Brazil: Rio Grande do Sul State to take Innovative Approach to Development by jointly Tackling Fiscal and Water Resources Problems

June 27, 2014

Program will increase capacity to mobilize revenues and invest in water management

WASHINGTON, June 26, 2014 – Better fiscal management and an improved integrated water resource management framework are the objectives of the US$ 280 million Strengthening Fiscal and Water Resources Management loan to the state of Rio Grande do Sul, approved today by the World Bank Board of Directors. As part of the program, the Bank will support an innovative approach that brings together fiscal and water resources management.

Rio Grande do Sul suffered severe and recurring droughts for half of the last decade, the most severe in 2012, with 1.8 million people affected. The events caused great harm to the state’s agricultural production and development, as agribusiness accounts for 30% of Rio Grande do Sul’s GDP. From 2002 to 2012, its average growth rate (2.6%) was one percentage point below the national average (3.6%). Acute fiscal problems prevent the state from undertaking the investments needed to manage irregular rainfall, therefore constraining the growth potential of the economy and reducing fiscal receipts.

We are always looking for new tools to improve management in all areas,said Tarso Genro, Governor of the State of Rio Grande do Sul. “This new partnership with the World Bank will allow us to be even more effective in fiscal management, which will in turn support improved service delivery to the citizens of Rio Grande do Sul.”

On the fiscal management side, the operation supports improved policies on tax expenditures, collection of tax arrears, procurement, cost reports and contingent liabilities. In the water resources pillar, the supported policies aim to promote sustainable irrigated agriculture by aligning the ‘More Water, More Income’ irrigation program with water resource management policies.

Rio Grande do Sul has perennial rivers, irregular but high rainfall and adequate soil for mechanized crops. Considering all those elements, investing in infrastructure associated with strengthening the water resources legal and institutional frameworks is key to improve the water management system.

“Rio Grande do Sul made a great effort to improve its fiscal systems and service delivery. This new project will boost the state’s capacity to invest in an area crucial to its growth,” said Deborah L. Wetzel, World Bank Director for Brazil. “We believe it will further strengthen economic opportunities for the state’s population, especially the poorest who are most affected by the lack of effective water management.”

Among the outcomes supported by the project are:

  • Expansion of irrigation to small and medium farmers,
  • Establishment of river basin plans for all state river basins,
  • Improve the recovery of tax arrears, and
  • Evaluation of the cost of tax incentives on a regular basis.

This loan from the International Bank for Reconstruction and Development (IBRD) to the State of Rio de Grande do Sul is guaranteed by the Federative Republic of Brazil and has a final maturity of 29.5 years, with a 4.5 year grace period.

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