Sao Fiancisco valley may be
divided into two major categories, public and private. According to PLANVASF, in
1983, public irrigation schemes occupied 73,775 ha, consuming roughly 85 m3 of
water per second, while private irrigation schemes consumed roughly another 11
m3/second. More recently, informed sources put the total irrigated area in the Sao
Francisco Valley at some 250,000 ha, whose water use ranges from 0.5 to 2.3
liters/see/ha, giving an average consumption of about 350 m3/second. * Under
PLANVASF, some 1.45 million hectares are planned to be developed in public
irrigation projects, with a total projected water demand of 690 m3/second. This
figure, however, seems rather conservative considering the irrigation technology
currently in use. To this figure, moreover, an unknown amount must be added for
future private irrigation expansion.    Private irrigation schemes, which are
presently estimated by CODEVASF to occupy around 100,000 ha in the valley as a
whole, 4 but are likely to expand considerably over the coming decades.
3.10        Urban Consumption. Figures for urban water consumption are incomplete.
PLANVASF calculated the 1965 rate as 11.5 m3/second, based on a consumption of 100
liters per person per day. However, given the dry climatic conditions prevalent
in the region, this is probably about half the actual amount. Assuming an urban
population share of 50% and considering the recent rapid growth of towns and cities
and industrial (especially agro-industrial) activities, the likely urban
consumption rate was probably between 20 and 30 m3/second in 1989.
3.11        Evaporation. The annual water loss for Itaparica, Moxoto, Tree Marias
and Sobradinho reservoirs is conservatively put at 315 m3/second in 1989. s When
additional reservoirs at Ibo, Oroco, Paratinga and Pao de Acucar are included,
however, the total figure rises to 520 m3/second.
2 Plano Diretor Para o Desenvolvimento do Vale do Sao Francisco (Recursos
Hidricos Superficiais), RTE 86/16, Brasilia, October 1988. PLANVASF was prepared
during the period 1984-87 period by the Brazilian Government, through CODEVASF
and SUDENE, together with the Regional Development Department of the Organization
of American States (OAS).
3 Ibid., Table IV.
4 See Annex 2.
s PLANVASF, op. cit.


17
3.12        Navigation. In order to ensure that the Sao Francisco is navigable,
minimum flow rates of 500 m3/second at Pirapora and 2,000 m3/second downstream from
Sobradinho are necessary. These amounts are essential for the operational system
which links energy generation along the river valley, together with the other
sources of demand for water use.
3.13        Water Transfer to Other River Basins. Plans have existed since 1910
for the transfer of water from the Sao Francisco to irrigate land in the semi-
arid interior of the states of Ceara, Rio Grande do Norte and Paraiba. PLANVASF
reviewed several proposals, the most grandiose being a plan to transport 330
m3/second of water through a project estimated to cost US$ 1 billion that would
tap the river at Cabrobo (Pernambuco) in the middle valley, utilizing four pumping
stations, 30 kilometers of canals and 14 dams.
3. Climate and Salinization
3.14        As already mentioned, the Sao Francisco valley has a varied and complex
climate, with   three contrasting ecosystems and rainfall regimes.        Annual
precipitation ranges from 350 to 1,600 mm and average temperatures vary from 18 to
27 degrees Centigrade. In the lower valley near the coast, rainfall peaks in May,
while in the middle portion rainfall is most heavily concentrated in March and in
the upper reaches in December. Superimposed on this broad distribution are further
variations and areas of transition.    The Sao Francisco River, moreover, flows
through the semi-arid Mertao for over half of its course.         This area is
characterized by low and variable rainfall, a crystalline rock structure, soils
with poor permeability and aquifers which are too small to regulnte river flow.
Thus, due to geological features and a distribution of rainfall which is highly
concentrated over a short period, many of the rivers in the vicinity are
intermittent.   During the dry season, which may last up to eight months,
accordingly, the surface flow of the Sao Francisco is largely dependent on the
arrival of waters from southern tributaries in Minas Gerais and Goias.
3.15        Natural salinization of the water table is common throughout the semi-
arid Northeast.  Wells bored through crystalline rocks demonstrate a low water
output of 4 m3/hour with a salinity level which varies from 500 to 20,000 parts per
million (ppm), averaging 2,000 ppm. In crystalline structures, chlorates of sodium
and magnesium predominate, making water unfit for human consumption and creating
serious problems for irrigation. Such water is normally used only for domestic
animals.  A number of research projects have been undertaken which attempt to
explain the dynamics of salinization. 6   These studies conclude that waters in
6  See especially those by Eneas Salati et. al.: "Estudo Preliminar das
Concentracoes de 18 0 e D em Aguas do Nordeste Braeileiro,n Boletim Cientifico,
BC-002, CENA/USP/CNEN, 1971; "Environmental Isotopes Used in a Hydrogeological
Study of Northeastern Brazil," in Isotope Techniques in Groundwater Hydrology,
Vol.1, IAEA, Vienna, 1974; "Utilization of Natural Isotopes in the Study of
Salinization of the Waters in the Pajeu River Valley, Northeast Brazil," in Arid-
Zone Hfydrology: Investigations With Isotope Techniques, IAEA, Vienna, 1980; and,
Otimizacao do Manelo de Agua da Re"iao Semi-arida do Nordeste Brasileiro, IV
Simposio Brasileiro de Hidrologia e Recursos Hidricos, Fortaleza, November 1981.


18
sedimentary formations are the oldest -- sometimes over 100,000 years as in some
deep wells -- while water in crystalline rock areas is of relatively recent origin,
with a recycling time ranging from 30 to 300 years. These salts are of oceanic
origin, carried to the region by rainfall. Rainwater has a chlorate concentration
of from 0.5 to 5 ppm. This salt concentration is in a stable state of dynamic
equilibrium at present but is liable to change depending upon the hydrological
balance, itself subject to modification by human activity such as settlement. Of
critical importance for the present study is the fact that rainfall in the region
brings about 10-30 kgs/ha per annum of salt, which is concentrated through the
process of evaporation in surface and subterranean water supplies.
3.16        The use of surface water for irrigation gives rise to additional
problems of salinization. Even the best quality river water, such as that of the
Sao Francisco, has a salt concentration over ten times higher than that of
rainwater. The Sao Francisco introduces, annually, about 800 kgs/ha of salt when
its waters are used for irrigation. Thug, in the absence of adequate natural or
manmade drainage, there is an automatic tendency for salinization to occur given
the intense evaporation which takes place in the region. This tendency has long
been noted, and it is estimated that about 1OZ of irrigated lands in the Northeast,
or a total of some 25,000 ha, experience salinization problems.
3.17        In most cases, salty soils are subject to recuperation as long as a
proper drainage system exists. 7 Adequate drainage allows water to flow away and
permits a lower water table, thereby facilitating aeration of plant root systems.
The major problem encountered in this respect is poor maintenance of drainage
canals, which are frequently choked with vegetation that prevents water from
escaping. In other cases, however, salinization may bring more serious problems
when the soil is saturated with sodium ions. Other problems arise from salinized
tributaries in the lower Sao Francisco valley which feed into the main river and
local irrigation schemes, occasionally causing widespread unanticipated flooding.
C. Demographic Characteristics
3.18        As the major waterway in the Northeast and the only perennial river
crossing the semi-arid sertaog, over the centuries the Sao Francisco valley has
acquired a relatively high population density.     Colonial penetration of the
interior and subsequent trade and transportation activities gave rise to relatively
large urban centers such as Penedo, Petrolina and Juazeiro.         Agricultural
settlement and livestock development along the fertile floodplain also occurred,
attracting a substantial farming population and offering a far more favorable
environment for settlement than the surrounding drylands. This historically high
demographic density has had the effect of maximizing the human environmental
impacts of the Bank-supported projects examined in this report.
7   C.R. Valdivieso-Salazar and C.G. Cordeiro, Proleto de Drenagem
Subterranea da Estacao Experimental da EMBRAPA no Perimetro Irrigado de
Bebedouro, Pernambuco, EMBRAPA-CPATSA, Publication No. 52, 1988.         C.R.
Valdivieso-Salazar, Drenagem Agricolat Relacao na Producao e Procedimentoo de
Diapnostico, EMBRAPA-CPATSA, Publication No. 53, 1988.


19
3.19        Prior to the implementation of the operations under review, all three
of the specific subregions involved possessed sizeable urban and rural populations,
mainly concentrated along the floodplain. The total population of the areas in
the middle and lower Sao Francisco valley directly or indirectly affected by the
Sobradinho  dam,   associated  emergency  irrigation  projects   and  subsequent
developments at Itaparica, according to the 1970 census, stood at around 1.4
million, 75% of which was officially classified as rural.     Petrolina was the
largest city in the middle and lower valley, with 37,800 inhabitants, closely
followed by Juazeiro with 36,300 and Penedo with 23,400. Most other urban centers
were small, including Remanso (7,000), CAsa Nova (2,400), Pilao Arcado (1,300) and
Sento Se (1,200), all of which had to be relocated as a result of the PA IV
Project. The most densely populated area, however, was the lower valley, which had
540,000 inhabitants in 1970, of which 213,000 -- or roughly 40% -- were located in
the eighteen riparian municipalities directly affected by the projects under
consideration.
D. Socio-Economic Characteristics
1. Middle Sao Francisco Valley *
3.20        By the early 1970's, productive activities in the middle valley had
evolved into a complex and delicately balanced system which was carefully attuned
to local geography and environmental conditions, broadly divided between the
fertile valley and semi-arid scrubland or caatinga. 9 Although pasture accounted
for about two-thirds of total land in rural establishments, the rearing of beef
cattle and goats was responsible for only one-quarter of the total value of
production. While livestock was then -- and continues to be -- a strategically
important investment for large and small farmers alike as a form of capital
accumulation and longer-term insurance against climatic (ie. drought-induced) and
economic uncertainties, the rural economy of the region was based mainly on
agriculture.
3.21          The rural population and the bulk of agricultural production was
concentrated along the river banks and in the mid-stream "islands" of the Sao
Francisco. Some 12% of farmland accounted for 75% of productive output in terms
of value, mainly on the Pernambuco side of the river. The diversity of agriculture
in the region was reflected in a combination of traditional rainfed crops such as
maize, manioc, beans, castor and cotton, alongside an increasingly important
irrigated output of onions, tomatoes, rice, melons, grapes and bananas. Riverine
lands were used to practice !er:ea farming during the rainy season in the
' For purposes of this study, the middle Sao Francisco valley comprises
the area between Barra, Bahia at the southern tip of Lake Sobradinho and the
town of Pao de Acucar in Alagoas downstream of Paulo Afonso, covering a distance
of more than 900 kilometers.
9 This section draws on the following: Tim Campbell, "Social and Economic
Consequences of Resettlement - the Case of the Sobradinho Hydropower Dam,
Brazil," mimeo, Inter-American Development Bank, Washington D.C., 1984, and
Fundacao Joaquim Nabuco, Hidreletrica de Itaparica: Impactos e Mudanca no Meio
Rural, Recife, 1988.


20
alluvium-rich floodzone, while small-scale diesel-pump irrigation was used in the
dry season.   The area of irrigated land in the middle valley expanded steadily
during the 1970's, with some municipalities such as Petrolandia in Pernambuco and
Rodelas in Bahia witnessing a four-fold increase during the decade, with up to 20%
of total farmland under irrigation.     This period likewise saw a significant
increase in the use of tractors and other modern farm inputs in the area, which
appears to have been associated with the generalized process of land concentration
as northeastern agriculture was becoming more capitalized. '0
3.22        In  accordance with   the  general   pattern  in  Northeast  Brazil,
landownership in the middle Sao Francisco valley was heavily concentrated. In the
area subsequently flooded by the Itaparica reservoir, for example, data collected
by the National Colonization and Agrarian Reform Institute (INCRA) show that
minifundia (average size under 15 hectares) accounted for 81% of all properties,
but occupied only 19% of total farmland. Latifundia (average size 283 hectares),
on the other hand, formed only 16% of total properties, but covered 71% of the
land. "Rural enterprises" (average size 343 hectares), in turn, represented 1.7%
of all units and cultivated 9% of total farmland.   Legal ownership rights were
unclear and had evolved in various directions. Technically, the "islands" and the
land on the riverbanks up to 15 meters from the water's edge at maximum level
belonged to the Ministry of the Navy. Over the generations, however, these areas
had been occupied by "owners" and leaseholders who did not possess legal title.
Many of these occupants, in turn, sub-let the land to other parties.
3.23           Over half of the farms in the middle valley were cultivated by
non-owners, and tenure relationships were dominated by a combination of
sharecropping, tenancy and wage-labor. Ties of social dependency and debt-bondage
with landowners (in which up to 50% or more of production went to the owner in
exchange for usufruct rights), along with the domination of marketing by
monopolistic intermediaries serving under-resourced small cultivators, helped to
perpetuate a situation of generalized poverty and deprivation. However, in spite
of the inherently exploitative nature of this system, it did allow many independent
small farmers to make an adequate living from the land and, by and large, to meet
their basic household needs.
2. Lower Sao Francisco Valley n
3.24        The agricultural economy of the lower valley, in contrast, has
traditionally been dominated by rice cultivation, which followed the natural rise
and fall of the Sao Francisco's waters during its annual cycle.    Prior to the
construction of Sobradinho dam, the regular deposits of alluvium precluded the
need for large applications of fertilizers.   In what is now CODEVASF's project
10 See, for example, Redwood, John III, "A Evolucao Recente da Agricultura
Nordestina: Principais Tendencias e Transformacoes," DRIN-BRAZIL Document No.
A-15, Recife, March 1983 and Redwood et. al., "Estrutura Fundiaria e
Transformacoes Recentes no Setor Agricola em Pernambuco," DRIN-BRAZIL Document
No. A-10, Recife, May 1982.
u The lower Sao Francisco valley corresponds to the section of the river
between Pao de Acucar and the mouth of the river some 220 kilometers downstream.


21
area, some 20,000 hectares of varzea were planted to rice, employing over 10,000
families directly on the land. Additional activities included production of other
staple foods such as beans and manioc, as well as some short-cycle herbaceous
cotton, coconut extraction, artesanal fishing and cattle raising. 1
3.25        For historical reasons, land distribution in the region, as elsewhere
in the Northeast, was heavily skewed. According to 1970 census figures, only 7%
of rural establishments occupied 80% of total farmland, with fewer than 100
proprietors controlling 90% of this area. At the other extreme, some 90% of all
rural properties were under 10 hectares in area, occupying just under a quarter of
the arable land. Nevertheless, the region's fertility and productivity, together
with the extensive use of sharecropping and tenancy, accounting for 75% of farmers
in the area, favored a high population density of up to 174 inhabitants per square
km., compared with a figure of 50 persons per km2 for the state of Alagoas and 18
persons/km2 for the Northeast region as a whole. n
3.26        The generally exploitative nature of sharecropping, in which half or
more of the rice crop went to the landowner, was partially offset by access to-
fishing for supplementary income, as well as the freedom to plant subsistence
crops. Sharecroppers normally had the right to cultivate 1 to 1.5 haectares of
low-lying riceland, together with about one hectare of land at a higher elevation.
However, mechanisms such as the use of,informal credit and advance fixing of crop
prices tended to decrease the cultivator's net disposable income, which was
estimated in the early 1970's to be on the order of US$ 100 per annum, or about
half the average rural income in the Northeast. 1    In view of the widespread
practice of subsistence farming, however, this figure probably understates real
living standards in the area.    In any event, the increasing substitution of
sharecropping by wage-labor, as well as the spread of sugar cane plantations in
response to incentives granted under the PROALCOOL program, i     especially in
southern Alagoas, was beginning to undermine the traditional system by the mid-
1970's.
12 Appraisal of the Lower Sao Francisco Polders Prijeg, Report No. 714a-
BR, World Bank, Washington, May 16, 1975 and H. 0. M. Barros, "Modernizacao
Agricola Autoritaria e Desestruturacao do Ecosistema: 0 Caso do Baixo Sao
Francisco," Cadernos de Estudos Sociais, Fundacao Joaquim Nabuco, Recife, Vol.
1, January-June 1985.
13 Barros, ibid.
14 Appraisal of the Lower Sao Francisco Polders Project, op. cit., pg. 5.
15  The National Alcohol Program (or PROALCOOL) was initiated by the
Brazilian Government in 1975 in response to the first petroleum price shock and
consisted of subsidized credits and other incentives to private producers of (for
the most part) sugar cane-based alcohol to be used as a fuel for light vehicles
either to supplement ("gasohol") or substitute gasoline, derived, at that time,
largely from imported oil.    After the second oil price increase in 1979,
PROALCOOL was expanded with the support of Bank Loan 1989-BR in the amount of
US$ 250.0 million, approved in July 1980. This operation, which closed in March
1987, has recently been audited by OED (Report No. 8887 dated June 29, 1990).


22
E. Conclusion
3.27        During the early 1970's, therefore, the ecological, demographic and
socio-economic characteristics of the middle and lower Sao Francisco valley
mirrored the situation in other Northeastern valleys, particularly those with
perennial rivers. A relatively concentrated rural and urban population had, over
the centuries, become established in the region by virtue of favorable
environmental conditions in comparison with the semi-arid interior. Ready access
to water for domestic, industrial, irrigation and transportation purposes was
complemented by the availability of fertile alluvium-rich soils along the valley
floor which supported a productive rural economy and a small, but growing, urban
sector.
3.28        On the other hand, quasi-feudal land ownership and tenure arrangements
had led to a concentration of wealth and political power over the same period, with
correspondingly poor living standards and low income levels for the vast majority
of farmers.   In the region's towns and cities, in turn, few formal employment
opportunities were provided.   Given that there was little likelihood of this
situation experiencing fundamental change on the basis of existing development
tendencies, the Bank-assisted projects considered in further detail below have
played a key role in the significant transformations which have taken place in the
middle and lower Sao Francisco valley since the 1970's.


23
IV. pAK-ASSISTED DEVELOPMENT PROJECTS
4.01        Before turning to the physical and human environmental impacts of
Bank-supported hydropower, irrigation and resettlement projects undertaken in
the middle and lower Sao Francisco valley over the past two decades, it is useful
to briefly describe these operations, their implementation experience and
principal non-environmental results. In doing so, reference will be made to the
projects' origins, objectives and main components, as well as to their
institutional arrangements, general performance and major outcomes. Since all
but one (Itaparica) of these operations have been completed and have, thus, been
the object of performance audit and/or completion reports, moreover, the basic
conclusions and lessons presented in these documents -- including those
specifically related to environmental issues and aspects -- will also be briefly
summarized.
A. The Paulo Afonso IV Hydropower Project
1. Origins. ObJectives and Description
4.02        As indicated in para. 2.05 above, the Paulo Afonso IV Hydropower (PA
IV) Project had its origins in studies by the Ministry of Mines and Energy in
the late 1960's. Based largely on expected rapid rates of urban and industrial
expansion in the Northeast, these studies projected a growth rate of energy
demand of nearly 14% a year through 1982. CHESF determined that the least-cost
alternative to supplying anticipated regional power needs through the mid-1980's
was the progressive hydroelectric development of the Sao Francisco valley,
complementing earlier investments at Paulo Afonso.       This would include
installation of the Sobradinho dam and reservoir, the expansion of generating
capacity at Paulo Afonso and the construction of new generating plants at Moxoto
and Xingo. The subsequent development of the Itaparica dam and reservoir was
also part of this program.
4.03        The Inter-American Development Bank (IDB) and the World Bank (IBRD)
were approached by ELETROBRAS, on behalf of CHESF, in mid-1972 to provide funding
for the PA IV Project. Agreements had previously been reached with the IDB for
the financing of the Moxoto plant, which was already under implementation at the
time. CHESF presented feasibility studies for the PA IV operation in early 1973
including preliminary plans for the resettlement of some 9,700 families to be
displaced upstream as a result of the Sobradinho reservoir. The project was
appraised jointly by IDB and IBRD in July-August 1973, with a follow-up World
Bank mission in October-November 1973.   IDB's loan for US$ 84.8 million was
approved on December 20, 1973 and, after negotiations in April-May 1974, IBRD
1 This and the following sections are largely based on the President's
Report (No. P-1414-BR), dated May 22, 1974, the Staff Appraisal Report (No. 396a-
BR), dated May 15, 1974, and the project completion and audit reports (OED Report
No. 6578), dated December 31, 1986, for the Paulo Afonso IV Hydropower Project.


24
funding in the amount of US$ 81.0 million was approved on June 4, 1974. Both
loans were signed on June 17, 1974.
4.04        The principal rationale for IBRD assistance to the project was to
support the Government's broader development efforts for the Northeast, the
poorest region in Brazil, and to maximize the mobilization of external resources
for CHESF's multi-year investment program. The latter objective was met through
the securing of US$ 71.9 million in bilateral financing for the operation in
addition to the multilateral loans themselves. The PA IV Project was further
justified in terms of its potential contribution to the reduction of Brazil's
rapidly rising petroleum import bill, as the operation's expected increment of
some 8,300 Kwh/year of hydro-based power generation represented the equivalent
of an estimated 1.9 million tons of fuel oil (or roughly 6% of Brazilian oil
imports at the time) that would have been required to produce the same amount
of energy in the absence of the project. This argument was specifically raised
in the staff introduction to the IBRD Board discussion of the project on June
4, 1974.   Much of this discussion, however, focused on the adequacy of the
proposed resettlement arrangements and the degree of the Bank's leverage over
the Borrower in this regard.   As a result of the Board's concern, President
McNamara personally agreed to review the detailed resettlement plans that were
required, under the Loan and Guarantee Agreements, to be submitted within nine
months after loan signing. 2
4.05        The PA IV Project consisted of the principal elements of CHESF's
fifth expansion plan, specifically the Sobradinho dam and reservoir, the Paulo
Afonso IV underground power station,    transmission facilities and associated
substations and project-related equipment and training. More concretely, the
components of the project were:
(a)   a 3.4 km long dam at Sobradinho including a 64 meter long
concrete spillway and earth-fill embankments and lateral earth
dikes on either side of the main structure, together with a
navigation canal and locks on the right bank, at an estimated
total cost of US$ 217.3 million;
2 Section 3.06 of the Loan Agreement between IBRD and CHESF, dated June 17,
1974, specifically states that "the Borrower shall (i) prepare, jointly with the
Guarantor, detailed plans for the resettlement of the population now living in
the areas which will be flooded by the Sobradinho reservoir in a manner which
will enable that population to earn a living under conditions at least equal to
those now existing; (ii) within nine months after the date of this Agreement,
or such other date as shall be agreed with the Bank, furnish such plans to the
Bank for its comments; and (iii) put such plans into effect in a manner
satisfactory to the Bank." Section 3.03 of the Guarantee Agreement likewise
refers to this obligation.
3  Paulo Afonso I had been partially financed by IBRD Loan 25-BR in the
early 1950's, while the second and third stage expansions at Paulo Afonso were
supported by funding from the IDB, as was construction of the Moxoto dam and
generating plant which formed part of CHESF's fourth expansion plan.


25
(b)   the Paulo Afonso IV hydroelectric power station comprising a
5 km bypass canal and an underground plant with space for six
generating units, four of which, each having 375 MW capacity,
were to be installed under the project, with a projected cost
of US$ 235.3 million;
(c)   some 390 kilometers of 500 kV and 2,350 km of 230 kV
transmission lines, together with 22 substations having an
aggregate transforming capacity of about 5,100 MVA, at an
estimated cost of US$ 234.4 million; and,
(d)   transportation equipment and training, at a projected cost of
US$ 5.6 million.
4.06        Construction of the Sobradinho dam, which was already underway at
the time the Bank loan was approved, was expected to create a reservoir with a
usable storage capacity of about 29.4 billion cubic meters, thereby increasing
minimum river flow from 1,150 m3/second to 2,060 m3/second and raising annual
generating capacity by about 8,300 GWh at plants already in operation and by
roughly 19,000 GWh at future generating plants to be installed downstream. The
Sobradinho reservoir was expected to extend some 300 kilometers upstream to the
town of Barra and inundate an area of approximately 4,150 square kilometers,
making it the largest inland water body in Latin America after Lake Titicaca
between Peru and Bolivia in the Andean highlands. The transmission lines to be
installed under the project, in turn, would extend from Paulo Afonso to the
rapidly growing metropolitan areas (and industrial centers) of Recife, Salvador
and Fortaleza, as well as to and/or between other state capitals (eg. Natal,
Aracaju) and important secondary cities (eg. Campina Grande, Juazeiro) in the
region.
4.07        In view of the very considerable dimensions of the reservoir and the
project's potentially significant consequences for the existing physical and
human environments both upstream and downstream of the Sobradinho dam, an
environmental impact "reconnaissance" was commissioned as part of the project
preparation process.   The results of this effort were formally presented to
CHESF, IBRD and IDB in September 1973. ' This study, while not constituting a
detailed environmental impact assessment of the project, nevertheless, was quite
comprehensive and the corresponding report presented specific recommendations
in such areas as human ecology (resettlement and environmental health), plant
and animal life, climate modification, water supply, irrigation and agro-
industry and environmental engineering.
4.08        The report singled out the displacement of some 70,000 people as
the potentially most adverse consequence of the project.    This dislocation,
however, was also seen to present an "unparalleled opportunity for the economic
development of these people and their region." Observing that "the relocation
of the displaced population is more complicated than construction of the dam,"
4 Goo6land, Robert, "Sobradinho Hydroelectric Project: Environmental Impact
Reconnaissance," The Cary Arboretum of the New York Botanical Garden, New York,
September 1973.


26
the report recommended that the relocation process should "start at once and must
be accorded all attention and resources necessary, commensurate with its
importance."   Other recommendations included the establishment of a "small
powerful executive force, possibly to be led by SUDENE and INCRA, to stimulate
and coordinate the present plethora of official agencies with overlapping
responsibilities and jurisdictions in the area." It was further proposed that
this executive group be responsible for the integration of relocation activities
with "economic and regional development, emphasizing irrigation and fish
production."
4.09        The report likewise suggested that community development units be
set up in each of the four small towns that would have to be rebuilt so as to
"provide adequate liaison between CHESF and the affected populations, minimize
the stress of relocation and promote community synthesis after relocation" and
that an "agricultural policy" for the area be planned and implemented. 6 The
report affirmed, moreover, that, while CHESF would be the main beneficiary of
the operation and, thus, should bear prime responsibility for its execution,
"this is an integrated project and it should be made quite clear that it is an
indivisible one as the human cost is the most onerous."   Finally, the report
observed that the project offered "a grand opportunity towards agrarian reform
on a limited scale" and that all land "in any way affected by the project should
be acquired and developed by and for the benefit of the displaced people." 7
4.10         As is indicated in greater detail in Chapter VI below, in order to
accommodate the population displaced by the reservoir -- about 35% of which
resided in the towns of Remanso, Sento Se, Pilao Arcado and Casa Nova, while the
rest were scattered in rural areas -- plans were made to physically relocate the
townships and resettle roughly 50% of the rural families in an agricultural
colonization project to be implemented by INCRA near Bom Jesus da Lapa, roughly
1,000 kilometers upstream from the Sobtadinho dam. Of the other rural residents,
it was expected that one-fifth (or 10% of the overall total) would accept
monetary indemnification and leave the area altogether, another one-fifth would
find employment in project-related construction activities, while the remaining
three-fifths would attempt to relocate, at least initially, along the margins
of the new reservoir where, according to the SAR, "farming conditions will in
general be worse than those of the present river shore." 8 This latter group,
however, was also expected to eventually resettle elsewhere.
5 Ibid., pg. 20.
6 Ibid., pg. 21. It was mentioned in this context, more specifically, that
agricultural extension agents and demonstration plots would be necessary and that
plots should be assigned to rural displacees as soon as possible in order "to
allow time for livestock and food plants, especially fruit trees, to become
established before relocation occurs."
' Ibid., pg. 22.
Report No. 396a-BR, op. cit., para. 4.21.


27
4.11        INCRA's role in accommodating the rural families to be displaced by
Sobradinho was formalized through an agreement signed with CHESF and ELETROBRAS
in October 1973 and subsequently ratified by a joint degree of the Ministries
of Agriculture and of Mines and Energy. 9 Under this agreement, CHESF, which
established a specific Resettlement Unit in 1972, assumed direct responsibility
for relocating the urban population. Overall resettlement activities were to
be financed by CHESF with funds to be provided by ELETROBRAS and drawn from a
special federal program for the development of the Sao Francisco valley
(PROVALE). CHESF, finally, would be responsible for resettling, along the shores
of the reservoir, that part of the rural population (characterized by the SAR
as "presumably the poorest and least educated") that was either ineligible or
unwilling to transfer to the proposed colonization scheme, "according to
standards to be decided on an ad hoe basis." The SAR also affirms that:
the poor quality of the land around the reservoir and
the fact that operation of the reservoir will cause its
shores to recede periodically up to several kilometers
will make the resettlement difficult in its immediate
vicinity. The relocation task is therefore complex; it
will require detailed planning if the reservoir area is
going to be evacuated on time and the affected
population is to receive proper attention. 1
4.12        Other ecological problems potentially resulting from the Sobradinho
dam and reservoir, mentioned in the SAR and contemplated in project legal.
documents, were also initially identified by the environmental reconnaissance
described above.    In this connection -- and in addition to the detailed
resettlement plan already cited - - CHESF and the Brazilian Government were
required to prepare and submit for Bank comment, within nine months after loan
signature, plans to: (i) minimize the future distribution and exacerbation of
plague, schistosomiasis and malaria in the reservoir area; (ii) minimize the
undesirable effects of decaying vegetation on the biochemical properties of the
reservoir; and (iii) promote fish conservation and production in the reservoir. 11
Due, moreover, to a concern that the expected increase in minimum river flow
might adversely affect agricultural production by permanently inundating some
arable land in that part of the middle Sao Francisco valley below the dam, CHESF
and the Brazilian Government agreed to present to the Bank an evaluation of such
potential effects within twelve months after loan signature and to provide
adequate compensation to any population suffering damages or requiring
9 These arrangements are described in p ra. 4.22 of the SAR.
10 Ibid., para. 4.22. The contractual obligation, cited in note 2 above,
requiring the Brazilian Government and CHESF to present detailed resettlement
plans for the Bank's "review and comment" within nine months after loan signature
is specifically mentioned in this context.
n SAR, para. 4.24; Loan Agreement, Section 3.07 and Guarantee Agreement,
Section 3.03.


28
resettlement as a consequence within      six months after submitting    this
12
assessment.
4.13        Finally, both the SAR and project legal documents recognized that
some 9,000 hectares of rice land in the lower Sao Francisco varzeas would be
lost due to the project-induced change in river regime unless adequate
protective measures were taken. 3 Of this area, however, some 1,800 ha were
expected to be protected under an existing polder project, prepared *'y SUVALE
(ie. CODEVASF's immediate predecessor) with technical assistance from the FAO
and an "emergency plan" would be elaborated in order to preserve the remaining
7,200 ha through a network of dikes and pumping stations.     In this regard,
during negotiations for the PA IV Project, the Brazilian Government agreed that
the engineering study and cost estimates for the "lower Sao Francisco emergency
plan" would be submitted to the Bank for comment within nine months of loan
signature and that this plan would be implemented by the end of 1978.     The
Government further agreed to prepare a "comprehensive development program to
cause the benefits of the lower Sao Francisco emergency project... to be shared
equitably by landholders, sharecroppers and laborers in the area of such
project." 14 This "emergency plan" subsequently became the Lower Sao Francisco
Polders and Second Irrigation Projects discussed below.
2. Implementation Exnerience and Princinal Results
4.14        The IBRD loan for the PA IV operation became effective on April 16,
1975, four months later'than initially expected, due to delays by CHESF in
hiring consultants for the execution and supervision of certain aspects of the
project.  Shortly after loan signing, IBRD and IDB formally agreed to divide
project supervision tasks with the former assuming responsibility for overseeing
implementation of the resettlement program at Sobradinho and the INCRA
colonization project (Serra do Ramalho) at Bom Jesus da Lapa, together with
installation of the 500 kV and 230 kV transmission lines and the 230 kV
substations, while the latter would supervise construction of the Sobradinho
dam, the Paulo Afonso IV hydroelectric station and the 500 kV substations.
12 SAR, para. 4.25; Loan Agreement, Section 3.08; and Guarantee Agreement,
Section 3.03.   For purposes of this requirement, the "middle Sao Francisco"
valley specifically referred to the 560 kilometer section of the river between
Sobradinho dam and the town of Pao de Acucar, downstream from Paulo Afonso, in
the state of Alagoas.
1   More specifically, preliminary studies undertaken by consultants to
SUVALE indicated that, as a result of the modification of river flow, "instead
of the 17,500 ha that are at present subject to seasonal flooding for eight out
of every ten years, about 3,100 ha would be permanently flooded, 6,700 would
continue to be subject to seasonal flooding and 5,900 ha would cease to be
flooded." (SAR, para. 4.27)
14 SAR, paras. 4.26-4.28; Guarantee Agreement, Sections 3.04-3.05.   For
purposes of this requirement, the Guarantee Agreement specifically identified
the "lower Sao Francisco" as the section between Pao de Acucar and the river's
mouth, covering a distance of 220 kiometers.


29
While the undertaking of joint supervision missions was considered desirable,
in practice, only one such mission, which focused on the urban resettlement
program, actually occurred.
4.15        The project underwent substantial design changes during execution
with an associAted increase in total costs. As detailed in the PCR, excluding
finance charges, actual costs on completion were estimated at roughly US$ 1,414
million, as compared with an expected US$ 693 million at appraisal. 15   The
additional costs were financed by CHESF and ELETROBRAS, together with further
suppl.ers and bilateral credits, while relatively small portions of the original
IDB and IBRD loans were eventually cancelled. The actual cost of the Sobradinho
dam and relocation program in current prices more than doubled from the
appraisal projection of US$ 177 million to US$ 371 million. This increase was
due largely to major design changes in the dam, modification of construction
methods on account of supply and time constraints resulting from these design
changes and the expanded scope of relocation activities, but they also reflected
a substantial initial underestimation of construction costs. 16
4.16        The principal design changes reflected CHESF's decision, shortly
after the Bank loan was approved, to anticipate installation of a 1,050 MW power
station at Sobradinho to coincide with completion of the dam rather than in the
early 1990's as originally planned and to include a 50 m3/second water intake
for the large Massangano (later renamed "Senador Nilo Coelho") public irrigation
project in the municipality of Petrolina, some 20 kilometers northeast of the
dam. According to the PCR, the decision to accelerate construction of the power
station was taken for a combination of "market" and "national strategic"
considerations.   The former included higher than expected regional energy
demands, together with the need for CHESF to supply electricity to ELETROBRAS'
subsidiary for Amazonia, ELETRONORTE, until the projected 1982 (later 1984)
start-up of the Tucurui hydropower plant on the Tocantins River in the state of
Para. Strategic considerations, in turn, involved reducing Brazilian dependence
on imported petroleum to meet future energy needs by accelerating domestic
hydropower development.   The additional generating capacity at Sobradinho
contributed directly to this latter objective by permitting the elimination of
gasoline-powered thermal generation in CHESF's system.
4.17        Changes also occurred during implementation in the Paulo Afonso IV
power station, resulting in a rise in costs from the US$ 203 million projected
at appraisal to an actual figure of US$ 383 million on completion, according to
the PCR. 1 In this case, the major design change involved an increase from four
375 MW (ie. 1,500 MW) to six 410 MW (ie. 2,640 MW) turbines and generators in
response to the same "market" and "strategic" factors mentioned in the preceding
paragraph.    The third major project comporent, transmission      lines and
is OED Report No. 6578, op. cit., PCR, Section 3.4 and Annex 3.1.
16 Ibid, see PCR Section 3.5 for details. The resettlement program alone
reportedly involved an actual cost of US$ 62.2 million, as compared with an
appraisal estimate of US$ 12.1 million.
7 Ibid, PCR, Section 3.6.


30
substations, likewise experienced a significant cost increment, from an
anticipated US$ 206 million at appraisal to US$ 350 million on completion. 'a
Changes in overall project design, combined with considerable planning and
procurement delays, were largely responsible for the cost overrun experienced
by this component which was not fully completed until March 1985, even though
most transmission investments were, in fact, undertaken between 1977 and 1982.
In addition to design modifications, planning delays were also due to staff
turnover as a result of the transfer of CHESF's headquarters from Rio de Janeiro
to Recife in 1975.
4.18        The physical construction of Sobradinho dam, which began in January
1973, continued until March 1979, two years later than originally expected.
Despite the design changes and implementation delays mentioned above, however,
filling of the Sobradinho reservoir began in February 1977, only one month after
the date initially anticipated. As a result of these changes and delays, on the
other hand, the original project closing date (December 31, 1978) was eventually
extended three times for a total of four and a half years, such that actual
closing did not occur until June 30, 1983, while Bank loan disbursements
continued until October 1983.
4.19        IBRD supervision of the operation was ultimately divided between two
project divisions.    Shortly after loan signing, the Latin America Energy
Division, realizing that it did not possess sufficient human resources to
supervise the resettlement component, requested support from the Agricultural
Projects Division responsible for Brazil.  This assistance, however, did not
formally commence until March 1975, some nine months after loan approval. In
addition, IDB later agreed to supervise urban resettlement activities through
a staff architect residing in Brazil.
4.20        With specific regard to the various environmental protection
measures to le taken in connection with the project, CHESF and the Brazilian
Government formally complied with their contractual obligations to submit
reports to the Bank on resettlement of the population displaced by the
reservoir, combatting endemic diseases, minimizing the undesirable effects of
decaying vegetation, promoting fish production, evaluating the effect of the dam
on the middle Sao Francisco and preparing an "emergency project" for the lower
Sao Francisco vareas.   The experience with the Sobradinho resettlement and
fisheries components and the lower Sao Francisco emergency plan will be further
discussed in Chapters V and VI below. In relation to the other requirements,
according to the PCR, the report on endemic diseases resulted in health programs
considered "satisfactory" by the Bank, while the Bank likewise accepted
Government findings that decaying vegetation would have only "short-lived
undesirable effects" on the reservoir and that construction of the dam would
a Engineering, supervision and administration costs, finally, also proved
to be significantly higher than expected at appraisal, increasing from a
projected US$ 105 million to US$ 307 million. Most of this difference was due
to the substantially higher engineering costs and longer implementation period
than originally anticipated.


31
have but a minor impact on the population residing in the middle Sao Francisco
valley.
4.21        Despite significant execution delays and cost overruns, the PA IV
Project was largely successful. As a result of the operation, CHESF effectively
expanded its generating capacity both at Paulo Afonso (by 2,460 MW) and -- with
the utilization of non-project resources to purchase and install the
corresponding generators -- at Sobradinho (1,050 MW). The project, in short,
clearly achieved its basic objectives of supporting broader Government
development efforts in the Northeast, by increasing the supply of electric
energy to the region's rapidly growing metropolitan areas and other large urban
centers, and mobilizing additional external resources for CHESF's investment
program. On the less positive side, however, as will be discussed in Chapter
VI below, the resettlement component proved both difficult to implement and
produced mixed results "at the cost of substantial human hardship." 20
3. The Bank's Role and Lessons Learned
4.22        During appraisal of the Paulo Afonso IV Project, many Bank staff
members had expressed reservations about its likely adverse environmental
impacts, as well as about the clearly inadequate provisions made by INCRA and
CHESF for relocation and compensation of the population displaced by Lake
Sobradinho. In particular, there was much disquiet about the emergency nature
of resettlement proposals, about CHESF's decision (without consulting the local
population) to divide displacees between the lakeside agrovilas and the
colonization scheme at Bom Jesus da Lapa and about the failure to adopt a
longer-term, more sustainable development strategy for the rural population of
smal. farmers and fishermen. 2 Such was the groundswell of concern that Bank
President McNamara, as previously noted, made a commitment to personally review
resettlement plans at Sobradinho and visited the region himself to inspect the
situation in late 1974. 2
4.23        It appears, however, that mounting criticism during the mid-1970's
from both within and outside the Bank was not translated into significantly
1g Ibid., PCR, Annex 2.1, pg. 5.
20  Ibid, PPAR, Evaluation Summary, pg. v.    Resettlement, in fact, is
characterized by this report as "the most difficult problem CHESF had to resolve
in connection with the project."
2   An Issues Paper submitted by a Bank engineer and financial analyst
following an identification mission for the project in December 1973, for
example, already raised many of these problems, while several subsequent internal
memoranda from Bank staff involved in its appraisal highlight concern over the
inadequacy %f resettlement plans and of the institutional arrangements proposed
to implement them.   Many of these same issues were also discussed in the
environmental reconnaissance stucy undertaken by Robert Goodland (op. cit.).
22 President McNamara's visit is mentioned in an internal memorandum dated
September 12, 1974.


