THE WORLD BANK IBRD * IDA I WORLD BANKGROUP

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1 Public Disclosure Authorized OFFICIAL I r4 pry DOCUMENTS THE WORLD BANK IBRD * IDA I WORLD BANKGROUP April 27, 2015 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Mr. Herbert Otto Roger Schubart Director-President Fundagdo Pr6-Natureza (Funatura) SCLN 107, Bloco B, S/201 Asa Norte Brasilia - DF, Brazil Dear Sir, Grant No. TF0A0093 ProCerrado Federal Project In response to the request for financial assistance made through a letter from the Ministry of Environment of the Federal Republic of Brazil, Oficio no 286/2013/SECEX/MMA, dated October 22, 2013, on behalf of Fundaqdo Pr6-Natureza - Funatura ("Recipient"), I am pleased to inform you that the International Bank for Reconstruction and Development ("World Bank"), acting as administrator of grant funds provided by the Department for Environment, Food and Rural Affairs United Kingdom of Great Britain and Northern Ireland ("Donor") under the Brazil Cerrado Climate Change Mitigation Trust Fund (BCCCMTF), proposes to extend to the Recipient, for the benefit of the Federative Republic of Brazil ("Member Country"), a grant in an amount not to exceed four million three hundred thousand United States Dollars (US$4,300,000) ("Grant") on the terms and conditions set forth or referred to in this letter agreement ("Agreement"), which includes the attached Annex, to assist in the financing of the project described in the Annex ("Project"). This Grant is funded out of the abovementioned trust fund for which the World Bank receives periodic contributions from the Donor. In accordance with Section 3.02 of the Standard Conditions (as defined in the Annex to this Agreement), the World Bank's payment obligations in connection with this Agreement are limited to the amount of funds made available to it by the Donors under the abovementioned trust fund, and the Recipient's right to withdraw the Grant proceeds is subject to the availability of such funds. The Recipient represents, by confirming its agreement below, that it is authorized to enter into this Agreement and to carry out the Project in accordance with the terms and conditions set forth or referred to in this Agreement. Please confirm the Recipient's agreement to the foregoing by having an authorized official of the Recipient sign and date the enclosed copy of this Agreement, and returning it to the World Bank. This Agreement shall become effective as of the date of its countersignature upon receipt by the World Bank of (a) the countersigned copy of this Agreement; (b) a copy of the Technical Cooperation Agreement referred to in Section 2.03 (b) of the Annex to this Agreement; and (c) evidence that the Operational Manual, satisfactory to the Bank, referred to in 2.03 (d) of the Annex to this Agreement, has been adopted by the Recipient. The offer of this Agreement shall be deemed withdrawn if the World Bank has not received the countersigned copy of this Agreement within 90 days after the date of signature of this Agreement by the World Bank, unless the World Bank shall have established a later date for such purpose. SCN Quadra 2 Lote A - Ed. Corporate Financial Center, 7* Andar Brasilia - DF, BRASIL Tel 55 (61) Fax 55 (61)

2 Very truly yours, INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Wborah L. Wetzel Director Brazil Country Management Unit Latin America and the Caribbean Region AGREED: FUNDA('O PRO-N TU- Funatura By IAutlionzed Re-resentative Name led1r6f.sca g Title fwyfy - A'694, Date: AQi e 2,. 2-e-Ir Enclosures: (1) Standard Conditions for Grants Made by the World Bank Out of Various Funds, dated February 15, 2012 (2) Disbursement Letter of the same date as this Agreement, together with World Bank Disbursement Guidelines for Projects, dated May 1, 2006 (3) "Guidelines: Procurement of Goods, Works and Non-consulting Services under IBRD Loans and IDA Credits and Grants by World Bank Borrowers" dated January 2011 (revised July 2014) (4) "Guidelines: Selection and Employment of Consultants under IBRD Loans and IDA Credits and Grants by World Bank Borrowers" dated January 2011 (revised July 2014) (5) "Guidelines on Preventing and Combating Fraud and Corruption in Projects Financed by IBRD Loans and IDA Credits and Grants", dated October 15, 2006, and revised in January 2011 ("Anti-Corruption Guidelines") -2-

