Enhancing Productive Opportunities in Rural Pernambuco: Community-Driven Development in Brazil

Simeon Nichter John F. Kennedy School of Government Harvard University [email protected] March 29, 2004 US$1 = R$2.92 Client: Renascer State Technical Unit Pernambuco Ministry of Planning

ACKNOWLEDGEMENTS The author would like to thank Asim Khwaja and L. David Brown for their continued guidance during the writing of this paper. The staff of the World Bank in Brazil made this research project possible by hosting the author for three months in 2003; special thanks to Luiz Gabriel de Azevedo for ensuring ample latitude yet continuous support, as well as Antonio Rocha Magalhães, Lilian Santos, Werner Kornexl, Marla McCarrol Pinto Rodrigues, Leo Feler and Cristina Oliveira Roriz in the Brasilia office. In addition, the warmth and insight of the World Bank’s Recife office was appreciated, particularly that of Luis Coirolo, João Barbosa, Fatima Amazonas and Tulio Barbosa. Particular thanks to Lara Goldmark of Development Alternatives, Inc. for her guidance and feedback during the research process, in addition to making this research opportunity possible. Renascer’s unflagging support of this research project—and patience with countless questions—was instrumental; special thanks to Brenda Braga (President) and Josenildo Souza (Productive Investments Manager), as well as Antonio P. Guedes, Ciro Monteiro Cavalcanti, Danusa Correia, Fatima Barros, Graça Alencar, Jair Afonso, Milton Carrico, Roberto Acioli and Ruy Carlos. Many interviewees in 30 rural communities across Pernambuco provided crucial insight; their diligence and tenacity is admired. Thank you to Judith Tendler for providing her research and words of encouragement. The advice of Lant Pritchett, Robert Jensen and Michael Woolcock was extremely helpful. The camaraderie and support of Marcos Monteiro, Jeff Brown, Karrie McLaughlin, Salimah Samji, and fellow SYPA seminar members deserves recognition, as does Dani Rodrik and Carol Finney’s contribution to the author’s experience in the MPA/ID program. The Center for International Development provided research funding for this project; thanks in particular to Aimee Pease Fox. Elizabeth Baca’s continued support is greatly appreciated. The views posited in this paper, as well as any errors or omissions, are those of the author alone.

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Table of Contents Executive Summary .......................................................................................................................v 1

Introduction ...........................................................................................................................1

2

Overview of Productive Subprojects ...................................................................................5

3

4

5

2.1

Program Analysis........................................................................................................... 5

2.2

Challenges...................................................................................................................... 8

Econometric Analyses .........................................................................................................11 3.1

Overview...................................................................................................................... 11

3.2

Exploring Challenging Factors .................................................................................... 13

3.3

Constructing an Index .................................................................................................. 16

3.4

Interaction Effects ........................................................................................................ 17

3.5

Fixed Effects ................................................................................................................ 18

3.6

Summary ...................................................................................................................... 20

Community Interviews........................................................................................................20 4.1

Overview...................................................................................................................... 20

4.2

Methodology ................................................................................................................ 21

4.3

Overall Challenges....................................................................................................... 22

4.4

Training and Technical Assistance .............................................................................. 23

4.5

Working Capital........................................................................................................... 25

4.6

Marketing Products ...................................................................................................... 27

4.7

Summary ...................................................................................................................... 28

Policy Implications ..............................................................................................................29 5.1

Overview...................................................................................................................... 29

5.2

Engaging the Market.................................................................................................... 30

5.3

Analytical Framework.................................................................................................. 32

5.4

Communities ................................................................................................................ 33

iii

6

5.5

Service Providers ......................................................................................................... 35

5.6

Municipalities .............................................................................................................. 37

5.7

Renascer ....................................................................................................................... 39

5.8

World Bank .................................................................................................................. 40

5.9

Political Dynamics ....................................................................................................... 41

5.10

Next Steps .................................................................................................................... 43

Conclusion ............................................................................................................................45

References .....................................................................................................................................46 Appendices ....................................................................................................................................49

iv

Executive Summary •

Community-driven development in Pernambuco strives to improve delivery of services to the poor and foster local decision-making. Productive subprojects play an important role in this effort, as they empower communities to choose and engage in activities that produce output for sale in the market.

•

Over 350 productive subprojects have been initiated over the past five years in Pernambuco, representing R$14.7 million of total investments. The World Bank provides 75% of these funds, and Renascer manages program implementation.

•

Many productive subprojects are facing difficulties. Nearly 20% of subprojects initiated in Pernambuco over the past 5 years have completely stopped production, and an additional 19% are deemed highly problematic.

•

Interviews of 30 rural communities provide insight into the complex challenges facing communities with productive subprojects. Major challenges include insufficient training and technical assistance, marketing support and working capital.

•

Econometric analyses suggest that while most communities can handle any single challenge, a combination of multiple challenges poses great difficulty. Productive subprojects involving training and technical assistance and at least one other factor have a 42% higher probability of failure than those facing no challenges.

•

Renascer has recently made a concerted effort to mitigate these problems through increased direct involvement in productive subprojects. However, intensifying World Bank resistance to such “top-down” approaches suggests that other options must be considered.

•

Renascer could develop a market-based mechanism for offering both training and technical assistance and marketing support. By enabling communities to select from eligible providers, this option could both improve service delivery and foster local decision-making.

•

An analysis of the incentives of key stakeholders suggests that this market-based mechanism could be designed to achieve objectives effectively. Primary stakeholders include Renascer, communities, municipalities, service providers and the World Bank.

v

1

Introduction Poverty remains a persistent and widespread problem in Pernambuco. Nearly 37% of the Brazilian

state’s population is indigent, and this indicator has not improved over the past 20 years (World Bank 2002). Rural communities have been particularly afflicted by recurring droughts and agricultural stagnation—over 55% of their citizens live below the poverty line (World Bank 2002). Within this context, the Brazilian government has changed its rural poverty alleviation strategies dramatically over the past few decades. During the 1970s and 1980s, highly centralized Integrated Rural Development programs attempted to raise efficiency, incomes and employment in rural areas through large sectoral projects (Van Zyl et al. 1995). Over their lifecycle, these hefty projects expended over US$3 billion in Pernambuco and other states in Northeast Brazil, yet only 20% of these resources actually reached intended beneficiaries (Coirolo 2003). The Integrated Rural Development programs reflected a global ideology prominent during the era, in which “top-down,” bureaucratic solutions were deemed best for addressing policy problems (Pritchett and Woolcock 2002). The abject failure of Brazil’s Integrated Rural Development projects stimulated experimentation with more targeted, decentralized poverty alleviation mechanisms. In the early 1990s, social funds emerged in Northeast Brazil as a major poverty alleviation instrument. Social funds enabled local communities to propose, design and implement small subprojects. Through this demand-driven methodology, social funds attempted to avoid problems that often plague government intervention, such as overly standardized and costly projects (Tendler 1999). This rise of social funds in Brazil reflected a global trend: the World Bank alone committed US$3.5 billion to social funds in 57 countries through June 2000 (Van Domelen 2003). Brazilian social funds have gradually evolved into community-driven development (CDD) projects. A major distinction between social funds and CDD projects is that the latter devolve decision-making power over the selection of subproject proposals (Pritchett 2004). Over the past ten years, Renascer—a state technical unit in Pernambuco—has gradually fostered this transition by supporting the creation of municipal

1

councils (Van Zyl et al. 1995).1 Whereas community proposals were previously evaluated at the state level, municipal councils now play this vetting role. In large part, this shift towards CDD responded to growing criticisms throughout the development community of social funds, which involve “top-down,” centralized decision-making processes (Pritchett and Woolcock 2002). The World Bank’s broader goals with respect to CDD have a direct impact on Renascer. This reality stems from the World Bank’s provision of subsidized loans to pay for 75% of Renascer’s CDD subproject disbursements (World Bank 2002). By holding the purse strings, the World Bank wields considerable influence over Renascer. Continued support hinges on Renascer’s commitment to the dual objectives of community-driven development—delivering services effectively and fostering decision-making in local communities (Pritchett 2004b). Specific implications are discussed later, but it should be noted that Renascer will likely face World Bank pressure if it takes actions improving one objective at the expense of the other. Renascer’s current CDD project—which is formally entitled a “Rural Poverty Reduction Program”—will reach approximately 100,000 families, nearly 27% of Pernambuco’s rural population (World Bank 2002). This project offers matching grants to rural communities that propose infrastructure, productive and social subprojects. As will be discussed, productive subprojects involve particularly substantial opportunities as well as challenges, and are the exclusive focus of this paper. Productive subprojects are defined as those engaging in activities producing output for sale in the market. Examples include dairy processing and goat herding. These subprojects are viewed by both Renascer and the World Bank as “graduation strategies” (Van Zyl et al. 1995). While infrastructure subprojects (such rural electrification and water reservoirs) and social subprojects (such as housing

1

It should be noted that state technical units frequently change names, especially after state elections. Renascer’s predecessors played a major role in this transition from a social fund to CDD methodology.

2

improvements and bathrooms) may improve the lives of poor citizens, it is hoped that productive subprojects may actually be able to lift beneficiaries out of poverty. Economic research lends support to the possibility that productive subprojects could substantially increase some recipients’ incomes. Productive subprojects often introduce non-farm income into communities. Throughout Northeast Brazil, only 21% of the rural working population in the region is engaged in nonagricultural activities as a primary activity (Ferreira and Lanjouw 2001). Diversification into rural non-farm activities has not only been shown to significantly complement budgets of the poor in Northeast Brazil, but may also provide self-insurance by buffering against negative shocks (Ferreira and Lanjouw 2001). Other research in rural Northeast Brazil suggests that the incomes of exclusively agricultural households are lower than incomes in both mixed-income and non-farm households (Da Silva 2001). This evidence led one researcher to conclude that non-farm opportunities sometimes “provide sufficient income to allow rural dwellers with limited access to land to escape poverty altogether” (Ferreira and Lanjouw 2001). By introducing such non-farm opportunities into some communities, it is hoped that productive subprojects could have similar impacts. While productive subprojects have provided benefits to numerous communities, they often have not yielded the potential benefits just discussed. As is discussed in Section 2, many productive subprojects are facing difficulties. Nearly 20% of subprojects initiated in Pernambuco over the past 5 years have completely stopped production, and an additional 19% are deemed highly problematic.2 Renascer recognizes that significant challenges face productive subprojects (Box 1), and recently chose to stop approving productive subprojects for a full year (Dec 2001- Dec 2002).

2

This analysis was conducted by the author, and is discussed extensively in Section 2.

3

Box 1: Published Statements by Renascer About Productive Investments “We want to overcome the mistakes of former models adopted by rural development projects in Brazil, which did not result in diminished poverty in the countryside, and left abandoned, poorly dimensioned and insufficiently managed equipment. After a series of analyses, discussed openly with communities, the Renascer team is adopting new procedures for selecting productive subprojects.” Renascer Public Newsletter, March 2003 “The challenge of Project Renascer consists in supporting productive projects without repeating the old models that traditionally stunted rural development in Brazil, those which did not enable diminishing of rural poverty.” Renascer Productive Investments Report, 2003 Just last year, Renascer introduced the rede solidaria program, in which it plays an active role in developing networks of productive subprojects in a given region.3 However, intensifying World Bank resistance to such “top-down” approaches suggests that other options must be considered. As mentioned earlier, continued donor support hinges on Renascer’s commitment to the dual objectives of communitydriven development. Thus, proposed interventions must not only reduce the failure rate of productive subprojects, but must also foster decision-making in local communities. This paper explores why productive subprojects often fail, and then discusses how Renascer may be able to improve subproject performance. To this end, Section 2 begins by providing a high-level analysis of productive subprojects. Section 3 then employs econometric techniques to study the determinants of subproject failure. Next, Section 4 discusses 30 community interviews providing insights about the complex challenges facing productive subprojects. Finally, Section 5 explores policy options and investigates the incentives of stakeholders.

3

The rede solidaria program is extensively described in Appendix A.

4

2 2.1

Overview of Productive Subprojects Program Analysis Over the past five years, Renascer has funded nearly 2,000 productive, infrastructure and social

subprojects in rural Pernambuco (Figure 2.1). During this period, productive investments represented 19% of all subprojects.4 In comparison, infrastructure investments (such rural electrification and water reservoirs) comprised 70% of subprojects, while social investments (such as housing improvements and bathrooms) comprised 12% of subprojects. Total investment in Pernambuco’s 356 productive subprojects approved in 1998-2002 in exceeded R$14.7 million. Examining trends in the data shown in Figure 2.1 yields a fascinating discovery. As mentioned in Section 1, Renascer and the World Bank share the hope that productive subprojects may be able to lift some beneficiaries out of poverty. Given this positive attitude, one might expect the share of productive subprojects (as a percentage of total subprojects) to increase over time. However, this percentage has declined consistently since 1999. Interviews with 20 Renascer managers and representatives revealed that communities are in fact clamoring for productive subprojects.5 However, Renascer has slowed disbursement because it cannot provide enough support to mitigate challenges faced by communities already given productive subprojects. As mentioned earlier, these mounting challenges finally led Renascer to stop approving productive subprojects for a full year (Dec 2001- Dec 2002).6

4

This section uses the terms “productive subprojects” and “productive investments” interchangeably.

5

Interviews with 20 Renascer managers and representatives were conducted by author in June-Aug 2003. Appendix A includes the interview guide employed in these discussions, as well as an English translation. 6

Major challenges include insufficient training and technical assistance, marketing support, and working capital. In the following sections, these challenges are discussed extensively.

5

Figure 2-1: Approved Subprojects by Category, Pernambuco PCPR 1 and 2 (1998-2002)7

Note: World Bank funds represent 75% of total investment figures. Infrastructure subprojects represented 69.9%, and social subprojects represented 11.6%, of Pernambuco’s PCPR subprojects in 1998-2002. Data for 1997 not included because PCPR 1 commenced in middle of year. 356 productive subprojects in 1998-2002 includes 346 from PCPR 1 and 10 from PCPR 2. Note that the PCPR 1 MIS includes a total of 351 productive subprojects, of which 3 were liberated in 1997, and 2 subprojects had no liberation date specified. Source:

Renascer MIS (PCPR 1 and PCPR 2), July 2003. Analysis conducted by author.

Another insight revealed in Figure 2.1 is the high volatility in number of subprojects approved per year. While 549 subprojects (of all types) were approved in 1998, only 167 were approved in 1999. Renascer officials explain that this wide variation is linked to political cycles, as mayors lobby for subprojects in their municipalities during election years (1998, 2000, and 2002). During years following municipal elections, Renascer approves fewer subprojects because administrative capacity is a binding constraint. These political pressures to disburse are important to recognize, as they reveal incentives of municipalities discussed when evaluating policy proposals in Section 5. These results are confirmed by

7

PCPR reflects the Portuguese acronym for “Rural Poverty Reduction Program.”

6

another study on subprojects in Northeast Brazil, in which legislators expressed satisfaction with “political yields” of subprojects (Tendler 1999). Econometric studies also have discerned a significant relationship between election cycles and subprojects in Mexico and Peru (cf Tendler 1999). In recent years, a panoply of productive subprojects has been approved in Pernambuco (Figure 2.2). Renascer’s demand-driven modality has enabled communities to select a wide array of activities—44 distinct types of productive subprojects were approved in 1997-2001. This diversity has made it challenging for Renascer to provide support to communities with productive subprojects, as representatives are unable to gain expertise about such a broad range of activities. This level of diversity contrasts starkly with infrastructure and social subprojects, which had only 17 and 6 types, respectively. Figure 2-2: Distribution of Productive Investment Funds, Pernambuco PCPR 1 (1997-2001)

Note: Includes all categories with at least three approved subprojects. Other subproject types with fewer than three approved subprojects comprise 6.3% of productive investment funds Source:

Renascer MIS (PCPR 1), July 2003. Analysis conducted by author.

7

As shown in Figure 2.2, the most common types of productive subprojects are irrigation / irrigation kits (23% of productive investments), goat herding (13%) and tractors (10%).8 The figure ranks subproject categories by average investment size, which is R$39,453 across all productive investments. For each subproject category, the width of its rectangle corresponds to the number of approved subprojects, and the area corresponds to the amount of overall investment funds.

2.2

Challenges A remarkably high percentage of productive subprojects are facing difficulties (Figure 2.3). Nearly

20% of subprojects initiated in Pernambuco over the past 5 years have completely stopped production (“paralyzed”), and an additional 19% are deemed highly problematic (“troubled”).9 Productive subprojects are also encountering difficulties much more frequently than their counterparts—nearly 20% of productive subprojects are paralyzed, compared to 9% of infrastructure and 13% of social subprojects.10 Why do so many productive subprojects encounter difficulties? Understanding the determinants of subproject failures is crucial, as it can provide information instrumental for developing effective policy recommendations.11 Addressing the challenges faced by productive subprojects could yield enormous financial benefits—after all, R$5.7 million of productive investments initiated in 1997-2001 became troubled. This includes R$2.7 million in partially functioning subprojects, and R$3.0 million in completely paralyzed projects.

8

Appendix B includes various related analyses that may be of interest, including approval rate by subproject type. Note that while the most common subproject types involve agricultural activities, Renascer interviewees anticipated that communities would engage in activities with higher income-generating potential if major challenges were addressed. 9

A more detailed version of Figure 2.3 is provided in Appendix B, and includes explanations of “paralyzed” and “troubled” categories. 10

This comparison is shown in Appendix B.

11

All mentions of subproject “failure” in this paper refer to “paralyzed” subprojects. This strict definition includes only subprojects for which production has completely stopped.

8

Figure 2-3: Troubled Productive Subprojects by Initiation Year, Pernambuco PCPR 1 (1997-2001)

Note: Data from MIS system cross-checked with Renascer productive investments team. 1997 data not shown as few productive subprojects liberated. “Troubled” and “Paralyzed” averages shown reflect all PCPR I (1997-2001) productive subprojects, including 1997. Note that PCPR 1 included 351 productive subprojects, of which 3 were liberated in 1997, and 2 subprojects had no liberation date in MIS Source:

Renascer MIS (PCPR 1), July 2003. Analysis conducted by author.

Interviews with 20 Renascer managers and representatives provided an excellent opportunity to identify hypotheses about the determinants of subproject failure.12 Respondents overwhelming suggested that subprojects involving three challenging factors were particularly likely to fail: •

Training and Technical Assistance – Subprojects involving activities unfamiliar to communities may be particularly challenging, requiring considerable training and technical assistance from external sources. For example, dairy processing subprojects typically require specialized training to use machinery.

12

Interviews conducted by author in Jun-Aug 2003. Appendix A includes the interview guide employed in these discussions, as well as an English translation.

9

•

Marketing Products – Subprojects involving product marketing may also be especially difficult, as poor communities may be accustomed to providing raw agriculture inputs to arriving middlemen. For example, herbal medicine production may require selling through unfamiliar channels, as well as offering information about treatments to potential customers.

•

Working Capital – Subprojects requiring frequent purchases of inputs may face credit constraints. For example, communities producing fruit sweets often need to purchase bottles and lids for their output.

Examining the relative frequency of failure across subproject types provides some support of respondents’ hypotheses (Figure 2-4). The five subprojects failing most often—candy production, feed mills, herbal medicine, fruit processing and clothing production—all involve at least two of the challenges listed above. However, conclusions should not be based on such observations alone, because it is possible that other factors in fact drive this result.13 For example, it could be that project size is actually the key determinant of project failure, and that the five problem subproject types mentioned happen to be disproportionately large. Conducting more rigorous analyses that hold other factors constant is possible through the econometric methods employed in the next section. The accompanying discussion is considerably more technical, so readers less interested in econometric details may skip directly to Section 4, which discusses community interviews. A brief overview of the next section’s results is as follows: econometric findings are consistent with the hypotheses of Renascer staff and observations from Figure 2-4. Subprojects involving challenging factors—training and technical assistance, marketing and working capital—have a higher probability of failure. In addition, most communities can handle any single challenge, but a combination of multiple challenges poses great difficulty. Productive subprojects involving training and technical assistance and at least one other factor have a 42% higher probability of failure than those facing no challenges.

