This evaluation shows that the World Bank Group remained an important partner for the government in addressing many key policy challenges. The World Bank adapted its program effectively to meet country needs, which shifted from the federal policy-based operations to subnational government support in the mid-2000s. The International Finance Corporation (IFC) provided useful advisory support for structuring innovative public-private partnership projects and timely trade finance during the 2008–09 global financial crisis. The Multilateral Investment Guarantee Agency (MIGA) concentrated its activities on the electricity transmission subsector.
IEG rates the overall outcome of the Bank Group program as moderately satisfactory, with some important variability across themes. The Bank Group made significant contributions when it served as a trusted advisor, providing analytical input and exchanging views on relevant policy issues. Advisory support for structuring public-private partnership projects leveraged IFC’s global expertise in project financing. The Bank Group’s convening power provided diverse stakeholders with a platform to examine issues and trade-offs that cut across organizational boundaries. In the area of the environment, the Bank helped reduce deforestation in the Amazon through support for a major expansion of protected areas and indigenous territories, as well as for building the capacity of national and state environmental agencies.
Results were less satisfactory in addressing infrastructure bottlenecks, particularly in logistics and the cost of doing business. These areas remained critical constraints to Brazil’s growth and a key government concern. Given the already high tax burden and competing demand for public spending, particularly in the social area, it is important to improve public investment planning and execution and to enhance the regulatory framework and its predictability in order to attract private investment into infrastructure. In addition, the Bank Group was not able to advance the dialogue in the area of directed credit or to enhance competition in the financial sector. A question regarding the overall strategy is whether the use of a few very large operations with opportunity cost relative to the IBRD exposure limit was appropriate.
The strong demand for Bank Group financial and knowledge support in Brazil is likely to continue. To ensure efficient use of operational resources, the Bank Group must maximize its contribution per dollar loaned and per dollar of Bank Group budget resources. IEG recommends that the Bank Group make catalytic impact a major criterion in the design of its future strategy in Brazil. This means that in selecting the programs and projects to support, the emphasis should be on those with benefits beyond the individual intervention:
- Reforms that create enabling environments and incentives for other actors
- Activities that enhance demonstration effects and replication of positive results
- Engagements that leverage the Bank Group’s knowledge base and its convening role to facilitate cross-sectoral dialogue.
Collaboration among the World Bank, IFC, and MIGA to attract the private sector into infrastructure investment and to reduce the cost of doing business has the potential for high gain. The Bank Group should continue to promote sustainable rural development taking advantage of the opportunities presented by the new Forest Code.
To remain a trusted advisor, it is important for the Bank Group to identify the areas where it could provide the most effective knowledge support. Sustained dialogue with Brazilian authorities and think tanks would be vital in this regard. Finally, the report recommends that IFC expand its public-private partnership operations and review the sub-borrower eligibility criteria in its financial market investments to reach small and medium size enterprises efficiently.