3 Grant No. TFOA0093 ANNEX Article I Standard Conditions; Definitions Standard Conditions. The Standard Conditions for Grants Made by the World Bank out of Various Funds dated February 15, 2012 ("Standard Conditions") constitute an integral part of this Agreement Definitions. Unless the context requires otherwise, the capitalized terms used in this Agreement have the meanings ascribed to them in the Standard Conditions or in this Agreement and the following additional terms have the following meanings: (a) "CAR" means Cadastro Ambiental Rural, the Member Country's electronic register of rural landholdings, established under the Forest Code. (b) "Cerrado Biome" means the biome in the central highlands of the Member Country's territory which covers an area equivalent to 200 million hectares over the following states in the Member Country: Bahia, Distrito Federal, Goi6s, Mato Grosso, Mato Grosso do Sul, Maranhdo, Minas Gerais, Parand, Piaui, Sdo Paulo and Tocantins. (c) "Degraded and Changed Land Recovery Project" means Projeto de Recuperaqdo de Areas Degradas e Alteradas - PRADA, plan to rehabilitate degraded areas in Legal Reserves and Areas of Permanent Preservation, established under the Forest Code. (d) "ESMF" means the Environmental and Social Management Framework prepared by MMA in August 2014, acceptable to the World Bank, adopted by both the Recipient and MMA, and published in and ProCerrado%20Federal aprov ada.pdf which contains the environmental and social protection measures in respect of the Project, including, inter alia, the description of the potential environmental impacts of Project activities; the preventive/corrective measures, including the training and capacity-building of firefighters and the use of adequate equipment. (e) "Federal Protected Areas" means three selected areas in the Cerrado Biome for the Project, namely (i) an area of 197,812 hectares in the Serra da Canastra National Park, (ii) an area of 159,954 hectares in the Chapada das Mesas National Park, and (iii) an area of 128,051 hectares in the Veredas do Oeste Baiano Wildlife Refuge. (f) "Forest Code" means the Member Country's law establishing general rules on the protection of vegetation, on areas of permanent preservation and legal reserve areas, on the logging, on the supply of forest raw materials, on the control of the origin of forest products and on the control and prevention of forest fires, and provides economic and financial instruments for achieving such goals, established under Law No. 12,651, dated May 25, 2012, published in the Member Country's official gazette on May 28, (g) "Fundacdo Pr6-Natureza - Funatura" or "Funatura" means the Recipient, a private non-profit organization established on July 30, 1986, and publicly registered on September 5, 1986, established in order to strengthen the role of the private sector in protecting Brazil's rich biological diversity and the quality of human life. -3-

4 (h) "ICMBio means Instituto Chico Mendes de Conservagdo da Biodiversidade, the Chico Mendes Institute for Biodiversity Conservation, or any successor thereto. (i) "MMA" means Ministgrio do Meio Ambiente, the Member Country's Ministry of Environment, or any successor thereto. () "National Policy for Forest-fire Management, Prevention and Control", or "Policy", means the policy to be prepared as required under the Forest Code. (k) "PPCerrado" means Piano de Ado para Prevenqdo e Controle do Desmatamento e das Queimadas no Cerrado, the Member Country's Action Plan for Prevention and Control of Deforestation in the Cerrado Biome, aimed at reconciling environmental and economic interests in a sustainable development framework, established under Decree dated September 15, 2010, published in the Member Country's official gazette on September 16, (1) "Project Operational Manual" means the manual for Project implementation as set forth in Section 2.03 (d) of this Agreement. (in) "Targeted Municipalities" means selected municipalities where the Project will be implemented, namely Natividade and Pium in the state of Tocantins, and Alto Parnaiba, Balsas, Riachdo, and Sdo Jodo do Soter in the state of Maranhao. (n) "Technical Cooperation Agreement" means the agreement referred to in Section 2.03 (b) of this Annex. Article II Project Execution Project Objective and Description. The objective of the Project is to enhance the capacity of the Ministry of Environment to establish integrated forest fire management and landholdings' registration in selected rural areas of the Cerrado Biome. The Project will consist of the following parts: Part I: Support for the Action Plan for Prevention and Control of Deforestation and Forest Fires in the Cerrado - PPCerrado Supporting activities to reduce deforestation and promote environmental compliance by landholders with the Member Country's forest legislation by monitoring and evaluating PPCerrado, and developing governance capacity to implement this Plan and supporting the reform in forest policy, focusing on the National Policy for Forest-fire Management, Prevention and Control, including: (a) organizing selected workshops, training, seminars, and meetings, with relevant stakeholders to disseminate the PPCerrado; (b) carrying out technical and scientific seminars and workshops to discuss and refine tools for producing data on deforestation and forest fires in the Cerrado Biome; (c) developing and implementing a monitoring and evaluation process for the PPCerrado; -4-