13

It should also be noted that some subproject types have few observations, further limiting the power of the graphical analysis. The econometric methods employed in Section 3 do not suffer from these limitations of Figure 2.4.

10

Figure 2-4: Subprojects Paralyzed by Type, PCPR 1 (1997-2001)

Note:

Includes all categories with at least three approved subprojects

Source:

Renascer MIS (PCPR 1), July 2003. Analysis conducted by author.

3 3.1

Econometric Analyses Overview This section employs econometric analyses to explore factors associated with productive subproject

failure. As mentioned in the previous section, interviews with Renascer managers and representatives provided hypotheses about determinants of subproject failure. Respondents suggested that subprojects involving three challenging factors were particularly likely to fail: training and technical assistance, marketing, and working capital.

11

This analysis examines the relationship between these three challenging factors and the probability of subproject failure. The model employed uses subproject failure as the outcome of interest.14 To test the hypothesis that subprojects involving the three challenges have a higher probability of failure, these factors are included as explanatory variables. Other variables also hypothesized to affect the probability of subproject failure are included as controls. A list of these controls and hypothesized relationships with subproject failure rates is now provided. It should be noted that the hypothesized relationships mentioned may not reflect reality—they are simply provided to illustrate that some relationship may be expected to exist:15 The controls are: •

Project size – Projects involving larger fund disbursements may require increased coordination by communities, so a positive relationship between project size and project failure may be expected.

•

Distance – Communities located farther from Recife (the state capital) may have less access to Renascer staff and other resources, so a positive relationship between distance and project failure may be expected.

•

Education – Communities with more education may have an increased ability to implement new productive subprojects or employ technology. Thus, a negative relationship between education and project failure may be expected.

•

Income – Communities with more income may have additional outside resources available to deal with challenges to their productive subprojects, so a negative relationship between income and project failure may be expected.

•

Inequality – Higher inequality may reduce bonding social capital within a community and thereby inhibit cooperation on subprojects, so a positive relationship between inequality and project failure may be expected.

14

This analysis uses a probit model to ensure that predicted values fall between 0 and 1. The dependent variable is defined as: paralyzed project = 1, non-paralyzed project = 0. Note that this model does not take into account truncation, which would require the use of a hazard model.

15

Hypotheses mentioned below about relationships between control variables and productive subproject failure should not be considered exhaustive. These controls are included to mitigate omitted variables bias in estimating the effect of the three factors (training and technical assistance, marketing assistance and working capital), not to test specific hypotheses mentioned about control variables.

12

•

Level of Rural Credit – Municipalities receiving more rural credit per capita may have increased funds to assist communities with productive subprojects. A negative relationship between level of rural credit and project failure may thus be expected.16

•

Initiation Date – Dummy variables for initiation years reflect the possibility that subproject failure rates may vary systematically by year, even after controlling for other included variables. One plausible hypothesis: the number of subprojects initiated fluctuates each year (as shown in Figure 2.1), and those launched during peak years may receive less Renascer support during the critical early stages of a subproject.

•

Decentralization Timing – As discussed in Section 2, the PCPR program has gradually decentralized many activities to the municipal level. Dummy variables identify whether subproject failure rates vary systematically by decentralization year, controlling for other included variables.

3.2

Exploring Challenging Factors Econometric analyses support the hypothesis that subprojects involving each challenging factor

(training and technical assistance, marketing and working capital) have a higher probability of failure. Table A (included in Appendix C) provides an overview of results from probit regressions investigating the marginal effects of each challenging factor.17 These results, which are both statistically significant and are of an appreciable magnitude in explaining subproject failure, are discussed below. Evaluating the bivariate relationships between each challenging factor and the probability of subproject failure yields strong associations. For example, productive subprojects requiring high levels of training and technical assistance are 11% more likely to fail than projects without such needs (A1).18 This result, which does not control for any other factors, is statistically significant at a 95% level of confidence. Conducting similar analyses for the other factors, productive subprojects involving marketing are 17% more

16

This variable measures total value of all rural loans disbursed in each municipality from 1999-2001, divided by the rural population in each respective municipality.

17

Note that each challenging factor is a binary variable, with the value of 1 corresponding to presence of a given factor. For example, the marketing variable has a value of 1 for each subproject requiring marketing, and 0 for each subproject not requiring marketing. 18

All regression coefficients reported in this paper reflect marginal effects (dprobit). Econometric tables are provided in Appendix C. Codes in parentheses refer to specific table and column numbers in which results can be found.

13

likely to fail than other projects (A3), while subprojects with high working capital needs have a 16% higher probability of failure than those without (A5). Both of these results are statistically significant at a 99% level of confidence. Including other variables as controls supports these findings. Subprojects requiring high levels of training and technical assistance are 12% more likely to fail (A2), those involving marketing are 20% more likely to fail (A4), and those with high working capital needs are 17% more likely to fail (A6) than their counterparts without these factors. Each of these results is statistically significant at a 99% level of confidence. In contrast to these results for challenging factors, remarkably few control variables appear to have strong relationships with the probability of subproject failure. Most of the variables hypothesized earlier to be linked to subproject failure—such as distance, education, income, inequality, level of rural credit, and initiation date—yield no statistically significant results in any of the regressions mentioned above (A2, A4, A6). It should be noted, however, that most control variables are measured at the municipal level. Community-level data, if available, might indicate that these variables measured at a local level do indeed have associations with the probability of subproject failure.19 On the other hand, project size does demonstrate a significant relationship with the probability of subproject failure. In each regression, a R$10,000 increase in subproject size is associated with a 4% to 5% increase in the probability of subproject failure (A2, A4, A6). This is not only statistically significant at a 99% level of confidence, but is also of an appreciable magnitude in explaining subproject failure rates—it suggests that a one standard deviation (R$14,700) increase in subproject size is associated with a 7% increase in the probability of subproject failure. In addition, two of the regressions (A4, A6) suggest that productive

19

It should be noted that one recent study of projects in Pakistani villages found that the impact of project-specific factors is greater than that of community-specific factors (Khwaja 2002).

14

subprojects in municipalities where PCPR operations have been decentralized most recently have a 13% to 14% higher likelihood of failing (at a 95% level of confidence). The regressions discussed thus far have separately examined each of the three challenging factors, with and without controls. If one includes training and technical support, marketing and working capital together in a regression, none of the coefficients on these factors is individually statistically significant (A7, A8). This result occurs due to multicollinearity among the three factors—for example, subprojects that require marketing are often likely to require working capital. Conducting a joint significance test reveals that the three factors are jointly significant at a 99% level of confidence.20 Thus, there is indeed a strong relationship between the three factors and the probability of subproject failure, but it is not possible from this regression to tease apart the significance of the separate effects. Earlier findings regarding the effects of project size and the 2001 decentralization cohort remain consistent in this analysis. It is also important to note that including training and technical support, marketing and working capital together in a regression drives down the effects of each factor. Controlling for other factors, subprojects requiring high levels of training and technical assistance are 6% more likely to fail, those involving marketing are 13% more likely to fail, and those with high working capital needs are 3% more likely to fail than their counterparts without these factors (A8). These smaller values correct for the omitted variable biases introduced when examining the effects of each individual factor (A1-A6).21 Due to the high correlation among the three challenging factors, it is necessary to incorporate all three to avoid such biases.

20

Joint significance test results are shown after Table A in Appendix C.

21

The earlier regressions suffered from upward omitted variable biases, due to (a) positive correlations between challenging factors, and (b) positive correlations between each factor and the probability of subproject failure.

15

3.3

Constructing an Index The analyses discussed thus far have revealed that including training and technical support,

marketing and working capital together introduces multicollinearity, yet excluding one or more these variables leads to an omitted variable bias. Constructing an index of these three challenging factors provides one viable solution, which may yield additional insights beyond the joint probability test already mentioned. Constructing a meaningful index requires careful consideration of the underlying subproject data. Particularly striking is the strong relationship between working capital and marketing.22 Of the 351 subprojects evaluated, 93% either have: (a) low marketing needs and low working capital needs, or (b) high marketing needs and high working capital needs. Because these two variables are so highly correlated, including them both in an index could lead to double counting. On the other hand, such a strong relationship does not exist between training and technical assistance and working capital, or between training and technical assistance and marketing. In order to create an index addressing the high correlation between marketing and working capital, the following formula was employed:23 Index = Training and Technical Assistance + max (Marketing, Working Capital) Econometric analyses demonstrate a strong relationship between this index and the probability of subproject failure. Evaluating this index as a discrete variable, each unit increase of the index is associated with a 9% increase in the likelihood of project failure (B1, B2). This result is statistically significant at a 99% level of confidence, and is robust to previously mentioned control variables.

22

Figure 1 in Appendix C provides matrices demonstrating the relationships between challenging factors.

23

Note that this index has discrete values between 0 and 2. For example, a subproject requiring high levels of training and technical assistance, marketing and working capital has an index value of 2. A subproject requiring high levels of marketing and working capital has an index value of 1.

16

Evaluating the effects of the index through the use of dummy variables provides deeper insight (B3). There is no statistically significant difference between subprojects with an index value of 1 and those with an index value of 0 (no challenging factors). However, subprojects with an index value of 2 have a 22% higher probability of subproject failure than subprojects with an index value of 0.24 In other words, no discernable association with increased failure is observed unless subprojects involve both technical assistance and at least one other challenging factor. Subprojects meeting this condition are associated with a 22% increase in the probability of subproject failure. This percentage rises to 23% when controlling for previously mentioned variables (B4).25 Earlier findings regarding the effects of project size and the 2001 decentralization cohort remain consistent in this analysis.

3.4

Interaction Effects Further econometric analyses reveal no interactive effects between challenging factors and the

control variables discussed earlier. One might hypothesize, for example, that communities distant from the state capital of Recife would fare particularly poorly with subprojects requiring marketing. But as Table C demonstrates, the relationship between index values and the probability of subproject failure does not differ significantly when distance, size, education, or income changes. This evidence is highly interesting, as it suggests that the association between challenging factors (training and technical assistance, marketing and working capital) and subproject failure rates is relatively constant across these control variables.26

24

This result is statistically significant at a confidence level of 99%.

25

This result is statistically significant at a confidence level of 99%.

26

It should be noted that although these control variables have sufficient variation to conduct analyses, distance, income and education are municipal-level variables. Community-level data, if available, might indicate that these variables measured at a local level do indeed have an interactive effect on subprojects.

17

3.5

Fixed Effects Thus far, econometric analyses have demonstrated a strong relationship between challenging factors

(both individually and as a combined index) and the probability of subproject failure. Employing a fixed effects model enables more rigorous testing of this result. Although previous regressions controlled for numerous municipality-level variables such as distance and education, it is plausible that other differences (such as mayoral performance) across municipalities also affect the probability of subproject failure. Neglecting to include such variables could lead to omitted variables bias. The fixed effects analyses in Table D and E address this potential problem by making comparisons across subprojects within the same municipality. This technique controls for all variables that are assumed to have identical effects on all subprojects in a given municipality. Fixed effects analyses provide additional support to earlier findings that subprojects involving each challenging factor (training and technical assistance, marketing and working capital) have a higher probability of failure (D1-D8). Including all three factors together in a regression reveals that subprojects requiring high levels of training and technical assistance are 12% more likely to fail, those involving marketing are 30% more likely to fail, and those with high working capital needs are 6% more likely to fail than their counterparts without these factors (D8). Conducting a joint significance test reveals that the three factors are jointly significant at a 99% level of confidence.27 Just as before, there is a strong relationship between the three factors and the probability of subproject failure, but it is not possible from this regression to tease apart the significance of the separate effects. These results control for subproject size, which is no longer statistically significant.28

27

Joint significance test results are shown after Table D in Appendix C.

28

It should be noted that controlling for other variables is no longer possible, since they are measured at the municipal level and would thus be cancelled out by the fixed effects methodology.

18

Employing this fixed effects approach also supports the relationship found earlier between the combined index and the probability of subproject failure. Evaluating this index as a discrete variable, each unit increase of the index is associated with an 18% increase in the likelihood of project failure (E2).29 Investigating the effects of the index using dummy variables, there is no statistically significant difference between subprojects with an index value of 1 and those with an index value of 0. However, subprojects with an index value of 2 have a 42% higher probability of subproject failure than subprojects with an index value of 0 (E4).30 Once again, these results control for subproject size, which is no longer statistically significant. Although these fixed effects analyses support earlier findings, they have dramatically different magnitudes. Percentages mentioned above from fixed effects analyses are as much as double the magnitude of earlier reported percentages. For example, fixed effects suggests that the discrete effect of an index value of 2 is a 42% higher probability of subproject failure (see above), but earlier analyses estimated this percentage to be only 23% (B4). This dramatic difference demonstrates the importance of addressing omitted variables bias by incorporating fixed effects. A multitude of omitted variables could have led the earlier results to be biased downwards, such as the number of trained public technicians in a given municipality.31 One important caveat, however, is that this fixed effects analysis does not control for variables that are not constant within municipalities. Community-specific characteristics may also affect the

29

This result is statistically significant at a confidence level of 99%.

30

This result is statistically significant at a confidence level of 99%.

31

The number of trained public technicians could be one of many omitted variables with a downward bias on index and challenging factor coefficients. This would occur if one assumes that having a higher number of trained public technicians would decrease the probability of project failure, but increase the complexity of projects chosen (due to communities’ higher expectation that they would receive assistance from the municipality). Note that fixed effects analyses would only address this omitted variable under the assumption that this variable affects all communities within a given municipality equally.

19

probability of subproject failure, but it is possible that including such variables could even further increase the reported effects of challenging factors on failure rates.32

3.6

Summary Econometric analyses support the hypothesis that subprojects involving challenging factors—training

and technical assistance, marketing and working capital—have a higher probability of failure. Careful consideration of underlying subproject data suggests that creating an index is useful, due to multicollinearity among challenging factors. By employing a rigorous fixed effects methodology, analysis reveals that subprojects involving both technical assistance and at least one other challenging factor are associated with a 42% increase in the probability of subproject failure. No discernable association with increased failure is observed unless this condition is met.

4 4.1

Community Interviews Overview This section explores findings from interviews of 30 communities with productive subprojects in rural

Pernambuco. These results not only support the econometric findings discussed in Section 3, but also provide a deeper understanding of the complex challenges facing productive subprojects. By providing insights about the determinants of productive subproject failure, this section enhances the base of information from which policy options can later be considered. Before delving into community interviews, it is important to recognize the rationale for employing a mixed method approach involving both quantitative and qualitative analyses. Each investigative method has its own comparative advantages, and quantitative and qualitative approaches are often both necessary to

32

Indeed, it is possible that omitting such characteristics in fact leads to an underestimation of the effects of challenging factors. Omitted variables would only lead to an upward bias on coefficients if they are: (a) positively correlated with challenging factors and the probability of project failure, or (b) negatively correlated with challenging factors and the probability of project failure.

20

understand complex phenomena (Hentschel 1999). These community interviews build upon the econometric analyses in Section 3, providing nuanced and contextual insights that may foster inductive reasoning (Ravi 2001). This contribution is important, because the challenges faced by communities with productive subprojects are difficult to understand using numbers alone or without contextual references (Rao and Woolcock 1999).

4.2

Methodology In order to explore the major challenges facing productive subprojects, interviews of 30 rural

communities in Pernambuco were conducted. Interview locations represented the state’s geographic diversity, including the forested Mata region, the intermediate Agreste region, and the arid Sertão region. As shown in Figure 4-1, the number of communities interviewed per region was proportional to the overall distribution productive subprojects in Pernambuco. Figure 4-1. Geographic Composition of Interviews and All Productive Subprojects

Interviews Conducted

PCPR Productive Subprojects

2

8%

4

8

9% 33%

Sertão Agreste Mata Sul

18%

6

Mata Norte Recife Area

10

32%

In order to assess the challenges facing various productive subprojects, interviews included 19 distinct subproject types. For the most common subprojects (e.g., goat herding, irrigation, and tractors), interviews were conducted in more than one community. Overall, the 30 interviews comprised 8.4% of all productive subprojects initiated in Pernambuco since January 1998. Specific communities were selected

21

using four methods: 13 identified as “representative” by Renascer, 7 chosen randomly from the subproject database, 5 identified as “top performers” by Renascer, and 5 of the more recent (PCPR 2) subprojects. After each two-hour community interview, lengthy discussions with Renascer representatives were conducted to provide a broader perspective and draw parallels with other non-interviewed communities with similar productive subprojects. The following additional information is provided in Appendix D: • • • • • •

4.3

Table of Communities Interviewed (Includes Descriptive Statistics) Major Challenges Faced, by Community Description of Challenges Mentioned Discussion of Challenging Government Regulations List of Communities Interviewed, by Major Challenge Community Interview Guide (in Portuguese, and translated into English)33

Overall Challenges The communities interviewed experience a variety of challenges with their productive subprojects.

Each two-hour interview investigated subproject operations carefully, so challenges were both explicitly mentioned by community members and identified through interview responses. Figure 4.2 provides an overview of these challenges. The most frequently cited challenges facing communities interviewed involve training and technical assistance, working capital, and marketing products. These frequent challenges are explained in detail with illustrative examples from community interviews.34

33

All interview guides used in this research project were designed and translated by the author.

34

An explanation of all challenges shown in Figure 4.2 is provided in Appendix D.

22

Figure 4-2. Major Challenges Facing 30 Interviewed Communities 25

20

19 16

15

4.4

3

3

3

3

Soil Analysis Needed

2

Expensive Expositions

3

Renascer Delinquency

4

Monophase Electricity

4

Inadequate Equipment

4

External Contingency

5

Subsistence Focus

5

Packaging

5

Project Choice by Outsiders

Regulatory Approval

Marketing Products

Training/Technical Assistance

0

Working Capital

5

Lack of Inputs

6

Fund Misappropriation

9

10

High Input Costs

Number of Communities Facing Challenge

Training and Technical Assistance Training and technical assistance available to communities is often insufficient for productive

subproject needs. Many community associations have received useful training on working effectively as an association, but less training that is tailored to specific subprojects and contextual factors. Numerous communities are involved in unfamiliar subprojects and thus require not only training, but also considerable continued assistance. Contracted providers of technical assistance often come only a few times for short visits, while others do not even show up. Technical assistance is often provided by distant Recife-based experts, who are difficult to contact for real-time help. Communities lack a primary contact responsible for the lifecycle of their productive subprojects. Numerous interviewees complain that they have no one to turn to when facing unforeseen problems.

23

Communities must navigate through a confusing array of government entities, which often change names or even go extinct due to a lack of continuity through elections. Several communities receiving technical assistance stressed that their help was obtained only by chance, either through family contacts or politicians. This lack of training and technical assistance has deleterious effects on productive subprojects. Some subprojects never commence, as no accompaniment is available to solve initial problems. Without training, some subprojects experience difficulty using purchased equipment. Communities with subprojects involving animals may lose their herds if unprepared for illness and feeding habits. Other subprojects may face low capacity usage due to insufficient training and technical assistance.

Training and Technical Assistance: Examples Jardim’s goat herding project lasted only a few months before all the goats died mysteriously. The community received funding for 64 goats in December 2000, and had no previous goat herding experience. Technicians from the federal agency INCRA had suggested they buy goats and were contracted to provide help, but never returned after project funds were released. Community members bought goats alone at an open fair, with no knowledge of purchasing criteria. After three months, the goats started to die. They spent R$400 on a private vet, but all the goats died within a month. Riacho Grande’s tractor is helping community members, but they have not received sufficient accompaniment. The productive subproject allocated money to state agency EBAPE to provide technical assistance and training. Technicians only came once or twice to take a quick look at the tractor. Community members explained these visits would have been more helpful if they had gone into the field to see if they were using the tractor and attachments properly. They must now pay R$2.50 an hour to a non-community member to drive the tractor. Members do not know how to drive, and they are not familiar with anyone who would teach them—the scarcity of this skill is what generates tractor drivers’ income. Povoada Vermelhos was unprepared for the feeding habits of its newly purchased chickens, and the 2001 project is now abandoned. The contracted provider of technical assistance only came a few times, and provided superficial advice. The community had no experience raising chickens, and did not realize feeding requirements. They soon ran out of feed, had no money, and brought rice from their kitchens to no avail. The chickens began to eat each other. The chickens then got sick, and luckily they were able to get help from a municipal vet but many still died. 500 of their 2500 chickens survived. They sold these chickens for a low price, and stopped production. Tapuias often has insufficient mandioca to use its casa de farinha (flour mill), and would benefit from help on planting techniques. The community uses the mill about 30 days a year, and is weighing whether benefits exceed monthly electricity bill of R$33. Members believe that they could boost mandioca production substantially with help using fertilizers. They need help obtaining soil analyses, to ensure that soil is appropriate for mandioca and wrong nutrients are not added.

