Shared Challenges and Shared Resources

September 25, 2014

Five municipalities in Rio Grande do Sul participated in an experiment in subnational partnerships to enhance municipal management and make on-the-ground infrastructure improvements. The cities were a mix of small and medium sized “hub cities,” ranging from 120,000 to 334,000 inhabitants, with a combined total population of 1 million.


In the southern half of the State of Rio Grande do Sul, overall economic growth has slowed and the benefits of growth are unevenly distributed. Approximately one fourth of the population are estimated to live below the poverty line. 

The shared challenges for the cities in the region include improving municipal governance, addressing rural and urban poverty, and improving infrastructure service provision. In addition, the municipalities need strategic interventions to overcome continued economic decline, enhance their competitiveness, and accelerate sustainable economic growth. However, the municipalities were not individually large enough to qualify for a cost-effective municipal level World Bank loan. The Bank program of direct municipal lending in Brazil—begun in 2004—targeted much larger cities, and these investments remained out of reach for Brazilians in small cities and rural areas.


In 2008, the Bank experimented with a new scale for subnational partnerships in Brazil. With the Rio Grande do Sul Integrated Municipal Development Program (PDMI), the Bank worked for the first time with an integrated adaptable programmatic loan (APL) for five participating municipalities with a combined population of 1.04 million people, of which 95% are urban and 5% are rural. The five cities are Bagé, Pelotas, Rio Grande, Santa Maria, and Uruguaiana. 

The overall strategy of the program was to enhance the capacity of municipal governments to improve infrastructure, economic growth, employment opportunities, and governance over the whole scope of their areas. The program’s design was unique because it allowed each municipality to tailor its projects to its individual needs and priorities. This included plans and studies for long-term improvements and direct investments in physical infrastructure. To bring about sustainable, long-term improvements in government capacity, most projects included investments in sector-specific plans and tools to improve municipal management. These were targeted especially towards the environmental, mobility, and water supply and sanitation sectors, as well as towards long-term economic development.

The main infrastructure investments were:

  • Highway and roads improvements.
  • Public transport services improvements.
  • Expansion of the water supply, sanitation, and drainage networks and treatment.
  • Urban upgrading and housing and social improvements in selected low-income neighborhoods.

Economic interventions included:

  • New agricultural production centers in Bagé.
  • Implementation of the 9.5-acre Jockey Park in Santa Maria. 
  • Provision of appropriate commercial space.
  • Improvement in the overall business environment.
  • Facilitation of access to microcredit, training and capacity enhancement activities targeted at selected clusters. 


Overall, the program successfully enhanced the municipalities’ capacity to provide services and implement infrastructure. Road infrastructure investments financed design, paving or rehabilitation of streets and installation of neighborhood drainage systems. The upgraded urban roads were complemented by improved sidewalks, landscaping, traffic safety measures, and bikeways. The program also opened opportunities for creative long term economic development in partnership with the private sector.  

Most innovatively, the program provided important pilot experiences for small-scale activities aimed at improving local economic development by:

  • Facilitating access to microcredit.
  • Fostering research and development through the construction of technology parks.
  • Supporting local and informal businesses and small producers under selected clusters.

The program’s water supply investments covered installation of micro and macro meters, rehabilitation of the water supply network, construction of a water supply system in rural Pelotas, enhanced treated water reserves, and expanded capacity for sewage systems and small treatment plants. These investments resulted in reductions in water losses, energy consumption, and maintenance costs. Finally, service providers increased their revenues due to improvements in the accuracy of water and sanitation billing and reduced operation and maintenance costs.

Bank Group Contribution 

The total Bank loan of US$ 47.47 million was disbursed.


Counterpart contributions from the municipal governments were partially financed through Federal Government resources, including PAC (Programa de Aceleração do Crescimento) funds.  

Moving Forward 

Because the program was designed with a long-term vision of improved municipal infrastructure and capacity, many of its results will continue to develop going forward, as plans are implemented. The program also invested in various planning tools and instruments to guide public management in urban development, transport, water sanitation and sewage, and environmental management. Bank support during implementation of the program and after closing, includes intensive guidance in quality assurance and institutionalization of plans and studies to assure that their results are translated into real benefits for the population. 

Almost all of the major interventions not completed during the program’s lifetime, including integrated water sanitation and sewage and urban improvements in Santa Maria’s Km3 neighborhood, are scheduled to be completed this year. 


Beneficiaries include the governments and residents of the participating municipalities. 

of the beneficiaries live in urban areas