32
improved resettlement provisions. In spite of the expressed concern over such
issues by numerous Bank staff members and even the Bank's President himself,
factors largely beyond their individual control appear to have rendered these
statements of little consequence.   To summarize these factors include: (i)
political pressure to speedily execute a strategically important hydropower
scheme; (ii) the resulting relatively low priority given to environmental issues
at the time by both the Bank and implementing agencies; (iii) a lack of
institutional and staff capacity, on the part of either the Bank or the
Brazilian executing institutions to adequately integrate environmental concerns
into project planning and implementation and the comparative marginalization of
such concerns as did exist; and (iv) the consequent weakness of loan
conditionalities which left the Bank with little leverage. These factors are
dealt with in greater detail later in this report, but additional comments are
in order here on the two latter points.
4.24        Conditionalities regarding resettlement #rrangements were built into
the loan agreement signed in June 1974, but Bank staff preoccupations persisted.
The Bank did not give itself the contractual authority to hold up project
construction in the event of the Government's failure to comply with the
provisions of loan covenants concerning resettlement and the environment. Both
the Bank and CHESF were apparently eager to begin funding and construction of
PA IV without undue delay. 23 All the Bank appears to have been able to do was
to periodically express its strong concern over any failings and delays in
resettlement activities identified by supervision missions.  By the time that
resettlement reached a crisis point, however, most of the loan funds for the
hydropower project had already been disbursed and the Bank had essentially lost
its leverage. Illustrative of this is the fact that the Bank's later request
that the Government develop a strategy for longer-term regional (including
fisheries) development met with a muted response and little, if any, concrete
action on the part of the Government.
4.25        It should also be observed that the role of the Bank's -- at that
time very small number of -- environmental specialists in the project appraisal
and supervision process appears to have been       relatively minor.     More
specifically, judging on the basis of the contents of the project files, the
role of the Bank's Environmental Advisor was rather passive. Although he was
apparently informed about key decisions related to the operation as they were
being taken within the Bank, his own intervention appears to have been very
limited and strictly of an advisory character. Accordingly. it appears that
environmental issues nay not have been taken sufficiently seriously early enough
2  The minutes of a meeting between CHESF and Bank personnel in Brasilia
on May 22, 1973 to discuss resettlement plans clearly suggest the secondary
priority given to the latter vis-a-vis maintaining the proposed construction
schedule for the Sobradinho dam.
24 For example, after the first two project supervision missions in May and
August 1975, respectively, the Bank remained concerned about the progress of
resettlement planning and implementation and, as a result, requested that the
Government provide quarterly progress reports on resettlement activities.


33
in the project cycle and, thus, had comparatively little influence either on
loan conditionalities or subsequent implementation and supervision. 5
4.26        Reflecting this situation, the PCR later acknowledged that, during
preparation and appraisal, the Bank, CHESF and the Brazilian Government all
"underestimated" the complexity of the "resettlement problem" despite the
recommendation of the environmental reconnaissance that adequate attention be
given to this particularly "complicated" feature of the projec. Even though,
after March 1975, the Bank significantly intensified its supervision effort in
relation to resettlement, to the point where this component may ultimately have
received more systematic attention than the project's technical and financial
aspects, 26 difficulties stemming from inadequate initial planning persisted.
Coordination between IBRD and IDB supervision activities was apparently also
inadequate. 27
4.27        Discussion of the principal lessons learned from the project in both
the PCR and the PPAR concentrates on the resettlement experience which was first
assessed by the Bank in OED's 1980 supervision study cited above and will be
further examined in Chapter VI below. The major lesson of the PA IV Project,
according to the earlier OED study, was "that planning for resettlement was as
important as planning for the hydroelectric project and that the inclusion of
covenants providing for resettlement did not assure the effective preparation
and implementation of such plans." 28  A "companion lesson," according to the
PCR, was that resettlement efforts on the scale of those occurring at Sobradinho
25  By this stage, however, outside protests had become numerous.     In
addition to various criticisms from the local church and the Diocese of Juazeiro,
the Human Rights Center of the Diocese of Joao Pessoa also strongly criticized
resettlement conditions at Bom Jesus da Lapa. Professor Johannes Augel of the
University of Bielefeld submitted a study of resettlement problems to the Bank
in September 1977, while, in 1980, a German television documentary was highly
critical of the Sao Francisco projects.
2   In this connection, the PCR (op. cit., para. 6.2.1) cites and agrees
with an earlier OED review of Bank project supervision experience that took the
PA IV operation as one of its case studies.    The OED report concluded that
supervision of the project's power component by the Bank's Energy Division for
Latin America was less thorough and effective than that of its resettlement
component. See OED Report No. 2858, Operational Policy Review - The Supervision
of Bank Projects, dated February 22, 1980, for additional details.
27 The Audit report (op. cit.. paras. 35-36) observes, for example, that
"whereas at the country program level, the collaboration [between the Bank and
IDB] seems to have worked smoothly, at the project level some difficulties
occurred" and that the "separation of supervision activities had the effect that,
ultimately, neither bank really looked anymore at the project in its entirety,
but concentrated on the part which it supervised."
28 PCR, op. cit., para. 7.2.1.


34
should probably be undertaken in the form of a separate project in order to
ensure "appropriate" levels of government funding and interest. 29
4.28        The audit report, finally, in agreeing with the conclusions of the
PCR and the OED supervision study in this regard, adds that "planning
resettlement mostly deals with people and calls for adjusted planning methods
usually implying a strong participation of the population to be affected by the
project.  Such planning is likely to take more time than that of a physical
facility like a power plant.   But even under the best of circumstances, the
uncertainty about the outcome is likely to be much larger than that associated
with an essentially technical project." so The PPAR likewise agreed with the
completion report's conclusion that, in the case of a large-scale resettlement
program, the possibility of carrying out a separate, but not independent,
project should be considered.
B. The Lower Sao Francisco Polders and Second Irrigation Projects
1. Origins, Objectives and Description 1
4.29        The origins of the polders (SF I) and second irrigation (SF II)
projects in the lower Sao Francisco valley are essentially the same as those of
the PA IV operation itself. Since these have already been described in paras.
4.02 and 4.13 above, they will not be restated here. It should be observed,
however, that the SF I operation was a pioneering project in a number of
respects. Other than the Alto Turi Land Resettlement Project (Loan 0853-BR),
approved in July 1972, SF I was the Bank's first attempt to support integrated
rural development in the Northeast and was the first Bank project involving
irrigation in Brazil. As mentioned in the staff presentation of the project to
the Board, moreover, it was also the first Bank operation in the country to
32
include an agrarian reform component.   Finally, as will be further described
29 Ibid, para. 7.2.1. In a footnote to this paragraph, however, the PCR
indicates that one Bank staff member presented a "contrasting" opinion to the
effect that "resettlement of this magnitude needs to be well advanced before work
on the reservoir is started." These recommendations, in fact, are complementary.
30 PPAR, op. cit., para. 39.
31  This and the following sections are largely based on the respective
Staff Appraisal Reports (No. 714a-BR, dated May 16, 1975 and No. 2265a-BR, dated
June 4, 1979), President's Reports (P-1610a-BR, dated May 23, 1975, and P-2583-
BR, dated June 6, 2583-BR), PCRs and (for SF I) PPAR (OED Reports No. 5669, dated
May 23, 1985, and No. 8158, dated November 6, 1989).
3    The staff introduction of the SF I Project to the Board further
affirmed that it would give the Bank and the Brazilian Government an opportunity
to gain improved knowledge both as to how to implement changes in land tenure
patterns and how to adapt agricultural technology and delivery systems to the
needs of small farmers.   Although there were no specific comments by Board
members on the operation during the meeting, the Bank's President indicated his
personal satisfaction with what he characterized as an extraordinarily complex


35
below, implementation of SF I encountered unique problems as a result of what
the audit report later described as the "extremely difficult physical conditions
prevailing in the flood plains of the lower Sao Francisco valley...complicated
by the independently controlled operations upstream of the hydroelectric
facilities." 
4.30        As previously indicated, the projects were prepared as part of an
"emergency" program to protect agricultural areas near the mouth of the Sao
Francisco River that would otherwise be permanently flooded as a result of the
Sobradinho dam. As an initial response to this situation, CODEVASF elaborated
and implemented an emergency polders project in two (Propria and Itiuba) of the
eight large varzeas in the lower valley in 1973. The SF I operation, in tu-:n,
was designed to protect the rest of the affected areas. The project was based
on preliminary studies undertaken by an international consulting firm with the
assistance of the World Bank-FAO cooperative program.   Due to the emergency
nature of the operation, however, these studies were less detailed than normally
required by the Bank and, according to the PCR, two "critical" issues which
later plagued project execution, namely, the "hydrology and hydraulics" of the
lower Sao Francisco River and the "social and economic environment" in the
project area, were not adequately considered.
4.31        According to the corresponding President's Report, the larger
objectives of the SF I project were to support the Brazilian Government's
efforts "to alleviate poverty, increase gainful employment, redistribute income
and increase small farmer productivity" and to "offset the adverse effects on
agriculture in the lower Sao Francisco valley resulting from completion of
hydroelectric facilities at Sobradinho and Paulo Afonso," partially financed by
Bank Loan 1008-BR described above. * More specific objectives were to bring
about substantial increases in output and employment through controlled
irrigated rice production. As a result of the operation, it was expected that
local rice production would increase by roughly 25,000 tons per year and that
some 18,000 permanent jobs would be created, while average family income would
rise to approximately US$ 1,500 per annum after full development, some nine
years after project initiation.
4.32        To achieve these objectives, the SF I operation would protect six
large and some 15 to 20 small yarzeas by providing flood protection dikes and
dual-purpose irrigation-drainage pumps. Two large varzeas (Marituba in Alagoas
and Betume in Sergipe), moreover, would be provided with complete internal
and fascinating undertaking.
3 OED Report No. 5669, op. cit., PPAR, para. 8.
34 Ibid., PCR, para. 2.09. More specifically, in the words of the PCR,
the former "caused serious repercussions along the lower river system, including
its main tributaries, after the closure of some of the yarzoa dikes," while poor
understanding of the latter "led to many confrontations between CODEVASF and
local people and institutions during the first years of project implementation."
as Report No. P-1610a-BR, op. cit., para. 28.


36
irrigation and drainage systems to permit improved production practices,
including the double cropping of rice.      A second stage, involving full
development of the other large varzeas, was to be prepared for Bank financing
at a later date.   This eventually became the SF II Project described below.
Under the SF I operation, however, 13,500 ha of rice land was to be protected,
benefitting an estimated 36,000 people, while some 4,400 ha of rice land and 750
ha of other land, benefitting an estimated 10,800 people, was to be provided
with full irrigation and drainage systems. 3 At the time of appraisal, the area
to be irrigated under the project represented about 8% of all irrigated land in
the Northeast and about 15% of the total land developed by CODEVASF.
4.33        In order to prevent windfall profits from accruing to a small number
of comparatively wealthy landholders and to ensure that the much larger number
of sharecroppers and small and medium farm owners would benefit from the
project, agrarian reform and land redistribution were to be carried out as
essential parts of the operation. For this purpose, the Brazilian Government
issued a decree in March 1975 declaring all lands covered by the project to be
subject to expropriation. According to the SAR, once acquired, such lands would
be subdivided and leased to "qualified farmers," possibly with the utilization
of some form of cooperative ownership.
4.34        The land redistribution aspect of the project, in fact, represented
an unprecedented attempt at the time to raise the standards of living of the
rural poor in the Northeast. Prior to the operation, the area was characterized
by a heavy concentration of land and income.       Fewer than 100 landowners
controlled 90% of the project area. Incomes were also highly skewed, but the
majority were very poor, with average per capita income in the project area, at
about US$ 200, being about half the corresponding national figure. Because most
of the people living in the lower Sao Francisco varzeas were sharecroppers,
tenants or salaried workers, however, there was no reliable information
concerning their exact numbers at the time the polders project was appraised.
4.35        The Brazilian Government was the borrower of the Bank loan (No.
1153-BR) in the amount of US$ 23.0 million for the SF I operation, which was
approved on June 9, 1975. CODEVASF was the executing agency for the project.
Total project costs were estimated at appraisal to be US$ 52.6 million and the
closing date was set for December 31, 1979. Project components, as appraised,
can be grouped into six categories containing the following subcomponents:
(a)   Directly productive components: (i) emergency dikes and
pumping stations for four varzeas (Boacica in Alagoas and
3 Report No. 714a-BR, op. cit., para. 4.01. The total (ie. rice and non-
rice) area to be protected under the SF I operation was estimated by the SAR to
be 32,000 ha, affecting some 47,000 people.
3  OED Report No. 5669, op. cit., PCR, para. 2.10.
38 Report No. 714a-BR, op. cit., para. 4.02.


37
Cotinguiba, Pindoba and Brejo Grande in Sergipe); 3 (ii) full
development of the Marituba (1,800 ha) and Betume (3,400 ha)
varzeas which were to be provided with protective dikes,
pumping stations and internal irrigation and drainage
networks; (iii) equipment for the operation and maintenance
of dikes, pumping stations, irrigation and drainage systems
and ancillary works; (iv) improved agricultural extension
services and the establishment of cooperatives; (v) fish
production; and (vi) resettlement of about 1,000 families
living in small varzeas that would not be protected from
flooding.
(b)   Indirectly productive components: (i) field trial and research
stations for rice, corn and other crops; (ii) fish hatcheries
and research; (iii) upgrading or construction of some 94 km
of feeder roads; (iv) training of newly settled farmers,
extensionists, tractor drivers and machine operators; and (v)
seed production and certification.
(c)   Social infrastructure: (i) installation of eight village water
systems; (ii) construction of thirteen new elementary school
classrooms and several vocational training workshops; (iii)
provision of rural electricity to some 2,500 people; and (iv)
construction of a health post in Marituba and a dispensary in
Betume, together with assistance to an existing malaria
control program.
(d)   Studies, surveys and plans: preparation of a detailed master
plan and feasibility study for an integrated rural development
project for the lower valley region, as well as the surveys
and designs required for full development of the four large
varzeas to be undertaken by SF II.
(e)   Monitoring: establishment of a system to monitor project
progress and costs and collect data for project evaluation.
(f)   Land: acquisition of all land required for rights-of-way and
full development of the Betume and Marituba varzeas.
4.36        With respect to its environmental aspects, the SAR emphasizes that
a "unique feature" of the operation was that one of its primary purposes would
be to offset the adverse impact of another Bank-assisted project. The appraisal
report likewise affirms that, by reducing extensive flooding in the two vargeas
selected for full development, the project would improve the general environment
3  The lands in these varzeas, however, would not be redistributed under
SF I. Instead, they would continue to be flooded annually by gravity, through
sluice gates when flood levels permitted and by pumping during years of low flow.
Smaller varzeas were to be similarly protected and operated except in those cases
where the amount of land affected was insufficient to justify protection.


38
in these areas. 4o   Furthermore, even though development of the varzeas was
expected to have a negative effect on local fisheries, the project would
partially offset this impact through investments in fish hatcheries and
research. 1 The latter would include a detailed study of the requirements for
the preservation and enhancement of fisheries resources in the entire lower Sao
Francisco valley.   Through its agricultural extension activities, finally,
CODEVASF was expected to orient farmers with respect to the selection of
pesticides that would not be harmful to fish, other crops or public health. The
agency would also help establish programs to monitor and control local use of
agricultural chemicals.
4.37        The SF II project, in turn, was approved on June 19, 1979 and
received an initial Bank loan (1729-BR) of US$ 28.0 million, which was later
supplemented by a second loan (1729-1-BR) in the amount of US$ 7.7 million,
approved on December 7, 1983. Total project costs were initially estimated at
US$ 74.7 million and the operation was expected to close on June 30, 1985. As
also occurred with SF I, the project was prepared by CODEVASF assisted by the
World Bank-FAO cooperative program.   According to the respective SAR, as a
complementary and follow-on project to the polders operation that was still
under execution, SF II was "conceived along lines very similar to the irrigation
works of Betume and Marituba since the physical and social environment created
by SF I have left little scope for fundamentally different alternatives." 42
4.38        As stated in the respective SAR, the project's specific objectives
were to: (i) increase the incomes of some 2,700 farmer families, who were among
the poorest in the lower Sao Francisco valley, by from 50% to 250% depending on
the farm model adopted; (ii) provide improved health and education facilities;
(iii) increase the quantity and fmprove the quality of local rice production;
and (iv) strengthen CODEVASF's management capabilities. These goals were to be
achieved by: (i) providing irrigation facilities; (ii) developing cooperatively
owned family plots to replace the previous highly skewed land distribution
pattern; (iii) providing cooperative production and marketing structures and
preparing local farmers to participate in cooperative activities; (iv)
introducing yield-enhancing technological improvements through better input
supply, farm mechanization and reduced post-harvest losses; (v) developing
improved extension services and applied research in small farm agricultural and
post-harvest practices; (vi) developing better storage facilities and a modern
paddy processing plant that would increase value added in the region; (vii)
providing the area with improved social and support infrastructure; and (viii)
reinforcing CODEVASF with locally recruited professional staff, initially
40 Ibid., para. 4.29.
" More concretely, according to the SAR (para. 4.11), the elimination of
flooding in the two fully developed arzeas was expected to decrease annual
freshwater fish production by about 300 tons out of an estimated total output
of 1,150 tons. Measures to be pursued under the project, however, were expected
to result in roughly 200 tons of additional fish production annually.
42 Report No. 2265a-BR, op. cit., para. 4.05.


39
advised by FAO specialists.     Both irrigated rice and rainfed non-rice (eg.
corn, cotton) production in adjacent highland (or "tabuleiro") areas would be
promoted under the project.
4.39        SF II, as appraised, contained the following components:
(a)   Physical works: (i) installation of irrigation, pumping,
drainage and associated electrical works in, and acquisition
of operation and maintenance equipment for, the Boacica,
Cotinguiba-Pindoba and Brejo Grande varzeas; (ii) construction
of a feeder road network (21 kms); and (iii) construction of
three paddy storage and drying units and additional rice
milling facilities in the nearby city of Propria (Sergipe).
(b)   Institutional   strengthening:   (i)  support   to   farmer
associations (buildings, equipment and incremental operating
costs over a five year period); (ii) training of CODEVASF
staff; and (iii) technical assistance to farmer associations
and CODEVASF.
(c)   Social infrastructure: (i) construction of some 1,000 houses
for displaced farmers or to replace deficient existing
dwellings; (ii)   construction and equipment of seventeen
primary schools, twelve of which to replace existing
structures; (iii) construction and equipment of eight rural
health posts and training of local primary health care
providers, together with improved water supply through ten
wells and an equal number of public fountains; and (iv)
electrification of six villages.
(d)   Studies, monitoring and evaluation: (i) technical and social
studies for additional CODEVASF projects in the Sao Francisco
basin; (ii) a detailed analysis of on-going CODEVASF
operations in the middle and upper Sao Francisco valley; (iii)
a review of CODEVASF's structure and functions; (iv) a study
for improvement of the sewerage network in Propria, upon which
additional demands would be placed as a result of the
project's "industrial" (ie. rice milling) component; and (v)
monitoring and evaluation of on-going SF I and SF II
activities by the University of Vicosa in Minas Gerais.
4.40        As was also the case with the polders project, according to the
corresponding SAR, SF II was expected to have a positive impact on the physical
environment.  In this connection, more specifically, it was anticipated that
more than one-third of the total SF II project area, which was either "idle or
under low-yield natural pasture" at the time of appraisal, would be "recuperated
for intensive, mainly irrigated agriculture." In addition, it was affirmed that
widespread schistosomiasis in the region, "which could tend to increase under
the proposed irrigation activities," would, in fact, diminish as the result of
" Ibid., para. 4.06.


40
a project-supported endemic disease control program to be developed by the
national Superintendency of Public Health Campaigns (SUCAM). Finally, project-
supplied housing and sanitation and public health facilities were expected to
improve environmental conditions in the area, while CODEVASF would continue to
advise local farmers in relation to proper pesticide use.
2. Implementation'Experience and Principal Results
4.41        Implementation of the SF I operation proved to be very complex and
problematic for a combination of environmental, engineering and socio-political
reasons. Together, these factors led to substantial revisions in the original
project design 4s and a five year extension of the project execution period.
As a result, SF I closed in September 1983, rather than December 1979 as
originally expected, and works were not physically completed urtil June 1984,
instead of June 1979. A 16% overrun in total project costs in dollar terms (US$
60.9 million, as compared to the appraisal estimate of US$ 52.6 million) was
also experienced.     Since the socio-political factors affecting project
implementation will be examined more fully in Chapter VI below, the present
discussion will focus on the natural and technical difficulties encountered by
the operation.
4.42        According to the PCR, the principal factor causing delays in
physical implementation of the project was a "limited knowledge of the local
hydrological conditions and soil foundation characteristics." 46 The combination
of heavy rains in April-May 1977 and insufficient preparation resulted in an
initial one year delay in construction activities. Project implementation was
further delayed on account of very extensive flooding in April 1979. ' Detailed
hydraulic engineering and geotechnical studies, in turn, led to substantial
design modifications at a number of project sites, causing additional time lags,
"  Ibid., para. 9.06.
45  The principal revisions to the project during execution were: (i)
elimination of protection works for the small varzeas; (ii) substitution of the
planned full development of Marituba varzea by rehabilitation of existing
irrigation and drainage networks at Propria and Itiuba varzeas; and (iii)
deletion of the protection dikes at Brejo Grande (Sergipe) and their replacement
by construction of an earth dam to control overflow from the Betume River, a
local affluent of the Sao Francisco.
46 OED Report No. 5669, op. cit., PCR, para. 3.06.
4   More specifically, high rainfall levels in the upper Sao Francisco
valley in Minas Gerais forced CHESF to release more than 12,000 m3/second from
the Sobradinho reservoir, which was about three times above the normal discharge.
This high volume of water from upstream caused a major disruption of on-going
flood protection and drainage works in the SF I project area, particularly in
the Betume varzea.   The 1979 flood, moreover, reportedly resulted in serious
damage, destroyed one rice harvest and impeded planting for the following one.
The Betume vargea was again adversely affected by heavy flooding in 1981, this
time due to above average rainfall levels in the lower valley region itself.


41
as did difficulties in land expropriation and the compensation of displaced
sharecroppers.    This also generated strong protests from      the affected
population, as well as from church and other local groups.
4.43        The other major "hydraulic" factor affecting implementation of SF
I involved the scheduling of "controlled flooding" in connection with the
construction of Sobradinhc dam. More specifically, execution of the main SF I
project works by CODEVASF was dependent upon the timing and volume of water
discharges by CHESF upstream at Sobradinho, such that construction planning for
the former was based on forecasts of (what the PCR describes as) the "semi-
controlled river floods" expected in connection with implementation of the dam.
In practice, however, due to design changes in the PA IV Project, especially the
decision to install generating capacity at Sobradinho, maximum discharges during
dam construction considerably exceeded those initially projected, seriously
hampering physical execution of drainage and irrigation works in the lower
valley.
4.44        SF II likewise experienced substantial delays and changes in scope
during implementation. As a result, the project completion date was extended
twice for a total of two years, from December 1985 to December 1987, while loan
closing occurred three years later than originally expected (ie. in June 1988
rather than June 1985). Design changes included alteration of the irrigation
works in most of the varzeas, elimination of the Brejo Grande varzea and the
rainfed agriculture component from the project and introduction of a pig-rice-
48
fish ("suino-rizi-piscicultura") subproject.   Once again, implementation was
affected by local flooding which, according to the PCR, had initially been
underestimated,     caused severe damage to irrigation works and eventually
obliged CODEVASF to seek additional funding for the project. As a result of
these alterations and delays, moreover, actual costs of drainage and irrigation
works executed under SF II were roughly 55% higher than those projected at
appraisal, even though, on account of the aforementioned reductions in project
scope, total dollar costs on completion (US$ 75.1 million) were not very
different from those estimated at appraisal (US$ 74.7 million).
4.45        SF I benefitted some 1,350 small farmers, or about 550 fewer
families than originally expected, through the construction of irrigation works
and other project investments.    During implementation, CODEVASF prepared a
detailed survey which revealed that the number of farmers opting for irrigation
was smaller than the number of irrigated plots offered by this and the second
project.   Response to the operations, moreover, apparently varied primarily
along economic lines. Larger landowners preferred to move out after receiving
48 Details of these changes are provided in the PCR (OED Report No. 8158),
op. cit., paras. 1.15-1.26.
9 The PCR for the second irrigation project (para. 1.20) observes, for
example, that neither the appraisal of SF I, nor that of SF II considered the
issue of crop and work damages due to flooding of the Boacica River upstream of
the varzea.   These floods, however, had a major negative impact on local
development possibilities since they precluded double cropping in about 70% of
the varzea.


42
monetary compensation for their holdings, while many salaried workers reportedly
also left the area in search of better working and living conditions elsewhere.
In contrast, medium-sized landowners, farmers and sharecroppers preferred the
irrigation option.
4.46        According to the PCR for SF I, rice yields "increased significantly
in the project area under the effects of controlled irrigation, improved soil
preparation and use of improved seed." so Projected incremental rice production
(27,700 tons per year), moreover, exceeded the appraisal target (25,000 tons)
by roughly 10%. Additionally, it was estimated that the pr.ject created some
1,400 new jobs as a result of the increased intensity of rice production and the
combination of rice, pig and fish farming activities. Substantial improvements
in farmer incomes have also reportedly occurred. 1 The audit report points out,
however, that the project's unit investment costs (including finance charges
during construction) were on the order of US$ 14,100 per irrigated hectare and
US$ 55,600 per settler family, which were considered high. 52
4.46        The long run sustainability of project benefits was also questioned
by the PPAR which observed that, at the time of completion, full benefit levels
had not yet been achieved and would require certain preconditions (such as the
organization and education of farmers and the provision of adequate support
services), that were by no means assured. 3  It was likewise observed that the
operation of irrigation facilities had revealed certain "technical deficiencies,
as well as the tendency of some soils to become saline with irrigation," while
local water management practices were found to be "far from optimal." Finally,
it was noted that the "natural dynamics" of the river system in the lower Sao
Francisco valley, including erosion and sedimentation processes, pose a longer
5o   OED Report No. 5669, op. cit., PCR, Annex 2, para. 3.          Rice
productivity, more sFecifically, is reported to have increased from an average
of about 1.6 tons/ha to 3.5 tons/ha in the area.
1 According to the PCR (Annex 2, Table A), average family incomes of rice
farmers rose very dramatically from a projected US$ 360 per year in the "without
project" scenario to US$ 3,349 per year in the "with project at full development"
situation, while pig-rice-fish farmers were estimated to attain an average annual
"full project development" income of US$ 4,915.
52 OED Report No. 5669, op. cit., PPAR, paras. 25-26.    These estimates
assume that the 1,350 settler families benefitted under SF I would eventually
cultivate a total of 5,325 ha of irrigated land and that the cost of irrigation
and related investments in 1983 dollars was US$ 75 million.     Extending the
analysis to include those families also expected to benefit from SF II, as well
as from non-project investments in uhe Propria and Itiuba varzeas (ie. a total
of some 3,440 farm families working approximately 11,600 ha of irrigated land),
the corresponding unit costs were US$ 14,200 per irrigated hectare and US$ 48,000
per settler family in 1983 constant dollars, which, in the words of the PPAR,
were still "unacceptably high."
5  These and the following observations are drawn directly from the PPAR
op. cit., para. 31.


43
run uncertainty for the polders installed under the operation. In addition, the
PPAR concludes that "strong institutional control and supervision" by CODEVASF
would be required in order "to enhance the chances of continued functional
existence of project structures and proper operation of irrigation and drainage
facilities."
4.47        According to its PCR, in turn, SF II directly benefitted another
1,823 small farmers -- 1,287 in the Boacica and Cotinguiba-Pindoba varzeas and
the remaining 536 in the Itiuba and Propria varzeas -- a total which corresponds
to roughly two-thirds of the initial appraisal target. s4 In addition, 34 new
schools were built and another 36 existing sc ools were upgraded, while ten
health centers were constructed and eight villa6e water systems were installed.
On the other hand, the PCR observes that rice output in the project area was
substantially lower than anticipated at appraisal, with the value actually
generated in 1988 (22,200 tons) being only 27% of the amount originally
projected (83,000 tons) for that year. ss The production of other crops was also
considerably below initial expectations.    As a consequence, the project's
reestimated economic rate of return on completion was only 7%, as opposed to an
appraisal forecast of 22%.
4.48        A study conducted by the International Labor Organization and the
United Nations Development Program in 1987, however, showed a considerable
improvement in net incomes of the families accomodated in the lower Sao
Francisco irrigation schemes, particularly when they were able to reap two
harvests a year through the application of better water control and soil
management practices. According to this source, as of December 1985, a total
of 3,164 families practiced irrigated agriculture on some 7,114 hectares in the
five CODEVASF projects in the area. ss The study estimates, moreover, that an
average (7.7 ha) irrigated lot in the lower Sao Francisco valley can generate
roughly 2.8 jobs a year.      Based on survey data for 1985-86, most of this
3  OED Report No. 8158, op. cit., paras. 1.27-1.40. According to this
source, moreover, farm budgets revealed that annual net returns from 3.5 ha paddy
farms in 1987 ranged from US$ 1,430 to US$ 2,550, as compared with a pre-project
range from US$'700 to US$ 1,025.
In their comments on an earlier version of this report (memorandum dated
July 24, 1990), however, Bank regional staff point out that, "while rice yields
in the irrigated areas are substantially higher than those estimated at
appraisal, the total production of rice is below estimates.      The cropping
intensity remained below appraisal estimates, primarily due to 18Ck of credit.
The agricultural extension services provided by CODEVASF to project beneficiaries
through IRGA (Instituto Riograndense do Arroz) were very intensive and of widely
acknowledged high quality."
56 ILO-UNDP, Emprego e Renda na Agricultura Irrigada: 0 Caso do Arroz no
Baixo Parnaiba e Baixo Sao Francisco, Brasilia, 1988, pg. 52. Of this total,
1,318 families were "ceded" a total of 1,104 ha of irrigated lands, while 1,846
irrigation farmers directly cultivated the remaining 6,010 ha.
s' Ibid., pg. 127.


44
employment, however, involved family labor, although temporary workers were used
extensively during planting and harvest periods (December-January and May),
reaching more than 40% of the total in peak mouths. In off-peak periods (eg.
especially February-March, June and August), however, family labor accounted for
85% or more of the total, while permanent labor represented no more than 3%
throughout the year.
4.49        The ILO/UNDP study likewise observes that, due to larger labor and
fertilizer inputs, rice production costs per hectare are considerably higher in
public, than in private, irrigation schemes, but that per hectare revenues were
also generally higher in the former. 9     The average net income per family
settled by the project was reported by Bank regional'staff to be US$ 4,200 per
year. 6o Assuming six persons per household, the net per capita income for this
group is about US$ 700 per year, or several times higher than that estimated at
the time of appraisal.
4.50        From an environmental standpoint, the PCR concludes that SF II was
largely benign. 61 The project, reportedly, had not caused the pollution of any
local aquifer since fertilizer and pesticide use, at the time of completion, was
limited.  The PCR argues, moreover, that, even if such chemicals were to be
applied more intensively in the future, "the flow of the Sao Francisco is so
enormous that it would not produce any detrimental effects on water quality."
This observation, however, ignores the potential negative impact of such
chemicals on the varzeas themselves. The completion report likewise affirms
that the project did not include land clearing or cause environmental problems
through erosion, while generally improving health and educational condItIons in
the area   through  its  social  infrastructure component.    On  the human
environmental side, however, the FCR reveals that CODEVASF experienced "some
difficulties" in settling forty Amerindian families in the Itiuba vargea because
they either rented their lots or chose not to irrigate them. The abandoned lots
apparently later became infested by rats, thereby presenting a problem to other
local residents.
4.51        The sustainability of benefit flows from the SF II Project is highly
uncertain. As indicated in the PCR, "development of the varzeas of the lower
Sao Francisco has so far been a difficult and lengthy process because of the
complexity... [of] project facilities and the limited experience of the
beneficiaries in irrigation and production management." 62 Furthermore, at full
development, operation and maintenance requirements for project drainage and
irrigation infrastructure are likely to be "extensive" and the associated costs
"substantial." Accordingly, local output will have to increase significantly
so Ibid., Table 36, pg. 84.
*  Ibid., Table 38, pg. 102 and pg. 128.
60 Internal memorandum to OED dated July 24, 1990 (op. cit.).
61 These observations are taken from para. 1.40 of the PCR.
62 Ibid., paras. 1.41-1.44.


45
and the collection of water charges be strictly enforced if the resources
necessary for adequate operation and maintenance are to be generated without
large additional public subsidies.
3. The Bank's Role and Lessons Learned
4.52        The Bank's performance in relation to the two lower Sao Francisco
operations was mixed. While supervision of SF I is reported by the PCR to have
been  generally  satisfactory,     even  though  insufficient  continuity  of
participating staff and the absence of an agriculturalist during a substantial
part of the implementation period were specifically identified as problems, the
audit report serious17, questions the Bank's having handled the operation as an
"emergency" project.   This observation is particularly germane in view of the
significant implementation problems resulting, at least in part, from inadequate
project preparation. Poor preparation, in turn, was itself largely due to an
insufficient initial information base, especially with respect to local
geological, hydrological and socio-economic conditions. In any case, the lower
Sao Francisco valley clearly presented a difficult physical and human
environment in which to attempt a complex and ambitious engineering and area
development project. The relative inexperience of CODEVASF with this type of
undertaking, together with the poor coordination between this agency and CHESF,
which was simultaneously engaged in another major Bank-supported operation in
the middle valley, further exacerbated the inherently problematic nature of the
lower Sao Francisco projects.
4.53        Even though preparation of SF II appears to have been more adequate
than that of the earlier polders project, many of the same implementation
difficulties encountered by SF I were also experienced by the follow-on
operation. While the PCR for the latter concludes that many of these problems
were probably unavoidable, it likewise affirms that, in light of the relatively
weak initial Information base, "the risk analysis could have been more thorough,
in particular as regards natural conditions (climate, soils, hydrology) and
their possible consequences on the design of the project," noting additionally
that the risk of undertaking the operation subsequently proved to be much
greater than perceived at appraisal. 6" On the other hand, the PCR also argues
that the "overriding objective of compensating the farmers for the negative
effects of the Sobradinho dam" did not permit the "lengthy data gathering
process" (ie. about a decade) that would have been necessary in order to obtain
"meaningful" hydrological information.    With regard to Bank supervision,
finally, while a total of eighteen missions occurred at regular intervals
between August 1979 and late 1988 in connection with the SF II operation, most
were carried out by an irrigation engineer, occasionally assisted by other
specialists.   In retrospect, the PCR observes that, while the emphasis on
irrigation infrastructure was largely appropriate, in view of the project's poor
0  OED Report No. 5669, op. cit., PCR, paras. 3.16-3.18, and PPAR, paras.
12-16.
" OED Report No. 8158, op. cit., para. 1.48.


46
agricultural performance, the Bank should have given equal attention to its
"production aspects." "
4.54        The principal lessons from the SF I and II experiences, as
identified in the respective completion and/or audit reports, include the need
to pay greater attention during project preparation and appraisal to the
underlying physical and human environmental constraints that are likely to
affect subsequent project implementation, as well as to the basic institutional
preconditions, including the need for adequate inter- institutional coordination, 66
which must be satisfied in order for such interventions to be successfully
undertaken. In relation to the latter, more specifically, the PPAR for SF I
observes that, in view of CODEVASF's "persistent weaknesses," particularly with
respect to agricultural development and resettlement, the Bank should have given
more attention to improving the agency's capabilities. The audit report further
recommends that, in future situations where there is a need to coordinate the
activities of institutions in different sectors, "Bank appraisal should attempt
to establish af effective mechanism by which...differences can be resolved
equitably and consistently, ie. where the country's interests are maximized and
not those of one agency or the other." 6?
C. The Itaparica Resettlement and Irrigation Project
1. Origins, Objectives and Description 68
4.55        In order to support Brazilian Government efforts to increase
electric energy supply, the Bank began preparation of a loan for the power
sector in 1985.   This loan (2720-BR, in the amount of US$ 500 million) was
0 Ibid., para. 1.47. Only two supervision missions, for example, included
participation of an agronomist.
66 The audit report for SF I (para. 30) argues that CHESF took "little
active interest" in CODEVASF's activities downstream from its power facilities,
further observing that it took years before the former agency agreed to provide
electric energy to the latter in compensation for some of the adverse effects
of its dams and that some of the project's principal execution problems "derived
from CHESF's management of its reservoirs which occasionally interfered not only
with work scheduled by CODEVASF's contractors but, in later years, also with the
operation of irrigation facilities."
'" Ibid., paras. 28 and 30. The PPAR (para. 30) likewise notes that, even
though an interministerial committee was established in June 1979 to study flood
control in the Sao Francisco valley and that periodic meetings had been held by
CODEVASF and CHESF in this connection, "these agencies' conflicting interests
could not always be reconciled."
' This an4 the following fiections are largely based on the Staff Appraisal
Report (No. 6914-BR) and President's Report (No. P-4670-BR), both dated October
27, 1987, for the initial Bank loan for the Itaparica Project and the President's
Report (No. P-5181-BR), dated January 10, 1990, for the supplementary loan for
this operation.


47
subsequently approved in June 1986. As part of the preparation work, a review
of social and environmental issues affecting the sector was undertaken. Among
other findings, this survey identified considerable delays in the resettlement
planning for the approximately 7,900 families to be displaced by the reservoir
to be created in connection with the Itaparica hydropower plant, located some
30 kilometers upstream of Paulo Afonso in the lower-middle Sao Francisco valley.
Of the families to be resettled, roughly 5,300 -- including 190 Tuxa Indian
families in the municipality of Rodelas    -- lived in rural areas.
4.56        As had previously occurred in relation to the resettlement program
carried out in connection with the Sobradinho reservoir, plans for the rural
population were found to be particularly inadequate. 7o        As a result,
disbursement of the first tranche of the power sector loan was made conditional
upon submission of a satisfactory resettlement plan for Itaparica, while release
of the second tranche was made dependent on attainment of adequate progress in
the implementation of this plan. Furthermore, at the time the power sector loan
was presented to the Board, Bank staff agreed to assist the Brazilian Government
in order to ensure that resettlement at Itaparica would be undertaken in such
a way as to avoid the hardships caused by the earlier dislocation of population
at Sobradinho.   In the process, particular emphasIs would be given to the
economic "reestablishment" of the rural population, a faator which had received
insufficient attention in the case of Sobradinho.
4.57        Preparation of the Itaparica Resettlement and Irrigation Project,
which was approved by the Bank on November 17, 1987 (Loan 2883-BR in the amount
of US$ 132.0 million), began on an "emergency" basis in June 1986. As will be
further described in Chapter VI, unlike the earlier experience at Sobradinho,
however, the population to be displaced at Itaparica had a direct role in the
planning of the resettlement operation, primarily through the intervention of
a local rural labor union confederation, POLOSINDICAL.   Basic project design
criteria, in fact, were negotiated between this latter organization and CHESF
in December 1986, following a strike by settlers at the dam site. n Engineering
6  Of these families, 98 were to be resettled on an area of 4,000 ha in
Rodelas, near their original homeland, and 92 would be relocated on some 2,100
ha acquired by CHESF roughly 15 km Zrom the town of Ibotirama (Bahia) in the
upper Sao Francisco valley.
70 The SAR for the Itaparica Project (para. 2.07), echoing the findings of
the earlier PCR and PPAR for the PA IV operation, specifically affirms that rural
resettlement at Sobradinho had been "inadequately planned and implemented,
resulting in unnecessary hardship for the evacuees."
n According to the President's Report for the supplementary loan (P-5181.
BR, op. cit., para. 5), these "design criteria" included: (i) families owning
or renting 6 ha or more of irrigated area would receive a 6 ha irrigated lot;
(ii) single rural laborers above the age of 18 who did not meet the preceding
criterion would receive a 3 ha irrigated lot; (iii) families irrigating less than
6 ha would receive an irrigated area according to a formula which took family
size into account; and (iv) CHESP would provide special credit facilities and
guarantee technical assistance, agricultural extension and marketing support to


48
of the proposed irrigation systems and rural and urban infrastructure, in turn,
was undertaken by local consulting firms under the orientation of CHESF' s
Directorate of Engineering assisted by a US Bureau of Reclamation team located
at the time in the (then) Ministry of Irrigation in Brasilia. The operation was
appraised by the Bank in June 1987 and negotiated in October 1987. At the time
the project was approved, physical relocation of the population at Itaparica had
already initiated and was expected to be completed by January 1988.
4.58        The Itaparica reservoir was expected to flood roughly 840 square
kilometers on either side of the river in the states of Pernambuco and Bahia,
including some 18,000 ha of irrigable land and another 40,000 ha previously
utilized for rainfed agriculture or grazing activities. With the filling of the
reservoir, most of the irrigable land in the region would be lost. Due to the
low levels of annual rainfall (350 mm) in the area and the frequent occurrence
of droughts, it was resolved that rural resettlement should be based on
irrigated farming. However, since soils in much of the immediate vicinity of
the Itaparica reservoir were judged to be inadequate, less than half of the
displaced rural population could be productively relocated in the area. The
remaining families, accordingly, would be resettled in irrigation projects
located up to 270 kilometers from their former places of residence.     Four
existing townships (Petrolandia and Itacuruba in Pernambuco and Rodelas and
Barra to Tarrachil in Bahia) would also be relocated.
4.59        In view of the "important contribution toward alleviating critical
power shortages in Northeast Brazil" expected to be made by the non-Bank
financed Itaparica power project -- whose eventual generating capacity will be
2,500 MW -- basic objectives of the resettlement and irrigation project, as
stated in the SAR, are to "maintain and, if possible, improve the living
standards of the 7,900 families to be resettled." n2 For the families to be
relocated in the new irrigation perimeters, more specifically, project goals are
to "improve agricultural production, provide adequate housing in small rural
centers (agrovilas) and improve land ownership conditions."       The urban
relocatees, in turn, would be moved to new towns "planned and designed to modern
town planning standards" and provided with a relatively high level of municipal
services. Total project costs were estimated at appraisal to be on the order
of US$ 303.7 million and the operation was expected to be implemented over a
seven year period. Completion of all physical infrastructure and irrigation
facilities was originally scheduled for December 1988 and that of all
agricultural development services by July 1993.
4.60        The project, as appraised, consists of three major components: (i)
construction of irrigation infrastructure and the provision of agricultural
support services; (ii) installation of rural infrastructure and services
including housing, water supply systems, roads, electrical energy, health,
education and other social services; and (iii) the provision of urban
settlers in all phases of the resettlement/reestablishment process.
n2  Ibid., para. 3.07.    The more recent President's Report for the
supplementary loan (P-5181-BR, op. cit., para. 2) mentions a figure of 8,300
families.