24

4.5

Working Capital Numerous communities identified working capital constraints as a major challenge to their productive

subprojects. The PCPR program offers only investment capital to communities, and does not provide working capital loans. In general, communities consider obtaining loans for working capital much more difficult than for investment purposes. Working capital needs are unexpected by some subproject recipients, as proposals do not include cash flow projections. A lack of working capital continues to hinder many productive subprojects throughout their lifecycle. Some communities struggle to commence operations because of insufficient funds to purchase inputs or packaging. Working capital constraints hinder large-volume purchasing and may thus lead to higher input costs, making it hard to compete with larger producers. Communities without sufficient funds to purchase packaging may produce intermittently, as they must wait to receive funds from product sales to pay for more jars or bags. Insufficient working capital may impede consistent production, making it difficult to serve high-volume clients. Some communities report that a lack of working capital leads them to eschew experimentation and produce “safer” products. Nearly all interviewees consider PRONAF loans (offering credit to rural farmers) from the federal government their only potential source of working capital. Yet communities frequently express frustration about the PRONAF program. Some interviewees give up after facing complicated and burdensome requirements and processes. Slow processing time is challenging, as loans sometimes arrive too late in the season to be used viably in subprojects involving agriculture. Many communities experience eligibility problems, and thus cannot access even this source of working capital loans. Loan approval is considered more difficult as a community association, since this requires all members to have clean credit and assume responsibility for debt. Communities have few assets to use as collateral, and productive subproject assets are not used to guarantee loans. Association members often apply individually for PRONAF loans in an

25

attempt to obtain working capital for productive subprojects. But they frequently experience eligibility problems, due to troubled credit histories (often stemming from lost production during droughts). It is important to note that marketing difficulties (see Section 4.6) are sometimes the root cause of working capital constraints. Without increased product sales, working capital loans may enable increased production only temporarily and only lead to higher inventories of unsold merchandise.

Working Capital: Examples São Severino dos Ramos cannot meet strong demand for its processed fruit sweets because it lacks working capital for packaging. After producing for one week, it ceases operation for three weeks to receive sales income and order more jars. The community association also pays higher prices by buying jars and lids in small quantities, and does not qualify for supplier credit because it is an informal enterprise. Mucuri can not take full advantage of its irrigation equipment, in part because it can not buy enough yam roots. Irrigation equipment enabled community to plant yams, which are highly profitable but require hefty root purchases. Members applied for individual loans, but bureaucracy is high and many are ineligible due to outstanding agricultural debt. One interviewee applied for a loan by obtaining land documents, conducting soil analyses, filling out an extensive application, and traveling for an interview. By the time the loan was approved in July, it was too late to plant. Community members interviewed were so frustrated that they never again applied for loans. Santana’s animal feed mill uses costlier inputs due to working capital constraints. The association does not have funds to stock up on algoraba leaves during harvest. So it must later purchase corn—a more costly substitute input—for production when no algoraba remains for sale. Santana could realize over R$40,000 of additional annual benefits from expanded working capital (see analysis in Appendix A). Community members applied for PRONAF loans independently, as they believed it was more difficult to get credit as an association. After filling out extensive applications, members were frustrated when the government asked for even more information. They finally gave up. Atapuz will soon commence fish processing operations, but is concerned about working capital availability. The association needs to pay for fish immediately on delivery, or else fishermen will sell to middlemen instead. Inauguration will be within two weeks of the interview, but the association planned to start by selling ice for fault of working capital. The community has no source of credit yet, but “If God is willing, we will get it.”

26

4.6

Marketing Products Marketing products is a major challenge for numerous communities with productive subprojects.

Communities are usually accustomed to selling primary agricultural products, but often have substantial difficulty marketing processed or manufactured goods from their productive subprojects. Learning about potential markets for products is difficult for rural communities, both before and after operations commence. Many interviewees live in remote areas, and have relatively little contact with cities. Barriers to reaching and learning about markets include a lack of personal contacts, transportation and lodging. Lacking a clear understanding of the market for their products, many find it difficult to choose which products to make. Communities also have difficulty identifying, contacting and understanding the needs of potential customers. Insufficient market research hinders some productive subprojects that offer products with few buyers or strong competition. Communities unfamiliar with demand across product types may focus on unpopular products that are difficult to sell. Communities opting for low-quality products may find they cannot meet prices of established suppliers with lower costs. Others producing high-quality products are unable to reach beyond open fairs to buyers willing to pay premium prices. Market studies may indeed suggest that some subprojects, such as community bakeries, are commercially unviable without guaranteed demand from public contracts. Communities typically receive little marketing assistance with their productive subprojects. Technical assistance often focuses on building and equipment purchases, but not marketing issues. Numerous interviewees sought individualized marketing help, but gave up after being shuffled between government entities. One government organization, SEBRAE, provides some high-level market studies, but rarely contacts potential customers and gives communities customized instructions on how to serve them. Shortterm marketing assistance—for example, identifying specific large-volume customers interested in

27

purchasing an association’s output, and clearly outlining these customers’ quality, timing and packaging requirements—may boost productive investment performance dramatically.

Marketing Products: Examples Normandia could not sell its clothing production, and the R$39,000 project is no longer operating. The community chose to submit a proposal for 11 sewing machines in 2000, because some members had experience sewing clothes for personal use. They had no experience producing clothes commercially and received no help determining what to produce. The association considered low-end t-shirts (costing R$2.50 each) the “safest” option, but only 40-50% of the 750 t-shirts were sold at the open fair. The machines now lie dusty from lack of use, but members report making Movimento Sem Terra (land reform movement) flags for other settlements occasionally. Cachoerinha confronts numerous obstacles to marketing its differentiated cheese. The community is historically renown for high-quality cheeses, but it is not able to capitalize on this reputation due to marketing challenges. Buyers in local open fairs will not pay a price premium for differentiated cheese, and penetrating the distant Recife market is difficult. Members occasionally travel to Recife by bus to try to sell cheese to restaurants and specialty stores, but sales are tough. The community could benefit from short-term assistance that identifies potential customers and explains how to serve them. Lagoa do Carro artisans are struggling to market their association’s tapestries. The productive subproject funded a showroom and inputs, but members do not know how to attract potential buyers. The local market for tapestries is saturated, and artisans frequently stop production for lack of funds to buy yarn. The association stresses it needs marketing assistance direly: “The problem with Banco do Nordeste (a regional public bank offering PRONAF loans) is that they give loans but don’t open channels.” All 300 tapestries in stock look identical, and members have no idea what designs distant customers might want. The association has received training in association management and colors / design, but needs help contacting large-volume buyers and obtaining specific instructions on types of designs and materials to employ. Salgueiro’s community bakery operates far below capacity, partly because it is unable to sell to other areas. The bakery produces 2,000 units of bread per week, yet capacity is 2,000-3,000 units per day. Marketing bread beyond the community would boost production, but barriers include few contacts and no transport. Salgueiro currently hopes to gain high-volume contracts to supply to the federal police and municipal school district. A market study may have shown low local demand and identified the need to guarantee large contracts before commencing operations.

4.7

Summary These interviews of 30 communities in rural Pernambuco provide insight about the challenges faced

by productive subprojects. Qualitative analysis of interview responses in Figure 4.2 revealed that training

28

and technical assistance, working capital and marketing are the most prevalent challenges.35 These results not only support econometric findings in Section 3, but also provide a deeper understanding of the complex challenges facing communities with productive subprojects. The next section applies the lessons learned thus far from quantitative and qualitative analyses, in order to evaluate potential policy recommendations.

5 5.1

Policy Implications Overview The mixed method approach employed in this analysis has revealed substantial information about the

determinants of productive subproject failure. As hypothesized by numerous Renascer officials during initial interviews, training and technical assistance, working capital and marketing are the most prevalent challenges faced by communities with productive subprojects. Econometric analyses have shown that while most communities can handle any single challenge, a combination of multiple challenges poses great difficulty. In addition, community interviews have provided vivid examples demonstrating the complexities of the challenges hindering productive subprojects. As mentioned earlier, Renascer is cognizant of these challenges, and has made valiant efforts to address them through its newly introduced rede solidaria program.36 However, intensifying World Bank resistance to this program suggests that other potential interventions must be considered. The World Bank is keen to avoid “slippage” to past “top-down” models of rural development (Tendler 1999), and is thus averse to Renascer’s increased role necessitated by the rede solidaria program. Renascer depends on World Bank funds for its operations, and must therefore ensure that its actions are aligned with the dual objectives of

35

Numerous less frequent challenges, such as regulatory approval and high input costs, also hinder productive subprojects. A description other common challenges, as well as a detailed discussion of regulatory approval difficulties, is provided in Appendix D.

36

In the rede solidaria program, Renascer plays an active role in developing networks of productive subprojects in a given region. This program is discussed in Section 1, and is extensively described in Appendix A.

29

community-driven development discussed earlier— delivering services effectively and fostering decisionmaking in local communities (Pritchett 2004b). The task of developing policy recommendations is therefore complicated, as it must be careful to promote these dual objectives of CDD. Any potential instrument must not only reduce the failure rate of productive subprojects, but also foster decision-making in local communities. Many plausible options fail this test, as they address the three major challenges facing productive investments but do not promote community participation in decisions. For example, if Renascer hired more specialists to provide technical assistance or prepare marketing plans, subproject performance would likely improve as communities received more support. But by heightening the role of the government, such supply-driven interventions are unlikely to enhance the participatory model that CDD embraces (Tendler 1999). After considering numerous policy options, one instrument emerged as particularly promising in achieving the dual objectives of CDD.37 This option—a market-driven mechanism for offering both training and technical assistance and marketing support—is explored thoroughly in this section.38

5.2

Engaging the Market Economic theory suggests that government functioning may be enhanced dramatically by employing

markets and market-like mechanisms for service delivery (Stiglitz 1998). Renascer and its counterparts in other Brazilian states have already embraced market mechanisms to a limited extent—for example,

37

An overview of other policy options considered by challenge is provided in Appendix D.

38

Note that working capital is not addressed by this mechanism. This challenge is particularly knotty—communities’ lack of collateral is compounded by the inability to overcome adverse selection and moral hazard using typical instruments. While joint-liability lending would usually address this issue through positive assortative matching among small groups, the equivalent program for an entire community would require bridging social capital, which is scant in rural Pernambuco. Using productive subproject funds as collateral requires a credible grim punishment of expropriation to affect behavior. This section’s focus on the other two challenges should not distress the reader: after all, econometric analyses demonstrated that communities are able to handle any single challenge, but not a combination of challenges. So by addressing the other two challenges, working capital may no longer be a binding constraint to subproject performance.

30

communities select private providers to design and submit detailed subproject proposals (Tendler 1999). However, ongoing training and technical assistance, as well as marketing support, are supply-driven and provided by public entities. As explored in community interviews (Section 4), this modality of service delivery has not effectively addressed the challenges faced by productive subprojects. A market-based mechanism for offering both training and technical assistance and marketing support could play an instrumental role in improving service delivery. This mechanism could involve the following high-level characteristics: • • • • • •

All communities with productive subprojects receive individual service accounts from Renascer.39 These accounts are credited annually with R$200, which cannot be withdrawn directly by communities. Through vouchers issued by municipalities, communities can use funds to procure training and technical assistance or marketing support by choosing among eligible providers. Municipalities make scheduling arrangements for the community, and handle various other administrative tasks. As compensation, the municipal office receives R$25 for each voucher issued. Communities provide vouchers to service providers after receiving support. Providers then submit vouchers to Renascer to receive direct remuneration. Communities deposit R$5 when receiving vouchers, which is refundable upon providing feedback on provider to municipality. Renascer compiles information on all transactions and providers, and disseminates reports at the municipal-level.

Specific details of the proposed market-based mechanism are explored throughout this section. Developing a viable instrument involves careful consideration of the interests of five key actors—Renascer, communities, service providers, municipalities, and the World Bank. A framework for conducting such analysis is now presented, followed by an extensive discussion about each of the five actors.

39

Targeting the instrument at non-troubled projects could also have appreciable impacts, as is demonstrated by the case of Santana in Appendix A.

31

5.3

Analytical Framework Evaluating whether a potential instrument will have an intended outcome requires an examination of

the incentives of each involved participant. By engaging in counterfactual analysis, this paper explores how actors optimizing their own objectives would be expected to act with and without a potential instrument.40 This analysis is conducted by examining five central elements that shape the incentives as well as constraints facing participants (Pritchett and Woolcock 2002):41 • • • • •

Resources – Which actions maximize participants’ resources? Do participants have sufficient resources to take a desired action? Information – Do participants have the incentive to withhold information? Do they have access to all relevant information? Decision-making—Do participants have the incentive to usurp communities’ decision-making ability? What decisions can each participant make? Delivery Mechanisms – Do participants have the incentive to embrace the proposed mechanism? Do they have the ability to subvert it? Accountability – What consequences do participants face? How does this affect their incentives?

Evaluating these five central elements provides insight into whether a given actor will face appropriate incentives to take a desired action.42 This analysis now examines the five primary actors—communities, service providers, municipalities, Renascer and the World Bank—whose involvement directly affects whether the potential instrument has its intended outcome.43

40

This process is not only useful for testing policy effectiveness, but is also instrumental by providing an iterative mechanism for policy design. After all, participants’ actions can be altered by adjusting their constraints through policy changes.

41

This analysis employs the five categories developed by Pritchett and Woolcock (2002), develops questions relevant for this analysis, and then uses this framework to analyze the viability of the proposed instrument.

42

By employing a rational actor approach, economic theory suggests that a given participant will take a desired action if it also optimizes his or her objectives. In turn, this condition depends on the incentives and constraints facing the actor.

43

Both Renascer and the World Bank are considered using a different technique. For Renascer, an assessment of the benefits and costs of this mechanism is provided. The World Bank is considered a veto player in this analysis (as it is unlikely to play an active role), so its support for the instrument considered.

32

5.4

Communities Communities play a key role in determining whether the proposed market-based service delivery

mechanism will have its intended outcome. Figure 5.1 provides questions developed to examine community incentives and constraints. Figure 5-1: Analysis of Community Incentives / Constraints Service Delivery Elements Resources

Information

Decision-Making

Delivery Mechanism

Accountability

Community Analysis: Incentives and Constraints • Do communities have sufficient funds for services? • Will they use funds for the intended use? • Do they have both incentives and opportunities to express local preferences? • Will they have information needed to make decisions? • Will they provide information ex post about services received? • Will they be encouraged to engage in local decision-making? • Will they have incentives to use suppliers most suited to meet local preferences? • How are their decisions insulated from external pressures? • Will they have access to the full range of available suppliers? • Will the mechanism enable communities to request and receive services promptly? • Will they demand and use unnecessary services? • Will they pay in full for services contracted and received?

Communities are unlikely to have their own resources to pay for training and technical assistance or marketing support. Productive subprojects are specifically designed to create income-generating opportunities in poor communities, and the headcount poverty rate in rural Pernambuco is 55% (World Bank 2002). Moreover, communities would have little incentive to spend limited resources on these services, as they often do not understand the extent to which specialists can contribute to their needs (Binswanger and Aiyar 2003). The proposed market-based mechanism could address these concerns by offering canalized funds to communities. By establishing accounts for each community that are credited with R$200 annually,

33

Renascer would provide communities with direly needed resources for training and technical assistance or marketing support. Using a voucher system—in which communities select services they want, and then pay providers with a voucher issued by the municipality—helps to ensure that communities cannot divert funds to other uses. Imperfect information may also challenge the effectiveness of the proposed market-based mechanism. Expected benefits from market-based instruments hinge crucially on the ability of markets to use information more effectively (Stiglitz 1998). Indeed, economic theory suggests that if information asymmetries exist, then markets may be thin or not even exist (Akerlof 1970). These theoretical arguments have important implications for communities with productive subprojects: there may not be a market for services if communities have incentives or constraints hindering information flows. The proposed mechanism could serve to enhance the inward and outward flow of information. Renascer can enhance communities’ access to information by providing pamphlets that include key information about providers, such as qualifications and daily rates of potential providers. Incentives for the outward flow of information could be created by requiring a R$5 deposit from communities to receive service vouchers, refundable upon submitting feedback about the quality of services received. This information would not only help other communities choose amongst providers, but could also offer service providers information about community preferences. Fostering community decision-making is highly important. Not only is this task one of the dual objectives of community-driven development, but it also plays an instrumental role: increasing beneficiary participation has been shown to directly cause better project outcomes (Isham, Narayan, Pritchett 1995). The proposed mechanism would explicitly increase community decision-making, in that service delivery is demand-driven. Creating accounts for communities creates an incentive for them to play an active role in choosing the optimal bundle of services given limited funds. As is discussed later, external influences on community decisions would need to be minimized by providing communities with sufficient information.

34

Also, Renascer could set up a toll-free number with an ombudsman for communities to make anonymous comments or complaints.44 With respect to accountability, allowing funds in community accounts to roll over each year would provide communities incentives to use services only when actually needed. Ensuring that communities pay for services rendered is also possible through this mechanism. Service providers would demand municipality-issued vouchers from communities as payment after they perform services, which they would then submit to Renascer for remuneration.

5.5

Service Providers Service providers also play a key role in determining whether the proposed market-based mechanism

will have its intended outcome. Figure 5.2 provides questions developed to examine service provider incentives and constraints. The effectiveness of the proposed market-based mechanism hinges crucially on the existence of many service providers. Few service providers currently exist beyond Renascer, except for government line agencies and public sector institutions such as SEBRAE.45 Often wielding monopoly power over specific realms of service provision, these providers frequently offer insufficient and untailored services (Tendler 1999). Introducing competitive pressure would likely improve service delivery, but requires financial incentives. Although many communities face challenges and desperately need support, many are either unwilling or unable to pay for it. By providing canalized accounts for training and technical assistance and marketing support, Renascer would effectively catalyze community needs into market demand. These resources would be expected to entice private parties to offer services. In order to stimulate competition

44

The Ministry of Health recently provided a toll-free line in Pernambuco, suggesting this may be a viable option.

45

SEBRAE focuses on small and medium-enterprise development.

35

further, Renascer could allow community associations with similar subprojects to act as service providers. Communities providing support would not only be particularly sensitive to issues faced by their counterparts, but they would also be likely to drive down the price of services. Figure 5-2: Analysis of Service Provider Incentives / Constraints Service Delivery Elements

Service Provider Analysis: Incentives and Constraints

Resources

• Will financial compensation be sufficient to entice service delivery? • Will providers offer services at a low price to communities?

Information

• Will they be able to inform all communities of their services? • Will they provide information to Renascer about additional needs of communities?

Decision-Making

Delivery Mechanism

Accountability

• Will providers choose to tailor services to community needs? • Will they interfere with communities’ decision-making processes? • Will they have the ability to choose their own pricing? • Will some providers be excluded from service provision? • Will the mechanism foster competition or collusion between providers? • How will the new mechanism distort current service provision? • Will they actually deliver contracted services to communities? • Will they have incentives to provide high-quality services?