5 (d) carrying out selected studies to support strategic decision-making; (e) developing studies on forest-fire management, prevention and control; (f) carrying out seminars and workshops to discuss forest-fire prevention and control with key stakeholders; and (g) producing a communication strategy and promotional materials. Part II: Rural Environmental Cadastre Supporting small landholders in Tocantins and Maranhdo to comply with the Forest Code through CAR, by carrying out a program of activities including: (a) carrying out communication campaigns to promote CAR and mobilize key stakeholders in approximately 58 Municipalities of the Cerrado Biome, including the Targeted ones; (b) establishing a CAR help desk in eight including the Targeted ones; Municipalities of Tocantins and Maranhdo, (c) carrying out geo-referencing activities to register small landholdings through CAR in the six Targeted Municipalities; and (d) preparing a Degraded and Changed Land Recovery Project (Projeto de Recuperaqdo de Areas Degradas e Alteradas - PRADAs) for small landholdings in the six Targeted Municipalities to rehabilitate degraded areas in legal reserves and/or areas of permanent preservation in compliance with the Forest Code. Part IH: Preventing and Fighting Forest Fires in Protected Areas Strengthening ICMBio's capacity to manage, prevent and control forest fires in the Federal Protected Areas, by: (a) equipping volunteer brigades, and providing training to the volunteer brigades on integrated forest fire management; (b) drafting protection plans for the Federal Protected Areas; (c) carrying out training on environmental management and promoting environmental education in selected communities and neighboring areas located in the Federal Protected Areas; and (d) acquiring selected equipment for strengthening actions to prevent and fight forest fires in the Federal Protected Areas. Part IV: Project Management and Administration Strengthening the Recipient's capacity in carrying out the Project, including overall management, financial management, procurement, accounting, audits, project coordination, monitoring and reporting, and financial and technical activities for project closure. -5-

6 2.02. Project Execution Generally. The Recipient declares its commitment to the objectives of the Project. To this end, the Recipient shall carry out the Project with the technical collaboration of MMA and ICMBio in accordance with the provisions of: (a) Article II of the Standard Conditions; (b) the "Guidelines on Preventing and Combating Fraud and Corruption in Projects Financed by IBRD Loans and IDA Credits and Grants", dated October 15, 2006, and revised in January 2011 ("Anti-Corruption Guidelines"); (c) the Procurement Guidelines as defined in paragraph 2.06.(a)(i); (d) the Consultant Guidelines, as defined in paragraph 2.06.(a)(ii); (e) this Article II; (f) the Project Operational Manual; and (g) the Technical Cooperation Agreement; all in a manner acceptable to the World Bank Institutional and Other Arrangements. Without limitation upon the provisions of the paragraph 2.02 above, the Recipient shall: (a) for the purposes of carrying out the Project, maintain, at all times during Project implementation, professional staff in adequate numbers, including a Project supervisor, a chief financial officer, a procurement specialist, an administrative and financial assistant, and any other staff required for providing technical assistance to implement the Project, all with terms of reference, qualifications and functions acceptable to the World Bank, to perform all Project's related functions including, inter alia, procurement and financial management; (b) enter into a technical cooperation agreement (the Technical Cooperation Agreement) with MMA and ICMBio, under terms and conditions satisfactory to the World Bank, therein setting forth the roles and responsibilities of each party in the implementation of the Project, including, inter alia, the following: (i) the parties' obligation to implement all joint actions and control mechanisms required for the carrying out of the Project in a coordinated manner, including appointing one staff each to be responsible for monitoring Project implementation on each party's behalf; (ii) the Recipient's obligation to: (A) implement, monitor and evaluate the Project, under the technical supervision of MMA, (B) carry out the overall financial and administration management of the Project, (C) hire consultants for project-related activities and make them available to MMA and ICMBio, and (D) prepare Annual Operational Plans, Procurement Plans, Progress Reports and Completion Report, in coordination with MMA; (iii) the responsibility of MMA for: (A) leading the monitoring and evaluation system under the Project, in accordance with BCCCMTF rules and procedures, (B) tracking technical progress under the Project, including the achievement of results, and coordinating with the Recipient and ICMBio the preparation of respective progress reports, and (C) supervising technical activities and coordinating actions with ICMBio and the Recipient to achieve the Project's objective; (iv) the respective responsibilities of the Recipient, MMA and ICMBio to hold regular meetings for operational planning, monitoring and adjustment of actions needed for the carrying out of the Project; and (v) the responsibility of MMA and ICMBio to prepare and furnish to the Recipient in a timely manner, with the collaboration of the Recipient, the terms of reference for hiring the services of third parties (consultants), as well as set the technical specifications of goods needed by the Project; (c) exercise its rights and carry out its obligations under the Technical Cooperation Agreement in such manner as to protect the interests of the Member Country and the World Bank and to accomplish the purposes and objective of the Grant and, except as the World Bank shall otherwise agree, the Recipient shall not amend, assign, abrogate, waive or fail to enforce the Technical Cooperation Agreement or any provision thereof. In case of any conflict between the terms of the Technical Cooperation Agreement and those of this Agreement, the terms of this Agreement shall prevail. The Recipient shall promptly inform the World Bank of any condition which interferes or -6-