49
infrastructure including housing, public buildings and road construction,
electrical, water supply and sanitation systems.   Irrigation infrastructure,
more specifically, would include pumping stations and water distribution
systems, on-farm irrigation equipment and power lines to the pumping stations.
A total of 18,000 ha would be subdivided into some 5,200 farms in five distinct
project areas, including some 7,900 ha (2,400 farms) on both sides of the
Itaparica reservoir (Bordo do Lago-BA and Bordo do Lago-PE) and three new
irrigation perimeters (Brigida and Caraibas between the towns of Cabrobo and
Santa Maria da Boa Vista in Pernambuco and Pedra Branca across the river in
Bahia), at varying distances from the dam site. n
4.61        Since soil management and     irrigation  techniques  in  the new
irrigation areas will be considerably different from traditional practices along
the river near Itaparica, agricultural extension farmer training and other
support services are a key part of the project. 7   A private consultant firm
having responsibility for overall management of the irrigation subproject areas
and coordination of operation and maintenance activities, together with
provision of organizational support to farmer organizations and on-farm
technical assistance to individual settlers, would be specifically hired for
this purpose. Rural housing, in turn, would be grouped into 121 small agrovilas
serviced with water supply and treatment systems, internal road networks,
linkages to existing highways, electricity and a total of 59 new rural schools
and eight new health posts. Some 3,200 families would be accommodated in the
new urban centers.
4.62        The project was expected to be implemented in three discrete stages:
(i) an "urban and rural relocation phase" ending in December 1987; (ii) an
"irrigation infrastructure construction phase" during 1988; and (iii) a "rural
production and socioeconomic consolidation phase" from January 1989 to December
1993. The first phase was expected to be completed roughly simultaneously with
formation of the Itaparica reservoir which CHESF formally agreed not to initiate
filling until physical relocation of the affected population had finished.
Furthermore, since irrigation infrastructure was not expected to be concluded
until several months after physical resettlement, monthly payments would be made
M More precisely, an estimated 430 farms would be located on some 1,500
ha at Brigida, 1,600 farms on 5,600 ha at Caraibas and 750 farms on 2,700 ha at
Pedra Branca.
7  As a complement to project production support activities, medium and
long-term agricultural investment credit is expected to be made available to
resettled farmers under the regular Northeast Irrigation Program (PROINE),
briefly described in para. 2.22 above.
n This was stated in Section 2.09 of the Project Agreement signed between
CHESP and the Bank on December 7, 1987.


50
to farmers for work on land clearing, road construction, the building of
irrigation systems and other tasks. 76
4.63        CHESF would have overall responsibility for resettlement and be
directly in charge of all rural (including irrigation) and urban infrastructure
construction during the first and second stages of project implementation. The
power company would likewise be responsible for acquiring all land required for
the operation, as well as for its eventual transfer to project beneficiaries,
or, in the case of the Tuxa Amerindians, to the National Indian Foundation
(FUNAI). During the third stage, however, responsibility for overseeing rural
development activities would be delegated to CODEVASF, 7 while administration
of the new urban centers would be handed over to the respective municipal
governments.   FUNAI, assisted by CHESF, would assume responsibility for
relocation of the Tuxa Indians, as well as for the subsequent provision of
agricultural and social extension services to their communities, while the
Pernambuco and Bahia state governments would furnish health and education
services.   Finally, a Recife-based non-governmental research institute, the
Joaquim Nabuco Foundation, would carry out an on-going evaluation of the
resettlement program under contract to CHESF.
4.64        Since the Itaparica dam and hydropower plant were already under
construction by the time (1981) the Brazilian Government began to require
environmental impact statements (RIMA) for major infrastructure prcjects, such
a document had not yet been concluded at the time the resettlement operation was
appraised by the Bank. An environmental assessment of the project, however, was
in elaboration by a private consulting firm hired by CHESF specifically for this
purpose. Accordingly, CHESF agreed both to provide the results of this analysis
to the Bank for comment not later than June 30, 1988 and to follow its
recommendations in carrying out the resettlement/irrigation project, taking the
Bank's observations into account. 78
n   More specifically, CHESF assured that it would make monthly support
payments of 2.5 minimum salaries to all rural families from the date of their
relocation up to nine months after water had become available for irrigation on
their farms. This agreement was formalized in Section 2.01(b)(iii)(A)(i) of the
aforementioned Project Agreement. The following subsection of this Agreement
indicates, moreover, that if probKlems of salinity not resulting from negligence
on the part of the farm family should occur within five years of the resettlement
date, each family would be entitled to a new plot of irrigated land.
7   A CHESF/CODEVASF working group was specifically established by the
Ministry of Irrigation in October 1986 to plan the agricultural development of
the new rural resettlement areas. This working group was expected to continue
to operate during the entire project implementation period. Ownership of all
rural infrastructure, moreover, would be transferred to CODEVASF upon completion
of project execution.
i   This agreement was formalized in subsections 2.08(a) and (b) of the
Project Agreement. -


51
2. Implementation Experiepce and Preliminary Results
4.65        Through the end of 1988, the project was implemented largely in
accordance with the original plan. By that time, physical relocation of the
population in the reservoir area had been concluded and most of the urban and
rural infrastructure was in place. A year later the relocated towns were fully
operational and economic and social conditions were reportedly "returning to
normal," while 109 agrovilas had been installed and were benefitting from
improved social services and other community facilities.    By December 1989,
furthermore, roughly 46% of the displaced rural families had received their
lots, while most of the remaining ones were in the process of demarcation. On
the other hand, none of the irrigation subprojects had yet been completed and
most farmers remained largely unemployed, even though, in accordance with the
terms of the POLOSINDICAL/CHESF and Bank Loan agreements, monthly maintenance
payments equivalent to 2.5 minimum salaries were being made to most of the
affected families.
4.66        Throughout 1989, in fact, little progress was registered in the
physical implementation of project irrigation infrastructure due primarily to
a shortage of funds resulting from the "unexpectedly rapid" escalation of
construction costs in an increasingly inflationary macroeconomic environment in
Brazil. 7  As a consequence, work on the irrigation systems virtually stopped
during the latter half of the year and it is anaticipated that consids -able
additional investment will be required in order to complete the project as
originally designed.     To assist in    this effort, the Bank    approved a
supplementary loan (2883-1-BR) in the amount of US$ 100.0 million on February
20, 1990 without altering the expected June 1993 project closing date. As of
this writing (July 1990), however, the Brazlian Government had not yet signed
the contract for this second Itaparica loan.
4.67        At the time the supplementary loan was approved, a revised estimate
of project costs indicated a 114% increase over the original (ie. 1987) US$ 304
million figure, to a projected total of US$ 649.7 million.      Most of this
increment would be absorbed by the irrigation subprojects, whose cost was
reestimated to be on the order of US$ 327.1 million, as compared with the
original appraisal estimate of US$ 129.0 million, representing an increase of
nearly 154%. At this reestimated total cost, projected expenditures for the
five irrigation subprojects alone would be on the order of US$ 18,570 per
hectare or US$ 63,270 per family, as compared with initial estimates of US$
" Since no major changes in physical design have taken place and all land
required for project implementation had been acquired prior to approval of the
original Bank loan, the dollar cost overrun was not due to increases in physical
quantities of works, goods and/or services to be provided under the operation.
Rather, the overrun appears to be due, in part, to the escalation of domestic
currency (at the time, cruzado' construction costs in relation to the devaluation
of the grgzado vis-a-vis the US dollar and, in part, to an initial understatement
of project costs In domestic currency terms. The President's Report for the
supplementary loan (P-5181-BR, op. cit., paras. 14-18) provides a more detailed
discussion of these factors.


52
7,320 per hectare and US$ 24,950 per family. so Significant cost increases were
also projected for most other project components, particularly rural education,
health and social services (205%), rural housing (145%), agricultural support
services (76%), rural roads (74%) and urban infrastructure (62%). *
4.68        With Bank approval of the supplementary loan and on the assumption
that the necessary counterpart funding will be forthcoming from ELETROBRAS, it
was anticipated that CHESF could complete the irrigation subprojects by December
1990, some 18 to 24 months behind schedule. 82 Additional Bank financing for the
project was justified in order to guarantee sustainability of the investments
made thus far.   In this context, the President's Report argued that project
achievements would only be sustainable if the operation "is completed with as
little delay as possible and the settlers get the benefits as planned." 83 It
was likewise affirmed that, in view of budgetary constraints faced by ELETROBRAS
and the Brazilian Government more generally, in the absence of additional Bank
funding, further delays would be a "virtual certainty," while a decision not to
go ahead with the supplementary loan would "put at great risk the project's
overall objective of restoring the livelihood of the rural settlers, would
increase even further the difficulties that these families have endured and
would result in the project's failure." It was argued, finally, that, if the
latter should occur, outside observers would question the Bank's commitment both
to the project and to its own resettlement policy, while future Bank-Government
dialogue on the social and environmental aspects of hydropower development might
be jeopardized.
so The President's Report (P-5181-BR, op. cit., para. 21) observes that,
while these investment costs are roughly three times higher than the historical
average for public irrigation schemes in the Northeast, this reflects "not only
the cumulative impact of sharply rising construction prices and construction
delays during project implementation, but also the inherently high cost of
providing irrigation to areas located far from perennial sources of water and
in an inhospitable environment." According to this source also, despite these
elevated costs, the approach followed by the project was, nevertheless, the least
cost solution "given the demands of settlers, of meeting the agreement between
POLOSINDICAL and CHESF and adhering to Bank resettlement guidelines."
H   In absolute terms, the most important of these categories is rural
housing, for which it is estimated that costs will increase from an appraisal
projection of US$ 78.4 million to a completion total of US$ 133.9 million.
e2 The impact of the economic plan of the new federal administration that
took office in March 1990, however, may result in additional delays.
ea   Additionally, as will be further described in Chapter VI, the
President's Report for the supplementary loan (P-5181-BR, op. cit., para. 20)
noted that the delay in installing project irrigation infrastructure "has
aggravated the settlers' hardships, [while] in the agovisla social tensions have
increased significantly and threaten to erupt in a violent confrontation between
settlers and CHESF field staff."


53
3. The Bank's Role and Lessons Learned
4.69        The Bank's role in the preparation of the Itaparica Project was
important. As indicated both in the staff introduction to the Board discussion
of the initial loan for the resettlement operation and in the President's Report
for the supplementary loan, the Bank assisted CHESF in identifying the most
cost-effective means of meeting the project's income objectives for the rural
population to be displaced by the reservoir. 84 According to the President's
Report for the more recent loan, particular attention was given to designing
irrigation schemes so as to guarantee their technical feasibility at the lowest
possible cost in the presence of such significant constraints as: (i) the tight
implementation schedule for resettlement; (ii) the Bank's involvement at a
relatively  late  stage;   (iii)  the  "strong  settlers' union   with  vocal
international support;" (iv) the inherent limitations of the physical
environment in terms of soil quality, climate and the lack of suitable areas for
irrigation; and (v) "the need to comply with the requirements of Brazilian law
and Bank policy that settlers not be adversely affected in an economic sense by
the move." a5
4.70        The "extraordinary" efforts of Bank staff in providing assistance
to CHESF to prepare the project were explicitly recognized by the Board in its
consideration of the first loan for the operation, as was the fact that the
issues involved had probably received closer attention in this instance than in
other Bank-supported resettlement schemes by virtue of its having been presented
as a free-standing project. Strong beneficiary (ie. POLOSINDICAL) and NGO (ie.
Fundacao Joaquim Nabuco) participation were also cited as positive features of
the operation.   Despite its numerous positive features, however, due to the
unique circumstances leading to Bank participation and the serious time
constraints on preparation described above, senior Bank management affirmed that
the Itaparica operation should not be considered as a "model" for future Bank
involvement in resettlement programs.
4.71        As a project still under implementation, it is too early to make
conclusive  judgments  as  to   the  project's  results  and  major  lessons.
Nonetheless, some preliminary lessons, reinforcing those already learned from
the earlier Sobradinho experience, are clear and will be further explored in the
following chapters.   One of these is the need to allow adequate time and
resources for the planning and implementation of resettlement activities,
including those which are essential for the economic "reestablishment" of the
84  The staff introduction to the Board discussion of the project on
November 17, 1987, in highlighting the Bank's involvement, noted, moreover, that
a "balance" had to be struck between the urgency of filling the reservoir and
relocating the affected population, given increasing power shortages in the
Northeast, and ensuring that sound resettlement plans were in place.
a   President's Report for the supplementary loan (P-5181-BR, op. cit.,
para. 7).   In some cases, however, project costs were increased, rather than
decreased, as, for example, when most of the lakeside areas originally identified
by CHESF were found to be unsuitable for irrigation and had to be replaced by
sites at distances of up to 270 kilometers from the reservoir.


54
displaced (especially rural) population. That this process must involve direct
and effective beneficiary participation is also evident. A third lesson is that
such resettlement efforts are likely to be costly and that these costs need to
be both realistically assessed and explicitly included in the ex-ante economic
evaluation of the project which has given rise to them.
4.72        A fourth lesson is that, especially for rural communities, the mere
physical relocation and rehousing of a population displaced by a hydropower or
other large project is, in and of itself, insufficient to guarantee a level of
livelihood similar or superior to that existing prior to resettlement. Specific
measures to support the economic "reestablishment" of this population and,
ideally, to enhance their long-run income generation possibilities are also
required.    This implies the need to situate physical displacement and
resettlement in the context of a broader socio-economic development effort in
benefit of the rural and urban populations involved, as, indeed, the Itaparica
Project is currently attempting to do, albeit at considerably greater financial
costs than initially anticipated. Furthermore, resettlement and economic re-
establishment activities, particularly the latter, are likely to be highly
complex, especially when there is a change not only in the physical -- and
frequently social -- environment in which productive activities must take place,
but also in the predominant technologies involved. This complexity needs to be
adequately appreciated and taken into account both in the initial preparation
of resettlement programs and throughout the course of their implementation.
D. Conclusion
4.73        This brief review of the Bank-supported Paulo Afonso IV Hydropower,
Lower Sao Francisco Polders and Second Irrigation and Itaparica Resettlement and
Irrigation Projects illustrates a number of the characteristics and problems
frequently associated with water resource use and management in a large river
basin. On the one hand, physical interventions that occur at one place in the
basin are likely to have an impact on much of the rest of the system.     The
Sobradinho dam, more concretely, not only resulted in a reservoir extending more
than 300 kilometers upstream and inundating an area of some 4,150 km2, but also
altered natural flooding patterns near the mouth of the river more than 700
kilometers downstream. It likewise displaced a large number of people both in
the area flooded by the reservoir itself and in the lower Sao Francisco varzeas.
To the extent that the dam provided one of the major justifications for the
agricultural colonization project at Bom Jesus da Lapa, roughly 1,000 kilometers
upstream of Sobradinho, moreover, its impact extended into the upper Sao
Francisco valley as well.
4.74         It can also be concluded from the experience in the middle and
lower Sao Francisco valley that the physical displacement of an existing
population almost automatically results in its socio-economic displacement as
well, in large measure because this leads to a significant change in the natural
environment on which that population's livelihood frequently depends. In the
specific case of the Sao Francisco valley, rural families that formerly relied
on the river banks, "islands" and/or floodplains for subsistence and/or
commercial agricultural production and on the river itself for fish and
transportation were forced to adapt to new, and generally far less productive,
physical surroundings along the lakeside or in colonization and irrigation


55
schemes located several hundred kilometers or more from their original places
of residence. Such adaptation, furthermore, often requires the development of
new production technologies and skills and, in many instances, of a new set of
social relations as well.
4.75        In the specific case of Sobradinho, additionally, much of the
affected population was forced to adapt to its new physical and social
surroundings with only limited assistance from the agency responsible for its
original displacement. In this case, moreover, the opportunity to undertake a
more comprehensive (and participative) local development effort in conjunction
with the involuntary resettlement of the population dislocated by the dam, as
had been explicitly recommended in the 1973 environmental reconnaissance report,
was lost by both the Bank and the Brazilian Government.     In contrast, even
though they have been beset by serious implementation problems and their
outcomes to date have not been universally positive, the lower Sao Francisco and
Itaparica projects have, nevertheless, consciously attempted to bring about the
socio-economic, as well as physical, reestablishment of at least part (SF I and
II), if not all (Itaparica), of the displaced rural populations.
4.76        The experience in the lower Sao Francisco valley also illustrates
the difficulties of implementing a complex engineering project in the face of
environmental and institutional impediments which are beyond the control of the
executing agency. Natural flooding due both to heavy rainfall upstream and in
the lower valley itself plagued physical execution of the polders and second
irrigation projects, as did CHESF's "controlled" flooding in connection with
construction of the Sobradinho dam.     Poor coordination between CHESF and
CODEVASF appears to have been a factor in the latter. Inadequate knowledge of
local geological and hydrological conditions in the lower valley, however,
aggravated efforts to install dikes, drainage and pumping facilities and other
protective works. These physical problems were also exacerbated by unexpected
socio-political resistance, described in Chapter VI below, which, similarly,
reflected poor understanding of the ex-ante situation in the project area.
4.77        Finally, as will also be discussed in greater detail in Chapter VI,
the Paulo Afonso IV Project in particular has contributed to significant
demographic growth in, and the rapid socio-economic transformation of, much of
the middle Sao Francisco valley, especially the area (including the cities of
Petrolina and Juazeiro) in the vicinity of the Sobradinho dam.           This
transformation, however, was not an explicit objective of the PA IV operation
even though this project was clearly designed to support urban-industrial
development, through increased energy provision, elsewhere in the Northeast.
The more localized regional development impact of the Sobradinho dam and
hydropower investments has, nevertheless, been important, generating both
benefits and costs for the local population, as well as helping to stimulate
significant migration to, and the rapid expansion of rural and urban productive
activities in, the area.
4.78        In the future, accordingly, the potential local development impacts
of large-scale infrastructural investments, such as major hydropower operations,
should be more adequately identified and assessed in the project preparation and
appraisal process.   Furthermore, appropriate measures should be designed to
assist the region to take fuller advantage of project benefits (eg. increased


56
local power supply and other physical infrastructure, greater or more regular
water availability for irrigation and other uses), as well as to better absorb
its indirect and potential long-run social and environmental costs (ie. the
displacement of small subsistence farmers by larger commercial agricultural
enterprises, pollution by agro-chemicals, possible shortages due to increasing
competition for water resource use, etc.). In short, the likely medium and long
run effects of the project's "insertion" into its regional context should be
more adequately considered and a more systematic effort undertaken to maximize
the local benefits and minimize the local costs resulting from the frequently
complex and multiple transformations associated with such investments.


57
V. PHYSICAL ENVIRONMENTAL IMPACTS AND PROTECTION MEASURES
A. Paulo Afonso IV Hydropower Project
1. Environmental Problems Associated with the Sobradinho Dam
5.01        A feasibility study to regulate the flow of the Sao Francisco River
was undertaken in 1972 with the aim of stabilizing Paulo Afonso's energy
generation at 2,460 MW and guaranteeing the production of future plants including
Itaparica.  The Paulo Afonso IV station was built below the three existing
generating plants and is designed to take advantage of the difference in level
resulting from Paulo Afonso falls. From a physical environmental standpoint,
however, the Sobradinho dam has caused problems both upstream and downstream. 1
5.02        Downstream problems include the permanent flooding of traditional
floodplain agricultural areas near the mouth of the river in Alagoas and Sergipe
which gave origin to the SF I and II Projects described in the previous chapter.
Another major ecological impact of Sobradinho on the lower valley has been the
trapping of alluvial sediments and nutrients by the dam, thus rendering soils
downstream less fertile than they would have been in the absence of the dam.
In addition, the flooding of vast areas of fish breeding grounds in the lower
valley with saline water is likely to alter the biological balance of aquatic
fauna, as well as of some species of terrestrial fauna.
5.03        Upstream of Sobradinho, a number of problems have also occurred.
There has been a permanent lose of fertile riverine farmland both in the area
inundated by the reservoir, as well as farther above the lake, due to the rise
in lowf low level as a result of regulation. Furthermore, a progressive siltation
process is occurring in the reservoir, as are changes in water quality. The
latter have affected aquatic fauna, which are likewise influenced by the shift
from running to stationary water caused by the impoundment. Terrestrial fauna
in the surrounding brushland (caatinga) has undoubtedly also been affected to
some extent. On the other hand, while some accumulation of aquatic plants 2 has
occurred, especially in the mid-section of the lake, this does not appear to
constitute a serious ecological problem at present.   Water pollution as the
result of agrotoxic waste and domestic effluents, which might stimulate an
undesirable proliferation of water plants in the future, however, has been
observed in the area.
1 Many of the physical environmental impacts of Sobradinho were foreseen
by Robert Goodland in his pre-appraisal study entitled, Sobradinho Hydroelectric
Project Environmental Imnact Reconnaissance, op. cit.    The risks to public
health, disruption of terrestrial and aquatic ecosystems, climatic disturbances,
dangers of impoundment and need for watershed protection from extensive
deforestation, as well as the environmental costs of irrigation, are all
discussed at length in this report.
2 For example, Eichornia sp and Salvinia. These plants may, in fact, have
a beneficial effect by providing protected areas that facilitate fish breeding.


58
5.04        The physical impact of Sobradinho in recent years, moreover, has been
influenced by the fact that, throughout the 1985-89 period, the lake did not
reach its maximum operational flow of 2,060 m3/second. * Various hypotheses
have been advanced to explain this phenomenon. These includes (i) poor quality
of the data used to calculate optimal operational river flow; (ii) lower-than-
average rainfall in the immediate Sao Francisco catchment area; (iii) low
rainfall in the central Brazilian plateau due to increasing Amazonian
deforestation; (iv) changes in the hydrological balance caused by deforestation
at the headwaters of the river in Minas Gerais; (v) heavy and increasing water
use upstream of the Sobradinho dam by public and private irrigation schemes; and
(vi) delays in the construction of the Itaparica dam which required increased
power generation at Paulo Afonso and Moxoto and, thus, the liberation of a larger
than normal volume of water from the Sobradinho reservoir. Among these factors,
the lower than normal rainfsll levels in the upper Sao Francisco drainage area
in Minas Gerais and the "excessive and premature" release of water from Lake
Sobradinho due to the delays at Itaparica appear to have been the main reasons
for the low level of the Sobradinho reservoir after 1985, according to CHESF and
the Ministry of Infrastructure. ' The possible (individual and collective)
contribution of these factors to declining water levels in the river, however,
needs. to be further assessed and should be systematically nonitored in the
future. In any event, the substantial drop in water level in Lake Sobradinho
during the latter 1980's has resulted in water supply problems for numerous
agrovilas, as water pumps have been left high and dry, as well as in conflicts
between small farmers and large landowners due to competition over the occupation
of exposed lakeside lands.
5.05        Fish production in the lake expanded considerably in the first few
years after impoundment, reaching a total of 20,000 tons in 1980. After the
fourth year, however, the total catch declined significantly, to a current figure
of some 4,000 tons per annum. These data, however, probably do not fully take
into account the extensive unregistered (and largely uncontrolled) fishing that
presently takes place on the lake.    According to a recent study, once the
situation on the lake is stabilized, the potential annual catch should be on the
3 This situation apparently changed quite dramatically in late 1989 and
early 1990, however, when heavy rains in northeastern and central Brazil
significantly increased the discharge of the Sao Francisco River,- requiring
Sobradinho's sluicegates to be opened for the first time in four years.
4 Comments on an earlier version of this report. These two agencies also
observe that, despite the unexpectedly large volume of water drawn from the
Sobradinho reservoir and the significant transfer of energy from the Tucurui
hydropower plant in the Amazonian state of Para, energy distribution -- and hence
consumption -- had to be rationed in the Northeast during 1987.
5 See Chapter VI below for additional details on the socio-economic impacts
of this phenomenon.


59
order of 5,000 tons. 6 It should also be observed in this context that, even
though CHESF submitted a preliminary framework for fisheries development in Lake
Sobradinho in March 1975, in accordance with the Loan and Guarantee Agreements
for the Paulo Afonso IV Project, no final plans were ever presented, nor was
sufficient vegetation cleared prior to the filling of the reservoir to facilitate
local fishing activity despite the recommendations of a Bank consultant in 1977
that an emergency program be prepared for this purpose.
5.06        A number of potentially serious problems, moreover, have arisen in
recent years in relation to the fishing industry on Lake Sobradinho. At present,
production is severely affected by predatory practices involving the use of
illegal fine-mesh nets. Furthermore, not only is the increasing contamination
of fish by agrotoxics dumped or washed into the reservoir of growing concern as
a potential public health hazard, but cases have been reported of pesticide use
to preserve fish, as well as of the use of dynamite for fishing purposes. None
of these issues has been adequately addressed by state environmental agencies
or other responsible authorities. Even though the state government of Bahia,
through its Research and Development Center (CEPED), has recommended the adoption
of a number of measures to avoid or control these problems, at the time of the
OED/SEPLAN mission in July-August 1989, no action had yet been taken. 8 In spite
of CEPED's warnings of insufficient demand, furthermore, three fish refrigeration
and storage unite were set up and have subsequently (and predictably) incurred
substantial financial losses, while potentially more useful fishing terminals
recommended by the same agency have yet to be established. '
6 J.F. Paredes et. al., "Sao Francisco River Hydrobiological Studies" in
The Dammed Lake of Sobradinho, University of Hamburg, 1983, and "Producao e
Problematica das Pescas no Lago e Represado de Sobradinho-Bahia," mimeo, CEPED,
Bahia, 1989.
7 Inter-American Development Bank, "Sobradinho Hydroelectric Project: The
Population Resettlement Component," Project Performance Review, PPR-18/84,
Operations Evaluation Office, November 1984, pareas. 4.06-4.07. More generally,
this report concludes that "from the beginning CHESF sought to limit its
responsibilities for overall economic development... .No long-term provisions were
made in the larger social and economic development strategy for the region
despite the creation of water, fisheries, transportation and irrigation resources
on a large scale."
8 J.P. Paredes and F.N. Pacheco, "Producao e Problematlaca das Pescas no
Lago e Represado de Sobradinho-Bahia," op. cit.
' In its comments on the draft of this report, CHESF observes that the
development and implementation of an adequate plan for the rational exploitation
of fisheries in Lake Sobradinho (and elsewhere in Brazil) require considerable
prior institutional strengthening of the specialized federal and state agencies
reGponsible for the sector, provision of the necessary financial resources and
clear transfer of the legal authority for -- as well a the political onus
associated with -- associated control activities.


60
2. Water Evaporation from Sobradinho Lake
5.07        Sobradinho has a maximum surface area of 4.126 km2 and forms the
largest reservoir in South America.   It is situated in a semi-arid region,
characterized by strong sunlight and winds and, hence, by high rates of
evaporation. Initial studies suggested evaporation of 2,200 mm per year when
the lake is full, indicating. a loss of 290 m3/second, or slightly more than 10%
of the total flow at Juazeiro -- located 40 kilometers dcwnstream from the dam -
- which is estimated at 2,800 m3/second. More recent studies estimate annual
water loss through evaporation as being in the range of from 1,947 to 2,251 mm. 0
According to the OED/SEPLAN mission's field estimates, the normal lose through
evaporation is around 10% of the flow at Sobradinho of 2,060 m3/second. However,
given the reduced volume of water in the lake during most of the period since
1984, the loss rate could be higher. Utilizing an evaporation rate of 2,000 mm
per year, it can be estimated that about nine billion cubic meters of water are
converted to vapor annually in this way.      More detailed studies of this
phenomenon are necessary, however, in view of the fact that water loss through
evaporation could eventually reduce the average flow of the Sao Francisco by up
to 50%, with potentially serious implications for competing water users in the
middle and lower valley.
5.08        As far as broader climate changes are concerned, presently available
data is insufficient to draw firm conclusions. However, it is conceivable that
a change in thermal currents as a result of the reservoir could alter local
rainfall patterns and bring about increased precipitation. To determine the
likelihood of this occurring, however, systematic studies of evaporation rates
before and after the formation of Laka Sobradinho, as well as of wind profiles
within its larger area of influence, are required. The high rate of evaporation,
together with the projected future expansion of irrigated land to over one
million hectares, nevertheless, could result in the production of some 38 billion
tons of water vapor annually.
3. Water Searcity in the Valley: Energy versus Irrieation
5.09        As noted above, Sobradinho was built in order to stabilize the
downstream river flow at 2,060 m3/second. From its source to the sea, the Sao
Francisco drops by 1,000 meters with the steepest gradients occurring in the
upper and lower reaches. The largest drop is in the lower valley. Below Paulo
Afonso, the river falls by 100 meters in the space of a few kilometers, while
in the 13 kilometers separating Moxoto and Pao de Acucar, it drops by 211 meters.
The location of the steepest gradients near the mouth of the river means that
increasing water consumption upstream due to irrigation evaporation and other
"uses" has severe implications for iuture power generation, since it will result
in a reduction in flow to the turbines.
10 N. Diae and M.P. Cobbi, "Quanto Evapora o Lago de Sobradinho?" COPPE,
Federal University of Rio de Janeiro, 1988.


61
5.10        According to PLANVASF, " projected public irrigation schemes alone
will cover 1,440,105 hectares and consume 690 m3/second of water. This seems to
be a rather conservative estimate considering the current extent of water use
in irrigation projects in the valley.    To this figure must be added watet
consumption by private schemes, which is presently unknown, although there has
been an significant proliferation of such projects around Petrolina over the past
two decades. Based on current projections, it is not difficult to imagine that
as much as half of the Sao Francisco's discharge could be utilized for irrigation
purposes in the future.
5.11        As far as losses through evaporation are concerned, a more detailed
analysis of the situation is needed.   Including the reservoirs of Itaparica,
Moxoto, Sobradinho and Tree Nariase, an evaporation lose rate conservatively put
at 315 m3lsecond is obtained. When the reservoirs at Ibo, Oroco, Paratinga and
Formoso are also considered, this figure rises to 490 m3/second. It is thought
that losses incurred downstream of Moxoto do not affect the system in terms of
power generation, but, if the planned reservoirs of Xingo and Pao de Acucar are
included, the total rate of water loss through evaporation in the Sao Francisco
valley increases to 520 m3/second, or roughly 252 of the river's regulated
discharge.
5.12        The above figures give some idea of the complexity of the system and
of the potential for a relative shortage of water in the Sao Francisco valley
as a result of the multiple, and increasingly ambitious, water use objectives
set, often independently, by the public and private sectors.          Serious
consideration must, therefore, be given in the future to alternative measures,
such as the use of other river basine (including the Amazon) for power
generation, improving the efficiency of, and eventua'ly limiting, water
consumption by irrigation projects and/or transferring water from other r*vers
to the Sao Francisco. In any event, a multi-region, multi-sector assessment of
longer run development options and constraints for the Sao Francisco valley is
necessary.
B. The Lower Sao Francisco Eolders and Second Irrigation Projects
1. Changes in Land Use
5.13        Before the Sobradinho dam was built, agricultural activities in the
lower Sao Francisco valley were closely tied to the seasonal rise and fall of
the river. The banks were flooded during periods of maximum discharge, after
which rice was planted on the exposed margin (vazante). This was essentially
the same system used in the Nile valley for thousands of years. Floodwaters
brought rich sediments from the upper reaches of the river to fertilize the lower
valley. A particular production system and social structure developed that was
adapted to this annual phenomenon. With the closing of the Sobradinho dam,
however, the river's flow was stabilized at around 2,060 m3lsecond, changing the
traditional flood pattern and bringing potentially drastic consequences for the
farming population, especially small rice cultivators. To prevent the permanent
n Plano Diretor Para o Desenvolvimento do Vale do Sao Francisco (Recursoo
Hidricos Superficiaie), RTE 86/16, Brasilia, October 1988.


62
flooding of low-lying areas and to control water levels, accordingly, a complex
system of dikee, floodgates and pumping stations was established.12
5.14        Five irrigation schemes were set up by CODEVASF on the "polders"
formed by flood-protection structures and related investmentst Cotinguiba-
Pindoba (2,500 ha), Boacica (5,400 ha), Propria (1,200 ha), Betume (3,000 ha)
and Itiuba (2,100 ha). Although paddy-rice is still the major crop, attempts
are being made to diversify production with cotton, corn, sweet potatoes,
peanuts, fruits and green vegetables. In addition, fish-farming, carried out
in association with pig-rearing, has expanded significantly in the area.
2. Integrated Pig--Rice-Fish Farming
5.15        Although fish-farming is still at an embryonic stage in Brazil, due
to favorable local conditions, it has become a reasonably well-established
activity in the lower Sao Francisco valley over the past decade. Since 1982,
the Itiuba pilot fish-farm has been supplying young fish to settlers for
commercial production to supplement their incomes in conjunction with rice
cultivation and pig-farming.   In some cases, the three activities are fully
integrated. These activities are dependent upon the production of young fish
from centers at the Betume project, which has a present capacity of two million
fish annually and a long-run potential of 12 million fish, and at Itiuba, which
could eventually produce another 15 million young fish a year.
5.16        The typical fish-farming unit covers about 5,000 m2, adjacent to
which a piggery io built with an area of 35 m2. Jointly, such facilities can
produce roughly 30 pigs per harvest and 5,000 fish a year. The pigs are bred
in confinement for 120 days, adding some 70 kilos in weight, while the fish are
fed twice a day on pip droppings.      Fish varieties include curimata pacu
(Prochilodue marggravil), tambaqui (Colossoma macropomum), the common carp
(Cyprinus carpio) and silver carp (Hypophalmicuthys molitrix). " This appears
to be one of the more succe&sful features of the lower Sao Francisco Projects.
3. Major Problems
5.17        On the less positive side, the poor water quality of many of the
affluents of the Sao Francisco which cross the irrigation projects in the lower
valley, including the Itiuba, Jacare and Propria Rivers, has led to soil
salinization and declining crop yields. Efforts have been made to minimize this
problem by improving project defenses against the penetration of saline wattes.
One such measure has been the construction of a rainwater retention pond at
Boacica to help prevent flooding duritig the vet season in the lower valley.
5.18        Due to the types of soils and geological structures that predominate
in the region, moreover, serious problems appear to affect maintenance of
pumphouses, sluicegates and other structures.   At Propria, for example, the
12 See section B of Chapter VI below for details of social impacts.
1s   For further details, see E.J.O. Motta, Programa de Suino-rizi-
pieetcultura do Baixo Sao Franciaco, CODEVASF, 1989.


63
OED/SEPLAN mission found that soil slippages and subsidence had put the system
out of alignment. Partial erosion of protective dikes along the Sao Francisco
has also occurred.   There likewise appears to be a lack of concern for the
preservation of forested areas and terrestrial and aquatic fauna at some project
locations. With more adequate intervention by CODEVASF and state environmental
and other agencies, these aspects could be improved, thereby affording greater
environmental protection.
5.19        Given the predominance of rice monoculture in the irrigation
projects, it is likely that problems of pests and disease may become more common
in the future, requiring proper corrective measures.       Local technicians
acknowledge that serious problems of infection by nematodes (thread worms) and
fungi alreadyexist in the area. At present, irrigation farmers are spraying
insecticides without adequate protection or due care. Better orientation in the
use of agrotoxic substances is clearly required, as is chemical analysis of
irrigation water to determine the present extent of possible contamination.
C. Itaparica Hydropower and Resettlement Projects
1. Water Oualitv and Fish Production Potential at ItaRarica
5.20        The Itaparica reservoir is fed mainly by the water which leaves
Sobradinho after it has passed through a process of natural regeneration on its
downstream journey of several hundred kilometers. Water quality at Sobradinho
has been analyzed since August 1982 and the reservoir can be divided into three
areas. 14 As mentioned in para. 5.05 above, studies have indicated an annual
fish production potential for Sobradinho of roughly 11 kgs/ha, giving a total
for the lake of 5,000 tons, well below the maximum recorded catch of 20,000 tons.
By trapping sedime. .s from the river, Sobradinho greatly alters the quality of
the water, which also undergoes seasonal variations in different parts of the
lake, as well as determining the water quality further downstream at Itaparica.
Based on calculations similar to those made for Sobradinho, fishing potential
at Itaparica, at about 2-3 kgs/ha per*annum, is considerably lower than at the
former. However, water drained into the lake by tributaries below Sobradinho,
as well as other biochemical factors, may affect this estimate.
14 J.F. Paredes, et. al., "Sao Francisco Hydrobiological Studies," op. cit.
Area 1, from the dam upstream to Remanso, is characterized by a sluggish flow
in which the water is almost stationary. This is the deepest part of the lake,
averaging eight meters, its waters are transparent and subject to strong winds,
with little surface vegetation. The presence of microcrustaceans allows young
fish and plankton to proliferate. Area 2, from Remanso t, station 11, is a zone
of transition from moving to stationary water, whose main current follows the
old Sao Francisco riverbed. It is fed by three major tributaries and has an
average depth of four meters, with many small pools forming during the dry
season. This region has the highest concentration of nitrates, due to the slow
movement and decay of organic matter, as well as the highest levels of water
hardness and chlorates, and is ideal for tle regeneration of fish stocks. Area
3 corresponds to the initial stretch, beyond station 11, up to Basra. The water,
for the most part, is fast-moving and muddy with few plankton.


64
2. Lake Itaparica and Flooded Areas
5.21        Lake Itaparica covers 834 km2, stores some 11 billion cubic meters
of water and is situated entirely within the semi-arid climate of the eertao.
This area has an annual rainfall of less than 400 mm, concentrated in the period
from December to March. However, the headwaters of many tributaries which feed
into the Sao Francisco are located in more humid regions, where annual rainfall
can reach 800 mm. Evaporation loss from the lake amounts to 40 m3/second, or
roughly 2% of the river's average discharge of 2,060 m3/second.
5.22        As indicated in para. 4.51 above, some 18,000 hectares of land
submerged by the Itaparica reservoir were irrigable, of which 8,000 ha were
being farmed prior to inundation. An additional 40,000 hectares of now flooded
land-were devoted to pasture and riverine or Kazante agriculture, producing a
range of crops. Vegetation in the flooded area was mainly xerophytic, typical
of the caatinga, although in some areas forest cover was still in evidence,
characterized by trees such as the crabeira (Tabebuia caraiba), quixabeira
(Bumelia vartorum), luazeiro (Ziziphus joazeiro), marizeiro (Geoffraea spinosa)
and the common algorobeira (Prosopis juliflora). It was decided not to remove
existing vegetation in most of the reservoir area prior to flooding since this
was not expected to affect water quality and would provide a refuge for fish.
However, certain areas near the town of Petrolandia, which should have been
cleared, were only partially deforested.
3. The Rescue of Terrestrial Fauna
5.23        Although the wild animal life of the semi-arid Northeast has been
largely decimated over time, both directly by man and as a result of the
destruction of natural habitate, important species survive in the forests and
more humid areas. 1   Mammals include the sakaui monkey (Callithrix jacchus),
common in forested regions. Rodents include the moco (Kerodon rupestris) and
aunare (Trichomys apercoides).    Larger animals such as the fox (Lycalopex
vertulus) and wildcat (Felis ap) are also still found. A variety of bird species
is encountered, ranging from the ribaca (Columbidae) and codorna or pigeon
(Tinamidae) to the anu or anum (Cuculidae) and acaua or laughing falcon
(Falconidae). Reptiles include a variety of lizards such as iguanas, chameleons
and tSlu (Geckonidae, Iguanidae and Teiidae). Snakes range from the jararaqa
(Bothrope sp) to the aucuri (Boidae family), most of which are not harmful to
man and feed on small animals.
5.24        A rescue operation for terrestrial fauna, known as "Operation Saci,"
was undertaken by CHESF prior to filling the lake.    Altogether, some 52,000
animals were captured, or 0.8 animals per hectare. Reptiles accounted for 80%
of the total, consisting mainly of lizards. Most of the rescued animals were
released at the site of the planned Itaparica ecological station near the town
of Floresta, Pernambuco.   In contrast to the comparatively poor record at
0
Braga, Ricardo and Lima, Raimundo,  "Bichos e Plantas no Doce Mar do
Sertao," Ciencia Hole, Vol. 10, No. 56, August 1989.