Ensuring information flows among service providers is essential, because information asymmetries give rise to market power (Stiglitz 2001). Many rural communities are geographically isolated, thereby restricting their access to information. In the past, firms involved in designing subprojects in Northeast Brazil provided limited information to communities, often offering limited menus of available options (Tendler 1999). Renascer can reduce providers’ ability to restrict information flows by compiling and publicizing information about all service transactions (e.g., services provided, cost, hours involved, type of subproject). Not only would this information dissemination hinder providers from hoodwinking communities, but it would also foster competition. Given the transparency of prices, providers would face

36

incentives to lower prices in an effort to attract additional service requests. Transparency may also heighten competition on non-price characteristics, such as days waited to receive technical support. Accountability can also be heightened with the proposed market-based instrument. First, it is clear that providers will have an incentive to deliver contracted services—they cannot get reimbursed from Renascer unless they receive a voucher from the community during their visit. Community feedback can also be used to increase accountability: since communities pay a R$5 deposit when receiving vouchers, they will indeed have an incentive to provide feedback. Publicizing this feedback would create an incentive to provide high-quality services and tailor offerings to communities, as providers would be concerned about reputation impacts.

5.6

Municipalities Municipalities also play a key role in determining whether the proposed market-based mechanism

will have its intended outcome. Figure 5.3 provides questions developed to examine municipality incentives and constraints. Municipalities are likely to weigh the relative costs and benefits of the proposed market-based instrument carefully. Although the mechanism does not require municipalities to contribute funds to pay service providers, the administrative burden placed on them is onerous. The role of the municipal office would include meeting community representatives, discussing potential providers, making scheduling arrangements with service providers and issuing vouchers. Although the relative frequency of such interactions will be low, it is important to create incentives for the municipality to participate. By paying municipalities R$25 per transaction handled, their participation will be encouraged, without providing municipal incentives for artificial stimulation of service demand.

37

Figure 5-3: Analysis of Municipality Incentives / Constraints Service Delivery Elements

Municipality Analysis: Incentives and Constraints

Resources

• Does service provision deplete municipal budgets? • Can municipalities divert funds for alternate use? • Will they disproportionately provide services to favored communities through clientelism?

Information

• Will municipalities have full information about providers? • Will they have incentives to share full information about providers to communities?

Decision-Making

• Will municipalities encourage community members to engage in decisionmaking? • How much discretion do they have in eligibility of providers?

Delivery Mechanism

• Will they have incentives to support the proposed mechanism? • Will they distort existing service delivery due to incentives created by new mechanism?

Accountability

• Will their attentiveness to service requests be accountable? • Will community and supplier complaints reach Renascer?

In addition to providing a financial incentive for municipalities’ administrative roles, the proposed intervention also imposes constraints to constrain their power over resources. By channeling funds directly from Renascer to service providers, the mechanism circumvents direct graft by municipalities. Clientelism is another concern, as mayors in Northeast Brazil have been known to promote the initiation of subprojects in communities with large constituencies (Damiani 1996). Setting up community-level accounts with equal funding levels prevents support from being channeled towards communities for political reasons. Special care must be taken to ensure that municipalities provide communities with complete information about their accounts and policies. Municipalities have incentives to reduce transparency, which limits their scope of possible actions (Stiglitz 2001). For example, municipalities may still be able to use the proposed market-based system for clientelistic purposes if communities are unaware that they actually have their own accounts. As the primary administrator, the municipality would have considerable control over information that communities receive. One way in which Renascer may be able to ensure that at least

38

some information is distributed to communities is by using the voucher as an informational tool. The voucher could take the form of an entire booklet, which would only be valid in its entirety. As usual, the municipality would provide the voucher to the community to use as payment for services rendered. But because weeks or months usually elapse before receiving requested support (at least presently), communities would have ample time to read the booklet’s relevant text to glean information not provided by their municipality.46

5.7

Renascer Exploring the interests of communities, service providers and municipalities suggests that the

proposed market-based mechanism may indeed be a viable instrument, but would require careful design and implementation. This section explores the benefits to Renascer of this effort. Renascer would benefit greatly by outsourcing service provision. Training and technical assistance is a particularly substantial strain on institutional resources. Renascer representatives must frequently travel to distant communities to help communities facing difficulties with their productive subprojects.47 This responsibility is considered onerous by Renascer staff; not only is it time-consuming, but representatives must often attempt to provide assistance to communities with unfamiliar projects. Providing technical service slows overall subproject disbursement, as the same representatives are responsible for conducting site visits of potential new recipients. Indeed, subproject accompaniment is often a binding constraint on the disbursement of new subprojects—as discussed earlier, the need to support existing subprojects contributed to the sharp declines in disbursal after election years shown in Figure 2.1.

46

Although the majority of rural community members are illiterate, most associations have at least one literate member.

47

Information on training and technical assistance in this paragraph stems from interviews with 20 members of Renascer staff conducted by author in Jun-Aug 2003. A detailed interview guide (in Portuguese, and translated into English) is provided in Appendix A.

39

The finding that support services pose a binding constraint on disbursements is of fundamental importance. Pressure to disburse is intense, and comes from all directions—communities, service providers, municipalities, and the World Bank (Tendler 1997). By addressing community needs for training and technical assistance and marketing support, Renascer may indeed be able to increase disbursement levels. For this reason, Renascer should be keenly interested in the proposed mechanism, so long as its resource and implementation costs are not excessive. Resource costs are expected to total under R$100,000 per year, which is less than 1% of operating funds.48 Although considerable implementation costs would initially ensue, most ongoing administration costs would be handled by municipalities.49

Given these relatively low

costs and the major expected benefits from outsourcing service provision, Renascer should give this instrument careful consideration.

5.8

World Bank The World Bank wields considerable influence over Renascer, given that it provides subsidized

loans to pay for 75% of subproject disbursements (World Bank 2002). Continued support hinges on Renascer’s commitment to the dual objectives of community-driven development—delivering services effectively and fostering decision-making in local communities (Pritchett 2004b). Unlike Renascer’s newly introduced rede solidaria program, the proposed market-based service delivery mechanism promotes both of CDD’s dual objectives. Not only would the mechanism expand communities’ access to training and technical service and marketing support, but it would also explicitly increase community decision-making through its demand-driven approach. The World Bank is likely to

48

This estimate assumes that R$200 accounts are established for the 356 subprojects initiated over the past 5 years, and that on average each community makes three transactions per year (for which municipalities receive R$25 per transaction).

49

Primary continued Renascer roles include collecting and publishing data on transactions and providers, as well as playing a monitoring role.

40

support the market-based model, given that it piloted Cédula da Terra, a successful market-driven land reform program, in 1997 (World Bank 2002). In addition to these broader goals, the instrument addresses shorter-term objectives by increasing disbursement rates. Given the overall confluence of positive factors, it is anticipated that the World Bank will embrace the mechanism.

5.9

Political Dynamics Before taking further action, Renascer must closely examine potential political dynamics. As is

discussed, certain implementation steps could lead to strong political opposition from one or more groups of involved participants. Communities may be likely to embrace the new delivery mechanism, as it offers additional resources for services. However, communities may oppose the introduction of this mechanism—and even threaten mayors with lost votes if the municipality implements it—if they perceive it to be displacing existing, free services. Thus, it could spark considerable political tension if Renascer was deemed to be cutting back on assistance, and even foment intense political opposition if Renascer chose to become an actual service provider using the market mechanism. Until the mechanism gains ongoing support from communities, municipalities and service providers, Renascer cannot appear to be charging for what it once provided for free. The market system could instead be introduced as an additional resource. Then, Renascer could gradually cut back on staff time allocated to addressing training and technical assistance and marketing challenges. Since fewer staff resources would imply a longer delay for Renascer support, the market-based delivery mechanism could be promoted to waiting communities an additional, more expeditious alternative. Eventually, once communities are accustomed to the market system, Renascer may well choose to compete as a service provider.

41

This specter of political tension is not limited to the relationship between communities and Renascer. Despite the many potential benefits to service providers of the proposed market-based mechanism, they may in fact subvert it while engaging in profit-maximizing behavior. Providers may apply political pressure on municipalities in an effort to attract service requests. Although this instrument ostensibly devolves decisionmaking to the local level, communities’ ability to choose providers is not impervious to outside influence. Communities must receive vouchers from their municipalities, and even if reporting mechanisms (e.g., the toll-free hotline mentioned earlier) are put in place, politicians will still enjoy a certain degree of influence over community members. If a provider threatens to shift political support away from a mayor if services are contracted to others, political pressures on community decision-making may well intensify. In order to mitigate the potential of provider-municipality tensions, it may be beneficial to prohibit service providers from operating within their own municipality.50 This restriction would reduce the incentive for providers to engage in this type of pernicious behavior in their own municipalities, where they might be expected to have the most political leverage.51 Forbidding intra-municipality service delivery could also reduce potential distortions created by the market-based instrument. Without this restriction, the instrument could corrode bridging social capital by monetizing network relations. After all, a person with technical skills may no longer want to help a nearby community for free if he or she could potentially charge a fee through the market-based mechanism. Rural communities in Pernambuco have minimal social networks outside their own municipalities, so forbidding intra-municipality service delivery could reduce negative influences on bridging social capital. Given that one of the aims of productive subprojects is to improve income opportunities, this point is particularly

50

Of course, it should be noted that transportation costs would likely increase with this restriction as communities could not contract nearby providers.

51

Note the assumption that providers cannot register their operations in other municipalities. Also, it is assumed that they would not engage in collusive behavior; otherwise, a provider could apply pressure on its own municipality on behalf of another provider, in return for similar favors.

42

salient. Productive subprojects’ success hinges on their ability to integrate communities into broader input and factor markets beyond their own communities, so corroding bridging social capital would be particularly deleterious.

5.10

Next Steps

As the preceding discussion of political dynamics has shown, the successful implementation of a market-based mechanism will hinge crucially on the perceptions of each type of stakeholder. Even if this instrument is designed with appropriate incentives to elicit desired behaviors and contributions in theory, without the buy-in of each stakeholder its implementation may be sabotaged. In order to achieve this support, it is therefore essential to design the instrument through a participatory process. For example, a process could include the following steps over the next year: Month 1-2 • •

Introduce the concept of a market-based mechanism in a meeting with all Renascer staff. Emphasize that the mechanism would be developed with input from all staff members, in order to shore up broader support within the institution. Establish a task force to develop a preliminary proposal for this mechanism, expanding on the discussion of incentives introduced in this paper. This task force could include six mid-level Renascer managers. Each relevant Renascer department would ideally have representation on this task force, including accounting (to design community accounts), public relations (for program publicity), and municipal affairs (to consider voucher administration).

Month 3-5 •

•

Approach 20 mayors with the preliminary proposal, emphasizing the opportunity to meet needs of their constituents. Municipalities could be chosen randomly, after ensuring geographic representation across the three regions in Pernambuco. Invite these mayors to attend a half-day 52 workshop at Renascer’s Recife office to elicit their feedback. The initial proposal could be adapted to the extent possible, in order to obtain municipality support. Allow mayors to announce the proposed instrument to communities at their monthly municipal council meetings. These municipal councils were specifically designed with the support of Renascer as it decentralized its operations, and include representatives from each community. Renascer

52

Mayors will have an incentive to attend—not only will the proposal be an opportunity to help constituents, but they may view involvement as fostering the likelihood of future Renascer subprojects in their respective municipalities.

43

•

representatives could participate in the meeting, eliciting feedback to incorporate into program design. Focus groups of communities could be used to gather additional input. Contact existing private providers of technical service, who currently receive Renascer funds to assist communities during the first months of subproject initiation. Emphasizing the possibility of increased revenues, obtain their feedback and incorporate into program design to the extent possible. In addition, it could be possible at this stage to contact communities with successful subprojects to explore their willingness to act as service providers, and to contact regional marketing firms to gauge their interest in participating.

Month 6 • •

After obtaining the feedback of relevant stakeholders, the initial task force could redraft the initial program proposal to incorporate identified stakeholder concerns. Next, a presentation about the proposal could be developed to convey objectives and operations. Meet with Luis Coirolo from the Recife office of the World Bank using this presentation. By using examples of successful communities needing additional support (e.g., Santana’s need for marketing assistance described in Appendix A), it may be possible to couch this meeting in positive terms instead of focusing solely on subproject failures. In addition, this collaborative meeting may alleviate tension created by the launch of the rede solidaria program without World Bank input. Solicit feedback and test willingness to earmark funds for program use.

Pilot Program and Potential Scaling Up • •

•

Launch a one-year pilot program in the 20 municipalities involved in program design. During the pilot, conduct real-time modifications as necessary to promote program success. Based on experiences of this pilot, reassess the desirability of a market-based instrument for the provision of training and technical service and marketing support. If deemed worthwhile, the initial Renascer task force could further refine program design to enable scaling up. The program could then be expanded more broadly to subprojects across Pernambuco’s 180 municipalities. Conduct continuous evaluation of the performance of this market-based instrument. Evaluation inputs could include community feedback forms and an analysis of both transactions by community and subproject failure rates. In addition, interviews of communities could investigate the extent to which local decision-making occurs, and frequency of external pressure by municipalities and service providers.

By including each stakeholder in a collaborative process such as that described above, the proposed market-based instrument will be more likely to gain a broad base of support. Although designing a technical solution using Renascer expertise may seem more expeditious, this process of adaptive decision-making will enhance the probability of success of the market-based mechanism.53 In addition, by including communities

53

This discussion of adaptive decision-making stems from a conversation with Michael Woolcock, and his interpretation of Heifetz.

44

in program design, this process helps to promote one of the dual overall objectives of CDD—fostering community decision-making.

6

Conclusion The success of many productive investments demonstrates their potential to deliver various benefits

to rural communities, including higher income, increased employment and strengthened social capital. Despite these successes, nearly 20% of subprojects initiated in Pernambuco over the past five years have completely stopped production. Interviews with Renascer staff and communities identified insufficient training and technical assistance, marketing support, and working capital as the major challenges facing communities with productive subprojects. Econometric analyses suggested that while most communities can handle any single challenge, a combination of multiple challenges poses great difficulty. By implementing a market-based mechanism to provide training and technical assistance and marketing support, Renascer may be able promote the dual objectives of community-driven development—delivering services effectively and fostering decision-making in local communities.

45

References Akerlof, G. (1970). “The Market for ‘Lemons’: Quality, Uncertainty and the Market Mechanism.” Quarterly Journal of Economics 84: 488-500. Bebbington, A. and T. Carrol. (2000). “Induced Social Capital and Federations of Rural Poor.” Washington, D.C.: The World Bank. Binswanger, H. and S. Aiyar (2003). “Scaling Up Community-Driven Development: Theoretical Underpinnings and Program Design Implications.” Washington, D.C.: The World Bank. Coirolo, L. (2003). “The Case for Decentralization: Community-Based Development in Northeast Brazil” (Presentation). The World Bank. Da Silva, J. and M. Grossi. (2001). “Rural Non-farm Employment and Incomes in Brazil: Patterns and Evolution.” World Development,Vol.29, No. 3, pp 443-453. Damiani, O. (1996). “Report for the Government of Brazil - World Bank Commission: Rural Poverty.” Cambridge: MIT. Damiani, O. (1996b). “Impressions from the Field” (Unpublished). Cambridge: MIT. Fausto, B. (1999). “A Concise History of Brazil.” Cambridge, UK: Cambridge University Press. Feldman, T. and S. Assaf. (2000). “Social Capital: Conceptual Frameworks and Empirical Evidence.” World Bank. Ferreira, F. and P. Lanjouw. (2001). “Rural Non-farm Activities and Poverty in the Brazilian Northeast.” World Development, Vol. 29, No. 3, pp 509-528. Hentschel, J. (1999). “Contextuality and Data Collection Methods: A Framework and Application to Health Service Utilization.” Journal of Development Studies, Vol. 35, No. 4, pp 64-94. Hesse, F. (1996). “Against All Odds: Successful Cases of Collective Use Of Tractors In Rural Ceará, Brazil.” MIT Department of Urban Studies and Planning Master’s Thesis. Isham, J. and D. Narayan and L. Prichett. (1995). “Does Participation Improve Performance? Establishing Causality with Subjective Data.” World Bank Economic Review, Vol. 9, Iss.2, pp 175-200.

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Jack, W. (2001). “Social Investment Funds: An Organizational Approach to Improved Development Assistance.” The World Bank Research Observer, Vol. 16, No. 1 (Spring 2001), pp 109-124. Khwaja, A. (2002). “Can good projects succeed in bad communities?” Cambridge: Harvard University. Narayan, D. (1999). “Bonds and Bridges: Social Capital and Poverty.” Washington, D.C.: The World Bank. Narayan, D. and L. Pritchett. (1996). “Cents and Sociability: Household Income and Social Capital in Rural Tanzania.” Policy Research Working Paper 1796. Washington, D.C.: The World Bank. Pritchett, L. (2004). “Overall Impressions from the CDD Case Studies for the Shanghai Conference.” Unpublished document. Pritchett, L. (2004b). Personal Conversation. Pritchett, L. And M. Woolcock. (2002). “Solutions When the Solution is the Problem: Arraying the Disarray in Development.” Center for Global Development. Projeto Renascer. (1999). “Relação dos Municípios Para Atuação FUMAC e FUMAC-P.” Recife, Brazil. Projeto Renascer. (2002). “Avaliação dos Conselhos Municipais FUMAC-P.” Recife, Brazil. Projeto Renascer. (2002). “O Caminho da Pesca Sustentável.” Recife, Brazil. Projeto Renascer. (2002). “Relatório de Atividades 1999-2002.” Recife, Brazil. Projeto Renascer. (2003). January 2003 Newsletter. Ano 3, Número 15. Recife, Brazil.URL: www.pernambuco.gov.br/renascer Projeto Renascer. (2003). March 2003 Newsletter. Ano 3, Número 17. Recife, Brazil. URL: www.pernambuco.gov.br/renascer Rao, V. and A. Ibáñez. (2002). “The Social Impact of Social Funds in Jamaica: A Mixed-Methods Analysis of Participation, Targeting and Collective Action in Community Driven Development.” Washington, D.C.: The World Bank. Rao, V. and M. Woolcock. (1999). “Chapter 8: Integrating Qualitative and Quantitative Approaches in Program Evaluation.” The World Bank. Ravi. (2001). “Q-squared? A Commentary on Qualitative and Quantitative Poverty Appraisal.” Cornell University. Rawlings, L., L. Sherburne-Benz, et al. (2004). “Evaluating Social Funds.” Washington, D.C.: The World Bank. Stiglitz, J. (1998). “More Instruments and Broader Goals: Moving Toward the Post-Washington Consensus.” The World Bank. Stiglitz, J. (2001). “Information and the Change in the Paradigm in Economics.” Lecture, Columbia University.

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Tendler, J. (1982). “Rural Projects through Urban Eyes: An Interpretation of the World Bank’s New-Style Rural Development Projects.” Washington, D.C. Tendler, J. (1997). “Good Government in the Tropics.” Baltimore: Johns Hopkins University Press. Tendler, J. (1999). “The Rise of Social Funds: What Are They A Model Of?” Boston: MIT/UNDP Decentralization Project. Van Domelen, Julie. (2003). “Social Capital in the Operations and Impacts of Social Investment Funds.” Washington, D.C.: The World Bank. Van Zyl, J., T. Barbosa, et al. (1995). “Decentralized Rural Development and Enhanced Community Participation: A Case Study from Northeast Brazil. Washington, D.C.: The World Bank. Wassenich, P. and K. Whiteside. (2003). “CDD Impact Assessments Study: Optimizing Evaluation Design Under Constraints.” Washington, D.C.: The World Bank. Wooldridge, J. (2003). “Introductory Econometrics: A Modern Approach.” Mason, OH: Thomson. World Bank. (1991). “Dynamics of Rural Development in Northeast Brazil: New Lessons from Old Projects.” Washington, D.C. World Bank. (2000). “FUMAC—Municipal Fund for Community-Driven Development Projects, Northeast Brazil.” Washington, D.C. World Bank. (2001). “Rural Poverty Alleviation in Brazil: Towards An Integrated Strategy.” Washington, D.C. World Bank. (2002). “Project Appraisal Document: Brazil Rural Poverty Reduction Program, State of Pernambuco.” Washington, D.C. World Bank. (2003). “Overview of Social Funds.” Washington, D.C.