7 threatens to interfere with the performance of the Recipient respective obligations under such agreement; and (d) in coordination with MMA, prepare a Project Operational Manual to be adopted by the Recipient for the operation of the Project, on terms and conditions acceptable to the World Bank, including arrangements for recording Project impacts, outcomes, outputs and inputs required to assess progress toward the achievement of Project objectives, detailed procedures and guidelines for disbursements, payments, approvals, commitments, reporting, and procurement procedures, monitoring and evaluation strategy and guidance on overall Project implementation. The Project Operational Manual may be amended by the Recipient from time to time with the prior approval of the World Bank. In the event of any conflict between the terms of the Project Operational Manual and those of this Agreement, the terms of this Agreement shall prevail Project Monitoring, Reporting and Evaluation. (a) The Recipient shall monitor and evaluate the progress of the Project under the technical supervision of MMA. The Recipient shall prepare Project Reports, in close coordination with the MMA, in accordance with the provisions of Section 2.06 of the Standard Conditions and on the basis of monitoring and performance indicators acceptable to the World Bank. Each Project Report shall cover the period of one calendar semester, and shall be furnished to the World Bank not later than one month after the end of the period covered by such report. (b) The Recipient shall prepare the Completion Report, in coordination with the MMA, in accordance with the provisions of Section 2.06 of the Standard Conditions. The Completion Report shall be furnished to the World Bank not later than six months after the Closing Date. In order to assist the Recipient in preparing the Completion Report, the Recipient shall employ consultants in accordance with the provisions of Section 2.07 of this Agreement Financial Management (a) The Recipient shall ensure that a financial management system is maintained in accordance with the provisions of Section 2.07 of the Standard Conditions. (b) The Recipient shall ensure that document and records are maintained in accordance with the provisions of Section 2.05 of the Standard Conditions. (c) The Recipient shall ensure that interim unaudited financial reports - IFRs for the Project are prepared and furnished to the World Bank not later than 45 days after the end of each calendar semester, covering the semester, in form and substance satisfactory to the World Bank. (d) The Recipient shall have its Financial Statements audited in accordance with the provisions of Section 2.07 (b) of the Standard Conditions. Each audit of the Financial Statements shall cover the period of one fiscal year of the Recipient. The audited Financial Statements for each such period shall be furnished to the World Bank not later than six months after the end of such period Procurement (a) General. All goods, works, non-consulting services and consultants' services required for the Project and to be financed out of the proceeds of the Grant shall be procured in accordance with the requirements set forth or referred to in: -7-

8 (i) "Guidelines: Procurement of Goods, Works and Non-consulting Services under IBRD Loans and IDA Credits and Grants by World Bank Borrowers" dated January 2011, revised July 2014 ("Procurement Guidelines"), in the case of goods, works and nonconsulting services; (ii) "Guidelines: Selection and Employment of Consultants under IBRD Loans and IDA Credits and Grants by World Bank Borrowers" dated January 2011, revised July 2014 ("Consultant Guidelines") in the case of consultants' services; and (iii) the provisions of this Section, as the same shall be elaborated in the procurement plan prepared and updated, by the Recipient for the Project in accordance with paragraph 1.18 of the Procurement Guidelines and paragraph 1.25 of the Consultant Guidelines ("Procurement Plan"). The procurement plan shall be prepared, and updated at least annually or as required to reflect actual project implementation needs and improvements in institutional capacity. (b) Definitions. The capitalized terms used in the following paragraphs of this Section to describe particular procurement methods or methods of review by the World Bank of particular contracts, refer to the corresponding method described in Sections II and III of the Procurement Guidelines, or Sections II, III, IV and V of the Consultant Guidelines, as the case may be. (c) Services. Particular Methods of Procurement of Goods, Works, and Non-consulting (i) Except as otherwise provided in sub-paragraph (ii) below, goods, works, and non-consulting services shall be procured under contracts awarded on the basis of National Competitive Bidding, including the method known as "pregdo eletronico" as provided in the Member Country's law No of July 17, 2002, under any e- procurement system acceptable to the Bank, subject to the following additional procedure, namely, that the bidding documents shall be acceptable to the Bank. (ii) The following methods, other than National Competitive Bidding, may be used for procurement of goods for those contracts which are specified in the Procurement Plan: (A) Shopping (including the method known as "pregdo eletr6nico", as provided in the Member Country's Law No , of July 17, 2002, under any e-procurement system acceptable to the World Bank); and (B) Direct Contracting. (d) Particular Methods of Selection of Consultants' Services. (i) Except as otherwise provided in item (ii) below, consultants' services shall be procured under contracts awarded on the basis of Quality- and Cost-based Selection. (ii) The following methods, other than Quality- and Cost-based Selection, may be used for the procurement of consultants' services for those assignments which are specified in the Procurement Plan: (A) Quality-based Selection; (B) Selection under a Fixed Budget; (C) Least Cost Selection; (D) Selection based on Consultants' Qualifications; (E) Single-source Selection of consulting firms; or (F) Selection of Individual Consultants. -8-