65
Sobradinho, CHESF appears to have taken considerable pains to preserve fauna
and the physical environment, more generally, at Itaparica.
4. The Environmental Protection Plan for Itaparica
5.25        Within its organizational structure, CHESF has recently established
special departments which are responsible for environmental control, I as well
as an environmental protection plan for Itaparica. The latter is composed of
physical, biotic and socio-cultural components.      Physical controls, more
specifically, include: (i) the collection of meteorological data by CHESF's
Division of Environmental Control through a series of weather and fluvial
stations to be supplemented by information gathered at posts on irrigation
projectes (ii) the monitoring of seismic activity through instruments installed
by the Astronomical and Geophysical Institute of the University of Sao Paulo;
(iii) a program to monitor soil use and the contamination of lakewaters, not yet
implemented, to be set up by a private agricultural extension company contracted
to take charge of project irrigation schemes once these come on stream; (iv) a
water quality monitoring program, currently already underway, that includes the
establishment of testing posts, together with the regular chemical and
microbiological analysis of samples, covering agrotoxic chemicals and heavy
metals, among other substances; and (v) landscaping of the dam construction site,
involving an area of 320 ha upstream of the impoundment, the replacement of
topsoil lost during excavations and reforestation with native and exotic species.
5.26        Biological programs, in turn, includes (i) the cleaning of the area
to be flooded which involved some deforestation to preserve water quality and
the removal of domestic septic tanks from urban areas; (ii) Operation Saci,
already mentioned, which was successfully executed in parallel to the filling
of the reservoir under an agreement with CESP and currently includes an
arrangement with the Federal Rural University of Pernambuco for monitoring fauna
in the area; (iii) a conservation program for aquatic fauna which includes
stocking the reservoir with fish, preserving existing species and undertaking
studies to identify natural fish breeding grounds with the aim of avoiding their
extinction downstream from Sobradinho. The latter program is currently being
implemented, while a fish farm at Paulo Afoneo is presently producing young fish
to assist in restocking Lake Itaparica. 1
5.27        Cultural measures, finally, entail a program for preserving items
of historical and archeological value that is currently being executed through
16 See CHESF's organization chart in Annex 3 to this report.
17 Sociel issues relating to the relocation of urban and rural populations
are discussed at length in Chapter VI below. Studies were also initiated in May
1989, under an agreement between CHESF and CESP, to determine the potential of
Lake Itaparica for recreational activities.
n The fish restocking program was approved in 1988 by the now extinct
SUDEPE/PE. CHESF has signed an agreement with the new federal environmental
coordinating body, IBAMA, for the monitoring of fishing activities, as wel as
for the issuing and renovation of fishing licenses for Itaparica reservoir.


66
an agreement between CHESF and the Federal Universities of Bahia and Pernambuco.
This program involves archival research into cattorial and church records and
cataloguing of the information gathered, together with the investigation of
archeological sites and the collection of Amerindian artifacts.
5. Licensing Problems for Itaparica: the Role of State Environmental
Protection Agencies
5.28        From the time construction act vities initiated at Itaparica through
the closing of the sluicegates and the 'subsequent start-up of electricity
generation, there have been a number of modifications to Brazilian environmental
legislation.   As a result, licensing of the Itaparica power station has
encountered several problems such that, at the time of the OED/SEPLAN mission
in mid-1989, even though the plant was in operation, it had not yet been granted
a full operating licence. In order to comply with current federal environmental
legislation, moreover, CRESF contracted an engineering firm to carry out an
environmental impact study (known as the RIMA), which was formally submitted to
state environmental control authorities in Bahia and Pernambuco in July 1987.
5.29        The Pernambuco state government, through its Company for the Control
of Environmental Pollution and Administration of Hydraulic Resources (CPRH), in
turn, contracted a team from the Federal University of Pernambuco to analyze the
environmental protection program drawn up on CHESF's behalf.    CPRHIs report
concluded, however, that the RIMA was inadequate both in terms of its analysis
of the project's potential negative impacts and in terms of the proposed
corrective measures and ruled that a more comprehensive plan for integrated
regional development was necessary.    An agreement was subsequently reached
between CHESF and the state government through which a provisional licence was
granted on the understanding that an improved program for environmental control
in the reservoir area would be prepared. "
5.30        The state government of Bahia raised similar concerns through its
own agency, the Center for Environmental Resources (CRA). CRA highlighted a
number of the critical issues discussed by CPRH, which remained to be addressed
by CHESF. Consequently, and in contrast to the outcome in Pernambuco, at the
time of the OEDISEPLAN mission, CRA still had not issued an operating licence
to CHESF for Itaparica.
19 Licence number LO 123/88, of 14 July 1988. The terms of the agreement
stipulate that CHESF would take a number of concrete steps toward improving its
environmental actions. These included streamlining Operation Saci, setting up
an ecological station, increasing fish stocks in the lake, drawing up an
operational plan for water use from the reservoir at minimum and maAimum levels,
preparing a plan for demarcating and distributing irrigated plote and agrscina
to provide periodic progress reports to CPRH.


67
6. Likely Future Problems
5.31        The reorganization of federal government agencies responsible for
environmental monitoring following the creation of IBAMA in February 1989, 20
may result in short term problems for the implementation of environmental
controls at Itaparica.   Furthermore, the transfer of responsibilities from
federal to state agencies is still unclear and the pertinent official agreements
have yet to be signed. In the case of Itaparica in particular, the involvement
of two states further complicates matters since the federal government must
ensure that the state programs are consistent in terms of both goals and
monitoring and enforcement procedures. More generally, in situations such as
that at Itaparica where two or more states are involved -- especially when the
respective state agencies are not in agreement as to the quality of a particular
project's environmental Impact assessment and/or the adequacy of the
corresponding control and/or mitigation measures to be taken -- there is clearly
a need for direct intervention, or at least coordination, from the federal level.
5.32        The most serious futtre physical environmental problems at Itaparica,
as at Sobradinho, will probably involve water quality, predatory fishing
activities and the possible contamination of lake waters by agrotoxic substances
and/or urban and industrial wastes.      In the irrigation projects, more
specifically, salinization is likely to be encountered, while a heavy use of
chemical fertilizers and pesticides ma, lead to the contamination of both soils
and food crop.. Urban areas in the region, in turn, are likely to experience
basic sanitation problems similar to those in many other Braziliar towns and
cities especially in terms of untreated sewage, poorly disposed solid waste and
insufficient investment in the maintenance of water treatment plants, where these
exist at all.
D. Conclusion
5.33        From a physical environmental standpoint, a number of significant
impacts have resulted from the formation of two sizeable artificial lakes, the
expansion of irrigated farming, increased energy production and associated urban
growth in the middle and lower Sao Francisco valley. Some of these side effects
(eg. predatory fishing practices) are already quite apparent, while others (eg.
pollution of waterways by agro-chemicale) are only beginning to emerge or may
do so only in the future. Many of the ecological changes associated either
directly or indirectly with the operations in question, moreover, were predicted
on the basis on comparable experiences with hydropower and irrigation schemes
elsewhere and by specific ex-ante environmental "reconnaissance" surveys in the
immediate areas of influence of the projects themselves.
5.34        In terms of anticipating potentially adverse impacts and undertaking
adequate preventive or corrective measures, however, the record thus far has been
mixed.   In the case of Sobradinho, while many of the impacts were probably
unavoidable in the first instance (silt retention, possible localized climate
20    IBAMA  incorporated  SEMA, the   previous national   environmental
secretariat, IBDP, the former Brazilian Forestry Development Institute, and
SUDEPE, the former Fisheries Development Superintendency.


68
change, flooding of riverine lands, modifications in aquatic and terrestrial
fauna, etc.), remedial action, where necessary, was slow.        In terms of
controlling predatory fishing and increasing water pollution by agrotoxics and
domestic waste, more specifically, much still remains to be done.
5.35        In the lower Sao Francisco valley, similarly, water contamination
and salinization of irrigated areas require more effective maintenance and
control. At Itaparica, on the other hand, while some problems remain, in general
CHESF demonstrates a much greater awareness -- especially when compared with the
earlier experience at Sobradinho -- of ecological requirements and a
comprehensive protection plan is presently being implemented to tackle the
various physical, biological and cultural problems associated with the hydropower
project.  A clear need, nevertheless, remaina for the careful monitoring of
environmental changes, particularly water quality, once the irrigation
subprojects begin production and the local rural economy develops.


69
VI. HUMAN ENVIRONMENTAL IMPACTS AND RESETTLEMENT EXPERIENCE
A. Paulo Afonso IV Hydropower Project
1. Introductlon
6.01        Construction of the Sobradinho dam and reservoir as part of the Bank-
assisted Paulo Afonso IV Hydropower Project has brought about major social and
economic changes in the middle and lower Sao Francisco valley.      It is no
exaggeration to say that Sobradinho has triggered a transformation in the
demographic and productive structure of the region, both in the immediate
vicinity of the lake and farther downstream. In the short term, this project
involved critical issues of how to cope with large-scale population
displacements, the payment of compensation and the physical relocation of those
affected. In the longer-run, equally important questions concern the provision
of viable development options for displacees and how this whole situation relates
to, and is constrained by, the wider parallel changes in the local economy set
in motion by Sobradinho. The following paragraphs deal with the more immediate
impacts, while section D below assesses the broader transformations currently
underway in the region.
6.02        Both the Bank and CHESF were aware of the vast scale and potentially
adverse social impacts of Sobradinho. In the first instance, this involved the
forced displacement and relocation of some 65,000 people from the lake area
itself, as well as of an estimated 10,000 rice farmers in the lower Sao Francisco
valley.   In response to this situation, a Resettlement Unit was established
within CHESF in 1972, an agreement was signed between CHESF and INCRA in October
1973, to define responsibilities for transferring the population to other areas
and providing alternative livelihoods, and an environmental reconnaissance of
the reservoir area, which diagnosed a number of potential problems concerning
ecological degradation, health conditions and the destruction of existing
riverine farming systems, was undertaken by a consultant in mid-1973. 1
6.03        With the findings of the environmental reconnaissance in mind, the
Bank used the pre-appraisal (June 1972), appraisal (July 1973) and loan
negotiation stages (April-May 1974) to focus attention on resettlement issues
and persuade the Brazilian Government of the need for adequate compensatory
measures.   Insofar as Sobradinho was concerned, the Loan Agreement for the
project established that CHESF and the Government would submit to the Bank, for
review and comment, (a) within nine months of loan signing (ie. by March 17,
1975), plans for resettling the population living in the lake area, setting up
health and environmental controls and promoting fish production, and (b) within
12 months of loan signing (ie. by June 17, 1975), an evaluation of the effects
Robert Goodland, Sobradinho Hydroelectric Prolect Environmental Impact
Reconnaissance, op. cit. While concentrating on physical impacts, as noted in
Chapter IV above, this study took pains to highlight the risk of widespread
unemployment as a result of massive population displacements, together with the
need for multi-sectoral planning to rebuild the local economy in favor of those
directly affected.


70
of dam construction and f low regulation on the middle Sao Francisco valley. It
should be stressed, however, that, throughout the appraisal and most of the
implementation period for the PA IV Project, the Bank did not possess an explicit
policy on involuntary resettlement.
2. Ponulation Dis2lacement and Resettlement
6.04        According to official figures, up to 65,000 people (almost 12,000
families) were displaced by Lake Sobradinho. Just over one-quarter of those
affected were from the riverside towns of Remansot C'asa Nova, Sento Se and Pilao
Arcadop while the remainder were of rural origin. 2The engineering consulting
firm contracted by CHESF to design the resettlement program estimated that 10%
of the rural displacees would iccept cash indemnity and move elsewhere, a further
10% would find employment in the local construction boom, 30% would settle in
13 new lakeside villages (arovilas), while the remaining 50% would travel some
800 kilometers upstream to an official colonization project (Serra do Ramalho)
at Bom Jesus da Lapa. At the time of appraisal in mid-1973, it was understood
that CHESF would take responsibility for compensating those affected, for the
urban resettlement and for establishing the lakeside A&Xgv_ilae, while INCRA would
administer the colonization scheme.
6.05        However, these estimates were based on a limited sample survey of
one town (Casa Nova) alone, which was unrepresentative of the area as a whole
and yielded information which proved to be wildly inaccurate for more general
planning purposes. As it turned out, 19% accepted cash compensation and moved
independently, while almost 70% remained in the immediate vicinity (32% in the
new towns, 222 in agrovilas and 15% in the dryland or caatinga) and only 8% opted
for INCRA's project at Bom Jesus da Lapa. 3 These miscalculations severely
compromised the resettlement effort and obliged the institutions involved to
undertake belated and largely unsatisfactory remedial measures as a result of
unexpectedly having to cope with a much larger remaining lakeside population than
originally anticipated.
3. The Serra dn, Ramalho Colonization Project
6.06        The most striking debacle occurred at Serra do Ramalho, where just
over 1,00~0 of the expected 4,500 or so families displaced by Sobradinho, chose
to resettle. aEach family was to receive a free brick house and use of a plot
of land ranging in size from 20 to 200 hectares depending on the quality of the
2   CHESF, Aspectos Socio-Economicos da Implantacao do Reservatorio de
Sobradinho, Recife,, 1980.
3  Shelton Davis, "Social Issues Associated With Resettlement," mimeop
Consultant's Report to PPDESO World Bank, January 29, 1987.
4 In its comments on an eariUer version of this report, CHESF argues that
much of the reason for the inability of this project to absorb families displaced
from Sobradinho was because INCRA handled it as a conventional land settlement
scheme without considering the special needs, traditional production systems and
previous social organization of the small farmers who were forced to relocate.


71
terrain. House and farm were to be purchased over a period of 20 years. Many
settlers, however, got off to a disastrous start, losing their possessions and
farm animals during the five-day boat and bus journey upstream.    Distraught
farmers, moreover, received no compensation for their losses and were left to
fend for themselves as best they could, seriously compromising the credibility
of both INCRA and CHESF.
6.07        A location many hundreds of kilometers from Sobradinho was deemed
necessary because, even though a large area of relatively fertile soils was
potentially available near the lake, this had been reserved by CODEVASF for
implantation of an irrigation scheme (ie. Massangano, near Petrolina). Chosen
for its apparent similarity with the resettlees' areas of origin, in practice,
Serra do Ramalho held little appeal for these farmers. It was situated at a
considerable distance from the Sao Francisco River and no irrigation facilities
were available. Even though most sattlers had been accustomed to wetland varzea
farming and irrigated agriculture on the banks of the Sao Francisco, CHESF and
INCRA assumed that displacees would be able to earn their livelihoods from the
vastly different, rainfed terrain at Serra do Ramalho. In addition to this basic
misunderstanding of farmers' adaptive dispositions and capacities, technical
support and credit were in short supply, while the failure to provide adequate
housing, health, educational and other basic facilities eventually discouraged
additional settlers from coming once news of this situation filtered back to
Sobradinho. According to a subsequent Bank mission, furthermore, over half of
the land designated for resettlement at Serra do Ramalho was, in fact, unsuitable
for agriculture. As a result, many of the original settlers eventually returned
to the Sobradinho area at their own expense.
6.08        In the absence of rural trade union activity or other social
movements in the region at the time, the Church took up the 1ettlers' cause.
A protest campaign was mounted by priests and bishops from the diocese of
Juazeiro (where Sobradinho was situated) and the Pastoral Land Commission (CPT),
which publicized the adverse impacts of the Sobradinho relocation exercise and
advised people against moving to SeLa do Ramalho. Local politicians, anxious
not to lose their followers, also applied pressure on INCRA and CHESF for greater
resettlement provisions to be made l-cally.    Even the national press gave
attention to the problems of disillusic,.,ed colonists at Bom Jesus da Lapa.  By
1977, consequently, the occupancy rate of the 3,500 houses in 10 agrovilas at
Serra do Ramalho was only 50%. The low take-up by Sobradinho displacees finally
led INCRA to open up the project to colonists from other parts of Brazil, thereby
defeating it6 original purpose.
6.09        After 14 years, the precarious economic situation at Bom Jesus da
Lapa does not appear to have improved. Many farmers, unable to make a living
from the land, now work as wage laborero on the adjacent private and public (ie.
CODEVASF) irrigation schemes. The project now has some 8,000 families and is
being increasingly occupied (about 1,500 families to date) by squatters
(gosseiros) from conflict-ridden areas such as that around Carajas in eastern
Amazonia. About 210,000 of its 250,000 hectares are occupied and INCRA is under
s Jornal do Brasil, report on August 29, 1976 entitled "INCRA Transfere
Familias para Desocupar Sobradinho."


72
pressure to expand the scheme further to absorb additional migrants. However,
a severe funding shortage has led to the gradual decay of the project's basic
infrastructure, including schools, roads and domestic water supply, which are
in desperate need of repair. Further problems have been caused by the gradual
decliLe in annual rainfall, attributed by many observers to deforestation to the
west of the Sao Franvisco River, resulting in falling yields of staple crops,
cotton and cattle. The Bank, howeve-., is currently funding feasibility studies
of groundwater irrigation potential for small farmers at Serra do Ramalho.
4. Rural Resettlement Around Sobradinho
6.10        From the outset, CHESF had planned to accommodate some 2,300 rural
families (about 14,000 people) in aggrovila, either bordering on or located near
the new lake. By 1980, 2,655 families had been settled in 25 rural nuclei, 21
of which were situated on the lake's margins.   Of the total, seventeen are
located in the municipality of Sento Se, four in Casa Nova, and two each in
Juazeiro and Remanso. These communities varied in size, from as few as six to
as many as 250 families. An additional 1,777 families of dryland herder-farmers
(gaatingue ros) were resettled at a greater distance from the water's edge. 6
Altogether, a total of over 22,000 rural resettlees were assisted in the lake
area, about 50% more than originally anticipated.     The number of planned
agrovilas was expanded from the original 13 t, 25 and implementation proceeded
relatively smoothly. The increase in the number of agrovila residents occurred
as a result of the original miscalculations, the return of disappointed
ex-colonists from Serra do Ramalho and accelerated migration from other rural
areas as land concentration accompanied the rapid spread of private mechanized
and irrigated farming and poor farmers sought basic health and educational
services for their families.
6.11        According to CHESF's plan, these rural nuclei were to be provided
with domestic water supplies, access roads and community buildings such as
schools, health posts, a post office, etc. Resettlees' belongings were to be
transferred from their old homes, they would receive 70% funding towards the cost
of a new house and half the amount needed to prepare a two hectare plot of
farmland by the lakeside, designed to diversify production and sustain a family
of six.    However, the difficulties of farmer adaptation in a sub tantially
different physical environment, combined with poor site selection procedures and
inadequate official support for the communities in question, adversely affected
this part of the resettlement effort. 8 As a result, a follow-up study of
6 CHESF, op. cit., 1980.
CHESF, op. cit., 1980, and IDB, Project Performance Audit Review,
Sobradinho Hydroelectric Project: the Population Resettlement Component, op.
cit.
8 In its comments or. an earlier version of this report, CHESF observes
that, while its own actions in this connection did not constitute an
"agricultural project" because the distribution of land to rural displacees was
not accompanied by the technical, economic and financial support necessary to
"systematize" agro-ranching &ctivities, the state government of Bahia did later


73
agrovila residents found that half suffered from insufficient food, an inability
to farm and lack of other employment, as well as from psychological stress. 9
6.12        Small farmers in the lakeside agrovilas have found it difficult to
sustain a livelihood from the land for several reasons. The reservoir inundated,
at a single stroke most of the fertile alluvial soils which had accumulated over
the centuries and which had previously permitted a delicately balanced system
of floodplain and dryland agriculture to be developed. This balance was replaced
by farming and living arrangements in which the displacees had no choice and that
were designed by outsiders having little knowledge of the area. Not only were
the areas that were set aside for smallholders characterized by relatively
infertile sandy soils, but the plots were frequently too small to be economically
viable. This was particularly serious in light of CHESF's failure to provide
adequate maintenance support for the affected families while they awaited the
first harvest, combined with a general lack of technical assisttnce and rural
credit.
6.13        Displacees were put under further strain due to the fact that only
those property owners with legal title were given compensation for the lose of
farmland. Those without proof of ownership, who had squatting rights or were
sharecroppers and tenant farmers, were compensated only for improvements
(benfeitorias).   This instantly decapitalized many previously independent
smallholders and made it more difficult for them to reestablish themselves in
the new communities. The repercussions of this compensation procedure may be
gauged from the fact that, according to a survey carried out by CHESF in 1973,
roughly two-thirds of farmers in the reservoir area were non-owners in the legal
sense. 10 Many farmers, moreover, were obliged to use their small compensation
payments simply to survive, bridging the gap between abandoning their former
homes and reaping their first harvests.    Others abandoned their new plots
altogether, selling out, where possible, to wealthier incoming commercial
farmers.
6.14        In addition to inadequate compensation, CHESF was widely accused of
adopting heavy-handed tactics to remove recalcitrant populations from the
reservoir area. First-hand accounts mention the use of special contractors who
issued threats to local populations and bulldozed houses with their occupants
barely out the door. In other areas, such as Pilao Arcado, for example, farmers
were allegedly moved out with no alternative accommodation being provided. n
Land speculation, sparked by rising property values associated with Sobradinho's
undertake various such actions under a special development program for the Lake
Sobradinho region.
9 OED Report No. 6578, op. cit., and Tim Campbell, "Social and Economic
Consequences of Resettlement - the Case of the Sobradinho Hydropower Dam, Bahia,
Brazil," mimeo, Inter-American Development Bank, Washington, D.C., 1984.
10 IDB, Project Performance Audit Review, op. cit.
1 CPT, As Ilhas de Resistencia: Os Lavradores no Vale do Sao Francisco,
Comissao Pastoral da Terra, Goiania, 1979.


74
V. mned infrastructure and other developments, also led to cases of violence.
One viction of 27 sharecropper families reportedly resulted in a death and
several serious injuries. 1
6.15        Visits to several rural resettlement nuclei near Sobradinho by the
OED/SEPLAN mission in mid-1989 revealed a common situation in which farming on
poorer lakeside soils, as predicted, is far more difficult than it had been on
the former river margins. With some investment, production of staples, as well
as cash crope, is feasible, as long as sufficient support is provided.   The
general impression at present, however, is one of a disrupted subsistence farming
economy where few have achieved the economic stability anticipated by planners.
The most viable communities seem to be those which have succeeded in obtaining
funding from outside NGOe or have been sufficiently well-organised to pressure
CHESF for a`ditional resources.   Otherwise, the present inhabitants of the
agrovilas claim to be generally neglecte.d by both CHESF and the relevant state
government authorities.
6.16        The substantial drop in the water level at Sobradinho between 1985
and 1989, moreover, exposed several kilometers of floodplain (varzea) near these
communities. While thin temporarily provided additional areas for cultivation,
it also set in motion several land conflicts as former proprietors around the
lake attempted to repossess their lands. 1  Educational and health facilities
are in notoriously short supply, while domestic water supplies are often
non-existent or precarious as the lake-edge has receded from the communities.
The agovila of Algodoes, for instance, which was visited by the OED/SEPLAN
mission, has carried on a four-year battle with CHESF to secure assistance in
transferring its diesel water pump to accompany the steadily lower water level.
6.17        Living standards and general conditions seem to vary considerably
among these communities.    For some, the move undoubtedly represented a
significant change for the better, However, the above-mentioned factors have
placed severe pressures on much of 'the resettled rural population. This has led
to several unforseen phenomena such as increased out-migration to urban areas
and the reconcentration of landholdings as small farmers are unable to survive
and capitalized outsiders have arrived to buy up abandoned plots at bargain
prices. For example, in the agrovila of Bem Bom, also visited by the OED/SEPLAN
mission, onion-growers from the town of Belem do Sao Francisco have taken over
a number of properties in this way. Similarly, many farmers in the communities
of Sao Goncalo and Algodao Velho have sold off their plots to a private shrimp
nursery project. This process has been facilitated by the slowness of INTERBA,
the Bahia State Land Institute, in distributing titles to resettled farmers,
thereby increasing tir vulnerability and making it difficult to obtain official
credit through the local banking system.
12 Tina Kimes, "Case History of Paulo Afonso IV (Sobradinho): The Human
Impact of a Hydroelectric Project," mimeo, World Bank, 1978.
1 Caminhar Juntos, Bulletin of the Diocese of Juazeiro, No. 139, January-
February 1989.


75
6.18        Many farmers hae reverted to artesanal fishing in an attempt to make
ends meet, but, as stated in paragraph 5.05 above, yields have recently been
falling due to over-fishing in the lake and no systematic fisheries development
has taken place, despite the recommendations of a World Bank consultant to this
effect in 1976. Banl; supervision missions suggested in 1978, moreover, that
CHESF develop an integrated rural development program for the resettled lakeside
population, including livestock, irrigated farming and fishing, as well as
complementary land tenure, marketing and social service inputs, but no further
action has been taken in this regard.
5. Urban Resettlement
6.19        Some 3,200 families (about 16,000 inhabitants) were transferred from
the old towns of Remanso, Casa Nova, Sento Se and Pilao Arcado to new communities
with the same names. More than 11% of rural displacees chose to move to the new
towns, while less than 1% of urban settlers went to arovilas. In the towns,
CHESF gave people the option of cash compensation or a straight exchange
(permuta) of their old houses for an equivalent new model.    Most wealthier
citizens chose to accept cash indemnity and build their own houses, while
lower-income town dwellers tended to opt for substitute houses. The new urban
centers, moreover, were provided with basic transport, sanitation, health,
education, leisure and other community infrastructure. Since the late 1970's,
there is no doubt that these towns have become quite prosperous and provided
better living standards for a large proportion of their expanding populations.
6.20        By 1980, for example, Remanso had doubled its population to 13,000,
while Casa Nova showed the most dramatic increase, growing from just under 2,400
in 1970 to a total of 11,000 inhabitants ten years later.      Casa Nova has
continued to expand with the growth of irrigated agriculture and local informants
currently put the number of resideits at some 15,000. Remanso, strategically
situated at the junction of two major highways (the lakeside BA-235 and the
interstate BR-234 to Sao Raimundo Nonato in the neighboring state of Piaui) has
grown faster still as commercial activities have expanded, partly in response
to the spread of small-scale private irrigated farming; since 1980 its population
has almost tripled to 31,000.     Whereas in 1970 about one-quarter of the
population in the middle and lower Sao Francisco valley was classified as urban
and, by 1980, the proportion had risen to one-third, today the figure is probably
over 40%.
6.21        It should be borne in mind, however, that much of this urban growth
is in fact due to the rapid spread of impoverished shanty-towns populated by
rural out-migrants expelled from the land as the result of agricultural
modernization, a process which Sobradinho has greatly facilitated.        One
unforeseen negative consequence of the project, for example, has been the
creation of Sao Joaquim, a town of some 15,000 workers and their dependents,
located near CHESF's operational headquarters for the Sobradinho hydropower
complex. Although Sao Joaquim provided many jobs during the construction phase
of the PA IV Project, it now has a largely unemployed population and growing
social problems.    Contrary to planners' expectations, fewer people than
anticipated left Sao Joaquim once the building and service boom finishe*
Originally a district of Juazeiro, it is now a separate municipality.


76
6.22       Although one survey found that two-thirds of new town inhabitants were
satisfi.d with resettlement, it also discovered that more than a third of the
displacees did not receive plots of land in the new towns. This number included
return migrants from Serra do Ramalho, as well as people who had absented
themselveb during the resettlement period in order to seek employment nearby in
the construction industry. As far as CHESF was concerned, rights to compensation
and relocation did not extent beyond the first move. 4 Problems also arose
initially from the failure to coordinate population transfere with the
installation of infrastructure. In Sento Se, for example, electricity supplies
were late and no sewage facilities were provided in the early months, leading
to public health problems.
6.23       The survey cited in the previous paragraph also found that one-third
of the new urban residents were dissatisfied with their transfer for a variety
of reasons including the lack of local employment opportunities once the initial
building boom had subsided, the impossibility of obtaining subsistence plots to
guarantee basic minimum food requirements and the high cost of urban services.
Even though the combination of cash, building materials and housing given to
urbar. displacees was a significant improvement over the earlier experience at
Moxoto, the compensation provided at Sobradinho -as still often insufficient to
see families through the first difficult years after relocation. 15
B. The Lower Sao Francisco Polders and Irrigation Projects
1. Introduction
6.24        The Lower Sao Francisco polders and irrigation projects were
conceived as a direct response to the adverse consequences of the Sobradinho dam
and reservoir on the rural population living in the lower valley. Regulation
of the river's seasonal variation increased the lowflow from 700 to 2,000
m3/second and meant that, in the absence of protective works, some 9,000 hectares
of productive varzea riceland would have been permanently flooded. As described
in Chapter IV above, the resulting "emergency" project, accordingly, aimed
initially at protecting the floodplain through a series of protective dikes and
pumping stations, and developing irrigated farming on two polders, Betume and
Marituba (SF I). This approach was extended, in a second stage, to cover the
polders of Cotinguiba-Pindoba, Boacica and Brejo Grande (SF II). Following the
expropriation of existing properties and the distribution of 3.5-hectare plots
to selected colonists, the projects were expected to absorb a total of some 3,800
small irrigation farmers on over 16,000 hectares of irrigated and 6,000 hectares
of non-irrigated land.
6.25       Just as the Sobradinho experience transformed the lives of the 65,000
people displaced by the reoervoir, the Lower Sao Francisco projects have had an
equally profound impact on the estimated 50,000 rural dwellers inhabiting the
varzea areas in question. In the short-term, these impacts have resulted from
14   Proleto  Sobradinho: Avaliacao   Socio-Economica  de Relocalizacao
Populacional, Fundacao Joaquim Nabuco/CHESF, Recife, 1983.
1 Fundacao Joaquim Nabuco and Project Performance Review, op. cit.


77
population displacement and CODEVASF's management of the area, compensation
procedures, changes in levels of local agricultural production, related social
conflicts and rural out-migration    from  the lower valley.     Longer-term
consequences involve the nature and sustainability of the CODEVASF-run irrigation
projects themselves including the extent to which the agency has assisted the
local population during the transition period, the subsequent agro-economic
performance of these schemes and their likely future as independently
administered enterprises.
2. Population Disnlacement and Agricultural Development
6.26        The wholesale expropriation of 25,000 hectares of land in the densely
populated lower valley between 1975 and 1980 is estimated to have displaced a
total of some 10,200 :ural families. These comprised 2,800 smallholders, 100
medium and larger proprietors and 7,300 sharecroppers and tenant farmers, or over
50,000 people altogether. 16   Since the projects in question had directly
absorbed less than 3,200 families by 1985, a      this suggests that a net
displacement of over 7,000 families, or approximately 35,000 people, may have
occurred in the project area. 18 The local impact of this net demographic lose
is partially reflected in the slow growth of Penedo, the region's largest town.
While cities in the middle Sao Francisco valley doubled in size between 1970 and
1980, the population of Penedo increased by only 15%, to reach 27,000 in the
latter year. More generally, rural population declined in absolute terms in
eight of the fourteen municipalities composing the lower Sao Francisco region
between 1970 and 1980, while four of these municipalities suffered absolute
losses in their total population. '9 In those areas where population growth was
16 H.0.M. Barros, "Modernizacao Agricola Autoritaria e Desestruturacao do
Ecosistema: 0 Caso do Baixo Sao Francisco," CAdernos de Estudos Sociais, Fundacao
Joaquim Nabuco, Recife, Vol. 1, No. 1, January-June 1985.
17 This figure is drawn from ILO/UNDP, Emprego e Renda..., op. cit., Table
19, pg. 52. According to Bank regional staff (internal memorandum dated July
24, 1990), the Bank had originally argued in favor of 2 ha irrigation plots,
which would have accommodated twice the number of displacees, but, in a
compromise with CODEVASF, which sought to implement 6 ha lots, finally agreed
on an intermediate size of 4 ha on the basis that the smaller lote "would have
created a rural slum." The projects, were, thus, actually able to directly
absorb some 3,000 families, but another 4,000 families were reportedly able to
remain in the area as workers and/or sharecroppers. This compares very favorably
with the alternatives of leaving the entire area to be flooded, which would have
required all 10,000 families to leave, of a simple polders project with no
irrigation which would probably have benefitted only 1,000 of the better off
families or a polder-cum-drainage alternative which might have retained 2,000
of the original 10,000 families in the area.
18 Bank operational staff familiar with the lower Sao Francisco projects
are under the impression that, directly or indirectly, these operations, in fact,
absorbed a larger number of people, but more precise figures are not available.
19 ILO/UNDP, op. cit., Table 3, pg. 27.


78
positive, moreover, the rates were very low (in most cases less than 1% a year),
indicating positive rates of net out-migration.
6.27        The immediate post-land acquisition phase in the lower Sao Francisco
valley was somewhat different in terms of its human environmental impact than
that at Sobradinho where some attempt was made to provide alternative livelihoods
for most of the farmers displaced by the reservoir, imperfect though these
efforts may have been. In the lower Sao Francisco, no provisions were made for
resettlement of that part of the displaced population not absorbed by the
irrigation schemes. Assistance was confined to short-term emergency employment
programs. These people, perhaps two-thirds of the total population involuntarily
removed, in the final analysis were left largely to fend for themselves.
6.28        More recent data suggest, however, that it may be important to
differentiate the period before and after 1980 with respect to rural development
tendencies in the lower Sao Francisco valley. The table below presents selected
indicators based on the Agricultural Census data for the 1970-85 period with
respect to the growth of the number of agricultural establishments, the total
area in farms, the area in crops (as opposed to pasture or other non-crop uses),
rural employment, the cattle population and, as a proxy for mechanization,
tractors for the two microregions (Penedo in Alagoas and Propria in Sergipe)
which make up the lower valley region. 20 Figures on average farm size, cropping
intensity, employment and crop area per farm unit and heads of cattle and
tractors per rural establishment are also presented.
6.29        These figures reveal that, while rural employment in the lower Sao
Francisco valley did, in fact, decline somewhat in absolute terms between 1970
and 1980, by contrast, it grew substantially -- from 41,400 to 51,600 -- during
the early 1980's, as did the number of rural establishments, which increased by
some 3,600 units between 1980 and 1985, to a total of more than 18,300 in the
latter year.  As a result, the average area per establishment fell sharply
between 1980 and 1985, reversing the tendency for a slight increase in average
farm size during the 1970's. Just the opposite trend, moreover, characterized
the evolution of the cattle population in the region, since its rapid growth
during the 1970's was totally reversed in the early 1980's. As a consequence,
the average number of heads of cattle per rural establishment was lower in 1985
than it had been in 1970. 2 Interestingly also, while the total area occupied
by rural establishments decreased between 1980 and 1985, the area in crops
increased substantially, from 44,700 ha in the former year to 55,500 ha in the
20 These microregions include the following municipalities: (i) Penedo -
Feliz Deserto, Igreja Nova, Penedo, Piacabacu, and Porto Real do Colegio; (ii)
Propria - Amparo do Sao Francisco, Brejo Grande, Canhoba, Ilha das Flores,
Neopolis, Nossa Senhora de Lourdes, Pacatuba, Propria and Telha.
2' While ranching has never been a major acrivity in the lower valley, the
possession of relatively small amounts of cattle has traditionally accompanied
small-scale agricultural (ie. rice and subsistence crop) activities in the region
and forms part of the survival strategy of many peasant farmers in the area.
See Mario Lacerda de Melo, Regionalizacao Agraria do Nordeste, SUDENE, Recife,
1978, Part II, Chapter 3. pp. 154-55 for additional details.


79
latter. On the other hand, the expansion in total crop area was essentially the
result of the growth in the number of rural establishments, since the aver.ge
crop area per farm remained exactly the same (ie. 3.0 ha/establishment) between
1970 and 1985. In addition, the average number of persons employed per farm in
the lower valley remained the same between 1980 and 1985 and was lower in both
years than in 1970, again reflecting the net outflow of rural workers during the
1970's. 22
Table 1
Lower Sao Francisco Valley: Selected Agricultural Indicators, 1970-85
A. Annual Growth Rates (%)         1970-80       1980-85        1970-85
Establishments                   1.3           4.5            2.3
Total Area Occupied              1.6          -2.4            0.2
Crop Area                        1.4           4.8            2.3
Employment                      -0.1           4.5            1.4
Cattle Population                5.5          -4.9            1.9
Tractors                         3.0           2.4            2.8
B. Indicators                         1970           1980           1985
Area/Establishment (ha)          13.4           13.9           9.9
Crop Area/Establishment (ha)      3.0           3.0            3.0
Crop Area/Total Area             22.3%         22.0%          30.2%
Employment/Estab. (persons)       3.2           2.8            2.8
Cattle/Estab. (heads)             4.0           6.0            3.7
Tractors/Estab. (No.)             0.02          0.02           0.32
Sources IBGE, Agricultural Census, 1970, 1980, 1985.
6.30        The above figures suggest, in short, that, after an initial period
of dislocation, accompanied by a slight decrease in rural employment and a more
substantial increase in small-scale ranching activities, the project-supported
irrigation schemes may, Indeed, have had an important -- and positive -- impact
on both rural land distribution and employment in the lower Sao Francisco valley.
The actual extent of this impact, however, remains to be determined in light of
two questions which may only be possible to answer with further direct field
research in the region. The first refers to the extent to which the observed
changes are, in fact, due to irrigated rice production rather than to other
12  1
The average number of persons employed per rural establishment (2.8) in
1980 and 1985, according to the agricultural census, moreover, was exactly the
same as that encountered by the ILO/UNDP study (op. cit.) for irrigated farms
in the region for the latter year, even though the average area per establishment
in 1985 was found to be somewhat higher by the former source (9.0 ha) than by
the latter (7.7 ha), suggesting that farm sizes, on the average, were higher
outside the irrigation projects.


80
tendencies simultaneously affecting the municipalities in the area, particularly
the expansion of labor intensive sugar cane production in response to the
national alcohol program (PROALCOOL) in the Alagoas portion of the region. 23
6.31        In this connection, it should be observed that, while 67% of the
increment in rural employment in the lower Sao Francisco valley in the early
1980's occurred in the Alagoas section of the region, only 36% of the families
settled in CODEVASF irrigation projects were located in this state. 2
Furthermore, most of the expansion in rural employuent between 1980 and 1985
occurred in the municipality of Penedo (4,200 workers), while CODEVASF's projects
in Alagoas (Itiuba and Boacica) are located farther to the west in the
municipalities of Igreja Nova and Porto Real do Colegio, whose combined increase
in rural employment between 1980 and 1985 wa on the order of 1,500 people, or
only about 15% of the total increment in the agricultural work force for the
entire area. 25 It should also be noted that, while rice cultivation declined
by 40% in area planted and 18% in volume produced in the municipality of Propria
and 39% in area and 7% in volume in Penedo between 1970 and 1980, sugar cane
production increased by 12,500% in area planted and 25,800% in volume of output
in the former municipio and b7 20,030% in area and 136,000% in volume in the
latter over the same period! 
23 This was a national program involving credit and other incentives for
the production of sugar cane-based alcohol as a vehicle fuel to substitute
imported petroleum products such as gasoline. PROALCOOL was partially funded
by Bank loan 1989-BR, approved in May 1981, for the Alcohol and Biomass Energy
Development Project, which was closed in March 1987. See OED Report 8887 dated
June 29, 1990 for additional information on this program and the related Bank-
loan.
24 Moreover, of the 1,138 families accommodated in irrigation projects in
Alagoas, fully 65% (739) were cultivating "ceded" lands with an average size of
0.8 hectares, as opposed to only 30% producing on "ceded" lands in the irrigation
projects in Sergipe, according to the ILO/UNDP study cited above.
25 The Marituba varzea, located in Penedo municipality, was originally to
have been fully developed under SF I, but was later substituted by the
rehabilitation of existing drainqge works in the Propria and Itiuba varzeas
because of difficulties in acquiring the necessary land (see paras. 4.30 and 4.36
above). The PCR (OED Report No. 5669, op. cit.) specifically refers (Annex 3,
para. 5) to the fact that "the redistribution of about 1,800 ha in the Marituba
area was never advanced beyond the discrimination phase because of strong
opposition from large land owners. This was particularly severe because Marituba
was one of the few areas in the project which still had unused land for the
resettlement of excess farmers." (Emphasis OED#
26' ILO/UNDP, op. cit., Table 15, pg. 45. More specifically, the area in
rice decreased from 6,341 ha to 3,885 ha in Penedo and from 7,646 ha to 4,562
ha in Propria during the 1970'., while the area in sugar cane increased from 32
ha to 6,543 ha in the former and from 2 ha to 252 ha in the latter over the
decade. The area planted in and output of corn also declined in Penedo during
the period, while the area and output in corn, beans and manioc in Propria all


81
6.32        The other relevant question concerns the extent to which those
persons or families which have been employed in the irrigation schemes after 1980
are the same ones that were displaced from the varzeas during the late 1970's.
To the extent that these families and individuals are not the same families,
despite the projects' positive results in terms of increased rural employment,
installation of the irrigation schemes may still have had a significant negative
impact on many of the original residents of the area. While this is a subject
that requires and merits further investigation, as the following sections
indicate, there are substantial reasons to conclude that the lower Sao Francisco
polder and irrigation projects -- and ultimately, the Paulo Afonso IV Hydropower
Project that made them necessary in the first place -- appear to have had a major
disruptive impact on a large number of rural families in the region.
6.33        Even allowing for the reabsorption of some displaced farmers as
irrigation colonists or agricultural laborers, in short, a significant loss of
livelihood may have occurred for many of the original rural residents of the
lower valley. This is somewhat anomalous in view of the fact that SF I and II
were considered "emergency" projects having the "social" purpose of providing
protection to a population threatened by the permanent flooding of their
farmlands. Even though, in principle, displacees from the lower valley were to
receive preferential treatment by CODEVASF in the allocation of irrigated plots,
a number of factors served to minimize the impact of this compensatory measure
and to fuel the movement of people from the area. These factors include the
wholesale loss of lands and sudden decrease in local agricultural production,
inadequate provisions for compensating those who had lost their sources of
employment on the land, the frequently violent nature of the expropriation
process itself, the subsequent long delays in project implementation and the
highly selective nature of CODEVASF's farmer recruitment procedures.
3. Expropriation and Compensation Procedures
6.34        CODEVASF began expropriations in the heavily populated varzeas of
Betume in 1975 and Boacica in 1976. Following the provisions of the 1964 Rural
Land Statute (Estatuto da Terra), which allows for the expropriation of lands
"in the social interest" to establish official colonization programs and other
public projects, compensation was paid only to property owners having legal
title. As at Sobradinho, those occupants with no such proof received payment
only for improvements to the land (benfeitorias). Sharecroppers, who formed 75%
of the displaced population, received nothing at all. They were, instead, to
receive priority in recruitment to the new irrigation schemes.
6.35        Strong local discontent was aroused over the summary way in which
many people suddenly lost their livelihoods. Resentment was likewise expressed
at alleged inconsistencies in the payment of compensation. Contractors hired
by CODEVASF were widely accused of using violent tactics to clear the land for
project preparation. Once productive farmers were, overnight in many instances,
reduced to a state of penury and forced to depend on emergency food rations and
decreased by 35% or more during the 1970's, although much of this may have been
due to the 1979 flood which is not specifically mentioned by this source.