48

Appendices A. A. Program Program Overview Overview

B. B. Quantitative Quantitative Analyses Analyses

C. C. Econometric Econometric Tables Tables

D. D. Community Community Interviews Interviews

Community Vignette Santana’s animal feed subproject demonstrates the substantial benefits productive investments can offer, as well as potential opportunities to expand benefits even further Rural Association of Santana z

z

z

z

z

z

The Rural Association of Santana processes animal feed using equipment purchased through the PCPR program The community receives R$52,300 in direct benefits each year from the mill, which is comparable to the subproject’s initial investment amount Whereas Santana farmers previously sold all their algaroba to a corporate processor, they are now able to process much of it themselves Santana’s substantial benefits from its productive subproject could more than double if two challenges faced by the community are addressed Increasing working capital could generate R$43,300 in additional annual direct benefits, as shown by an accompanying analysis Providing marketing assistance could also yield Santana R$35,800 in additional annual direct benefits

Note: Analysis conducted by author. See accompanying analysis for detailed calculations Source: Moacir Vicente da Silva, President of Associação Rural de Santana. Association received R$43,781 (first parcel liberated 3/23/2000) and R$ 9,342 (first parcel liberated 11/30/2001)

Community Vignette Santana currently receives R$52,300 of direct benefits each year from its animal feed processing facility Santana: Direct Annual Community Benefits zz

zz

zz

zz

Incremental Incremental Algaroba Algaroba Income Income represents represents the the additional additional income income farmers farmers earn earn from from selling selling algaroba algaroba to to Santana’s Santana’s grain grain processing processing unit unit –– Santana Santana typically typically pays pays 15 15 centavos centavos per per kg kg during during the safra, and 21 centavos per kg otherwise the safra, and 21 centavos per kg otherwise –– Farmers Farmers not not selling selling to to the the association association earn earn 44 to to 55 centavos per kg selling to a corporate processor centavos per kg selling to a corporate processor Profit Profit from from Grain Grain Sales Sales shows shows the the annual annual profits profits Santana Santana earns earns from from selling selling its its grain grain to to wholesalers wholesalers –– Average Average profit profit estimated estimated to to be be R$67.20 R$67.20 per per ton ton –– Santana Santana produces produces on on average average 285 285 tons tons per per year year –– Profits are currently reinvested to build working Profits are currently reinvested to build working capital capital Wages Wages Paid Paid reflects reflects the the annual annual earnings earnings received received by by the the three three employees employees of of the the grain grain processing processing unit unit –– Each Each of of the the unit’s unit’s three three employees employees receives receives R$8 R$8 per per ton ton of of overall overall output output Incremental Incremental Corn Corn Income Income represents represents the the additional additional income income farmers farmers earn earn from from selling selling corn corn to to Santana’s Santana’s grain grain processing processing unit unit –– Santana Santana pays pays the the market market rate rate for for corn, corn, which which usually usually varies varies from from R$20 R$20 per per 60 60 kg kg bag bag during during the the safra safra to to R$35 R$35 per per bag bag otherwise otherwise –– Farmers Farmers selling selling to to the the association association receive receive the the full full market market price, price, whereas whereas they they would would lose lose 7.5% 7.5% to to middlemen middlemen transporting transporting the the corn corn otherwise otherwise

60,000 4,100

52,300

Incremental Corn Income

Total Direct Benefits

6,800

50,000 19,200

40,000

R$ 30,000 22,200

20,000

10,000

0 Incremental Algaroba Income

Profit from Grain Sales

Wages Paid

Note: Analysis conducted by author. Profit from grain sales determined using the following data: overall gross inputs are 50% algaroba, 50% corn. Half of algaroba inputs purchased in harvest at R$0.15 per kg, half out of harvest at R$0.21 per kg. Drying process reduces purchased algaroba weight by 13.5%. 80% of corn inputs purchased in harvest at R$20 per 60 kg sack, 20% out of harvest at R$35 per sack. Packaging costs are R$0.30 per 40 kg sack. Energy consumption averages 9.5 kw per ton, at R$0.275 per kw. Maintenance costs are R$185 per month during 40-ton production, less shown energy costs plus R$100 in filter costs per year. Santana receives $0.40 per kg for its animal feed. Source: Moacir Vicente da Silva, President of Associação Rural de Santana. Association received R$43,781 (first parcel liberated 3/23/2000) and R$ 9,342 (first parcel liberated 11/30/2001)

Community Vignette Offering working capital and marketing assistance could provide Santana an additional R$79,100 in direct benefits each year Increased Working Capital: Incremental Annual Direct Benefits

Increased Working Capital

60,000 zz

zz

zz

Increased Increased working working capital capital could could enable enable Santana Santana to to use use only only algaroba algaroba in in production, production, increasing increasing annual annual direct direct benefits benefits by by R$43,300 R$43,300 Santana Santana currently currently uses uses corn, corn, aa more more expensive expensive substitute substitute input, input, because because itit does does not not have have funds funds to to purchase purchase enough enough algaroba algaroba while while itit is is in in season season

(4,100)

22,200

45,000

43,300

R$ 30,000

With With more more funds funds to to stock stock up up on on algaroba, algaroba, the the association association would would benefit benefit from from cost cost reductions reductions and and additional additional algaroba algaroba income, income, but but lose lose some some corn corn income income by by selling selling to to middlemen middlemen

25,100

15,000 0 Savings: Exclusive Additional Algaroba Loss in Corn Income Total Direct Benefits Algaroba Use Income

Marketing Assistance zz

zz

zz

Marketing Assistance: Incremental Annual Direct Benefits 60,000

Marketing Marketing assistance assistance could could yield yield Santana Santana an an estimated estimated R$35,800 R$35,800 in in incremental incremental annual annual direct direct benefits, benefits, given given current current profit profit margins margins Santana Santana currently currently operates operates at at capacity capacity for for six six months, months, and and could could produce produce year year around around through through assistance assistance in in reaching reaching new new markets markets Benefits Benefits would would include include incremental incremental income income from from algaroba algaroba and and corn corn sales, sales, increased increased profits, profits, and and additional additional wages wages

45,000 4,700

R$

35,800

Incremental Corn Income

Total Direct Benefits

13,100

30,000 15,000

2,800

15,200

0 Incremental Algaroba Income

Additional Profit from Grain Sales

Incremental Wages

Note: Analysis conducted by author. Savings and profit calculations shown based on following data: current overall gross inputs are 50% algaroba, 50% corn. Half of algaroba inputs purchased in harvest at R$0.15 per kg, half out of harvest at R$0.21 per kg. Drying process reduces purchased algaroba weight by 13.5%. 80% of corn inputs purchased in harvest at R$20 per 60 kg sack, 20% out of harvest at R$35 per sack. Three employees work in the processing facility and are each paid R$8 per overall ton produced. Packaging costs are R$0.30 per 40 kg sack. Energy consumption averages 9.5 kw per ton, at R$0.275 per kw. Maintenance costs are R$185 per month during 40-ton production, less energy costs plus R$100 in filter costs per year. Santana receives $0.40 per kg for its animal feed. Incremental income calculations based on alternative algaroba price of 4-5 centavos per kg (corporate processor), and 7.5% higher price received on association corn sales by avoiding transportation middlemen. In addition to working capital, algaroba storage would require additional space, costing roughly R$6,500. Current production is 40 tons per month for 6 months, but only 5-10 tons during other times Source: Moacir Vicente da Silva, President of Associação Rural de Santana. Association received R$43,781 (first parcel liberated 3/23/2000) and R$ 9,342 (first parcel liberated 11/30/2001)

Santana Animal Feed Processing Cost Breakdown Santana Animal Feed Processing Cost Breakdown (R$ per Ton)

400

400.0

Revenue

24.0

7.5

2.6

2.4

Energy

Maintenance

Profit

0.6%

16.8%

104.1

300 R$ per Ton 200

67.2

192.3

100

0

% of Revenue

Corn

Algaroba

Labor

Packaging

48.1%

26.0%

6.0%

1.9%

0.7%

Note: Analysis conducted by author. Algaroba is substantially cheaper than corn (a substitute input), but working capital constraints inhibit Santana from stocking up when available; thus, overall gross inputs are 50% algaroba, 50% corn. Half of algaroba inputs purchased in harvest at R$0.15 per kg, half out of harvest at R$0.21 per kg. Drying process reduces purchased algaroba weight by 13.5%. 80% of corn inputs purchased in harvest at R$20 per 60 kg sack, 20% out of harvest at R$35 per sack. Three employees work in the processing facility and are each paid R$8 per overall ton produced. Packaging costs are R$0.30 per 40 kg sack. Energy consumption averages 9.5 kw per ton, at R$0.275 per kw. Maintenance costs are R$185 per month during 40-ton production, less shown energy costs plus R$100 in filter costs per year. Santana receives $0.40 per kg for its animal feed. Source: Moacir Vicente da Silva, President of Associação Rural de Santana. Association received R$43,781 (first parcel liberated 3/23/2000) and R$ 9,342 (first parcel liberated 11/30/2001)

Rede Solidária Renascer is actively working to address challenges facing productive investments by organizing networks of subprojects z

z

z

z

z

z

Renascer recognizes the challenges facing productive investments, and is actively seeking opportunities to increase the benefits that accrue to subproject recipients Renascer chose to stop approving productive subprojects for a full year (Dec 2001- Dec 2002), and is launching a revised program All productive subprojects in the PCPR 2 must represent part of a rede solidária. Since December 2002, 11 productive subprojects have been approved within two networks: – Agroindustry: eight communities primarily in Mata Sul, with two other communities awaiting approval – Fish processing: three communities in Mata Norte These subprojects are receiving high levels of attention and support from both Renascer and various other partners Due to this assistance, rede subprojects are unlikely to face most of the major challenges commonly experienced by communities with productive subprojects However, the key remaining question is whether the rede concept can be expanded to benefit a wider base of recipients – Average size of rede productive subprojects is R$107,103 compared to R$39,453 for PCPR 1 productive subprojects – Agroindustry initially involves 6-12 producers per community, but many others could potentially benefit if rede is successful – Ten of 11 approved subprojects are in the Mata Sul and Norte regions. Other regions are now being considered

PCPR 2: Approved Productive Subprojects Community

Type of Project

Total Funds (R$)

Producers Involved*

Families in Association

Rodeadouro

Agroindústria de Frutas

128,043

12

15

Conceição e São José

Agroindústria de Frutas

119,398

7

46

São Benedito Do Sul

Agroindústria de Frutas

111,531

6

30

Vila Nova

Agroindústria de Frutas

111,531

10

22

Sítio Do Meio

Agroindústria de Frutas

119,398

10

10

Serra Dos Quilombos

Agroindústria de Frutas

119,398

10

25

Pedra Imã

Agroindústria de Frutas

119,398

10

21

Serra Dágua

Fitoterapia

96,360

10

36

Atapuz

Aquisição de equipamentos

42,399

NA

50

Tejucupapo

Aquisição de equipamentos

44,421

NA

50

Pontas De Pedra

Aquisição de equipamentos

166,259

NA

300

Agroindustry Network * From “Terms of Reference” sheet provided to potential technical assistance providers at agroindustry network meeting, July 2003 Source: Analysis conducted by author. Renascer MIS (PCPR 2), July 2003; Interviews of five PCPR 2 rede subprojects, conducted in July 2003

Fish Processing Network

Rede Solidária Three fishing communities in Goiana form one of Renascer’s new productive investment networks z

z

z

z

z

z

z

Source:

The fish processing rede solidária in the municipality of Goiana involves productive subprojects in three communities: Ponta de Pedras, Atapuz, and Tejucupapo

PCPR 2: Partner Institutions in Goiana’s Rede Solidária

Instituição Renascer (PCPR)

• Financiamento da reforma unidade de beneficiamento e comercialização de Ponta de Pedras • Financiamento dos pontos de recepção e comercialização do pescado de Atapuz, Tejucupapo e Barra de Catuama

Renascer (Prorenda Rural-PE)

• • • •

Overall goal of network is to generate employment and income for over 10,000 fishermen in Goiana Approved subprojects used for creating a processing and commercialization facility in Ponta de Pedras (R$166,259), as well as points of reception and commercialization in Atapuz (R$42,399) and Tejucupapo (R$44,421)

• • •

Ponta de Pedras will use part of the other two communities’ production to produce goods such as bolinho de peixe Communties are receiving significant marketing assistance, as well as training and technical assistance Interviewees mentioned some concern about insufficient working capital and regulatory hassles, but the level of attention given to these networks suggests that special efforts will be made The rede has a high level of support from the municipality, as well as numerous partners listed in table: “Entendemos que o estabelecimento de cooperação entre instituições...é fundamental para o desenvolvimento da atividade pesqueira no município, solidificando uma ação de extensão contemporânea capaz de diminuir a pobreza existente no campo.” Manoel Cosme – Prefeitura de Goiana

Tipo de cooperação

•

Implementação de Programa de Extensão Pesqueira: Apoio à organização das comunidades Capacitação dos pescadores e das lideranças Assessoramento técnico–produção, beneficiamento e comercialização Pesquisa aplicada sobre maricultura Programa de educação ambiental Zoneamento, ordenamento e gerenciamento pesqueiro em Goiana Articulação institucional

Comunidades de pescadores

• Execução dos projetos, prestação de contas e gerenciamento dos empreendimentos

Prefeitura de Goiana

• Fornecimento de ponto de vendas no mercado público de Goiana, para a comercialização dos produtos das comunidades.

Conselho Pastoral dos Pescadores – CPP

• Apoio organizacional das comunidades pesqueiras envolvidas no projeto

Federação dos Pescadores de Pernambuco – FPP

• Mobilização das comunidades e monitoramento dos trabalhos

Fundação Alcoa

• Financiamento da unidade de recepção e comercialização de pescado de Atapuz

Fabrica Ponsa S/A

• Aquisição dos produtos Pesqueiros para o fornecimento ao seu refeitório

Projeto Competir (Senai, Sebrae e GTZ)

• Promoção de marca, embalagem e design dos produtos das comunidades pesqueiras

Analysis conducted by author. “Rede solidária: o caso da pesca sustenável em Goiana,” Josenildo de Souza e Silva; Renascer MIS (PCPR 2), July 2003; Interviews of Atapuz and Ponta de Pedras in July 2003

Unidade Técnica Guia da Entrevista Panorama da Entrevista Essa entrevista consiste nas seguintes seções: I. II. III. IV. V. VI.

Introdução Papel dos Investimentos Produtivos “Scaling Up” dos Investimentos Produtivos Bem-Sucedidos Principais Fatores a Considerar Estimulando Demanda por Investimentos Produtivos Vínculos

Introdução (Minuto 0) z z

z

Apresente o entrevistador Explique o motivo da pesquisa: “Como seu programa tem mostrado, investimentos produtivos tem o potencial para gerar oportunidades de trabalho e renda nas comunidades rurais. Essa pesquisa tem como objetivo geral entender as oportunidades apresentadas pelos projetos produtivos orientados para o mercado”. Conheça o entrevistado através de uma conversa informal sobre sua experiência: –

Ha quanto tempo você trabalha nesta unidade técnica?

–

Onde você trabalhou antes?

Papel dos Investimentos Produtivos (Minuto 3) z

Vamos começar conversando sobre o papel dos investimentos produtivos no PCPR. Na sua opinião, quais são os objetivos gerais de sua agencia em apoiar subprojetos produtivos? –

z

O PCPR II agora distingue entre duas categorias de investimentos produtivos: projetos com clara orientação para o mercado e projetos sem orientação para o mercado. Qual é o motivo de diferenciar entre essas duas categorias? –

z

Como esses objetivos diferem daqueles relativos a investimentos em infraestrutura ou sociais?

Você considera uma das categorias mais prioritária que a outra?

Seu manual de operações estima que 25% dos investimentos serão do tipo produtivo durante esse projeto de quatro anos. Que porcentagem dos investimentos produtivos você estima será alocada para subprojetos com orientação para o mercado?

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Unidade Técnica Guia da Entrevista “Scaling Up” dos Investimentos Produtivos Bem-Sucedidos (Minuto 10) z

Você poderia fornecer alguns exemplos de investimentos produtivos com orientação para o mercado que na sua consideração estariam entre os mais bem-sucedidos de Pernambuco? –

z

Você acha que seria possível “scale up” (expandir na grande escala) o sucesso desses subprojetos a outras comunidades? –

z

z

Por que você considera esses subprojetos particularmente bem-sucedidos?

Como isso seria atingido?

Que fatores seriam mais importantes para o êxito desses subprojetos na sua opinião? –

Explore os assuntos de infra-estrutura existentes, localização geográfica perto de cidades, assistência técnica, tecnologia e crédito.

–

O sucesso desses subprojetos sugere a você que os mesmos tipos de investimentos devam ser propostos pelas associações em outras áreas?

Ha outros investimentos produtivos com orientação para o mercado que você vê como oportunidade de crescimento para as áreas rurais? –

Sua unidade técnica já conduziu alguma pesquisa sobre os investimentos produtivos que seriam mais atrativos para as áreas rurais?

Principais Fatores a Considerar (Minuto 20) z

Na sua opinião, quais são os desafios mais difíceis enfrentados por comunidades rurais em relação aos investimentos produtivos? –

z

z

Você acha que as comunidades recebem um nível suficiente de assistência técnica? –

Que outros tipos de assistência técnica poderiam ser úteis?

–

Quais são as fontes mais eficientes de assistência técnica disponíveis atualmente?

–

Que alternativas você veria para expandir assistência técnica ainda mais?

Até que ponto a falta de crédito impede as comunidades de empreender investimentos produtivos com orientação para o mercado através o PCPR? –

z

Explore os assuntos de assistência técnica, tecnologia e crédito.

Considerando que as comunidades recebem fundos perdidos através desse programa, qual a probabilidade que as comunidades devolvam os empréstimos?

Quais são os canais que as comunidades rurais tipicamente usam para atingir o mercado geral? –

Quais os meios mais vantajosos para que as comunidades possam atingir o mercado, na sua opinião?

Page 2 of 4

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Unidade Técnica Guia da Entrevista Estimulando Demanda por Investimentos Produtivos (Minuto 30) z

Como as comunidades aprendem sobre os tipos específicos dos investimentos produtivos que elas podem propor? –

z

z

Que recursos estão disponíveis pelas comunidades para que elas possam analisar opções dos investimentos antes de apresentar as propostas? Quem fornece essa assistência “pre-proposta?” Para quantos tipos dos investimentos produtivos existem projetos-padrões? Quanto desses são por investimentos produtivos com orientação para o mercado? –

z

z

Quão específicas são as suas campanhas de divulgação em relação aos tipos dos investimentos produtivos que disponíveis?

Parece que o processo de propor um investimento é consideravelmente mais fácil para os investimentos com projetos-padrões. Qual é o efeito que isso tem nas propostas de investimentos produtivos?

Você acha que a definição de prioridades por parte dos Conselhos Municipais tem efeito nas propostas de investimentos produtivos que as associações apresentam? Caso afirmativo, como? Seu manual de operações explica que o PCPR só apóia investimentos produtivos uma vez. Você acha que esse fato torna as comunidades mais avessas a risco com relação à escolha dos investimentos produtivos? –

Quais seriam os mecanismos para reduzir a presença ou percepção do risco?

Vínculos (Minuto 40) z

z

z

Quais programas ou recursos estão disponíveis pelas comunidades depois de finalizar seus investimentos produtivos? –

Quais são os seus pensamentos sobre as oportunidades de desenvolvimento para as comunidades depois de ser graduadas do Projeto?

–

Como o Projeto poderia possibilitar a continuação do desenvolvendo das comunidades após os investimentos produtivos?

Que passos podem expandir o êxito inicial das comunidades rurais em atingir mercados de exportação através o programa de “Free Trade” (livre comércio)? Quais são os vínculos potenciais entre o PCPR e outras entidades públicos ou privados? –

z

Como seria possível expandir a troca de informações entre o seu projeto e o Banco do Nordeste?

