The World Bank Group today approved its new Country Partnership Strategy (CPS) for Brazil, which will guide the Group’s overall program in the country for 2008-2011. The World Bank Board expressed strong support for the new engagement approach, which seeks to respond to the evolving needs of this sophisticated middle-income country. Bank Group support will focus primarily on long-run, path-setting challenges where Brazil has not yet devised solutions and where international experience can be of particular value. In response to Brazil’s changing needs, the Bank will provide less financing and more knowledge services to the Federal Government, and will focus the majority of its funding on State programs, complying in all cases with the spirit and letter of Brazil’s remarkable Law of Fiscal Responsibility.

The new Bank strategy outlines a carefully selective program of approximately US$ 7 billion of new financing from the International Bank for Reconstruction and Development (IBRD) for Brazil over the next four years, an enhanced program of support from the International Finance Corporation (IFC) to the private sector and a deeper integration of IBRD and IFC programs in Brazil.

The IBRD program continues a results-based approach anchored on the country’s goals and priorities defined by the Government in programs such as the Growth Acceleration Plan (PAC). The CPS sets out development targets toward which the Bank Group can contribute substantially by 2011, including improving the quality of public expenditures, especially in infrastructure; decreasing the GDP per capita gap between the Northeast and Brazil; and halving the rate of deforestation in the Amazon.

The IFC program will focus primarily on tier 2 companies, with investments in front run companies limited to when such financing has a major demonstration effect on corporate governance and social and environmental performance.

“This partnership strategy represents the latest step in a long and deep relationship between Brazil and the World Bank Group,” said John Briscoe, World Bank Director for Brazil. “The strategy identifies many areas where Brazil no longer needs assistance from the World Bank Group, and identifies areas where the combination of knowledge, financing and seal of approval of the World Bank can make major contributions to the country’s development. The partnership also identifies new ways in which other developing countries can benefit from Brazil’ s world-leading expertise in areas including fiscal federalism, biofuels, clean energy, AIDS and conditional cash transfers.”

Recognizing Brazil’s level of technical sophistication and public policy planning capacity, the Bank Group will also place greater emphasis on supporting the country’s progress on the current agenda of Government priorities, instead of contributing to the identification of new priorities. This stronger focus on the “how,” as opposed as the “what” will result in much closer integration between lending, studies and other activities.

"Brazil is very pleased with the partnership with the World Bank,” said Rogério Studart, Executive Director for Brazil at the World Bank Board. “John Briscoe, the institution’s director for Brazil, appreciates well what President Lula’s Administration expects from this collaboration. Brazil does not need just plain project financing any more, but rather it seeks the Bank’s knowledge of years of achievements as well as mistakes. Brazil also has much to contribute to the Bank, for example in collaborating with other countries for development. Yesterday, Brazil reached investment grade, and this is good news. However, what fills me with pride is to represent a Government that was able to lift millions out of poverty. This is what institutions such as the World Bank must work for.”

Brazil’s needs have evolved remarkably since the previous partnership strategy, with a much-improved macroeconomic situation and reduced vulnerability, and the focus of lending also will be considerably different. Instead of large Federal loans in support of the balance of payments, most of the Federal program will consist on technical assistance programs of ambitious scope but modest financial size, focusing Brazil’s top challenges. The states will be the main recipients of most (70%) of the Bank financing, based on their development priorities and in compliance with the Fiscal Responsibility Law.

To maximize results, the new strategy will not engage in areas where the country’s knowledge and capacity are well developed, and will rather seek to contribute its expertise in areas such as infrastructure development, long-term fiscal stability, quality of basic and secondary education, and reconciling growth and development with the conservation and sustainable use of sensitive biomes.

The strategy includes a framework for involvement with both the public sector (IBRD) and private sector (IFC) in the Amazon Region. The Amazon Partnership Framework derives directly from the Government of Brazil’s Programa Amazônia Sustantável (PAS). It provides an integrated approach for reconciling: the needs for local economic and social development for the 24 million people who live in the Amazon; the small and large infrastructure needed for local, regional and national development; and conservation of the region’s unique natural assets and local, national and global environmental services.

Leveling the Playing Field

The new partnership strategy goes beyond support for Brazil’s domestic programs and contributes to bolster the country’s growing role as an international development partner. The country is one of the top 15 donors to the International Development Agency, the World Bank’s concessional window for the poorest countries. The Bank will engage as an active partner with Brazil in global and regional challenges such as climate change, biofuels, trade and infrastructure integration, helping make sure Brazil’s voice and concerns, along with those of other emerging countries, are heard in international discussions that can affect the country’s development perspectives.

In “South-South” partnerships, the Bank will lend its credibility, convening power and “seal of approval” to help Brazil share and multiply its innovative experiences such as the ethanol program, Bolsa Família, the STD/AIDS program and community driven poverty reduction programs.

The 2008-2011 Country Partnership Strategy was prepared in close consultation with the Government of Brazil, and included an extensive process of collecting inputs from the legislature, state governments, environmental and social movements, the private sector, and Brazil’s other development partners.

US$ 1.6 Billion in New Loans Approved

Together with the Country Partnership Strategy, the World Bank Board also approved the first three loans for Brazil under the new framework, the record single-day loan approval for Brazil:

• The Second Minas Gerais Partnership for Development (US$ 976 million) will carry forward the Bank’s long-standing support to the Government of Minas Gerais in its efforts to implement the 'State for Results' program. The objective is to improve the quality and efficiency of the delivery of public goods and services, reinforcing the fiscal and macroeconomic advances made previously, with the overall objective of promoting economic growth and poverty reduction. The program will support sectors with significant impact on the enabling environment for public service delivery (public sector, private sector development) and those with considerable expenditure programs in which improvements in efficiency of resource use and allocation, innovation in public management and improved monitoring and evaluation (M&E) can provide substantial gains (health, education, transport).
• The Second Family Health Extension Project (US$ 84 million) seeks to build on the success of the previous program expanding medical attention to vulnerable groups lacking easy access to the hospital system. Studies credit the program for the major decrease in child mortality rates between 1999 and 2004. The new operation will increase access to primary care in large, urban municipalities; raise the technical quality of and patient satisfaction with primary care; and improve the efficiency and effectiveness of Family Health service providers as well as the broader delivery system.
• The São Paulo Trains and Signaling Project (US$ 550 million) will improve the level of service provided to the urban rail transport users in the São Paulo Metropolitan Region in a safe and cost-efficient manner by increasing the carrying capacity of key train and metro lines. This program will have major benefits for the poor and middle-class who are the dominant users of public transport, and in improving the efficiency and competitiveness of Brazil’s largest city.