82
temporary shelter provided by the diocese of Propria. 2         CODEVASF did
subsequently introduce osveral emergency work schemes, recruiting displaced labor
for project construct-,on and land preparation activities.   However, it is
unlikely that these measures were sufficient to offset the longer-term
consequences on the local population kn view of the fact that no resettlement
provisions were made for the majority of those forced to leave the immediate
area.
6.36        Not surprisingly under the circumstances, a serious confrontational
situation developed between the local population and CODEVASF.  Simultaneous
expropriations in all varzsas served only to heighten local objections,
especia3ly as CODEVASP was unable to immediately use the land it had acquired
and which remained idle for a lengthy period as a result. In September 1976,
there was a major public reaction against CODEVASF, and the Bishop of Propria,
Dom Jose Brandao de Castro, wrote a letter to the Minister of the Interior
protesting events in the area. At that time, moreover, sixty ex-laborers from
the former Fazenda Betume took legal action against CODEVASF for compensation
to cover their lose of employment. 2 The Brazilian press subsequently gave
coverage to this case and associated problems in the lower valley, affording
CODEVASF much unfavorable publicity. 2 The combination of local protests and
a lack of financial resources eventually resulte! in a slowing down of the rate
of land acquisition. o
6.37        An acute conflict also emerged between CODEVASF and the Cariri-Xoco
Indians, long-standing inhabitants of the lower valley, who were also affected
by the scheme.    The Amerindians took action in 1978 to repossess their
traditional lands on which CODEVASF had set up a demonstration farm (fazenda
modelo). Negotiations led to the lands being ceded back to the tribe under the
supervision of FUNAI. These families were later joined by the majority of a
group of forty Cariri-Xoco who had been resettled on the Itiuba polder. However,
many of the Indians experienced difficulties in adapting to irrigated farming
and either abandoned or rented out their plots for a small fee. Lack of credit
and drainage problems have also contributed to the permanence of just four
Amerindian farmers in the Itiuba project by 1989.
6.38        Many of these conflicts owe their origins to the fact that CODEVASF
had no coherent strategy for dealing with the potential problems associated with
27 Estado de Sao Paulo, August 24, 1982, "Trabalhadores Rurais Apelam por
Posseiros."
28  The Federal courts, howaver, reached a judgement in favor of the
plaintiffs only in 1987.
29  See, for example, A Tarde, Salvador, report on December 16, 1979
entitled "Cinco Anos de CODEVASF, Cinco Anos de Fracasso," ("Five years of
CODEVASF, Five Years of Failure") and Jornal do Brasil, January 19, 1981,
"CODEVASF Prejudica Agricultores" ("CODEVASF Harms Farmers").
30 R. Moreno, "Consultant's Report from Pre-Appraisal Mission for SF II
Irrigation Project," World Bank, December 29, 1977.


83
land expropriation. Such problems should have been anticipated in a densely
populated area characterized by a high degree of property fragmentation and
concentration where many sharecroppers had been residing for zhirty years or
more. CHESF's experience at Sobradinho should also have provided useful lessons.
However, CODEVASP expected these disputes to be resolved on an ad hoe basis by
its field staff handling the proceas. The agency's approach appears to have been
largely limited to attempting to improve its image through public relations
exercises and providing emergency social investments ouch as schools and health
posts.
4. Decrease in Agricultural Production and Rural Land Use Changes
6.39        These factors were further exacerbated by a significant decrease in
(non-eugar cane) agricultural output in the lower valley during the latter
1970's, caused in part by the serious flooding of the Sao Francisco River in
1979, previously mentioned in para. 4.42 above, which also contributed to
substantial execution delays in the SF I Project. As indicated in Table 1 and
para. 6.31 above, moreover, the slow growth of agricultural activity between 1970
and 1980 was also accompanied both by an absolute decrease in rural employment
and a significant change in rural land use which involved a shift from the
production of rice and other subsistence food crops (ie. corn, beans and manioc)
to sugar cane and cattle raising, particularly in the Alagoas portion of the
region, as well as substantial rural and urban out-migration. 31
6.40        This led the ILO/UNDP study of rice production in the lower Sao
Francisco valley to conclude, upon examining demographic tendencies in the region
during the 1970's, that "neither primary sector activities, nor urban activities
were able to fix the region's population, a result perhaps of the expansion of
cattle and the stagnation of regional agricultural production both for the market
and for subsistence." 32 This study, furthermore, cites a document prepared by
the state Agricultural Planning ^ommission of Alagoa (CEPA-AL) in indicating
another reason for the stagnation of rice output euring the late 1970's:
"Alagoas' rice production is going through a period of decline motivated by the
expectation of expropriation by CODEVASP of the entire rice region and also by
the non-fulfillment of the targets foreseen in the referred entity's [is.
CODEVASF's] settlement plan." 3
5. Prolect Imlementation and Farmer Recruitment
6.41        Problems experienced during the land acquisition phases of SF I and
II were also compounded by CODEVASF's self-confessed failure to devise a
satisfactory strategy for handling social questions during and after project
a1 The cattle population in the Penedo microregion (Alagoas) increased from
roughly 18,500 in 1970 to 43,500 in 1980, while that in the Propria microregion
(Sergipe) increased from some 33,500 in the former year to 44,700 in the latter.
32 ILO/UNDP. op. cit., pg. 26 (emphasis OED).
3 Ibid., pg. 46 (emphasis OED). The document cited is CEPA-AL's Plano
Anual de Producao e Abastecimento, Maceio, 1979.


84
construction. There are several clear indicators of this shortcoming. No funds
were made available, nor were any actions taken to compensate farmers for the
harvest losses as a result of the emergency works undertaken by CODEVASF during
the execution of SF I, resulting in massive rural out-migration. As far as can
be ascertained, similar policies were pursued in connection with the
implementation of SF II, with largely similar results. In an effort to relieve
some of the social stress thus caused, CODEVASF did set up emergency employment
programs or "work fronts." At Betume, for example, 1,800 workers were absorbed
by such a program. However, theea were short-term relief measures having little
productive outcome other than temporarily supplying the population with a
subsistence wage.
6.42        These critical social issues appear to have been accorded a low
priority at the time by CODEVASF management in Brasilia. Handling of the local
population, according to a Bank consultant's report, was delegated to the
agency's regional director, without his being given clear instructions on how
to deal with the problems encountered or provided adequate logistical and
administrative support. Furthermore, there appears to have been a fundamental
difference of opinion within CODEVASF regarding the source of these problems.
While its President at the time dismissed them as largely the product of Church
"provocation," other agency officials recognized the need for changes in company
policy and field procedures.
6.43        There was a basic fallacy, moreover, in CODEVASF's stated aim of
resettling the entire population formerly living off the land within the project
area. The irrigation projects, by their very nature, were incapable of either
directly absorbing the total number of farmers or creating sufficient additional
employment. Barely one-third of the total number of displaced farmers could,
in fact, have been reabsorbed as colonists in the new schemes, especially after
the possibility of using the Marituba varzea in Alagoas for this purpose was
lost.    The social and economic problems arising from this fundamental
contradiction between objectives and strategy were compounded by CODEVASF's
farmer recruitment methods, which were widely accused of being arbitrary and
discriminatory. Settler selection criteria, which, in SF I, were not made known
to the local population beforehand, eliminated many applicants on the basis of
age, family size or illness. Allegations were also made that favoritism based
on political allegiances influenced the selection procedures. In view of these
problems, some modifications to CODEVASF's settler recruitment criteria were
introduced at the Bank's insistence during the execution of SF 1I.
6. Proiect Performance
6.44        A number of design problems caused delays in project execution and
cost overruns, affecting economic performance.   As indicated in Chapter IV,
moreover, serious flooding occurred in some varzeas such as Propria and Boacica,
the latter requiring installation of a retention dam on the river of the same
name which was still under construction at the time of the OED/SEPLAN visit in
mid-1989. Modifications to the drainage system to avoid flooding have also been
required in other varzeas, such as Cotinguiba-Pindoba. Long delays in project
14 Ibid-


85
execution, however, meant that many displacees chose to migrate, rather than
remaining in the area in the hope of securing employment in the projects. At
the &ppraisal of SF II in 1979, for example, it was anticipated that the new
irrigation schemes woult' be completed withir six years.   However, ten years
later, only 672 of the farmer settlement target has been met.
6.45        While there is no doubt that SF I and II provided valuable social
infrastructure (schools, health clinice, etc.) in the lower valley, economic
performance of the irrigation schemes has not been as good as anticipated. '
The PCR for SF II, moreover, concluded that "the financial sustainability of the
project still needs to be proven." a6 This economic weakness is due partly to
the above mentioned problems in the land acqisition and project execution
phases, but is also the result of CODEVASF' ack of expertise in promoting
agricultural production.     Paddy yields   an   overall output have    lagged
substantially behind schedule, currently stanuing at about one-quarter of
appraisal estimates. Production of crops other than rice is also considerably
lower than anticipated, while rice monoculture is still the norm despite project
attempts at the diversification of local output.
6.46        These shortfalls have been due to several factors. Problems of poor
drainage and salinization have rendered large areas unproductive.    Initially
CODEVASF and later the Alagoas and Sergipe state rural extension services
(EMATERs) provided inadequate technical support to irrigation farmers. This has
been partly rectified by the contracting of IRGA, the Rice Institute of Rio
Grande do Sul, which resulted in rice yields increasing substantially, to over
four tons per hectare in 1988. However, withdrawal of this expertise due to
financial constraints has recently led to a decline in productivity. * Another
serious and general problem is the lack of production credit for irrigation
farmers.
6.47        Farm budget figures reveal a doubling or tripling of net farmer
incomes, while additional revenue from "pig-rice-fish farming" has boosted
returns for the roughly 10% of project producers engaged in such activities. *
However, these aggregate figures mask inequalities in the distribution of farmer
incomes. Although precise data are not available, it is evident that, while a
substantial number of settlers has prospered, many have not fared as well. This
is due partly to differences in individual capacity and experience with irrigated
3  In its comments on an earlier version of this report, CODEVASF affirmed
in this regard that, as SF I and II were "emergency" projects carried out in
response to construction of the Sobradinho dam, they would not otherwise have
figured among the agency's priorities in technical, economic or social terms.
Furthermore, CODEVASF argues that the costs and benefits of these two projects
should be analyzed together with those of Sobradinho rather than considered
totally independently.
*  OED Report No. 8158, op. cit.
3  Ibid.
*  Ibid.


86
farming.  Another basic cause, however, is the varying quality of the plots
supplied to settlers. Many have been adversely affected by problems of flooding
and salinization, disrupting their farming activities. It has also been observed
that low yields, combined with the high cost of inputs such as fertilizers, made
necessary because of the loss of alluvium and natural fertility in thu lower
valley following the construction of Sobradinho and other dame, and pesticides,
has contributed to farmer turnover.   At the time of the OED/SEPLAN visit,
moreover, it was estimated by local officials that roughly 10% of the farmers
in Propria, the oldest irrigation project in the lower valley, were in debt to
the cooperative.
6.48        Farmer indebtedness, among other factors, may also be leading to
farmer turnover and land concentration in the lower Sao Francisco irrigation
schemes.  Although the resale of irrigated plots is uot permit-,;ed under the
contracts signed with CODEVASF, farmers may transfer usufruct rights. CODEVASF
officials admitted that the more successful producers were thus able to expand
their area of control and, hence, their income-generating capacity. Furthermore,
their lower-than-expected yields means that farmers need a plot much larger than
the standard 3.5 hectares -- perhaps double or triple this area according to
local technicians -- to meet family needs. In view of these observations, the
impact of differential farmer productivity on economic feasibility and subsequent
land tenure patterns within public irrigation schemes, together with their
implications for future project design and implementation, is an area requiring
further research.
7, Cooperative Organization and "Emancipation"
6.49        CODEVASF's original proposal was to establish a giant cooperative
for some 8,000 farmers along the lines conceived by INCRA for agricultural
colonization schemes in general. However, following consultation with the Bank,
this model was rejected in favor of a more dec2ntralized structure. Under SF
II, farmer associations were to be set up in each of the varzeas. After four
years, these associations would be transformed into primary cooperatives, owning
their land. At present, four of the five varzeas are thus covered, namely,
Betume (CAMIB), Itiuba (COOPERMIT), Cotinguiba-Pindoba (COOPERCAM) and Boacica
(COOPERCICA).  These local cooperatives are statutorily linked to a central
regional marketing cooperative in Propria, which also provides inputs and
technical assistance. Sufficient information is not yet available to permit a
proper evaluation of the efficiency of the cooperative structure. However, its
popularity is perhaps accurately reflected in the fact that many settlers have
chosen not to join. Indeed, in the Boacica scheme, for example, only about one-
third of the 600 or so farmers are cooperative members.
6.50        Due to slow progress in improving yields and encouraging cooperative
membership among irrigation farmers, as well as rising administrative costa,
CODEVASF has sought to increase farmer involvement in the lower Sao Francisco
projects through a policy of "emancipation". This was announced in 1986 by
CODEVASF as a general policy for all its irrigation schemes. A five-year period
of joint farmer administration with CODEVASF (co-gestacao), during which the
local cooperatives would gradually take over management of the projects, is to
be followed by total administrative and financial autonomy. This independent
status will be recognized through a written contract between the project


87
cooperative and the Ministry of Agriculture. 3' The first project to adopt this
procedure was Gorutuba in Minas Gerais. A new org,nization, CONVASF (Social and
Economic Development Council for Lower Sao Francisco Irrigation Perimeters), has
been created to coordinate the activities of newly "independent" projects in the
region.
6.51        There is some evidence in the lower valley that a start has been made
in the direction of "emancipating" CODEVASF's projects. However, it is still
unclear whether these schemes will be able to achieve full technical and
financial autonomy. The policy seems to have been the brainchild of CODEVASF's
President during the previous federal administration and not even the regional
directors were involved in its formulation. The policy, moreover, was apparently
imposed on the organization without wider consultation among its staff, thereby
generating some internal resentment. As far as can be ascertained, no studies
were undertaken to test the economic feasibility of "emancipating" the projects.
Given their shaky economic performance to date, therefore, considerable doubt
must be expressed as to whether the projects in the lower Sao Francisco valley
will be able to fully assume current public sector functions.
C. Itaparica Resettlement and Irrigation Project
1. Introduction
6.52        The human environmental impacts of the (non-Bank financed) Itaparica
hydropower project are on a similar scale to those of the earlier Bank-assisted
Sobradinho and lower Sao Francisco projects, in this case directly involving
some 8,000 families, or roughly 40,000 people. However, what sets Itaparica
apart from these experiences and, indeed, from any other similar project in
Northeast Brazil is that, for the first time, large-scale dam construction has
been accompanied by a comprehensive resettlement program, designed to benefit
the entire displaced population. Although the dam itself was planned in the
mid-1970's, Bank involvement is quite recent, being initiated in 1985 during
preparation of a power sector loan that was approved in June 1986. As observed
in Chapter IV above, a review of social and environmental issues in the sector
revealed severe inadequacies in CHESF's resettlement provisions for Itaparica,
a problem of particular urgency as the reservoir was scheduled to be filled in
early 1988. As a result, disbursements of t':e first and second tranches of the
power sector loan were made conditional upon -.i.ESF's submission of an acceptable
resettlement plan and attainment of adequate progress in the implementation of
this plan, respectively.
6.53        The Bank's US$ 132 million loan was designed to "restore and improve
the living standards of the families to be resettled as a result of the Itaparica
Hydroelectric Project." 4o The Bank's major priority was the rural population,
which comprised 75% of the total; hence, about 80% of the loan was allocated to
support irrigation and agricultural production, rural infrastructure and services
3  CODEVASF, CODEVAS? 1985-88, Ministerio da Agricultura, 1989.
4o Loan Memorandum for the Itaparica Resettlement and Irrigatioa Project,
World Bank, October 27, 1987.


88
in five major schemes located at varying distances from the reservoir. CHESF's
overall objectives were framed in terms of promoting regional development,
creating a class of small independent farming families and encouraging community
participation in the resettlement process as a means of minimizing potential
conflicts. 41
6.54        The major human environmental impacts of Itaparica concern the
immediate consequences of land acquisition and expropriation between 1979 and
1987, the physical transfer of people tG their new homes during 1987-88 and the
(present) transition period between occupation of the projects and initiation
of irrigated agricultural production. An additional issue involves the loss of
potentially valuable archeological sites through flooding.  Following on the
earlier experiences at Sobradinho and in the lower Sao Francisco valley, the
Itaparica Project, although still under implementation, nevertheless, brings
important additional lessons for the Bank, for the executing agency, CHESF, and
for the affected population itself.
6.55        Underlying the whole issue of human environmental impacts at
Itaparica is the decisive role played by the local rural trade union consortium,
the Polo Sindical do Submedio Sao Francisco (hereafter POLOSINDICAL) and its
influence on the scale and nature of the resettlement plans finally adopted by
CHESF.   If resettlement at Itaparica, unlike the previous experiences at
Sobradinho and in the lower valley, has been characterized by a comprehensive
strategy aimed -t benefitting all those affected, this can be attributed in good
measure to the pressure brought to bear by POLOSINDICAL on CHESF, 42     the
Brazilian Government and, by extension, the Bank. Its presence throughout the
process guaranteed that rural displacees were able to effectively participate
in the basic decisions governing their future.
2. Local Participation: the Role of POLOSINDICAL
6.56        The decade separating the first land expropriations for Itaparica
in 1977 and the commencement of resettlement in 1987 saw fundamental changes in
the way in which relocation problems were dealt with by CHESF, by the affected
populations and by the Bank itself. The most important single event lying at
the root of these changed attitudes and official responses was the emergence and
consolidation of a major social movement in the lower-middle Sao Francisco valley
in the form of POLOSINDICAL.
6.57      When dam construction works started for Itaparica in 1980, CHESF's
intention was to rehouse the urban population, but to offer only financial
compensation to farmers, optimistically hoping that they would peacefully move
elsewhere. No resettlement plan had, at this stage, been drawn up. The first
41 CHESF, Reservatorio de Itaparica: Plano de Desocupacao, Recife, 1985.
42 In its observations on the draft of this report, CHESF affirms that,
considering its "institutional isolation" and the indefinition with respect to
financial resource availability for resettlement activities, in reacting to
"external pressures" of various kinds, it is unlikely that its response at the
time could have been significantly different.


89
evictions in order to set up a construction camp (canteiro de obras) at Itaparica
took place in 1979. Apparently, due to what was subsequently described as a
"communications failure" between CHESF engineers in charge of construction and
DIR (Departamento de Implantacao de Reservatorios), the internal unit responsible
for dealing with displaced populations, a strong local conflict broke out. 4
6.58        Alerted by the cnowledge that a major project was to be undertaken,
and having learned from the earlier social upheavals at Sobradinho, Moxoto and
the lower Sao Francisco, the surrounding rural population embarked on a policy
of non-cooperation with CHESF, requesting proper compensation for all displacees.
Largely for this purpose, POLOSINDICAL was established in 1979 with Church and
NGO support and based in Petrolandia, one of the towns to be relocated.    It
brought together twelve neighboring rural trade unions in a direct response to
the perceived threat of the Itaparica Hydroelectric Project to local livelihoods.
Significantly, it was the first time that this local sertanelo (or backlands)
population had ever become involved in organized political activity.
6.59        The initial organizational phase gave way to more systematic and
widespread campaigns for access to CHESF's plans and maps of the project area
so that its full impact could be gauged, for the relocation of all displacees
on alternative lakeside lands and for the provision of basic production support
services and social infrastructure. Under the banner of "Land in Exchange for
Land along the Lakeside" ("Terra por Terra na Margem do Lago") and justified by
the 1964 Land Statute, the rural union movement staged a number of mass
demonstrations calling for resettlement plans to be drawn up and made public.
A regular newsletter spelling out problems faced by the local population was also
published. " In 1984, local demands were formalized in a document presented to
CHESF.
6.60       The 1985-86 period saw a hardening of relations between CHESF and
POLOSINDICAL. CHESF resisted entering into a dialogue with the local population
and, even though the agency had formed a specific working group to address
resettlement issues. the rural workers' consortium was not invited to
participate. In 1983, CHESF underwent an internal reorganization, but its new
directorate was even less willing to incorporate the wishes of the population
to be displaced at Itaparica. Apparently without consulting either its own new
division responsible for resettlement planning (ATIR) or the affected communities
themselves, plans for lakeside irrigation schemes were drawn up. However, later
feasibility studies revealed that most of the proposed sites were unsuitable due
to saline soils and other problems.   In response, another mass demonstration
against CHESF occurred in October 1985 with presentation of a list of grievances
to the federal government, including land appropriation for resettlement purposes
and the installation of adequate irrigation facilities.
4 Interview with Margarida Dantas de Oliveira, CHESF/ATIR, Recife, August
25, 1989.
"  Boletim dos Trabalhadores Rurais Atingidos pela Barragem de Itaparica,
Petrolandia.


90
6.61       In August 1986, events began to accelerate. With land acquisition
due to be completed by early 1987 and the floodgates due to be closed in January
1988, a Bank mission visited Itaparica as part of its review of the Environmental
Sector Master Plan in connection with the power loan. This period also witnessed
a strong protest campaign mounted by international NG0s against CHESF, as well
as against the Bank over its role in financing energy expansion in Brazil.
Representatives of POLOSINDICAL wrote to the Bank in October 1986, expressing
their own concern and highlighting a number of inadequacies in CHESF's proposed
lakeside resettlement plans. Among other aspects, POLOSINDICAL objected to the
superficial nature of pedological studies, the poor soil quality in the areas
chosen for lakeside projects, the criteria used to establish plot sizes and plans
to reserve 30-hectare tracts for large rural enterprises.
6.62        In addition, growinS frustration on the part of the local population
over CHESF's failure to respond Lo their criticisms and demand that a mutually
acceptable resettlement plan be formalized culminated in a sit-in by several
thousand local men, women and children at the dam site, paralyzing operations
for six days and attracting national media coverage. The subsequent agreement
between CHESF and the rural unions, signed on December 6, 1986, set out several
important preconditions including: (i) firm dates for land acquisitior-s, the
building of housing and irrigation infrastructure and transfer of the population;
(ii) the indexation of compensation payments; (iii) the granting of larger
irrigated plots than originally planned based on family size and prior
land-owning status; and (iv) the provision of maintenance payments of 2.5 minimum
salarics per month to settler families pending the first harvests.
6.63       Soon afterwards, CHESF updated the cadastre of families to be
resettled initiall undertaken in urban centers in 1982-83 and in the rural
areas in 1984-85     and began a series of routine preparatory measures with
each community to familiarize their residents with the options open to them.
The company likewise began to reach resettlement agreements with individual
families, as well as with the communities collectively, and to make arrangements
for the physical transfer of people and their possessions.   Beginning in May
1987, thirty-seven special four person teams were trained and fielded to carry
out this process.     In 1987 also, CHESF introduced a new Department of
Resettlement Coordination, liaising between DIR and ATIR, to take charge of these
functions and carry out continuing negotiations with POLOSINDICAL. Thus, by the
time the Bank appraised the resettlement project in June-July 1987, the major
parameters both for the transfer of population and the subsequent initiation of
4s "Critica aos Anteprojetos para a Borda do Lago PE/BA Apresentados pela
CHESF," mimeo, POLOSINDICAL, Petrolandia, October 22, 1986.
46 "Acordo entre a CHESF e Trabalhadores Rurais Atingidos pelo Reservatorio
da Usina Hidrelectrica de Itaparica, com a Presenca do Ministro das Minas e
Energia," POLOSINDICAL, Petrolandia, December 6, 1986.
4  Updating of the cadastre, according to CHESF, involved accounting for
the formation of new families and seasonal migration to and from the project
area as a result of the agricultural cycle and construction activities at the
dam site and in the new urban centers.


91
irrigated agricultural production had been largely established by means of a
formal agreement between CHESF and POLOSINDICAL.
3. Expropriation and Copensation
6.64         In the cases of both Sobradinho and the lower Sao Francisco
projects, official procedures for acquiring land and compensating occupants had
been major bones of contention. Factors such as the ineligibility of untitled
farmers, inadequate payments for land improvements (benfeitorias) and the failure
to provide alternative livelihoods for displacees gave rise to frequently intense
open conflicts whose reverberations can still be felt in the region. Although
official reports tend to gloss over the subject, the livelihoods of many
displacees from Sobradinho and the lower valley had, in effect, been ruined,
especially those of smallholders and sharecroppers who received little or no
compensation or were ineligible to join the new projects. Even in the case of
Itaparica, late payments to a number of displaced farmers, as well as some
inconsistency in calculating indemnification, left some people (eg. the Tuxa
Indians in Rodelas) unsatisfied. However, the advance negotiations which took
place between CHESF and POLOSINDICAL helped to ensure that expropriation and
.indemnification procedures for Itaparica, by and large, avoided past errors and
injustices.
6.65       Constant pressure on CHESF from the rural union movement, particularly
after 1985 as the deadline for closing the floodgates approached, helped to widen
the range of options open to Itaparica displacees. CHESF's belated resettle-
ment plan, the Plano de Desoeupacao, 48 offered four possibilities to the rural
population: (i) cash compensation for business people; (ii) places in the new
towns for the elderly; (iii) lakeside irrigation projects for smallholders and
(iv) collective schemes for landless workers, tenants and sharecroppers.
Further discussions and revised plans meant that the rural population of over
30,000 eventually chose the following solutions: 'o
(a)   11.8%, mainly wealthier farmers, opted for cash compensation
and free transport to a destination of their own choice within
a 500 kilometer radius.
48 CHESF, op. cit., 1985.
4  In its comments on the preliminary draft of this report, CHESF observes
that rural displacees initially expressed their concerns in terms of obtaining
"the necessary means to develop water for [agricultural] production on their own
lands."  Only later was the specific idea of developing irrigation projects
introduced which brought with it a number of difficulties in order to achieve
compatibility between the physical and technical requirements of such
undertakings and the interests of the affected families.     This experience
suggests that resettlement efforts involving irrigation cannot follow the design
parameters established for conventional public irrigation schemes.
50 Fundacao Joaquim Nabuco, Hidreletrica de Itaparica: Impactos e Mudanca
no Meio Rural - Relatorio Final de Avaliacao do Reassentamento da Populacao
Rural de Itaparica, Recife, 1988.


92
(b)   3.1% moved to small group projects elaborated on the initiative
of the farmers themselves and built by CHESF. This involves
a total of nine schemes, including the 25-family Manga de Baixo
pilot project, Riacho do Bento and Ibotirama for the Tuxa
Amerindians, as well as Apolonio Sales, near Petrolandia.
(c)   0.3% opted for the new fish-farms set up in the region
following CODEVAS. 's comparatively successful experience in
the lower valley.   This option was presented to resettlees
whose allocated lands are too poor to sustain agriculture.
(d)   8.1% of rural displacees decided to live in the new townships
of Petrolandia, Itacuruba, Rodelas and Barra do Tarrachil.
(e)   22.9% went to two large lakeside irrigation projects totalling
almost 8,000 hectares, situated in the states of Pernambuco
(Barreiras and Ico-Mandantes, or Borda do Lago-PE) and Bahia
(Borda do Lago-BA).
(f)   The remaining 53.8% have been resettled on four "special"
irrigation projects (Brigida, Pedra Branca, Caraibas and
Gloria) situated at varying distances frox Itaparica and
covering a total of 10,000 hectares.
6.66       For the first time in any comparable Brazilian project, therefore,
displacees were offered a comprehensive range of resettlement options which did
not automatically spell disaster for a large proportion of those affected. This
was the product of strong local pressure on CHESF, as well as Bank participation
in the power sector loan and subsequent Itaparica plan.    The importance of
community involvement in decision-making processes at this critical stage is
illustrated by the example of the Salitre resettlement site, which was to have
accommodated 1,500 families, but was dropped in 1986 due to lack of support from
the local population.
4. Displacement and Resettlement of the Population
6.67        Given the somewhat belated, but relatively wide-ranging, auvance
preparations made by CHESF at Itaparica, the physical transfer of the population
to their new homes proceeded fairly smoothly.    Itaparica's floodgates were
finally closed in February 1988 and, by April of that year, relocation of
families from the area to be inundated was virtually complete. During February
and March as many as 100 families were being moved daily. " Some 5,000 families
were taken to the new agrovilas, where each received a masonry house and the
right to an irrigated plot.       Basic sanitation, health and educational
infrastructure had been installed. Even though, as described below, there were
several problems with these facilities, a total of 109 agrovilas were built and
their residents installed in a relatively short period of time.
s1 Daniel Gross, "Itaparica Resettlement: Final Draft Supervision Report",
mimeo, World Bank, April 26, 1988.


93
6.68        Pending the commencement of agricultural production -- which, as of
late 1989, had not yet occurred on any of the major projects -- each family was
to receive a monthly maintenance payment of 2.5 "reference" minimum salaries,
equivalent to about US$ 75.   An additional 317 families were moved to urban
areas, while another 500 waived their right to resettlement and farmland in
exchange for cash compensation. Altogether, some 2,700 families were transferred
to the relocated towns, where people were able to opt for a new house, a
combination of cash compensation and a serviced plot or, in the case of
non-property owners, materials for the construction of their own dwellings.
6.69        Although relocation was generally well planned and executed, several
problems, nevertheless, occurred.   Some time prior to the actual move, for
example, CHESF resettlement teams advised farmers not to plant crops since they
were likely to be lost in the rising waters of Itaparica. However, delays in
building the agrovilas meant that those producers who followed this advice
experienced shortages of basic foodstuffs such as beans, rice and manioc.
Maintenance payments, moreover, could only be made after resettlement had taken
place. Although CHESF did provide some emergency relief, many felt the amounts
involved were insufficient.     Financial problems, in turn, arose for a
considerable number of farmers whose negotiated compensation payments had still
not been initiated by CHESF several months after the move. 52 In general terms,
however, the transfer went well and, as one consultant expressed it, "there were
remarkably few complaints about this phase." 5  This stands in direct contrast
to the traumatic experiences at Sobradinho and the lower Sao Francisco valley
and represents a significant advance in the handling of forced resettlement in
the Brazilian Northeast.
6.70        Another set of issues arising from formation of the Itaparica
reservoir, the wholesale transfer of population involved and the consequent
relocation of productive activities concerns the differential spatial impact of
resettlement in the middle Sao Francisco valley. 4     The municipalities of
Itacuruba and Rodelas, for example, have witnessed a substantial decrease in
their populations. In the case of Itacuruba, there is no compensatory irrigation
activity in connection with the project. On the other hand, as a result of the
operation, Curaca in Bahia, together with Oroco and Santa Maria da Boa Vista in
Pernambuco, will receive large influxes of irrigation farmers. This is likely
to result in substantial benefits for the local economies of these latter
municipalities over time in the form of increased agricultural production and
urban growth and associated tax revenues and other externalities. Once the new
irrigation projects are fully operational, moreover, there is likely to be a
further concentration of economic spin-off benefits in the Petrolina-Juazeiro
nexus arising from the processing of fruits and vegetables, possibly at the
expense of Arcoverde, Belo Jardim and Pesqueira in central-western Pernambuco.
52   "Trabalhadores Denunciam a Grave Situacao do Reassentamento de
Itaparica," POLOSINDICAL, Petrolandia, October 27, 1988.
5  Gross, op. cit., pg. 1.
s' Fundacao Joaquim Nabuco, Hidreletrica de Itaparica, op cit.


94
6.71        Raising the lowflow level of the Sao Francisco as a result of
Itaparica, furthermore, has adversely affected the rural economy of the
municipality of Belem do Sao Francisco by causing the permanent flooding of
previously productive riverine lands. These rich alluvial soils, irrigated by
small diesel pumps during the dry season, made Belem one of the major
onion-producing regions in the middle valley. Literally overnight, according
to local informants, 70% of this farmland was lost. Although some 350 farmers
have been resettled in the Caraibas project, many have chosen to leave the area
altogether. In addition, the risk of flooding in the town itself -- which was
not relocated -- has increased and local officials are negotiating with CHESF
for the construction of protective dikes. In any event, taken together these
developments have greatly reduced commercial activity in'this once thriving
market town. Furthermore, it is unlikely that the start of irrigated production
at Caraibas will benefit Belem, since the project is 100 kilometers away and the
nearest town is Santa Maria da Boa Vista, at a distance of 40 kilometers.
6.72        Immediately beneficial social impacts, on the other hand, are also
observable as a direct result of the Itaparica resettlement program. In what
has turned out to be, in effect, a localized agrarian reform, traditional
structures have been extensively replaced by new forms of land tenure and
production. In the expropriated areas, land ownership was highly concentrated.
According to 1980 census figures, which tend to understate the actual degree of
concentration, 82% of farms in the lower-middle Sao Francisco valley occupied
only 19% of the land, while a mere 1.7% of owners accounted for 72% of total
farmland. More than half of the farmers on the Pernambuco side of the river were
non-owners, bound to their employers by traditional tenancy or sharecropping
Prrangements in which 50% or more of their agricultural output went to the
property owner in exchange for usufruct rights.
6.73        Larger farmers and owners of irrigation pumping equipment used on
the river have, therefore, have lost much of their political and social force
in the region. This is due both to the overall strength of POLOSINDICAL in
defending the livelihoods of its members and the restructured land tenure system
in the irrigation projects themselves, which, together have transformed many
previously landless rural workers into independent smallholders.   While the
potential held by this reorganization for farmers' economic success and changing
social relations will only become fully apparent once agricultural production
is properly instituted and the agrovilas become stable communities, on the basis
of progress to date, it is, nonetheless, clear that Itaparica has offered a
significantly wider range of viable opportunities for its resettlees than either
Sobradinho or the lower Sao Francisco projects. 55
ss However, as noted in paragraph 6.96 below, traditional forms of tenure
such as sharecropping are likely to persist within the new irrigation projects.


95
5. The Impact of Itaparica on Amerindians
(a) The Tuxa
6.74        A special case has involved the relocation of some 190 families of
acculturated Tuxa Amerindians from the old town of Rodelas and rural areas of
the municipality of Itacuruba, where they had lived for several centuries. The
community earned its living from cultivating the extremely fertile mid-stream
island known as the "Ilha da Viuva."    Its 108 hectares were irrigated by a
combination of aqueducts and diesel pumps to produce bountiful crops of onions,
rice, beans and manioc, as well as a range of fruits, thereby providing for the
group's subsistence needs and generating a commercial surplus. Even though the
Tuxa no longer speak their original native language, the tribe has an internal
political structure and possesses characteristic mythical and religious beliefs
and rituals.
6.75       Due to a part*san political dispute which divided the community during
municipal elections in the early 1980's, when the time came to relocate, the Tuxa
decided to set up two separate resettlement projects. Ninety-two (later 107)
families decided to move to Ibotirama, 1200 kilometers upstream on the Sao
Francisco River, to an area of 2,000 hectares, of which roughly 200 ha will be
irrigated. The remaining 98 families chose to relocate in a special section of
Nova Rodelas and were granted 4,000 hectares of drier egrtao -- some twenty
kilometers from their new place of residence -- of which 100 hectares are
suitable for irrigation. In a written agreement (convenio) signed in July 1986,
CHESF committed itself to provide production and social infrastructure and
temporary maintenance payments to the two communities, as well as to demarcate
the land. FUNAI, in turn, would directly provide administrative support, staff
the schools and health posts and furnish agricultural extension services. 56
6.76         Aside from technical hitches and delays that have put irrigated
production in both projects well behind schedule (see below), socio-psychological
problems have apparently also been associated with the transfer of the Tuxa from
their traditional lands to these new areas, exacerbating the impact of the
rolitical schism occurring independently of the project several years prior to
their relocation.   Although such disorientation is a general problem with
resettled communities along the Sao Francisco valley, " it is even more marked
56 Fundacao Joaquim Nabuco, Hidreletrica de Itaparica, op cit., and Report
No. 6914-BR, op. cit.
$   In their comments on an earlier version of this report (internal
memorandum dated July 24, 1990), moreover, Bank operational staff point out that
"if anything the Tuxa have received considerably more attention, resources and
services than other affected groups. Their problem is basically the same as
(that] of the other rural resettlees plus the general difficulties they
experience as Indians under the jurisdiction of FUNAI."


96
among Amerindians such as the Tuxa. 56 Although acculturated, their ancient,
but still strong, mythical-religious belief systems created an important bond
between the people and their land. Once broken, a process of increasing social
disintegration appears to have been set in motion. This is probably aggravated -
by economic pressures resulting from delays in project implementation. In any
event, internecine family quarrels and alcohol abuse, previously rare among the
Tuxa, have reportedly become commonplace at both Rodelas and Ibotirama. This
situation was exacerbated in the case of Ibotirama by the violent response of
the military police to a murder in the village in June 1989 which generated a
climate of insecurity and prompted twelve members to take refuge in Rodelas.
(b) The Pankaruru
6.77        Although not directly involved in the Itaparica resettlement program,
the Pankaruru tribe has, nevertheless, suffered from the demographic changes set
in motion in the region. Located rear Petrolandia at Brejo dos Padres, some
5,000 Pankaruru Indians occupy an official 8,100-hectare reserve whose origins
date back to the eighteenth century and was originally demarcated in 1940 by
FUNAI's predecessor, the Indian Protection Service, but was ratified only in
1987 as part of a strategy to remove non-Amerindians from the area. so Since the
1950'*s, their fertile tribal lands have gradually been taken over by squatter
farmers, who now occupy almost half of the area.   The pressures and ensuing
conflicts, some involving loss of life, have resulted in the Pankaruru being
gradually forced into the less productive nearby foothills. Community members
observe that this problem has recently been accentuated due to increasing
pressure on local land resulting from resettlement at Itaparica and the growing
population attracted into the region. Once irrigated production starts on the
nearby Borda do Lago-PE project and land values rise, this situation could
worsen.
6.78        The Pankaruru issue, moreover, places POLOSINDICAL in a dilemma and,
at the same time, exposes some of the limits on its ability to help resolve land
and resettlement issues for all those affected by Itaparica.   Historically,
white farmers have been hostile to Indians' territorial claims and cultural
identity. This tradition continues at Itaparica, where Pankaruru interests are
represented by FUNAI. The socio-political distance between the tribe, on the
58 In its comments on an earlier version of this report, FUNAI observes
that the Tuxa have, indeed, been affected in a socio-psychological sense as a
result of their forced relocation on account of Itaparica. It also points out
that the federal Constitution adopted in October 1988 (Article 230) now requires
that the exploitation of hydrological resources, including potential energy uses,
on tribal lands can only be authorized by the Congress after hearing the affected
communities. The Constitution likewise prohibits the removal of Amerindians from
their lands except in cases of catastrophe, epidemics or for reasons of national
sovereignty as determined by the Congress or the occupation of tribal lands or
exploitation of the resources on these lands except in the public interest.
9 In commenting on an earlier version of this report, FUNAI observed that
the area was recently redemarcated by the Army and that non-Amerindian occupants
were in the process of being inventoried for subsequent relocation.