Como você descreveria o papel das ONGs no Programa? –

Como você acha que o envolvimento delas ampliado ainda mais? Qual seria o efeito se o envolvimento delas aumentasse?

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Unidade Técnica Guia da Entrevista z

Qual é o objetivo da iniciativa de ter alguns investimentos produtivos parcialmente repagáveis (FUMAC-Ps com Fundos Rotativos)? –

Qual foi a reação das comunidades?

Page 4 of 4

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State Technical Unit Interview Guide Discussion Overview This interview consists of the following major sections: I. II. III. IV. V. VI.

Introduction Role of Productive Investments Scaling Up of Successful Productive Investments Key Factors to Address Spurring Demand for Productive Investments Linkages

Introduction (Minute 0) z z

z

Introduce interviewer Explain purpose of the study: “As your program has shown, productive investments have the potential to boost both income and employment in rural communities. This research is focused on understanding the opportunities presented by market-oriented productive investments.” Get acquainted with the respondent through a casual discussion about his or her background –

How long have you worked at this agency?

–

Where did you work earlier?

Role of Productive Investments (Minute 3) z

Let’s begin by talking about the role of productive investments in the RPAP program. What do you consider to be the overall goals of your agency in supporting productive subprojects? –

z

Your program now differentiates between two categories of productive investments: those that are market-oriented, and those that are not. What is the purpose of distinguishing between these two categories? –

z

How do these goals differ from those of infrastructure or social subprojects?

Do you consider one of these categories a priority over the other?

Your operational manual estimates that 25% of all subprojects will be productive investments during this four-year project. What percent of these productive investments do you expect to be market-driven versus non-market driven?

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State Technical Unit Interview Guide (continued)

Scaling Up of Successful Productive Investments (Minute 10) z

Please give a few examples of market-oriented subprojects that you consider to be amongst the most successful in (Pernambuco). –

z

Do you believe it would be possible to scale up the success of these subprojects to other communities? –

z

z

How might this be achieved?

What do you believe are the most important factors contributing to the success of these subprojects? –

z

What makes you consider these subprojects to be particularly successful?

Probe for existing infrastructure, proximity to towns, technical assistance, technology, and credit

Does the success of these subprojects suggest to you that the same products should be pursued by associations in other areas? Are there any other products that you believe are growth opportunities for rural areas? –

Has your agency conducted any studies of which marketable products might be promising for rural areas?

Key Factors to Address (Minute 20) z

What do you believe are the most difficult challenges facing communities with respect to productive investments? –

z

z

Do you feel that communities currently receive sufficient levels of technical assistance? –

What other types of technical assistance might be helpful?

–

What are the most effective sources of technical assistance that is currently available?

–

What do you consider to be possible ways of expanding technical assistance further?

To what extent does the lack of available credit prevent communities from undertaking market-driven productive investments through the RPAP program? –

z

Probe for technical assistance, technology, and credit

How likely would these communities be to repay loans, given that they currently receive matching grants through this program?

What are the channels that rural communities typically use to reach the overall marketplace? –

What do you consider to be more advantageous ways in which the communities could access the market?

Page 2 of 3

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State Technical Unit Interview Guide (continued)

Spurring Demand for Productive Investments (Minute 30) z

How do communities learn about the specific types of productive investments that they may pursue? –

z

z

What resources are available for communities to study investment options before submitting proposals? Who provides this pre-proposal support? For how many types of productive subprojects do standardized plans exist? Of these, how many are for market-oriented productive subprojects? –

z

z

How specific are your publicity campaigns with respect to types of productive investments possible?

The proposal process appears to be considerably easier for projects with standardized plans. What effect does this have on pursuing productive subprojects?

Do you believe that priority-setting by municipal councils has an effect on community association’s selection of productive investments? If so, how? Productive investments are provided only once to communities. Do you think that this makes communities more risk averse with respect to the investments they choose? –

What might be possible mechanisms to reduce the presence or perception of risk?

Linkages (Minute 40) z

z

z

What programs or resources are available to communities after they receive their onetime productive investments? –

What are your feelings about communities’ development opportunities after their “graduation” from the RPAP program?

–

How might the RPAP program better enable communities to continue developing after their productive investments?

What steps can be taken to expand on the initial success of rural communities reaching export markets through the Free Trade movement? What are possible linkages between RPAP projects and other public or private entities? –

z

How would you describe the role that NGOs have played in the RPAP program? –

z

How might the initial information exchange between your project and Banco do Nordeste be expanded? How might their involvement be increased even further? What effect do you think this might have?

What is the goal of the initiative to have some productive investments partially repayable (FUMAC-Ps)? –

What has been the reaction of communities? Page 3 of 3

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Appendices A. A. Program Program Overview Overview

B. B. Quantitative Quantitative Analyses Analyses

C. C. Econometric Econometric Tables Tables

D. D. Community Community Interviews Interviews

Quantitative Analysis Productive investments involve a wide range of subproject types. The PCPR 1 program included proposals for 56 types—and approvals for 44 types—of productive investments Productive Investment Proposals by Type, Pernambuco PCPR 1 (1997-2001) 90 Não Considerado

80

Reprovado Reformulado

70

Aprovado

60 50 Number of Proposals 40

655 655proposals proposalsfor for productive subprojects productive subprojects in inPCPR PCPR1, 1,of ofwhich which 351 351were wereapproved approved (53.6% (53.6%approval approvalrate) rate)

30 20

0

Note:

Source:

Caprinocultura Kit Irrigação Mecanização Agrícola Irrigação Fitoterapia Galpão Casa de Farinha Pisicultura Confecção Avicultura Apicultura Tração Animal Bovinocultura Agroindústria de Laticínios Equipamento de Pesca Ovinocultura Padaria Comunitária Agroindústria de Frutas Mini Usina de Leite Fábrica de Doce Produção de Mudas Caprinocultura/Ovinocultura Olaria Controle de Praga Fábrica de Ração Bananicultura Benefic. de Algodão Curtume Hidroponia Tecelagem Benefic. da Cana de Açucar Benefic. de Algaroba Benefic. de Milho Criação de Escargot Fábrica de Bolsa Implantação de Pastagem Pátio de Secagem Reciclagem de Lixo Suinocultura Agroindústria de Linguiça Aquisição de Equipamentos Benefic. da Mandioca Benefic. do Mel Câmara Frigorífica Caminhão Capacitação Criação de Galinha Caipira Benefic. de Lixo Extração de Minério Fábrica de Gelo Fábrica de Limpeza Kit-Feira Ambulante Lavanderia Rádio Comunitária Ranicultura Serigrafia

10

Project approval requires proposals to demonstrate technical viability and adequate elaboration. Proposals demonstrating viability but poor elaboration are reformulated. Proposals that are sufficiently elaborated, but which lack viability, are rejected. Proposals with neither technical viability nor appropriate elaboration are “not considered” (unlabeled in the MIS). Analysis includes all productive subprojects in PCPR 1 (1997-2001). After 2001, only 10 productive subprojects were approved in the PCPR 2 program (fish processing equipment, agro-industry, and herbal medicine subprojects) Analysis conducted by author. Renascer MIS (PCPR 1), July 2003

Quantitative Analysis Productive subprojects more frequently encounter difficulties and become paralyzed than infrastructure or social subprojects Percent of Troubled Subprojects by Year of Liberation, Pernambuco PCPR 1 Productive Investments Infrastructure Investments Social Investments 80%

80% Unclassified / Not Initiated Other Non-Concluded

70%

60%

Percent of 40% Troubled Subprojects 30%

48.5% 40.0% 33.9% 28.6%

Troubled Average 38.7%

Unclassified / Not Initiated Other Non-Concluded

70%

Not Concluded - Paralyzed Concluded - Paralyzed

60%

60%

50%

50%

40%

40%

Not Concluded - Paralyzed Concluded - Paralyzed

45.9%*

32.3%

30.6% 30%

Paralyzed Average 19.9%

20%

Unclassified / Not Initiated Other Non-Concluded

70%

Not Concluded - Paralyzed Concluded - Paralyzed

50%

80%

30%

21.9%

24.4%

Troubled Average 24.3%

23.0%

20%

20%

19.0% 14.3%

10%

10%

0%

0%

Troubled Average 33.1%

Paralyzed Average 13.2%

Paralyzed Average 10% 9.4%

0%

1998 1999

2000 2001

1998 1999

2000 2001

1998

1999

2000

2001

Paralyzed Subprojects

21

16

26

7

37

2

30

16

1

1

11

5

Total Subprojects

112

75

103

56

416

78

291

134

21

14

37

62

* This high percentage is attributable to five paralyzed housing subprojects in the same MST community in the municipality of Gameleira Note: Data from MIS system cross-checked with Renascer productive investments team. “Other Non-Concluded” data includes “Não Concluído,” “Não Concluído em Andamento” and “Não Concluído em Funcionamento” MIS categories. 1997 data not shown as few productive and no social subprojects liberated. “Troubled” and “Paralyzed” averages shown reflect all PCPR I productive subprojects, including 1997. Note that PCPR 1 included 351 productive subprojects, of which 3 were liberated in 1997, and 2 subprojects had no liberation date in MIS Source: Analysis conducted by author. Renascer MIS (PCPR 1), July 2003

Quantitative Analysis More expensive subprojects appear to become paralyzed more frequently, but statistical analysis is necessary Subprojects Paralyzed by Average Size, Pernambuco PCPR 1 (1997-2001) 100%

Overall Average Size of Productive PCPR 1 Subprojects: R$39,453

90% 80% 70%

Fábrica de Doce

Fábrica de Ração

Percent of Subprojects Paralyzed

60% 50% 40%

Confecção

Fitoterapia

Mini Usina de Leite Agroindústria de Laticínios

Produção de Mudas

30%

Avicultura

Overall Percent of Productive PCPR 1 Subprojects Paralyzed: 19.9%

20%

Kit Irrigação

Pisicultura

Irrigação Galpão Bovinocultura Pesca

Casa de Farinha

10%

Tração Animal

Apicultura Caprinocultura

Caprinocultura / Ovinocultura

0% 0

10,000

20,000

Agroindústria de Frutas

30,000

Ovinocultura

Padaria Comunitária

40,000

Mecanização Agrícola

50,000

60,000

70,000

Average Size of Subproject Type (R$) Note:

Source:

Includes all categories with at least three approved subprojects. PCPR I averages shown reflect 1997-2001 data. Paralyzed subprojects uses strictest definition of “Não Concluído Paralisado” and “Concluído Paralisado” MIS categories. Including “Não Concluído,” “Não Concluído em Andamento” and “Não Concluído em Funcionamento” categories, 38.7% of subprojects are troubled. Analysis conducted by author. Renascer MIS (PCPR 1), July 2003

Quantitative Analysis Productive subprojects in municipalities with lower HDI scores are more likely to be paralyzed, but statistical analysis is necessary Productive Subprojects Paralyzed by Municipality HDI Index Quintile, Pernambuco PCPR 1 (1997-2001)

80% Não Concluído Paralisado

70%

Concluído Paralisado

60% 50% Percent of Subprojects Paralyzed

40% 27.1%

30% 20%

17.4%

30.6% PCPR 1 Productive Subprojects Average: 19.9%

16.0% 11.8%

10% 0% First Quintile Productive Subprojects:

Second Quintile

Third Quintile

Fourth Quintile

Quintile of Municipality HDI Index

Higher HigherHDI HDIScore Score

Fifth Quintile Lower Lower HDI HDI Score Score

Paralyzed Subprojects

16

8

12

19

11

Total Subprojects

92

68

75

70

36

PCPR 1 (19972001)

% of PE Rural 20.7% 21.5% 19.8% 16.4% 20.0% Population Note: Econometric analyses tested more refined hypotheses of two HDI components, income and education. Paralyzed subprojects uses strictest definition of “Não Concluído Paralisado” and “Concluído Paralisado” MIS categories. Including “Não Concluído,” “Não Concluído em Andamento” and “Não Concluído em Funcionamento” categories, 38.7% of subprojects are troubled. Analysis does not include 10 productive subprojects for which municipality data not available. High relative frequency of productive subprojects in top HDI quintile may reflect use as graduation strategy Source: Analysis conducted by author. Renascer MIS (PCPR 1), July 2003; UNDP HDI Report (2000); IBGE Census Data (2000)

Quantitative Analysis Types of productive subprojects paralyzed less frequently do not appear to be specifically targeted Approval Rate by Percent of Subprojects Paralyzed, Pernambuco PCPR 1 (1997-2001)

100%

Overall Percent of Productive PCPR 1 Subprojects Paralyzed: 19.9%

90% 80%

Galpão Bovinocultura

70%

Percent of Subprojects Approved

60%

Produção de Mudas Agroindústria de Frutas

Fábrica de Ração

Caprinocultura Tração Animal Irrigação

Caprinocultura / Ovinocultura Pesca

50%

Pisicultura Apicultura

Kit Irrigação Agroindústria de Laticínios Avicultura

Overall Approval Rate of Productive PCPR 1 Subprojects: 53.6%

Fitoterapia

Mecanização Agrícola

40%

Fábrica de Doce

30%

Mini Usina de Leite

Padaria Comunitária Ovinocultura

Confecção

Casa de Farinha

20% 10% 0% 0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Percent of Subprojects Paralyzed Note: Source:

Includes all categories with at least three approved subprojects. Paralyzed subprojects uses strictest definition of “Não Concluído Paralisado” and “Concluído Paralisado” MIS categories. Including “Não Concluido,” “Não Concluído em Andamento” and “Não Concluído em Funcionamento” categories, 38.7% of subprojects are troubled. Analysis conducted by author. Renascer MIS (PCPR 1), July 2003

Appendices A. A. Program Program Overview Overview

B. B. Quantitative Quantitative Analyses Analyses

C. C. Econometric Econometric Tables Tables

D. D. Community Community Interviews Interviews

Key to Regression Tables

•

For Continuous Variables, Coefficients Represent dF/dx o Variables: Project Size, Distance, Education, Income, Gini, Credit Access

•

For Dummy Variables, Coefficients Represent dF/dx for a Discrete Change of Dummy Variable from 0 to 1 o Variables: Training, Marketing, Working Capital, Commenced Year, Decentralization Cohort

•

Z-Statistics Provided in Parentheses, and are Based on Heteroskedasticity-Robust Standard Errors

•

Statistical Significance: * Statistically Significant at 95% Level of Confidence ** Statistically Significant at 99% Level of Confidence

Table A: Challenging Factors Training

Training

(A1)

(A2)

0.107 (2.44)*

0.124 (2.75)**

Marketing

Marketing (A3)

0.171 (2.98)**

(A4)

Working Capital

Three Challenges

(A5)

(A7)

(A8)

0.050 (1.08)

0.063 (1.30)

0.063 (0.65)

0.127 (1.26)

0.080 (0.87)

0.034 (0.38)

(A6)

0.205 (3.42)**

Working Capital

0.163 (3.19)**

0.172 (3.29)**

Project Size

0.005 (3.31)**

0.005 (3.04)**

0.004 (2.90)**

0.005 (3.23)**

Distance

0.012 (.81)

0.014 (0.95)

0.015 (1.00)

0.014 (0.90)

Education

-0.269 (0.60)

-0.201 (0.45)

-0.161 (0.35)

-0.177 (0.40)

Income

0.009 (0.02)

-0.151 (0.26)

-0.106 (0.18)

-0.129 (0.22)

Gini

-.109 (0.21)

-0.133 (0.26)

-0.173 (0.34)

-0.136 (0.27)

Credit Access

-0.000 (0.63)

-0.000 (0.10)

-0.000 (0.28)

-0.000 (0.31)

Commenced in 1998

-0.081 (1.35)

-0.098 (1.62)

-0.093 (1.54)

-0.094 (1.56)

Commenced in 2000

0.029 (0.50)

0.041 (0.70)

0.046 (0.79)

0.036 (0.62)

Commenced in 2001

-0.104 (1.66)

-0.112 (1.87)

-0.105 (1.71)

-0.110 (1.83)

1997 Cohort

-0.017 (0.23)

0.005 (0.06)

0.011 (0.14)

0.006 (0.08)

1998 Cohort

0.097 (1.55)

0.114 (1.84)

0.094 (1.50)

0.106 (1.68)

2001 Cohort

0.111 (1.70)

0.139 (2.07)*

0.132 (1.99)*

0.136 (2.02)*

N

351

348

351

348

351

348

351

348

Pseudo R2

.02

.07

.02

.08

.03

.08

.03

.09

Joint Significance Test for A8 Null Hypothesis: (1) Training and Technical Assistance = 0 (2) Marketing = 0 (3) Working Capital = 0 Chi2 (3) = 13.46 Prob > Chi2 =

0.0037

Figure 1: Analysis of Observations, by Challenging Factors

Table B: Index

(B1) Continuous Index

(B2) Continuous Index with Controls

0.086 (3.24)**

0.091 (3.41)**

(B3) Discrete Index

(B4) Discrete Index with Controls

Two Factors

0.219 (3.71)**

0.234 (3.83)**

One Factor

-0.018 (0.35)

-0.016 (0.30)

Index

Project Size

0.005 (3.25)**

0.004 (2.65)**

Distance

0.013 (.88)

0.017 (1.15)

Education

-0.205 (0.46)

-0.130 (0.29)

Income

0.044 (0.07)

-0.129 (0.22)

Gini

-.145 (0.29)

-.192 (0.39)

Credit Access

-0.000 (0.48)

-0.000 (0.23)

Commenced in 1998

-0.088 (1.48)

-0.080 (1.33)

Commenced in 2000

0.035 (0.60)

0.061 (1.04)

Commenced in 2001

-0.105 (1.71)

-0.107 (1.76)

1997 Cohort

-0.001 (0.02)

-0.021 (0.27)

1998 Cohort

0.093 (1.49)

0.095 (1.52)

2001 Cohort

0.123 (1.87)

0.142 (2.12)*

N

351

348

351

348

Pseudo R2

.03

.09

.05

.10

Table C: Interaction Effects

Index

(C1) Base

(C2) Size

(C3) Education

(C4) Income

(C5) Distance

0.086 (3.24)**

0.052 (0.73)

0.314 (1.72)

0.166 (0.99)

0.092 (2.29)*

Size

0.003 (1.42)

Size * Index

0.001 (0.61)

Education

0.336 (1.00)

Education * Index

-0.338 (1.28)

Income

0.148 (0.38)

Income * Index

-0.153 (0.49)

Distance

0.005 (0.29)

Distance * Index

0.003 (0.17)

N

351

351

351

351

351

Pseudo R2

.03

.05

.04

.03

.03

Table D: Fixed Effects by Factor

Training

(D1) Training

(D2) Training

0.181 (1.99)*

0.197 (2.12)*

Marketing

(D3) Marketing

0.402 (3.29)**

(D4) Marketing

(D5) Working Capital

0.387 (3.20)**

Working Capital

0.323 (3.14)**

Project Size

0.006 (1.82)

(D6) Working Capital

0.004 (1.20)

0.308 (3.00)**

(D7) Three Factors

(D8) Three Factors

0.102 (1.00)

0.120 (1.17)

0.306 (1.62)

0.302 (1.62)

0.079 (0.47)

0.056 (0.33)

0.004 (1.23)

0.004 (1.31)

N

165

165

165

165

165

165

165

165

Pseudo R2

.08

.10

.12

.12

.11

.12

.12

.13

Joint Significance Test for D8 Null Hypothesis: (1) Training and Technical Assistance = 0 (2) Marketing = 0 (3) Working Capital = 0 Chi2 (3) = 11.34 Prob > Chi2 =

0.010

Table E: Fixed Effects by Index (E3) Discrete Index

(E4) Discrete Index with Control

Two Factors

0.431 (3.38)**

0.423 (3.32)**

One Factor

-0.044 (0.39)

-0.018 (0.15)

Index

(E1) Continuous Index

(E2) Continuous Index with Control

0.180 (3.05)**

0.179 (3.01)**

Project Size

0.003 (0.88)

0.005 (1.57)