9 (e) Review by the World Bank of Procurement Decisions. The Procurement Plan shall set forth the thresholds over which contracts will be subject to Prior Review by the World Bank. All other contracts shall be subject to Post Review by the World Bank. Article III Withdrawal of Grant Proceeds Eligible Expenditures. The Recipient may withdraw the proceeds of the Grant in accordance with the provisions of: (a) the Standard Conditions; (b) this Section; and (c) such additional instructions as the World Bank may specify by notice to the Recipient (including the "World Bank Disbursement Guidelines for Projects" dated May 2006, as revised from time to time by the World Bank and as made applicable to this Agreement pursuant to such instructions), to finance Eligible Expenditures as set forth in the following table. The table specifies the categories of Eligible Expenditures that may be financed out of the proceeds of the Grant ("Category"), the allocations of the amounts of the Grant to each Category, and the percentage of expenditures to be financed for Eligible Expenditures in each Category: Category Amount of the Grant Percentage of Expenditures Allocated to be Financed (expressed in USD) (exclusive of Taxes) (1) Goods, non-consulting 3,208, % services, consultants' services, and Training (2) Works 270, % (3) Operating Costs: 100% (a) MMA 306,000 (b) Funatura 430,000 (c) Auditing 86,000 TOTAL AMOUNT 4,300,000 For the purposes of this Table, the term: (a) "Operating Costs" means the costs incurred for the purposes of project implementation, including (i) operation and maintenance of vehicles; (ii) incremental office equipment and supplies; (iii) shipment costs (whenever these costs are not included in the cost of goods); (iv) office supplies; (v) rent for office facilities; (vi) utilities; (vii) travel and per diem costs for administration and technical staff carrying out supervisory and quality control activities; (viii) communication costs, including advertisement for procurement purposes; (ix) administrative and operational support staff; and (x) auditing. -9-

10 (b) "Training" means the costs associated with the preparation and carrying out of seminars and workshops, including event logistics, transportation, catering, material preparation, course enrollment fees, per diems and other costs directly related to the preparation and implementation of seminars and workshops Withdrawal Conditions. Notwithstanding the provisions of Section 3.01 of this Agreement, no withdrawal shall be made for payments made prior to the date of countersignature of this Agreement by the Recipient, except that withdrawals up to an aggregate amount not to exceed $100,000 equivalent may be made for payments made during the 12 months immediately prior to the date of the countersignature of the Grant Agreement, for Eligible Expenditures under Category (3) Withdrawal Period The Closing Date referred to in Section 3.06 (c) of the Standard Conditions is December 29, Article IV Recipient's Representative; Addresses Recipient's Representative. The Recipient's Representative referred to in Section 7.02 of the Standard Conditions is its Director-President Recipient's Address. The Recipient's Address referred to in Section 7.01 of the Standard Conditions is: Fundagao Pr6-Natureza (Funatura) SCLN 107, Bloco B, S/201 Asa Norte Brasilia - DF, Brazil Facsimile: (55-61) World Bank's Address. The World Bank's Address referred to in Section 7.01 of the Standard Conditions is: International Bank for Reconstruction and Development 1818 H Street, N.W. Washington, D.C United States of America Cable: Telex: Facsimile: INTBAFRAD (MCI) or Washington, D.C (MCI)

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