97
one hand, and other local farmers, as represented by POLOSINDICAL, on the other,
is heightened by the fact that seve:al prominent union leaders, including the
presidents of both the consortium and the Petrolandia rural labor union, occupy
lands within the reserve. According to the Indians, during 1989 trade unionists
staged a public demonstration in support of posseiros and against the Pankaruru.
FUNAI, moreover, appears to have done little thus far in response to the group's
demands for protection against further invasions of their territory.
6. The Transition Period: Employment.iSocial Services and Pre-
Production Preparation
6.79        Following the relatively successful transfer of the populations
displaced by Itaparica to their new urban and rural homes, the next major
challenge involves the resumption of productive activities.   This problem is
particularly acute for the roughly 5,170 families relocated into irrigation
projects which have yet to come on stream. While the longer-term economic future
of the new irrigation schemes is difficult to predict, it is, nevertheless,
possible to assess developments occurring during the "transition phase" from the
initial arrival of resettlees in late 1987 through early 1990.
6.80       Most outside observers are in agreement that resettlees in the
aArovilas are, on balance, satisfied with the move to brick houses and new
communities that offer a range of facilities to which they previously had little
or no access. 60 However, since the actual population transfer took place in
late 1987 and early 1988, the level of frustration and associated social problems
have markedly increased. Intra-communal violence associated with alcohol abuse
has become more widespread since the move, leading to the disintegration of some
families and a climate of tension within the community. Morale is generally low
and, although farmers continue to look to the future with a degree of cautious
optimism, this is tempered by growing despair over CHESF's failure to guarantee
the prompt resumption of economic activities. According to company sources,
resentment against officials was running so high in Caraibas that, for fear of
being assaulted, CHESF personnel could only visit the project in unmarked cars.
CHESF has been subjected to a steady stream of protest notes over this issue,
both from white farmers through POLOSINDICAL and from the Tuxa Amerindians.
6.81       Discussions with leaders of POLOSINDICAL and CHESF personnel during
the OED/SEPLAN mission in July-August 1989 also revealed a certain resentment
toward the Bank for its perceived responsibility in delaying additional funding
to permit resumption of irrigation works, which were slowed down in mid-1989.
CHESF staff, in particular, tended to attribute project delays to this factor,
ignoring their own organization's role in the matter. Delays in project works,
however, can not be attributed to the Bank since an undisbursed balance of US$
34.4 million remained in the original (ie. 2883-BR) loan account for the project
as of May 31, 1990, while the supplementary loan (2883-1-BR), approved by the
Bank in February 1990, has yet to be signed by the Brazilian Government.
Shortages in local counterpart funding appear to be the principal reason for such
delays. The generally poor social climate in the projects, in turn, derives from
60 Fundacao Joaquim Nabuco, Hidreletrica de Itaparica, op cit., and Gross,
op. cit.


98
various problems associated with project implementation to date, and may be may
be considered, more specifically, in terms of: (a) the employment situation; (b)
social services; and (c) pre-production preparation. s1
(a) Employment
6.82        The most serious immediate problem during the transition period has
been the lack of stable and productive employment for arovila residents. Even
though monthly maintenance support payments have been made by CHESF to such
families during the period since relocation, these are widely observed to be
insufficient to meet the basic needs of resettlees. Inflation and delays, in
fact, have reduced the value of these payments by 20% or more in real terms. 62
In addition to the financial question per se, moreover, is the risk that
long-term dependence on such payments may undermine individual pride and the
self-esteem of this once extremely active and productive population. Several
residents have set up small enterprises such as charcoal-making, building and
retail sales, while others have found work with the construction comp&nies
installing the irrigation projects, but comparatively few settlers have, in fact,
been or remain employed owing to the lack of specific non-agricultural skills
among this population and the slow-down in project oxecution.
6.83       Following a campaign by resettlees and negotiations with POLOSINDICAL,
still other farmers are receiving additional payments from CHESF to clear their
own irrigation plots of thick scrub (caatinga), at an estimated average cost of
US$ 300 per plot. 63   This will enable settlers awaiting the initiation of
irrigated farming to gain at least some income in addition to the monthly
maintenance payments, as well as to plant rainfed crops for subsistence purposes.
Resettled families have also been using domestic water supplies to establish
small irrigated gardens for the purpose of growing their own food. These are
important sources of additional sustenance for the population, in view of the
relatively high price or non-availability of staple foods in the shops, following
the disruptive impact of Itaparica on local agricultural production.
(b) Social services
6.84        Concern has also been expressed by project beneficiaries over the
varying quality of social service provision. Primary schools have been built,
but, in many cases, classes have not yet started because of delays in state
61  In commenting on the previous version of this report (internal
memorandum dated July 24, 1990), Bank operational staff correctly observe,
moreover, that "even under the best of circumstances, dissatisfaction would have
arisen due to the gap between actual resettlement and the beginning of
agricultural production.   While employment generation, social services and
project preparation could all stand improvement, they cannot mitigate against
the lack of production infrastructure."
62 Itaparica Resettlement and Irrigation Project: Second Progress Report
on Project Execution, January 1990.
63 Gross, op. cit., pg. 4.


99
recruitment of teachers. It has also been common for state-appointed teachers
to leave their posts because of poor conditions in the arovilas and/or due to
the non-payment of their salaries.     This Is extremely disappointing for
resettlees, since the possibility of obtaining better education for their
children following relocation is a strong ambition of most parents. Health posts
have likewise been built, but staffing is sporadic. It is not clear whether
permanent medical assistance from practical nurses is currently available in all
cases, although CHESP is supposed to provide weekly doctors' visits to each
community. These general problems in the provision of social services have been
compounded by physical obstacles arisint in some instances from impassable roads,
power failures and water shortages. 6   The irregularity of public transport
services, provided by CHESF to take people from the relatively isolated arovilas
to the nearest towns, was also highlighted by villagers as a serious problem.
6.85        During the transition phase, CHESF's relocation teams -- composed
of social workers and agricultural technicians -- have shifted their attention
from transferring people to solving specific problems arising in the arovilas.
The team in each project engages in a wide variety of activities such as
communicating CHESF policy to villagers, assisting families not receiving support
payments, facilitating access to social services and processing requests for
home repairs. Due to the accumulation of resettlement problems, however, CHESF's
teams find themselves increasingly in the position of having to attempt to defuse
growing intra-communal tensions and of bearing the brunt of local resentmant.
(c) Pre-production Preparation
6.86        The current mood of frustration is clearly related to the significant
changes in lifestyle to which many displacees have been subjected in a short
space of time, as well as to the aforementioned problems with the provision of
community services. Perhaps the major source of resentment is the long delay
in commencement of irrigated production. Even by December 1989, just half of
the 5,000 or so rural families had received their plots. The first projects,
moreover, were due to come on stream in July 1988, according to the agreement
signed between CUESF and POLOSINDICAL in December 1986. However, by late 1989,
only the 25-family Mangs de Baixo pilot scheme was in operation, cultivating 87
hectares out of a total of nearly 20,000 hectares due to be irrigated in
connection with Itaparica. CHESF has anticipated, somewhat optimistically, that
the Brigida and Borda do Lago-BA projects would come on stream by March 1990,
with the other projects following six months later. By late 1989, in Caraibas,
where 1,550 families (or over 7,000 people) have been resettled, even though
the primary water conveyance works had been underway for some time, as a result
of the perceived slow pace at which the irrigation network was being installed,
colonists were reported to be particularly antagonistic towards CHESF. According
to the revised project implementation schedule, CHESF is expected to complete
all the irrigation schemes by December 1990, some 18-24 months behind the
original target date.
64 Ibid. Some cases of poor housing construction (eg. cracking walls and
foundations in units built on expansive soils) have also occurred, but CHESF is
reportedly taking adequate remedial action.


100
6.87        Questions have occasionally been -kised, moreover, in connection with
the technical and economic feasibility of some of the individual irrigation
projects. Doubts have arisen, for example, with respect to the design of the
water conveyance systems in two such projects. 65    Bank operational staff,
however, feel confident that the irrigation schemes are sound and will perform
as designed.
6.88        Marketing is another critical issue and has been a common problem
with public irrigation in the Northeast in the past. 66 It is not yet clear
whether sufficient thought has been given to the capacity of local, regional and
national markets to absorb the projected increases in the production of onions,
beans, melons and tomatoes in the Itaparica schemes.    While the Producers'
Association at the small (ie. 25-family) Manga de Baixo pilot project appears
to have been successfully able to sell its output thus far, the extent to which
the much larger number of settlers will be able to market their produce when all
the Itaparica schemes come on stream is a question which will require careful
monitoring. 67   If evolving market possibilities are not given adequate
attention, moreover, project farmers may ultimately be forced to sell their
output below cost, as has already happened with their riverside crops. 68
Serious doubts likewise exist as to whether fish-farming is a viable activity
in the middle Sao Fkancisco in view of expected competition from lake fishing.
6.89        Following the unsatisfactory results of international tendering for
the provision of irrigation training and extension support for Itaparica,
CODEVASF has agreed to assume responsibility for these tasks. Thus far, however,
CHESF and CODEVASF have been tardy in setting up arrangements for farmer training
and project administration. While farmer training and pilot projects have been
underway for nearly two years in various localities, as of September 1989, no
formal agreement had yet been reached between the two agencies even though some
projects were due to start agricultural production less than a year later. At
Brigida, which is due to come on stream in June 1990, for example, through the
end of July 1989, there had been only a single visit by a CODEVASF technician
unaccompanied by CHESF.
65 "Itaparica Resettlement: Back-to-Office Report," World Bank, March 17,
1987.
"  Anthony Hall, Drought and Irrigation in North-East Brazil, Cambridge
University Press, 1978.
67 In any event, given its fairly isolated location, it seems improbable
that local markets at Ibotirama will be able to absorb the expected output once
the Tuxa's new irrigation project becomes operational. More generall;, however,
the Bank's operational staff believes that, given their locations closer to
important urban-industrial centers such as Petrolina-Juazeiro and the existence
of good transport links, it is reasonable to assume that marketing and processing
facilities will be developed still closer to the irrigation project sites and
that, over time, regional, national and even international markets will be able
to absorb the products of the Itaparica farmers.
6 Fundacao Joaquim Nabuco, Hidreletrica de Itaparica, op. cit.


101
6.90        Training is of crucial importance, moreover, since, although most
of the resettled farmers have irrigation experience, the new system will be
distinctly different from that to which they are accustomed.        Sprinkler
irrigation, more specifically, will require watering techniques different than
those utilized in the traditional diesel pump and gravity-feed system common
among small producers in the middle Sao Francisco valley. Furthermore, given
the much poorer caatinga soils where the new projects are located, when compared
with the fertile alluvial deposits of vae agriculture, there will undoubtedly
be a need for heavier inputs of fertilizers and other chemical treatments. These
differences have implications not only for labor-force intensity and organization
of the agricultural calendar, but also for production costs and, ultimately, the
economic feasibility of the new technology.
6.91        Furthermore, although considerable attention has reportedly been
given to the longer-term organization of irrigation farmers and there are nascent
organizations in many aagovilas that may evolve into full-fledged farmer
associations in the future, 69   the large-scale formal type of cooperative
structure likely to be required stands in direct contrast to the traditional
forms of more spontaneous small-group farmer cooperation that have evolved in
the lower-middle Sao Francisco valley. In addition, the fact that as many as
half of project farmers were previously sharecroppers and tenants, dependent upon
vertical patron-client relationships with landowners and lacking any form of
collective structure, renders the creation and nurturing of appropriate
organizational arrangements for irrigated agriculture even more important, if
potentially more problematic.
7. Costs of Project Implementation, Farmer Incomes and Equity
(a) Project Cosi
6.92        As previously indicated in Chapter IV, of a total estimated project
cost at appraisal of US$ 303.7 million, the Bank contributed an initial loan of
US$ 132 million, some 80% of which was allocated for the development of
irrigation facilities and rural infrastructure.   The Bank's contribution was
subsequently increased by a supplemental loan of US$100 million in February 1990,
while total project cost was revised upward to US$ 650 million.      The five
irrigation subprojects are expected to have a total of 5,170 irrigated family
plots, whose overall rate of return was initially estimated at 13% over a 25
years period. With the upward revision of project cost figures, however, the
rate of return estimate was revised downwards to just under 11%. Partial cost
recovery is planned via individual farm water charges to cover operation and
maintenance, although CHESF would subsidize production during the first five
years by absorbing electricity charges. In view of the involuntary nature of
the Itaparica resettlement, statutory provisions for imposing area-based water
charges to recover public investments have been waived in this came. 70
69  As indicated above, a successful farmer's association exists, for
example, in the Hangs de Baixo pilot project.
70 Report No. 6914-BR, op, cit.


102
6.93        The appraised cost of Itaparica is at first sight quite reasonable
when compared with similar resettlement experiences in Northeast Brazil.
According to the Bank's recent Irrigation Subsector Review for Brazil, in public
irrigation projects in the region, the total cost of on-farm investment (land
preparation,  drainage and irrigation   equipment) and off-farm    investment
(including water conveyance, drainage, roads and energy) has varied from US$
4,500 to US$ 7,500 per hectare, not including agricultural support services or
operational support. n    The total cost per resettled family in irrigation
schemes administered by DNOCS and CODEVASF, in turn, is officially put in the
range of US$ 40,000-60,000. This compares with an appraised cost at Itaparica
of between US$ 5,800-8,100 per hectare, or US$ 19,200-28,000 per family. In view
of the recently-approved second Bank loan and the revised total costs for
Itaparica, the average cost in real terms is presently expected to rise to a
level somewhat above the general figure for public irrigation in the Northeast
given above. Even though the cost of resettlement may be slightly more than US$
63,000 per family, 72 Bank irrigation specialists still consider this to be the
least-cost solution for carrying out the resettlement agreement negotiated by
CHESF with the impacted communities. Brazilian Government officials, however,
view these costs as "excessive" and argue that they should not be considered as
the norm for similar projects elsewhere in the country. n
6.94        In considering the reasons for the comparatively high per family
irrigation costs associated with the Itaparica Project, moreover, it is important
to reemphasize that the single most important factor in the high cost of the
operation, as designed, was the high level of militancy engendered by CHESF's
handling of the resettlement component prior to Bank involvement.       As a
consequence of this situation, CHESP was in a weak position when it finally sat
down at the bargaining table with the rural unions. 7    A second significant
71 Report No. 7797-BR, op. cit.
72  Ia its comments on an earlier version of this document, DNPA/MEFP
observes that the draft report does not give sufficient attention to the
"extraordinary cost projections for implementation of the project concerning
which doubts exist if they can effectively be met."      According to DNPA's
analysis, "the current (ie. December 1990) cost estimates for the project are:
US$ 545.5 million for the agricultural component, US$ 104.2 million for the urban
component and US$ 301 million for relocation and indemnizations.         This
represents.. .US$ 173,000 per family. The agricultural component alone represents
US$ 99,300 per family or US$ 29,500 per hectare, exhorbitant levels that are
without parallel in international terms. The subsidy costs to the families at
present are on the order of US$ 9.7 million."
n3  Observations on an earlier draft of this report by the Ministry of
Infrastructure.
" In its observations on the draft of this report, CHESF attributes much
of the high resettlement cost per family to the "negotiated" lot sizes which were
larger than those normally developed by CODEVASF in its conventional irrigation
projects. These larger-sized plots reflected resettlees' preferences for areas


103
factor was the fact that CHESF allegedly allowed hundreds of families to move
into the area to be flooded after construction began. "  These families later
became candidates for resettlement with the same rights as those residing in the
area for generations, greatly increasing the cost of the project. 76
6.95        Notwithstanding the eventual financial costs of resettlement at
Itaparica and their underlying causes, this calculation is not the only, nor
necessarily the most important, consideration in this and similar situations.
A relatively heavy financial cost may be the inevitable price that must be paid
in order to implement a hydropower project that adversely affects a large number
of people. Such costs, however, should be fully assessed as part of the initial
appraisal of the project which has given origin to them and have a direct bearing
on the decision whether to undertake the specific investment or sector loan
designed to support the operation with which the resettlement in question is
associated.
6.96        In an involuntary resettlement program, the first priority of
executing and funding agencies should be to guarantee the livelihoods of the
displaced farming population and other impacted groups. The major challenge at
Itaparica, accordingly, is to establish a system of irrigated agriculture which
will provide adequate employment and income to resettlees and, after the initial
adaptation period, permit them to become economically self-sufficient.    The
ultimate success of irrigation at Itaparica, therefore, will depend on how well
CHESF and CODEVASF retrain and help to organize farmers, as well as on the
provision of necessary inputs, pricing and marketing structures to service the
projects themselves. It is often automatically assumed that it is difficult,
if not impossible, to simultaneously meet both economic (production) and social
(resettlement) goals through resettlement schemes, but there is no logical reason
why these objectives should be irreconcilable. Itaparica will provide a fertile
testing ground for this hypothesis.
which could accommodate both the present and potential future family labor force
by providing for the anticipated land requirements of the next generation (ie.
the sons and daughters of the original plotholders) as well.
7   CHESF points out in this regard, however, that it would have been
virtually impossible to "cordon off" the project area for the close to twelve
year period required which implementation of the Itaparica dam and reservoir
eventually required.
76 This latter factor was reported to OED by Bank regional project staff
in their comments (internal memorandum dated July 24, 1990) on an earlier version
of this document.   It was also observed in this context that "the technical
literature on the subject, available since before this project was launched,
clearly states the importance of preparing a cadastre of candidates for
resettlement early in the planning stage, providing them with appropriate
identification and firmly discouraging others who might consider attempting to
gain resettlement benefits through an address change."


104
(b) Farmer Incomes and EgAity
6.97        A standard criticism of public sector irrigation projects in the
Northeast and elsewhere is that they create small "islands" of privileged farmers
who not only enjoy substantially higher incomes than producers in adjacent
rainfed lands, but who also frequently benefit to a relatively greater extent
than other small producers from a variety of social facilities such as improved
housing, schools and health clinics. It was estimated at appraisal that, when
the sub-projects are fully operational, Itaparica's annual farm incomes will
range from US$ 2,100 (on 1.5 hectare plots) to US$ 5,900 (on six hectare plots).
Average regional income figures are of little use for comparative purposes in
this situation. However, 1980 census data indicate that, before resettlement,
some 40% of the working population in this part of the middle-valley earned at
least one minimum salary (about US$ 40 per month, or US$ 480 per year), while
only 30% earned less than half a minimum salary. " Although these monetary
figures do not take the subsistence element of farmer incomes into account, they,
nevertheless, clearly suggest that, if the anticipated income streams are
achieved, irrigation farmers and their families are likely to be significantly
better-off in a financial sense than prior to resettlement.
6.98        Furthermore, in addition to the employment and incomes generated
directly for project beneficiaries themselves, benefits are likely to be spread
into the surrounding local economy.    Judging from the experience of other
irrigated zones in the Northeast, it is likely that considerable secondary
employment may be generated. Although traditional labor relationships are liable
to be replaced to some extent by temporary wage-labor, however, it is probable
that sharecropping will survive as a flexible and mutually advantageous
arrangement for landowner and worker. 78    The extensive use of gravity-fed
technology in the Itaparica irrigation projects, moreover, will demand relatively
labor-intensive artesanal methods in contrast to central-pivot and other more
highly mechanized systems found in the area around Petrolina and Juazeiro.
6.99        Without careful project implementation, these potential benefits
could, nevertheless, be undermined by problems which are already familiar in
other irrigation schemes in the region, such as the salinization of soils, poor
water management, inefficient cooperative structures and insufficient farmer
access to essential inputs. As has been witnessed in the lower Sao Francisco
valley and elsewhere in the Northeast, these handicaps could eventually lead to
growing farmer indebtedness and increasing producer turnover and land
concentration, in the process defeating the original objectives of the
resettlement program.
n  Fundacao Joaquim Nabuco, Hidrelectrica de Ita-parica, op cit.
78 J. Graziano da Silva (ed.), A Irrigacao e a Problematica Fundiaria no
Nordeste, Instituto de Economia, UNICAMP/PRONI, Sao Paulo, 1989.
79 In its observations on an earlier draft of this report, DNPA/MEFP argues
that the document "does not properly analyze the real difficulties in implanting
viable irrigated agriculture [in the Itaparica schemes] in view of the social
and economic constraints that will be difficult to overcome within a period of


105
8. Archaeological Sites
6.100       One of the more unavoidable costs of the Itaparica project is the
permanent lose of archaeological sites and artifacts. The Sao Francisco has long
been recognized as an ancient site of human habitation, as reflected in the
petroglyphe (designs carved out on rock face, known in the region as
itacoatiaras) that extend for long distances along the valley.       Research
undertaken prior to flooding at Itaparica by the Federal University of
Pernambuco, in collaboration with CHESF and foreign universities, has yielded
additional information on some 200 archaeological sites. so These were first
settled roughly 10,000 years ago by hunter-gatherers from what are now the states
of Goias and Piaui, forming the "Itacoatiara tradition," and some 2,000 years
ago by Aratu Amerindians. Although the petroglyphe were, for the most part, lost
to the watars of Itaparica, researchers managed to salvage ceramics, stone tools
and funeral urns. The ceramii tradition is partly continued locally today by
the Pankaruru and Atikum indigenous groups. Historical material which has been
lost, moreover, includes Franciscan mission buildings established during the
early colonial period on some of the mid-stream islands in the river.
D. Other Human Environmental Impacts
1. Population. Migration and Employment
6.101       Wider demographic and socio-economic changes occurring in the middle
and lower Sao Francisco valley during the 1970's and subsequently have been both
substantial and uneven in their consequences. The total population in the area
expanded from 1.4 million to nearly 1.9 million between 1970 and 1980, an
increase of more than 30%. This figure is significantly higher than the average
for the northeastern states as a whole, where population growth during this same
period was only on the order of 15-20%. While some of this difference may be
due to differential rates of natural increase, the formation of Sobradinho and
the events set in motion by it, especially the rapid expansion of irrigated
agridulture and of associated industrial and urban service activities, have
attracted a large number of migrants to the middle Sao Francisco valley, thereby
less than 10 years, even if the affected populations are provided with all the
(especially financial-economic) support required so that they can produce
economically. These constraints are very substantial: the socio-economic ones
which are derived from the poverty and backwardness of a population which
presently possesses no resources except its own unskilled labor; the financial
ones which are manifested in the present shortage of resources in the country
as a whole to finance poor farmers in capital-intensive activities and in the
lack of schemes to absorb risks, until [the Itaparica farmers] are consolidated
which will require 5 to 6 years at least; the commercial ones which are reflected
in the absence of indispensable alternatives (agro-industries) which will emerge
only when [agricultural] production is consolidated; and the environmental ones,
with low fertility soils, once higher production costs are imposed."
so Gabriela Martin, "Dez Mil Anas de Historia, Adeus," Ciencia Hole, Vol.
10, No. 56, August 1989.


106
accelerating the pace of change in the region. Itaparica, further downstream,
may well precipitate a similar, if less dramatic, process during the 1990's.
6.102       Demographic change, however, has by no means been uniform in the
areas of influence of the projects under review. The middle valley has fared
better, its population having grown by 36% over the same period, while that in
the lower Sao Francisco increased by 26%.     The most spectacular jump in
population occurred in the municipality of Petrolina, which increased by almost
130% during the 1970's, to reach a total of 104,000 by 1980. This huge increase
is closely related to the expansion of economic activities in the region
resulting from Sobradinho and the growth of public and, especially, private
irrigation. 81 This situation contrasts strongly with that in the lower Sao
Francisco valley where many of the municipalities witnessed very small or even
negative rates of population growth over the same period.
6.103       In common with regional trends for Northeast Brazil as a whole, the
middle and lower valley has experienced a marked process of rural out-migration,
coupled with rapid urbanization. 82   While this is closely associated with
general demographic, social and economic transformations, the speed of change
has undoubtedly been increased by the direct and indirect impacts of the Sao
Francisco projects.  These have had both negative consequences, in terms of
displacing more people than were resettled, and positive effects insofar as the
areas have already experienced and/or will benefit in the future from new sources
of economic growth.
6.104       While there has been an overall decrease in the proportion of the
total population classified as rural in the middle and lower valley, this decline
has also been more dramatic in some areas than in others. Rural areas directly
impacted by Sobradinho, for instance, experienced a sharp decrease in rural
population not only in relative, but also in absolute, terms. 83  During the
1970's, however, this phenomenon was most marked in the lower valley, where
heavy net out-migration appears to have occurred as a result of the changes
induced by Sobradinho and the irrigation projects.     Again, this situation
a' See sections 2 and 3 below.
82 Urban growth is dealt with in more detail in section 4 below.
83 In Casa Nova, for example, the rural population fell from 31,627 in 1970
to 28,361 in 1980, a lose of 1.1% per annum.
84  In Microregion 124 in Sergipe (municipalities of Ilha das Flores,
Neopolis, Propria, Brejo Grande, Amparo de Sao Francisco, Nosea Senhora de
Lourdes, Pacatuba and Telha), for example, which covers an important estuary of
the Sao Francisco and where much land acquisition and expropriation took place
during the 1970's, there was an absolute decrease in population from 38,000 to
35,000, representing a negative growth rate of 2 to 3% a year.


107
contrasts sharply with that in Petrolina, whose rural population grew
significantly over the same period. 8
6.105       In terms of employment generation, although little concrete data
exists to permit an evaluation of the projects' wider consequences, some
observations are, nevertheless, possible.  The process of land concentration
which has been observed around Lake Sobradinho is likely to result in a reduction
in the proportion (or even the absolute number) of farm owner-operators with a
corresponding increase in wage labor. The establishment of new irrigated farming
enterprises will create other kinds of jobs. However, research has shown that
the expansion of irrigated farming does not necessarily lead to a total breakdown
of traditional land tenure relations.  It has been found, for example, that
sharecropping and leasing arrangements may well persist in the region in order
to ensure an adequate labor supply for large-scale irrigation enterprises. 6
Due to the heavy initial out-migration in the lower valley, on the other hand,
irrigated farming may possibly experience a labor shortage problem in the future.
6.106       While it is difficult, at present, to predict the employment
generating capacity of irrigated agriculture, research undertaken in the middle
Sao Francisco valley suggests that it has the potential to expand rural job
opportunities significantly. A recent study of public and private farms in the
region concluded that irrigation development has significantly increased local
demand for labor, attracting workers, and hence migrants, from other areas.
Private irrigated agriculture, especially for high-value commercial crops such
as grapes, industrial tomatoes and rice, were found to be particularly labor-
intensive. 87 The finding that considerable potential exists for the expansion
of small private owner-operator irrigated farms is heartening for the middle
valley, especially in the light of the Itaparica resettlement program which will
involve over 5,000 producers. While generally encouraging, these results should,
nevertheless, be treated with caution due to methodological problems. 8
85 The rural population in this municipality increased from 23,000 in 1970
to almost 30,000 in 1980, or at an annual rate of 2.5%.    Petrolina's urban
population, in turn, increased even more substantially, from 38,000 to almost
75,000, or at more than 7% per annum.
86 This is because sharecropping provides a stable supply of workers for
labor-intensive gravity irrigation techniques and is a flexible form of
relationship that allows the worker to perform mtltiple roles as manager or
lesser partner in an enterprise if the situation demands it. See, J. Graziano
da Silva (ed.), op. cit.
87  Eugenio Maffei, Jose Ferreira Irmao and Herminio Ramos de Souza,
Irrigacao e Emprego no Sertao do Sao Francisco, OIT/PNUD/SUDENE, Recife, 1986.
According to the calculations of these authors, private irrigation absorbs 0.7
workers per hectare, compared with a figure of 0.06 for dryland farming in the
Northeast.
88 For example, the stratified sample on which the calculations were based
included only 40 farmers (15 on public projects and 25 on private farms). In
addition, the two sectors are ill-defined; "private farms" include both small


108
Furthermore, the study does not address the issue of the potential limits to the
growth of irrigated agriculture imposed by demand constraints or the fact that
current high cost technologies and the implicit risks for small farmers
discourage the irrigated production of low-value staple crops which are crucial
to food security in rural areas.
6.107       The rapid growth of Petrolina, Juazeiro and smaller towns in the
middle valley suggest a parallel expansion of urban job opportunities in the
region. Indeed, the development of food processing and other large and small-
scale industries and associated commercial and service activities testify to a
certain degree of additional employment creation.   However, the information
presently available is insufficient to permit firm conclusions as to the extent
to which the increasing urban population is being productively absorbed in such
activities. The rapid expansion of shanty-towns and urban social problems noted
by local observers may, in fact, reflect a serious mismatch between population
growth as the result of rural-urban migration, on the one hand, and the number
of new jobs available, on the other. In any event, there has, almost certainly,
been a significant expansion of the urban informal sector, together with the
(probably much smaller) increase in formal job opportunities. This is an area
requiring further research.
2. Rural Development
6.108       The first systematic irrigation plan for Brazil, published in 1971,
was carried out by a Brazilian-Israeli consortium and set clear goals for 1980. 89
In the Northeast, DNOCS was given responsibility for irrigating 78,000 hectares
in 36 public schemes scattered throughout the semi-arid interior of the region,
while CODEVASF was assigned an irrigation target of 112,000 hectares in 17
projects in the Sao Francisco valley. The major objectives of the plan were to
increase employment, farmers' income levels and agricultural output. The plan
anticipated, for example, the direct creation of 115,000 jobs in the Northeast
by 1980, as well as twice this amount of indirect employment.   The National
Integration Plan (PIN) of 1970 gave added impetus to irrigation development in
the Northeast as part of an anti-drought and production strategy, linked to a
policy of directed resettlement in the Amazon region.      PIN projected the
irrigati". of 40,000 hectares in the region between 1972 and 1974 alone.
CODEVASF, however, fell far short of its targets, such that, by the end of 1980,
it had irrigated only 9,800 hectares (20%) of a revised 50,000 ha target for the
decade and settled 2,780 families. At that time, moreover, only 54% of the area
irrigated by CODEVASF was settled by small farmers with the remaining 46%
occupied by large commercial ventures.
family units and large agro-industrial enterprises such as AGROVALE which employs
only 0.02 workers/ hectare. Judgments as to the more general validity of labor-
absorption coefficients estimated for particular crops, moreover, must also take
the technology employed into account.
89  GEIDA, Programa Plurianual de Irrigacao, Grupo de Irrigacao para o
Desenvolvimento Agricola, Brasilia, 1971.


109
6.109       The 1980's, in contrast, have witnessed a significant expansion of
the area irrigated by CODEVASF, which, by 1988, had reached 66,000 hectares in
14 projects absorbing nearly 6,200 farmers. Two recently inaugurated projects,
Senador Nilo Coelho (formerly Hassangano) near Sobradinho and Boacica in the
lower valley, however, account for a large proportion of the 35% increase in
the total area irrigated by the agency since 1984.   Over half (ie. close to
37,000 hectares) of CODEVASF's irrigated area, furthermore, is concentrated in
the Petrolina-Juazeiro axis (see Annex 2). During 1989, the agency planned to
irrigate an. additional 25,000 hectares in five projects located in different
parts of the valley: Formoso A, Gorutuba, Marituba, Expansao Nilo Coelho and
Miriros. CODEVASF was also expected to commence implementation of several major
new schemes during 1989, including the World Bank-supported Jaiba (22,000 ha)
and Jequitai (35,000 ha) projects.    Another 196,000 hectares were at the
feasibility and design stages. 9o
6.110       Construction of the Sobradinho dam and reservoir during the
mid-1970's, by regulating the flow of the Sao Francisco and increasing the supply
of electric energy, has permitted the rapid expansion of private, as well as
public, irrigation schemes and attracted an increasing number of farming,
agribusiness and agro-industrial enterprises to the region, which are discussed
in the following section. 91  While this has undoubtedly increased agricultural
output and provided additional employment, another apparent consequence has been
to exacerbate the historical tendency toward land concentration in the Brazilian
countryside. Even though a more detailed study of rural land transactions and
land use changes over the period would be required in order to more precisely
identify the role of increasing public and private irrigation in the recent
concentration of land holdings in the middle Sao Francisco valley, there can be
little doubt that such concentration did, in fact, occur between 1970 and 1985.
6.111       Annex 1 below presents census data on rural land distribution for
key regions around Lake Sobradinho. It reveals that, since the late 1970's, the
percentage of farmland in smallholdings has gradually decreased, while there has
been a simultaneous expansion of larger estates.   In Microregion 133, which
covers the northern periphery of the lake, for example, small plots with less
than 10 hectares have seen their share of farmland fall by one-quarter, from 6%
in 1970 to 4.6% in 1985. At the same time, land held in properties of 100 to
1,000 hectares accounted for 26% of the total in 1980 and 37% in 1985. In the
municipality of Petrolina, this trend is even more pronounced, while in
neighboring Juazeiro the acquisition of land by large enterprises for irrigation
90 E. Assirati, "Situacao Atual do Investimento em Irrigacao Publica no
Nordeste", mimeo, IPLAN, Brasilia, 1988.
91  See, for example, Manoel Correia de Andrade, "Producao de Energia e
Modernizacao do Vale do Sao Francisco," Revista de Economia Politica, Vol. 4,
No. 1, January-March 1984, pp. 43-55.


110
purposes drove up the Gini coefficient of land concentration from 0.74 in 1980
to 0.86 in 1985. "
6.112       It should also be observed, however, that the Itaparica Project, as
designed, would decrease, rather than increase, rural land concentration in the
areas occupied by the new irrigation schemes. Under the terms of the agreement
with the rural unions, moreover, irrigation farmers cannot sell their lots within
five years of receiving them.   While informal sales may, indeed, take place
during this period, perhaps leading to some concentration of land holdings within
the projects, neither the Government nor the Bank has any control over this.
3. Agro-Industrial Development
6.113      In most of the Northeast, the direct benefits of irrigation tend to
be limited to the immediate project areas in question and few broader economic
transformations have occurred. However, this is clearly not the case around
Petrolina-Juazeiro. The spread of publicly-sponsored irrigation and accompanying
physical infrastructure has attracted many private enterprises to the region.
By 1988, it is estimated that some 100,000 hectares had been privately irrigated
in the Sao Francisco valley, compared with CODEVASF's 66,000 hectares.  Once
again, the Petrolina-Juazeiro area accounts for the largest share at 45% (see
Annex II).  This region has likewise developed an increasingly sophisticated
transport, communications, processing and marketing infrastructure in order to
cope with the rapid growth in agricultural production, especially fruits and
vegetables, and to attract further private investment. Fiscal incentives have
also been provided through the FINOR ALIMENTOS program administered by SUDENE.
Between May 1988 and July 1989, for example, grants were made to 17 irrigated
farming enterprises in the Sao Francisco valley, totalling over 13 million
cruzados, or one-third of the total approved for the entire Northeast under this
scheme. About half of the total irrigation costs of these projects were financed
through FINOR ALIMENTOS.
6.114      A broad range of high-value fruits and vegetables is currently being
produced, most of which were not cultivated on any significant scale, if at all,
in the valley prior to the recent spread of irrigation technology.     These
products include grapes, melons, figs and asparagus, as well as more common crops
such as rice, corn, beans, yams, pumpkins, cotton and onions.    The use of
expensive technology, such as central-pivot and drip-feed irrigation systems,
is also becoming more widespread. According to CODEVASF estimates, the value
of agricultural exports from the Petrolina-Juazeiro "development pole" was on
the order of US$ 20 million in 1988. The middle Sao Francisco valley, moreover,
92 Census data, however, do not capture the full magnitude of the changes
arising from irrigation development.   The IBGE census offers only partial
geographical coverage (only 25% of Petrolina municipality in 1980, for example),
while the more recent implementation of numerous large projects is not reflected
in the official figures. In Petrolina, for example, the Gini coefficient of
land concentration was artificially lowered between 1978 and 1984 due to the
expansion of the area surveyed, the expropriation of 41,000 hectares for
CODEVASF's Nilo Coelho project and a land-titling program in the region to secure
future compensation for landowners (see Graziano da Silva, op. cit., pp. 68-69).


111
presently accounts for 46% of Brazil's installed tomato processing capacity.
Major agro-industrial enterprises in the region include CICA, Etti, Frutos do
Vale and grape/wine-producing farms at Casa Nova (Fazenda Ouro Verde) and Santa
Maria da Boa Vista (Fazenda Catalunha) . A manufacturer of irrigation equipment,
Dantas Irrigacao, moreover, opened a factory in Petrolina's industrial district
in 1988.
4. Urban Development
6.115       Generally speaking, urban development in the Sao Francisco valley
has proceeded at a rapid pace since 1970. The proportion of the total population
in the valley officially classified as "urban" varies from one-third in Bahia
to two-thirds in Pernambuco. By 1980, the city of Petrolina had doubled in size
to over 73,000, while its twin city of Juazeiro had reached 61,000. "    This
pattern appears to have been maintained and perhaps even intensified during the
1980's. Although precise figures are not available, it seems likely that the
city of Petrolina may have again doubled its population, to around 150,000 today,
while the increase in Juazeiro may be slightly lower. The new towns along the
lakeside, built to replace the original urban settlements inundated by the
Sobradinho reservoir, have also grown rapidly and were discussed above.
6.116      The pace of urbanization, however, has by no means been universally
high in the areas affected by the projects under consideration in this report.
The population displacements and social conflicts associated with CODEVASF's
emergency polders project in the lower Sao Francisco valley, for example, have
contributed to a much slower than average growth rate for the city of Penedo in
southern Alagoas. This phenomenon is also related to Penedo's historical decline
as a regional port and fordinE point for north-south highway traffic with the
building of a bridge for the BR-101 highway over the Sao Francisco upstream at
Propria in tht 1970's. While other urban centers were growing by up to 100%
between 1970 and 1980, as already noted, Penedo's population rose by just 15%
and does not appear to have advanced much further since then.
6.117        Other towns have also been adversely affected as a result of the
schemes in question.   Belem do Sao Francisco (with a population of 9,000 in
1980), for example, located at the western extreme of Lake Itaparica, has not
fared well. Once a prosperous market town catering to the needs of a thriving
local farming economy based on small-scale irrigation on the river banks and
mid-stream islands, its future is now a matter of concern. Regulation of the
Sao Francisco has effectively flooded 70% of this rich farmland, causing economic
losses and a population exodus which have seriously affected local commerce.
Dikes still need to be built to protect the town itself from potentially
extensive flooding. According to local opinion, however, even these actions are
unlikely to revive the town's flagging fortunes in the medium to longer-term.
9  The regional importance and rapid growth of Petrolina and Juazeiro led
them to be included among the thirteen urban areas in different parts of Brazil
covered in the Bank-supported Medium-Sized Cities Project (Loan 1720-BR, approved
in June 1979). See OED Report No. 8302, dated December 29, 1989, for details.


112
6.118       The new town of Petrolandia, on Lake Itaparica, by contrast, has
grown rapidly to reach a current estimated size of 18,000, compared with the old
town's population of 10,000 in 1980, before its relocation. Resettlement has
apparently resulted in demographic expansion, although a note of caution should
be sounded since the municipality was already quite prosperous on the basis of
the significant small-scale riverside irrigation development that has grown up
since the 1960's. The town's population, in fact, doubled between 1970 and 1980.
It remains to be seen, moreover, whether Petrolandia will continue to grow as
rapidly after 1990, when the irrigation schemes for the rural population
resettled from Itaparica are scheduled to come on stream.
5. Public Health Asects
6.119       By and large, the improved infrastructure within the new towns,
smaller communities and agrovilas at Sobradinho and Itaparica, together with
increased access to project-provided health-care facilities in the lower Sao
Francisco valley, should lead to an overall improvement in public health in the
immediate areas covered by the operations under review. In general terms and
despite the lack of detailed information, it may be concluded that thelcurrent
pattern of disease is no different in intensity and distribution to that
prevailing prior to construction of the reservoirs and irrigation works. Yet,
some problems have occurred that were predicted at the pre-appraisal stages.
These have largely involved water contamination, resulting from poor sanitation
and the uncontrolled used of agrotoxic substances in irrigated agriculture.
6.120       At Itaparica, more specifically, delays in building a water treatment
plant following the filling of the lake are thought by some observers to have
facilitated an outbreak of water-borne gastro-intestinal diseases. 9  This was
believed to have been caused in the first instance by the rotting of uncleared
biomass, together with a proliferation of algae and water contamination by
fertilizers.   Laboratory tests, in fact, revealed a number of infectious
bacteria. 96 Subsequent investigation into the matter by epidemiological experts
suggests that the event was prcoably unrelated to construction of the reservoir.
Nevertheless, given that some urban and many rural communities in the areas of
influence of the middle valley projects, especially around Sobradinho, still use
untreated water for domestic purposes, it is possible that gastro-intestinal
problems remain underreported.   It should be noted, however, that CHESF's
environmental plan for Itaparica includes both water-monitoring and public health
programs, the latter involving agreements with state government authorities to
provide improved health care facilities at the community level. 
6.121       A major growing public health problem throughout the middle and lower
Sao Francisco valley arises from the largely uncontrolled used of agrotoxic
substances such as fertilizers, herbicides and pesticides. Thn rapid expansion
9' Goodland, Sobradinho Hydroelectric Project, ,p. cit.
9 Braga and Lima, op. cit.
96   Ibid.   These bacteria included Enetrobacter sp, Klebsiella sp,
Eacherichia coli and Pseudomonas aeruginosa, among others.