N

165

165

165

165

Pseudo R2

.11

.12

.14

.14

Appendices A. A. Program Program Overview Overview

B. B. Quantitative Quantitative Analyses Analyses

C. C. Econometric Econometric Tables Tables

D. D. Community Community Interviews Interviews

Community Interviews List of Communities Interviewed (1)

Community

Type of Project

Region

Municipality

Date Liberated

Total Investment

Selection Method

Status

1

Cachoeirinha

Agroindústria de Laticínios

Agreste

Cachoeirinha

7/29/1998 7/18/2000

R$ 56,239 R$ 29,979

Representative

Functioning

2

Lagoa Do Carro

Confecção

Mata Norte

Lagoa do Carro

12/16/1998

R$ 55,386

Representative

Functioning

3

Santana

Beneficiamento de Algaroba

Sertão

Tuparetama

3/23/2000 11/30/2001

R$ 43,781 R$ 9,342

Representative

Functioning

4

Jardim Do Moreno

Mecanização Agrícola

R. M. R.

Moreno

9/21/2000

R$ 49,362

Top Performer

Functioning

5

Riacho Grande

Mecanização Agrícola

Sertão

Salgueiro

6/18/2001

R$ 49,260

Representative

Functioning

6

Pedrinhas

Pisicultura

Sertão

Petrolina

12/27/2000

R$ 48,800

Representative

Functioning

7

Mucuri

Kit Irrigação

Agreste

Bonito

12/21/2000

R$ 48,565

Representative

Functioning

8

Bálsamo Da Linha

Bovinocultura

Mata Sul

Jaqueira

12/31/1998

R$ 48,511

Top Performer

Functioning

9

Pilões

Galpão

Agreste

Cumaru

2/5/1998

R$ 47,826

Random

Paralyzed

10

Serra Dágua

Pisicultura

Mata Sul

Rio Formoso

12/27/1999

R$ 47,592

Top Performer

Functioning

Source: Renascer MIS (PCPR 1), July 2003; Interviews of 30 Pernambuco communities with PCPR productive investments, conducted in July 2003

Community Interviews List of Communities Interviewed (2)

Community

Type of Project

Region

Municipality

Date Liberated

Total Investment

Selection Method

Status

11

Estivas

Kit Irrigação

Mata Sul

Amaraji

12/29/1999

R$ 47,036

Random

Functioning

12

Salgueiro

Padaria Comunitária

Sertão

Salgueiro

12/19/2000

R$ 43,811

Representative

Functioning

13

Sao Severino Dos Ramos

Agroindústria de Frutas

Agreste

Macaparana

11/18/1999

R$ 42,975

Representative

Functioning

14

Babilônia

Mini Usina de Leite

Mata Norte

Nazaré da Mata

12/27/2001

R$ 41,972

Representative

Functioning

15

Fundação Terra

Apicultura

Sertão

Arcoverde

12/27/2000

R$ 40,323

Representative

Functioning

16

Normandia

Confecção

Agreste

Caruaru

2/25/2000

R$ 39,071

Representative

Paralyzed

17

Pinto

Caprinocultura

R. M. R.

Moreno

6/17/1998

R$ 38,079

Random

Paralyzed

18

Povoado Vermelhos

Avicultura

Sertão

Lagoa Grande

8/7/2001

R$ 34,735

Representative

Paralyzed

19

Perseverança

Avicultura

Agreste

Gravatá

9/4/2000

R$ 33,332

Random

Paralyzed

20

Jundiai

Caprinocultura

Agreste

Orobó

11/25/1999

R$ 27,528

Top Performer

Functioning

Source:

Renascer MIS (PCPR 1), July 2003; Interviews of 30 Pernambuco communities with PCPR productive investments, conducted in July 2003

Community Interviews List of Communities Interviewed (3)

Community

Type of Project

Region

Municipality

Date Liberated

Total Investment

Selection Method

Status

21

Jardim

Caprinocultura

Sertão

Tuparetama

12/1/2000

R$ 21,422

Random

Paralyzed

22

Tapuias

Casa de Farinha

Mata Sul

Amaraji

2/21/2000

R$ 20,833

Top Performer

Functioning

23

Poço Verde

Hidroponia

Agreste

Bezerros

3/23/2000

R$ 19,247

Random

Paralyzed

24

Orobó

Kit-Feira Ambulante

Agreste

Orobó

11/10/1999

R$ 16,392

Representative

Paralyzed

25

Caraibas

Fitoterapia

Sertão

Arcoverde

6/29/1998

R$ 15,275

Random

Paralyzed

26

Rodeadouro

Agroindústria de Frutas

Agreste

Bonito

12/10/2002

R$ 128,043

PCPR II

In Execution

27

São Benedito Do Sul

Agroindústria de Frutas

Mata Sul

São Benedito do Sul

12/23/2002

R$ 111,531

PCPR II

In Execution

28

Atapuz

Aquisição de equipamentos

Mata Norte

Goiana

12/23/2002

R$ 42,399

PCPR II

In Execution

29

Pontas De Pedras

Aquisição de equipamentos

Mata Norte

Goiana

2/17/2003

R$ 166,259

PCPR II

In Execution

30

Serro Azul

Agroindústria de Frutas

Mata Sul

Palmares

None yet

None yet

PCPR II

To Be Approved

Source:

Renascer MIS (PCPR 1 and 2), July 2003; Interviews of 30 Pernambuco communities with PCPR productive investments, conducted in July 2003

Community Interviews Major Challenges Faced, by Community (1) z

1. 1.Cachoeirinha Cachoeirinha Agroindústria Agroindústriade de Laticínios Laticínios

z z z z z z

2. 2.Lagoa LagoaDo Do Carro Carro Confecção Confecção

z z z

z

3. 3.Santana Santana Beneficiamento Beneficiamentode de Algaroba Algaroba

4. 4.Jardim JardimDo Do Moreno Moreno Mecanização Mecanização Agrícola Agrícola

z z z

z z

Note: Source:

Working Capital Marketing Products Expensive Expositions

Training/Technical Assistance Working Capital Marketing Products High Input Costs

Training/Technical Assistance Subsistence Focus

z

Training/Technical Assistance

z

Training/Technical Assistance Working Capital Monophase Electricity Soil Analysis Needed

6. 6.Pedrinhas Pedrinhas Pisicultura Pisicultura

7. 7.Mucuri Mucuri Kit KitIrrigação Irrigação

z z z

z

8. 8.Bálsamo BálsamoDa Da Linha Linha Bovinocultura Bovinocultura

z

z

9. 9.Pilões Pilões Galpão Galpão

z z z z

z

5. 5.Riacho RiachoGrande Grande Mecanização Mecanização Agrícola Agrícola

Working Capital Marketing Products Regulatory Approval High Input Costs Project Choice by Outsiders Packaging Renascer Delinquency

z

Training/Technical Assistance Subsistence Focus

z

10. 10.Serra SerraDágua Dágua Pisicultura Pisicultura

z

Training/Technical Assistance Subsistence Focus

Regulatory Approval Lack of Inputs External Contingency Insufficient Equipment Monophase Electricity

External Contingency Fund Misappropriation

Order of challenges listed does not reflect relative importance, but reflects frequency of challenges across all interviewees Renascer MIS (PCPR 1), July 2003; Interviews of 30 Pernambuco communities with PCPR productive investments, conducted in July 2003

Community Interviews Major Challenges Faced, by Community (2) z

11. 11.Estivas Estivas Kit KitIrrigação Irrigação

12. 12.Salgueiro Salgueiro Padaria Padaria Comunitária Comunitária

z z z

z z z z z

13. 13.Sao SaoSeverino Severino Dos DosRamos Ramos Agroindústria Agroindústriade de Frutas Frutas

z z z z z

z

14. 14.Babilônia Babilônia Mini MiniUsina Usinade deLeite Leite

z z

z

15. 15.Fundação Fundação Terra Terra Apicultura Apicultura

Note: Source:

z z

Training/Technical Assistance Working Capital Insufficient Equipment Soil Analysis Needed

Training/Technical Assistance Working Capital Marketing Products High Input Costs Monophase Electricity Working Capital High Input Costs Lack of Inputs Packaging Insufficient Equipment Working Capital Marketing Products Regulatory Approval

Training/Technical Assistance Regulatory Approval Lack of Inputs

z

16. 16.Normandia Normandia Confecção Confecção

z z

z

17. 17.Pinto Pinto Caprinocultura Caprinocultura

z

z

18. 18.Povoado Povoado Vermelhos Vermelhos Avicultura Avicultura

z

z

19. 19.Perseverança Perseverança Avicultura Avicultura

z z

z

20. 20.Jundiai Jundiai Caprinocultura Caprinocultura

z

Training/Technical Assistance Working Capital Marketing Products

Training/Technical Assistance Fund Misappropriation

Training/Technical Assistance Working Capital

Training/Technical Assistance Fund Misappropriation Renascer Delinquency

Training/Technical Assistance Working Capital

Order of challenges listed does not reflect relative importance, but reflects frequency of challenges across all interviewees Renascer MIS (PCPR 1), July 2003; Interviews of 30 Pernambuco communities with PCPR productive investments, conducted in July 2003

Community Interviews Major Challenges Faced, by Community (3) z

21. 21.Jardim Jardim Caprinocultura Caprinocultura

z

z

Training/Technical Assistance Working Capital Lack of Inputs Subsistence Focus Soil Analysis Needed

z

Project Choice by Outsiders

z

22. 22.Tapuias Tapuias Casa Casade deFarinha Farinha

Training/Technical Assistance Project Choice by Outsiders

z z z

z z z z z

z

25. 25.Caraibas Caraibas Fitoterapia Fitoterapia

Note: Source:

z z

Working Capital Marketing Products Packaging

27. 27.São SãoBenedito Benedito Do DoSul Sul Agroindústria Agroindústriade de Frutas Frutas

z

Working Capital

z z

Working Capital Marketing Products

z

Regulatory Approval

z

Training/Technical Assistance

z

28. 28.Atapuz Atapuz Aquisição Aquisiçãode de equipamentos equipamentos

23. 23.Poço PoçoVerde Verde Hidroponia Hidroponia

24. 24.Orobó Orobó Kit-Feira Kit-Feira Ambulante Ambulante

26. 26.Rodeadouro Rodeadouro Agroindústria Agroindústriade de Frutas Frutas

z z z

Training/Technical Assistance Working Capital Marketing Products High Input Costs Project Choice by Outsiders

29. 29.Pontas PontasDe De Pedras Pedras Aquisição Aquisiçãode de equipamentos equipamentos

Training/Technical Assistance Regulatory Approval Project Choice by Outsiders External Contingency

30. 30.Serro SerroAzul Azul Agroindústria Agroindústriade de Frutas Frutas

Order of challenges listed does not reflect relative importance, but reflects frequency of challenges across all interviewees Renascer MIS (PCPR 1 and 2), July 2003; Interviews of 30 Pernambuco communities with PCPR productive investments, conducted in July 2003

Community Interviews The most frequently cited challenges facing communities interviewed were training and technical assistance, working capital, marketing products, and regulatory approval Major Challenges Facing 30 Interviewed Communities

zz

Training Training and and Technical Technical Assistance Assistance are are frequently frequently described described by by communities communities as as insufficient insufficient to to meet meet productive productive subproject subproject needs needs

zz

Working Working Capital Capital loans loans are are difficult difficult to to obtain. obtain. This This often often contributes contributes to to lower lower capacity capacity utilization, utilization, higher higher input input prices, prices, or or packaging packaging issues issues

zz

Marketing Marketing Products Products is is highly highly challenging challenging for for communities communities unfamiliar unfamiliar with with the the needs needs of of potential potential customers customers and and ways ways to to access access channels channels

zz

Regulatory Regulatory Approval Approval poses poses aa major major obstacle obstacle to to communities communities with with consumable consumable products, products, since since little little guidance guidance or or assistance assistance is is provided provided

zz

High High Input Input Costs Costs make make itit difficult difficult to to compete compete on on price, price, and and are are often often caused caused by by low low production production volumes volumes and and working working capital capital constraints constraints

zz

Lack Number of Lack of of Inputs Inputs can can lower lower capacity capacity utilization, utilization, and and typically typically involves involves low low yields yields of of agricultural agricultural products products used used for for processing processing or or animal animal feed feed Communities Mentioning Project Project Choice Choice by by Outsiders Outsiders can can leave leave communities communities with with productive productive Challenge investments investments with with which which they they have have little little experience experience or or genuine genuine interest interest

20

19

16

15

10

Soil Soil Analysis Analysis is is difficult difficult to to obtain, obtain, and and could could increase increase yields yields of of inputs inputs

zz

Expensive Expensive Expositions Expositions impede impede some some artisans’ artisans’ marketing marketing of of products products

Source:

3 2

0

Interviews of 30 Pernambuco communities with PCPR productive investments, conducted in July 2003

Expensive Expositions

zz

3

Soil Analysis Needed

Renascer Renascer Delinquencies Delinquencies delay delay fund fund release release until until paperwork paperwork is is submitted, submitted, and and may may require require flexibility flexibility in in extenuating extenuating circumstances circumstances

3

Renascer Delinquency

zz

3

Monophase Electricity

Monophase Monophase Electricity Electricity can can render render purchased purchased equipment equipment unusable unusable

3

Inadequate Equipment

zz

4

Fund Misappropriation

Inadequate Inadequate Equipment Equipment can can paralyze paralyze subprojects subprojects or or increase increase costs costs

4

External Contingency

zz

4

Subsistence Focus

Fund Fund Misappropriation Misappropriation reflects reflects interviewees’ interviewees’ accounts accounts of of resource resource diversion diversion by by association association members members or or elaborators elaborators

5

Packaging

zz

5

Project Choice by Outsiders

External External Contingencies Contingencies represent represent reliance reliance on on other other entities entities for for subproject subproject needs. needs. Unfulfilled Unfulfilled arrangements arrangements can can paralyze paralyze subprojects subprojects

5

5

Lack of Inputs

zz

6

High Input Costs

Subsistence Subsistence Focus Focus may may be be mentioned mentioned positively positively by by communities communities with with tractors tractors or or other other subprojects, subprojects, but but can can reduce reduce income income opportunities opportunities

Regulatory Approval

zz

9

Working Capital

Packaging Packaging difficulties difficulties prevent prevent communities communities from from effective effective marketing, marketing, and and are are often often linked linked to to working working capital capital and and regulatory regulatory issues issues

Training/Technical Assistance

zz

Marketing Products

zz

25

Community Interviews List of Communities by Major Challenges (1) Training Training// Technical Technical Assistance Assistance

z z z z z z z z z z

z

Working WorkingCapital Capital

z z z z z z z

z

Marketing Marketing Products Products

z z z z

Note: Source:

Santana (3) Jardim Do Moreno (4) Riacho Grande (5) Pedrinhas (6) Mucuri (7) Bálsamo Da Linha (8) Estivas (11) Salgueiro (12) Fundação Terra (15) Normandia (16) Cachoeirinha (1) Lagoa Do Carro (2) Santana (3) Mucuri (7) Estivas (11) Salgueiro (12) Sao Severino Dos Ramos (13) Babilônia (14)

Cachoeirinha (1) Lagoa Do Carro (2) Santana (3) Salgueiro (12) Babilônia (14)

z z z z z z z z z

Pinto (17) Povoado Vermelhos (18) Perseverança (19) Jundiai (20) Jardim (21) Tapuias (22) Orobó (24) Caraibas (25) Serro Azul (30)

Normandia (16) Povoado Vermelhos (18) Jundiai (20) Tapuias (22) Orobó (24) Rodeadouro (26) São Benedito Do Sul (27) Atapuz (28)

z z z z z z z z

z z z z

Normandia (16) Orobó (24) Rodeadouro (26) Atapuz (28)

Numbers in parentheses reflect community identification numbers used in other slides Interviews of 30 Pernambuco communities with PCPR productive investments, conducted in July 2003

z

Regulatory Regulatory Approval Approval

z z z z z

z

High HighInput InputCosts Costs

z z z z

z

Lack Lackof ofInputs Inputs

z z z z

Cachoeirinha (1) Pilões (9) Babilônia (14) Fundação Terra (15) Caraibas (25) Pontas De Pedras (29)

Cachoeirinha (1) Santana (3) Salgueiro (12) Sao Severino Dos Ramos (13) Orobó (24)

Pilões (9) Sao Severino Dos Ramos (13) Fundação Terra (15) Povoado Vermelhos (18) Tapuias (22)

Community Interviews List of Communities by Major Challenges (2) z

Project ProjectChoice Choiceby by Outsiders Outsiders

z z z z

z

Packaging Packaging

z z z

z

Subsistence Subsistence Focus Focus

z z z

z

External External Contingencies Contingencies

z z z

z

Fund Fund Misappropriation Misappropriation

Note: Source:

z z

Cachoeirinha (1) Jardim (21) Poço Verde (23) Orobó (24) Caraibas (25)

z

Inadequate Inadequate Equipment Equipment

Cachoeirinha (1) Sao Severino Dos Ramos (13) Babilônia (14) Rodeadouro (26)

Jardim Do Moreno (4) Riacho Grande (5) Bálsamo Da Linha (8) Tapuias (22)

Pilões (9) Serra Dágua (10) Povoado Vermelhos (18) Caraibas (25)

Monophase Monophase Electricity Electricity

z z

z z z

z

Renascer Renascer Delinquencies Delinquencies

z z

z

Soil SoilAnalysis Analysis

Serra Dágua (10) Pinto (17) Perseverança (19)

Numbers in parentheses reflect community identification numbers used in other slides Interviews of 30 Pernambuco communities with PCPR productive investments, conducted in July 2003

z z

z

Expensive Expensive Expositions Expositions

z

Pilões (9) Estivas (11) Sao Severino Dos Ramos (13)

Mucuri (7) Pilões (9) Salgueiro (12)

Cachoeirinha (1) Babilônia (14) Perseverança (19)

Mucuri (7) Estivas (11) Tapuias (22)

Lagoa Do Carro (2) Orobó (24)

Government Regulations Government regulations often pose a significant challenge to communities with productive subprojects. Projects involving food production legally require DEFIS (health and sanitation board) approval, though many communities circumvent this requirement by selling products informally. A lack of government approval can hinder communities’ marketing efforts. Communities without DEFIS-registered labels cannot access channels such as supermarkets, and are often restricted to selling at open fairs. Regulatory problems can thus reduce revenue by pressuring both volume (through restricted channel access) and price (through higher price sensitivity at open fairs). Without proper approvals, communities may not qualify for large contracts from school districts or other public entities. Communities may also delay bulk, customized packaging purchases for many months until obtaining DEFIS licenses, which in turn increases costs and makes commercialization difficult. Communities often want to obtain DEFIS licenses, but encounter substantial difficulties complying with requirements. They frequently learn of additional regulations after commencing operations, and must therefore incur difficult and expensive modifications. Initially, communities are highly focused on meeting Renascer’s building specifications and other requirements. Their productive subprojects then commence with low-volume production sold at open fairs, where informal products are common. Communities only later seek DEFIS approval to widen channel access, and begin to learn about stricter regulations. For example, Renascer and DEFIS building requirements are

not completely aligned. New packaging may also need to be created, due to design and color specifications. Even minor infractions during inspections create lengthy delays for obtaining licenses. Some interviewees complain that they have little or no guidance in understanding complex DEFIS requirements and identifying potential trouble areas.