113
of both large and small-scale private irrigation during the 1980's has resulted
in the widespread use of chemicals to protect valuable crops and increase yields.
Washed into the river, lakes and subsoil, these chemicals are an increasingly
serious threat to public health, especially in those areas where human and animal
water supplies are either untreated or ineffectually treated. " Furthermore,
as mentioned in the previous chapter, the use of agricultural chemicals for the
preservation of fish, an activity which local reports suggest may be common in
the Sobradinho area, could have harmful health effects on consumers.
E. Conclusion
6.122       On the basis of current evidence, it is evident that the projects
reviewed in this report have had far-reaching impacts within the middle and lower
Sao Francisco valley itself and beyond. They have directly affected the lives
and livelihoods of about 170,000 displaced people and accelerated the pace of
existing social and economic change for a great many more. At the same time,
major new activities have been introduced in the region, including capital-
intensive irrigated farming and associated agribusiness enterprises, which
promise to bring increasing economic prosperity to the area.
6.123       The effects of these changes upon the local population, however,
have been mixed. Some groups, such as capitalized landowners and many urban
dwellers, appear to have benefitted significantly. Others, such as uncompensated
sharecroppers and tenant farmers, may have suffered irrecoverable losses. Many
of these consequences, moreover, were not envisaged at the time or, if
anticipated, were not adequately taken into account in project design and
execution.  Environmental repercussions, both physical and human, direct and
indirect, were, thus, dealt with in what was, in many instances, a haphazard and
imperfect manner.
6.124       Yet, out of these experiences have come warning signs for future
projects of a cimilar nature in Brazil and elsewhere. These will be briefly
reviewed in the next chapter.    Planners and policy-makers should take the
opportunity to incorporate these lessons into current knowledge and perceptions,
as well as to bring them to bear on the crucial environmental aspects of both
on-going and future interventions.
"   Local informants around Sobradinho, for example, complained to the
OED/SEPLAN mission that direct contact with the lakewater caused skin irritations
and "itchiness."


114
VII. THE WORLD BANK AND THE ENVIRONMENT IN THE SAO FRANCISCO VALLEY
A. Bank and Borrower Perceptions of Environmental Issues
1. The Bank
7.01        During the 1970's and 1980'a, many lessons were learned concerning
what constitute appropriate procedures for dealing with the resettlement of large
populations dislocated by hydropower and other development projects. At the
time of the appraisal of the Sobradinho (ie. Paulo Afonso IV) and Lower Sao
Francisco operations, however, the Bank had not yet formulated an explicit policy
on involuntary resettlement.    Although concern over such issues had been
expressed by individual staff members and consultants, the lack of a policy
framework contributed to many of the substantive and procedural errors committed.
These experiences served as major examples of the potential pitfalls to be
avoided by future programs and were instrumental in leading the Bank to focus
more closely on resettlement and associated environmental issues in large
infrastructure projects.  It is probably no coincidence that the Bank's most
recent policy statement on involuntary resettlement includes a photograph of a
village being demolished in preparation for Sobradinho on its front cover.
7.02        In February 1980, an internal statement was issued to Bank staff
delineating a specific policy with respect to forced resettlement. 2 Further
guidelines on involuntary resettlement were drawn up in 1986, shortly before the
Itaparica loan was signed, which duly acknowledged that "the Bank has sometimes
not applied the policy and its related operational procedures with adequate
vigor." 3 Accordingly, extensive recommendations were made concerning procedures
to be followed throughout the project cycle in order to ensure that resettlement
measures were given adequate priority and provided for both organizationally
and financially. These guidelines included the recommendation that sectoral
lending operations should "take into account the need for sound resettlement
1 See Cernea, Michael, "Involuntary Resettlement in Development Projects:
Policy Guidelines in World-Bank Financed Projects," World Bank Technical Paper
No. 80, Washington, D.C., 1988.
This indicated that "the Bank recognizes the human suffering and hardship
caused by involuntary resettlement, and therefore tries to avoid or minimize such
resettlement...[and that where resettlement is unavoidable, there should be)...a
well prepared resettlement plan...the major objective (of which] is to ensure
that settlers are afforded opportunities to become established and economically
self-sustaining in the shortest possible period, at living standards that at
least match those before resettlement."    See Social Issues Associated With
Involuntary Resettlement in Bank-Financed Projects, Operations Manual Statement
No. 2.33, February 1980, pg. 3.
SOperatione Issues.in the Treatment of Involuntary Resettlement in Bank-
Financed Projects, Operations Policy Note No. 10.08, October 8, 1986.


115
policies and the country's willingness and ability to handle involuntary
resettlement." ' 
7.03        These recommendations were further refined and extended to form a
comprehensive and much-acclaimed set of policy-guidelines for Bank-funded
involuntary resettlement projects, published in    1988. 5    This document
specifically recognizes that projects funded by the Bank during the 1960's and
1970's, including Sobradinho, "sometimes contained relocation operations that
were flawed by the lack of social planning...[and which] failed to restore, let
alone improve, the social and economic well-being of the displaced population....
Resettlement operations were left out of the main project design, and implicitly
out of the Bank's concern for implementation and assistance to the borrowing
agency responsible.i' 6 The policy measures now in force, moreover, reflect the
Bank's desire to promote a development, as opposed to welfare, oriented approach
to resettlement, as well as to ensure that such issues, in conjunction with other
project goals such as infrastructure expansion, are given adequate attention
throughout the project cycle.
7.04       Although less dramatic than the social impact caused by the
displacement of tens of thousands of people, physical environmental issues were
also highlighted by the experience of Sobradinho. Problems of soil erosion, silt
retention, public health and possible climatic disturbances were identified at
appraisal, during supervision and on project completion. The experience in the
Sao Francisco valley also contributed to internal Bank debate about the
environmental aspects of dam-building, as well as to subsequent Bank policy
formulation, which now requires such operations to be based on sound natural
resource management.         1
7.05 -     As far as Bank activity in Brazil is concerned, the growing concern
with the environmental impacts of dam construction was instrumental in the
inclusion of steps to improve appraisal procedures for the first Power Sector
Loan, approved in 1986, which specifically included a review of resettlement
plans in connection with installation of the Itaparica hydropower plant. While
the Bank was under no direct obligation to finance this resettlement program,
it decided to do so in good measure because of its increasingly strong policy
commitment in this area. The leading role played by the Brazil Department in
4 Ibid., pg. 4.
5 Cernea, op. cit. The Bank is still the only international development
agency to have adopted an explicit policy and set of procedures for handling
involuntary resettlement operations. The Bank's current guidelines, however,
are used as a reference point by other multilateral, as well as bilateral, aid
organizations.
6 Ibid., pp. 9-10.
' Environmental Policies and Procedures of the World Bank, World Bank, May
1, 1984. It seems likely that this experience also contributed to the impetus
for the later (ie. 1987) strengthening and restructuring of the environmental
review process within the Bank more generally.


116
this initiative should be specifically acknowledged. The Bank's involvement in
the Sao Francisco valley has, thus, clearly constituted a major learning
experience for the institution. It has also helped to raise overall awareness
within the Bank of the potential pitfalls and human costs of failing to deal
adequately with forced resettlement, while providing an impetus for the
strengthening and revision of the relevant internal polices and the adoption of
appropriate measures in terms of staffing inputs.
2. The Borrower
7.06        During the 1970's and early 1980's, the perceptions of the principal
executing agencies with regard to both physical and human environmental issues
associated with Bank-supported development projects in the middle and lower Sao
Francisco valley were, at best, inadequate and, at worst, seriously deficient. 9
Resettlement of the population displaced by Sobradinho was conceived by CHESF
as essentially a relief exercise. As a power company, it had little notion of,
or  concern  with,   the  region's   longer-term  socio-economic  development
requirements. 10 Similarly, in the lower valley, CODEVASF's perceptions of the
ecological and social dimensions of the problems faced was limited by its primary
role as an irrigation, rather than a resettlement, regional development or
environmental protection, agency. Despite the "emergency" nature of the polders
and irrigation projects, which were designed to rectify the negative impacts of
regulating river flow upstream at Sobradinho on the population in the lower
valley, there was little apparent awareness within CODEVASF of the wider
repercussions of the net population displacement involved, nor was consideration
a   For example, during 1986-87, the Bank sent staff and consultant
sociologists and anthropologists on 45 project missions to assess resettlement
needs  and  issues.    See Michael Cernea, "Involuntary     Resettlement  and
Development," Finance and Development, September 1988.
9 In its comments on an earlier version of this report, the Ministry of
Infrastructure observes that the principal problems identified by the case study
could have been better anticipated and dealt with had environmental assessments,
which are now required by Brazilian law, been carried out at the time of project
preparation. This is clearly demonstrated by the fact that, even though they
were undertaken after preparation was well advanced, such studies in the case
of Itaparica generated results which permitted a more satisfactory treatment of
environmental issues than at Sobradinho.
10 In commenting on the previous version of this document, CHESF affirmed
that the social and environmental impacts of its dams were not subject to more
extensive study prior to their implementation because of the relatively lesser
attention given to these aspects by public agencies in the power and other
sectors, as well as by external lending agencies, at the time.   Nonetheless,
CHESF also points out that its involuntary resettlement efforts represented a
"pioneering" experience in Brazil in this regard. In its comments on the draft
report, in turn, CODEVASF made similar observations in relation to the
comparatively recent concern of external funding agencies with environmental
protection matters.


117
given to providing alternative livelihoods for those not employed locally in the
new public irrigation schemes.
7.07        The lessons of Sobradinho and the lower valley might reasonably have
been expected to engender a different, more comprehensive, view of resettlement
needs at Itaparica, CHESF's next major project in the Sao Francisco basin.
Initially, however, this was not the case.   In spite of its relatively poor
record of rural resettlement in connection with Sobradinho, CHESF had not
originally intended to undertake a comprehensive relocation program of the kind
now in implementation at Itaparica. Once again, CHESF appears to have thought,
optimistically, that the rural population would be content to accept monetary
compensation and then abandon the area.
7.08        It was largely the political pressure of the local trade union
consortium (POLOSINDICAL) from 1979 onward, together with an unfavorable
publicity campaign mounted by Brazilian and international NGOs against the
Government and the Bank, which obliged CHESF to draw up a more extensive
resettlement plan for the rural population, undertake negotiations with
POLOSINDICAL and then seek Bank funding to undertake the program. Although its
perceptions on resettlement and other environmental issues have undoubtedly
improved, the impetus for such changes sprang, for the most part, not from CHESF
itself, nor indeed the Bank in the first instance, but directly from the affected
population.  To this day, in fact, Brazil lacks a national policy on forced
resettlement, which is still tackled on a piecemeal, project-by-project basis.
B. Project Design and Effectiveness With Regard to Environmental Issues
7.09        In all of the projects under review, there is a clear link between
Bank and Borrower perceptions regarding environmental issues, the methodological
and organizational provisions for dealing with these questions and subsequent
project outcomes.   In Sobradinho and the lower Sao Francisco polders and
irrigation projects, the absence of a Bank policy on involuntary resettlement
led to environmental issues being conceived in relatively narrow terms, with the
needs of large segments of the affected populations and ecosystems being either
ignored or underplayed. This resulted in inadequate project design, as well as
negative social and ecological consequences, and also contributed to increased
financial costs. In both cases, the lack of a comprehensive resettlement plan
prevented a correct cost estimate at appraisal and led to inadequate budgeting
procedures and insufficient financial resources during project implementation.
7.10        Sobradinho was conceived by both the Bank and the Borrower as a
sectoral, hydropower expansion project above all else. Although a resettlement
program was incorporated, it was marginalized in the planning process and, thus,
proved to be seriously deficient in practice. Wile the urban plan appears to
have been relatively carefully prepared and catered reasonably well to the needs
of the 13,000 or so people thus relocated, the rural population of over 50,000
was dealt with in a more haphazard fashion and no broader development program
was formulated, contrary to previous recommendations. 1 As described in the
previous chapter, the INCRA colonization project upstream at Serra do Ramalho
1  See Goodland, op. cit.


118
was a resounding failure in terms of absorbing the Sobradinho population. The
arbitrary selection of a dryland area for irrigation farmers, poor soil
conditions and the lack of adequate farming and social infrastructure, led to
its abandonment by Sobradinho displacees and their replacement by landless
cultivators from other regions.
7.11        The swollen lakeside population, whose numbers were initially grossly
underestimated by CHESF, has had to struggle to make ends meet. Fertile alluvial
soils have been lost, while basic support for agricultural activities, as well
as educational and sanitation facilities, has been in short supply. This has
resulted in plot abandonment and the acquisition of lands by capitalized
outsiders. The use of heavy-handed eviction techniques by CHESF as part of the
relocation package, as well as shortcomings in compensation procedures, deepened
the rift between the agency and the local rural population. A major potential
opportunity to promote rational fisheries development was also lost, leading to
predatory practices and the possible depletion of a valuable economic resource
for the area. The failure to take more seriously the risks of ecological damage
from the largely uncontrolled use of agrotoxic substances for fishing and farming
purposes is likely to become an increasingly significant problem over time,
especially as both public and private irrigation project continue to expand in
the vicinity.
7.12        In the lower valley also, fundamental misperceptions about the
centrality of environmental issues was reflected both in poor initial project
preparation and considerable subsequent implementation difficulties. Although
conceived as an "emergency" response to the consequences of Sobradinho, the
polders and irrigation schemes have fallen far short of adequately dealing with
the complex social and ecological issues raised.        Due to basic design
shortcomings, the irrigation schemes in the lower Sao Francisco would never have
been capable of directly or indirectly creating jobs for the entire displaced
rural population of some 50-60,000. CODEVASF's highly selective recruitment
criteria, delays of several years between the initial lose of farmland and
irrigation project operation, as well as inadequate and sometimes harsh
compensation   and   eviction  methods    (occasionally  generating   violent
confrontation), all combined to create a net population lose of over 30,000 in
the area. The fact that implementation of SF II took place after the Bank issued
its OMS on resettlement policy in 1980 should be emphasized.      However, no
corrective action was taken in the light of these new guidelines, even though
this might have improved project execution and ensured a more adequate relocation
process.
7.13        The failure to take due account of human environmental issues at the
identification and design stages has had both implications for on-going project
operation and wider repercussions in the lower Sao Francisco valley. The history
of local conflicts surrounding the expropriation, displacement and resettlement
process has soured relations between CODEVASF and local farmers, possibly
contributing to low farmer take-up of irrigated plots and membership in project
cooperatives.   Dependency and paternalism have also been encouraged by the
agency's traditional "top-down" management style, which has not generally
incorporated irrigation farmers into decision-making. Even though poor economic
performance has been due in good measure to engineering and physical design
factors, poor social relations have played a crucial role in exacerbating the


119
problems. Economic performance has also been adversely affected by the failure
to adequately plan for ecological side-effects such as salinization, while the
future public health implications of the increasing and possibly excessive
agrotoxic use in the area could be serious.
7.14        The improved design and execution of the Itaparica resettlement
program from an environmental perspective, on the other hand, is a major advance
on past practices and reflects a clear evolution in thinking on the part of both
the Bank and the Borrower.   This is the first full-scale free standing Bank
operation in Brazil that attempts to integrate major population displacement and
relocation within a longer-term development program for all of those directly
impacted by a hydropower project. The desires of the 40,000 people affected by
Itaparica were eventually taken into account by CHESF in planning for the post-
displacement and land acquisition phases and a range of alternative solutions
have been offered.  The population has likewise been provided with temporary
maintenance support, pending operation of the irrigation schemes, and discussions
are underway between CHESF, CODEVASF and representatives of the affected
population (POLOSINDICAL) over the future organization of production and
administration of the schemes. In terms of ecological impacts also, the Bank
and CHESF have been aware of potential problems and have taken steps to introduce
appropriate controls. 10
C. Project Limitations in Relation to Wider Environmental Issues
1. Physical Environmental Impacts
7.15        In addition to the immediate ecological repercussions of the projects
under review, there are wider implications for the Sao Francisco valley as a
whole. In common with similar dame elsewhere, Sobradinho and Itaparica retain
much of the river's alluvium. Without controls such as lake-dredging, over the
long run this will reduce the power stations' working life as the lake silts up,
thereby reducing energy production. Furthermore, by disrupting the annual flood
cycle and reducing silt deposits, the fertility of downstream riverine soils is
reduced. This will affect agricultural yields a .A is likely to necessitate
larger applications of fertilizers by farmers along the river, both within and
outside of public irrigation schemes.
7.16        The increased use of chemical fertilizers and other agrotoxics such
as pesticides, in turn, has serious implications for water quality and increases
the risk of both surface and ground water contamination. This problem is further
compounded by the steadily increasing volume of untreated human and industrial
effluents deposited in the lakes, the main river and/or its tributaries, arising
from the rapid demographic, urban and agro-industrial growth stimulated in good
measure by these projects -- and by Sobradinho in particular -- together with
parallel private investments.
7.17        Another broader environmental issue concerns the growing competition
over access to available water resources among different users including public
10 Report No. 6914-BR, op. cit., para. 4.03 (e). See also Chapter V above.


120
and private irrigation, energy production and domestic and industrial
consumption. Given the region's semi-arid climate, together with the greatly
expanded surface area as a result of the Sobradinho and Itaparica reservoirs,
increasing evaporation threatens to further diminish the total volume of water
available by up to 25% or more. n In the Northeast's largest perennial river
valley, therefore, water could, paradoxically, become an increasingly scarce
resource in the future due to the rapid pace of change, induced to a large extent
by Sobradinho in the first instance and, more recently, by the rapid expansion
of public and private irrigation schemes.
7.18        Limits on the availability of water could place serious constraints
on future economic growth in both the Sao Francisco valley and, in the case of
power generation, on the Northeast more generally, so that the area could
ultimately become a victim of its own success.     The fast-growing irrigated
agricultural sector, CHESF's plans to build further dams in the middle and lower
Sao Francisco, as well as the increase in domestic use as towns and cities
continue to expand, will all increase future competition over water resources
in the valley and necessitate additional solutions. These should beginwith more
systematic cross-sectoral water resource use planning and management. 12
7.19        A further potential, if largely unknown, future environmental problem
relates to local and regional climatic change which may be induced by the
formation of large artificial water bodies such as Sobradinho and Itaparica
lakes.  Similar experiences in other parts of the world have suggested that
alterations in the weather patterns are likely under such circumstances, possibly
leading to increased cloud formation, cooling of the area and greater
precipitation. However, this positive effect could be offset by the adverse
impact of deforestation in the river catchment area or in neighboring regions,
especially at the headvaters and in eastern Amazonia, for example.   Clearly,
further research into these phenomena are required and an inter-regional
perspective should be taken.
2. Human Environmental Impacts
7.20        In addition to their physical environmental consequences, the
projects reviewed in this report have had significant social impacts within the
valley and beyond. Most obviously, the displacement of some 120,000 people by
Sobradinho and the lower valley "emergency" schemes has had several major
repercussions.  By destroying the community structures of over 40,000 rural
dwellers and failing to provide them with sustainable, alternative livelihoods,
Sobradinho has greatly exacerbated the pace of rural-urban migration. This has
1 See Chapter V above.
12 This conclusion reinforces the findings of the Bank's recent irrigation
subsector review for Brazil (Report No. 7797-BR, op. cit., para. 27) which
observes: "Along the main stem of the Sao Francisco River, water management
should focus on the allocation of water between hydropower and irrigation
requirements. For this purpose consumptive water use limits for irrigation need
to be established.    Along the smaller tributaries of the river, control
structures should be designed primarily to enhance irrigation potential."


121
contributed to the rapid growth of urban centers in the area and the associated
expansion of shanty-towns and increased demand for local services.   The same
conclusion can be reached with respect to the lower Sao Francisco polders and
irrigation schemes, which made even less provision for the "excess" of some
30,000 people which is estimated to have left the immediate area altogether.
The impact of this migration on regional capitals such as Aracaju and Maceio,
although unmeasured, is likely to have been significant.
7.21        Regulation of the Sao Francisco covered the fertile varzeas and
effectively eliminated the traditional system of floodplain farming based on the
seasonal rise and fall of the river, thereby affecting the livelihoods of
agriculturalists within and beyond the immediate projects themselves both
upstream and downstream of the dame. On the other hand, the rapid expansion of
private irrigation which has been facilitated by the creation of Lake Sobradinho
(and probably also Lake Itaparica in the future) appears to have led to
increasing land concentration in the hands of capitalized outsiders, who have
been able to purchase plots from struggling small producers unable to continue
farming activities under these new conditions. 13 The projects have, thus, set
in motion trends beyond their control which are likely to have strong social,
as well as economic, implications over the long run.
7.22        An important, but frequently neglected, dimension of project human
environmental impacts concerns the nature of the relations between the executing
agencies, CHESF and CODEVASF in the present instance, and the local population.
In this respect, a major sour point of the operations under review has been the
well-documented confrontational stance between these institutions and the
impacted groups that characterized all three experiences.    Due both to the
authoritarian macro-political climate in Brazil during the 1970's and early
1980's and the low priority given to resettlement planning which resulted in poor
project design and implementation, relations between the two executing agencies
and the affected populations were strongly marred. The area around Sobradinho
and the lower valley were both the scene of long and acrimonious disputes between
CHESF and CODEVASF, on the one hand, and the populations threatened with summary
eviction, on the other. At Itaparica also, POLOSINDICAL fought during eIht
years to force changes in CHESF's resettlement strategy and win adequate
compensatory benefits for those affected, especially among the rural population.
7.23        Whatever has happened in the past, however, the conflict-ridden
history of interaction between official agencies and local populations in the
middle and lower Sao Francisco valley has implications for current development
challenges in the region. These soured relations have polarized public opinion
and made existing negotiations (at Itaparica, for example) more problematic, the
" Since the land is no longer naturally irrigated by the river, these new
circumstances require farmers to invest heavily in irrigation equipment, while
the poorer soils (away from the old river margins) mean that recurrent costs for
inputs have also increased substantially. Without the necessary funds, many have
little choice but to sell out when an opportunity arises and to attempt to earn
their livelihoods elsewhere, either in the city or as farm laborers with all the
implications that this has for incomes, food security and other aspects of social
welfare.


122
seeds of mutual distrust having been sown over the past two decades. The failure
of the projects surveyed in this report to deal satisfactorily with this
dimension is, thus, potentially a major limiting factor on future project success
to the extent, for example, that it may undermine the effective establishment
of production, operation and maintenance systems on the Itaparica irrigation
subprojects.  It could also jeopardize future hydropower development in the
region.
D. Lessons From the Sao Francisco Valley Experiences
1. Paulo Afonso IV/Sobradinho Prolect
7.24        The Sobradinho experience provides all the institutions involved in
its planning and implementation with valuable lessons on the potential pitfalls
to be avoided in projects of this kind, as well as with respect to how to carry
out more environmentally (ie. socially and ecologically) sound resettlement
programs. At the same time, while, with the benefit of hindsight, it is possible
to draw such conclusions, it should also be clearly borne in mind that Sobradinho
must be seen within the particular economic, political and institutional context
of Brazil during the 1970's. 1 Furthermore, as already discussed above, more
recent Bank policy guidelines on involuntary resettlement have addressed many
of the issues raised in this report. Nonetheless, valuable lessons were learned
from Sobradinho 15 in the following areas:
1  In its comments on the draft -f this report, DNPA/MEFP observes that
"the relative failure of [resettlement at Sobradinho] was due to the historic
neglect of marginal populations in Brazil in terms of formulating more adequate
agricultural policies and providing improved economic and social support
services. In this connection, water supply problems at Serra do Ramalho...were
responsible for how many (Sobradinho resettlees] abandoning the project?
However, the Brazilian Government and INCRA in particular should be given credit
for offering the alternative of Serra do Ramalho where excellent soils were
available, rainfed agricultural was possible, and there was important regional
infrastructure and land of high economic value. On the other hand, notorious
difficulties exist in the country in terms of providing cheap resources to more
than 3 million needy small farmers, which the authors of the report should
highlight in so insistently criticizing the lack of credit for smallholders."
15 In commenting on the preliminary report, DNPA/MEFP observes that the
analysis should have further explored two important phenomena which contain rich
lessonst "the reemergence of the relocated towns around the lake as new
commercial and service centers, which represents a real alternative for the
reconstitution of economic activity9...(and) the migration [to the area] which
is occuring due to the attraction of the agroindustrial pole at Petrolinal
Juazeiro. Both of these phenomena reveal that, in the approach to the issues
of dislocated populations, a broader prospective vision was lacking, [as was]
consideration of alternatives other than agriculural resettlement, which could
have avoided great sacrifices on the part of the communities affected by the
hydroelectric investments."


123
(a) Loan Negotiation and Conditionalities
7.25        From the beginning of the project cycle, the Bank, in practice, paid
insufficient attention to the question of resettlement.      During the loan
negotiation stage, for example, no satisfactory program for relocating displacees
was established. Moreover, the Bank seems to have adopted an unduly flexible
line with CHESF and the Brazilian Government in terms of loan conditionalities
for environmental and resettlement issues. As expressed in a Decision Memorandum
of January 1974, these components were to be submitted to the Bank for "review
and comment" only, rather than to the Bank's "satisfaction". 16 A stronger Bank
response at this critical juncture might have elicited a more comprehensive and
effective relocation plan from CHESF and the Brazilian Government. The Bank was
overly optimistic in its apparent belief that the mere inclusion of covenants
for resettlement would ensure the adequate preparation and implementation of
comprehensive relocation plans. Nevertheless, the Sobradinho experience did make
a direct, and ultimately positive, contribution to the formulation of current
Bank policy on resettlement. 1
(b) Bank Appraisal and Supervision Procedures
7.26        As far as the Bank's role is concerned, a number of critical factors
led to the complex issue of resettlement at Sobradinho receiving incomplete
consideration during project appraisal.  The Bank assumed responsibility for
supervision of the Sobradinho rural resettlement, while IDB took charge of the
urban component.   There was a lack of suitable staff within the LAC Energy
Division, which was clearly not equipped to supervise resettlement. Support was,
therefore, requested from the Agriculture Projects Division responsible for
Brazil. This division, however, had not participated in the earlier preparation
or appraisal of the resettlement program.    Moreover, the first mission to
supervise the rural component was sent only in May 1975, almost a year after the
signing of the Loan Agreement. It was only at this stage that severe planning
deficiencies were identified -- for example, the relative failure of the Serra
do Ramalho colonization scheme and the higher than expected number of farmers
who chose to remain at the lakeside -- and the full implications of the Bank's
involvement in the project became apparent.
16   At a decision meeting to review resettlement and environmental
mitigation preparations on January 14, 1974, it was concluded that the Bank
should not accept full responsibility for the soundness of the plans, as implied
in the draft document in which it was recommended that CHESF and the Brazilian
Government submit proposals to the Bank's "satisfaction".   Consequently, the
wording was changed so that the final loan document of June 17, 1974 required
only that such plans be submitted for the Bank's "comments" (Loan Agreement
Section 3.08).
15 Observations by the Bank's central Agricultural Projects Division made
during execution of Sobradinho during 1978 were used to formulate draft policy
guidelines, which were widely discussed internally, sensitizing staff and
alerting them to the problems encountered. In view of the seriousness of the
issues raised, these guidelines were adopted and issued in 1980 as an OMS (op.
cit.).


124
7.27        For a project with such massive repercussions on the region, the
Bank's appraisal report pays scant attention to the potentially adverse social
impacts of Sobradinho. While a consultant's recommendations regarding the need
for* environmental safeguards are acknowledged in the report, a      the full
implications of the undertaking for the urban and rural populations are dealt
with too superficially.      There is a notable lack     of sociological or
anthropological inputs at this critical stage. This observation also applies,
it should be added, to the numerous supervision missions which took place between
1975 and 1978. Due in part to miscalculations of the scale and nature of the
resettlement, effort, the cost of the Sobradinho dam and relocation increased
from US$ 177 million to US$ 371 million in constant prices. 1
7.28        The Bank's limited impact on the design of the Sobradinho
resettlement program is due also to its late participation in the project more
generally, whose implementation had already begun when the Bank and the IDB
appraised the operation in 1973. The timing of the Bank's involvement probably
served to reduce any leverage that it might have otherwise have had to influence
project outcomes. After 1975, supervision missions, of which there were seven
by 1978, increased in frequency, together with their critical appreciation of
what was happening on the ground. Many sound and valuable recommendations were
made at the time by these missions regarding the need for longer-term farming
and fishing activities and criticisms were made of CHESF's handling of the
situation. However, since the Bank lacked leverage at this stage, the executing
agencies do not appear to have taken this advice as seriously as they might have
done earlier in the process.
(c) CHESF's Policy Priorities and Institutional Capacity
7.29        Effecti-ae resettlement planning in the case of Sobradinho was
likewise severely himpered by the fact that, at a time of rising oil prices,
CHESF was under increasing pressure to give priority to power generation over
all other considerations.   The macroeconomic climate, together with CHESF's
internal engineering bias, meant that resettlement was erroneously perceived as
a secondary issue and, thus, received a substantially lower priority than the
agency's overriding energy production goals. It was thought that these complex
social issues could be easily resolved through a certain, but ultimately
insufficient, measure of planned intervention, coupled with a firm hand.
Technically, therefore, CHESF did not properly equip itself to deal with
resettlement on the scale necessary.  On the operational side, the agreement
between CHESF and INCRA was insufficient to assure proper institutional
coordination and an adequate response to the needs of displacees, either in the
short or the longer term.
'6 Goodland, op. cit.
17 OED Report No. 6578, op. cit., PCR.
16     Interestingly, as pointed out in Chapter IV above, Robert Goodland's
ex-ante environmental reconnaissance study (op. cit.) had stressed the need for
a comprehensive and well-coordinated resettlement strategy at Sobradinho which


125
(d) Compensation
7.30        Indemnification procedures for the rural population did not, in a
large number of cases, adequately compensate those displaced for their loss of
livelihood arising directly from the project.     This involved the loss of
farmlands which had been cultivated, if not legally owned de Jure, for several
generations by large numbers of smallholders and other peasant farmers. Loss
of other productive assets built up over long periods of time, while nominally
compensated at market values, was often found to be irreparable in practice.
Furthermore, intangible socio-cultural assets such as community structure,
cohesiveness and support networks were severely affected, without due attention
given to the granting of appropriate compensation or, more importantly, the
setting up alternative community support mechanisms.
(e) Comprehensive Rural Development
7.31        The harsh impact of limited compensation procedures was exacerbated
by the failure to provide sufficiently for longer term development. There is
considerable evidence to indicate that, on balance, much of the rural population
displaced from the Sobradinho reservoir area is materially worse off than
beforehand, in addition to which many suffered severe trauma and psychological
stress.  In some measure, this negative outcome is due to poor planning and
insensitive handling of the actual population transfer. However, it is also
attributable to a basic misconception, namely that the whole relocation exercise
should be conceived as an emergency welfare or relief measure rather than as part
of a longer-term rural development strategy.
7.32        From the outset, CHESF was essentially geared to providing short-term
relief and minimizing resettlement costs and broader socio-economic involvement.
The apparent indifference shown by CHESF and other government bodies to the
plight of rural displacees is reflected in several ways including: (i) the
failure to provide essential social and economic infrastructure in the lakeside
agrovilas, still evident in 1989, over a decade later; (ii) INCRA's inability
to make Serra do Ramalho an economically viable proposition for small farmers;
and (iii) the failure, despite firm Bank advice, to develop a comprehensive
fisheries management plan for the lake, which could have provided employment
and helped avoid predatory and ecologically damaging activities.
7.33       Perhaps the most glaring omission in this connection, however, given
the heavy investment in large-scale public and private irrigation which took
place at the time or shortly thereafter and continues to expand in the area was
the failure by the Government to systematically develop small-scale irrigated
agriculture along the lake margins or elsewhere to specifically benefit rural
displacees. The absence of an adequate integrated rural development program goes
much of the way toward explaining the lakeside population's current vulnerability
would have incorporated a larger number of government agencies in order to deal
with the complex economic and social problems likely to arise. For the most
part, however, this recommendation appears to have been ignored by both CHESF
and the Bank.


126
and its continuing dissatisfaction with CHESF. 19 In contrast, the resettled
urban population has fared much better and, not surprisingly, is relatively
pleased with the outc.me.
(f) Local Participation
7.34        Sobradinho is a classical, almost stereotypical, example of a
"top-down" or "blueprint" approach to involuntary resettlement.    All major
decisions were taken by government agencies such as CHESP and INCRA cr by outside
engineering firms. Although opinion surveys about site preferences were carried
out at the time of the initial planning, no institutional mechanism was
introduced for systematically consulting the local population as part of the
decision-making process. On the contrary, official policy appears to have been
one of releasing only minimal information about what was happening and ultimately
presenting the affected population with a fait accompli. Lack of information,
misinformation and the use of heavy-handed tactics by CHESF and its contractors
put the local population on the defensive and led to instances of physical
resistance. The lack of communication, especially during the early phases of
the Sobradinho undertaking, appears to have been instrumental in generating a
climate of fear and mistrust both toward CHESP and, to a not inconsiderable
extent, toward the Bank as well.
7.35        In the absence of active trade union or grass roots movements at a
time of strong political repression in Brazil, it was left to local opinion
leaders such as the Church to take up the cause of the impacted population. Only
in this way and through negative media coverage and protest letters to key
institutions including the Bank did news of the situation in Sobradinho acquire
wider circulation. It must also be observed in this context that, judging from
back-to-office reports, the numerous Bank supervision missions to Sobradinho seem
to have failed to pick up the true extent of local dissatisfaction with CHESF's
intervention. The Bank became more fully aware of what was happening somewhat
late in the resettlement process.   During an interview with the OED/SEPLAN
mission in August 1989, for example, the well-informed and active Bishop of
Juazeiro, Dom Jose Rodrigues de Souza, stated that, at no time after his arrival
in the area in February 1975, did any Bank mission attempt to contact him for
clarification or advice about events there. The use of social expertise, while
no panacea, would, nevertheless, have assisted the Bank in making a fuller
assessment of the evolving situation.
(g) Ecological Hazards
7.36        From an ecological perspective, Sobradinho has demonstrated that,
unless properly controlled, pollution by agrotoxic substances and human effluents
can present serious long-term problems in large-scale hydropower and associated
irrigation development contexts. It is also important to ensure that fishing
activities are carefully monitored and controlled in order to avoid the depletion
19 Once again, Goodland (op. cit., pg. 20) clearly suggested in 1973 that
relocation of Sobradinho's displaced population should be integrated with wider
economic and regional development plans "emphasizing irrigation and fish
production."


127
of stocks and possible contamination through the use of agrotoxics for fish
preservation after the catch. Sobradinho has also shown that high water lose
through evaporation and the rapid proliferation of irrigated agriculture may
accentuate potential conflicting demand among competing consumers (hydropower,
irrigation, domestic and industrial) over the long run. This could have adverse
consequences for both the local and regional economies, possibly leading to the
formation of growth bottlenecks in the Sao Francisco valley.
2. Lower Sao Francisco Polders and Irrigation Prolects
7.37        In common with CHESF's operations at Sobradinho, CODEVASF's approach
in the lower valley teaches salutary lessons in relation to undesirable human
and physical environmental outcomes which similar future projects should take
into account.   Again, experience in the lower Sao Francisco valley, as at
Sobradinho, should be viewed in the larger context of an authoritarian public
sector in Brazil during the 1970's and early 1980's which precluded direct
popular participation in the design and execution even of "emergency" projects.
However, with the subsequent change to a Qore open and democratic political
process in Brazil, the experience has important implications for comparable
future interventions.
(a) CODEVASF's Policies and Implementation Procedures
7.38       SF I and II were intended as "emergency" projects, designed to help
resolve the problem of permanent flooding in the lower valley caused by
Sobradinho's success in regulating river flow. They were thus conceived within
a spirit of protecting the substantial population of riverine farmers through
a program of flood prevention and systematic small farmer irrigation development
on a number of traditional varzeas which were to be transformed into polders and
whose lands were to be expropriated and redistributed. This spirit is well-
captured in the Bank's appraisal report for SF I which refers to these schemes
as constituting an "agrarian reform to help ensure that project benefits would
be shared equitably." 20 Reference is also made to the fact that such public
irrigation operations perform essentially a "social" function rather than being
commercially inspired. The Brazilian Government's official position was that
such schemes were designed primarily to benefit sharecroppers and other small
farmers whose traditional riverine farming activities had been adversely affected
by Sobradinho. 2
7.39       While some measure of success has been achieved in attaining these
objectives, it is, nevertheless, clear that a major contradiction exists between
the stated aims and the results of these projects.      As has already been
mentioned, far from permitting total reabsorption of the displaced population
(some 50,000 people altogether), SF I and II resulted in substantial
out-migration from the area. Although precise figures are not available, it is
quite possible that the net population lose may have exceeded 30,000 people.
20 Report No. 714a-BR, op. cit., pg. i.
21 CODEVASF, CODEVASF 1985-88, op. cit., 1989, and OED Report No. 8158, op.
cit.


128
This is attributable to many factors including: (i) the heavy-handed nature of
forced displacement in the lower valley; (ii) the long delay in project
execution; (iii) CODEVASF's highly selective recruitment procedures; (iv) the
very design of the irrigation schemes themselves, which were incapable of
accommodating labor on the land at previous levels of intensity; and, (v) non-
project factors including serious flooding of the Sao Francisco River and the
very rapid expansion of sugar cane production in parts of the area.
7.40       A first important lesson of the lower valley experience is,
therefore, that "emergency" projects conceived in such circumstances by no means
guarantee that the executing agency will either choose or be able to deal
comprehensively with the resettlement dimension and, thas,'adequately cater to
the needs of all those affected.   Second, and as a corollary to the above,
CODEVASF's previous experience lay primarily in the design and executi-n of
relatively small irrigation schemes. Accordingly, it was ill-equipped to deal
with the large-scale human resettlement required in the lower Sao Francisco.
It can, thus, legitimately be argued that it was unrealistic to expect CODEVASF
to perform this role, just as CHESF was similarly handicapped at Sobradinho, and
that alternative or complementary organizational arrangements should have been
contemplated to assist the irrigation agency in its task.
(b) Bank Appraisal Procedures
7.41        Given that the lower valley polders and irrigation schemes were
viewed as a solution to economic and social problems resulting from Sobradinho,
it is surprising that the Bank itself does not acknowledge this large not
population displacement in the lower valley.   Frequent reference is made in
project documents to the numbers of people who would be absorbed by the new
schemes, as well as to the Bank's concern that resettlement and/or compensation
provisions should be comprehensive. as However, neither CODEVASF, nor the Bank
appears to have taken full account of those who, for a variety of reasons, could
not be thus employed. In late 1977 and early 1978, a Bank consultant spelled
out in detail some of the then current and impending social conflicts in the
area, as well as CODEVASF's lack of any coherent strategy for dealing with
resettlement. 2 Shortly thereafter, a staff member of the Bank's (then) Office
of Environmental and Health Affairs reported his concern about health and
resettlement problems. 2 However, these issues are underplayed by the Bank's
22 For example, section 3.05 of the Loan Agreement, dated August 4, 1975,
states that the Borrower "shall furnish plane acceptable to the Bank for
resettling farmers in the Project Area who shall be adversely affected by the
construction of hydroelectric installations upstream on the Sao Francisco River
and who shall not benefit from the facilities under Part A of the Project."
23 R. Moreno, "Consultant's Report for the Pre-Appraisal Mission for SF 11
Irrigation Project," December 29, 1977, and "Lower Sao Francisco Irrigation
Project: Conflicts in the Lower Sao Francisco Valley," January 16, 1978.
24  In memoranda dated March 1 and May 24, 1978, this staff member
specifically expresses concern about the exclusion of a health component and
comments on CODEVASF's lack of community workers to deal with social problems.


129
appraisal reports for SF I and II and both seem to implicitly assume that the
amount of direct and (especially) indirect employment expected to be created by
the projects would be sufficient to deal with the phenomenon of negative net
displacement. This shortcoming is particularly serious in the case of SF II,
which was appraised in 1978 at a time when the difficult social and economic
conditions created by SF I had become quite evident.
7.42        Somewhat belatedly, the human environmental repercussions of SF I
are acknowledged in the PPAR, which raises questions about the "impact of the
project and the possibilities of exacerbating local tensions due to massive
dislocation of people." 25  However, neither this document, nor -Lhe project
completion report upon which it is based mention the actual scale of the problem,
largely restricting their comments to CODEVASF's "limited understanding" of
social issues and the problems with managing farmer settlement.    Little or
nothing is said, in short, about the fate of those who were not resettled.
7.43        Even the project completion report for SF II, having the advantage
of an additional decade of accumulated experience, as well as more up-to-date
information on project impacts, fails to document this major problem. Although
the PCR certainly acknowledges some degree of social attrition and the
confrontation between CODEVASF and the local population, on the basis of current
evidence, it is unjustified in asserting that "CODEVASF handled with success
the difficult social situation which prevailed in the project area during the
implementation of the project" and that tensions "disappeared once the irrigation
works were completed and irrigation farmers were settled." 26      The PCR's
attention is concentrated on the internal organization and economic performance
of the polder irrigation projects, while the issue of net population displacement
and its repercussions both within the immediate area and farther afield is not
mentioned. As stated above, SF Il was implemented after the issuing of the
Bank's 1980 OMS on involuntary resettlement and some corrective action could have
been taken even at this relatively late stage.
7.44        As far as the Bank's role at the appraisal stage is concerned,
therefore, two major lessons emerge from the lower Sao Francisco experience.
First, the Bank was ill-equipped to be able to satisfactorily appraise the full
physical and, particularly, human environmental repercussions of the polders and
irrigation schemes. This was compounded by the absence of Bank policy guidelines
to direct actions at the field level. n Social issues were not treated with the
detailed attention demanded by the complexity and potential gravity of the
situation and this has had negative consequences whose repercussions are still
25 OED Report No. 5569, PPAR, op. cit., pg. v.
2" OED Report No. 8158, op. cit., pp. 11, 13.
2? Since June 1990, mortiover, the Bank has had a policy (OD 4.30, para. 16)
requiring compensation for landless families involuntarily displaced by the
projects receiving its support, a provision that was not present in the original
Bank resettlement guidelines adopted in 1980.


130
evident in the region. Second, the Bank's implicit or explicit acceptance of
CODEVASF's assurances that the new Irrigation projects would fully absorb the
displaced population was unwarranted. Proper investigation of these dimensions
would have revealed this flaw and allowed more adequate compensatory measures
to be designed.
(c) Implementation and Supervision of Irrigation Plojects
7.45        It seems apparent that insufficient attention was paid by CODEVASP
and the Bank to complex issues of farmer settlement in the irrigation schemes.
Although.modifications to established procedures were suggested by Bank staff,
progress in their implementation was frequently slow. This also raises serious
doubts about the long-run technical and economic feasibility of these schemes,
especially if CODEVASF relinquishes direct support and obliges them to become
totally independent enterprises. The indiscriminate and sometimes violent way
in which CODEVASF handled the land acquisition phase of SF I and 11 has been well
documented. The climate of fear and apprehension thus induced among the poor
majority of displa3ees in the lower valley, moreover, does not augur well for
future relations between CODEVASF and the local population, which continue to
be characterized by a large element of mutual distrust.
7.46        The "blueprint" approach 2a adopted by CODEVASF is also reflected
in the subsequent implementation of the polder irrigation projects. Research
has shown that the public irrigation model in Northeast Brazil has traditionally
been marked by a high degree of authoritarianism and paternalism. 't This fact,
together with the poor economic performance of the schemes thus far, has led to
some farmer turnover and the beginnings of land concentration in some project
areas, as less successful farmers are squeezed out.    Another indication of
colonisto' reticence to subject themselves to the CODEVASF regime lies in the
fact that a large proportion of producers have chosen not to join the respective
official cooperatives, a decision presumably based on a perception of where
their best interests lie.
7.47        Unlike the situation at Sobradinho, where the Bank's potential
leverage was constrained by its late entry into the Paulo Afonso IV Project, In
the lower valley a clear opportunity existed for the Bank to insist that benefits
be more equitably distributed to the displaced population and, thus, to minimize
social and economic upheaval. However, this opportunity appears to have been
largely foregone.   While careful Bank monitoring did positively influence
irrigation farmer recruitment criteria and other technical aspects of the
projects, the basi* social Issues were not confronted. Part of the explanation
may be found in thu low priority given to social planning during appraisal and
supervision and the relative absence of social and environmental analysis.
However, its persistence during execution and even after project completion
suggests that these gaps are symptomatic of more complex causal factors. These
are closely bound up with a possible lack of institutional commitment on the
28 Dennis Rondinelli, Development Projects as Policy Exoeriments, Methuen,
1983.
"  Anthony Hall, Drought and Irrigation in North-East Brazil, op cit.


131
Bank's part to addressing the resettlement issue in as full and comprehensive
a way as possible at the time when project appraisal and loan approval took
place.
7.48        With regard to project implementation and supervision, therefore,
the principal lesson to be grasped is that the Bank must not only be adequately
equipped in manpower terms to tackle difficult and sensitive social and
environmental issues but that, in addition, it must be institutionally committed
to exerting leverage at critical junctures to ensure that potentially negative
impacts on vulnerable populations, such as those residing in the lower Sao
Francisco valley, are averted or minimized.     In this particular case, for
example, a strategic Bank intervention during the implementation stage might
have led to introduction of a fairer and more comprehensive compensation strategy
for sharecroppers and untitled smallholders. Provision could also have been made
for resettling the large surplus rural population that could not be accommodated
in the new irrigation schemes in the lower valley in similar projects elsewhere,
as is currently being done in the case of Itaparica, even if this meant involving
other government agencies and additional Bank funding for a more all-embracing
resettlement strategy.
(d) Local Participation
7.49        The now self-confessed occasionally insensitive nature of CODEVASF's
actions in the lower Sao Francisco during the late 1970's and early 1980's were
largely responsible for the ensuing social tensions in the region.    A more
constructive approach would have been for the agency to have established
mechanisms for creating an effective dialogue with the local communities over
the timing, scale and nature of CODEVASF's plans.    Somewhat paralleling the
experience at Sobradinho, it was, to a large extent, pressure from the local
Church which succeeded in drawing public attention to the social repercussions
of SF I and II and obliged CODEVASF to incorporate short-term relief measures.
The polders and lower Sao Francisco irrigation projects, both in the earlier
execution and later production stages, thus, Illustrate the potentially negative
repercussions of failing to consult impacted groups and project beneficiaries.
An important lesson, therefore, is that all such schemes should include
institutionalized mechanisms for conferring with the local population as a means
of helping to avoid such problems in the future.
(e) Ecological Issues
7.50        The economic performance of the lower Sao Francisco irrigation
schemes reaffirms the problem of declining soil fertility due to the retention
of alluvium by Lake Sobradinho. This has led to a substantial increase in the
application of fertilizers in order to maintain declining yields and production
levels.   It has also been demonstrated that monocrop rice cultivation has
increased vulnerability to pests and plant diseases, requiring applications of
agrotoxics, which has led to growing risks of water contamination and a potential
public health hazard. A further lesson is that poor organi7ation and management
of basic project infrastructure may lead to problems of poor drainage and the
exacerbation of already serious salinization caused by physical factors
associated with the geology of the region and high evaporation rates.


132
3. Itaparica Resettlement and Irrigation Prolect
7.51        With important lessons having been learned as a result of experiences
at Sobradinho and, to some extent, in the lower Sao Francisco valley, Itaparica
represents a pioneering advance. Notably, it is the first such scheme in Brazil
to plan both for the physical relocation and the socio-economic reestablishment
of the entire displaced population, providing a range of options for those
directly affected and emphasizing the longer-term economic security of rural
relocatees within a program of irrigated agriculture. so Notwithstanding this
major progress, however, both CHESF and the Bank can derive useful lessons from
this on-going program, as follows:
(a) CHESF and Resettlement Planning
7.52        Although a resettlement plan was designed and implemented for those
displaced by the Itaparica dam and reservoir, its relative success so far and,
indeed, its very existence are due largely to sustained pressure upon CHESF by
POLOSINDICAL and the local population more generally. Despite the traumatic and
widely publicized events at Sobradinho in the mid and late-1970's, in the early
1980's, CHESF did not appear to have profited from this experience. In other
words, CHESF did not, of its own volition, plan for comprehensive relocation at
Itaparica, but did so only under duress.    Had there been no such pressure
applied, it is likely that Itaparica would have witnessed a repetition of events
at Sobradinho.
7.53        Given CHESF's initial lack of preparation for handling large-scale
resettlement, the project's achievements thus far are a tribute to those within
the agency who have dedicated themselves to resolving resettlement problems.
Nevertheless, CHESF is still characterized by a strong engineering bias which
so In its observations on the preliminary draft of this document, DNPA/MEFP
argues that, in view of the very high costs of resettlement at Itaparica, "the
report does not warn of the impropriety of continuing to blindly invest resources
in such projects, nor of the economic and social consequences of the
'assistencialist' scheme in effect, which was conceived for the short term, but
is likely to perpetuate itself, whether in the form of direct subsidies (which
are perverse as presently practiced) or heavy subsidies to production. What is
missing in the report are proposals to radically reformulate the concept
implemented at Itaparica. It is important that project resources be immediately
reoriented to make viable a broader intervention to reactivate the microregional
economy (not exclusively agriculture) and provide training to permit
reintegration of the affected population into the labor market. With respect
to irrigation, investments should be reprogrammed so as to rapidly conclude
several  smaller-scale   projects  and   immediately  implement  agricultural
activities....[P]art of the investments should be redirected to make other
employment alternatives viable." Elsewhere DNPA notes that "the report commits
a grave sin in not analyzing the economic-financial perspectives of Itaparica
resettlement, [thereby] further contributing to the maintenance of an extremely
undesirable status quo with predictable consequences: the waste of scarce
resources poorly applied in one of the poorest regions of the world and the
exodus and marginalization of the least favored populations of the region."


133
tends to result in the marginalization of resettlement planning. The fact that
mass popular pressure was needed to ensure that a comprehensive relocation
strategy was elaborated suggests that there may still be a need for institutional
restructuring within CHESF to increase the relative priority given to
resettlement in the process of hydropower development in Northeast Brazil.
(b) Local Participation
7.54        The central role played by POLOSINDICAL throughout the Itaparica
experience suggests that social issues may only be adequately and fully addressed
in project situations where a strong process of local community participation
exists. Accordingly, from the course of events at Itaparica, it appeats that
a degree of "bottom-upn pressure, guaranteeing an active dialogue between
executing agencies and representative organizations, may be a necessary
prerequisite for successful planning. 31 CHESF's secretive stance in the early
1980's and its general reluctance to consult the local population resulted in
unnecessary delays and cost overruns, while creating a climate of mutual
antagonism. The actions of POLOSINDICAL, in turn, have become so influential
that they not only have helped to determine the outcome at Itaparica, but are
likely to exert a strong influence on all future hydropower development in the
Sao Francisco valley.
7.55        In the case of hydroelectric schemes, 4ommunity participation is
important not just during the expropriation and population transfer phases, but
also for the process of establishing viable new communities and productive
P-':ivities suited to people's needs. Although the trade union consortium did
manage to acquire a say in some major decisions, it did not take part in basic
project design. The poor performance of fish-farms at Itaparica and doubts about
the technical and economic feasibility of the new irrigation schemes suggest,
however, that, in such cases, more effective local participation could facilitate
project sustainability. By avoiding unnecessary mistakes in project design and
execution, a process which could be assisted through prior consultation with
affected populations, experience shows that implementation costs could also be
reduced. Many of the current social problems in the aovilas for instance,
might also have been avoided had such cooperation been actively sought by CHESF
from the outset.
3   In its observations on the preliminary draft of this report, CHESF
acknowledges that "organized social pressures (which were almost non-existent
at Sobradinho and very expressive at Itaparica) created a favorable climate to
improve planned actions to carry out resettlement." CHESF also points out that,
due to their complexity, resettlement activities require differentiated treatment
from conventional public sector irrigation and colonization projects so as to
permit relocated populations to adjust to their new circumstances. This process
is necessarily a slow one and is likely to be most effective when there is
systematic negotiation between the affected communities and the agencies involved
in relation to the conditions under which resettlement will take place and the
targets to be achieved.    This also implies the need to avoid "emergency"
situations where both the social and financial costs of relocation are likely
to be high.


134
(c) Bank Appraisal of Sectoral Loans
7.56        The Bank too can learn critical lessons from Itaparica.     While
justifiably held up as a major advance on past experiences, especially in Brazil,
legitimate criticisms can be advanced of the Bank's role. Although the Bank took
rapid steps to provide necessary technical assistance and funding once the
potential impacts of Itaparica became apparent and its support was requested by
CHESF, this corrective action, nevertheless, came rather late.      The human
environmental implications of Itaparica were officially revealed only in 1985
when the Bank began preparing a power sector loan. However, the tumultuous
situation in the Sao Francisco valley at Petrolandia had been known to Bank staff
well before 1985, through the media, through personal contacts in the area and
via NGO representations.   The Bank was asked by CHESF to provide emergency
financial assistance in mid-1986 when the dam was already 80% built and a tight
deadline had already been established for its completion in view of pressing
regional energy requirements.
7.57       Due to its late entry, the Bank was once again handicapped in its
ability to influence basic project design.    Although the Bank was able to
exercise some choice over site selection for the irrigation subprojects and on
details such as the requirement that domestic water supplies be installed, it
had no voice in the choice of the irrigation model.   This continues to be a
source of preoccupation in terms of the scheme's longer-run technical and
economic feasibility. While the Bank was undoubtedly correct, in view of the
wider social repercussions, to go ahead with its funding despite these
reservations, this has, nonetheless, placed severe constraints on the Bank's
ability to modify the pattern of intervention. The knowledge held informally
by Bank staff members concerning the confrontational situation between CHESF and
the local population at Itaparica should have been acted upon during the very
earliest discussions about the Bank's possible participation in the 1986 power
sector loan, ie. well before 1985.    This would have put the Bank in a far
stronger position to influence the outcome at Itaparica.
(d) Ecological Aspects
7.58        The experience thus far at Itaparica shows that, in spite of
persistent problems already outlined, with proper planning it is possible to take
preventive measures to ameliorate potentially adverse ecological impacts.
Operation Saci to rescue terrestrial fauna, as well as the various other
environmental protection programs elaborated by CHESF embracing physical,
biological and cultural dimensions, are testimony to this fact. However, it is
also clear that continued monitoring of these aspects is necessary, especially
in view of the planned expansion of irrigated agriculture around the lake which
is likely to involve the intensive use of chemical fertilizers, pesticides and
herbicides that, judging from evidence at Sobradinho and elsewhere, could have
serious repercussions both on local ecosystems and the human population.


135
E. Implications for Future Bank Projects
1. In the Sao Francisco Valley
(a) Sensitivity to Environmental Issues
7.59        Future Bank projects in the Sao Francisco valley must incorporate
a greater sensitivity to human and physical environmental factors. 32 This is
of crucial importance from several standpoints. First, the Bank must be seen
to match its officially stated concern for social and ecological priorities with
concrete measures to effectively tackle these dimensions. This is essential
for reasons of both project efficiency and social justice.   Furthermore, the
establishment and enforcement of such priorities would help to maintain the
Bank's credibility as an environmentally conscious institution.   Second, the
incomplete procedures adopted by the Bank at Sobradinho and in the lower Sao
Francisco emergency projects have resulted in heavy social costs. These are not
only unacceptable on the grounds of social equity, but are also detrimental in
financial terms due to the delays and cost overruns which subsequently resulted.
These issues have been addressed more adequately at Itaparica than in earlier
operations, but such concerns should be continually present in the on-going Bank-
supported development of the Sao Francisco valley.
(b) Local Participation
7.60        The emergence of a strong local community movement at Itaparica
through the trade union consortium signifies a new phase in the preparation and
implementation of hydropower and public irrigation projects in the Sao Francisco
valley.   It has, in effect, set a major precedent for future interventions
involving large-scale population displacements in the region. The perceptions
and resettlement strategies of executing agencies such as CHESF and CODEVASF must
now fully incorporate the concept of local participation in the design and
execution (indeed, in the whole cycle) of comprehensive development projects and
programs. 3  The Bank, with its strong policy initiatives in this field, will
also be in a stronger position to assist such agencies in preparing suitably
designed interventions and providing appropriate funding.
32 In its observations on the previous version of this report, CODEVASF
highlighted the need for future economic infrastructure projects in the region
to include adequate environmental protection measures and for the corresponding
costs to be defined, analyzed and financed as an integral part of these
investments.
3  In its observations on the previous version of this report, DNPA/MEFP
reaches a similar conclusion: "resettlement actions, which should always be
minimized, should be the object of broad participation on the part of the
communities involved, while the 'simplism' of bureaucratic solutions, which
generally result in excessive social costs, should be fought against."


136
(c) Water Resource Planning and Management
7.61        At present, the Sao Francisco River is able to cope with the multiple
demands made upon it for energy generation, irrigated agriculture and urban
domestic and industrial use. However, growing competition among these users,
coupled with further losses through evaporation as additional reservoirs are
created, are likely to make river water an increasingly scarce resource in the
future, a problem which is exacerbated in the short term by Pbnormally low
rainfall (as between 1985-89). Hence, there is an urgent need for a permanent
process of cross-sectoral water resource use planning and management for the Sao
Francisco valley. This will require direct interministerial intervention at the
federal government level and could, perhaps, take the form of a renewed and
strengthened PLANVASF.  This would, it is hoped, permit a greater degree of
control to be exercised with respect to future growth in regional demand for
water, allowing the balanced development of urban and rural activities within
the resource capacity of the valley.
2. For Large Hydropower Projects in General
(a) Power Sector Loans
7.62        Many of the problems discussed in this report were due at least in
part to the Bank's late participation in designing appropriate interventions to
address environmental problems, such as the need for comprehensive resettlement
arising from hydropower development.   Although a broader sectoral approach
increases Bank leverage at the sectoral level, there is also a risk that
individual projects carried out by sectoral agencies may not be scrutinized with
the same rigor as those financed by specific investment operations. Thue, the
Bank should endeavor to assess as early as possible individual hydropower
projects whose planning and/or implementation may be financed through power
sector loans.   This would help ensure that physical and human environmental
issues are analyzed in a timely fashion at the earliest stage in the project
cycle and that appropriate corrective measures can be designed in consultation
with the executing agency and affected populations in question.    Otherwise,
the Bank risks being called in on a purely emergency basis which imposes severe
constraints on its ability to influence basic project design, as has been seen
at Sobradinho, in the lower valley and even at Itaparica, and has implications
for the social, economic and environmental suetainability of sectoral
investments.
7.63        More generally,   environmental planning and impact assessment
mechanisms and procedures should be put into place at the sectoral level. This
process, in fact, was successfully initiated in Brazil in connection with the
Bank's power sector loan (No. 2720-BR) through the establishment of Environmental
Departments at ELETROBRAS and in each of its regional subsidiaries, including
CHESF, in the mid-1980's.    A manual for identifying and dealing with the
34 This point is developed in G. Edward Schuh, Guy le Moigne, Michael
Cernea and Robert Goodland, "Social and Environmental Impacts of Damse the World
Bank Experience," Commission Internationale des Grandes Barrages, San Francisco,
1988.


137
potential environmental and social consequences of hydroelectric projects was
subsequently prepared by ELETROBRAS and a series of specific studies to assess
the physical and human environmental impacts of past and on-going developments,
including the Sobradinho and Itaparica hydropower projects, have been, or are
currently in the process of being, carried out by consultants. 3 Under existing
federal legislation, moreover, all major new hydroelectric (including both
generation and transmission) projects must present environmental impact
assessments (RIMAs) to the appropriate state and/or federal environmental
authorities in order to obtain the licenses required for construction and
subsequent operation. 3 The Bank should encourage or support similar
arrangements and activities, where necessary, in all other countries where it
undertakes program lending for the power sector.
(b) Rural Development
7.64        Planning for longer-term rural development deemed necessary as the
direct result of population displacements caused by hydropower projects should
be undertaken simultaneously with that for dam construction and associated
infrastructure works.   This is the only way to avoid major delays in the
implementation of rural development interventions (such as the Itaparica
irrigation subprojects), together with economic hardships that will inevitably
follow. Wherever possible, moreover, adequate development (including irrigation)
programs for displaced rural populations should be implemented in as close
proximity as possible to their previous (Le. pre-resettlement) locations in order
to avoid the problems experienced at Sobradinho when nearby lands in the
possession of another public agency (CODEVASF) were not made available for this
purpose. This may require firm interinstitutional coordination across sectors
that is frequently difficult to achieve in the context of what are essentially
single sector investment operations.
(c) Ecological Hazards
7.65        It is clear from the experience at Sobradinho, as well as early
evidence from Itaparica and that in other countries more generally, that the
3   ELETROBRAS, Manual for Studies of Environmental Effects of Electric
Systems, Rio de Janeiro, June 1986.    The Sobradinho/Itaparica study, whose
specific focus concerns the regional "insertion" of these projects, is being
undertaken by the Economic Research Institute Foundation (FIPE) of the University
of Sao Paulo.   The results of this study, however, were not available for
consideration in the present report.
36 The pertinent legislation is federal Law No. 6938 of August 31, 1981,
which defined a national environmental policy, established a national
environmental system for Brazil (SISNANA) and created a national environmental
council (CONAMA), and Decree No. 88,351 of June 1, 1983, which authorized CONAMA
to determine the conditions under which potentially environmentally degrading
activities would be required to undertake environmental impact assessments
(RIMAs) prior to licensing.     These conditions, together with the basic
characteristics and coverage of the corresponding RIHAs, were subsequently
specified by CONAMA Resolution No. 1 of January 23, 1986.


138
building of artificial reservoirs carries with it major potential environmental
risks in terms of changes in water quality and downstream soil fertility, as well
as adverse impacts on aquatic and terrestrial flora and fauna, not to mention
still poorly understood effects on local and even regional climate. In Brazil,
as elsewhere, these consequences are likely to multiply and intensify over time
as the development of the country's hydropower potential expands. The Bank,
accordingly, should be fully cognizant of these aspects and consider ways in
which they can be ameliorated.
3. For Irrigation Projects in General "
(a) Population Displacement and Absorption
7.66        Public irrigation projects in Northeast Brazil have tonded to have
a net displacement impact, as occurred in the lower Sao Francisco irrigation
schemes. Wherever the Bank is involved in funding such pro.jects or programs,
steps should be taken to minimize the level of forced removal and to provide
alternative long-term stable employment opportunities on the land for those who
are displaced.
(b) Irrigation Technology
7.67        Given the frequently high cost capital-intensive nature of irrigation
technology adopted on public schemes in the Northeast and the inherent problems
of guaranteeing a favorable economic rate of return, greater emphasis should be
placed on developing less expensive, simpler methods having lower investment,
operation and maintenance costs. 36 This would also facilitate the removal of
official subsidies and the organizational independence of projects which would
become farmer-managed.
(c) Project "Emancipation"
7.68        The traditional lack of farmer participation in the management of
public irrigation schemes in Northeast Brazil is currently being addressed by
recently introduced policies of project "emancipation." This policy, however,
has been decreed by CODEVASF (and DNOCS) without prior consultation with the
irrigation farmers themselves. Hence, caution should be exercised by the Bank
in uncritically endorsing such an innovation since feasibility studies have not
a   For additional lessons and recommendations related to the Bank's
experience with irrigation projects, including their environmental dimensions,
see recent OED Reports No. 7876, dated June 15, 1989, and No. 8494, dated March
22, 1990, which examine the socio-economic, institutional and technical impacts
of specific irrigation operations in Mexico (Rio Sinaloa and Panuco), Morocco
(Doukkala I and II), the Phillipines (Upper Pampanga and Aurora-Penarnada) and
Thailand (Northeast I and II).
3   In its commenis on the draft of this report, CHESF emphasized the
persisting need to clarify the appropriate irrigation technology and social and
land tenure organization which should be adopted in future resettlement projects
in the region.


139
yet been made to test the potential for administrative autonomy or economic self-
determination of existing and planned future projects. This problem is all the
more serious in view of the above mentioned high cost nature of the irrigation
model itself, together with the traditionally low income generating capacity of
public irrigated farming ir. the region.    9   Given the often significant
differences among specific irrigation projects and their beneficiary populations,
moreover, the viability of this scheme should, at least initially, be determined
on a case by case basis.
(d) Agrotoxic Pollution
7.69        The  expansion  of public   and, especially, private    irrigated
agriculture in the Northeast has greatly increased the long run risk of water
contamination by chemical pollutants such as fertilizers, pesticides and
herbicides. In some of the areas surveyed by the OED/SEPLAN mission, this is
already having serious repercussions on fishing and, through the food chain, as
well as by direct contact, on the human and animal populations. The Bank should,
therefore, address this problem in future irrigation projects it is requested
to finance in Brazil or elsewhere.    More concretely, it should ensure that
executing agencies are adequately prepared to orient their clients with respect
to the proper use of agro-chemicals and that national and/or subnational
environmental protection agencies are adequately equipped to monitor and control
the affected waterways, as well as to enforce whatever sanctions may be
required.
4. For Involuntary Resettlement Programs
(a) Implementing Agency Commitment to Resettlement
7.70        Borrower commitment to appropriate resettlement objectives and
procedures at the policy level should be reflected in preparation by the
executing agency of a comprehensive resettlement plan prior to loan negotiations,
while adequate conditionalities must be introduced to guarantee implementation
of any such plan to the Bank's full satisfaction. Such measures, moreover, must
provide assistance both for the immediate post-displacement period and for
longer-term sustainable development of the affected communities. Although the
Bank has little, if any, control over the broader processes of regional
development which are also bound to influence the settler reestablishment
process, it can, nevertheless, insist that proper measures be taken to support
and strengthen productive activities, as well as to limit adverse environmental
impacts, in the areas under the project's direct control.
3 With respect to the question of "emancipation," DNPA/MEFP, in commenting
on the draft report, observes that it should have given more attention to the
"administrative and economic-financial management" of the lower Sao Francisco
projects.  It further notes that "similar to other irrigation projects whose
infrastructure was implanted by the Government, those implemented by CODEVASF
in the lower Sao Francisco will, for many years, depend on public resources for
their operation and maintenance in virtue of the limited productive perspectives
(objectively, too little land and rice monoculture) of those resettled on them."


140
(b) Timing of Population Transfers
7.71        During project implementation, dam construction and resettlement
should be carefully synchronized so that population relocation L- complete well
before flooding commences.   In addition, more thought needs to be given to
appropriate forms of compensation, while suitable procedures should be
established to avoid undue delays in payment.
(c) Institutional Capacity of Executina Agencies
7.72         Accordingly, before entering into loan agreements, the Bank should
ensure that implementing agencies such as CHESF and CODEVASP are adequately
structured and staffed to execute major resettlement programs, as well as to
identify and undertake needed environmental protection measures. In the absence
of such institutional preconditions, the Bank should be prepared to delay, or
even deny, funding in cases where the livelihoods of large populations are
threatened or where there is a risk of major environmental damage.   Greater
emphasis should be placed on institution building at the level of the executing
agency,  introducing  appropriate  in-house  expertise  and  assisting  with
organizational restructuring, if necessary, 4o to permit, for example, greater
cooperation between engineering and resettlement divisions.
5. For River Basin Development in General
(a) A Regional Development Perspective
7.73        Major river basin interventions such as Sobradinho and Itaparica
should be seen within the wider regional development context rather than simply
as individual single sector investment projects. 4 The wide-ranging human
40 CHESF is currently unjergoing a process of internal restructuring which,
it is hoped, will enable it to better address resettlement problems.
4 In commenting on an earlier draft of this report, furthermore, CHESF
affirmed that carrying out large-scale resettlement through a free-standing Bank-
financed operation. as at Itaparica was "very opportune" in view of the generally
limited experience and technical capabilities of power companies in this regard
and the complexities of the rural settlement (Sobradinho) and/or irrigation
(Itaparica) activities involved.
42 In Latin America, the Organization of American States (OAS), through its
Department of Regional Development, has traditionally supported an integrated
approach to river basin development.   In Brazil, specifically, both the Sao
Francisco (PLANVASF) and the Araguaia-Tocantins (PRODIAT) systems, the latter
in eastern mazonia, amoug other river basins, have recently benefitted from such
assistance. For additional information on the OAS approach and experience, see
the following QAS publicationst Environmental Quality and River Basin
Development: A Model for Integrated Analysis and Planning, Washington, 1978;
Integrated Regional Dgvelopment Planninq: Guidelines and Case Studies from OAS
Experience, Washington, January 1984; and Minimum Conflict: Guidelines for
Planning the Use of American Humid Tropie Environments, Washington, 1987. On


141
environmental repercussions of the Bank-funded projects under review both within
the Sao Francisco valley and farther afield suggest that a broader perspective
is necessary so that schemes may be designed to ameliorate potentially harmful
impacts. 43 For example, the minimization of population displacements and the
provision of sustainable and comprehensive alternative livelihoods in farming
or fishing activities for those affected can reduce rural-urban migration caused
by project intervention into a local economy and society. Similarly, measures
to control water contamination from fertilizers used by commercial agriculture
which expands as a direct result of such Bank-financed public investments could
help to reduce wider ecological problems.
(b) Local Participation
7.74        The involvement of local populations in the preparation and execution
of hydropower and irrigation development projects can greatly facilitate the
adoption of environmentally sound strategies from both an ecological and a social
perspective. Clearly, the efficacy of such participation will depend on several
factors including the precise nature of such consultations and at what stage of
the project cycle they are introduced or develop. However, events at Itaparica
and in oeher river basins show that, while no panacea, local involvement is one
essential prerequisite that can assist planners and policy-makers to devise and
implement both resettlement and broader development strategies which are more
likely to be economically, socially and ecologically sustainable. A more open
and flexible attitude may sometimes be required in such negotiations and a
dialogue should be initiated early on with a range of representative bodies such
as trade unions, community associations, church groups and other non-governmental
organizations, both domestic and international. *
F. Implications For Bank Procedures
1. Country Policy Dialogue
(a) Resettlement as a Policy Priority.
7.75        The Bank must ensure that, whenever loans are negotiated for
hydropower and irrigation development involving population displacements, either
the Asian experience, in turn, see Sun, Peter, "Land and Water Management in
Asia," EDI Policy Seminar Report No. 20, World Bank, Washington, October 1989.
* In its comments on the preliminary draft of this report, the Ministry
of Infrastructure stressed the "enormous structuring power" of these two large
hydropower investments, both in terms of the territorial organization of their
areas of influence and, more importantly, with respect to their impact on
regional patterns of human settlement and productive occupation in the middle
and lower Sao Francisco valley.
" See, for example, Michael Cernea, Non-Government Organizations and Local
Development, The World Bank, Washington, 1988 and Robert Goodland, "Environment
and Development: Progress of the World Bank," mimeo, Washington D.C., February
1989.


142
at the project, program or sectoral level, that adequate resettlement provisions
be accorded a high priority. The Bank should also encourage Borrower countries
to formulate their own explicit resettlement policies. It should be a matter
of national policy, for example, that there is no net displacement effect
associated with large infrastructure and/or productive sector investments or at
least that all those relocated are fully and adequately compensated so that
they are able to resume their economic activities elsewhere with minimal trauma
and disruption. Furthermore, the Bank should consider assisting Borrowers to
formulate national involuntary resettlement policies in order to help avoid the
current ad hoc, largely piecemeal approach adopted by many countries.
(b) Timing of Resettlement
7.76        Ideally, the resettlement component should be designed and prepared
by the Borrower parallel to or even before engineering works get underway. It
is an unsatisfactory state of affairs when, even with the benefit of previous
project experiences (eg. Sobradinho), the provision of adequate resettlement
and compensation provisions is heavily dependent upon the existence of a strong
local popular protest movement (as at Itaparica). Such priorities need to be
fully internalized in both central governments and the relevant sectoral
executing agencies, as well as within the Bank itself.
2. Project Identification, Preparation and Appraisal
(a) Early Bank Involvement
7.77        The experience of Sobradinho in particular suggests that, wherever
possible, the Bank should be involved in the earliest stages of project
identification and preparation, so that it may exert timely pressure, where
necessary, to ensure that environmental protection and resettlement provisions
are properly defined and costed from the outset as integral components of the
larger project which has given origin to the need for them, rather than being
appended as an afterthought.
(b) Social and Environmental Exnertise
7.78        It is essential, moreover, that appropriate social and environmental
Impact assessments are carried out during the initial stages by qualified
personnel, whether Bank staff or consultants. Such key issues may, thus, be
openly debated and provided for in the actual project design.    In both the
Sobradinho and the lower Sao Francisco valley experiences, these aspects were
not sufficiently explored ex-&aGte, with unnecessarily negative consequences,
particularly in terms of human impacts.   The inclusion of such professional
expertise, however, is a necessary, but not sufficient precondition for the
proper appreciation and diagnosis of environmental (ie. both ecological and
social) dimensions. It is likewise necessary to institute mechanisms which will
ensure a more systematic and institutionalized inte3ration of social science and
environmental knowledge into Bank procedures.


143
(c) Local Particilpation
7.79        The experience of Itaparica and the history of POLOSINDICAL strongly
suggest that the interests and livelihoods of displaced populations may be
significantly enhanced if they are actively involved in dialogue with executing
and funding agencies at the earliest stages of the project cycle.       Thus,
conscious efforts should be made to contact local representative organizations
and to consult with them about both short-term emergency relief provisions and
compensatory procedures and the design of longer-term resettlement/economic
reestablishment programs. Local participation is particularly important as a
way of alerting funding and executing agencies to potentially negative impacts.
3. Project Implementation and Supervision
(a) Environmental and Social Inputs
7.80        Once a project is underway, from a human and physical environmental
standpoint it is important that Bank supervision likewise inciude qualified
personnel to monitor progress and advise on corrective measures where necessary.
It is unrealistic to expect that even the best-intentioned economists,
hydrologiets and power or irrigation engineers are likely to be technically
equipped to adequately cover the social and ecological dimensions of project
execution. 4s
(b) Local Participation
7.81        It is now increasingly recognized by development practitioners that
active involvement of beneficiaries in decision-making during project
implementation not only helps schemes run more efficiently and cost-effectively ,
but also encourages social stability and environmental sustainability. 46
Through such bodies as trade unions, community assciations, church and other
NGOs, not only can local needs be expressed more readily, and valuable
information provided for project design, but executing agencies can be lobbied
more effectively. " Itaparica has become a classic example of this process in
action.
* The comments made in para. 7.78 also apply here.
* See, for example, B. Bagadion and F. Korten, "Developing Irrigators'
Organizationes A Learning Process Approach," in Michael Cornea (ed.), F_ulin
People First: Sociological Var%ables in Rural Development, Oxford University
Press, 1985.
47 M.Cernea, Non-Governmental Organizations and Local Development, op cit.


144
G. Recommendations for Future Research and Impact Evaluation
1. In the Sao Francisco Valley
(a) Human Environmental Issues
7.82        A number of study areas are suggosted by the experience of the Bank-
assisted projects reviewed above which would help in the future design and
implementation of more appropriate and sustainable resettlement strategies:
(i) Post-resettlement experience at Sobradinho shows the need
to investigate small-scale private irrigation systems for flood-plain farmers
in less fertile areas displaced from their traditional riverine lands.   This
should help to determine which particular measures and support packages are
necessary to assist displacees in the recomposition of their farming livelihoods.
Moreover, this would have wider application and, even in the context of a more
comprehensive approach such as Itaparica, enable the assessment of low-cost
technologies as a possible aiternative to capital-intensive strategies.
(ii) A comparative study of the longer-term spread effects and
wider socio-economic impacts of the different resettlement approaches pursued
at Sobradinho, Itaparica and in the lower Sao Francisco valley would provide
pointers for the most appropriate strategies from a regional development
perspective.
(iii) At Itaparica, appraisal studies are urgently needed as to
how best to organize the management of agricultural production and small farmer
organizations, as well as with respect to the manpower requirements for such a
task. In view of the relatively large scale of these irrigation subprojects in
the Northeast Brazilian context, the success of these ventures could stand or
fall on how well or how badly their constituent populations are brought together
economically and socially. In view of the currently high expectations regarding
project "emancipation" policies, feasibility studies to examine this potential
are urgently required in order to avoid the danger of such schemes being given
their "independence" prematurely.
(iv) Research is required into the impacts of irrigation in the
Sao Francisco valley on rural and urban growth and employment patterns, including
informal sector development.
(b) Physieal Environmental lseues
7.83        There are also important gaps in our knowledge regarding the
ecological consequences that are likely to result from further development of
hydropower and Irrigation potential in the Sao Francisco valley. Additional
studies are, therefore, recommended in the following areast
(i) In terms of the growing competition among water users in
the valley, notably electricity generation and irrigation, investigation is
needed into possible alternative sources of energy production, as well as more
efficient Irrigation technologies and practices from the standpoint of water
consumption.


145
(ii) In connection with the same issue, detailed and more
accurate studies of evaporation lose rates in the Sao Francisco basin will assist
in calculations of possible water shortages which may occur in the future, as
well as to plan for appropriate measures.
(iii) Climate modelling studies would help to predict likely
changes in local weather patterns.   Unstable air circulation conditions and
increased precipitation may be induced both by large bodies of water such as
Sobradinho and Itaparica lakes and extensive irrigated areas.      There is,
accordingly, a need for studies of the broader impacts of these reservoirs on
regional climate and production patterns.
(iv) In view of the increasing risk of water contamination by
agrotoxice as irrigated agriculture expands in the valley, together with their
potentially adverse impact on animal and human populations, this is an issue that
deserves careful and systematic investigation. At present, little or no research
is being undertaken into water quality in the area.
2. In Large River Basins in General
7.84        Many of the gaps in planners' and policy-makers' knowledge that have
become apparent during the executir. of projects in the Sao Francisco valley
have implications for the development of large river basins more generally.
(a) Human Environmental Aspects
7.85        There is an overall need to better understand the social dimensions
and impacts of river basin development involving hydropower and irrigation
schemes. Several major areas can be highlighted:
(i) Investigations into the human impacts of major population
displacementa, including the consequences for family structure and economy,
agricultural production levels and patterns, public health and other major socio-
economic indicators.
(ii) Studies of mechanisms for involving displaced populations
in the preparation and implementation of comprehensive resettlement schemes with
the purpose of minimizing disruption in the abort-term, while helping to ensure
the longer-term economic sustainability of resettlementlirrigation projects.
(iii) Research into appropriate production technologies, as well
as organization and management structures, to facilitate the reintegration of
displaced and other impacted populations into the regional economy.
(b) PhysItcal Environmental Dimensions
7.86        Similarly, the ecological consequences of the Bank-supported
interventions in the Sao Francisco valley suggeat areas of further research which
have a wider relevance in terms of river basin development:


146
(i) The Ipacts of largeartificial reservoirs on water quality
for agricultural, industrial and domestic use.
(ii) The effects of slit retention by dams on downstream soil
fertility and agricultural production.
(iii) The consequences of water pollution brought about by rapid
irrigation development and use of agrotoxic chemicale.
(iv) The physical limitations on river basin and larger regional
development imposed by finite river water supplies and increasing competition
among users in different sectors and locations.
(v) Climate changes due to the formation of large bodies of
water and their likely impacts upon the regional environment.


147
ANNEX I
Table 1: Distribution of Landownership in Key Areas
of the Middle Sao Francisco Valley, 1970-85
1970               1980               1985
MR 133*
(hectares)     N         A         N        A         N
under 10      80.3      6.0      68.9      4.8      70.6     4.6
10-100      15.7     14.1      25.7     14.1      23.6    13.0
100-1000      3.5     27.0       4.8     24.2       4.7    24.1
1000-10000     0.4     30.7       0.5      26.6      0.8    37.2
over 10000    0.1      22.3       0.1     30.2       0.1    21.1
PETROLINA
under 10      61.2     10.5      41.0       4.7     40.1     4.9
10-100      36.3     37.1      52.2      38.5     51.1    39.1
100-1000      2.3     21.5       6.5      31.2      8.4    39.5
1000-10000    0.1      10.6       0.3     20.6       0.3    16.5
over 10000     0.1     20.3       0.1       5.0        -      -
* Includes the municipalities of Barra, Campo Alegre de Lourdes, Casa Nova, Pilao
Areado, Remanso and Sento Se.
N - % of properties.
A - % of farmland occupied.
Source: Agricultural Census (IBGE) for 1970, 1980 and 1985.


148
ANNEX II
Table 2: Irrigated Area in "Development Poles"
Along the Sao Francisco River Valley
Projects                              Hectares Irrigated
(December 1988)
CODEVASF
Northern Minas Gerais                        12,870
Bom Jesus da Lapa                             3,606
Barreiras                                    2,250
Petrolina-Juazeiro                          36,959
Lower Sao Francisco                          10,345
Subtotal                               6f,030
PRIVATE PROJECTS
(estimate)
Northern Minas Gerais                       40,000
Bom Jesus da Lapa                            7,000
Barreiras                                    6,800
Petrolina-Juazeiro                          45,000
Lower Sao Francisco                          2,000
Subtotal                              100,800
TOTAL                                       166,830
Source: CODEVASP, CODEVASF 1985-88, Ministry of Agriculture, Brasilia, 1989.


149
ANNEX III
Organizational Structure of CHESF
(Environmental Units)
Presidency
(PR)
Admin.    Engineering Finance    Operations   Construction
Division   Division    Division   Division    Division
(DA)       (DE)         (DF)       (DO)        (DC)
Itaparica
Superin-
- tendency
(SIT)
Technical                    Technical
Assistance                   Assistance
for the                     - Reservoir
Environment                  Implemen-
(ATMA)                      tation
(ATIR)
Dept. for
Reservoir
Implemen-
tation
(DIR)
Division for
the Execution of
Environmental
Control (DOEA)


MAP SECTION


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