Government Regulations: Examples Babilônia encountered difficulties in gaining regulatory approval for milk processing, and continues to be negatively affected. The association constructed a processing facility with Renascer funds, but did not realize specification requirements until a later DEFIS inspection. For example, the insides of rooms must have rounded corners to make cleaning easier. Babilônia needed to reform the facility and wait for approval, and could not order labeled bags for its milk until receiving a DEFIS barcode. In the meantime, the community had to return funds earmarked for packaging to Renascer (due to spending deadlines). Babilônia now lacks working capital for packaging and is temporarily using borrowed bags, hindering marketing efforts Caraibas planned to produce herbal medicine, but could not comply with health regulations and the project is abandoned. The community received all equipment needed to commence production, but it is all stored in boxes. They had rented a house to use as a processing facility, but health inspector later told them they couldn’t produce there and gave many specific requirements (e.g., bathroom must be located outside the facility). The association did not have funds to construct building to meet regulations, so they appealed to the mayor for assistance. The mayor allowed them to use a room in the health clinic, but bringing plants and soil into medical area was not acceptable. The mayor later promised funds for them to build facility, but never followed through. Caraibas never commenced operations. Fundação Terra’s apiculture project is awaiting regulatory approval. The association is highly eager to sell its honey to supermarkets, which require suppliers to have DEFIS licenses. Not only are supermarkets high-volume customers, but they also offer higher prices. Supermarkets pay R$8 per 600 ml bottle for DEFIS-approved honey, versus the R$6 currently received for informal (non-approved) production. Fundação Terra has to conduct numerous reforms to obtain approval, because during construction it was unaware of the need for rounded corners inside rooms and pavement in front of the processing unit. They must also revamp their impressively designed packaging, as they did not know that DEFIS forbids placing a picture of a bee on labels and imposes strict color guidelines.

Associações Comunitárias Guia da Entrevista Panorama da Entrevista Essa entrevista consiste nas seguintes seções: I. II. III. IV. V. VI.

Introdução Seleção do Projeto Produção e o Mercado Treinamento, Assistência Técnica e Acesso à Tecnologia Desafios de Produção Vínculos

I. Introdução (Minuto 0) z z

Apresente o entrevistador Explique o motivo da pesquisa: “Nessa conversa, a gente gostaria de aprender mais sobre o seu projeto de Renascer. Nós esperamos ouvir sobre os desafios que sua comunidade tem enfrentado, assim como as lições aprendidas e sucessos até hoje. Isso nos ajudará a entender que tipos de serviços seriam mais pertinentes para assistir projetos produtivos em Pernambuco”.

II. Seleção do Projeto (Minuto 3) 1. Você pode, por favor, descrever o seu projeto? 2. Como você ficou sabendo do programa RENASCER pela primeira vez? − Quem contou a você sobre o programa? O que foi dito? − O que você achou sobre o programa no inicio? 3. Que fez sua comunidade após ouvir sobre o programa? 4. Foi idéia de quem formar uma associação? − Todas as pessoas da comunidade são membros da associação? − Caso contrario: Por que alguns membros da comunidade não se afiliaram à associação? − Quem é o encarregado dessa associação? − Como essa pessoa foi escolhida? 5. Como vocês escolheram entre os vários tipos dos investimentos a propor? − Quem participou na discussão sobre qual investimento a propor? − Que outros tipos dos investimentos foram considerados? − Vocês estavam preocupados com a possibilidade de alguns dos investimentos não serem aprovados? − Você tinha ouvido falar sobre outras comunidades que empreenderam quaisquer outros investimentos? Que ouviu sobre as experiências delas? − Alguém deu para você dicas ou recomendou cautela sobre qualquer coisa? 6. Como a comunidade tomou a decisão final sobre qual investimento a propor?

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Associações Comunitárias Guia da Entrevista − Todas as pessoas da comunidade tiveram a mesma influência na decisão final? − Alguém não concordou com o projeto escolhido? Por quê? 7. Que eram suas expectativas inicias desse programa? − Algo se tornou diferente do que você tinha esperado? 8. Como foi feita a proposta do projeto? − Que envolveu a proposta? Foi difícil preparar? − Alguém de fora da comunidade ajudou com a proposta? Como? − Como vocês conheceram essa pessoa? − A proposta descreveu bem o que a sua comunidade queria ou foi preparada com presa? 9. Que aconteceu após entregar a proposta? − Demorou quanto tempo para aprovar sua proposta? − Vocês enfrentaram políticas complicadas com o Conselho Municipal ou foi um processo bem simples? − As prioridades do Conselho Municipal tiveram efeitos na sua escolha de projeto? III. Produção e o Mercado (Minuto 30) 10. Sua comunidade produz quantas unidades do produto por mês? 11. Que tipos de materiais são usados para produzir esse produto? Quanto custa cada tipo de material? 12. Que tipo de equipamento vocês usam para produzir esse produto? − Quanto custa para usar essas maquinas, ou para operá-las e mantê-las? 13. Que tipo de embalagem vocês usam? − Quanto custa por unidade do produto? 14. Como vocês entregam o seu produto para o mercado? − Vocês entregam quantas unidades do produto cada viagem? E quanto custa para entregar o produto? 15. Têm outros custos envolvidos na produção do produto sobre os quais a gente não falou? 16. Se os membros da sua comunidade produzissem os seus produtos independentemente (não parte da associação), teriam custos diferentes? Como? 17. Para quem vocês vendem o seu produto? 18. Que preço vocês recebem pelo produto? − Você acha que esse preço é justo? − Tem variação do preço que você recebe? − Se os membros da sua comunidade vendessem os seus produtos independentemente, receberiam preços diferentes? Como? − Há sempre um bom mercado para o seu produto? Sua associação está preocupada com isso? 19. Após vender o seu produto, ele será revendido quantas vezes até chegar ao consumidor final, na sua opinião? Page 2 of 5

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Associações Comunitárias Guia da Entrevista − Quanto você acha que o consumidor final paga pelo seu produto? − Você acha que tem alguma maneira de receber maior parcela do preço final do produto? 20. Quanto lucro você ganha por unidade do produto? − Quanto lucro a comunidade recebe em total por mês? − Todas as pessoas na comunidade produzem a mesma quantidade do produto? − Como a comunidade compartilha o lucro? 21. Com base na sua experiência, vocês mudaram algumas das coisas que estavam fazendo antes para aumentar a rentabilidade do seu produto? 22. Vocês mudaram alguma das coisas que estavam fazendo antes para aumentar o volume da produção? IV. Treinamento, Assistência Técnica e Acesso à Tecnologia (Minuto 55) 23. No inicio do projeto, sua comunidade recebeu treinamento ou aulas? − Quem forneceu esse treinamento? − De onde vocês conheceram essa pessoa ou organização? 24. Esse treinamento os ensinou sobre o quê? − Foi fácil entender? − Quanto tempo durou o treinamento? − Sua comunidade teve que pagar por esse treinamento? 25. Havia assuntos importantes e problemas que enfrentaram depois que não foram incluídos nesse treinamento? − Como esse treinamento poderia ter sido mais útil? 26. Você acha que mais treinamento seria benéfico para sua comunidade? − Que tipo de treinamento seria mais útil? − Quem deve oferecer esse treinamento? − Sua comunidade estaria disposta a pagar por isso? 27. Mais tarde durante o projeto, alguém de fora da comunidade deu conselhos ou assistência ao seu projeto? − Exemplos podem incluir uma pessoa ou organização fornecendo conselhos sobre os tipos de material a utilizar, ou ajudando com uma maquina. − Quem os ajudou? 28. Que fizeram pelo seu projeto? − Com qual freqüência forneceram ajuda? Por quanto tempo? − Os conselhos foram úteis? − Como a ajuda deles poderia ter sido melhorada? − Sua comunidade teve que pagar por essa ajuda? 29. Você precisa de ajuda com alguma outra coisa? − Quem deve oferecer essa ajuda? − Sua comunidade estaria disposta a pagar por isso? 30. Há equipamentos para produzir ou processar o seu produto que sua comunidade não possui? Page 3 of 5

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Associações Comunitárias Guia da Entrevista − Sua comunidade tem acesso a essas maquinas? − Caso afirmativo: Como vocês acessam essas maquinas? Quanto você tem que pagar para usá-los? Isso é um preço justo? − Caso contrario: Você poderia receber um preço mais alto por seu produto se tivesse acesso a esses maquinas? Como seria possível ter acesso a essas maquinas? V. Desafios de Produção (Minuto 80) 31. Se pudesse mudar uma coisa do seu projeto, o que seria? 32. Qual é o maior desafio que o seu projeto enfrenta? 33. Aconteceu de alguma vez sua comunidade não poder produzir seu produto por alguma razão? Por quê? − Como vocês superaram esse problema? 34. Vocês sempre têm acesso fácil aos materiais que precisam para o seu produto? − Tem variação grande no custo dos materiais? − Tem alguma maneira na qual vocês poderiam pagar um preço menor pelos materiais? Por exemplo, poderiam se juntar com outras comunidades para negociar um preço menor dos provedores? 35. Vocês poderiam receber um preço mais alto se aumentassem á qualidade do produto? − Com base na sua experiência, vocês mudaram alguma coisa que estavam fazendo antes para aumentar a qualidade do seu produto? 36. Ás vezes os compradores rejeitam seus produtos por causa de qualidade? − Com vocês poderiam aumentar qualidade ainda mais? − Alguém ajudou sua comunidade a fabricar produtos com maior nível de qualidade? 37. Os compradores do seu produto às vezes requerem quantidade específica com data de entrega? − Vocês sempre conseguem produzir a quantidade necessária em prazos curtos? − Que dificuldades vocês enfrentam para produzir com data de entrega? 38. Alguma vez tiveram dificuldades em obter componentes necessários para operar ou manter suas máquinas? 39. Aconteceu alguma vez de ter que parar de produzir produtos por falta de fundos para comprar materiais ou remontar máquinas? 40. Quais são as fontes de crédito disponíveis para superar tais problemas de fundos? − O Banco do Nordeste já ofereceu crédito? − Por que vocês não recebem crédito suficiente das fontes disponíveis? − Quais os requisitos impostos por essas fontes para fornecer um empréstimo?

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Associações Comunitárias Guia da Entrevista VI. Vínculos (Minuto 100) 41. Vocês já tiveram contato com alguma outra comunidade que está produzindo produto similar? − Como vocês são capazes de trabalhar juntos ou compartilhar informações? 42. Vocês estão fazendo alguma coisa com pessoas da fora da comunidade que podem ajudar vocês no futuro? 43. Sua comunidade recebe ajuda de outros programas públicos ou privados? − Que programas? − Esses programas têm algum tipo de efeito nesse projeto? 44. Esse projeto tem mudado os relacionamentos entre membros da sua comunidade de alguma maneira? − As pessoas estão mais próximas ou mais distantes? De que maneira? − Por causa desse projeto, você acha que os membros da comunidade ajudam uns aos outros mais, menos, ou da mesma maneira?

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Community Associations Interview Guide Discussion Overview This two-hour interview consists of the following major sections: I. II. III. IV. V. VI.

Introduction Choice of Project Production and Market Details Training, Technical Assistance, and Technology Access Production Challenges Linkages

I. Introduction (Minute 0) z z

Introduce interviewer Explain purpose of the study: “In this conversation, we would like to learn more about your project. We hope to hear about both the challenges that your community experienced with this project and what you see as lessons learned and successes to date. This will help us understand what types of assistance might be able to help productive projects across Pernambuco.”

II. Choice of Project (Minute 3) 1. Could you please give a brief description of your project? 2. How did you learn about the RENASCER program for the first time? − Who told you and what? What did you think in the beginning? 3. What did your community do after hearing about the program? 4. Whose idea was it to form an association? − Did everyone in the community want to become a member of this association at first? − Why did some community members not initially join the association? Did any change their mind—if so, why do you think they did so? − Who was in charge of the community association? − How was this person chosen? 5. How did you choose between types of investments to propose? − Who participated in the discussion about what investment to propose? − What other types of investments were discussed? − Were you afraid that some projects wouldn’t be accepted? − Had you heard about any other communities that had undertaken any investments? What had you heard about their experiences? − Did anybody give you any advice or caution you about anything? 6. How was the final decision made about what investment to propose? − Did everyone have an equal say in the final decision? Page 1 of 4

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Community Associations Interview Guide − Did anyone not agree with the project chosen? Why? 7. What were your initial expectations for this program? − Did anything turn out differently than you expected? 8. How was the project proposal done? − What was involved? Was it difficult? − Did anyone from outside the community help with the proposal? How? − How did you learn about this person? − Did the proposal describe well what your community wanted, or was it just put together in a hurry to take a chance? 9. What happened after the proposal was submitted? − How long did it take for your project to be approved? − Did you face any difficult politics with the Municipal Council or was it just a simple application? − Did the priorities of the Municipal Council affect your choice of projects? III. Production and Market Details (Minute 30) 10. How many units does your community produce per month? 11. What inputs are used? − How much does each cost? 12. What equipment do you need to use to make your product? − How much does it cost to use these machines, or to operate and maintain them? 13. What type of packaging do you use? − How much does this cost per unit? 14. How do you transport your goods to the market? − How often do you do this, and how much does this cost? 15. Are there any other costs involved that we have not mentioned? 16. If your community members produced their products independently (not part of an association), how would these costs be different? 17. To whom do you sell your product? 18. What price do you receive for the product? − Do you think that is a fair price? − Does the price you receive vary over time? − If your community members sold their products independently (not part of an association), would they receive a different price? − Are there always people willing to purchase your product? Is your association concerned about this? 19. After you sell your product, how do you think it finally reaches the final consumer? − How much do you think the final consumer pays for this product? − Is there any way that you could get more of the money between what you sell your product for and what the consumer pays? 20. How much profit do you make per unit? − How much profit does the community earn altogether per month? − Does everyone in the community produce an equal quantity of the product?

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Community Associations Interview Guide − How are the profits shared between members of the community? 21. Based on your experience, have you changed anything that you do in order to increase profitability? 22. Have you changed anything to increase your amount of production? IV. Training, Technical Assistance, and Technology Access (Minute 55) 23. In the beginning of your project, did your community receive any training or lessons? − Who provided it? − From where did you know this person or organization? 24. What did the training teach you about? − Was it easy to understand? − How long did the training take? − Did you have to pay anything for this training? 25. Were there issues and problems that you later faced that weren’t covered by this training? − How could this training have been more useful? 26. Do you think you would benefit from more training? − What kind of training do you think would be most helpful? − Who should provide this training? − Would you be willing to pay for it? 27. Later in the project, did anyone from outside the community provide any advice or help with your project? − Examples could include a person or organization providing advice on proper inputs to use or helping with a machine − Who provided this help? 28. What did they do for your project? − How often did they provide help, and for how long? − Was their advice helpful? − How could their help have been even better? − Did you have to pay for their help? 29. What else do you need help with but it is not available? − Who should provide this help? − Would you be willing to pay for this? 30. Are there any machines used to produce or process this product that your community does not own? 31. Does your community have access to these machines? − If yes: How do you have access to these machines? How much do you pay to use them? Is this a fair price? − If no: Would you be able to get a higher price for your products if you had access to these machines? How might you gain access to such machines?

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Community Associations Interview Guide IV. Production Challenges (Minute 80) 32. If you could change one thing about your project, what would it be? 33. What is the most challenging problem faced by your project? 34. Was there any time you couldn’t use the investment for any reason? Why? − How did you overcome this problem? 35. Do you always have easy access to the materials you need for this project? − How much does the cost of materials vary? − Is there any way you could pay a lower price for your inputs? For example, could you join together with other communities to negotiate better prices from suppliers? 36. Could you get a higher price for your products by improving quality? − Based on your experience, have you changed anything that you do in order to improve the quality of your product? 37. Do your buyers ever turn down products because of low quality? − How might you be able to improve quality even more? − Has anyone helped you make better quality products? 38. Do the people who buy your products ever require a certain quantity by a deadline? − Are you able to meet these deadlines? − What are the problems you face in meeting deadlines? 39. Do you ever have difficulty obtaining replacement parts needed to maintain your machines? 40. Do you ever have to stop making your products because a lack of funds to pay for supplies or fix machines? 41. What sources of credit are available to overcome such funding problems? − Has the Banco do Nordeste provided any credit? − Why can’t you get enough credit from available sources? − What do they require? IV. Linkages (Minute 100) 42. Do you have any contact with other communities making similar products? − How are you able to work together or share information? 43. Is there anything you are doing with other people outside the community that you think will help you in the future? 44. Does your community receive help from any other government program? − What programs? − Do they affect this project in anyway? 45. Has this project changed relationships between members of your community in any way? − Are people closer than before or more distant? In what ways? − Do people join together and assist each other more, less, or the same after this project?

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Strategic Options: Training and Technical Assistance Addressing key challenges could increase community benefits from productive investments. Numerous options could expand training and technical assistance to communities z

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Limit range of productive subproject types, so that concentrated efforts can address training and technical assistance needs Approve productive subprojects only to communities with relevant prior experience Encourage communities to pay for elaborated technical assistance on a per-visit basis, either directly or through municipal council contracts Establish reporting mechanisms so that communities can provide feedback to municipal councils on quality of training and technical assistance received. Create sanctions for poor providers (e.g., sixmonth exclusion from list of approved providers), as well as recognition for outstanding providers Foster interaction between communities receiving productive investments and past recipients of same subproject type. Enable experienced community members to serve as technical service providers to other communities with new productive subprojects (may be cheaper and more attentive to needs) Continue to seek and broaden relationships with NGOs, and actively facilitate their initial contact with communities receiving productive investments Provide communities a telephone list that identifies technical assistance contacts by type of difficulty experienced (e.g., animal sickness). Offer periodic updates through municipal councils Establish a telephone hotline allowing communities to voice issues facing their productive investments. Could be offered 10 hours per week with a 0800 number (similar to Ministry of Health hotline) Assign a specific Renascer representative to each community for entire lifecycle of productive subproject. This rep could serve as an ultimate point of contact in case other mechanisms fail

Strategic Options: Working Capital Numerous options could increase the availability of working capital for productive investments z

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Facilitate the use of equipment acquired through productive investments as collateral for working capital loans. This may allow communities with imperfect credit histories to obtain needed loans Conduct cash flow analyses during subproject elaboration, and ensure that adequate financing is secured before approval Strengthen the existing cooperation with Banco do Nordeste by sharing subproject information more extensively (e.g., offer access to MIS system). Renascer could also play an increased liaison role between Banco do Nordeste and communities during regular visits Explore additional sources of working capital loans beyond Banco do Nordeste, and create list for communities Encourage Banco do Nordeste and alternative credit providers to offer working capital loans directly to associations, and highlight potential advantages over loans to individuals Introduce a microfinance component to the PCPR program, which specifically addresses working capital needs of communities with productive investments. This could complement Banco do Nordeste efforts, given Renascer’s high level of interaction with recipient communities Advise municipal councils to order packaging and inputs jointly for multiple communities, thereby obtaining volume discounts with existing working capital Negotiate with firms selling packaging and inputs to obtain supplier credit for associations, either based on associations’ credit histories or productive assets as collateral

Strategic Options: Marketing Products Numerous options could help communities with productive investments market their products more effectively z

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Limit range of productive subproject types, and develop template business plans. These plans would identify key issues for each eligible subproject type, and would be tailored to reflect local conditions Encourage SEBRAE to expand offerings of individualized, short-term marketing assistance. Associations would benefit from help specifying large-volume customers interested in purchasing output, as well as information about these customers’ quality, timing and packaging requirements Include funding for marketing assistance in productive subproject proposals, so that communities may obtain customized help when necessary Offer training on business and marketing skills—such as determining profit margins or identifying customer needs—through municipal councils. These skills deserve a strong emphasis, so training should be provided independently of other offerings Assign Renascer technicians to provide one-time marketing assistance for productive subprojects. Some communities could benefit greatly from help identifying potential customers for existing output Identify major purchasers of each type of productive subproject output, and provide this list to communities (feasible if the range of productive subproject types is limited)

Strategic Options: Government Regulations Numerous options could help communities with productive investments overcome challenges posed by government regulations z

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Conduct training courses to inform communities about regulations that may affect their productive investments (e.g., DEFIS health and sanitation requirements). These courses could be offered to communities through municipal councils Ensure that Renascer construction requirements for productive investments are aligned with DEFIS regulations Coordinate the review of subproject proposals by DEFIS inspectors before approval, so that potential violations are identified and addressed before construction commences Develop a targeted assistance program for communities facing difficulties in abiding by regulatory requirements, either directly or through municipal councils Consider granting extensions on deadlines for equipment and packaging purchases when communities face delays obtaining regulatory approval